Author Topic: Case Study: Roast Me (gently)  (Read 9691 times)

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Case Study: Roast Me (gently)
« on: January 09, 2020, 12:51:21 PM »
First off, thanks to anyone who takes the time to read this.

I have a journal floating around somewhere that I’m terrible at keeping updated. Not sure if I’ve ever done a proper case study. This community changed my life, by the way. Found you guys at the end of 2017 and have since paid off $25K in debt, increased my investment balances by $44K, and increased my income by $21K. Holy shit! Y’all are really out here doing the Lord’s work.

Age: 30F
Not married, no dependents. MCOL area. 2020 numbers are as follows:

Salary (base): $85,362
Annual Bonus: $10,400
Rental Income: $4,800
Phone Reimb: $900
Total Income:   $101,462

Everything below is calculated using base salary, rental income, and phone reimbursement, so $91,062 annually. I handle the bonus separately. In the past it has gone to debt repayment – this year it went toward front-loading cash savings in various categories.

Gross Monthly Pay: $7,041.38 (includes rent)
Pre-Tax Savings: 12.8% of base salary

Pre-Tax Deductions
401K:      $656.66/month, $9,576/year (10%)
           Employer match: 4% = $3,830
HSA:       $211.54/month, $2,700/year (2.8%)
           Employer contribution: $800/year
           Total yearly contribution: $3,500
Medical:   $104.40/month, $1,357.20/year

Taxes:
•   Federal: $710
•   State: $330
•   OASDI/Medicare: $483

Post-Tax Deductions: $76 to United Way

Net Monthly Pay: $4,107
Take-Home Monthly Income (+Rent): $4,507

Assets
Home Value:   $215,795
401K:      $62,834
HSA:       $8,725 ($6,500 invested)
Cash:      $18,000
                        Emergency Fund: $10,500
                        Deferred Spend: $7,500

Total Assets:   
$305,354 (with home value)
$89,559   (without home value)

Liabilities
Mortgage:   $134,700 (@ 4.25%, 18 years remaining)
Electrical:   $4,540     (@ 0% until July 2021)

Total Liabilities:
$139,240 (with mortgage)
$4,540     (without mortgage)

Net Worth:
•   $166,114 (with home value)
•   $85,019   (without home value)

26 pay periods per year, I consider the extra 2 “bonus” checks & save almost all of it. Numbers below are a reflection of a normal, 2-paycheck month, and include the $400 in rental income I collect, along with a breakdown for the % of total take-home pay each category accounts for.

Total Monthly Take-Home: $4,507

Housing      23.5%
Mortgage      $1,060 (includes taxes & insurance)
Utilities         8.6%
Power & Natural Gas   $150
Water & Sewage     $70
Waste & Recycling   $30
Cable & Internet           $140 (see notes below)
Auto         6.9%
Gas                 $80
Insurance              $95 (see notes below)
Taxes         $36
Maintenance      $100
Food         8.8%
Groceries              $400
Other         12.5%
Entertainment           $400  includes anything not accounted for in other categories. Mostly restaurant eating, random clothes purchases, shower gifts, etc.
Cell Phone              $110
Streaming Services   $36
TruGreen              $20
Save/Deferred Spend   26.4%
Travel         $200
Sinking Fund/House   $850 (see notes below)
Emergency Fund     $100
Vet                 $40
Debt Paydown      6.4%
Electrical Work      $290

Total Monthly Take-Home:       $4,507
Total Monthly  Budgeted:      $4,207
Total Yearly Budgeted:         $50,484

Bare-Bones Monthly Spend:      $2,360 (housing, utilities, auto, groceries, and debt)
Bare-Bones Yearly Spend:      $28,320

Investment Order:
1.   Establish an Emergency Fund to your satisfaction
2.   Contribute to your 401k up to any company match
3.   Pay off any debts with interest rates ~5% or more
4.   Max HSA if eligible

5.   Max Traditional IRA or Roth
6.   Max 401k
7.   Fund mega backdoor Roth
8.   Pay off any debts with interest rates ~3% or above
9.   Invest in taxable account

Some thoughts:
•   Recently paid off vehicle not included in my assets above – 2014 Acura MDX that I plan on driving for as long as it’ll go, which is hopefully a Really Long Time. KBB value between $15-20K
•   My goal is FI, not RE (for now)
•   Sinking Fund/House savings are currently out of control because I anticipate having to replace my entire HVAC system (including ductwork) within the next 12-24 months. Also worth noting that the Zillow estimate I’m using for my home value is probably low by about $15K based on recent comps. Not my forever home but no plans to sell any time soon
•   Grocery budget also includes dog food and all household products like laundry & dish soap, etc.
•    “Debt Paydown” – I used a 0% credit card to pay for some critical electrical work at my house last summer. 0% until July 2021, no plans to pay off early, no regrets about having the work done
•   Charitable contributions are currently only about 1.3% of my gross pay which makes me feel like a real Scrooge. I’ve been in the “put your own oxygen mask” on phase for a while but I feel like I’m out of it now. Would like to see that around 5% by end of 2020

Some specific questions:
1.   Generally, am I OK?
2.   Do I have too much cash? Not enough? I never want to need to rely on credit to pay for something again so I’m heavily focused on stockpiling for expenses, but I might be over-compensating at this point? That "deferred spend" category includes savings for house repairs (like the HVAC) but also future travel, vet stuff, etc.
3.   My plan based on the investment order is to ease off the HVAC savings in July, leave 401K at 10%, open a Trad IRA, & redirect at least $500/month into that. I think steps 5&6 (max Trad/Roth vs max 401K) are interchangeable depending on income. Should I be focused on maxing 401k next instead? Admittedly I like the idea of the TradIRA because I feel behind having only 2 investment vehicles… 401k and HSA.
4.   I’m anticipating that HVAC work to cost around $10-$12K. How do others save for expected large expenses other than just dumping cash into a savings account?
5.   I separate my cash into 2 categories: true Emergency Fund and deferred spending. I keep them in 2 separate accounts. Neither are particularly high-yield… I think one is 1% APR. Does anyone have suggestions on a better way to manage this cash while keeping it very accessible? I have a ton of available credit for “spongy debt” but the peace of mind of having cash a click away is highly valuable to me.
6.   Now that my car is paid off I feel there are potential savings in the Auto category, I just don’t have a good understanding on what all is needed re: insurance and whether cutting back would be worth it. Seems like people around here advocate for dropping comprehensive coverage if you have cash on hand to replace your vehicle but that’s only going to save me about $15/month, seems like peanuts and more risk than reward? What am I missing there?
7.   I know cable is stupid on top of the streaming services & I know the phone bill is too high. Those are my current areas of improvement. Anything else glaringly obvious?
8.   What stupid shit did you waste money on in your 30s and what kinds of things do you wish you could go back and do instead?

This was way longer than I meant for it to be. Thanks to anyone who made it all the way through. Also I realize the formatting is all screwed up on the budget section... tried for 20 minutes to fix that and gave up. Sorry.
« Last Edit: January 09, 2020, 12:57:31 PM by frugalfoothills »

Freedomin5

  • Magnum Stache
  • ******
  • Posts: 2892
  • Location: China
Re: Case Study: Roast Me (gently)
« Reply #1 on: January 09, 2020, 01:15:04 PM »
Generally you are okay. Not being American, I can’t comment on the more US specific questions. However, what jumps out at me are your housing related costs. Between your mortgage, utilities, deferred maintenance, and previous maintenance, you’re currently diverting ~$2600/month towards your house. That’s the number I would target to make the biggest impact on your savings.

For example, where is the $400/month rent coming from? If you’re renting out a room, then that may be too low given that your utilities is $400/month, which means half the rent goes towards your roommate’s portion of utilities.

Also, do you have other bedrooms you can rent out?

The other area of focus would be increasing your income, either by switching jobs or taking on a side hustle.

One of the best shifts in mindset that worked for us in our late 20s and early 30s was to aim for at least a 50% after tax savings rate (that is, save at least 50% of our take home income, in addition to whatever was already being saved in tax-sheltered accounts).

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #2 on: January 09, 2020, 01:43:45 PM »
You're absolutely right about the rental income being way too low. A good friend lives with me (and has for 7 years) and her rent has always been a flat $400. I've thought about raising it many times but always decide not to for various reasons... I have a thread out there somewhere about that entire situation but the TL;DR version is basically that she's terrible with money and I'm too much of a doormat to "make her life harder" in my eyes.

