Reader Case Study: Grandmother Of Five Hoping For Financial Security and Funds To Travel!
Marie is an active, travel-loving grandmother of five who wants our help planning the remainder of her career and her retirement. We’re headed to North Carolina today to make sure Marie can meet her goals of financial security coupled with fun!
Case Studies are financial and life dilemmas that a reader of Frugalwoods sends to me requesting that Frugalwoods nation weigh in. Then, Frugalwoods nation (that’s you!), reads through their situation and provides advice, encouragement, insight, and feedback in the comments section. For an example, check out last month’s case study.
I provide updates from our Case Study subjects at the bottom of each Case Study several months after a Case is featured. You all requested an easier way to track Case Study updates and I have heard your pleas :)! Here’s list of all the Case Studies that currently have an update provided at the end of the post (and a hint that if you’re a past Case Study participant who hasn’t sent me your update yet, send it on over–your fans want to hear from you!):
- Reader Case Study: Earn More, Spend Less, Or Both? (Julie’s story, published October 2016)
- Reader Case Study: Stay Home With Baby or Return To Work? (Kelly’s story, published November 2016)
- Reader Case Study: The Case Of The Over-gifting In-Laws! (Grace’s story, published December 2016)
- Reader Case Study: Renovations and Vacations (Audrey’s story, published January 2017)
- Reader Case Study: Help Me Decide How To Pay Off $185K In Student Loans (Bridget’s story, published February 2017)
- Reader Case Study: The Grad School Dilemma (Emily’s story, published March 2017)
- Reader Case Study: Can We Buy Our Dream Home? (Jack & Elizabeth’s story, published April 2017)
- Reader Case Study: We Have A Van, Now We Need A Plan! (Florence & Anna’s story, published May 2017)
- Reader Case Study: To Buy Or Not To Buy In Sydney, Australia? (Jemma & Greg’s story, published June 2017)
- Reader Case Study: Starting From Scratch In Canada; Where Do I Go From Here? (Alison’s story, published July 2017)
- Reader Case Study: Moving To Europe From South Africa, Trying To Make Ends Meet (Clara’s story, published August 2017)
- Reader Case Study: Should We Stay (In San Francisco) Or Should We Go Now? (Melanie & Kurt’s story, published September 2017)
- Reader Case Study: Having A Quarter-Life Crisis in Nashville, TN! (Steph & Zach’s story, published October 2017)
- Reader Case Study: National Park Rangers Figuring Out Finances (The Ranger’s story, published November 2017)
- Reader Case Study: Londoners Wonder About Buying A Property (Betty & David’s story, published December 2017)
- Reader Case Study: At Age 57, It’s Not Over Yet! (Lucy’s story, published January 2018)
- Reader Case Study: From Brooklyn to LA With a Baby (the FrugalBrooklyn’s story, published February 2018)
- Reader Case Study: Debt And Dreams In Queensland, Australia (Sam & Keith’s story, published March 2018)
- Reader Case Study: Single Psychologist Saving In NYC (Lauren’s story, published April 2018)
- Reader Case Study: How A Cancer Diagnosis Changes Everything (Emily & John’s story, published May 2018)
- Reader Case Study: Inside A Financial Circus (No, Really, The Finances Of An Actual Circus!) (Jana & Dextre’s story, published June 2018). WITH UPDATE PHOTOS TOO!!!!
- Reader Case Study: Should We Buy A Campground And Laundromat? (Payton & Riley’s story, published July 2018)
- Reader Case Study: Should I Become A Veterinarian? (Sally & Harry’s story, published September 2018)
- Reader Case Study: With Twins On The Way, Should We Quit And Move? (Rose & David’s story, published October 2018)
I probably don’t need to say the following because you all are the kindest, most polite commenters on the internet, but, please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not to condemn.
And a disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises. I encourage everyone to do their own research to determine the best course of action for their finances.
With that I’ll let Marie, this month’s Case Study subject, take it from here!
Hello Frugalwoods nation! I’m Marie and I just turned 50 years old. I’m divorced and happily single with no plans to change that as I’m not interested in dating at this point in my life. Maybe that will change in the future, but I doubt it!
I’m originally from the San Francisco Bay Area and moved to North Carolina four years ago to be closer to my son and his family. My daughter and her family have since moved here, so it’s wonderful to have my entire family–both of my adult children and all five of my grandchildren–nearby! The area in California that I’m from is expensive and the lifestyle very stressful. There was a lot of pressure to have a big house and an expensive car, etc., even if you can’t afford it.
I was ready for a major change and since my son and his family were already in North Carolina, I decided to make the move. I also decided to move out east to be able to help with my grandson who has autism. Another thing I love about North Carolina is how friendly people are and how much more relaxed the pace of life is. The cost of living is also much lower. When I’m not working, I love spending time with my family, reading, cooking, and traveling. I love to visit museums, attend special events (low cost/ free ones!), and write. All in all, I love living here and am so glad I made the cross-country move!
