Reader Case Study: National Park Rangers Figuring Out Finances
Have you ever wondered about the life and finances of the Park Rangers you see staffing America’s most dazzling natural resources? Well, wonder no more as this month’s Reader Case Study addresses the questions of two real life Rangers on how best to allocate their savings now that they’re debt free (hooray!). 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 also provide updates from our Case Study subjects at the bottom of each Case Study several weeks/months after their story is featured. To see what past Case Study participants have decided to do, check out the Case Study section and scroll to the bottom of the individual posts.
P.S. Another way to get support on your financial journey is to participate in my free Uber Frugal Month Challenge! You can sign-up at any time to join the over 21,000 fellow frugal sojourners who’ve taken the Challenge and saved thousands of dollars.
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.
With that I’ll let Mrs. Ranger, this month’s case study subject, take it from here!
The Ranger’s Story
Greetings, Frugalwoods readers! I’m Mrs. Ranger (age 32), my husband is Mr. Ranger (age 34), and completing our family is our dog Hairy (age 2). We live in the Southwestern United States and we both work as National Park Rangers.
Mr. Ranger and I met eight years ago while working as seasonal Park Rangers and were married in 2011. We are self-proclaimed minimalists, which helps us to be frugal savers, but we’re just now getting serious about financial independence.
About two years ago, we accepted our first permanent positions with the National Park Service (NPS). This was very exciting for us since with a permanent position we now both have a steady paycheck, benefits, and retirement accounts! Before we accepted these positions, we worked as seasonal park rangers, which entailed working six month appointments at different parks all across the USA. We’ve worked at some amazing places including: Rocky Mountain National Park, Acadia National Park, Grand Teton National Park, and Yosemite National Park, along with a few smaller NPS units along the way.
We had a fantastic time seeing our beautiful country, but it also meant it was hard for us to save because we never knew what was ahead. Plus, there’s a popular saying among Park Rangers: “we get paid in sunsets and sunrises,” which means our income might not be great, but our office locations definitely are.
To get a position with the NPS, people often assume it works like the military and that after you’re hired, the Park Service sends you where they need you. I wish it were that simple. The way it actually works is that applicants apply to specific positions and then months after you apply, you might hear back from a park. Often, my husband and I had to put in 50 or so applications per season in the hopes of being hired, which was never guaranteed. We never knew where we would end up, or if both of us would even be employed at all by the NPS. This still rings true today.
To advance further in our careers as Park Rangers, we’d have to move to another permanent position, at another park in a different part of the country. We can’t plan this part of our life out, because we never know when or where a vacancy might pop up. What we do know is that we want to move in the next couple of years to somewhere west of the Mississippi, but who knows where that will be or when that will happen.
The Ranger’s Hobbies
Since we are minimalists, we keep our hobbies minimal too, and they include: walking Hairy, exercising in our home gym, fixing up our yard, hiking, and camping. We have an active little community and often partake in events, which mostly consist of pot-lucks. Our biggest splurge is travel. We try to take at least one overseas trip every year or two, and have visited some great sights throughout the years, while staying on a budget.
Travel is a big motivator for us to save more and buy less, and we hope to continue taking these semi-yearly trips. We generally try to keep our trips as low cost as possible, but end up spending about $2,500-$3,500 per trip abroad. In addition to traveling overseas, we also take short week-long trips about twice a year to visit our families, who live in different regions of the USA, which usually requires us to fly to see them.
Learning About Finances
When you’re a seasonal Park Ranger, you are not entitled to an employer-sponsored retirement account, so during our first seven years out of college, Mr. Ranger and I never took an interest in learning about retirement or long-term savings. During this time we were mostly concentrated on saving up enough money to pay our bills during the winter when we might not be working, or saving for a vacation or a car. It never crossed our minds to save for retirement on our own! I am very grateful to my older brother who finally sat me down at the age of 29 and told me about Roth IRAs. In light of this, I feel like we are playing catch-up with our retirement savings. During our time as seasonal employees, we managed to stay out of debt aside from our student loans and a car loan, all of which we paid off in January 2017!
