Case Study: Hubby just lost his job

[Metalsatsuma1212]

Hello wonderful Mustache Community,

I am a long time reader (lurker) and recently saw a recommendation to post a case study in order to see the magic happen and I figured there is no better time for a little magic in our life then after my hubby was fired.

Here is the nitty gritty:

Debt:

Account Name   Balance   Interest Rate
      
Mortgage               179,697     4.75
Student Loan       51,040     5.75
2014 Mustang       16,514     2.99
2012 Escape        3,584     2.99

1938.19 a month


Bills   

Medical     130
Gas             121.63
Electricity     100
Cell Phone   127.26 (for two phones)
Hoa              54
Water     48.50
Garbage     49
Life insurance   34
car insurance    180
internet     90
Netflix      11.99

1075.88 a month

Assets:

Not many but we have some.

Hubby and I have a combined 11k in 401k. My house is currently valued (in the very up market) at 300k.

variable spending:

Groceries: a little high at $600
eating out mostly fast food $60 a month (I have an unhealthy obsession with Mcdonalds Egg White Delights)
misc purchases (tp etc) $100 a month
gas: $200 a month
kids/entertainment: usually zero, we go to parks and hike a lot


Details:

We live in the USA. I gross $45,000 and make $20,000 in spiff income as an IT sales person (spiff income is 1099 and taxed at 30%). I started my quest for FI about six months ago and have made some great progress including paying of hospital bills, small credit cards, my student loan, etc. I know we are kind of a long ways off but I am very open to learning.

I've been working for ten years at my current job. We have a dog sitting business where we average $4000 a year profit. My husband was making $45,000 a year as well and unemployment should pay a $436 a week for max of six months. He will be looking for employment this week and going forward.

I have been trying to talk him into trading in his Mustang and maybe my SUV as well. The housing market is insane in Portland Oregon where we live so buying a house closer to my work would be hard today. We get health insurance through my work and it is roughly $8400 a year my cost. My husband is a type 1 diabetic so good insurance is very important.

We have 2 kiddos one almost 3 and one ten years old. I also support my sister (room and board) in exchange for daytime child care of the toddler.

My questions are, where can we improve besides the very very eye sore Mustang which I am fighting my non-FI focused hubby on. Well gently trying to coax as fighting would not help our marriage. I have worked hard to cut back in many areas such as we rarely eat out and we shop at Winco for groceries. MMM post on gutting the food bill was a huge help.

Help me smart people :-). And THANK YOU in advance.

[swick]

Welcome to the forums, Metalsatsuma1212!

If you haven't come across it, I would recommend the Convert your Spouse thread here:http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-convert-your-so-to-mmm-in-50-awesome-steps/ It has some great advice for getting your spouse on board!

Spending: You have your bills listed but you haven't mentioned your variable spending, gas/groceries/shopping/eating out/entertainment/kids stuff. If your hubby isn't willing to tackle the 'stang yet, these will be the categories that make the biggest difference. If you could update your case study with all of your variable spending it will help us make some suggestions for you.

[PJ]

Hi, appears there's another duplicate thread - I posted there before I saw this one. 

Will flag for the moderators and ask them to combine...

Hi there, I'll see if I can get this party started!

First, I'm not sure if you know about the case study spreadsheet - there are some bits of information missing that would probably be helpful.  For example, what's your monthly take home pay from regular job and from side business(es)?  How much are you spending on groceries, haircuts, gym memberships, birthday presents, etc each month?  What is your monthly mortgage payment, student loan payment, car payments?  And so on.

And especially, I'm wondering how precarious your position is, with your husband out of work.  Did he receive a package that will allow you to cover your monthly bills for a period of time?  What is your total monthly spending?  Can you cover that on your paycheque and side income, or is there a shortfall, and if so, how much?

Other than that, it's a matter of going line by line with the info you have given, and thinking about how to reduce each thing:

Gas             121.63
If you live somewhere cold, and have the heat on, turn the temperature down (there is a thread somewhere about this right now, and some people keep their homes in the low and mid-fifties F/low teens C, not just when they are out but even when they're at home.  You may not have the fortitude to go that low, but turn the thermostat down two degrees today (and put extra sweaters on the kids!) then do it again in a week or so.  See "how low can you go!"  If your hot water heater is also powered by gas, go turn it down a notch too.  You may not be able to all have showers back to back with it set lower, but if you stagger showers with some bathing in the evening and some in the morning, you should be fine. 

Obviously, if you live in a hot climate, reverse this advice for the air conditioning - turn the temperature up, or turn it off entirely, at least for certain times of the day.  But that would presumably impact electricity rather than gas.