After working as an executive assistant for nigh on 20 years, I was recently promoted to a project coordinator position in the health care sector. It was great to get a promotion, but my raise was only an extra $2,000 per year. Plus, my new position has longer hours and travel, so the pay has been a disappointing aspect. I’ve been thinking of going to back to school to finish my AA degree and then perhaps pursue a BA/BS degree in order to command a higher salary.
My employer would pay for my tuition if I went into a career in healthcare, which I’m not currently in. Therefore, the cost would be on my dime to the tune of about $6,000 for tuition and books at the local community college. I’m not sure if this makes sense at this time in my life. I love to learn and I enjoy school, but I’m mindful that I need to select my goals carefully since time is not necessarily on my side.
However, I’m deeply grateful to have a job that allows me to help others, that has good benefits, and I get to work with some pretty amazing people. Plus, when I travel for business, I work at beautiful venues and stay in very nice accommodations. Not bad for a day’s work! Still, I feel I could be making a lot more if I had a degree. I’ve also thought about getting a side hustle, such as in virtual assisting or starting a blog, to bump up my income a bit. Due to my work schedule, I wouldn’t be able to do a second traditional “brick and mortar” job.
One of the main perks of my job is the travel. When flying to a city I’ve never been to before (or one I love to revisit), I try to tack on a half-day to explore before flying back home. When you aren’t paying for accommodations or airfare, travel costs are minimal. While in Boston recently, after my conference ended, I toured the exquisite Trinity Church ($10), dined on one of the best sandwiches and chai lattes I’ve had in my life ($14), enjoyed exploring the Harvard campus ($0), rubbed the left foot of the John Harvard statue for luck (!), visited the World’s Only Curious George shop–which my youngest grandson is crazy about ($9 for a toy)–enjoyed nature’s gorgeous October leaf show ($0), and bought a few souvenirs for my other grandkids ($22). I love finding ways to save while having great experiences!
Marie’s Money and Housing Question
I’m concerned that I do have some debt: about $1k in credit card debt and a car loan of $11k. Due to the increased travel for my new job, I financed a 2014 Hyundai Sonata with very low mileage for $14k.
I currently share a large three-bedroom apartment with a roommate and we split the rent and utilities equally. My roommate and I get along very well and don’t plan to get a 3rd roommate, especially since the third bedroom is more of a bonus room. We pay for our own groceries and household supplies and share those items as needed.
Houses are fairly inexpensive here, so I’m thinking seriously of buying something small next year and paying it off before I retire. However, I have $0 saved for a down payment as I’ve been focused on paying off my debt. I’m beginning to rethink that strategy as I have only $1,000 in my emergency fund, not a whole lot in retirement, and am still about $12k in debt.
That scares me since retirement is only 15-18 years away if all goes according to plan. I love giving to others through tithing 10% of my net income and also giving nice gifts to my kids and grandkids. I can be overly generous at times, which is something I know I need to change so that I can reach my goals.
Where Marie Wants To Be in 10 Years:
- Finances: I’d love to have a nearly paid-off house, one year’s worth of living expenses in savings, $250k or more in my retirement account, and enough discretionary income to fund a bit of travel, hobbies and fun with family.
- This is where I shake my head and wonder where all the money I’ve made has gone. I’ve gotten in and out of debt more times than I can count and I frittered away a small inheritance and a divorce settlement in the last decade. I think it comes down to never learning about money and always thinking that I have plenty of time.
- I tend to be overly generous, as mentioned above, but I also know that by not taking care of myself financially now, I put an unfair burden on my children in the future.
- I’d love to have over $350k in investments by the time I retire in 15-18 years, no debt, and a home that I own free and clear. I feel that with social security and a withdrawal rate of 4% from investments, I won’t be living a lavish retirement life, but it will be comfortable as long as I continue to live frugally.
- That said, I don’t want to put off living NOW for the future. I want to take a trip to Paris next year (2020) with my daughter and also take my grandkids to Florida someday to visit the famous mouse.
- Again, I am painfully aware that time is not on my side and that I can do anything, but not everything. I’m willing to do what it takes, including living very frugally, to make a change for the better for my future.
- Lifestyle: I’d like to be active and traveling more as I turn 60 (and beyond!).
- The most important thing for me is to have more downtime to enjoy life.
- I’d like to have the time and the resources to do a little travel, spend extended time with my family and friends, and time to volunteer.
- I love visiting Europe and also exploring beautiful places right here in the U.S. such as New England, the Pacific Northwest, and the beaches in Florida.
- I am fine with frugal travel so I believe I can make this work, plus the Frugalwoods have given me great tips on how to do exactly that!
