# Reader Case Study: The Long Road to Mustachianism

## By Mr. Money Mustache

## Sat, 15 Sep 2012 12:00:43 +0000

The battle of Mustachianism vs. Consumerism rages on, and we have made some serious headway lately, with almost a doubling of the blog’s readership in the past month and some funny appearances in major media.

But with new exposure comes new skepticism, and the need to explain the whole package from scratch to whole legions of people who have never heard of it before.

Can we crack through decades of established habit to allow people to lead richer, happier lives? Many newcomers to the blog don’t even realize how incredibly expensive (and inefficient) their lives are. To illustrate what we’re up against, check out today’s Reader Case Study:

Dear Mr. Money Mustache,

I discovered your blog a couple of weeks ago and have been reading it pretty much non-stop. I love your down-to-earth, practical and well-researched advice and was hoping you might be able to do a reader case study on my situation.

My husband and I are 28 years old (married for 5 years) and feel like we’ve made a lot of good financial decisions. However, like many of your other readers, I’m sure, there is one out there that is still haunting us and preventing us from realizing our dreams.

When we were in high school, we were both given the opportunity to attend state schools free of charge through a state-funded scholarship program. However, being in the “I’m a teenager so I know everything” stage, we both chose to attend expensive private colleges where we thought we’d get better educations. Even with private scholarships and after having paid more than the minimums every month, we still owe a combined $150,000 on our student loans. We consolidated our private loans as much as Sallie Mae and the Federal Government would allow and are currently paying a 3.75% interest rate (variable of course… I think it’s prime+1%).

After starting to read your blog, we decided to try to pay off our student loans in 4 years. Doing the math, if he pays $2,000/mo. on his and I pay $1,000/mo. on mine, we can do it. Is this the right decision? Or should we be trying to invest some of that money? We currently have no money in stocks, bonds, or REITs, but have been considering starting small (until we get the hang of investing) and putting around $3K into the Vanguard funds you suggested in some of your posts.

Here’s what our financial picture looks like:

– Combined salaries: $157,000 before taxes ($86,000 me, $70,000 husband) (I take home around $2,200 every 2 weeks and my husband takes home around $1,800 every 2 weeks because health insurance comes out of his check)

– Savings: $31,000 ($25,000 of it is in a high-yield savings account earning .8% interest, while the other $6,000 is in a normal savings account earning a mere .2% interest). This is both our emergency savings and our savings for the downpayment on our next home (We are hoping to get to 20% so we don’t have to pay PMI next time around. Also, current market value on our house is approx. $10K-$15K less than what we owe).

– 2 cars (paid off) (I work 32 miles from home and husband works 40 miles from home. In our area, the jobs close to home pay less than half what we make traveling into the city.)

– Car insurance: ~ $140/month combined

– Mortgage and real estate taxes: $1675/month (unpaid principal balance of $206,029) (interest rate 5% + PMI). (As a side note, we tried to refinance but FHA regulations have changed since we originally got our mortgage and we were told there would be no significant advantage because our PMI would go up from $100/mo to over $300/mo, thereby cancelling out any savings) (We’re also hoping to move from our condo into a single-family home in the next 5 years)

– Internet + basic cable (cheaper to keep 5 channels of tv than to get rid of it due to cable company’s bundling) (husband works 2 days/ week from home, so high speed Internet is needed).

– Electric bill: ~ $120/month

– Gas bill: Between $6-$100 a month depending on how cold the New England winter is.

– Combined cell phone bill: $150/mo.

– Gas for the cars: ~$600/mo.

– Groceries: ~$500/mo.

Also, to throw another wrench in, I am going to community college part time to get trained in a completely different career. Anticipated remaining cost over the next 2 years is $16K.

Hopefully I’ve captured everything. I really appreciate your opinion and hope your readers can learn something from our situation.

Thank you,

All right, so we’ve got three main points here:

- A fairly large student loan debt
- The desire to save for a home
- The desire to save for retirement

Balancing all this out, we have a powerful asset

- An unusually large double-worker-no-kids income of $157,000 per year

How do you decide between these priorities? Do we pay down the debt as a matter of principle? Do we save for retirement because the expected return is probably greater than 3.7%? Do we save for a downpayment to get into a bigger house?