The Ranger’s Current Living Location
We are currently living in a very remote part of the Southwest. We are so remote that the nearest grocery store, hospital, doctor’s offices, and more are an hour and half drive away, and the nearest town with an airport and big box stores is about a four hour drive away. It took time to adjust to where we currently live, but after two years, we have it down.
We go to town about once every two weeks to buy produce, meat, and dairy. We do big stock-ups at places like Target, Walmart, and large grocery stores about every three months. There are some perks to living so remotely: first, we don’t have stores nearby to spend money at, and second, our rent is insanely cheap. But our life is very different from people who live in cities and towns.
Where The Rangers Want To Be In 10 Years:
- Finances: We want to be on our way to financial independence, with the hopes of retiring in our early 50’s. I would also like to have some funds available in non-retirement accounts.
- Lifestyle: In 10 years, I see us continuing to be fur parents and maybe having a baby in the next two to three years. Our dream home would be a house that we either own/rent that has about an acre of land, enough to be able to garden and maybe have a chicken or two. We would also still like to be traveling.
- Career: Mr. Ranger and I both LOVE our careers. I see us continuing to work for the Park Service and hopefully advancing up a level from where we currently are. Our careers would also require us to move and hopefully we’ll be in a location that is not as remote as our present one.
The Ranger’s Finances
|Annual Net Income||Amount||Notes|
|Mr. Ranger||$28,000||After tax, health insurance and TSP (401k)|
|Mrs. Ranger||$19,000||After tax, health insurance, TSP (401k), and Rent. Rent is deducted directly from my paycheck after taxes, it equals to about $500 a month.|
|Combined Annual Total:||$47,000|
|Combined Monthly Total:||$3,916.66|
|Groceries||$350.00||This includes all of our food, household, and personal items.|
|Random||$250.00||We seem to have one random expense pop up every month, such as a vet bill, new computer, car expense, or a health-related bill.|
|Roth IRA contributions||$200.00||Split between two accounts|
|Car Insurance||$124.00||For both vehicles|
|Utilities||$120.00||Electric and propane.|
|Internet||$114.00||This includes a landline, which the phone company requires us to have. here is only one internet provider in our location and they only have one option.|
|Amazon household expenses||$75.00||Includes dog food, protein powder and anything else we might need with a two-day notice.|
|Restaurants||$50.00||We treat ourselves to a meal out each time we go in to town|
|Gas for cars||$50.00|
|Friday Treat||$40.00||To celebrate the end of the work week we purchase a 6 pack of craft beer for the weekend.|
|Cell Phone||$35.00||We share a cell phone. It is the most basic of the basic and we are still on my parents plan.|
|Medical||$30.00||This includes copays and any other medical expenses.|
|Hobbies||$20.00||About $20 a month for home projects|
|Clothing||$20.00||We infrequently purchase clothes, but $20 a month equals about what we spend a year.|
|Entertainment||$17.19||Netflix and Hulu|
|Renters & Personal Property Insurance||$12.00|
|Savings||$24,000||$20,000 is our emergency savings and what is left over is for travel.|
|Mrs. Ranger TSP (401k)||$13,338||5% match from employer and contributing 24% ($13,000 per year)|
|Mr. Ranger TSP (401k)||$10,386||5% match from employer and contributing 24% ($13,000 per year)|
|Mrs. Ranger Roth IRA||$6,910||Contribute $100 a month, plus any extra month left over|
|Mr. Ranger Roth IRA||$3,464||Just opened a few months ago and put in about $100 a month|
|Vehicle||Year and Make||Notes|
|Mr. Ranger’s vehicle||2000 Jeep Wrangler||Paid off in full|
|Mrs. Ranger’s vehicle||2014 Toyota Corolla||Paid off in full|
The Ranger’s Questions For You
1) I feel like we are always planning for the known unknown. If we want to advance in our careers, we have to move. Moving may or may not include purchasing a house. In some Park Service locations, the park is able to provide housing for its employees–not for free, there’s still rent to pay–but this makes moving to a new job much easier. However, more often then not, housing is not available and Rangers are required to purchase a home or find a rental. I would like to start saving for a down payment on a home, in the hopes of moving in the next 1-3 years. How do you suggest we go about saving for a house? Continue putting money into our savings account or open a separate account, possibly low-fee index funds?
