We’re headed to Brooklyn, NY this month to talk future plans with a young couple and their two-month-old infant. The FrugalBrooklyns, as they’d like to be called, are loving their new roles as parents and, while they enjoy life in the Big Apple, are plotting a cross-country move to Los Angeles, CA.
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.
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. FrugalBrooklyn, this month’s case study subject, take it from here!
The FrugalBrooklyn’s Story
My husband, Mr FrugalBrooklyn and I (Mrs. FrugalBrooklyn) live in Brooklyn, NY–as you might’ve guessed–and had our first baby at the end of December. We’re both urban planners: he works for a government agency and I’m at a non-profit.
My husband is 35, I’m 33, we met in NYC, and got married in 2016. We have many different hobbies and interests, which is probably why we enjoy living in the big city. We love the outdoors and like to surf, ski, run, bike, hike, and sail. Traveling–both within the US and internationally–is another of our hobbies.
Additionally, we’re pretty social and have friends and family all over the country and the world. Community involvement is also important to us and we’re both involved with transportation and social justice advocacy and volunteering, and are active in our professional careers through trainings, networking, and professional development.
All that being said, Mr. FrugalBrooklyn is more of an introvert, which has been a good influence on me because it’s given me the opportunity to be more mindful of the time I spend outside the home. Reflecting on this means that I now spend more time cooking and doing things around the house than I used to before we got married, which is nice.
The Brooklyn to LA Move Plan
We plan to make a cross-country move to Los Angeles, CA by the fall of 2019. Our rationale for this is that LA is cheaper than NYC, closer to my side of the family, and has more job opportunities for urban planners. We’ve casually thought about financial independence but haven’t really made any moves towards that. Additionally, we would like to start trying to get pregnant with our second child around June 2019, so hopefully I’ll be early in my pregnancy by the time we head to LA, but the specific details for that part of our lives are less important. While this is our future plan, we want to continue living in Brooklyn for another two years.
We selected fall 2019 as our target move date because my current job has a contract with the city which would be ending then. However, since having our first baby in December, my plans for heading back to work may be shifting (see below for more). In light of this, perhaps we should consider moving sooner. The biggest factor is that we want to secure at least one job before making the move. We believe that my husband will be able to find a job with a salary of $120,000/year and that I’d find a salary of $80,000/year in LA (for comparison, we currently earn $99,000 and $62,500 respectively). The jobs that we should be able to obtain, plus our work experience, plus the lower cost of living in LA would all increase our quality of life.
Where In LA?
We’d really like to buy a home in LA and the location of this home will depend on where we end up working. We love transit-friendly, kid-friendly areas and we like the ocean and hiking. Since we’ll be coming from NYC, a walkable, central, transit-friendly neighborhood would be ideal. Of course, public school quality is also a major consideration. We like Los Feliz if our jobs are in downtown LA or nearby. Santa Monica looks like a good option if our jobs are located near the western part of the city.
I think our LA homebuying budget will be around $800,000 since it’s a high cost of living area, especially if good schools and good transit are taken into consideration. Realistically, we can probably buy a small-ish condo with that budget.
The Car Question
If we move to LA, we will obviously need a car out there and we are leaning towards buying or leasing a car while we’re still in Brooklyn. It would help to have a car now to visit my in-laws, who are easily drivable but not located in an area that’s public transit accessible. We’re considering the various ways to own a car from buying used to leasing a new car. Additionally, we need to think about the best way to save money in terms of insurance, maintenance, and parking fees.
Many New Yorkers with cars choose to park on the street and move the car for street cleaning, which happens once a week in our neighborhood. We lean towards paying for parking in a nearby garage or renting a space from a homeowner who has extra space in their driveway. This would likely cost $150/month. Another option we could try is a “car share” with another family in our neighborhood whereby we charge neighbors through an app to use our car when we’re not.
