Reader Case Study - What's My Next Move?

[rduncan1216]

Life Situation: Married Filing Jointly, no dependents yet, but if all goes well will be expecting first child in August 2017.  Currently live in Winston-Salem, NC.  I am 32 and wife is 26.

Gross Salary/Wages: I work a retail job that is hourly + commission.  $16.93/hr (45-50 hrs a week, anything over 40 is OT).  Commission is expected to be around $1300, but lately has been closer to $1000.  My expected income is 48k-52k per year before deductions ($3700 on a low month, $4500 on a higher).  Wife currently works part time as a waitress (just started).  I'm anticipating her making around $1200 per month in tips.  She also has a photography business but work is sporadic. 

Pre-tax deductions: Currently not contributing to 401k.  Health insurance premium is $300 per month for both of us.

Other Ordinary Income: N/A

Qualified Dividends & Long Term Capital Gains: N/A

Rental Income, Actual Expenses, and Depreciation: N/A

Adjusted Gross Income: Health insurance ($300) only deduction thus far

Taxes: Federal, state/local, and FICA.  Federal: $342, State: $173, Soc Sec: $236, Medicare: $55.  Taxes are odd for me because my employer withholds commission at a higher rate.  I have had my accountant help me adjust my w4, and I think we have it so that I won't get a huge return this year.

Current expenses:
Rent: $875  (this is on the high side because we live downtown, when lease is up in September we will be moving)
Utilities: $100 (i only pay for electricity, this may increase in the winter, first time in this apartment.)
gas: $180 for both cars
Car insurance: $136 (have to carry comp/collision on one)
Internet: $50
Cell phone: $100
Groceries/goods: $600
Netflix/Hulu: $19
Medical: Usually around $50, may increase with wife being pregnant
Car payment: $170
Student Loan: $190
Eating out: $150 (by far our biggest weakness)
Life Insurance: $20
Misc: $200

Total: $2840
I see this and know that I am leaving myself no room for savings.


Expected ER expenses: (optional, if relevant)

Assets: Amount & description - I have a 401k with about $1500 in it (contributed for a few months, not sure if I should continue).  And an IRA with $22.5k rolled over from another 401k.  I have a small chunk of money ($300) in Robinhood that I play with penny stocks with.

Liabilities: Student Loan: $22,000 at 4.625% $190 payment.  Car loan: $4800 at ~4% $170 payment


Specific Question(s): First of all, thank you for taking a look at our situation.  I know that our breakdown of expenses isn't very mustachian, particularly our groceries and eating out, but my wife and I are committed to fixing that. 

My main question revolves around career advice and income moving forward.  The role I am in (retail sales for a large cell phone provider) has always paid well, considering it does not require a degree.  However, I used to be able to make more money, but they have adjusted compensation plans in what seems like a purposeful decision to pay us less (the numbers above are post-adjustment FYI).  I used to want to pursue management, but since being married and having our first child on the way, I want out of retail completely.  The struggle I've already run into is that many 9-5 roles that I could take pay significantly less than what I have now, unless I get my bachelors degree, which will obviously open up some doors.

I have a student loan from going to the University of Texas for 2 years for Electrical Engineering.  I was young and stupid, got mediocre grades, and eventually left because of depression and other things that made me second guess everything about my life.  I have a strong desire to go back to school and finish an engineering, finance, or business degree, but am overwhelmed by the academic bureaucracy and trying to navigate it all.  Going back is a huge source of anxiety for me, especially because I'm afraid that my credits will be too old to transfer (I left UT in 2006).  I am also against taking on more student debt, and also prolonging how long it takes if I only take 1-2 classes at a time.  This is another reason my current income/expenses are a source of stress.

Wife is in similar situation; 2 associates degrees that don't help much in job market, and wants to go back for a bachelors, but again we question the cost at this point.  Should we go at the same time? 

We had considered relocating (lateral transfer), but I question the wisdom with our situation now.  We are near my parents to help out with baby when it is born, etc.

I also would like to buy another house one day (just sold this year to minimize expenses), and possibly rental income, but at this point I am not saving enough to generate any kind of down payments, and would like to be out of debt before purchasing.

All in all, I guess my question is, what should we do next?  Sit tight and pay off debt?  Put debt on hold and invest?  Bite the bullet and go back to school no matter the cost?  Any advice (financial or motivational) would be helpful.  Money and debt have become a huge source of anxiety for me and my marriage, it's all I can think about.  I feel like I'm under performing every single day and that I can't find a way to get ahead, and to provide for my baby and retire as early as possible.

Thank you for reading this far, and thank you in advance for any help you can provide.

edited for grammar

[meandmyfamily]

What is the plan when the baby comes?  Daycare?  SAHM?  Grandparents?

[rduncan1216]

Not familiar with SAHM...

My wife and I were just talking about that, and its our desire for her to stay home with the baby, but we don't know if that is feasible given our financial goals.  If she doesn't stay home, my mother would be fine with helping out most likely.  Avoiding daycare would be ideal for financial and other reasons.

edit: SAHM = stay at home mom. 