- Career: I don’t see myself continuing on in the project coordinating role, but rather, would like to do something in program management, event planning, or writing that can be done from home with a bit of travel and a lot of autonomy.
- With my executive assistant background, I have a lot of skills that could be put to good use for people that need part-time administrative support, travel arranging, etc.
|Marie’s monthly net income||$4,000||Take home pay after taxes, healthcare, life insurance (through company), AD & D, long-term disability, and short-term disability. This also includes cell phone and mileage reimbursement as I travel quite a bit for work.. The total amount fluctuates–since I often work 10-20 hours overtime per month–but it’s usually around this total.|
|Annual bonus||$1,200||Annual bonus; this amount fluctuates from year to year but this is about average.|
|Annual total:||$49,200||Note: this doesn’t include 401k contributions as I have temporarily suspended them to focus on paying off my debt (my employer matches 100% of up to 6% of my contributions). This also does not include an extra $1,500 per quarter for selling back 80 hours of PTO per quarter at 75% value. I don’t take PTO very often so I’m fine with keeping 80 hours of PTO in my account and selling off the rest each quarter. Since I only get 75% value, I’m not sure if this is something I should continue doing or not.|
|Extra debt payments||$1,238||I use all of my remaining take-home pay to pay down debt every month.|
|Rent||$600||I share a 3 bedroom, 2 bath apartment with a roommate; rent is split 50/50|
|Charity||$400||Giving 10% of my net income to charity is important to me|
|Groceries||$275||Some organic items; I cook most of my meals at home and pack lunches and snacks for work. I know I need to spend less in this area. I tend to overspend when I go to Costco to shop for groceries!|
|Car payment||$208||2014 Hyundai Sonata; financed at 3.6%|
|Travel||$200||Sinking fund for trips throughout the year. This is also my savings for trips to visit family and a planned trip to Paris with my daughter in Spring 2020. I travel a lot for work so I’m able to combine some leisure travel with work trips with very minimal out-of-pocket cost so this amount is for special trips.|
|Grandkids||$150||Granddaughter’s dance lessons; therapy for my grandson with special needs; other occasional educations opportunities for all grandkids. Education is very imporant to me.|
|Eating out||$120||This is for “dates” with my grandkids; coffee dates with friends and occasional meals out with my adult children.|
|Gasoline||$100||I travel quite a bit from work; mileage reimbursement included in my paycheck helps offset this cost.|
|Gifts||$100||Birthdays, anniversaries and Christmas gift fund (I buy gifts throughout the year for optimal savings, which allows me to purchase thoughtful gifts)|
|Entertainment/Miscellaneous||$100||Books, hobbies, movies, entrance fees to museums, etc. My local library has a few passes I can check out, but it only includes one local museum and one kids’ museum. I almost always look for things that are free/very low cost so I have lumped entertainment into this category.|
|Credit card payment||$100||0% until October 2019|
|Car insurance||$65||Sinking fund for bi-yearly expense paid in full; insurance is with Geico; high-coverage limits as car is financed with a $1,000 deductible; this amount will go down once car is paid off.|
|Life insurance||$59||Personal life insurance policy; separate from work policy|
|Utilities: Electricity||$52||1/2 of bill, which is split with my roommate|
|Car maintenance||$50||Sinking fund for car maintenance: tires, oil changes, etc.|
|Clothing||$50||My new role at work has required a nicer wardrobe|
|Utilities: Water||$30||1/2 of bill, which is split with my roommate|
|Utilities: Internet||$25||1/2 of bill, which is split with my roommate|
|Utilities: Gas||$15||1/2 of bill, which is split with my roommate|
|Household supplies||$10||mostly paper goods; I make my own laundry detergent, use vinegar for fabric softener and buy shampoo/conditioner at a deep discount through sales|
|Car registration||$10||sinking fund for yearly expense|
|Renter’s insurance||$8||1/2 of bill, which is split with my roommate|
|401k||$29,264||Retirement fund from previous employer; need to roll over|
|IRA||$16,603||Vanguard; personal IRA|
|401k||$6,693||401k with current employer; temporarily stopped contributions to focus on paying off debt; employer matches up to 6% at 100%|
|Emergency fund||$1,000||I reduced my emergency fund from $5k to $1,000 in order to pay off debt, but I’m not sure that was the best thing to do|
|Life insurance policies||$352,000||$252k whole-life policy through employer; $100k 20-year term life personal policy; I was diagnosed with very early stage cervical cancer nine years ago (treatment was deemed curative so I’m at extremly low risk for a recurrence) but it can still be challenging for me to get a reasonably priced policy.|
|2014 Hyundai Sonata||$12,254||Loan balance is currently $11,300; I’ve been thinking that perhaps I should trade this in for an SUV without taking on more debt. My job requires me to transport items for programs I set up, so that would give me more trunk space.|
|Car loan||$11,300||Financed at 3.6%|
|Credit card debt||$980||Barclay card; 0% through October 2019|
Marie’s Questions For You:
- Should I buy a house? Although real estate in North Carolina is very reasonable (I could get a nice, small home for under $170k or a condo for under $120k), does it make sense to tie up my income to pay off a home within 15 years, or would I be better off investing it/paying off all my debt/building up my emergency fund?