All of these are good questions, but there’s one thing you need to do before any of that. You need to

SCREAM AND RUN AROUND LIKE YOUR HAIR IS ON FIRE!!! …… BECAUSE YOU HAVE THE MOST INSANE, RIDICULOUS, SUICIDAL, and STUPENDOUSLY EXPENSIVE CAR-COMMUTING HABIT OF ANY CASE STUDY I’VE EVER FEATURED HERE!!!

I mean, HOLY. SHIT. The two of you are driving a combined ONE HUNDRED AND FOURTY FOUR MILES PER DAY, and yet ending up at the same place you started each night. WHY?? A commuting habit like this will cost you over $215,000 every ten years if you simply shift the money you currently waste on driving, towards paying off your student loans instead. In fact, your choice to live so far away from your work is a much bigger boat anchor keeping you from getting ahead than any amount of student loan debt could ever be.

So I’m going to start by having you move close to work. Like, right now. I mean your husband should be shopping for apartments on Craigslist even as you finish reading the rest of this article. You can shout the rest of it across the room to him as you read and he searches. It’s that much of an emergency.

You can rent out your current condo, and find a new rental in the city. Eventually the condo can be sold. Your new place might be smaller, but that’s fully appropriate right now – you are in debt, so it’s emergency payoff time, not luxury time.

Your new apartment can be at the midpoint between the two jobs, thus you can both bike, walk, or take the subway to work. In the worst case, one person can walk, while the other drives a short distance. This change alone will make the difference between “broke” and “millionaire” over just a portion of a typical working career. And yet it will change your whole life for the better. You’re about to get all your free time back! You get to experience the feeling of ending your workday, biking home, and still having some time in the evening to actually accomplish something. From this point forward, you will not give a shit about what the rush hour traffic on the interstate looks like. And you never will again, for the rest of your life! Congratulations!

Compounding the savings, you’ll be able to sell both of your cars, which are probably fairly new and expensive, and have between zero and one not-quite-as-new, efficient cars which don’t require collision insurance coverage.

Whew, that was intense, but I feel a lot better, don’t you? Without the outrageous drain of a crazy commute, you’ll finally have the chance to start keeping some of your own money.

Since your income is similar to that of Mr. and Mrs. Money Mustache during our own Prime ‘Stashing Years, you’ll probably find that you have almost $100,000 per year available to save after expenses. To make the most of your high taxable income, contribute the maximum possible amount to tax-advantaged savings accounts like 401Ks and IRAs, using low-fee index funds as the vehicle.

Next, take your $25,000 emergency fund and throw it into that student loan. Your new lifestyle will be much lower cost, and you’ve got two incomes (plus the unemployment insurance system) backing you up, so there is no need to keep such a high buffer. That will save you about $925 per year of interest, further accelerating the payoff.

Meanwhile, you’ll have time to brush up on additional skills, such as

- getting your $500 grocery monthly spending down to perhaps $250,
- the electric bill should be under $40,
- prepaid cell phones combined with Google Voice (and the voice/text chat plugin for Gmail) for unlimited free calls at home should run you about $50/month combined

plus, miscellaneous training sessions for your Frugality Muscles, including

- cooking your own food
- cutting at least some of your own hair
- doing plenty of outdoor recreation, and
- getting your indoor rec from The Library

If you make these changes, you’ll magically find that within just 2-3 few years, you have wiped out the whole student loan. This will allow you to turn your attention to the house downpayment. At that point, the 20% savings will show up within a year and you will finally be in a position to really buy your first house.

But don’t feel rushed to do so – if your active urban lifestyle is as fun as I predict it will be, you might choose to continue renting for much longer and using the money you’d normally spend on a house for investments instead. Perhaps even until you are financially independent 7-10 years later! At that point, you will be able to move to the locale of your dreams, buy a house with some of the spare change in your pocket, and let the good times roll.

This reader did not mention whether or not kids are planned for the future, but if they are, changes like this are even more powerful if they are made at this stage in a person’s life. It is far easier to change your habits for the better and create a more efficient and less stressful lifestyle Right Now, than it is to do so once you have the added full-time job of one or more children around requiring all of your focus. Starting a family is much better done when you’re out of debt and not dependent on multiple incomes for survival.

There are many paths you can enjoy, thanks to your new Mustachian take on life.. but all of them lead through the same initial bottleneck: eliminating your life-draining commute, and getting out of your Debt Emergency before making any more major purchases.

Best of luck, and if you like, keep us informed of how things are going as you make progress!

(And if any of our old case studies are out there reading, please write in through the contact form and let me know how things are for you too – many people have been asking about how you’re doing!)