Author Topic: Spend less or earn more or maybe both?  (Read 6039 times)

lackofstache

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Spend less or earn more or maybe both?
« on: September 24, 2013, 09:55:34 AM »
backstory:

I'm 29. I work my wife is a SAHM for our two children; ages 5 & nearly 3.

I graduated w/ a BFA (I know, I know, but very little debt to do it) in 2008. My wife (then friend) and I decided it best for her to stop school when she became pregnant, I, too was in school and we were in seperate towns. She was borrowing $ to stay in school, also going for a BFA.

I've worked several jobs since graduating, sometimes as many as 4 at once, but currently have only 1 full-time job. My wife works 2 days a week at a local farm co-op which brings us lots of fresh veggies, chicken & pork.

I will make ~$60K this year at my current gig, with about $5K coming in from design jobs on the side.

My wife was diagnosed w/ cancer in late 2012, has recovered nicely, everything is fine at the moment. We were ok financially until 2011 when we decided to buy a home, since then, we've been able to save very little. When she was diagnosed in 2012, I started spending like crazy, somehow a mental reaction to the circumstnaces and a change in thought about length of life and what it meant to "do what you want" while you're here.

Anyway, since June, we've rebounded and got some fresh goals w/ obtaining freedom.

where we are financially:

Debt:
Mortgage: $83K ($570/mo includes tax, insurance & stupid stupid PMI)
car: $7000 ($268/mo) 2006 Mazda5, low miles, averages about 25 mpg city
student loan me: $3K ($60/mo @ 3%)
student loan her: $8K ($110/mo @ 6.25-7.5%)
loan from brother: $8K ($234/mo @ 4%)

Bills:
Phones: $100/mo for two (part of a family plan, will switch when the break even point for cancellation fees works out; about 6 months from now)
Internet: $43/mo
Gasoline: $100/mo
Car Insurance: $20 & $45/mo
Life, health, etc insurance: $200/mo
Groceries: $450 (high, I know, especially considering we work for food as well. This is down from $1,000 and we're sorta stuck. We don't eat much in the way of processed foods, she cooks constantly & uses high quality ingredients. We think of food as our biggest weakness)
Eating Out: $100
clothing avg: $50/mo total
kids avg (classes, toys, parties, etc): $40/mo
yoga: $20/mo (online; we both use it multiple times a week)
Netflix: $10/mo
Spotify: $7/mo
Bikes maintenance/hobby: $30/mo (I flip bikes occasionally, have made $500 this year off parts & bikes)
Home maintenance/upgrades: $100/mo

Current Savings:
Roth: $2K
$ Market: $500
Checking: $3500

We are currently paying an extra $1,000 to debt and will snowball; (currently the car, next will be my brother, her loans, my loans, our mortgage)

We have lowered our monthly expenses dramatically over the last 3 months and still have a decent way to go, I know. I should note in addition to the Mazda, I have a 1994 Ranger w/ 95,000 miles that I've driven all of 2500 miles in the last year. I ride the 9.5 miles one way to work 4-5 days a week, every week.

Are there any things that stand out that we should cut? Should I look for another position w/ more income possibility?
Should we sell either of the cars?

I'm at a loss for our next move...

Left

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Re: Spend less or earn more or maybe both?
« Reply #1 on: September 24, 2013, 10:03:41 AM »
Why do you need two cars? The grocery might be the largest bill, but it seems reasonable for 4 people. I see eating out to be something that you could cut back on. How do you do yoga online and why would it cost money? I'd cut out spotify for another free music app.

I see nothing wrong with your BFA, if you were holding it against you from how it sounded.

at ~$60k/year, you're spending about half of what you make (including what you are repaying), are you using the other half to save or paying back debt? You said you pay back additional $1k each month, unless my math's off somewhere, it sounds like you have a spare $1k missing in the equation that you could be saving
« Last Edit: September 24, 2013, 10:07:42 AM by eyem »

lackofstache

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Re: Spend less or earn more or maybe both?
« Reply #2 on: September 24, 2013, 10:43:11 AM »


Eyem,

Thanks for the reply.

We don't NEED two cars; my truck was a gift, costs $300/yr in insurance, taxes, plates, etc & saves $12/mo on our other car (multi-car discount) I use it to get free dirt, mulch, etc. which would cost a fair amount, but I'll probably sell before winter as that ties up $2,000-2,500 in capital.

Yoga classes online are nice. We pay, because there aren't any free sites we've found to be as good. When my wife was going to physical classes they were closer to $15-25 per class depending on location, time, etc.

Spotify will go.

$60K is gross, net is closer to $4200/mo. We've got $1242 going to debt repayment, $1315 towards monthly purchases, $1,000 extra towards debt, $200 towards Roth & $150 towards Money Market. That leaves ~$300/mo that stays in checking in case next months commission isn't as high. Anything above $3500 in checking at the end of the year will be used to pay down debt.

