# Reader Case Study: Yeah, But How About a Difficult Life?

## By Mr. Money Mustache

## Wed, 07 Nov 2012 21:45:26 +0000

Despite the fact that he wears mostly ripped jeans and installs his own sewer pipes, Mr. Money Mustache is occasionally accused of being a privileged upper-middle class elitist who doesn’t understand the problems of real people.

So this week we look at a call for advice from a reader with more challenge packed into her life than some of our past studies.

Dear MMM,

I’ve been reading your reader case studies and rolling my eyes here. Let’s get real. Not everyone in this world has a combined income of $100,000. Nor do they not have kids, or even just one baby. Please. Most people are raised without a lick of finances in their head. They only figure them out after receiving large amounts of debt.

But by then, it feels to late to change the tide. Most people get married when they are in their 20’s, then in a year or two they have a babe, making Mom’s education worthless for income, while Dad tries to grow up over night into the $50,000 year income he would like. Everyone harps on the new parents, “Your kid needs to be socialized, put him in daycare. Your kid should play T-ball, Dance, Soccer, and photography.” Meanwhile Mom and Dad decide they enjoy the babe and have more. Now, they have 4. While Dad works to pay off the hard lessons of debt, he supports the family on about $50,000 a year. This is reality for most people.

And for me. :). I wanted to challenge you to do a reader case study on real people who have it hard. Not easy ones who make over $100,000 a year and you’re thinking, “No kidding. Get rid of the Hummer.” I will type out my budget so you can see where you can “trim the fat” – for a challenge. Not because I feel that I really need the help – but you never know.

Income: Currently $50,000

Cars: We own 2. A suburban (paid cash) in order to drive once a week as a family, or haul our trailer to the dump. {Please note my husband is a Dealer for a tool company – it’s a franchise. The amount of card board we recycle fills a 10ft x 10 ft trailer every two weeks. The recycle center is 20 minutes from the house. I never go that way, unless it is to recycle. }

We own a gas saver car that gets 30 mpg, and can fit (in a tight squeeze) all 6 of us. We paid cash for this car and use it as the main car.

House: $1275. We tried to rent cheaper. They count the number of people living in a small apartment and there is a bit of a rush for rentals. After trying to be cheap as possible, we rented for $1500 plus utilities. Thus, we bought a foreclosure to fix up ourselves. At the peak, this house was worth $300,000. When we bought it the appraisal was $200,000 and we paid $180,000 at 4.1% interest, with no PMI.

Food: $1,000 a month. We eat mostly veggies, fruit and free range type meat. We do not buy prepackaged things, I am just feeding 5 boys. The government allows $150 per person on food stamps. We do $166. The extra is to allow for personal heygine, and snacks for extra activites. We do Cub Scouts once a week (the boys earn their own money to pay for it), and the snacks are for times when we have to run far from home (say 20 minutes). Un avoidably the children get hungry. So does my husband. :). Every time.

Here is the rest of the “budget”

Gas: 100
Insurance: 160
Student Loan: 90 ($8,000 left)
Bad Debt: 570 (I don’t want to talk about bad choices)
Life insurance: 35
Food: 1000
House payment: 1275
Trash: 25
Water: free – I have a well
Electric: 150 (I know this is high. It’s a remodel. It’s getting better every month).
Phone/internet : 80
Medical: 80
Cell Phone: 170 – my husband has one for his work. I’m going to look into what you suggested before w/google. I just haven’t yet.

Total: $3735

That leaves a difference of $529 – to cover clothes, shoes, and life. However, through it all we managed to save $5000 this year and used it to pay down debt.

Good luck!
SF

MMM Replies:

Dear SF,

I’ll admit that your situation is not trivially easy like most of the financial problems of the middle class. And part of the challenge is that for the most part, you’ve started running things pretty well already.

You got what sounds like a great deal on a house with some upside – and the opportunity to build sweat equity with your own labor while you live there. You raise four kids on less than what some people spend on themselves. You have no car loans, small student loans, and aren’t blowing money by putting lottery tickets, booze, and manicures on credit.

But here’s what you CAN do:

The Bad Debt:

This is a recurring theme in emails I get these days: people have credit card debt, often at interest rates above 15%, and yet they are still going along merrily building an “emergency fund” in a 0% savings account, making extra payments on other debts or cars or 401ks or doing renovations. So let me remind you once again:

CREDIT CARD DEBT IS AN EMERGENCY!! It goes out first, before you engage in any other activity. Do not write to Mr. Money Mustache for advice if you still have credit card debt. My advice is: tap all possible resources, up to and including couch-surfing, prostitution and illegal drug and organ sales, to pay off your credit card debt first. After that, we can start fixing the rest of your life.