So question about the housing costs -- right now I have $850/month going toward saving for a future HVAC system. What is the right answer there, if not to stockpile cash for those upcoming expenses? If I cut that back and up my 401K then my savings rate improves, but what happens when the system craps out? I guess that's what I'm missing here... how are people saving for major expenses if not doing it this way?

Laura33

  • Magnum Stache
  • ******
  • Posts: 2717
  • Location: Mid-Atlantic
Re: Case Study: Roast Me (gently)
« Reply #3 on: January 09, 2020, 01:45:13 PM »
First, you've made great progress, so good going.  Are you actually getting that $400/mo. from the roommate on a consistent basis? 

To answer some questions, in no particular order:

1.  The key part of the next step is to max out your tax-sheltered retirement accounts (401(k)/IRA).  Generally, which option you choose depends on (i) whether you are eligible for a deductible traditional IRA, and (ii) how good/bad the investment options are in your 401(k).  If you have a bunch of high-fee managed funds in your 401(k), then you want to prioritize the IRA, because you control which funds you buy and can choose low-fee index funds.  OTOH, if you like your 401(k) choices and don't want to deal with a separate account, then just go ahead and max that out first.

The decision that is based on income is whether to do traditional or Roth.  Just do traditional and call it good -- that is very likely the right call at your income level anyway, and it's more important to get going and get the money put away than it is to make the absolutely perfect bestest choice. 

Also, I think you are a little confused about the two "investment vehicles."  The 401(k) and IRA and HSA are all buckets -- they just hold whatever investments you put into them.  There is no benefit whatsoever to spreading your investments across multiple different buckets.  What matters is the overall asset allocation you decide to put in those buckets.  So if it's easier to just max out your 401(k) than it is to start up an IRA, and you have a nice, low-cost index fund in your 401(k), then just do that first, and you will be fine. 

2.  FWIW, your car is still costing you a lot, even though you have it paid off.  It's a bigger vehicle, so it's going to use more gas than a smaller option.  It's worth more, so it will cost more in insurance.  And it is a "luxury" make, meaning that you'll spend more on maintenance if you go through the dealer.  I would not advise dropping your insurance now except for liability -- that is something you do when you drive a beater and have enough cash on-hand that you can replace it easily if you have an accident.  For you, $20K in a vehicle is still a noticeable pot of $$. 

The most cost-effective way to manage your vehicle spend is to sell the Acura and buy a used, smaller, cheaper vehicle for cash.  That will give you cash in-hand to invest and lower your future depreciation/operating costs.  But you have done a good job getting the ship righted and using your money pretty well otherwise, so you can afford to keep the big car if that's your priority -- just be aware of what it is costing you.

3.  Same thing with the house.  The mortgage and home value and all that don't seem out of whack at all.  But you are spending thousands on top of that for pretty basic, mandatory things, like electrical and HVAC.  So it is worth considering where you are in that sort of "necessary home upgrade" list, and if there is a lot of that kind of thing still to come, you may want to consider selling and moving.  Or, again, if you love the home and are willing to pay the extra to stay there, so be it.

4.  But with 2 and 3, remember that life is an "or," not an "and."  You can reasonably decide that you want to be FI; you can reasonably decide you want to drive a luxury vehicle; you can reasonably decide you want to stay in a house that needs ongoing repairs that basically double your monthly outlay.  But you can't reasonably decide you want all of those things.  So the more house things and car things you decide are worth it, the further you are pushing yourself away from FI.  You can spend each dollar only once. 

5.  Saving for big things:  you're doing a great job of this.  I just throw money into a money market account for these purposes.  Don't know/care enough to look at other options.  And frankly, it's not enough of my 'stache for the difference between 1.1% and 1.2% interest to make a difference.  The primary focus of that money is to be there when I need it, not to make the most interest for me in the interim (whereas the primary focus of my 401(k) money is to grow, grow, grow).

I get the sense you are good money manager.  You have a good budget, you proactively save for the things you know will be coming down the pipe, you buy things to last a long time.  I think to take the next step, you should focus a little more on the big picture:  are your plans taking you where you want to be, and are you spending your money where it makes the most impact on your life; are you investing your money where it can work the hardest to set up your future; do you feel comfortable and confident that you understand investing enough to make good decisions; etc.  Really, you're like 90% of the way there; you just need that little boost to put you over the top. 

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #4 on: January 09, 2020, 02:02:58 PM »
Thank you so much for the feedback, @Laura33 ! You always leave such thoughtful responses. I'll try to do my best to answer :)

First, you've made great progress, so good going.  Are you actually getting that $400/mo. from the roommate on a consistent basis? Yes! You must remember my other thread where my friend had not paid rent in years and was basically squatting in my house. Thanks to the replies in that thread we had a come-to-Jesus talk (lots of crying, not on my side) and she has paid every month for over a year now. Still waaaay below market rate and honestly even way below "you're my friend so I'm cutting you some slack" rate, but she IS paying.

To answer some questions, in no particular order:

1.  ….

Also, I think you are a little confused about the two "investment vehicles."  The 401(k) and IRA and HSA are all buckets -- they just hold whatever investments you put into them.  There is no benefit whatsoever to spreading your investments across multiple different buckets.  What matters is the overall asset allocation you decide to put in those buckets.  So if it's easier to just max out your 401(k) than it is to start up an IRA, and you have a nice, low-cost index fund in your 401(k), then just do that first, and you will be fine.  My 401K is through Fidelity and has good choices (S&P 500, etc.) so I suppose it would be easier to just bump my contributions for now. I guess in my mind I still view 401K as "after retirement" and everything else as pre-retirement accessible, even though I've been around these parts long enough to know you can access 401k cash before 65 through a Roth ladder.

2.  FWIW, your car is still costing you a lot, even though you have it paid off.  It's a bigger vehicle, so it's going to use more gas than a smaller option.  It's worth more, so it will cost more in insurance.  And it is a "luxury" make, meaning that you'll spend more on maintenance if you go through the dealer.  I would not advise dropping your insurance now except for liability -- that is something you do when you drive a beater and have enough cash on-hand that you can replace it easily if you have an accident.  For you, $20K in a vehicle is still a noticeable pot of $$. 

The most cost-effective way to manage your vehicle spend is to sell the Acura and buy a used, smaller, cheaper vehicle for cash.  That will give you cash in-hand to invest and lower your future depreciation/operating costs.  But you have done a good job getting the ship righted and using your money pretty well otherwise, so you can afford to keep the big car if that's your priority -- just be aware of what it is costing you. *wince* I know... I will admit I was a little pressured into buying this particular car. I drove a 2000 Honda Accord for 14 years, it was the only car I'd ever owned... 2 years ago it was time to get something newer and my father (bless his heart) was very involved in that process. His mindset with vehicles is to buy something very nice, pay it off quickly, then enjoy the fruits of your purchase for 20 years before upgrading. No lie, drove the same car for 20 years during my childhood. I was looking in the $10K range and he actually felt so strongly about me getting something "nice that I can grow into" that he contributed $12.5k to the purchase of the Acura. If it had been totally up to me, it wouldn't have been quite as luxurious of a purchase.

I don't see myself selling it right now, but I do hear you about it costing me more than a different vehicle would. Will keep it in the back of my mind
.


3.  Same thing with the house.  The mortgage and home value and all that don't seem out of whack at all.  But you are spending thousands on top of that for pretty basic, mandatory things, like electrical and HVAC.  So it is worth considering where you are in that sort of "necessary home upgrade" list, and if there is a lot of that kind of thing still to come, you may want to consider selling and moving.  Or, again, if you love the home and are willing to pay the extra to stay there, so be it. I do love it and doing home improvements/upgrades is 100% my favorite way to spend my money, full-stop. The electrical and HVAC are the 2 problems. Other than that (knock on wood) the house is in great shape.

5.  Saving for big things:  you're doing a great job of this.  I just throw money into a money market account for these purposes.  Don't know/care enough to look at other options.  And frankly, it's not enough of my 'stache for the difference between 1.1% and 1.2% interest to make a difference.  The primary focus of that money is to be there when I need it, not to make the most interest for me in the interim (whereas the primary focus of my 401(k) money is to grow, grow, grow). Then maybe it's fine where I've got it, thanks for the perspective.[/b]


Watchmaker

  • Pencil Stache
  • ****
  • Posts: 700
Re: Case Study: Roast Me (gently)
« Reply #5 on: January 09, 2020, 02:48:01 PM »
I glanced at the replies and saw you got detailed and (I'm confident) excellent advice from Laura33. I didn't read her post though, so some of what I saw may duplicate hers.