Staying Home With Baby vs. Going Back To Work
After having our first baby in December, I am strongly considering staying at home for at least six months instead of the three months I originally intended. I hope my current employer will be OK with this leave extension. The first three months are paid leave (4 weeks at 100% salary, which I was able to do through saving on vacation days, work provided paid leave and 8 weeks at 50% salary, which was paid for by the new NY state Paid Family Leave policy). The next three months would be completely unpaid.
We crunched the numbers and through frugality–it’s amazing the options and freedom frugality gives you!!!–we can definitely afford me staying home for more months, we would just be saving less. Another consideration are childcare expenses. We’re interested in having a nanny, which would likely run us $2,500-$2,800/month. There’s also the possibility of using a nanny share, where either I work part-time or from home and the nanny works part-time or we share a nanny full-time with another family. There are opportunity costs and benefits cutting both ways with this decision.
I’m wondering about ways to maximize the frugality of me staying home longer with the baby. I was thinking perhaps this would lead to more home-cooked meals and greater frugality in our grocery spending. But maybe there some hidden frugal benefits of me staying at home versus working that we can consider. Some of my thoughts on this are that: work clothing would be less important, some discretionary spending would be reduced since I wouldn’t be in Manhattan in an office distracted by cafes and random city spending.
Also, I wonder if I should take even more time off (perhaps nine months or a year) and use that time to either find a better paying job and/or start a business venture? On the other hand, I wouldn’t want too big of a gap in my resume as it might reduce my earning potential in the future. If we can be even more frugal with me staying at home with the baby, it would give us more options in terms of what kind of paid work I could pursue in the future.
Where the FrugalBrooklyns Want To Be In Ten Years:
- Finances: In ten years, we’d like to have 3 times our annual income in retirement savings. Right now we have one times our annual income. It would be nice to have a solid downpayment for buying a house in LA and great if we could buy a duplex and rent out the second unit. We’d like to stay in LA for around a decade and then most likely return to New York City when the kids are a bit older and ready for high school. Mr. FrugalBrooklyn wants to run for political office in NYC, hence the return to NYC in order to develop that aspect of our lives.
- Lifestyle: We’d like to own a home in the Los Angeles area, continue to travel with our children, and continue to be physically active, active in our community, and living a healthy lifestyle.
- Career: We don’t have defined goals, but some ideas we have are to be managers of some sort, to do something entrepreneurial, and generally increase our level of expertise and professional development. That could mean working in an office, working from home, or some variation. We don’t have goals to necessarily retire early, but it would be nice to have the financial security to allow us to develop our careers without worrying about our finances.
Mr. and Mrs. FrugalBrooklyn’s Finances
|Mrs. FrugalBrooklyn||$2,443.54||After taxes, transit pass, and IRA/Brokerage contributions, which are not sponsored by my work, but something I save independently. My employer does not offer a 401K/403b.|
|Mr. FrugalBrooklyn||$3,967.26||After taxes, pension, 457b (government equivalent of a 401k), college savings (529), and health insurance contributions.|
|Rent||$1,749||750 square foot one-bedroom with a dining room that we use as a “spare” room. Pretty affordable for NYC/Brooklyn!|
|Travel/Vacation||$650||We tend to go on one international trip/year, one west coast trip/year, and a few local surfing & skiing trips/season. We have a JetBlue Travel Rewards card.|
|Groceries/Pharmacy||$450||Costco, Trader Joe’s, CSA in the summer/fall|
|Health/Fitness/Co-pays||$185||Co-pays due to my pregnancy make this a higher amount this year than is typical|
|Household supplies and laundry||$100||Laundry, Target, Bed Bath & Beyond, and household supplies such as laundry detergent, cleaning supplies, towels, etc|
|Restaurants/Bars||$100||About 1 restaurant and 1 bar/month|
|Personal/Professional Development||$75||Conferences & Trainings|