[Goldielocks]

For career, two options jump to mind:

Retail management (and up)
 and
Sales (Business to Business type sales, like selling robots or sensors or IT equipment to manufacturers).

Advantages to you

Retail management
- your wife is in a highly mobile job
- therefore you can move anywhere.
- you have management experience, or can get experience at your current employer, then use that to transition to a huge employer with multiple locations.  If you have 1 year of asst manager experience, you can start to transfer easily into the management trainee programs elsewhere.
-The large chains need managers in difficult to fill semi-rural locations, and that is where you and your family's mobility step in, for quicker advancement than average.  Not many want to move for a $60k per year job where their spouse will have trouble finding a new job.


Sales
- Business to business sales need great technologists that understand what they are talking about, but are willing to travel for work quite a bit.  e.g., 30-75% of your month, home on weekends, etc. 
- Because of that, they are willing to pay a lot more than other jobs
- you may have a hands on learning style, which fits well with tech sales and demonstrations, action oriented, etc.

Both of the above involve you changing jobs for more pay, eventually, while your wife stays home with baby and works the most lucrative shifts.

[AZDude]

I estimated your monthly income(just you) at $3692 gross(was somewhat conservative).

$3692
-$300 HI
-$342 Fed
-$173 State
-$236 SS
-$55 MED

=$2586

Total expenses are $2840

This is an issue if your wife is pregnant and the kid is due in August. Kids add expenses and your wife does not really make enough for child care to be worth it. If she becomes a SAHM, then you are losing ~$254 a month, every month.

Not only that, but expecting a part-time pregnant waitress to make $1,200 per month might be expecting too much.

The good news is that there is plenty of room to cut expenses. Cell phone of $100 is way to high. I pay ~$23 a month for my wife and I. Groceries of $600? My family of 3 pays about $500. Netflix/Hulu? Choose one. Eating out? Not a good idea. If you just cut that to $50 instead of $150, it would help a bunch.

That is $288 a month in savings. Now you are at least stable on one income.

Assuming you wife works until 8 months pregnant, which is about when my wife decided to stay home, that is about $6,400 in net earnings. Use that to pay off the car loan.

Now you have about ~$250 a month extra.

As for you career, your wife is probably in a better spot because she makes far less than you and has those associates degrees which will probably transfer easier than 10 year old engineering credits of dubious worth(don't feel too bad, everyone on this board knows someone who went to school, dropped out, and regrets it).

Depending on what her degrees are in, she could go any number of directions. One to consider would be teaching. Starting salary is not great($35,000), but you get benefits, its good for people with children, and there is a high demand(virtual certainty of finding a job).

Probably looking at two years, most of which could be done online with some part-time work thrown in. At that point, when she is working FT, then you could look at your own career. By then, you two would have something like $1,500 extra per month. More than enough for you to finish your own degree and find a higher paying job, if you want.

Its going to a long road, and you will be itching to just "do something", but understand as a future father who is also the current breadwinner, that you will have to be "the rock" until things settle down with your future child. That doesn't mean you cannot explore other options.

Plenty of free courses to learn programming, etc.. You could self-study take some certification exams in the tech field. It would be tougher to find work without a degree, but its certainly possible. I used to work, as a programmer, with a former air conditioning repairman who self-taught and managed to snag a job. So it can be done. But both of you going back to school at the same time with a newborn baby and a shoestring budget seems like a bad idea.

Good luck. Hopefully this post has been helpful.

[rduncan1216]

For career, two options jump to mind:

Retail management (and up)
 and
Sales (Business to Business type sales, like selling robots or sensors or IT equipment to manufacturers).

Thanks for your reply!

I think that of those two options, retail management is the most feasible.  I don't know how I would feel about the travel required for sales, BUT I want so badly to get out of retail.  I have 10 years of experience now, and I feel like I'm getting towards the end of my shelf life.

You've come to similar conclusions to me as far as my best options, assuming I decide to forgo further education. 

[rduncan1216]

AZDude:

Thanks for your reply.  I definitely agree that my wife is in a better spot to make a career switch at this point, and as much as I would like to get out of my retail role, I understand that finding something in a different field with no experience or education will be tough.  Also, my math and your math look about the same, which is what prompted my anxiety, haha.

You echo my sentiment of not wanting to "rock the boat" with a baby on the way.  There is a lot of uncertainty with trying to change careers, such as health insurance etc, but I also want to find a way to increase my income if possible. 

Plenty of free courses to learn programming, etc.. You could self-study take some certification exams in the tech field. It would be tougher to find work without a degree, but its certainly possible. I used to work, as a programmer, with a former air conditioning repairman who self-taught and managed to snag a job. So it can be done. But both of you going back to school at the same time with a newborn baby and a shoestring budget seems like a bad idea.

This is an interesting thought, as I had considered taking some IT courses at community college or self teaching to gain some certifications to try to get an IT job.  Would just have to research to see which certifications would be most valuable in my area.  I guess programming could be rolled into that as well.