2) I’m a bit dumbfounded about how to allocate our savings now that we are out of debt and have extra money to save. We’re not maxing out our retirement accounts and might be able to, however, this would leave us very little savings for anything else. Should we try to max out our retirement accounts before allocating money to other things, such as travel?
3) I love the thought of investing in low-fee index funds outside of our retirement accounts, but is this an option for us since we are not maxing out our retirement accounts?
Mrs. Frugalwoods’ Recommendations
The Rangers win, hands down, for the coolest jobs. Ever. Their photos alone are incredible! I commend Mr. and Mrs. Ranger for pursuing careers they love and that bring them so much personal fulfillment–that’s where it’s at!!! I also want to highlight the fantastic fact that they are debt free! This is no small accomplishment and I laud them for focusing their money on paying off all of their debt.
Paying down high-interest debt (I do not include home mortgages here) is the first step towards any other financial goal. It is job #1 and the Rangers rocked it! Given this, they are starting from a position of strength. While I understand that they feel they’re playing catch-up, they’re actually in a terrific financial state to move forward and plan for their future. And now, I’ll address Mrs. Ranger’s questions in turn.
Question #1: How do we save for a house?
The first consideration here, in my opinion, is actually not about money at all. Mrs. Ranger noted several times that in order to advance in their careers, they will need to continue their trajectory of moving every few years. If this is the case and they foresee several moves in the next ten years or so, then I’d say it does not make sense to buy a home from a financial perspective. Renting is not a bad thing and buying a home DOES NOT necessarily equal financial security.
Home ownership, in fact, is not a prerequisite for financial stability or financial independence. It is 100% possible to be financial independent and financially secure without owning a home. In fact, you’ll often get there faster if you don’t incur the massive capital expense of buying and then maintaining a home. The challenge with the Ranger’s awesome lifestyle is that, if they move every few years, it will be difficult for them to accrue enough equity for a home purchase to be financially viable. The transaction costs alone of buying and selling mean you need to live in a place for a certain number of years before you can expect to break even.
While some housing markets lend themselves to rentals, others do not and can make home ownership a money-draining, exhausting experience. I myself own two homes (one that I live in and one that I rent out) so I’m not a homeowner-hater, merely a pragmatist. And I want to disabuse the Rangers–and everyone else reading this–of the notion that home ownership is a guaranteed slam dunk financial decision. It’s often not, especially if you foresee lots of moves in your near future.
For the sole reason of their frequent moves, I’d advise the Rangers to continue renting until they enter a phase of life where they’re no longer moving every few years. Once they’re settled in a location that they can reasonably expect to stay in for five or so years, then–and only then–would I consider buying a home. They’ve done an admirable job of finding very inexpensive rent, which means they’re able to save at a high rate every month, which is superb!
Here are a few other resources to peruse in considering whether or not home ownership makes sense for the Rangers:
- Is It Better To Rent Or Buy -The New York Times
- Why your house is a terrible investment -JL Collins
- Is buying better than renting? -Mr. Frugalwoods
Another factor to consider is whether or not the Rangers want to have a baby. Mrs. Ranger mentioned that they might want to have a baby in the next few years and I want to discuss that for a moment. Moving frequently with kids is not impossible and many, many families make it work beautifully. However, it is undeniably more challenging to move frequently with kids in tow. Mr. FW and I moved four times in six years pre-kids and, while difficult, those moves were a breeze compared with our one move post-kid. And that experience made us vow we’ll never move again…
The physical act of moving as well as the uprooting of schools, friends, community, etc is all compounded with a child. Packing the house alone (with a kid) is akin to torture (in my opinion and that might just be me… ). Also, if both Rangers plan to continue working post-kids, they’ll need to account for the cost of daycare in their budget. I’m living proof that raising children can be very inexpensive, but daycare is an often exorbitant expense that all prospective parents need to carefully research and consider.