Some specific questions:
1.   Generally, am I OK?
Yes, you're doing great!
2.   Do I have too much cash? Not enough? I never want to need to rely on credit to pay for something again so I’m heavily focused on stockpiling for expenses, but I might be over-compensating at this point? That "deferred spend" category includes savings for house repairs (like the HVAC) but also future travel, vet stuff, etc.
I think for a homeowner who prefers to avoid using credit, you've got a very reasonable amount of cash.
3.   My plan based on the investment order is to ease off the HVAC savings in July, leave 401K at 10%, open a Trad IRA, & redirect at least $500/month into that. I think steps 5&6 (max Trad/Roth vs max 401K) are interchangeable depending on income. Should I be focused on maxing 401k next instead? Admittedly I like the idea of the TradIRA because I feel behind having only 2 investment vehicles… 401k and HSA.
If you have good, low cost options in your 401k, I'd focus on maxing that out before the IRA. Don't worry about "only" having the 401k and the HSA, it's all about how much you put into them.
4.   I’m anticipating that HVAC work to cost around $10-$12K. How do others save for expected large expenses other than just dumping cash into a savings account?
I use a money market account for most of my "cash", and keep enough in a checking account to handle upcoming known expenses.
5.   I separate my cash into 2 categories: true Emergency Fund and deferred spending. I keep them in 2 separate accounts. Neither are particularly high-yield… I think one is 1% APR. Does anyone have suggestions on a better way to manage this cash while keeping it very accessible? I have a ton of available credit for “spongy debt” but the peace of mind of having cash a click away is highly valuable to me.
Money Market accounts are liquid, and offer similar rates as high rate checking accounts.
6.   Now that my car is paid off I feel there are potential savings in the Auto category, I just don’t have a good understanding on what all is needed re: insurance and whether cutting back would be worth it. Seems like people around here advocate for dropping comprehensive coverage if you have cash on hand to replace your vehicle but that’s only going to save me about $15/month, seems like peanuts and more risk than reward? What am I missing there?
I think you have too much car, and you should look into selling it and replacing it with a used corolla or whatever. Lower gas, lower insurance, plus it frees up some cash.
7.   I know cable is stupid on top of the streaming services & I know the phone bill is too high. Those are my current areas of improvement. Anything else glaringly obvious?
TruGreen. Unnecessary expense, and depending on what they are doing, possibly unhealthy.
8.   What stupid shit did you waste money on in your 30s and what kinds of things do you wish you could go back and do instead?

I'm still doing stupid shit, but you just try to learn every day. Things I'd tell my 30 y.o. self:

Don't deprive yourself of things you enjoy (e.g. eating out), but find a way to make them cheaper (split an entree with a friend, drink water, only eat out as a social occasion as opposed to convenience, etc). Own the least car and home you can get away with. Use travel rewards better. Not financial, but: pay attention to your health (physical and mental).

Watchmaker

  • Pencil Stache
  • ****
  • Posts: 700
Re: Case Study: Roast Me (gently)
« Reply #6 on: January 09, 2020, 02:53:56 PM »
4.  But with 2 and 3, remember that life is an "or," not an "and."  You can reasonably decide that you want to be FI; you can reasonably decide you want to drive a luxury vehicle; you can reasonably decide you want to stay in a house that needs ongoing repairs that basically double your monthly outlay.  But you can't reasonably decide you want all of those things.  So the more house things and car things you decide are worth it, the further you are pushing yourself away from FI.  You can spend each dollar only once. 
...
I get the sense you are good money manager.  You have a good budget, you proactively save for the things you know will be coming down the pipe, you buy things to last a long time.  I think to take the next step, you should focus a little more on the big picture:  are your plans taking you where you want to be, and are you spending your money where it makes the most impact on your life; are you investing your money where it can work the hardest to set up your future; do you feel comfortable and confident that you understand investing enough to make good decisions; etc.  Really, you're like 90% of the way there; you just need that little boost to put you over the top.

These are both great points. You've got pretty much everything in order--any additional savings are small details or will require bigger lifestyle changes. So it's time to really start thinking about if the car is worth it to you, if the house is worth it to you, if retiring early is worth it to you.

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #7 on: January 09, 2020, 03:10:39 PM »
Thanks, all. You've given me great feedback.

So does this sound like the right course of action:
  • Pull back on cash savings for future home expenses/projects and focus on increasing/maxing my 401K instead. I can only adjust my contribution % quarterly through my employer so my next adjustment should be effective March1. I'll have $16,820 available to contribute so I think bumping my contribution to 24% gets me there by EOY
  • Reducing monthly expenses by cutting cable & looking into canceling TruGreen

Still resisting the big change for selling the car but I'll think about it.

MonkeyJenga

  • Walrus Stache
  • *******
  • Posts: 8747
  • Location: the woods
Re: Case Study: Roast Me (gently)
« Reply #8 on: January 09, 2020, 03:18:01 PM »
Is raising rent further/getting a new roommate on the table?

Watchmaker

  • Pencil Stache
  • ****
  • Posts: 700
Re: Case Study: Roast Me (gently)
« Reply #9 on: January 09, 2020, 03:22:30 PM »
Thanks, all. You've given me great feedback.

So does this sound like the right course of action:
  • Pull back on cash savings for future home expenses/projects and focus on increasing/maxing my 401K instead. I can only adjust my contribution % quarterly through my employer so my next adjustment should be effective March1. I'll have $16,820 available to contribute so I think bumping my contribution to 24% gets me there by EOY
  • Reducing monthly expenses by cutting cable & looking into canceling TruGreen

Still resisting the big change for selling the car but I'll think about it.

You're doing great. It's okay for this to take some time.

ericrugiero

  • Bristles
  • ***
  • Posts: 254
Re: Case Study: Roast Me (gently)
« Reply #10 on: January 09, 2020, 03:48:59 PM »
Thanks, all. You've given me great feedback.

So does this sound like the right course of action:
  • Pull back on cash savings for future home expenses/projects and focus on increasing/maxing my 401K instead. I can only adjust my contribution % quarterly through my employer so my next adjustment should be effective March1. I'll have $16,820 available to contribute so I think bumping my contribution to 24% gets me there by EOY
  • Reducing monthly expenses by cutting cable & looking into canceling TruGreen

Still resisting the big change for selling the car but I'll think about it.

Since your father contributed toward the car you have another complication in selling it.  How would he feel if you sold the car and pocketed the cash?  What you have is definitely not optimal from a cost standpoint but it's not killing you either.  If it was a purchase by you with no family dynamics I'd say sell it and buy something more economical.  With the money he contributed and the possibility of hurting his feelings (He spent that money to help you have something nice.  Pocketing it could be offensive.) I would tend to keep the car. 

Aunt Petunia

  • Handlebar Stache
  • *****
  • Posts: 1158
Re: Case Study: Roast Me (gently)
« Reply #11 on: January 09, 2020, 03:50:42 PM »
You have gotten some great advice so far. I would also maybe look into refinancing the mortgage for a lower rate.

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #12 on: January 09, 2020, 06:08:16 PM »
Thanks, all. You've given me great feedback.

So does this sound like the right course of action:
  • Pull back on cash savings for future home expenses/projects and focus on increasing/maxing my 401K instead. I can only adjust my contribution % quarterly through my employer so my next adjustment should be effective March1. I'll have $16,820 available to contribute so I think bumping my contribution to 24% gets me there by EOY
  • Reducing monthly expenses by cutting cable & looking into canceling TruGreen

Still resisting the big change for selling the car but I'll think about it.

Since your father contributed toward the car you have another complication in selling it.  How would he feel if you sold the car and pocketed the cash?  What you have is definitely not optimal from a cost standpoint but it's not killing you either.  If it was a purchase by you with no family dynamics I'd say sell it and buy something more economical.  With the money he contributed and the possibility of hurting his feelings (He spent that money to help you have something nice.  Pocketing it could be offensive.) I would tend to keep the car.