Again, thank you for the response, it really really helps me.

[Freedomin5]

You have some major life changes coming up next year. I would suggest staying put (ok, moving to a cheaper apartment is fine) and not making any other major life/career changes until after the baby is born. Having a baby is stressful enough as it is without moving cities/changing jobs/simultaneously starting a new degree. also, if you're already stressed about finances, I don't know if you should be taking on more debt to finance a degree at the moment. I mean, if your employer provides tuition assistance for you to get a degree, that would be different, but if you have to pay for it yourself, the degree will likely give you more stress.

Stay close to grandparents if you have a good relationship with them. They will be a huge source of support for you and your spouse when you are exhausted, sleep deprived first time parents.

There seems to be some room to squeeze additional savings out of your budget. You've already named groceries and eating out as two areas. There are threads on this forum that suggest you can also drastically cut your cell phone bill. Since you have Internet, you really don't need Netflix/Hulu. You mentioned two cars. Is it possible to sell one of them and carpool? That would hopefully get rid of the car loan.

Once you've knocked down most of your debt and built an emergency fund, then focus on changing careers. Also, is it possible for you to pick up a side gig (e.g., delivery person, etc.) to help bring down the debt more quickly? That's will allow you to get out of debt sooner.

If you haven't already read Dave Ramsey, it's a nice place to start (though some on this forum may disagree), especially since you have a not insignicant amount of debt that you have been holding for the past 10 years. After you get to the step where you knock off all your debt, the rest of the steps about saving and investing are a bit meh. At that point, you can move onto reading JLCollins for investing advice.

Finally, don't get sucked into all the "buy the best for your baby" misguided thinking. You really do not need a stroller with a NASA-designed and approved suspension system to give your baby the smoothest ride of his/her lifetime, or other silly stuff like that. Next year, start scouring Craigslist and garage sales for a crib, stroller, etc. There are threads on this forum focusing on "what newborn baby really needs".  People will likely want to give you gifts, so be honest about what you need, which, really, is not much for a newborn. We spent $150 on DD's baby paraphernalia prior to her birth by buying it used. Everything else (bottles, baby carrier, clothes, toys, diapers, wipes, baby bag, etc.) were gifts or other people's cast-offs.

[intirb]

Do you have any kind of emergency savings?

If not, I would work on reducing that budget down to your "low month" income (good suggestions in this thread already) and either a) save anything excess (from higher commissions or from wife's part-time gig) in an emergency fund up to at least $5k or so or b) put that money to pay off the car loan (it has a lower interest rate, but paying it off quickly will give you an immediate breathing room of $170 per month).  Or some combination of A and B.  Then you can work on the student loan.

In some magical world where your wife can continue earning $1200 a month after the pregnancy (maybe with some help from the grandparents?), you could be debt free in about 2 years, with an extra $1500 a month to start putting towards your goals.

I agree with posters that you should not be making any crazy career moves with a baby on the way.  Once your loans have been paid off, you'll have some extra $350 a month to contribute either to savings or to education for a better career, not counting any income from your wife.

[rduncan1216]

Freedomin5:

Thank you for your reply!

We have already started isolating areas of opportunity in our budget, and you bring up some good points.  Something we had not considered was selling the car that has the note on it (I could probably sell it somewhere between 4.5-6k) and buying something with cash.  Not sure if it makes sense to do that or just hustle through the loan because it's a good reliable car.

Leaning towards staying local for the reasons you mentioned.

We have taken Dave's course, and we've been "doing his plan" for over a year now, and we are not getting anywhere.  I ultimately chalk it up to not being disciplined enough, and not being able to tell ourselves "no".  That was part of my reason for wanting to post here and get involved with a community that supports a frugal lifestyle.

Once we have gotten rid of debt, would you recommend investing in school to switch careers, or use the one that I have now to build my 'stache?  You mention tuition reimbursement, and my current employer offers it, with strings attached.  I wasn't sure that I wanted to get involved with that.  Although, I work for an extremely large company, and the sky is the limit as far as opportunities to use that degree somewhere else besides retail.

[rduncan1216]

Do you have any kind of emergency savings?

Not much.  About $300.  I had $1000, per Dave Ramsey, but had to use it last month.  So that is definitely a priority.  My wife and I were torn between building back up to $1000, and then paying off car, or building up to $1000 and then continuing to save every penny until the baby gets here. 

[Sandia]

Your groceries, eating out, and "misc" add up to the cost of your pricey lease! This is something you can start fixing NOW, which will give you a confidence boost and build up that critical emergency fund before baby arrives.

Step 1: Track every single thing you buy, but particularly in these categories.
You need real, hard numbers for at least a month. Assess your strengths and weaknesses here and decide which method works best for you. It has to be EASY for both of you to keep the habit. Do you like pen and paper? Use a notebook and make bookkeeping a daily ritual with your wife. Do you both use the same phone? Find an app. Do you both use a card to pay for everything? Consider a software like YNAB. My partner and I work on computers all day and are a little paranoid about software accessing our bank details, so we use basic Excel spreadsheet saved to Dropbox.