Rebecca Stapler

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Re: Spend less or earn more or maybe both?
« Reply #3 on: September 24, 2013, 10:52:02 AM »
Congratulations on your wife's recover!

1)The truck is up to you -- whether the $300/yr is worth the free dirt, mulch, etc.

2)Spotify -- glad to see you're already cutting it!

3)Dining out -- we recently cut this out of our budget. We found that half of our dining out budget was buying take-out when I was too tired/lazy to cook dinner after work. The take-out we got was never as healthy as our normal meals, too, so it was a bit of a dopeslap: "WHY are we spending more to eat poorly?!" So, I started making freezer meals that I can pull out of the freezer at the last minute for dinner on those nights. Meatballs are my typical go-to.

4) Is your wife interested in learning how to "coupon"? We save a ton of money timing our grocery purchases with sales and coupons. I think there is a link in my signature with my best couponing tips for beginners. We eat whole and organic foods and keep our budget for 3 under $600/mo. (we don't get any freebies from a co-op!) ETA: I ask whether your wife wants to learn, because she SAH, but if you're the shopper then by all means ask yourself if you want to learn!

5) You mentioned design freelancing, and wondering if you can make more $$. Yes. Yes, you can. There is a big demand for graphic designers, especially those who can program (so says my programmer spouse, who is trying to get me to learn!) My spouse picks up freelancing gigs whenever he goes to a conference, and he also hears about a lot of opportunities through a local MeetUp group devoted to Python (the language he programs in). If you're interested in learning how to program, he says that Python is very easy to learn and is in demand.

Mega

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Re: Spend less or earn more or maybe both?
« Reply #4 on: September 24, 2013, 12:35:40 PM »
Get your wife to run a home daycare (depending on legal requirements in your state). Depending on daily reate, it could be an extra 10K a year ($40/ day) PER child.

Alternatively, both of your children will be in school soon. Have you talked to her about going back to school / work?

What is the delivery cost for mulch / dirt, and why do you need $300/x many loads per year?

Please remember debt principle repayment is the SAME as saving money for retirement.

lackofstache

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Re: Spend less or earn more or maybe both?
« Reply #5 on: September 24, 2013, 02:03:28 PM »
So I posted previously, but maybe not clearly, the truck costs $300, but saves $144 on insurance on our other vehicle. Net cost $156. It has saved me that much in mulch, dirt, bricks, free stuff this year. I'm still going to sell it and use the money to pay down debt.
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Stan: I believe you're right in regards to eating out, we'll cut it down to $50 for October and see how we do.

My wife is NOT interested in couponing; I would be, but I don't do the shopping & I'm horrible w/ impulse purchases of food, I'm better off letting her get what she gets, she has stayed within whatever budget we've alotted, I'm just unsure of how much to alot, we'll leave it be for now.

My wife actually just e-mailed me as she landed a design/branding job for a restaurant. She'd been discussing, but closed the deal today. That should be between $5-10K over the next 6 months. I don't think I mentioned she also is a big part of the design income. I'm currently working in insurance and financial services and am studying for my securities licenses, so learning coding is out for the next few months and I'm not sure I have the interest to pursue it anyway.
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Mega: The daycare isn't feasible for us currently, as I've clarified now, she does bring in income and saves $ through the farm. I grew up in a daycare (my mother's) and there are far too many liabilities associated to make it worth it for me at this time.

Our children may or may not leave home for school, fwiw. Either way, she probably won't be returning to school immediately, if she does the art/design full time on her own, I'd guess she would be able to bring in $25-35K/yr in addition to the farm. That would speed up FI pretty quickly and keep us from having to spend on tuition.

Delivery cost is negligible, but the cost of mulch+delivery is much more than free mulch w/ a truck that comes out to <$15/mo. Again, I'm thinking I'll sell the truck, anyway.

I do realize debt repayment is, in essence, the same as saving.
//////////////////////////////
Anything else I'm missing? Should I just stick to this and see how it goes? No face punches?

lackofstache

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Re: Spend less or earn more or maybe both?
« Reply #6 on: September 25, 2013, 07:25:20 AM »
Interest on the car is 7%. I figured w/ tax deductions on loan interest & the fact it's depreciating, I'd rather pay it off first & have title in hand if we decide to sell for a more fuel efficient vehicle.

Schooling is a concern as the schools near our home aren't great, we have visited & know kids there. There are a few public magnets & charter schools that are of interest, one near my work in particular, but that's 9 miles from home...