This is a really good point and I do think he would be against me selling it. If I did, I do feel like I would need to repay him what he contributed. So if I sold it for $20k, paid him back the $12.5k he contributed, and then bought a $7.5k car with the proceeds I don’t actually come out ahead... that feels like a net loss since I have an excellent vehicle that I plan on keeping for a decade now. Thanks for pointing that out.

kpd905

  • Handlebar Stache
  • *****
  • Posts: 1825
Re: Case Study: Roast Me (gently)
« Reply #13 on: January 09, 2020, 06:58:05 PM »
You may want to look into refinancing your mortgage right now.  I just went from a 4.3% to a 3.5% 30 year.  If you went with a 15 year you could drop your interest rate down to 3% or so. 

This is where I checked for rates: https://www.nerdwallet.com/mortgages/refinance-rates?trk=nw_gn1_4.0

AM43

  • Stubble
  • **
  • Posts: 163
Re: Case Study: Roast Me (gently)
« Reply #14 on: January 10, 2020, 09:51:27 AM »
Don't sell the car. Is it too much of a car for you, yes. But what's done is done.
Acura MDX is a really nice reliable SUV and most importantly paid for with the help of your father.
You will get good use out of it over the years and it will save you money in many other ways.

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #15 on: January 10, 2020, 12:16:21 PM »
I agree. I think at this point the best move is to just appreciate the fact that I have a very nice (nicer than I need) vehicle that I got for a "deal" thanks to my dad, and I should take this non-Mustachian thing and just do my best to make it Mustachian going forward... aka drive it into the ground.

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #16 on: January 10, 2020, 12:21:22 PM »
Is raising rent further/getting a new roommate on the table?

Getting another roommate is definitely NOT on the table. I'm focused on getting rid of the roommate I already have! (gently, like a mom bird pushing their baby bird out of the nest, except the baby bird is actually a full-grown bird older than the mom bird)

I do think raising the rent is one step in that direction, though. She has a goal to get her (disastrous) finances in order by July... I'm thinking we will have a conversation mid-year about raising her rent once she's in a better spot, and that might be the catalyst for her to start looking at options for her own place. OR, she pays the increased rent and I enjoy that extra cash for a little while longer.

Jon Bon

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Midwest
Re: Case Study: Roast Me (gently)
« Reply #17 on: January 10, 2020, 12:28:29 PM »
I need to know more about the HVAC thing here.

What is the actual issue? I have a hard time thinking that a house could sink enough (and still be standing) the point where new HVAC ducts are needed? Is the furnace/blower/AC ok? Or does that need to be replaced too?

$850 a month is a ton of money for something like an HVAC system.



frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #18 on: January 10, 2020, 12:40:02 PM »
I need to know more about the HVAC thing here.

What is the actual issue? I have a hard time thinking that a house could sink enough (and still be standing) the point where new HVAC ducts are needed? Is the furnace/blower/AC ok? Or does that need to be replaced too?

$850 a month is a ton of money for something like an HVAC system.

So my AC unit is 20 years old and my furnace is older than that, I think. In the spring I had a company come out to do a "spring tune up" on the system since I've lived here 7 years and have never done that, and the dude basically told me there's all this stuff wrong with the system (AC unit and furnace both have issues needing repair, I can't remember what all they were, though) and that I'd be lucky to get another year out of it.

He also told me that when it does die, since my ductwork is original to the house, it wouldn't be able to support the demands of a new unit so I should expect to have to have all the ductwork replaced at the same time. A friend of mine had this happen last year to him so that sounded legit to me, and the total cost for a new unit AND new ductwork in his (comparably sized) home was about $12k. That's the barometer I've been using.

I wasn't surprised about the ductwork, honestly. It looks terrible up in my attic. But I'll also admit to being someone susceptible to predatory sales-types, and definitely susceptible to scare tactics... you think he was bullshitting me?

Also, like I said upthread, I do feel a little like a psycho socking away $850 a month for this when I have $18K in cash already and the system is (from the outside) working fine. I'm just a little traumatized from my debt emergency still and never want to find myself back in that situation, so I feel like I need to HOARD ALL THE CASH, JUST IN CASE!!!!!! But, admittedly, the pendulum might have swung too far in the opposite direction.

kei te pai

  • Bristles
  • ***
  • Posts: 414
Re: Case Study: Roast Me (gently)
« Reply #19 on: January 10, 2020, 12:50:11 PM »
Your dear friend has had a helping hand for a long time. But you do not need to wait until she has her finances in order to start the rent increase process. Her finances may take a dive, would you drop her rent then?
Start the conversation now - hey friend, there is a huge household investment needed for the HVAC, rent is going up $100/month from next month. Oh and by the way, Im dropping the cable to help pay for it too.

Jon Bon

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Midwest
Re: Case Study: Roast Me (gently)
« Reply #20 on: January 11, 2020, 09:52:12 AM »
I need to know more about the HVAC thing here.

What is the actual issue? I have a hard time thinking that a house could sink enough (and still be standing) the point where new HVAC ducts are needed? Is the furnace/blower/AC ok? Or does that need to be replaced too?

$850 a month is a ton of money for something like an HVAC system.

So my AC unit is 20 years old and my furnace is older than that, I think. In the spring I had a company come out to do a "spring tune up" on the system since I've lived here 7 years and have never done that, and the dude basically told me there's all this stuff wrong with the system (AC unit and furnace both have issues needing repair, I can't remember what all they were, though) and that I'd be lucky to get another year out of it.

He also told me that when it does die, since my ductwork is original to the house, it wouldn't be able to support the demands of a new unit so I should expect to have to have all the ductwork replaced at the same time. A friend of mine had this happen last year to him so that sounded legit to me, and the total cost for a new unit AND new ductwork in his (comparably sized) home was about $12k. That's the barometer I've been using.

I wasn't surprised about the ductwork, honestly. It looks terrible up in my attic. But I'll also admit to being someone susceptible to predatory sales-types, and definitely susceptible to scare tactics... you think he was bullshitting me?

Also, like I said upthread, I do feel a little like a psycho socking away $850 a month for this when I have $18K in cash already and the system is (from the outside) working fine. I'm just a little traumatized from my debt emergency still and never want to find myself back in that situation, so I feel like I need to HOARD ALL THE CASH, JUST IN CASE!!!!!! But, admittedly, the pendulum might have swung too far in the opposite direction.

Ok yeah, get some new bids on that HVAC work.

Sure 20 year old units are reaching the end of their useful life, it does not make sense to put a bunch of money into them to repair them.

That being said, I have never heard of someone needing their ducts replaced. A 20 year old blower and a modern blower pretty much work the exact same way. I dont know what part of the world you are in, but ive never heard of ducts needing replaced just for a new HVAC system.

The house did not grow bigger did it? The air your are moving around now with the old unit is the same air that you would be moving around with the new unit. Their might be more to your story but this sure feels like a huge (and dishonest) up-sell.

How old is your house?

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #21 on: January 11, 2020, 10:14:01 AM »
I need to know more about the HVAC thing here.

What is the actual issue? I have a hard time thinking that a house could sink enough (and still be standing) the point where new HVAC ducts are needed? Is the furnace/blower/AC ok? Or does that need to be replaced too?

$850 a month is a ton of money for something like an HVAC system.

So my AC unit is 20 years old and my furnace is older than that, I think. In the spring I had a company come out to do a "spring tune up" on the system since I've lived here 7 years and have never done that, and the dude basically told me there's all this stuff wrong with the system (AC unit and furnace both have issues needing repair, I can't remember what all they were, though) and that I'd be lucky to get another year out of it.

He also told me that when it does die, since my ductwork is original to the house, it wouldn't be able to support the demands of a new unit so I should expect to have to have all the ductwork replaced at the same time. A friend of mine had this happen last year to him so that sounded legit to me, and the total cost for a new unit AND new ductwork in his (comparably sized) home was about $12k. That's the barometer I've been using.

I wasn't surprised about the ductwork, honestly. It looks terrible up in my attic. But I'll also admit to being someone susceptible to predatory sales-types, and definitely susceptible to scare tactics... you think he was bullshitting me?

Also, like I said upthread, I do feel a little like a psycho socking away $850 a month for this when I have $18K in cash already and the system is (from the outside) working fine. I'm just a little traumatized from my debt emergency still and never want to find myself back in that situation, so I feel like I need to HOARD ALL THE CASH, JUST IN CASE!!!!!! But, admittedly, the pendulum might have swung too far in the opposite direction.

Ok yeah, get some new bids on that HVAC work.

Sure 20 year old units are reaching the end of their useful life, it does not make sense to put a bunch of money into them to repair them.