Step 2: Stop wasting food.
This is often the hidden culprit behind high grocery budgets. If you EVER throw out food gone bad, then you've literally throwing money in the trash. You can't afford to do that. You need to be inventorying your fridge and pantry regularly to say 'oh shit, this lettuce is getting soft, guess tomorrow is taco night!'. The other trick is getting creative. Is the lettuce going soft, but you don't have taco shells? Then make lettuce wraps instead! Or whatever. The point is really committing to stopping food waste in every way possible.

Step 3: Decide what specific item to tackle first.
Either choose the easiest or the most expensive things you can reduce. Are you accidentally buying something you don't actually value/need? We used to get milk out of habit, but could never use it up before it went bad; so we stopped buying milk. Are you accidentally buying something brand-name when the generic is just as good? Choose one problem at a time, find a good solution, and then move on to the next item. This reduces the choices you have to make, so you don't burn out.

Step 4: Find long-term solutions and create new habits.
You might have to spend money or time to create lasting savings. Do you need to buy a thermos so you can stop buying coffees? Do you need to buy a cooking appliance so you can stop eating at restaurants? Do you need to learn how to like water so you can stop buying useless juice/soda/etc? Do you need to cook extras for lunch the next day or freezing for future don't-wanna-cook nights? Start eating more of the cheap foods and use expensive foods as flavoring/garnishes/treats.

Step 5: Find cheaper alternatives to what you do need.
Now that you've eliminated the low-hanging fruit and the unnecessary expensive habits, start learning the prices of your groceries. Now that you know what things usually cost at your common store, pay attention to when things go on sale there and stock up then. Now that you're familiar with that store, look around at other stores to figure out if they sell it cheaper. Find ways to make your ingredients cheaper. Do you like to use broth in meals? Buy a whole chicken, eat the meat, make your own broth with the bones.


MMM suggests your grocery budget should be ~$150 per person, per month. If you can achieve this habit before the baby comes, you'll be in a MUCH better position to weather any storms.

[rduncan1216]

Your groceries, eating out, and "misc" add up to the cost of your pricey lease! This is something you can start fixing NOW, which will give you a confidence boost and build up that critical emergency fund before baby arrives.

Sandia:

Thank you for your reply.  We agree that the lease is a bit high and we will be moving as soon as it is up.  The bright side of the lease is that the utility cost of our complex is extremely low.  I put $100 for electricity in my run-down but I haven't actually paid more than $75 since we moved in.  This is our only utility expense.

Cell phone can be reduced.  I get a good discount and as such have allowed it to inflate a bit because I'm carrying my parents and my brother on it (they all pay their way, and honestly I'm the one that is too liberal with the plan).

Food is definitely our biggest area of opportunity.  I think that $300 is a bit of a stretch for us simply because I include the cat and dog food, as well as household items like paper towels, toothpaste, etc.  That being said, I think that we could get it to $400 with some effort.  As far as eating out, that is just us indulging a vice.  We love to eat out and have a beer, and what gets us in trouble is just what you said: "Don't wanna cook nights"

Again, thank you, you gave me some good ideas.

[rduncan1216]

No one has mentioned 401k yet.  I am currently not contributing...should I leave my contribution at zero?  Or contribute enough to get the match?  My employer offers a 6% match.

[rduncan1216]

Here is a quick rundown of a thought experiment I did with my wife a few days ago (I was thinking about food stamp amounts which I think are $125 per person per month):

Wow.  I guess I forgot where I was posting, lol.

You're definitely right about a simple diet being affordable. I began eating oatmeal in the mornings this month and definitely see the difference already in our cost per day (helps me to break up the goal into smaller chunks).

I think the challenge with us will be balancing the frugality with our love of cooking and variety.

However, simplifying as many meals as we can and doing fewer "fancy" meals will save a ton of money, reduce stress of having to figure out food, and make the times when we do get to cook together on a "fancy" meal that much more enjoyable. Thank you.

[Goldielocks]

For career, two options jump to mind:

Retail management (and up)
 and
Sales (Business to Business type sales, like selling robots or sensors or IT equipment to manufacturers).

Thanks for your reply!

I think that of those two options, retail management is the most feasible.  I don't know how I would feel about the travel required for sales, BUT I want so badly to get out of retail.  I have 10 years of experience now, and I feel like I'm getting towards the end of my shelf life.

You've come to similar conclusions to me as far as my best options, assuming I decide to forgo further education.

I also came to those options because I used to work for a large grocery retailer as backstage management support, so I saw how they think.... and then and now, I often need to buy equipment and technology for warehouse and manufacturing and know that tech sales can make very good money without a full degree, but a 2 year training is very valued.

In truth, those two options came to mind because it is the easiest for your wife, and especially likely to allow her to stay home with your baby, if she wants, as opposed to supporting the three of you through 2 years of education first.

Another option for you is to join a technologist association like ASET, or IEEE as a technologist, and start applying with that to design and manufacturing firms, electric utilities (meter installation, etc)...  a bit more of a leap, but also likely no more school needed to change career for you....