Or, if this is actually gas for cars, read up about hypermiling.  Walk, bike or carpool whenever you can.  This will also require expanding your definition of "whenever you can!"  Combine trips for shopping, and do no recreational driving - the car is for getting to work and for groceries only.

Electricity     100
Become vigilant about turning out lights when you and the family leave a room.  Hang your clothes to dry rather than using the dryer.  Unplug anything not currently in use to reduce phantom power.  Cook multiple things at the same time rather than turning on the oven for one thing (my mom will turn on the oven for an hour to make a baked potato for just herself, and cook the meat for her meal separately on the stove top!)  Lots of energy efficiency tips to be found online...

Cell Phone   127.26
Is this one phone or two?  Who is it with and are you under contract?  Do you have long distance, or data?  Drop it - entirely, or at least to the lowest possible level.  I decided over a year ago that I could go to the lowest data level, and it's been fine.  I have wifi at home and work, so I'm connected the majority of the time.  And I keep my mobile data turned off, unless I find myself on the road and absolutely need to check for an email or use my gps.  I've never gone over.  Side benefit - I'm not constantly looking at email when I'm out and about with friends or family!  It's very freeing!

Water     145 
This seems really high to me, but then, I don't have kids.  Still, it's useful to look at things like how often clothes get worn before being washed, or how many times towels get used before washing.  And how long people spend in the shower, or how full you fill the bathtub for the kids.  And depending again on your climate, if you're watering the lawn, then look at frequency and time of day to get the most bang for your buck in terms of water usage.

These are just a few examples where I've gone more in-depth, but obviously you'll want to shop around to make sure you have the best price on insurance (life, home, auto, medical), you'll look at what internet and cable and Netflix coverage you have and make some choices.  And so on. 

I will leave the cars to people who enjoy face punching more than I do.  But just to say that you may not get much more sympathy for having an SUV than your husband will for his Mustang ;-)  Do you know what each of them is valued at currently, in comparison to what's remaining owing on the loans?  And what's the mileage like for each of them (and miles per gallon/km per litre?)

Hope that all helps to get you started thinking of places where you can exercise control really quickly, and start to at least trim down some of your expenses.  I'm sure that when you post some more details, others will also chime in!

MOD NOTE: Sorry, PJ. I thought it has combined properly, still working a few kinks from the server transfer.

[waltworks]

You live in Portland, you have no excuse for owning cars instead of fixed gear bikes!

I am kidding (a little). But car loans? On your incomes? F'ing sell the cars yesterday and get a gas-sipping beater or better yet a couple of decent city bikes.

How on earth do you make $45k in IT after 10 years on the job? That's basically an entry level salary at any bottom-level white collar (or hell, blue collar) job. Might be time for you to look for a new job as well?

-W

[PJ]

Gulp.  I wrote a long and detailed post on the duplicate thread, then flagged it for mods to combine.  I assumed that my post on that thread would get moved over to this one.

Mods:  Is it gone forever?  I would hate to have to re-write it, if I don't have to...

[Metalsatsuma1212]

@PJ ugh I'm so sorry on the duplicate. The site timed out and I refreshed no post. When I saw I'd created a duplicate I tried immediately to delete but didn't have the option.

[Metalsatsuma1212]

@waltworks yeah the commute kills me if the market corrects itself we will move closer. And I'm totally on board with beater cars. Def the next steps.

$65,000 is higher then average for my position in Oregon (average is 51k). I maybe wasn't very clear. It's 45 plus 20, just broke it out to show how it's taxed. I'm in sales too so I can always make more. I love my job and my boss so yeah I could look for something else but it's stable and pays way more money then I even need. But I'm open to hearing why the pay isn't on par with the going rate.

[swick]

Gulp.  I wrote a long and detailed post on the duplicate thread, then flagged it for mods to combine.  I assumed that my post on that thread would get moved over to this one.

Mods:  Is it gone forever?  I would hate to have to re-write it, if I don't have to...

Mod Note: I added it to your first response, PJ. Sorry!

[Metalsatsuma1212]

@Pj thank you so much for the really thoughtful response.

I see I did list water incorrectly as it is for 3 months, not cost per month and have adjusted.

I also added our other expenses, we don't buy much "stuff" as I am on a year challenge to not buy anything if possible. Food I listed a little high to account for the months we don't shop at Winco, the bill usually lands around $500.

The thing I have taken away the most so far is we really need to trade in/sell our cars for something more fuel efficient. If anyone know a great way to sell cars let me know as I don't have a clue.