That being said, I have never heard of someone needing their ducts replaced. A 20 year old blower and a modern blower pretty much work the exact same way. I dont know what part of the world you are in, but ive never heard of ducts needing replaced just for a new HVAC system.

The house did not grow bigger did it? The air your are moving around now with the old unit is the same air that you would be moving around with the new unit. Their might be more to your story but this sure feels like a huge (and dishonest) up-sell.

How old is your house?

Well that’s encouraging. My house was built in the late 70s, I think 1978. Sounds like I might need to slow my roll a bit. 

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #22 on: January 11, 2020, 10:29:06 AM »
I think this is the current plan.

1. Will not be selling the car due to reasons discussed up thread

2. Continue hoarding cash like a dragon in a cave protecting its golden egg until next round of 401k changes (4/1, misspoke earlier)

3. I should have $22k in cash saved by 4/1 which feels like enough to keep my Debt Emergency PTSD at bay. I will increase contributions to max out 401k  by end of year (25% should do it)

4. Monthly take-home should still be around $3,700 which is still plenty for me to be able to continue saving cash each month (just not to the tune of $850) to keep padding the EF and saving for YOLO stuff like travel and general 30 year-old life fun

5. Discuss raising the rent for my friend mid-year. Maybe only bump it to $500 and see how that goes... then raise again in 2021 if she still hasn’t started looking for her own place. Enjoy a little extra cash until then.

6. Cut cable and cancel TruGreen

7. Increase charitable contributions. Maybe add a recurring $50 donation to an organization I care about. There are a few great local animal rescue groups that could use it.

Dee18

  • Handlebar Stache
  • *****
  • Posts: 1732
Re: Case Study: Roast Me (gently)
« Reply #23 on: January 11, 2020, 11:06:45 AM »
Re the ductwork.  I once owned a house where the ductwork had been replaced with metal ductwork with carpet like lining on the inside.  When it aged, it began emitting nasty little particles that caused breathing problems.  I replaced the ductwork with just metal duct work and the change was fantastic.  On the other hand if you have flexible ductwork, it may have developed small holes that leak a lot.

SunnyDays

  • Handlebar Stache
  • *****
  • Posts: 1084
Re: Case Study: Roast Me (gently)
« Reply #24 on: January 11, 2020, 05:21:58 PM »
You are going about the roommate situation backwards.  She will never get her finances in order until she has to, and as long as she's paying below market rent (how much below, by the way?) she has no incentive to improve things.  Why would she want to move somewhere else where she has to pay more?  You've been keeping her afloat at your expense for a LONG time - now she needs to sink or swim.  (The analogy of trying to help a drowning person and they end up pulling you under too comes to mind here.)  As I said in your other thread, you're NOT helping her (because she doesn't know how to live within her budget partly due to her low rent) and I would dearly love to know why you are really doing this.  If you are truly that much of a door mat, I despair for you!  WAKE UP, WAKE UP!!!!!!!!!!!

Jon Bon

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Midwest
Re: Case Study: Roast Me (gently)
« Reply #25 on: January 12, 2020, 06:06:24 AM »
I need to know more about the HVAC thing here.

What is the actual issue? I have a hard time thinking that a house could sink enough (and still be standing) the point where new HVAC ducts are needed? Is the furnace/blower/AC ok? Or does that need to be replaced too?

$850 a month is a ton of money for something like an HVAC system.

So my AC unit is 20 years old and my furnace is older than that, I think. In the spring I had a company come out to do a "spring tune up" on the system since I've lived here 7 years and have never done that, and the dude basically told me there's all this stuff wrong with the system (AC unit and furnace both have issues needing repair, I can't remember what all they were, though) and that I'd be lucky to get another year out of it.

He also told me that when it does die, since my ductwork is original to the house, it wouldn't be able to support the demands of a new unit so I should expect to have to have all the ductwork replaced at the same time. A friend of mine had this happen last year to him so that sounded legit to me, and the total cost for a new unit AND new ductwork in his (comparably sized) home was about $12k. That's the barometer I've been using.

I wasn't surprised about the ductwork, honestly. It looks terrible up in my attic. But I'll also admit to being someone susceptible to predatory sales-types, and definitely susceptible to scare tactics... you think he was bullshitting me?

Also, like I said upthread, I do feel a little like a psycho socking away $850 a month for this when I have $18K in cash already and the system is (from the outside) working fine. I'm just a little traumatized from my debt emergency still and never want to find myself back in that situation, so I feel like I need to HOARD ALL THE CASH, JUST IN CASE!!!!!! But, admittedly, the pendulum might have swung too far in the opposite direction.

Ok yeah, get some new bids on that HVAC work.

Sure 20 year old units are reaching the end of their useful life, it does not make sense to put a bunch of money into them to repair them.

That being said, I have never heard of someone needing their ducts replaced. A 20 year old blower and a modern blower pretty much work the exact same way. I dont know what part of the world you are in, but ive never heard of ducts needing replaced just for a new HVAC system.

The house did not grow bigger did it? The air your are moving around now with the old unit is the same air that you would be moving around with the new unit. Their might be more to your story but this sure feels like a huge (and dishonest) up-sell.

How old is your house?

Well that’s encouraging. My house was built in the late 70s, I think 1978. Sounds like I might need to slow my roll a bit.

FWIW I can get a new AC and furnace for about $5000 granted I have a good guy and I get 'contractor prices'.

Aw your duct work is just a baby! Its not even wrapped in asbestos! I assume it is just your standard steel ductwork?

Something you can do is inspect it for leaks and seal. You can use special tape or dope for this. Pretty simple work to do, I just wipe the joint with a damp rag and tape it up. It can help your efficiency.

Ask around to your fellow home owners for an honest HVAC guy.

Freedomin5

  • Magnum Stache
  • ******
  • Posts: 2892
  • Location: China
Re: Case Study: Roast Me (gently)
« Reply #26 on: January 12, 2020, 02:26:05 PM »
I think this is the current plan.

1. Will not be selling the car due to reasons discussed up thread

2. Continue hoarding cash like a dragon in a cave protecting its golden egg until next round of 401k changes (4/1, misspoke earlier)

3. I should have $22k in cash saved by 4/1 which feels like enough to keep my Debt Emergency PTSD at bay. I will increase contributions to max out 401k  by end of year (25% should do it)

4. Monthly take-home should still be around $3,700 which is still plenty for me to be able to continue saving cash each month (just not to the tune of $850) to keep padding the EF and saving for YOLO stuff like travel and general 30 year-old life fun

5. Discuss raising the rent for my friend mid-year. Maybe only bump it to $500 and see how that goes... then raise again in 2021 if she still hasn’t started looking for her own place. Enjoy a little extra cash until then.

6. Cut cable and cancel TruGreen

7. Increase charitable contributions. Maybe add a recurring $50 donation to an organization I care about. There are a few great local animal rescue groups that could use it.

Is there room to put “Max out 401k” to your list as well? Or at least increase contributions to 401k? Maybe with the money you save from canceling cable and increasing rent?

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #27 on: January 12, 2020, 05:14:11 PM »
I think this is the current plan.

1. Will not be selling the car due to reasons discussed up thread

2. Continue hoarding cash like a dragon in a cave protecting its golden egg until next round of 401k changes (4/1, misspoke earlier)

3. I should have $22k in cash saved by 4/1 which feels like enough to keep my Debt Emergency PTSD at bay. I will increase contributions to max out 401k  by end of year (25% should do it)

4. Monthly take-home should still be around $3,700 which is still plenty for me to be able to continue saving cash each month (just not to the tune of $850) to keep padding the EF and saving for YOLO stuff like travel and general 30 year-old life fun

5. Discuss raising the rent for my friend mid-year. Maybe only bump it to $500 and see how that goes... then raise again in 2021 if she still hasn’t started looking for her own place. Enjoy a little extra cash until then.

6. Cut cable and cancel TruGreen

7. Increase charitable contributions. Maybe add a recurring $50 donation to an organization I care about. There are a few great local animal rescue groups that could use it.

Is there room to put “Max out 401k” to your list as well? Or at least increase contributions to 401k? Maybe with the money you save from canceling cable and increasing rent?

Sorry if that wasn’t clear, maxing 401k was #3 on my list. I can only make updates quarterly through my plan.

Cassie

  • Walrus Stache
  • *******
  • Posts: 6492
Re: Case Study: Roast Me (gently)
« Reply #28 on: January 12, 2020, 05:28:02 PM »
I would definitely raise the rent. She’s been getting a deal for 8 years. It doesn’t have to be up to market rate and it’s a win-win for both of you.