|Utilities||$50||Electricity and Water (Building Management pays for gas)|
|Internet||$50||Internet-only plan through Optimum|
|Mrs. FrugalBrooklyn Discretionary||$50||After-work networking & social/work lunch outings/coffees|
|Mr. FrugaBrooklyn Discretionary||$50||After-work networking & social/work lunch outings/coffees|
|Gifts||$50||Birthday & Holiday gifts – we have a pretty big family|
|Clothing/gear||$40||Usually winter/fall clothing, some maternity clothing (most maternity clothes were hand-me-downs)|
|Personal Care||$35||Haircuts, face wash, lotions|
|Transportation||$20||Mostly uber/lyft and transit fees. This is so low because my husband’s office reimburses his transit pass and I pay for mine as a pre-tax deduction.|
|Cell Phone||$0||My parents pay for my cell phone and Mr FrugalBrookyn’s parents pay for his. We don’t want this to continue and would like recommendations on low-cost cell phones and data plans.|
|Total Monthly Expenses:||$3,804|
|IRA & Roth IRA||$84,127.88||Combined total for Mr. and Mrs. FrugalBrooklyn|
|457b (Mr. FrugalBrooklyn) and 401k from a previous job of Mrs. FrugalBrooklyn’s.||$28,283.37||No match offered by employer. Mrs. FrugalBrooklyn’s current employer does not offer a 401K.|
|Pension (Mr. FrugalBrooklyn)||$21,092.80|
|College Savings (529)||$722.69|
|Cash (High Yield Savings Account)||$27,324.07|
Mrs. FrugalBrooklyn’s Questions For You
- Given that we will be in Brooklyn for two more years and live a moderately frugal lifestyle already, we want to know how much more we could cut from our spending. We’ve had trouble getting to the next level of frugality; for example, we still spend a good amount on eating out and I think our grocery bill is too high. Since we just welcomed a new member of our family, I want to see if we can trim more in order to get to a higher savings rate (our average savings rate is currently about 41%). What would you suggest?
- Should I consider a longer leave to stay home with our baby? How might this impact my future earning potential? What efficiencies could be created by my staying home? If I do stay home, should we consider moving to LA sooner rather than later?
- How should we go about procuring a car? Buy used? Lease new? Any tips on how to be economical and practical regarding parking in the city?
- Would it make sense to then sell the car when we move to LA or should we use it to drive to LA for our move? I see two scenarios: 1) we move all of our stuff via moving company; 2) we sell all of our furniture and start fresh in LA, thus necessitating we drive ourselves cross-country. Which would be more economical?
Mrs. Frugalwoods’ Recommendations
First off, mad props and gigantic congratulations to the FrugalBrooklyns for: 1) being debt free! 2) having a healthy emergency fund! 3) saving for retirement! WOO HOO!!! These are the first three tenets of being a financially responsible person in the world and they are killing it. Way to go!!! If you are reading this right now and do not have those three things on lock down, start working towards that magical trifecta immediately. And now, let’s dig in!
The overarching imperative that comes across as I read the FrugalBrooklyn’s story is that they need to prioritize their goals and aspirations. I LOVE that they are thinking longterm and planning out where they want to be financially, in terms of having kids, and geographically. However, I think they’re at a crucial juncture right now where some prioritization will serve them well. The FrugalBrooklyns have several major life goals on the horizon:
- Potentially having Mrs. FrugalBrooklyn stay home with their baby
- Buying a car
- Moving cross-country to LA
- Buying a house in LA
- Having a second child
- Moving back to NYC in ten years
- Running for political office
Whoa buddy! That’s a lot of big goals! All of them perfectly fine and all of them well-articulated by Mrs. FrugalBrooklyn. The challenge is that they don’t currently have enough money to fund all of these dreams. And that is not a bad thing–it gives them something to work towards! However, the rapid timeline in which they’re discussing losing an income, buying a car, moving cross-country, and buying a house just isn’t financially feasible with their funds on hand.
Dreams Cost Money
At present, the FrugalBrooklyns have $32,801.03 in liquid (non-retirement) funds. This is a fantastic amount of money to have saved up and they should be proud!! However, we need to break down the costs they can expect to incur with their near-term goals.