- Should I return to school to finish my AA degree and then possibly my BA/BS degree in the hopes of commanding a higher salary? Or should I focus on getting the most out of my current role while I: a) live as frugally as possible while still enjoying life; and b) create extra sources of income through blogging/virtual assisting/other?
- What suggestions do you have for curbing my natural bend towards being overly generous? I need help in this area!
- What are the most important lifestyle adjustments I can make to get myself on firmer financial footing?
Mrs. Frugalwoods’ Recommendations
I know Marie feels like she has a lot of room for improvement, but I have to tell you, she is doing tremendously well! It’s not easy to go through a divorce and navigate the workforce without a college degree and live with a roommate as an adult and have joyful relationships with your adult children–and Marie is crushing it on all of these fronts! Wow! Marie has beaten the odds and should serve as an inspiration to anyone else facing similar circumstances.
I am impressed with Marie’s ability to be introspective and to recognize that yes, some things do need to change if she wants to retire comfortably and frankly, have the ability to retire at all. Marie’s determination–and her willingness to be flexible and creative–will serve her well and I am honored and thrilled to be part of her journey. Marie is an incredibly organized and composed person, which I know because she goes down in Case Study history as the FIRST person to ever submit a Case Study that I didn’t have any clarifying or follow-up questions about. And I ask a lot of questions, so that should tell you something about Marie’s level of detail and accuracy!
KUDOS on the Roommate Situation
I want to spend a moment congratulating Marie for making what I’m guessing wasn’t an easy decision to live with a roommate in a rented apartment. This is quite possibly the BEST financial decision Marie has ever made. Why? It keeps her housing costs DIRT CHEAP. For many of us (myself included), our rent or mortgage is by far our largest outlay every month. But not Marie. She spends a cool $600 per month on rent, which is phenomenal. And cheap. And she said she likes her roommate and her apartment, so she’s not sacrificing her quality of life. Way to go, Marie! This housing kudos leads us nicely into addressing Marie’s first question:
Should Marie Buy A House?
Nope. At least, not right now for the simple fact that she doesn’t have the assets to do so. Before considering buying a home, I advise Marie to do the following:
- Pay off her debt
- Rebuild her emergency fund
- Re-start 401k contributions
- Save up a downpayment
- If Marie focused on the lower end of the price range she cited ($120K for a condo), a 20% downpayment would be $24,000 plus closing costs, moving expenses, and a home maintence/repair savings account.
Buying a house–especially one as inexpensive as Marie cited–isn’t a bad idea, it’s just not tenable in her current financial situation. However, Marie is a focused person and so if she decides that owning a home is a priority, I have no doubt she’ll make it happen.
A few other rent vs. buy considerations:
- Marie’s rent is such an incredible deal right now and I wonder if this is typical of her area or if she lucked into a great deal? If this is in fact market rate rent for her area, then I’d say it seems like a fabulous place to be a renter–especially with a roommate.
- If Marie bought a home, I wonder if she would rent out a room to either her current roommate or someone else? Doing so could make the math work well in her favor–with someone paying half of her mortgage in rent every month, she’d be on a fast track to paying it off.
- Marie’s love of travel–and desire to do more of it–is another factor that makes me pro-renting and anti-buying. Owning a home (no matter how modest) is a responsibility and might impinge on Marie’s ability to flit around the globe. Renting, particularly with a roommate, seems like an ideal arrangement because she never has to worry about her house when she’s away. Furthermore, if her roommate was amenable, might she be able to sublet her room while she’s gone? If Marie is thinking of traveling for much of the year post-retirement, I wonder if she could forgo a permanent address entirely and just stay with one of her kids when she’s home? I’m not sure if Marie is thinking of traveling quite that much, but that would certainly be a frugal way to do it and would avoid rent and a mortgage altogether! Just a thought.
All in all, buying a home right now isn’t possible and buying a home in the future might not make the most sense for Marie’s finances and lifestyle. There’s nothing wrong with being a longterm renter and there’s no need to own a home in order to have financial security. In fact, not owning a home would give Marie quite a few more options in how she uses her time and money.
Should Marie Pursue her Associate’s and Bachelor’s Degrees?