Freedomin5

  • Magnum Stache
  • ******
  • Posts: 2892
  • Location: China
Re: Case Study: Roast Me (gently)
« Reply #29 on: January 12, 2020, 06:13:30 PM »
I think this is the current plan.

1. Will not be selling the car due to reasons discussed up thread

2. Continue hoarding cash like a dragon in a cave protecting its golden egg until next round of 401k changes (4/1, misspoke earlier)

3. I should have $22k in cash saved by 4/1 which feels like enough to keep my Debt Emergency PTSD at bay. I will increase contributions to max out 401k  by end of year (25% should do it)

4. Monthly take-home should still be around $3,700 which is still plenty for me to be able to continue saving cash each month (just not to the tune of $850) to keep padding the EF and saving for YOLO stuff like travel and general 30 year-old life fun

5. Discuss raising the rent for my friend mid-year. Maybe only bump it to $500 and see how that goes... then raise again in 2021 if she still hasn’t started looking for her own place. Enjoy a little extra cash until then.

6. Cut cable and cancel TruGreen

7. Increase charitable contributions. Maybe add a recurring $50 donation to an organization I care about. There are a few great local animal rescue groups that could use it.

Is there room to put “Max out 401k” to your list as well? Or at least increase contributions to 401k? Maybe with the money you save from canceling cable and increasing rent?

Sorry if that wasn’t clear, maxing 401k was #3 on my list. I can only make updates quarterly through my plan.

Sorry, my bad. I missed that part. Good job! :)

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #30 on: January 13, 2020, 08:00:21 AM »
You are going about the roommate situation backwards.  She will never get her finances in order until she has to, and as long as she's paying below market rent (how much below, by the way?) she has no incentive to improve things.  Why would she want to move somewhere else where she has to pay more?  You've been keeping her afloat at your expense for a LONG time - now she needs to sink or swim.  (The analogy of trying to help a drowning person and they end up pulling you under too comes to mind here.)  As I said in your other thread, you're NOT helping her (because she doesn't know how to live within her budget partly due to her low rent) and I would dearly love to know why you are really doing this.  If you are truly that much of a door mat, I despair for you!  WAKE UP, WAKE UP!!!!!!!!!!!

Not sure what you mean by "would dearly love to know why you are really doing this"... are you implying I have some nefarious ulterior motives here? Because that's how that reads. I really hope not.

She is one of my closest friends. She has been living with me for 7 years. It's true that I'm getting to a point now where I would rather live alone, but outside the issues I've had with her paying rent, I have enjoyed having her as a roommate. Of course I find it difficult to kick her out knowing she has nowhere to go. I think it's easy for you to give that advice from a 10,000 foot view, but are you really so confident that you'd be able to do the same to one of your best friends? People and relationships are not black and white, she is a good person who is a mess when it comes to managing her money. That doesn't make her a bad person, and that doesn't make it easy for me to "WAKE UP!" and kick her out of my home.

Watchmaker

  • Pencil Stache
  • ****
  • Posts: 700
Re: Case Study: Roast Me (gently)
« Reply #31 on: January 13, 2020, 09:33:06 AM »
I think this is the current plan.

1. Will not be selling the car due to reasons discussed up thread
I originally missed the fact that your father helped out. Knowing this, I can see why you'd choose to keep it.

5. Discuss raising the rent for my friend mid-year. Maybe only bump it to $500 and see how that goes... then raise again in 2021 if she still hasn’t started looking for her own place. Enjoy a little extra cash until then.
You said in your last post that you'd really rather live alone, so I'm not sure the issue here is even how much rent you are charging. Maybe that's the conversation you should have with your friend. Give her plenty of time to find a place she can afford, maybe even gift her her last month's rent to help her get on her feet, but let her know she should be looking for another place.

6. Cut cable and cancel TruGreen
Great!

7. Increase charitable contributions. Maybe add a recurring $50 donation to an organization I care about. There are a few great local animal rescue groups that could use it.
YMMV, but I've noticed I get less satisfaction out of recurring monthly donations since I don't feel like I'm actually giving the money. I have more fun giving a bigger amount annually. Just food for thought.

SunnyDays

  • Handlebar Stache
  • *****
  • Posts: 1084
Re: Case Study: Roast Me (gently)
« Reply #32 on: January 13, 2020, 10:03:14 AM »
You are going about the roommate situation backwards.  She will never get her finances in order until she has to, and as long as she's paying below market rent (how much below, by the way?) she has no incentive to improve things.  Why would she want to move somewhere else where she has to pay more?  You've been keeping her afloat at your expense for a LONG time - now she needs to sink or swim.  (The analogy of trying to help a drowning person and they end up pulling you under too comes to mind here.)  As I said in your other thread, you're NOT helping her (because she doesn't know how to live within her budget partly due to her low rent) and I would dearly love to know why you are really doing this.  If you are truly that much of a door mat, I despair for you!  WAKE UP, WAKE UP!!!!!!!!!!!

Not sure what you mean by "would dearly love to know why you are really doing this"... are you implying I have some nefarious ulterior motives here? Because that's how that reads. I really hope not.

She is one of my closest friends. She has been living with me for 7 years. It's true that I'm getting to a point now where I would rather live alone, but outside the issues I've had with her paying rent, I have enjoyed having her as a roommate. Of course I find it difficult to kick her out knowing she has nowhere to go. I think it's easy for you to give that advice from a 10,000 foot view, but are you really so confident that you'd be able to do the same to one of your best friends? People and relationships are not black and white, she is a good person who is a mess when it comes to managing her money. That doesn't make her a bad person, and that doesn't make it easy for me to "WAKE UP!" and kick her out of my home.

No, I didn't mean that you have some nefarious motive.  But if you have let someone take advantage of you to that degree, there has to be something else going on besides wanting to help a friend.  You said in your previous thread that she owes you about 20K in unpaid rent an I wonder how much more in the reduced rent you've been accepting.  Has she provided you with something of equivalent value to make up for this?  I know that relationships are not financial transactions, but how do you not feel severely angry at her behaviour?  To me, it says "I don't respect you," regardless of how good a person she is.  (Don't confuse "good" with "pleasant."  It's the difference between character and personality.)  It would be different if she had had some catastrophe befall her and you wanted to help her out, but that's not been the case.  She is simply vastly overspending on unnecessary stuff while she shorts you on rent.  For years and years. Frankly, if that's not thumbing her nose at you, I don't know what is.  I'm not trying to be mean, and I can see letting her get away with it for a bit before you "wake up," but for 7 years?  I'm not suggesting you kick her out tomorrow, but give her a deadline of say, 6 months, and/or raise her rent.  She has nowhere to go because she's spent all her money and that is not your fault.  As long as you keep making excuses for her, she will be living with you forever.  I'm saying this all with kindness, really; I'm trying to help you.  Tough love, you know?

Laura33

  • Magnum Stache
  • ******
  • Posts: 2717
  • Location: Mid-Atlantic
Re: Case Study: Roast Me (gently)
« Reply #33 on: January 13, 2020, 10:18:33 AM »
You are going about the roommate situation backwards.  She will never get her finances in order until she has to, and as long as she's paying below market rent (how much below, by the way?) she has no incentive to improve things.  Why would she want to move somewhere else where she has to pay more?  You've been keeping her afloat at your expense for a LONG time - now she needs to sink or swim.  (The analogy of trying to help a drowning person and they end up pulling you under too comes to mind here.)  As I said in your other thread, you're NOT helping her (because she doesn't know how to live within her budget partly due to her low rent) and I would dearly love to know why you are really doing this.  If you are truly that much of a door mat, I despair for you!  WAKE UP, WAKE UP!!!!!!!!!!!

Not sure what you mean by "would dearly love to know why you are really doing this"... are you implying I have some nefarious ulterior motives here? Because that's how that reads. I really hope not.

She is one of my closest friends. She has been living with me for 7 years. It's true that I'm getting to a point now where I would rather live alone, but outside the issues I've had with her paying rent, I have enjoyed having her as a roommate. Of course I find it difficult to kick her out knowing she has nowhere to go. I think it's easy for you to give that advice from a 10,000 foot view, but are you really so confident that you'd be able to do the same to one of your best friends? People and relationships are not black and white, she is a good person who is a mess when it comes to managing her money. That doesn't make her a bad person, and that doesn't make it easy for me to "WAKE UP!" and kick her out of my home.

