The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: takemewest on March 21, 2016, 09:06:13 AM
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Long story short, but my husband found out his admin contract at a local university isn't getting renewed (in the end, it's for the best and wasn't a great fit). He'll be out a job mid-May and plans to use his GI bill to get his teacher licensure and teach science (something he's always wanted to do).
Before I lay out my question, here's a financial recap of what our situation will be in May, once he has no job:
- Emergency fund of $10k, which would last us about 5 months if we had no income coming in
- My job pays enough to cover monthly expenses and contribute to 401k, but no other savings
- No debt except mortgage, which is $1100/mth[/]
- A generally healthy retirement situation for our age—both 31—with a little more than $110k across accounts
Our short term dilemma, and what I'd love some input on, is this: I have a summer hustle lined up in addition to my normal income, and we planned to use the extra income to do a few renovations on our house (new windows and new floors--the current carpet is disgusting from the previous owner's pet messes).
Now that we're down an income, my spouse is nervous about spending that money (and yes, I totally get why). However, I'd like to go forward and do it while we have the money because if, for example, he has a very hard time finding a job once he finishes his degree and we decide to sell or move, we need the upgrades for a competitive price on our house. While he's back in school, there won't be any foreseeable way to afford these upgrades once the summer gig has passed, and since we have a decent emergency fund (and my job is quite stable), I'd like to just go for it. Am I being an idiot? Our house is the classic "worst house in the best neighborhood" scenario, so I think these upgrades would mean a big return if we had to sell (our realtor agrees, btw). Of course, funneling it straight to the emergency fund would give us more security for a year or two while he's back in school.
Thoughts, other ideas or suggestions? Face punches? I should mention that we've of course modified other life expectations, like changing travel plans, etc., so that we aren't spending excessively. This is such a huge 180-degree turn from where we were last time I posted (wondering if we were doing the right things with DINK status), and now I feel a bit shell-shocked in making the best financial decisions.
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I am having a hard time understanding why you will have the money to do it now, but not once he starts school? Why not keep the money in a high interest savings account, cd, or money market account in the meantime? If an emergency comes up, you have the money. If it doesn't, and you are thinking of selling in the near term, then go for the renovations at that time. An increase in home equity doesn't really do you a whole lot of good until you sell.
However, that's just me. My wife would probably not be able to mentally deal with terrible carpet and the likes. So I'd probably end up with a compromise. Do a couple of the unbearable items now, and bump up our emergency/home improvement fund with the rest.
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You're right---I didn't really explain that well. I guess I meant that we seem to be sitting on polar opposites--either we use it or we save it, so if we save it, we "wouldn't have it" to use later because it would be money that is off limits. A middle ground option is probably much more manageable. These are the aspects of money management that are admittedly VERY hard for me because both my husband and I are black/white people who have a hard time seeing the options in between that sound simple to others. Thanks!
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How much money
However, that's just me. My wife would probably not be able to mentally deal with terrible carpet and the likes. So I'd probably end up with a compromise. Do a couple of the unbearable items now, and bump up our emergency/home improvement fund with the rest.
Compromise is what I was thinking, too. That carpet sounds pretty bad.
As for remodeling for the purpose of selling later - my understanding it that it usually does not return more than you put in. http://money.usnews.com/money/personal-finance/articles/2012/10/25/renovations-that-yield-the-best-return-on-investment (http://money.usnews.com/money/personal-finance/articles/2012/10/25/renovations-that-yield-the-best-return-on-investment) - for instance, a kitchen remodel returns on average 66% according to that source. This may be better if you do a competent DIY project, but it seems difficult to actually have a remodel be an investment. It would likely make the house easier to sell, though, as many people want a "move-in ready" house.
When are you planning on selling?
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Is DH on the Post 9-11 GI Bill? If so he should be receiving BAH while in school assuming he's going full time, so that would be an income coming in from him.
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Felicity--My brother installs hardwood floors, so we'd be able to DIY that part (just not the windows). I'm hoping that would up any return. We don't have any plans to sell, but we both feel like we that would be the first option if this new transition doesn't go as planned and just want to be prepared.
We've watched all of our parents on both sides make really poor financial decisions because they weren't willing to let go of a house and rent in tough times, so I guess we're probably overcompensating for those lessons by jumping the gun on this a little! Sometimes the boyscout-always-be-prepared motto takes us to task until we remember to calm the hell down. Thanks for the input! And yes, the carpet is disgusting. As the weather warms up, there's a constant smell of wet dog/animal pee in our lower level. Horrendous.
And yes, MishMash--he will get BAH while in school! Holy cow, I didn't even think of that. Wow. I'm sure he mentioned it at some point but it didn't really sink in that this would be income while he's in school. That does change things.
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You can actually check how much it will be by looking up a BAH calculator online, it's by zip code. If he's getting BAH and you have the side hustle I'd say do the floors, you can do it relatively cheaply, it has a bigger bang for it's buck aesthetically if you have to sell fast. I'd hold off on the windows unless your heating/cooling bill is insane until you are at least a few months into the new "normal" and can adequately judge if they 1. Need to be done and 2. if you are comfortable enough financially in an emergency to kick off the thousands it will take to do them.
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Speaking of middle-of-the-road solutions... Have you considered having the carpets cleaned as a short-term solution? Making the carpets tolerable might be low cost for the short term. I found a good used Bissell steam cleaning carpet shampoo machine on Craigslist with a broken drive belt for $35 with attachments & extra shampoo, replaced the belt ($3.98 from Amazon), and my son uses it to clean the neighbors carpets for $50/cleaning. It's especially nice on a hot spring day when the drying carpet cools down the room.
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If the carpet is downright nasty, yes, replace it. Otherwise, don't do rennovations around unemployment.
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I might do carpet if it was really that bad...but only if it was really bad and smelly and beyond a steam clean. Def not anything else though until another source of income was lined up.
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I second what everyone else seems to be saying...get rid of the nasty carpet. Make sure you treat the floor underneath before you put down new flooring.
I've had to deal with animal urine in rentals and it's downright disgusting. I would remove all the bad carpet and treat the floors. Leave the floors open for a couple of days to make sure that you got rid of all of the smell. Sometimes it takes multiple treatments if the urine made it's way into the floor boards. I don't know what's under the carpet in your situation.