I don’t know. I think Marie should do a bit more research before making this decision. Principally, she should suss out whether or not have a degree (either an associate’s or a BA) would guarantee her a higher salary at her current company. It doesn’t sound like Marie has any desire to leave the company she’s working for and so I recommend she do some digging into whether or not having a degree automatically equals a pay raise and if so, how much that raise would be. In some professions, and at some employers, a degree triggers an automatic promotion or pay increase. But at plenty of other jobs? It’s nice but it doesn’t translate into more money. Since Marie seems to enjoy her job, getting a degree would only make sense if there was a guaranteed commensurate pay bump. Furthermore, since Marie is getting ready to glide into retirement, I’d want to see the cold hard math pan out on her costs for the degree + the number of years it’ll take her to complete it + the increase in salary until retirement.
Marie should talk to HR, her supervisor, friends at work–anyone who can shed light on whether or not a degree would equal more pay. Some companies have this type of information formally written down in an employee manual. Additionally, I’d dig a bit deeper into the employer tuition benefit she mentioned. Marie should get a list of exactly which degree programs her employer would pay for and consider if any of those make sense for her. Even so, I’m not saying that getting a free degree would necessarily even be worth it. As someone who worked full-time while getting my employer-paid master’s degree, I can attest it is SO MUCH work to go to school while working full-time. I’m hard pressed to advise it. It’s not unmanageable, but it was a pretty awful time in my life–and I didn’t even have children yet!!! All that to say, even if the degree is free or cheap, the outlay of time and stress might not be worth it. So, do some more research, Marie, and see what you think.
My uneducated hunch is that it might be better for Marie to do an awesome job in her current position and advocate for a raise after a year of proven excellent performance. It’s obvious Marie’s employer values her–in light of her recent promotion–and wouldn’t want to lose her. So, Marie should feel confident at the negotiation table when year-end reviews or salary conversations come up.
Should Marie Get A Side Hustle?
If she wants to, sure! Marie is insightful and creative and I love that she’s considering lots of different ways to earn more. Her incredible track record as an executive assistant would, I imagine, make her a stellar virtual assistant (VA). I think my question for Marie is if she thinks she’d enjoy this work and if she’d be able to make enough money to justify the outlay of her time, which is precious. As part of her to-degree or not-to-degree question, Marie should do some preliminary virtual assistant research and see what sort of hourly rate she could expect as a VA. This would be another great data point to plug into the equation of whether or not a degree is worth it. Again, since I think Marie’s question is primarily about earning more income, it might be that she could start work as a VA tomorrow and make enough in a year to compensate for the salary we’re assuming she’s losing without a degree. I like her ingenuity and it’s OBVIOUS Marie is super organized and efficient, so it seems to me that she’d be a very in-demand VA.
As to her question about starting a blog, I wouldn’t advise it as a money-making scheme. It takes A LONG TIME to earn an income from blogging and it’s not a very part-time type of occupation. I do earn an income from Frugalwoods, but I’ve been writing it for almost five years and I made $0 for quite a long time… It also takes a ton of work to write a blog and I’d only advise Marie start one for the love of writing. I wouldn’t do it for any other reason. That being said, there’s no law against Marie working as a VA to make that money and writing a blog for the sheer joy of it. These are two highly mobile careers/hobbies and so Marie could easily tackle both while traveling for work or pleasure!
And, I don’t want to get too far ahead of myself here, but… if Marie found that she enjoyed working as VA, and if she had a large enough client base, and if she earned enough to replace her salary… do you see where I’m going with this? She’d put herself in a very fine position to retire from her current position and travel the world while holding down her VA jobs. Just a thought…. And if Marie likes this thought, I’d advise starting VA work ASAP to see how tenable that plan is. It takes time to build up a client base and it takes time to work for yourself (oh boy does it ever… ), so she should see if it’s something she enjoys. I love working for myself and don’t see myself ever going back into an office, but I will tell you there are days that I wish it didn’t all fall to ME (and to Mr. FW) when something goes awry with the website or a client or etc etc and so forth. All that to say, Marie should test the self-employment waters and see how she likes it! If I needed a VA, I would definitely want to hire someone like Marie who has decades of experience. Just sayin.
How Can Marie Be Less Generous?
You didn’t read that wrong, Marie hit the nail on the head when she identified that one of her downfalls is generosity. I encourage generosity and I am touched every time this topic comes up in a Case Study or a conversation with a reader because you all are such deeply compassionate, caring individuals. There’s nothing wrong with having a generous heart, indeed we’d all be a lot better off if more of us approached the world with a generous heart.
However. This becomes a problem when we’re generous to the detriment of our own financial health and stability. I consider this a “put your own oxygen mask on first” type of scenario. The issue is that if a person is generous beyond their means, at some point, they will become wholly dependent upon others to support them.
Marie is keenly aware of this because she noted:
I tend to be overly generous.. but I also know that by not taking care of myself financially now, I put an unfair burden on my children in the future.