OK, I don't want to re-open that whole other discussion.  But I would ask you to challenge the way you think about her.  The way you frame this up, she is a wonderful, delightful, perfect person, with this one minor little flaw.  And who wouldn't be happy to put up with that?  After all, none of us is perfect, right?

The thing is, she is not an almost-perfect human with a teensy-tiny flaw.  Because that "flaw" includes taking advantage of other people -- including you, her close friend who has supported her unquestioningly for years, who has always had her back, who has always provided a safe place to fall, and who has asked for almost nothing in return.

The issue is not that she is perpetually short of money -- it is why she is perpetually short of money.  She is not broke because she spends her days unselfishly giving to others -- lending money to a friend who is short on rent, working a poverty-level nonprofit job to help those with less, etc.  She is broke because she buys herself whatever fun thing she wants, regardless of how that affects other people.  Including her fantastic friend whom she supposedly loves and who has consistently supported her for more than 7 years. 

IOW, she is a fundamentally selfish human being who puts her own wants in front of others' needs, no matter how much she supposedly cares about those others (that would be you).  That doesn't mean she isn't fun to be around and hang out with and all that stuff.  And it doesn't mean that she doesn't have other good qualities, or that you should dump her as a friend.  We are all imperfect, all fallible.  But please stop idealizing her.  Acknowledge that her one little "imperfection" is a propensity to take advantage of the people who care the most about her -- as often as possible, for as long as possible. 

And with that in mind, also realize that your continued support is not "helping" her get on her feet, because that is not now and has never been her goal.  She will continue to live with you, and pay whatever reduced rent you force her to, for as long as you let her.  That is the trade you are making.  So if you do continue to let her live with you -- whether at $400 or $600 or whatever reduced rent you offer -- do so with the full understanding that you are not "helping" her get her finances in order, "helping" her get back on her feet.  Instead, you are simply providing her additional money to spend on pretty-things-that-are-not-rent that provide her a nice lifestyle.

Cassie

  • Walrus Stache
  • *******
  • Posts: 6492
Re: Case Study: Roast Me (gently)
« Reply #34 on: January 13, 2020, 05:56:09 PM »
Listen to Laura!

Malum Prohibitum

  • Pencil Stache
  • ****
  • Posts: 732
Re: Case Study: Roast Me (gently)
« Reply #35 on: January 16, 2020, 08:45:37 AM »
And with that in mind, also realize that your continued support is not "helping" her get on her feet, because that is not now and has never been her goal.  She will continue to live with you, and pay whatever reduced rent you force her to, for as long as you let her.  That is the trade you are making.  So if you do continue to let her live with you -- whether at $400 or $600 or whatever reduced rent you offer -- do so with the full understanding that you are not "helping" her get her finances in order, "helping" her get back on her feet.  Instead, you are simply providing her additional money to spend on pretty-things-that-are-not-rent that provide her a nice lifestyle.

Enabling.

It's easy to blow money when you do not have to put money toward a priority like a mortgage or market rate rent.

Your are making it easier for her to continue her money mess.


Is a part of this just that you don't want to confront her because she spent the entire time crying last time?  That's manipulative.

ReadyOrNot

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: Case Study: Roast Me (gently)
« Reply #36 on: January 16, 2020, 09:48:32 AM »
Looks like you're doing amazing. $100k at 30 year old?  That's incredible.  Tons of room for that to increase in the future!

I would max out the 401k and the try to live on the rest.  I always maxed out my 401k / HSA / Roth IRA (which I was eligible) and then tried to live on the rest.  Pay yourself first is the golden rule.

With regards to charitable donations, it doesn't have to be money.  You could volunteer since you don't have a family yet.  When you have more room to splurge on charities in the future, then feel free to donate.  I plan to increase my charitable contributions in the future as my NW increases, but I've kept it to a small % of my income now as I've always believed if I can help myself be financially free, it lessens the burden on the world and I can give back later.

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #37 on: January 16, 2020, 10:26:03 AM »
Looks like you're doing amazing. $100k at 30 year old?  That's incredible.  Tons of room for that to increase in the future!

I would max out the 401k and the try to live on the rest.  I always maxed out my 401k / HSA / Roth IRA (which I was eligible) and then tried to live on the rest.  Pay yourself first is the golden rule.

With regards to charitable donations, it doesn't have to be money.  You could volunteer since you don't have a family yet.  When you have more room to splurge on charities in the future, then feel free to donate.  I plan to increase my charitable contributions in the future as my NW increases, but I've kept it to a small % of my income now as I've always believed if I can help myself be financially free, it lessens the burden on the world and I can give back later.

Thank you so much! And you're right, I focused hard last year on increasing charitable giving through time investment instead of money as I was focused on saving and paying off the car. I teach GED Science to adults trying to go back and earn their GED through a local literacy program every week and am now 7 months into a one-on-one mentorship/private tutoring with a woman who has one section left to pass. That has been rewarding in so many ways.

I'm not ignoring all the other responses and feedback about the roommate situation... I have just been swamped with work this week and then on Monday the bottom of my 18 year-old hot water heater rusted out and flooded my laundry room. $1,500 later and I'm good as new but needless to say, my week has been full :) Will try to get around to replying to some of those later.

DaMa

  • Bristles
  • ***
  • Posts: 438
Re: Case Study: Roast Me (gently)
« Reply #38 on: January 16, 2020, 12:56:12 PM »
Hi!  I think you are doing great.  I have a story to share...

DS1 was not good with money.  He was paying super low rent to DS2, $50 a week, and not being responsible about it.  DS2 wanted him out.  So DS1 asked if he could move in with me.  I added up all expenses and divided by 2, then charged him double.  That way he was forced to pay what he would pay if he was living on his own.  I saved 1/2 for him to be sure he would have the money for security deposit and 1st months rent when he moved out.  I also gave him 6 months max.  His rent was $1000: $500 for his 1/2 and $500 for forced savings.  He also buckled down and saved another $500 a month and was out in 3 months.  He proved to himself he could do it, and learned what was important and what wasn't.  He's gotten more mustachian since.





ReadyOrNot

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: Case Study: Roast Me (gently)
« Reply #39 on: January 16, 2020, 01:28:28 PM »
DaMa - that is absolutely brilliant.  I will follow the same plans with my own if there should be a lack of sufficient motivation to grow up and take on financial responsibilities.

DaMa

  • Bristles
  • ***
  • Posts: 438
Re: Case Study: Roast Me (gently)
« Reply #40 on: January 16, 2020, 02:07:25 PM »
Thanks.  It developed from my mom had a friend who charged her son rent after high school graduation (not in college).  She saved it all and gave it to him at his wedding.

ReadyOrNot

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: Case Study: Roast Me (gently)
« Reply #41 on: January 16, 2020, 02:13:24 PM »
Wow, that is double brilliant.  Some smart parenting for sure!  I'm going to steal this play from the playbook!

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #42 on: January 16, 2020, 03:09:05 PM »
Funny you should mention that... back when my friend moved in with me (7 years ago) I did something similar, though since she was only paying $400/month the "savings" were minimal, about $50. My plan was to do the same for her eventually since the whole reason she moved in with me for so cheap was because at the time her salary was incredibly low (she is in social work at a non-profit) and had no family to help guide her. I figured by the time she moved out she'd have a small pot of savings to help her with whatever came next.

Unfortunately she found out about it and the first time she hit a struggle with paying her bills she asked me for her "savings." I think it had only amassed like $150 at that point. We started over. She did it again. I realized pretty quickly that this plan would never work with her and gave up. Over the past 7 years, her circumstances have changed (makes about $20K more per year, has a much better relationship with her family) yet I haven't raised her rent. That's as much help as I've been willing to give her.

I think what you did was an amazing lesson for your son to learn. It's hard for me because I am NOT her mother, I am her friend. She is not a child, she is 31. And she HAS been given the gift of 7 years worth of ridiculously low living expenses, multiple years where she paid nothing at all, and has squandered that opportunity to improve her situation at every turn, often at my expense.

I do hear everyone in this thread and am thankful for all the input. I don't want it to seem like I have an idealized version of her in my head -- she has some really great qualities, but she also has some really, really bad ones. I love her like a sister in the way you love someone despite their flaws, but just because I love her and think she is a fundamentally good person doesn't mean I don't ultimately also resent her for taking advantage of me. She is not a very considerate person in general (easily her WORST quality) and I'm not the only relationship she has that is one-sided where she takes far more than others should be asked to give. She doesn't do it deliberately, but I don't know whether that makes it better or worse. She just doesn't think about how her actions or inactions impact anyone but herself.