[afuera]

Just posting to say I feel for you.  My hubs was laid off around this time last year and he was unemployed for 10 months.  Hopefully your hubby finds work much quicker than mine did but this is a perfect time to really get creative with your budget.  Looking back at it now, we made a lot of really positive changes (selling our fancyass car, switching phone plans, spending way less at bars/restaurants, cutting out stupid amazon purchases, etc.) and I'm not sure we would have made those changes had we not felt the sting of losing hubs' income.  Now that he is working again, we are able to save and invest so much more than we used to and our lower spending is now our new normal.
So I understand the situation definitely is not ideal but it can be a great opportunity to flex some mustache muscles.  Good luck!

[Metalsatsuma1212]

@afuera THANK YOU! That helps a lot! On the webs you don't always get a lot of compassion and I love your points, now is the time to set up for a better future. Cars and call phones def an area we plan to change.

[PJ]

swick, you're the best!  Thanks, I actually thought about quoting myself from the other thread, but then thought, "Nah, it'll get transferred over."  But I should have saved you the effort and done it myself.

Anyway, Metalsatsuma1212, no worries about the duplicate, it happens occasionally.  And thanks for clarifying some of the details.  I agree with what's been said about this being an opportunity for you guys to really reflect on lifestyle and money management and financial goals, and to set yourselves up for a better financial future, once your hubby gets work again.  Great that you're doing a buy nothing approach, so I'll invite you to join us over in the Throw Down the Gauntlet section.  You can join the Eat All the Food in Your House thread, the Rein in the Grocery Spending thread, the Homemade Christmas or Thrift Gift threads, or just the Uber Frugal March thread!  You'll get all the support you need to trim those budget areas down to help you ride out this tough time!

[Bracken_Joy]

The cell phone cost jump out at me! http://forum.mrmoneymustache.com/share-your-badassity/communications-tech-son-of-the-superguide!/

And I'll +1 that we need a better breakdown of variable costs. It makes me wonder if you are tracking spending? If not, that is a MUST, it is financial wellness 101- you can't improve if you don't know where it's all going! Every. single. dollar. I use Mint. A lot of people use Personal Capital. Those two are free. Other love YNAB (you need a budget) but it costs money to use.

[Metalsatsuma1212]

I know it seems crazy but we don't have much variable spending since I have locked down all purchases except food, bills, etc. I am trying to get to 50% debt repayment (and later savings rate). I use mint religiously and it seems confused that I am not spending money, saying "are you sure your accounts are linked correctly" or something.

My hubby and I just say no to any misc items, even going so far as to not rent movies etc. We really cannot justify buying that $1 thing or that $2 this when we are still in debt. Our friends are really supportive and understand we cant buy misc items or go on trips etc.

I was also a crazy coupon lady in a past life so we have a HUGE stockpile of items including new in box toys, gifts, toiletries, etc. Part of the plan this year to "buy nothing" stems from, even though I was getting stuff at 90% off even 100% free, stuff kind of took over. 

I sometimes get parking costs downtown but my work reimburses all that so I don't count it.

So yeah a no spend challenge is really really tough but very worth it. I do miss some things like kindle books and fancy drinks but it is a temp state for a permanent awesome future.

[Metalsatsuma1212]

@ PJ I will check out this groups. I love challenges! It is the type A in me :-).

[FI@2022Jem]

I see you mention kindle books- talk to your local librarian!  Lots of libraries offer free digit downloads and access to e-books as well as physical books.  You can request them online from home and download them without even having to go into the branch!

It's also worth mentioning how wonderful it is to have understanding friends- the more you can include your in-person support people in addition to on-line support people the better!  Potlucks, Picnics, BYOB, etc.

Best of luck to you and your family!

[Metalsatsuma1212]

@FI@2022Jem oh yes! I think I did read that somewhere about ebooks through your library! What a great idea! I will go check that out this weekend. Thank you!!!

[Metalsatsuma1212]

Thank you SO MUCH to everyone who responded. I really took away a lot of great info and a lot to think about.

[TreesBikesLove]

$200 a month is a shit load for gas. Take the MAX or use Trimet more often. Go down to one car if you are badass enough. If your husband is not budging on getting rid of the "fun car" then test drive a cheap used miata. He might love it just as much as the Mustang and then you are getting the same "utility" from a fun drop-top $5k car as an expensive, loud $25k 'stang. Move to an apartment in the city. Get a job out in the burbs where you live. Move to the midwest.

Just brain-dumping but good luck! I live in a suburb of Portland and hate the housing market but enjoy being by my extended family and like my current job.