My thoughts exactly. I LOVE that Marie is the type of grandmother who is actively involved with her kid and grandkids, but for her own sake–and the sake of her kids–she’s got to dial back the financial outlay to her family. If Marie does not want to be financially dependent on her children after she retires, she needs to make some changes to her spending. Unfortunately, some of the ripest areas for reduction relate to her generosity (which we’ll cover in detail in a moment).
I want Marie to reflect on what she loves about spending time with her children and grandchildren and realize that buying things for them isn’t the highlight of her interactions. I am sure her children adore having her as an ongoing positive presence in their kids’ lives and I encourage her to look for free and cheap ways to show her love. A few ideas (which she probably already does, but I figured I’d share them just in case):
- Babysitting. As the parent of two young children, THE BEST gift anyone can give me is childcare. My in-laws, my parents, and my adopted mom neighbor all know this about me (probably because I’ve told them 1 million times) and so when they visit, they watch the kids for periods of time so that Mr. FW and I can: tackle a household chore/project, go hiking, or go out to dinner. Together. Alone. Without our darling children. Our amazing adopted mom neighbor takes Kidwoods for one morning a week and babysits for one date night every month. This is pure gold and I can’t ever repay her. If Marie isn’t already doing date nights/Saturday afternoon/whenever kidwatching, this would be a wonderful gift to her children and their children.
- A cooked meal. As the parent of two young children, THE SECOND BEST gift anyone can give me is food. Life is so hectic with kids and so anytime someone offers us a meal, I say YES. An occasional cooked dinner could be an incredibly supportive and thoughtful gift.
- Help with chores/projects. As the parent of two young children, THE THIRD BEST gift anyone can give me is their time and energy to help me with a chore/project. While my parents visited this fall, they helped me do a slew of household chores/projects Mr. FW and I haven’t had a chance to get to. My awesome mom and dad put furniture pads on the bottom of all of our furniture (yes we’ve lived here for almost three years), helped me sort through Kidwoods’ summer clothes and the next size of clothes for Littlewoods, organized all of our toy bins and identified stuff to give away or save for when the kids are older, cleaned under my oven, cleaned my kitchen sink, glued broken things back together (that was an embarrassingly large pile)… and the list goes on. Point being, this might seem like trivial stuff, but it was an incredible gift to me since this is the type of work I just can’t seem to get around to on my own.
These are all free ways that Marie could demonstrate her affection for her children and grandchildren. I am not advising that Marie become a grinchy miser, but rather, that she get a clearer picture of how much she needs to save before retirement and an articulated path on how to get there. Fortunately, that’s exactly the sort of thing we tackle in Case Studies, so let’s continue!
Marie is currently 50 and said she’s hoping to retire in 15-18 years, when she’ll be 65-68. She also noted that she’d like to have “over $350k in investments by the time I retire in 15-18 years, no debt, and a home that I own free and clear.” This is a laudable goal and I love how forward-thinking Marie is. Let’s break down some numbers and see how we can get Marie to this goal.
- Current assets $53,560
- Minus current debt ($12,280): $41,280
- Savings goal: $350,000
- Total amount needed to save to reach goal: $308,720
- Number of years to save: 18
- Amount Marie will need to save each year for the next 18 years: $17,151*
*this is not a perfect calculation as it doesn’t account for any interest gains from investments, but it’s a ballpark
Marie should also run these numbers with this calculator, which allows you to account for an annual interest rate.
Marie should also do the work to calculate her expected social security benefit. The program on this website can tell Marie the dollar amount to expect each month. I suggest she perform this calculation to have a more accurate view of what to expect from social security. Marie also mentioned enacting a 4% safe withdrawal rate from her assets in retirement, which, if she succeeds in saving $350k, would be $14,000 per year, which isn’t impossible to live on, but it’s not much, especially if she’s still paying rent or a mortgage.
Let’s map out a plan to help Marie get here! Per usual, we’re going to start with everyone’s favorite Frugalwoods Case Study exercise…
The reason I love talking about reducing spending is that it’s something you can do RIGHT NOW, today, immediately! It doesn’t involve a lot of complicated maneuvering and it’s usually a process of NOT doing stuff, so ya know, it’s easier than a lot of other things you could do on very short notice.
In every single Case Study, I like to point out that what you choose to save or not save is a very personal decision. Cutting every last expense is NOT the right answer for everyone and I am NOT an advocate for making yourself miserable in the process of achieving financial stability. I AM an advocate for values-based, goal-oriented spending. I think it’s important to assess whether all of your expenses bring you fulfillment and a good return on your investment.