I’ll address staying-home-with-baby and buying a car in just a moment. First, I want to turn my attention to the move-to-LA plan. Primarily I question if this move would really lower their cost of living. While LA is a tad cheaper than NYC, it is by no means a vast departure from high cost of living. Both NYC and LA are listed among the top ten most expensive cities in the USA.
I did note that the FrugalBrooklyns posit they’ll increase their gross salaries in LA from $99K to $120K/year and $62,500 to $80K; however, this is only a total gross increase of $38,500 (which’ll be much less after taxes and other deductions). On top of that, the FrugalBrooklyns are looking at dramatically increasing their housing costs. They currently pay really inexpensive rent, which is allowing them to save at a fairly high rate every month.
Buying A Home In LA
Mrs. FrugalBrooklyn said that their homebuying budget for LA is $800,000. For a purchase price of this amount, assuming your mortgage lender requires you to put 20% down, they’ll need $160,000 in cash saved up, plus another 2-5% of the purchase price for closing costs, which for $800K would be $16,000 – $40,000. That means the FrugalBrooklyns would need a grand total of $176,000 to $200,000 saved up in cash.
Even if they’re able to find a great mortgage interest rate that’ll allow them to put down less–say just 10%–that’s still $80,000 in cash for the downpayment plus the $16,000 – $40,000 for closing costs, for a grand total in the neighborhood of $96,000 – $120,000. Now, these are totally doable amounts of money to save up on their salaries; however, I’m not seeing how that’ll be possible in their under-two-year timeline.
Another good data point to keep in mind is the hefty monthly mortgage payment that an $800,000 home will levy. I used this online mortgage calculator and input the data points of a 4% interest rate on a 30-year fixed-rate mortgage with 10% down on an $800K home and learned that the monthly mortgage payment would be $3,437.39. However, it’s crucial to note that this total does not include homeowner’s insurance, PMI, property taxes, or home owner’s association fees (Mrs. FrugalBrooklyn said they’d likely be able to afford a condo, many of which come with monthly HOA fees). Using that same online calculator, I input estimates for all of those figures and came out with a total monthly cost of $4,979.06. This is obviously not a precise estimation, but it’s a good approximation of what their monthly outlay would be on a home in the $800K price range.
This is a vast departure from their current monthly rent of $1,749. What this total also neglects to include are utilities (at present, some of their utilities are covered by their landlord), maintenance (as the owner of two homes I can testify that something is always breaking), upkeep of the yard, and sundry other homeowner expenses. I’m not saying all this to deter the FrugalBrooklyns from their dream of home ownership, but I do want to provide a serious reality check on the actual costs. If their goal is to enjoy a lower cost of living, I’m just not sure that a move to LA–and the purchase of a home there–is going to facilitate that dream, especially in light of the fact that the LA salaries they cited aren’t a tremendous increase over their current salaries. It seems that with that level of downpayment and monthly mortgage, the FrugalBroolyns would make themselves quite house poor with very little–or nothing–leftover for savings, travel, or flexibility.
Thinking Hard About Moving To LA
The other red flag for me here is their plan to move back to NYC in a decade or so. While it’s possible their LA home would appreciate in that timeframe, there’s no guarantee that it will, and it’s a lot of cash (and hence a lot of opportunity cost) to tie up in a house in the meantime. Additionally, I’m not clear on the feasibility of running for political office in NYC after living in a different state for a decade. Admittedly, I am no expert in this area, but I believe that living in district for a period of time is considered advantageous, if not mandatory, for political campaigns. Just another factor to consider if running for office in NYC is a true goal.
Furthermore, I wonder about their desire to move back to NYC when their kids are in middle/high school. Having moved myself in the 6th grade, I can tell you that this is a moderately traumatic time to move for a kid and I wasn’t too thrilled about it. Granted, I turned out fine, but it is something to consider. Moving little kids is much less of a big deal, but once kids are entrenched in school and friend networks, it represents a much larger disruption to their lives.