I have let this situation fester for long enough that it has changed the way I see her as a person.That's how I know it's coming to an end and I am ready to live alone. But, that's not to say that I don't still love her, and enjoy spending time with her, and want her to succeed, and want very much to NOT be the source of any pain or suffering for her. All that to say... lots of complicated emotions tied up in what others see as a landlord/tenant relationship. I realize that a lot of that is my own fault.

ReadyOrNot

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: Case Study: Roast Me (gently)
« Reply #43 on: January 16, 2020, 03:28:45 PM »
I have let this situation fester for long enough that it has changed the way I see her as a person.That's how I know it's coming to an end and I am ready to live alone. But, that's not to say that I don't still love her, and enjoy spending time with her, and want her to succeed, and want very much to NOT be the source of any pain or suffering for her. All that to say... lots of complicated emotions tied up in what others see as a landlord/tenant relationship. I realize that a lot of that is my own fault.
This is absolutely not your fault.  You seem to be a kind and generous person who has your act together trying as much as possible to help a loved one out.  Unfortunately like the situation with my SO, we can only do so much to enable the other person to be more responsible and take charge of life.

I suggest it might now be the best course of action to set your friend free and let her deal with the reality / challenges of living on her own.  Sometimes birds need to be nudged from the nest to really learn to fly and be free.

And with her being free, it could free you up to find a life partner and potentially have a family as well.  Best of luck!

DaMa

  • Bristles
  • ***
  • Posts: 438
Re: Case Study: Roast Me (gently)
« Reply #44 on: January 16, 2020, 07:08:17 PM »
I would say let her know you need to bring her rent to where it should be in order to meet your financial goals.  Show her how much you pay and divide by 2 (or whatever you would charge a new roommate).  Let her know several months in advance that you will raise rent a $100 a year or $50 every 6 months until you get to that point.

Mom's friend did not tell her son she was saving that money for him.  I wouldn't either in that situation, but not because he might want it sooner.  What if my situation changed, and I needed to keep that money?

JustK

  • 5 O'Clock Shadow
  • *
  • Posts: 17
Re: Case Study: Roast Me (gently)
« Reply #45 on: January 17, 2020, 08:25:50 AM »
This may or may not apply where you live, but do check to see if your power provider offers any rebates or incentives for improving your duct work / HVAC.  Duke Energy in Florida does offer various rebates (after a free energy audit) from time to time, but they aren't widely advertised, so they can be easy to miss.  They require you to use one of their approved providers for the work, but I was able to save some decent money for repairing leaky ducts and adding insulation to my 1950s-built home. We probably also could have gotten a rebate for installing a new, energy-efficient HVAC system when we bought the house several years back, but we missed out on that opportunity.

(Same for your utility provider if you ever have to update/replace any plumbing.)

Villanelle

  • Magnum Stache
  • ******
  • Posts: 3552
Re: Case Study: Roast Me (gently)
« Reply #46 on: January 17, 2020, 10:53:35 AM »
I am going to echo what I think is the most important part of @Laura 's excellent post.

Your goal for her is financial independence.  He goal for herself is something else entirely.  You actions are in line with her goal, but that meaningless because she's moving in an entirely different direction.

I would approach this by first deciding how much I want some rent money, vs. how much I want to live alone.  If I wanted to keep the money for a while, I'd increase the rent by $100.  It sounds like that is still below FMV, so it's very unlikely she will move out.  I'd also let her know that after evaluating my finances, I really need to get the rent up to FMV, so I'd be raising it by $50 more every 6 months until we got there, and I'm telling her this now so she can be prepared.

If I wanted her out, I'd raise the rent $100 and tell her that I really want to live alone, so I'm giving her 6 months notice to find another place. 

I would NOT give her money on the way out.  You've given her tens and tens of thousands of dollars, between what she never paid and the cheap rent.  If that wasn't enough, nothing will be. 

Prepare for tears.  (This is where I like to have a basic line that I repeat in some form, over and over and over.  "I'm sorry you are upset.  I've had to make the choice that's best for the next part of my life."  "I can see this is hard, but it's what I need to do."  etc.") Prepare for begging.  Prepare for her to do nothing.  About 6 weeks before your deadline, ask her about progress and make it clear you will NOT be extending.  Two weeks out, if when she's done nothing, stand firm. "You're friends with Sally, right?  She would probably be willing to put you up for a while, especially if you offered to pay her rent."  Stand firm, and telegraph in advance that you will be doing so. 

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #47 on: January 17, 2020, 11:09:59 AM »
This may or may not apply where you live, but do check to see if your power provider offers any rebates or incentives for improving your duct work / HVAC.  Duke Energy in Florida does offer various rebates (after a free energy audit) from time to time, but they aren't widely advertised, so they can be easy to miss.  They require you to use one of their approved providers for the work, but I was able to save some decent money for repairing leaky ducts and adding insulation to my 1950s-built home. We probably also could have gotten a rebate for installing a new, energy-efficient HVAC system when we bought the house several years back, but we missed out on that opportunity.

(Same for your utility provider if you ever have to update/replace any plumbing.)

Thanks! Looks like I just missed out on a rebate program Duke was running in my area. I guess it wouldn't have mattered anyway since I already had the work done and didn't go through them, but good to know on any future repairs. I will definitely keep this in mind if this year is the year the HVAC bites the dust...

frugalfoothills

  • Bristles
  • ***
  • Posts: 274
  • Age: 30
    • Bulls, Bears and Beers
Re: Case Study: Roast Me (gently)
« Reply #48 on: January 17, 2020, 11:24:23 AM »
Thanks, all. I really do appreciate the advice and support. Couple things and then I'd like to put the roommate conversation to bed as it's not really the focus of this case study & I feel like we've kind of gotten derailed --

  • She is actively working to get her finances under control (just paid off one of her cards... this is an absolute first) so I do see SOME new effort on her part. You are all correct, though, in saying I am more invested in her financial independence than she is. I think some of that just stems from the fact that she has never known financial security so she doesn't know how much better her life could be. Paying the one card off did give her a huge taste of that, and I'm hoping to see that progress continue
  • I am giving this situation 6 more months at the current $400 rate. In July, I will raise her rent to $500. If at that time I see she has made zero additional progress with her finances, I will have the discussion that I'm looking to live alone come 2021 and she has 6 months to find somewhere else to go. If she seems to be continuing to get her life in order, I'll put that conversation off for another 6 months. Of course if I change my mind and want her out during that time I'll adjust the plan accordingly.
  • I will definitely NOT be giving her any money when she leaves -- my "gift" to her will have been the 7 years of living either for free or virtually nothing. I expect there will come a time in the future when the reality of what that meant for her sets in, but I don't think she'll really appreciate it until she's out on her own and realizes how expensive life is (and how freakin good she had it for so long!) Bitter pill to swallow when she accepts how she squandered that opportunity and how she could have set herself up for future success, but it's really too late now for her to do anything other than dig out.

I do appreciate all of the commentary and thank you for pushing me to put a plan together for this year. When I say that some of this is my fault, I mean that I should have (from the beginning) set clearer boundaries and expectations with her. We were 22 when this arrangement came about and, if I'm being honest, I never expected it to last as long as it has. It has always been less of a landlord/tenant arrangement and more of a "hey you should move in with me because we are friends!" casual arrangement, which has led to her taking a LOT of liberties with the lack of structure and my generally non-confrontational attitude. I, though, have grown over the past 7 years and she (and the living situation) remains the same as it was in 2013.

MidwestM

  • 5 O'Clock Shadow
  • *
  • Posts: 2
Re: Case Study: Roast Me (gently)
« Reply #49 on: January 17, 2020, 11:36:16 AM »
Long time lurker here.  Your situation reminded me so much of my own that I wanted drop in to offer some additional encouragement regarding your roommate.

You've gotten a lot of great advice in this thread and I won't rehash or try to add.  Having been in a place that's similar to yours, I did want to encourage you to raise her rent sooner rather than later.  There may be difficult conversations, but you'll feel so much better after you do it if for no other reason than you'll be appropriately reimbursed for the value of what you're giving her.

You're doing a great job!  This is a really hard spot to be in and I completely empathize.  Keep up the good work!!