I think it’s also important to question if your rate of savings will help you to achieve your long-term goals. But what you spend on? That’s a very personal choice and one you have to make for yourself. My job is to point out areas where you might be able to save, but only you can decide if that level of savings is right for you. If you’re struggling with where to save more and how to map out a longterm financial plan, I encourage you to take my free 31-day Uber Frugal Month Challenge.
Ok, with that said, let’s take a look at potential savings for Marie:
|Item||Current Amount||Mrs. FW’s Notes||Proposed New Amount||Amount Saved|
|Extra debt payments||$1,238||Marie should get this debt dispensed with ASAP (we’ll discuss how in a moment), which will free up this mega amount for her to SAVE!!||$0||$1,238|
|Rent||$600||As I mentioned, Marie gets a gold star here. No change recommended.||$600||$0|
|Charity||$400||I know it’s important to Marie to be generous and give to others. I commend her for this, but I’m also deeply worried about her own future if she doesn’t start saving money. I urge Marie to suspend her charitable giving until she can get her own finances in order. Once she’s on solid financial footing, she can re-start her philanthropic donations. In the meantime, I urge her to find other ways to give back, namely through volunteering her time||$0||$400|
|Groceries||$275||This isn’t outrageous, but as Marie noted, there’s room for savings here. She said she tends to overspend when she goes to Costco and I think I’d ask why she’s going to Costco in the first place. Their quantities are massive and, it could very well be costing her money as opposed to saving it. I encourage her to try a month or two of not going to Costco and being more mindful about groceries to see if there’s an opportunity to save more.||$200||$75|
|Car payment||$208||As soon as this is paid off, Marie can celebrate saving this money every month! And then drive this car forever. No seriously, forever.||$0||$208|
|Travel||$200||I know that this is another major priority for Marie and so I hate to tell her to eliminate it, but I’m also concerned about how far she has to go before retirement. I encourage her to consider if she can truly afford $2,400 of travel every year at this point. I’ll leave it in for now.||$200||$0|
|Granddaughter’s dance lessons; therapy for my grandson with special needs; other occasional educations opportunities for all grandkids.||$150||Woah woah woah. Put on the brakes! Why is Marie paying for all of these things for her grandchildren? I hate to be the grumpy bear, but Marie’s kids need to pay for these things for their children. As Marie sagely noted, she is in a position right now where she needs to ensure her own future, unless she thinks her kids will be in a position to support her during her retirement.||$0||$150|
|Eating out||$120||I hate to say it (because I LOVE to eat out), but this is low-hanging fruit that Marie needs to cut (at least for now!).||$0||$120|
|Gasoline||$100||I imagine there’s no room to reduce this and it’s not terribly high.||$100||$0|
|Birthdays, anniversaries and Christmas gift fund (I buy gifts throughout the year for optimal savings, which allows me to purchase thoughtful gifts)||$100||I like Marie’s strategy of buying gifts throughout the year and assuming she’s buying for nine people (her two children, their spouses, and nine grandkids), $1,200 per year isn’t awful. However. Marie also has a travel fund, another line item for her grandkids’ activities, and a line item for taking them all out to eat. I think Marie needs to decide which of these is the priority and then tell her family that she’ll be suspending one of them in favor of paying for the others. It’s either: gifts, travel, grandkids’ activities/lessons, entertainment, or eating out as a family. It can’t be all.||$50||$50|
|Entertainment/Miscellaneous: Books, hobbies, movies, entrance fees to museums, etc. My local library has a few passes I can check out, but it only includes one local museum and one kids’ museum. I almost always look for things that are free/very low cost so I have lumped entertainment into this category.||$100||This is yet another line item that involves Marie’s generosity towards her family, which is such a warmhearted thing. BUT! We’ve got to prioritize Marie’s needs right now and I think this is another area that’ll need to be either cut or reduced.||$50||$50|
|Credit card payment||$100||Let’s get this paid off!||$0||$100|
|Car insurance: Sinking fund for bi-yearly expense paid in full; insurance is with Geico; high-coverage limits as car is financed with a $1,000 deductible; this amount will go down once car is paid off.||$65||Fixed expense, I imagine it can’t change.||$65||$0|
|Life insurance: Personal life insurance policy; separate from work policy||$59||I have a note on this below.||$0||$59|
|Utilities: Electricity||$52||Fixed expense, I imagine it can’t change.||$52||$0|
|Car maintenance||$50||Fixed expense, I imagine it can’t change.||$50||$0|
|Clothing: My new role at work has required a nicer wardrobe||$50||Once Marie has her new work wardrobe set, I strongly encourage her to go on a clothes-buying ban||$0||$50|
|Utilities: Water||$30||Fixed expense, I imagine it can’t change.||$30||$0|
|Utilities: Internet||$25||Fixed expense, I imagine it can’t change.||$25||$0|
|Utilities: Gas||$15||Fixed expense, I imagine it can’t change.||$15||$0|
|Household supplies||$10||Impressively low! Wow!||$10||$0|
|Car registration||$10||Fixed expense, I imagine it can’t change.||$10||$0|
|Renter’s insurance||$8||Smart! I’m glad Marie has this!||$8||$0|
|Current Monthly Subtotal:||$3,965||Proposed New Monthly Subtotal:||$1,465||$2,500|
|Current Annual Total:||$47,580||Proposed New Annual Total:||$17,580||$30,000|
Holy cow!!! If Marie is able to make even some of the above reductions, she will be in excellent shape! If she makes all of these cuts, she’ll be on track to save a record-breaking $30,000 per year. PER YEAR. That’ll fast track her to her retirement goal (which we outlined above) and give her plenty leftover for traveling!