[Sandia]

Your groceries, eating out, and "misc" add up to the cost of your pricey lease! This is something you can start fixing NOW, which will give you a confidence boost and build up that critical emergency fund before baby arrives.

Sandia:

Thank you for your reply.  We agree that the lease is a bit high and we will be moving as soon as it is up.  The bright side of the lease is that the utility cost of our complex is extremely low.  I put $100 for electricity in my run-down but I haven't actually paid more than $75 since we moved in.  This is our only utility expense.

Cell phone can be reduced.  I get a good discount and as such have allowed it to inflate a bit because I'm carrying my parents and my brother on it (they all pay their way, and honestly I'm the one that is too liberal with the plan).

Food is definitely our biggest area of opportunity.  I think that $300 is a bit of a stretch for us simply because I include the cat and dog food, as well as household items like paper towels, toothpaste, etc.  That being said, I think that we could get it to $400 with some effort.  As far as eating out, that is just us indulging a vice.  We love to eat out and have a beer, and what gets us in trouble is just what you said: "Don't wanna cook nights"

Again, thank you, you gave me some good ideas.

Exactly, food is your best opportunity right now. Other things might be on your mind (eg lease, etc), but it will take time to implement, so the sooner you improve the food and misc categories, the sooner you can fix everything else as people mentioned.

If you start off thinking that your goal is too difficult, then you won't achieve it. Facepunch! Use the power of optimism: there are hundreds (thousands?) of people on this forum - not to mention around the world!! - who prove every day that this kind of spending is not only achievable, but worthwhile. It might take you some time to reach the goal, but it is absolutely the right goal to try to work towards.

Remember, you don't have to fix everything all at once, but every single penny you save on groceries is greater financial security for your wife and baby.

[Dicey]

No one has mentioned 401k yet.  I am currently not contributing...should I leave my contribution at zero?  Or contribute enough to get the match?  My employer offers a 6% match.

That was the first thing that jumped out at me, but I wanted to read all the other posts before chiming in. You are leaving considerable money on the table, which is an inexcusable mistake.  Fix it today. Don't think about it, just enroll to get the full match. Crucial to get this done before close of business today.

Next, iIgnore this if spouse has already conceived. If so, Mazel Tov!) Your wife is only 26. Having a newborn baby is super stressful. It will be so much easier if you are on solid financial footing. You have SL debt, no EF and aren't contributing to a 401k that has a 6% match. How are you going to save for college? My STRONG advice is to wait a year or two to conceive. In the interim, figure out the work you want to do, kill the car loan, get an EF, save enough for your pregnancy OOP expenses, do the 401k, do Roths for each of you, move to a cheaper apartment.

The sequence you are proposing is sub-optimal at best. If you want to avoid getting trapped in a dead-end job you hate, buried under mountains of debt, it makes a lot more sense to figure this other stuff out first.

I'm curious to know about your home buying/home selling chain of decisions. I suspect there are lessons to be gleaned from that experience. 

Okay, go set up your 401k, then report back. Let your accountant know so you can tweak your withholdings for next year. Because contributing to a 401k lowers your taxable income, you'll barely see a difference in your net pay. Go!

[rduncan1216]

I'm curious to know about your home buying/home selling chain of decisions. I suspect there are lessons to be gleaned from that experience. 

Okay, go set up your 401k, then report back. Let your accountant know so you can tweak your withholdings for next year. Because contributing to a 401k lowers your taxable income, you'll barely see a difference in your net pay. Go!

Thank you so much for replying!

First, we have conceived, we just found out a few days ago.  We are really excited, and I'm hoping that the reality of this is what we need to kickstart our discipline into action.  That being said, I feel like I should contribute to 401k anyway, and reduce expenses to compensate for that and for rebuilding the emergency fund and paying down debt.

After talking with my wife, we see two options:

1) Reduce expenses, cutting heavily; begin contributing to 401k; use the savings to build up a large emergency fund before baby arrives.  Once baby is here safe, payoff car and leave $1000 in EF.

2) Reduce expenses, cutting heavily; begin contributing to 401k; use savings to build up $1000 EF, and pay off car before baby arrives.

I'm leaning towards option 1, wife is leaning towards option 2.

And if I'm making a huge mistake by contributing to 401k anyway, please chime in.

As for the house, there was definitely a lot learned.  I bought the house in 2012, before I was married, and I was making better commission, grossing about 60k per year.  Money was nowhere near as tight because it was just me.  I goofed up and bought a bigger house than i needed, on a 30 year fixed.  As I grew in knowledge about finances and debt, and also got married and started thinking about a family, we decided to get rid of the mortgage and the expense of owning a house.  There was going to be needed work cutting down trees that was going to cost multiple thousands of dollars which I simply didn't have, so I thought the wise choice was to get out before I got really sunk.  On top of all this, my wife and I want to (eventually) buy something a bit smaller that we pick out together.   Didn't have a ton of equity so basically broke even with the sell.