Emergency And Travel Fund
Let’s talk a bit about how the Rangers will save up their eventual down payment. I want to heartily congratulate the Rangers for building up a robust emergency and travel fund. Way to go! Having a well-stocked emergency fund is a requirement for financial stability and I typically recommend folks save three to six months of living expenses in an easily accessible savings or checking account. The Rangers currently have a whopping $20K in their emergency fund and another $4K in their travel fund. This is fantastic! If this were purely an emergency fund, I would actually recommend the Rangers keep much less in there since they only spend $18K a year; hence, $20K is overkill.
However, if the Rangers think they might be in a position to buy a home in the next five years (i.e. they won’t be moving as frequently), keeping this much cash liquid makes sense as this will become their down payment on a home. On the other hand, if they don’t foresee buying in the next five years or so, it will probably make more sense for them to reduce their emergency fund to circa $9,000 (which is roughly six months of living expenses) and put the rest into low-fee index funds, where it can grow over time.
Travel is important to the Rangers and they’ve managed to do it very frugally indeed. I see no reason for them to stop traveling every year. They’ve done a great job of saving up for their trips and I don’t recommend diverting funds from travel towards retirement. Living a financially stable life is all about creating a life you love to live every single day and I think the Rangers are doing fabulously at this! So I say, travel on!
Question #2: Should we try to max out our retirement accounts before allocating money to other things, such as travel?
In a word, no. At their current income levels, the Rangers are doing a STELLAR job of putting money into their 401ks. I am a huge proponent of saving into a 401k or 403b, especially if your employer matches your contributions, because this is FREE MONEY (more on that here). Not contributing to a matching 401k is like turning down a free $20 bill someone is trying desperately to give you. Seriously, it’s that dumb. So the Rangers get an A+ in this category. However, a 401k is only one way to save and it’s a limited method because you can’t access the money in a 401k (without hefty penalties) before you’re 59.5 years old.
Let’s run through a bit of terminology on 401ks for the edification of everyone:
- “Maxing out” a 401k means contributing the maximum annual amount allowed by the IRS, which can change yearly, and which you can look up here. For 2017, the maximum allowable amount is $18,000 per person. The IRS recently announced that this limit will increase to $18,500 in 2018. Hence, it’s good to check on this every year! Don’t expect your HR department to know this dollar amount because, uh, not very many people do this and, in my personal experience, it’s best to do your own research (which takes 30 seconds on the IRS website) to determine the annual maximum allowable contribution and then tell your HR department how much of your paycheck you want diverted into your 401k.
- “Contributing to reach your employer match” means you contribute enough to your 401k to receive a matching amount of money (aka free money) from your employer. This amount varies by employer; ask your HR department for the details as this is their area of expertise.
Everyone should do #2; but doing #1 is optional and largely dependent on the rest of your financial picture because $18K is a lot of money and, again, 401ks are only one way to save.
Whether or not the Rangers choose to bump their contributions up to $18K each is ultimately a personal decision–it’s not like it would be the wrong things to do. But, in my opinion, they probably shouldn’t because it represents a very large percentage of their net worth. If their salaries were higher and they were able to swing the $18K in addition to other savings methods, then I’d say go for it. However, at their current income levels, I probably wouldn’t recommend it, though there’s no hard and fast rule. Additionally, we need to consider…
The Ranger’s Roth IRAs
We need to spend some time on the Ranger’s Roth IRAs (individual retirement accounts). Roth IRAs are also traditional retirement savings accounts and are generally used by people who do not have access to an employer-sponsored 401k or 403b program. In an ideal world, the Rangers would’ve been contributing to these IRAs for all seven of the years before they had access to 401ks. But, there’s no reason to fret over that now.