I encourage the FrugalBrooklyns to ponder this move very carefully and consider if it will actually meet their goals. Additionally, I want to point out that I’m a firm believer in living where you want to live, regardless of the cost of living. And if they truly desire to live in LA, then go for it! However, the fact that they would eventually be moving back to NYC makes me question the rationale for moving out to LA. If what they’re looking for is a lower cost of living locale for a decade before moving back to NYC, I encourage them to research lower cost of living cities where urban planners are in demand. LA is not a cheap place to live, but it’s worth it if that’s where they want to be regardless of the cost of living.
Buying A Car
If the FrugalBrooklyns make the move to LA, I think car ownership is an inescapable fact of life in LA and they should definitely budget for the purchase price, maintenance, insurance, gasoline, registration, repairs, parking and all the other fun expenses that come with car ownership.
They noted an interest in buying a car while still in Brooklyn, but it doesn’t sound like they’d use a car all that often in the city. I’m wondering if they’ve explored instead getting a ZipCar membership to use for their infrequent car trips in the city? Alternately, renting a car from an old school rental place might be another economical option. Cars are expensive to own–even when you’re not driving them–and I’m not sure they need to go whole hog on car ownership while in Brooklyn.
If, and when, they do decide to purchase a car, I cannot recommend highly enough that they buy a used car. I have several posts devoted entirely to this topic because buying or leasing a new car is truly one of the worst financial decisions you can make. I don’t come down that hard on too many things, but I do on cars. Briefly, buying a new car is like shooting yourself in the foot not once, not twice, but three times. Here’s why:
- The mark-up on new cars is astronomical.
- The opportunity cost of buying a new car–even if you pay cash–is profound.
- Most car loans have interest rates, which means you’re spending even more money on a majorly depreciating asset.
I won’t rehash the whole argument against new cars here, but will instead direct you to the following post: Why We Buy Used Cars And You Should Too.
In terms of parking in the city, if the FrugalBrooklyns decide to buy a car while in NYC, I highly recommend they try out street parking for a few months before making the decision to rent a garage spot. We parked on the street when we lived in Cambridge, MA and while, yes, we did have to move our car on street cleaning days and yes, sometimes it’s tough to find a spot and you have to walk a few blocks, it wasn’t really that much of a hassle. Mr. FW and I originally thought we’d rent a parking spot in Cambridge, but after testing out street parking for a few months realized it wasn’t that big of a deal–even with infant Babywoods in tow. Plus, $150/month on parking is a pretty darn big outlay of cash!
To Mrs. FrugalBrooklyn’s question on buying the car in Brooklyn and then selling it before moving to LA, I advise against this. Buying anything big–a house or a car–entails so many mind-numbing details (registering it at the DMV, getting it inspected, etc) and expenses that it doesn’t make financial or practical sense to go through all that hassle only to turn around and sell it and do the whole process over again out in LA. If they buy a car in Brooklyn, I advise they plan to drive it out to LA and use it as their car in LA as well.
Having recently bought two used cars as well as a house–with a tiny infant–I can speak from personal experience that I would not recommend that anyone make these transactions more complicated than necessary. I cannot tell you how much time and money goes into buying houses and cars–oh wait, I can! It’s all here on Frugalwoods! I’ll summarize thusly: moving, buying a house, and buying a car are all massive drains of time and money. No way around it. Even when you’re frugal about it, these are expensive, time-consuming, red-tape-filled, paperwork-explosion exercises to be done as infrequently as possible (in my opinion).
Staying Home With Baby?
This is a tough one. Mrs. FrugalBrooklyn summed it up perfectly when she said that there are “opportunity costs and benefits cutting both ways with this decision.” She is 100% right. Losing Mrs. FrugalBrooklyn’s income–possibly for just a few months–to allow her to stay home with their baby would represent a decrease of $2,443.54 per month in income. With her husband’s salary, and their current rate of monthly spending, they’d be saving just $163.26 per month. This means that it IS feasible–they wouldn’t be dipping into the negative, but it’s a massive cut to their savings rate.