Since you weren’t an MMM reader when this was racked up, you are hereby forgiven for whatever you did. But a $570-per-month payment at your level of income is spectacularly high, and thus it needs to be treated like an emergency. If you’re not already doing so, all extra payments should go to this high-interest loan (while making only minimum payments on the student loan and mortgage). And any luxuries that can be cut or savings made (see below), should be fired at this debt too.

The Cars:

I didn’t get the financial details of your vehicles, but they’re still worth scrutinizing carefully. A Chevrolet Suburban is a pretty useless vehicle – a minivan has larger capacity, plenty of power to pull a trailer, and uses far less gas. But if your Suburban is an old model worth less than $2000, and you drive it less than 20 miles a week, it might still be an fine choice because purchase price is more important than fuel efficiency for vehicles you rarely use. As a note to other big-family readers, there are some great small 6-passenger vans out there that are not behemoths – check out the Nissan Quest from around the 2001 model year range as an example. (My neighbor recently sold one in fine working condition for $1200 to buy an unnecessary $19,000 Subaru Forester).

Similarly, I assume your other more efficient car is a low-cost one (under $5000), and that you’ve already replaced all adults-only trips under 4 miles with bike/bike trailer trips.

Make sure you’ve shopped around thoroughly for car insurance (check Geico), and consider dropping collision/comprehensive insurance if you haven’t already. If that “$160/month” figure is mostly for car insurance, there may be huge savings available as my own car insurance is in the $20-$30 range.

Potential savings in this area: $50-$200/month.

The Food:

You’ve got about twice as many mouths to feed as me, but considerably more than twice the food budget. This might be worth looking into, since we eat a balls-out luxury diet in the MMM household that only became so flashy after we reached retirement. Costco should be your best friend. Rice and beans and potatoes can be very luxurious when cooked with skill. Coconut and olive oil are incredibly cheap on a per-calorie basis, yet great for your health. So make high-fat meals. Free range meat? Depending on the cost, I probably wouldn’t be buying that right now, until the emergency is lifted. Even now I feel just a little ridiculous when I buy a bit of organic chicken or ground beef, because it is so expensive, resource-intensive, and unnecessary. So I do it only once a week or so. There are MMM readers reading here right now that feed six people with Royal Family quality on less than half of what you’re spending – look to them for inspiration!

Potential Savings: $200-$500 per month!

The Phones:

As you have acknowledged already, that part of your spending is Off The Hook. You’re not Sir Richard Branson, running the Virgin Mobile company and needing to host data-intensive videoconferences from locations worldwide at a moment’s notice. You can have two phones on a modern plan like Republic or Google Fi, they’ll cost you about $10-20 and use your home internet access for long calls when you’re home.

Potential Savings: $150/month

Electricity:

$150/month might be reasonable if you are stuck with electric heat and you are running in the winter season. But watch out for unnecessary electric use: keep the house below 68F in winter, avoid A/C in summer if possible, hang-dry clothes when you have time, and ditch any incandescent bulbs unless you are benefiting from the heat they kick off. Our family is down to under 200 kWh/month, which works out to under $20 (although with natural gas heat and cooking).

Potential Savings: $100/month

Phone/Internet:

$80/month. Wait a minute, didn’t we already cover phones above? If you have cell phones, you don’t need a land line. You can get unlimited free calling from home with Google Talk. Hopefully, with shopping around and negotiating, you can get an internet-only account for $50/month or less.

Potential Savings: $50/month

Finally, the remaining elephant in the room is INCOME! You’re making 50 grand per year right now, but that should not be viewed as your upper limit. Maybe you have skills that can be applied to a side-hustle on weekends. Maybe your husband can advance in his business or another one. And eventually, your kids will grow old enough to need less care, and free you up to work more in the future. And thus, the future is bright. Just be sure to capture any additional income for savings, rather than lifestyle inflation.

With potential savings of $550-$1000/month, you have the opportunity to double or triple your savings rate. Since your current rate is about 10%, you would be cutting about 13-22 years off of your mandatory working career, reaching financial independence that much sooner. As debts and the house get paid off, this will only accelerate.

This is also a great lesson for readers who are not yet in a situation like this. Your financial life works out much better if you get your shit together before having kids, not afterwards. Before parenthood, you’re free to work as many hours as you like, live in any amount of space or even on the couch of a friend, stay up all night to further your education, and more. Use this precious time to get ahead – your future self will thank you for decades to come.

As soon as the kids hit, everything goes out the window and you need to begin anew. I like to think of each child as a 12-hour-a-day job. Two parents can share a single child and even have a bit of time to work. Barely. Beyond that, things start overlapping and stress builds. You can handle it, of course, but if you have the option, you should still get your shit together before having kids. It is worth it.

A Call to All Past Case Studies:

Your fellow readers have been asking about you! If you were in one of these articles in the past, and have news to report back, please send me an email through the contact form. Impress your Mustachian colleagues, or embarrass Mr. Money Mustache for being too optimistic. It would be great to follow up occasionally, and see how things have changed for you over the past year.