401ks and Roth IRAs are both tax-advantaged, but in opposite ways. Here’s the rundown:
- 401ks (and 403bs): You contribute to 401ks pre-tax, which means you don’t pay taxes on this money now. You do pay taxes on this money when you withdraw it (after age 59.5), however, the crucial thing to remember is that you will likely be contributing to your 401k during your highest earning (and thus highest tax) years and then withdrawing from it in your lowest earning (and thus lowest tax) years, also known as traditional retirement. If you still have a high income at age 59.5, it’ll probably be wise to wait until your income drops off before withdrawing from your 401k.
- Roth IRAs: Roth IRAs are the opposite of 401ks in terms of taxes. You contribute to them post-tax, which means you pay taxes on this money now, but you won’t when you withdraw it (after age 59.5). So, again, the opposite of a 401k. However, Roth IRAs can be a particularly good choice for people with a lower income (and thus a lower marginal tax rate) because in this case, you’re not sacrificing much in terms of tax savings.
A primary reason to contribute the full $18K annually to a 401k is to avoid paying taxes on that money. However, since the Ranger’s income is on the lower end, it’s not likely they’re actually avoiding very much in taxes by contributing to their 401ks at such high rates.
Are you still with me? Soldier on, folks, we’re getting to some good stuff! I’ll reward you with more of the Ranger’s incredible photos soon too.
As employees of the federal government, some quick googling revealed that the Rangers likely have access to a Roth TSP account through their employer, which operates in the same tax-advantaged structure as a Roth IRA (see my above explanation). The Rangers are currently in a 401k TSP account and I have a hunch that it would be more advantageous from a taxation perspective to switch their employer-sponsored accounts over to the Roth TSP option.
I’m going to stress that I can’t recommend specific action without digging into their tax returns (plus I am not an accountant!), but, I suspect it’s highly possible it would be more advantageous for the Rangers to switch over to Roth TSPs, for reasons of when they’d pay taxes on their money. If the Rangers make this switch, I’d recommend ceasing contributions to their Roth IRA accounts–there’s no reason to have two separate Roth accounts since they operate in the same way.
I recommend the Rangers dig into their taxes and figure out the most advantageous option for them. All that being said, I wouldn’t recommend they contribute more to retirement accounts than what they’re already doing.
Question #3: Is investing in low-fee index funds outside of our retirement accounts an option since we’re not maxing out our retirement accounts?
Yes! This is totally an option and one that the Rangers could start doing now. However, I’ll refer them back to the above discussion about purchasing a home. If the Rangers plan to purchase a home in the near future (let’s say roughly the next five years), then they should probably keep their money in a savings account, as it is right now. The reason for this is that investments in the stock market should be made for the long-term.
While you can liquidate index funds at any time (unlike 401ks), that’s not the way to build your wealth. Money grows in the stock market slowly and over time, thanks to the power of compounding interest. Pulling money in and out of the market on a short timeframe doesn’t allow for longterm growth. Plus, should the market experience a downturn, the Rangers could lose their downpayment. Market downturns are perfectly normal and aren’t as much of a problem when you’re invested for the longterm because, historically, the market always corrects itself and rebounds.
Additionally, as you near traditional retirement age, and thus plan to begin drawing down on your investments, you need to decrease the risk in your portfolio in order to insulate yourself against such downturns. For a more robust discussion of investing, please see here and here.
Another option for the Rangers is to contribute less to their 401ks (I’m using that as a blanket term to refer to their TSPs and Roth IRAs) and instead funnel that money into low-fee index funds. No matter what, they should continue contributing enough to their 401ks to quality for their employer’s match, but they could siphon off contributions above that limit and instead buy low-fee index funds. If the Rangers decide to invest in low-fee index funds, I recommend either Fidelity or Vanguard as a brokerage as they both offer excellent low-fee index funds that you can set up yourself online (more on that here). However, there are two primary factors to consider before doing this:
- Timeframe for buying a home (discussed above)
- Whether or not financial independence is a true goal (discussed below)
If you’re working towards financial independence and early retirement, then it’s almost a requirement to have money invested outside of traditional retirement accounts (401ks, Roth IRAs, etc). Additionally, if you have enough money leftover every month after: 1) contributing to your 401k; and 2) building up your emergency fund; then it’s usually a wise decision to invest in low-fee index funds. However, if you plan to work at least until age 59.5, and you don’t have much extra money leftover after contributing to your 401k and stocking your emergency fund, it becomes a more nuanced decision.