You guys are seeing a culmination of a few years of frustration over finances because I feel like we KNOW exactly where our pitfalls and problems are.  I know that I need more income but feel stuck and confused because all I've ever done is retail and have no clue the best way out of it.  Realizing now that this probably isn't going to happen at this point.  I'm trying to move past the stress and regret of these decisions and move forward in a way that relieves anxiety in the household and gives my baby and my wife the opportunities they want in life.

[Dave1442397]

No one has mentioned 401k yet.  I am currently not contributing...should I leave my contribution at zero?  Or contribute enough to get the match?  My employer offers a 6% match.

Because contributing to a 401k lowers your taxable income, you'll barely see a difference in your net pay.

Exactly! You'll be amazed at how little difference it makes. Get your withholding adjusted so that you're as close to zero at tax time as possible.

[thegradwife]

You guys can totally make this work. My husband and I make about the same but we have a 4 year old with another on the way. We make $52000 a year and our expenses are about same though our rent is about $300 more.

One big thing is your wife can work and stay with the baby all the time. I started taking nanny jobs when my baby was 6 months old. I started getting paid $8 an hour which sucked, but I liked getting out of the house and I got free lunch. The few hundred I made from this actually allowed us to pay off all our debt. Another option is working somewhere that has really early or late shifts. I currently work very early mornings so my shift is done when my husband goes to work. This lets me still pull in $10,000 a year while being home with my kid. I also have another side job as last minute babysitter at night, which pays really well thanks to my nanny experience. Without me working, we only pull in 32,000 which can pay all of our bills, but sucks and is stressful.

Food cost for us drops a lot when I'm home, since I have more time.

Our kid has been really cheap. We got a lot off hand-me-downs and freecycle. Including the extra money for a second bedroom and tax breaks, our kid has been about $1,500 a year. They really don't need much and if you avoid daycare, it's really not too bad.

I'm on an iPad, so I can't see your post again, but if you have two can I'd get rid of one. One car life has saved us a lot of money.

And lastly, when we first had our kid and I wast working for the first 6 months, we found that putting money into our emergency fund after rent made us have to cut back on driving, food and eating out. The money wasn't there so we learn to just deal with it.

Hope this helps!

[rduncan1216]

thegradwife:

It certainly helps, thank you so much. I really appreciate everyone's input. You've all helped me look at this in a positive way to help move forward. I'll keep you all posted. 

[Dicey]

I'm curious to know about your home buying/home selling chain of decisions. I suspect there are lessons to be gleaned from that experience. 

Okay, go set up your 401k, then report back. Let your accountant know so you can tweak your withholdings for next year. Because contributing to a 401k lowers your taxable income, you'll barely see a difference in your net pay. Go!

Thank you so much for replying!

First, we have conceived, we just found out a few days ago.  We are really excited, and I'm hoping that the reality of this is what we need to kickstart our discipline into action.  That being said, I feel like I should contribute to 401k anyway, and reduce expenses to compensate for that and for rebuilding the emergency fund and paying down debt.

After talking with my wife, we see two options:

1) Reduce expenses, cutting heavily; begin contributing to 401k; use the savings to build up a large emergency fund before baby arrives.  Once baby is here safe, payoff car and leave $1000 in EF.

2) Reduce expenses, cutting heavily; begin contributing to 401k; use savings to build up $1000 EF, and pay off car before baby arrives.

I'm leaning towards option 1, wife is leaning towards option 2.

And if I'm making a huge mistake by contributing to 401k anyway, please chime in.

As for the house, there was definitely a lot learned.  I bought the house in 2012, before I was married, and I was making better commission, grossing about 60k per year.  Money was nowhere near as tight because it was just me.  I goofed up and bought a bigger house than i needed, on a 30 year fixed.  As I grew in knowledge about finances and debt, and also got married and started thinking about a family, we decided to get rid of the mortgage and the expense of owning a house.  There was going to be needed work cutting down trees that was going to cost multiple thousands of dollars which I simply didn't have, so I thought the wise choice was to get out before I got really sunk.  On top of all this, my wife and I want to (eventually) buy something a bit smaller that we pick out together.   Didn't have a ton of equity so basically broke even with the sell.

You guys are seeing a culmination of a few years of frustration over finances because I feel like we KNOW exactly where our pitfalls and problems are.  I know that I need more income but feel stuck and confused because all I've ever done is retail and have no clue the best way out of it.  Realizing now that this probably isn't going to happen at this point.  I'm trying to move past the stress and regret of these decisions and move forward in a way that relieves anxiety in the household and gives my baby and my wife the opportunities they want in life.

You're welcome, and congratulations! I am strongly in favor of option 1 as well. If you pay off the car first, then need the money, you could pull another loan on it, but what an unnecessary hassle! More money in the bank always equals more options.

Put another way, by not saving enough to get the  401k match, you're losing about $3,000 on a 50k income per year. Plus, you're paying tax on $3k in income you don't have to, plus the nothing you're saving is earning nothing, so money is being pissed away in several directions. By contrast, 4% on a $4800 car loan is only a couple hundred bucks a year. Say $300, just for grins. See where I'm going with this? 