We're looking into Costco; right now we buy nuts, OJ, cheese and a few other things once monthly at Trader Joe's. We get most of our chicken & veggies from the farm. Bacon & eggs from a local co-op grocer & the rest from Aldi's. We're really going to investigate our spending this month to figure out what can be cut.

Clothing was a rough estimate, honestly we haven't tracked it terribly well. I buy all my clothes second hand or at TJ Maxx/Marshall's on super sale. My wife only buys a couple pairs of pants & shirts/sweaters per year new & the kids stuff is primarily second hand or gifts.

The yoga is starting to seem crazy when put in annual terms, though it was WAAAAY cheaper than her going to classes, so it seemed like a good deal when we started it, it's just time to take it further. I'll look online for used DVD's, we've maxed out our library renting abilities; did I mention we have a coupla kids? They like books, a lot.

Thanks for all the thoughts on this, I think we'll sell the truck to pay down debt, get rid of yoga & spotify and work on getting food down to $300/mo for October.

I also found out this morning that our porch chairs (purchased for $20 at Goodwill 3 years ago) are worth about $700 in their condition.

Rebecca Stapler

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Re: Spend less or earn more or maybe both?
« Reply #7 on: September 25, 2013, 12:38:40 PM »

Thanks for all the thoughts on this, I think we'll sell the truck to pay down debt, get rid of yoga & spotify and work on getting food down to $300/mo for October.

Those are great changes. Good luck!


I also found out this morning that our porch chairs (purchased for $20 at Goodwill 3 years ago) are worth about $700 in their condition.

If this were me, I would consider it found money. I would sell the chairs for $700 and find a great deal on another set of chairs that cost less, so I would see a profit. But that's just me!

Mega

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Re: Spend less or earn more or maybe both?
« Reply #8 on: September 25, 2013, 12:57:27 PM »
I didn't see that you have a farm. It likely makes sense to keep the truck / get a trailer, if you can get free mulch / compost.

lackofstache

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Re: Spend less or earn more or maybe both?
« Reply #9 on: September 25, 2013, 01:08:41 PM »
Mega; my wife works a couple days a week at farm co-op. I think I'll sell the truck to pay debt quicker. Once debt is gone, I can decide whether a truck is worth having around. If it is worth having, I can always buy another.

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Re: Spend less or earn more or maybe both?
« Reply #10 on: September 25, 2013, 01:17:43 PM »
if you think the load isn't much for the dirt/mulch, you could haul with the car as well, you may need to make multiple trips though if it's too heavy

willn

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Re: Spend less or earn more or maybe both?
« Reply #11 on: September 25, 2013, 01:34:40 PM »
I get the feeling you won't want to do this but....how much is the car worth?  I'd sell both cars and get a 3K beater.  That's Mustachian.  Then if you save the car payment for a year you can sell the beater for 3k, and upgrade to a 6K car but with no payment.  Or you could pound down another one of your debts. 

Next, (this will get disagreements here) I'd stop funding retirement while you crush the 26K in debt, whoa, without the car its 19K, and you should be able to do that in less than a year.  Yeah you'd miss a bit opportunity in stock but the market is high now anyway, and you'll be reducing your risk. ONce the debt is gone you'll be dumping 2200/month or more toward retirement!

I like the idea of attacking stuff very intensely for shorter periods rather than dragging that debt out two or more years.  Life habits are changed through really getting intentional and seeing big progress fast--that progress teaches you something--how you can make big changes faster than you think.   It helps in a way that isn't obvious at first but can affect other areas of your life, I wouldn't be surprised if you start earning more money because you get more focused.


lackofstache

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Re: Spend less or earn more or maybe both?
« Reply #12 on: September 25, 2013, 02:21:19 PM »
I get the feeling you won't want to do this but....how much is the car worth?  I'd sell both cars and get a 3K beater.  That's Mustachian.  Then if you save the car payment for a year you can sell the beater for 3k, and upgrade to a 6K car but with no payment.  Or you could pound down another one of your debts. 

Next, (this will get disagreements here) I'd stop funding retirement while you crush the 26K in debt, whoa, without the car its 19K, and you should be able to do that in less than a year.  Yeah you'd miss a bit opportunity in stock but the market is high now anyway, and you'll be reducing your risk. ONce the debt is gone you'll be dumping 2200/month or more toward retirement!

I like the idea of attacking stuff very intensely for shorter periods rather than dragging that debt out two or more years.  Life habits are changed through really getting intentional and seeing big progress fast--that progress teaches you something--how you can make big changes faster than you think.   It helps in a way that isn't obvious at first but can affect other areas of your life, I wouldn't be surprised if you start earning more money because you get more focused.




Willn: I DO want to sell the car, it's just a hassle w/ a loan & no title. If anyone has done this, please let me know how you did it. I'm paying it off sooner rather than later so that I can sell it & buy a cheaper car.