I fully realize, however, that what I’m suggesting in the above spreadsheet would entail a seismic lifestyle change for Marie. These aren’t easy things to stop paying for and a lot of it might be painful. And I’m not necessarily saying she should eliminate all of these expenses. But if she wants to have a prayer of retiring in 15-18 years, she will need to save around $17,151 per year as we calculated above. And even that much saved would equal a pretty lean retirement, with an annual outlay that’s much, much lower than she currently spends.
The main points on Marie’s spending for her family:
- I’m not pretending these are easy choices to make. They’re not. They are, for the most part, a question of delayed gratification and of focusing on future Marie instead of what present Marie wants to do. It’s also tough because A LOT of this spending isn’t on Marie herself–it’s on things for other people. And that, in my experience, is the absolute hardest stuff to eliminate.
- What I suggest is that Marie be strategic and begin to prioritize what and how she wants to be generous with her family. Her monthly budget includes all of the following categories for her family:
- Travel with family
- Activities/lessons/therapy for grandchildren
- Eating out with kids and grandkids
- Gifts (birthdays, anniversaries, Christmas)
- I think Marie needs to decide which items on this list are her sacred cows and which items she can either dramatically reduce or eliminate. Marie–I’m going to email you my spreadsheet so that you can play around with different dollar amounts to figure out where you want to save and spend.
- This won’t be an easy conversation for Marie to have with her adult children, but I encourage her to frame it along the lines of, “I need to cut back and save more money right now so that I don’t end up living with you when I retire.” At this point in her life, Marie has a responsibility to plan for her own future.
I’m wondering why Marie carries life insurance? Life insurance is typically held by a primary breadwinner to provide for their dependents (spouse and/or children) in the event of the breadwinner’s death. Since Marie no longer has any dependents, I’m wondering why she has life insurance? Unless I’m missing something, I’d get rid of it entirely.
The Other Side Of The Equation
Right after the expense rundown, I always like to point out that there are two sides to this equation:
Spending AND Income
Marie has already broached the idea of trying to earn more, so it’s highly possible she could ramp up her income and decrease her spending in order to get to her goals even faster. Usually, the best results (and the fastest) come from a strategic combination of both increased income and decreased spending.
Overall Financial Next Steps
Ok I’ve already written a novel, so I’m gonna summarize this real quick for Marie. Here are the immediate next steps I advise Marie take:
- Contribute to 401k. If Marie does nothing else, she needs to start contributing 6% to her 401k to qualify for her employer match. This is free money, DO NOT leave it on the table. Especially when there’s so much room to save more every month. More on 401ks here.
- Pay off debt. Marie does not have a lot of debt, especially when you consider how much she could potentially save every month and funnel into debt repayment. Woohoo!!!! Go Marie!
- Prioritize your debt-payoff by interest rate. Pay off the car loan ($11,300 at 3.6%) first and then the credit card ($980 at 0%).
- Build emergency fund back up. Marie noted this is a goal and so she knows the drill. Calculate 3-6 months worth of spending and then beef up that e-fund.
- Save, save, save! In order to reach that $350k in 18 years goal, Marie needs to save like the awesome woman she is and put herself–and her needs–first.
- Do not trade in the car. NOPE. Marie is still paying off her current car and trading in is almost never a good deal. Marie should pay this car off and then drive it into the ground.
- No more credit cards. I don’t often give this advice because I’m a credit card user and an advocate for earning credit card rewards. However, I was struck by Marie’s note that she’s been in and out of debt more times than she can count. This to me says that credit cards probably don’t jive with Marie’s personal finance style. I recommend she ditch the cards and go all-cash (and debit cards). I have a feeling this might help Marie get out–and stay out–of debt.
I am rooting for Marie and I’m also very confident that she has what it takes to make the life she’s envisioning possible.
Ok Frugalwoods nation, what advice would you give to Marie? She and I will both reply to comments, so please feel free to ask any clarifying questions!
Would you like your own case study to appear here on Frugalwoods? Email me (firstname.lastname@example.org) your brief story and we’ll talk.
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