[Metalsatsuma1212]

@PJ ugh I'm so sorry on the duplicate. The site timed out and I refreshed no post. When I saw I'd created a duplicate I tried immediately to delete but didn't have the option.

Pj we got the gas down to $75 a month and electricity down to $80 based on what you recommended. Thank you!!! It is so awesome to see savings on such simple things, we kept the house at 65 and unplugged some items sucking power that we don't even use.

[alewpanda]

Have you made any adjustments to phone bills?  They seem high.  Check out Pageplus, Ting, or other no contract plans for some really cheap options!

[Metalsatsuma1212]

Have you made any adjustments to phone bills?  They seem high.  Check out Pageplus, Ting, or other no contract plans for some really cheap options!

That is very next on my list. We get a $45 a month expense credit from work but I would love to get it lower.

[Exflyboy]

Just piling on because your situation is very similar to what mine was when I "started".. I.e 36 years old and a little more income than you (when your hubby was working) but not a great deal more..

Anyway, yes as others have said there are some high bills there which can be cut easily.

1) Cars .. sell them. They are relative gas guzzlers, can you get down to one car between you both? And by that I mean a low cost gas sipper. Right now you just need reliable transport nothing more fancy than that... Pay cash!

2) Cell phones.. My Wife uses Republic and pays $11/m for unlimited talk and text. I have Purevoice USA and pay $5/m for a low use plan. There others, Airvoice wireless, Ting etc.

3) Why is your spiff income taxed at 30%? I don't think it is.. you may have 30$ witheld but this should be rolled up like any income at the end of the year.. you should be in the 15% tax bracket.. The State will screw you for their 9% on almost everything of course.

4) Loans. This is kinda tricky... I think on balance you want to get those student loans down as fast as possible (if they are tax deductable that might alter the equation some).. So all the savings from above get thrown into that, then the car loans etc (maybe when you sell the cars you have to pay these off first?). I am assuming you have no credit card debt?

5) When you get all the loans paid off, then throw as much as you can at the 401k's. The reason being is that the amount you put in your 401k's won't show up on your W2.. Thus you don't pay either fed or state income tax on that money. If you earn enough to max out the 401k's eventually then max out the Traditional IRAs.. thats another $11k you can hide from the taxman. Your financial future has no savings so this has to be the priority as soon as you get out (and STAY OUT) of debt. All cars (and anything else will be bough for cash and of course you don't buy new cars and learn how to maintain them yourselves.

[DavidAnnArbor]

If your company does matching toward a 401K, then you absolutely first much put the minimum in you can into your 401K in order to get the company match.

[Metalsatsuma1212]

Just piling on because your situation is very similar to what mine was when I "started".. I.e 36 years old and a little more income than you (when your hubby was working) but not a great deal more..

Anyway, yes as others have said there are some high bills there which can be cut easily.

1) Cars .. sell them. They are relative gas guzzlers, can you get down to one car between you both? And by that I mean a low cost gas sipper. Right now you just need reliable transport nothing more fancy than that... Pay cash!

2) Cell phones.. My Wife uses Republic and pays $11/m for unlimited talk and text. I have Purevoice USA and pay $5/m for a low use plan. There others, Airvoice wireless, Ting etc.

3) Why is your spiff income taxed at 30%? I don't think it is.. you may have 30$ witheld but this should be rolled up like any income at the end of the year.. you should be in the 15% tax bracket.. The State will screw you for their 9% on almost everything of course.

4) Loans. This is kinda tricky... I think on balance you want to get those student loans down as fast as possible (if they are tax deductable that might alter the equation some).. So all the savings from above get thrown into that, then the car loans etc (maybe when you sell the cars you have to pay these off first?). I am assuming you have no credit card debt?

5) When you get all the loans paid off, then throw as much as you can at the 401k's. The reason being is that the amount you put in your 401k's won't show up on your W2.. Thus you don't pay either fed or state income tax on that money. If you earn enough to max out the 401k's eventually then max out the Traditional IRAs.. thats another $11k you can hide from the taxman. Your financial future has no savings so this has to be the priority as soon as you get out (and STAY OUT) of debt. All cars (and anything else will be bough for cash and of course you don't buy new cars and learn how to maintain them yourselves.

Yes I think you are correct it is 15% on the spiffs, I was incorrect. And the car loan and student loan are all we have left and I am attacking them with a vengeance. That gives me so much hope that others have been where we are and have gotten out of the black hole so to speak. Cell phone is my very next project, we are going to switch as soon as possible. Thank you for much for your post!