The IRA is a Roth; there are two reasons I personally have to continue to contribute at least SOME money, but let me know if I haven't thought well on it: 1) there isn't $5,000 in there, so fees will hit the account if the minimum ($50) isn't deposited on a monthly basis 2) This is acting as an EF in some ways as I can always access the principal, so if this weren't going to the Roth, it'd probably sit in my money maket or checking...

willn

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Re: Spend less or earn more or maybe both?
« Reply #13 on: September 25, 2013, 02:25:42 PM »
Yeah it is a hassle but it's easy enough, call your bank and let them know what you want to do, and you can even do the transaction at the bank.  I know someone who did this some years ago, I don't recall it being too painful.

For the Roth that fee sucks.  I think Vangaurd has a 1K minimum on one of their target Roth accounts, transfer it to them and you can stop.  Vanguard is probably where you'll want to be anyway.  $50 won't change your life too much but we are trying to optimize you ;)  Good luck, I think you're going to do great!


lackofstache

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Re: Spend less or earn more or maybe both?
« Reply #14 on: September 25, 2013, 02:57:27 PM »
Willn, thanks for pushing me on this;

My bank requires a certified check or wire transfer & will release the title within 2 days; probably insufficient for a cash buyer. I'll find a way to get this paid off sooner though.

The Roth; I was incorrect in my assumptions, even w/ the minimum desposit of $50, I'm still paying $10/quarter for the minimum balance fee. I am stopping this, this month; I will use that $ towards the car for right now.

Between selling the truck ($2K), the chairs ($700), $800 in payments from a design job last month & The normal $1268 + $175 from Roth, I should be able to throw $4943 at the loan in October. That leaves $2057 on the loan, if I pay normally, that'll be December when it's paid off. I can sell & have ~$7000 in my pocket, spend $3K and put that towards other debts along w/ the $1268 from the monthly car pay off. This should speed it up by several months.

Recon

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Re: Spend less or earn more or maybe both?
« Reply #15 on: September 25, 2013, 03:10:52 PM »
For the Roth that fee sucks.  I think Vangaurd has a 1K minimum on one of their target Roth accounts, transfer it to them and you can stop.  Vanguard is probably where you'll want to be anyway.  $50 won't change your life too much but we are trying to optimize you ;)  Good luck, I think you're going to do great!

Yep, part of my emergency fund is a Vanguard Roth IRA, and it does have a 1K minimum.  See if you can move the money over to Vanguard and possibly get it into a target retirement fund.

MKinVA

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Re: Spend less or earn more or maybe both?
« Reply #16 on: September 25, 2013, 03:45:54 PM »
I think you are doing great, especially after a health scare for such young people. Look, if you and your wife enjoy the yoga, it keeps her focused on her body (that can be very important as a survivor), keep paying for it. Later, you may find a cheaper alternative. I think right now your wife may really need this steady outlet.

As for eating out, we have an open air mall near us that we would go to with the kids and bring our own food and sit at the tables and have dinner. Sometimes there are even bands playing. This was made easier by the fact that I raised two picky eaters who didn't want restaurant food anyway! At least my husband and I felt we had been "out" for the evening.

lackofstache

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Re: Spend less or earn more or maybe both?
« Reply #17 on: September 26, 2013, 07:52:15 AM »
MKinVA:
We're gonna keep the yoga while looking for cheaper long term options, with the goal to stop paying $20/mo. every month. forever...

In the Summer we go to the local velodrome a lot. It's free to watch & you can bring your own food, booze, whatever. When we have that option, it's usually our "eating out" for the week, with a little food, popcorn & cheap bottla wine, but when the velodrome closes & winter approaches, there are fewer places to go to do this; maybe  the food court at our Art Museum, also free btw.

Thanks for all the kind words & recommendations, I feel I have a better grasp on what needs to be done in regards to our debt & investments. The reason I started the Roth wehre I did, is that it's the only one I know of that can be started for less than $1K. At the time I started it, I wasn't doing well s/ savings & wasn't living the mustachian lifestyle that I'm trying for now. Things have changed, though and I'm looking to switch the current balance to Vanguard and am going to stop contributing to it for a while.

travelbug

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Re: Spend less or earn more or maybe both?
« Reply #18 on: September 26, 2013, 03:14:03 PM »
Wow, you are doing great and it's wonderful to see someone so open to the awesome suggestions that have been given.

That is part of it: be open to a new way of life and embrace the freedom it brings.

With the yoga, can you purchase used Yoga magazines, or borrow books/mags from the library as many of those have full class routines in them. That's what DH and I do. And as you are familiar with the positions you can make up your own routines. Write down some of the ones you like (i draw stick men so I remember them as some of the names are a bit obscure) and then create your own flow.

Good luck OP. Looking good.