Mrs. Ranger mentioned that they’d like to work towards financial independence (FI) and I encourage them to think this through very carefully. If they’re serious about achieving financial independence, then they will need to either increase their salaries or understand that their timeline for achieving FI will be a bit longer. Financial independence does not need to be your goal in order for you to live a financially stable, happy life.
And if the Rangers love their jobs–which I think they do–then I see no reason for them to leave those jobs for higher wages elsewhere in an effort to reach financial independence more quickly. I’d focus on increasing their salaries as Park Rangers, since that’s clearly their passion and continue on with their lifestyle of sustainable, joyful frugality. They also might consider taking on secondary sources of income, such as side hustles or other part-time work. Here’s a full list of the many different unconventional (and usually part-time) ways in which Frugalwoods readers supplement their income.
Getting second jobs isn’t a requirement and it’s not something the Rangers need to do; however, if reaching FI is a true goal, then it’s something to consider. However, if the Rangers both envision themselves happily working as Park Rangers until they reach traditional retirement age, then they are doing a fabulous job! They should stay the course with their high savings rate and continue loving life.
I think the ultimate questions for the Rangers to ponder are:
- Do you want to be Park Rangers for the rest of your careers or do you want to reach financial independence quickly?
- What would you do after reaching FI that you’re not able to do now? If the Rangers are already living their best lives–doing jobs they love and pursing hobbies they adore–then this is a really important consideration.
There are no wrong answers here!
No Frugalwoods Case Study would be complete without a run through of expenses! The Rangers are already incredibly frugal, but we’ll take a stroll through their spending to see if we can sniff out any opportunities for additional savings.
- Car insurance: $124/month for two cars seems high to me. I’d suggest they shop around to see if a lower quote exits.
- Cell phone: I recommend they look for a cheaper provider. I pay $19.99 through BOOM mobile. Ting and Republic Wireless are two other low-cost providers to investigate.
- Restaurants/Friday Treat/Entertainment: I am not necessarily advocating for the elimination of these three categories because the Ranger’s spending is SO LOW in all of these areas. However, depending on how aggressive they want to be in achieving their financial goals, these are the proverbial low-hanging fruit. If the Rangers decide that they want to take their frugality to the next level, eliminating these three items would net them an additional $107.19 in savings every month (also known as $1,286.28 per year).
These are minor tweaks the Rangers could make to decrease their spending as they’re already living an extremely frugal lifestyle for which I commend them! For the Rangers, the real opportunity is in the area of increasing income. At a certain point, there’s not more to frugalize and you have to look at the other end of the equation: income. If they’re interested in reaching their financial goals more quickly, the route to get there will be through augmenting their income.
In summary, I advise Mr. and Mrs. Ranger to do the following:
- Investigate their employer’s options for a Roth TSP account and determine if it would be more tax advantageous to switch to this account from their 401k TSP accounts. If they make this switch, I’d recommend ceasing contributions to their Roth IRAs as there’s no reason to contribute to more than one Roth retirement account–make life easy and consolidate.
- Look into my expense reduction suggestions.
- Map out their potential work-related moves (as it’s possible) for the next ten years or so to determine when and if it will make sense to buy a home.
- If they won’t be buying a home in the next five years or so, consider reducing their emergency fund to circa $9K (six months of living expenses) and invest the remainder in low-fee index funds.
- Once they’re relatively certain they’ll be in the same location for circa five years (or so), buy a home if they so desire.
- Determine if financial independence is a true goal. If so, brainstorm ways to increase income. Begin investing in low-fee index funds.
- Consider the ramifications of having a baby as it relates to frequent moves and finances (especially daycare).
- Plan their next trip abroad and enjoy this wonderful life they’ve created!
Ok Frugalwoods nation, what advice would you give to Mrs. Ranger? 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 (email@example.com) your brief story and we’ll talk.
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