BTW - Sorry about the house. What happened to your down payment money? BTW, shit always goes wrong with houses. Don't let it scare you. You Tube and the Fabulous MMM Forum Folk are here to help.

BTW 2 - Retail sales translates well to other sales. I spent most of my career as a manufacturer's rep, where experience and results generally matter more than college degrees. Way back when, I found a headhunting firm that specialized in Sales. It jump started my path to FIRE.

Random weirdness - the guy who owned that headhunting firm now sells real estate in Palm Springs/Palm Desert. We chose him by reputation to be a buyer's agent for us last year. Didn't make the connection until we were out looking at houses, because I worked with one of his people, never met him or even knew his name. Small world. Yeah, I'm now FIRE and out buying rental property in a resort area because someone in his firm hooked me up with a good outside sales job thirty years ago. Crazy.

[katscratch]

I just bought cat food and dog food from Jet at $1.67/lb each where our cats and dog eat about 1/2lb per day (1/2lb for one dog and 1/2lb for two cats).  There are far cheaper food choices, but I like to splurge on the food we get them (Taste of the Wild which appears to have a decent ingredient list and high protein values).

If you have a Costco near you, I've read that their Nature's Domain food is TotW rebranded.  At any rate the ingredients are identical and they're processed in the same factory.  At my Costco the dog food is $1.06/lb.  The cat food was also a similar decrease in price.


rduncan1216 I don't have any new suggestions but CONGRATULATIONS on your pregnancy!!

[chasesfish]

rduncan:

I'm late to this thread, but I hope I can help:

1) Like others have said and you've pointed out, you need to stop "eating out".  You not a midevil king that needs peasants to prepare your food for you.

2) What are you considering doing to get your income up?  I think you should consider one of two things, you live in the same hometown as a large financial institution with a really good reputation to work for.  You should try to get on there.   You also may want to consider relocating to a larger city with better salaries.   I moved to Atlanta at 25 in B2B sales, it did incredible things for my income.

3) With whatever you do career wise, go find a great boss/mentor to work for that recognizes hard work and hustle.   If you can manage for a cell phone company, you'd be much better off in B2B sales.   You can figure out if it'll require a degree or not after you get in.

[2Birds1Stone]

I would second what chasesfish said!

I was a retail store manager for 4 1/2 years. In December of 2014 I took the plunge and got my foot in the door doing B2B sales for a software company.

This is what happened.

Year Gross W-2 Income
2016   ~$170,000
2015   $109,000
2014   $49,000
2013   $53,000
2012   $52,000
2011   $39,000
2010   $25,000

I have no college degree, and the industry in which I managed a retail location, had nothing to do with technology or software.

If you have a knack for business, are coachable, personable, and have a strong drive to succeed I think you would do well in B2B sales.

I can't think of another career path that can provide such leaps in income without lots of schooling or retooling.

[chasesfish]

I would second what chasesfish said!

I was a retail store manager for 4 1/2 years. In December of 2014 I took the plunge and got my foot in the door doing B2B sales for a software company.

This is what happened.

Year Gross W-2 Income
2016   ~$170,000
2015   $109,000
2014   $49,000
2013   $53,000
2012   $52,000
2011   $39,000
2010   $25,000

I have no college degree, and the industry in which I managed a retail location, had nothing to do with technology or software.

If you have a knack for business, are coachable, personable, and have a strong drive to succeed I think you would do well in B2B sales.

I can't think of another career path that can provide such leaps in income without lots of schooling or retooling.

To add on to this, my trajectory was almost identical.  I earned $50,000 at 24 and $160,000 at 29.    Be coachable, have a strong desire to succeed, and focus on solving client's problems.

[katscratch]

Slow2Fire thank you for clarifying.  Now I don't feel as bad for keeping my cat on his spendier food :)

Ok no more sidetracking from me!

[rduncan1216]

Sorry it took a while for me to get back to respond, thank you for your replies everyone!

2) What are you considering doing to get your income up?  I think you should consider one of two things, you live in the same hometown as a large financial institution with a really good reputation to work for.  You should try to get on there.   You also may want to consider relocating to a larger city with better salaries.   I moved to Atlanta at 25 in B2B sales, it did incredible things for my income.

The B2B sales is something I will look more closely at.  I would love to find something like that, I suppose it will just take some digging and networking.

I had considered getting on with one of the financial institutions that are around, probably starting at the bottom and working up, but I don't think that is feasible right now because I'd assuredly be taking a pay cut.

Also, my wife and I have been talking, and she seems to be at a point where she wants to increase her income as well, because her photography business isn't doing what she had hope.  She is looking at something that she can quickly get certified in and boost her income, and is ok with working to help make our goals easier to achieve for the baby.  She was looking at something like becoming a dental hygienist.

This is awesome.  Thank you so much.  This thread has inspired us to really cut our spending; I've already killed hulu and cut my internet price by about $20.  Next year my insurance premiums will drop $20 per month.  We haven't eaten out since posting, and have only spent about $75 on groceries through the first week of December.  If we keep this up we will be able to have a chunk of money for baby, and probably pay for a couple classes for DW.  Also bumped contribution to 6% to get match in 401k 

[Freedomin5]

Freedomin5:

Thank you for your reply!

We have already started isolating areas of opportunity in our budget, and you bring up some good points.  Something we had not considered was selling the car that has the note on it (I could probably sell it somewhere between 4.5-6k) and buying something with cash.  Not sure if it makes sense to do that or just hustle through the loan because it's a good reliable car.

Leaning towards staying local for the reasons you mentioned.

We have taken Dave's course, and we've been "doing his plan" for over a year now, and we are not getting anywhere.  I ultimately chalk it up to not being disciplined enough, and not being able to tell ourselves "no".  That was part of my reason for wanting to post here and get involved with a community that supports a frugal lifestyle.

Once we have gotten rid of debt, would you recommend investing in school to switch careers, or use the one that I have now to build my 'stache?  You mention tuition reimbursement, and my current employer offers it, with strings attached.  I wasn't sure that I wanted to get involved with that.  Although, I work for an extremely large company, and the sky is the limit as far as opportunities to use that degree somewhere else besides retail.

Depends on how much you tolerate your current job, and how likely you would be to find a job you enjoy/tolerate in your new field after you graduate. If you get your degree and can keep your job (or be promoted to a job you would enjoy more) at your current company (with a corresponding pay raise, of course), then I don't see why not, especially if your employer is paying for the degree. Personally, I'm against taking on ridiculous amounts of debt to fund education - I completed all three of my degrees debt-free by using my savings, applying for scholarships, and working part-time. However, if "investing in school" means investing time and not money (well,except for opportunity cost of lost salary), then you will have to make the tough decision regarding whether school will open doors to pursuing a job that you find fulfilling, and whether the opportunity costs are worth the potential benefits.

However, since you found the original college experience overwhelming, have you considered also the emotional aspects of returning to school, namely, how you would navigate the experience differently the second time around to avoid burning out again? What was it about the first experience that made it so terrible, and what can you do to mitigate the risks the second time around?

Just from your brief blurb about university, it sounds like there is a lot of fear surrounding it. You'll need to get a handle on that and work through those fears and anxieties (and part of working through means being able to honestly answer the questions listed above). Otherwise going back to school may trigger those fears again and keep you from pushing through when the going gets tough.

You will also need to consider the time commitments given that you will have a young family to care for.

[chasesfish]

One other suggestion - Can you take your retail/retail management experience and get into a company that does more B2B sales but has a retail presence?

I'm thinking of places that sell Building Supplies both retail and commercial - Sherwin Williams, Furgeson enterprises, ect.  There's good money in the construction supply business if you can hustle and go talk to people.

[rduncan1216]

Depends on how much you tolerate your current job, and how likely you would be to find a job you enjoy/tolerate in your new field after you graduate. If you get your degree and can keep your job (or be promoted to a job you would enjoy more) at your current company (with a corresponding pay raise, of course), then I don't see why not, especially if your employer is paying for the degree. Personally, I'm against taking on ridiculous amounts of debt to fund education - I completed all three of my degrees debt-free by using my savings, applying for scholarships, and working part-time. However, if "investing in school" means investing time and not money (well,except for opportunity cost of lost salary), then you will have to make the tough decision regarding whether school will open doors to pursuing a job that you find fulfilling, and whether the opportunity costs are worth the potential benefits.

However, since you found the original college experience overwhelming, have you considered also the emotional aspects of returning to school, namely, how you would navigate the experience differently the second time around to avoid burning out again? What was it about the first experience that made it so terrible, and what can you do to mitigate the risks the second time around?

Just from your brief blurb about university, it sounds like there is a lot of fear surrounding it. You'll need to get a handle on that and work through those fears and anxieties (and part of working through means being able to honestly answer the questions listed above). Otherwise going back to school may trigger those fears again and keep you from pushing through when the going gets tough.

You will also need to consider the time commitments given that you will have a young family to care for.

Thank you for your reply!  As far as actually attending school, all of my anxiety and stress I dealt with in the past are gone.  I am fully confident in being able to succeed in school at this point in my life, simply because I have matured and changed mindset so much over the last decade.  The only anxiety I face is that of the process of applying, transferring credits, and so forth.  I'm not proud of my performance the first time around, and it stresses me to know that going back requires revisiting transcripts and so forth.

As an update to everyone, my wife and I are doing much better since making this post and reading through the comments!  So far this month, we have spent only $335 groceries, household goods, and the few times we have eaten out in a pinch.  This is a huge difference for us!  I have already set aside $1200, and hope to set aside a bit more, to get our savings started rolling into next year! 

I'm having one of the best months every as far as my work performance.  I really took the advice to heart, and I'm working towards earning a promotion into management in the future, or finding a b2b sales position.  I have been working to improve my performance and outlook.  I'm in a much better head-space and feel very fortunate.

Thank you to everyone!