On the other hand, as Mrs. FrugalBrooklyn sagely noted, a nanny share would cost them in the neighborhood of $2,500-$2,800/month, which would, in effect, eat up the entirety of Mrs. FrugalBrooklyn’s salary. However, that doesn’t necessarily mean that it would be more financially viable for her to stay at home.
As she pointed out, the opportunity cost of staying at home could mean a potentially harmful gap in her resume that could serve to stymie her future earning potential. Thus, it’s not just the cost of the nanny in the present moment that should be taken into account, but also the potential future earnings she might be giving up.
That being said, if Mrs. FrugalBrooklyn does decide to stay home, I would posit that there’s a lot she can do from home to stay current in her profession. She mentioned several times an entrepreneurial desire and this could be her time to pursue those ideas. While it’s not possible to work full-time from home with a baby, I’ve been able to successfully work part-time from home with a baby on both writing my book and doing the work I do here on Frugalwoods. Hence, don’t assume that no “work” will get done while doing the even-more-difficult WORK of raising a child.
Another factor to consider is the couple’s stated interest in having a second child fairly soon. Double daycare costs would push this decision over the edge and would make it more financially viable for one parent to stay home with the kids. Obviously, this second baby is still just a plan, but daycare x 2 is something to take into consideration when determining whether or not to stay home with baby #1.
Given the essential wash of this decision from a financial perspective, I strongly encourage the FrugalBrooklyns to assess this decision from a place of what feels right for their family. If Mrs. FrugalBrooklyn wants to stay at home with their baby, then that is what they should do. They can afford it and they should pursue this life path. Their frugal lifestyle has made this an option for them and they should take it if it’s what they want. This is the crux of why I encourage frugality: you never know what life will throw your way. Before their baby was born, Mrs. FrugalBrooklyn hadn’t considered staying home, but now that the baby is a reality, her feelings on the matter have changed. By living a frugal lifestyle, they’ve put themselves in the fabulous and enviable position of being able to make the decision they WANT to make, not the decision they HAVE to make based on financial imperatives. Congrats to the FrugalBrooklyns for creating this option for their family!
What I also have to point out here–and I hate to sound like the grim reaper of home buying–is that either decision regarding childcare will gobble up their savings rate, which, unfortunately, will delay their home buying aspirations.
Savings Accounts Side Note
One of the easiest ways to optimize your money is to keep it in a high-interest savings account. With these accounts, interest works in YOUR favor (as opposed to the interest rates on debt, which work against you). Having money in a no (or low) interest savings account is a waste of resources because your money is sitting there doing nothing. Don’t let your money be lazy! Make it work for you! And now, enjoy some explanatory math:
- Let’s say you have $5,000 in a savings account that earns 0% interest. In a year’s time, your $5,000 will still be… $5,000.
- Let’s say you instead put that $5,000 into an American Express Personal Savings account that–as of this writing–earns 1.70% in interest. In one year, your $5,000 will have increased to $5,085.67. That means you earned $85.67 just by having your money in a high-interest account.
And you didn’t have to do anything! I’m a big fan of earning money while doing nothing. I mean, is anybody not a fan of that? Apparently so, because anyone who uses a low (or no) interest savings account is NOT making money while doing nothing. Don’t be that person. Be the person who earns money while sleeping. Rack up the interest and prosper. More about high-interest savings accounts, as well as the ones I recommend, here: The Best High Interest Rate Online Savings Accounts.
I was excited that Mrs. FrugalBrooklyn requested advice on ways to reduce their spending because I love doing that in every case study anyway! With each case study, I always preface my advice with the caveat that everyone has to make their own spending decisions and everyone needs to decide what matters most to them and how they want to spend their hard-earned money.
I think that with the FrugalBrooklyns, we’ve identified a need to save more money–both to pay for childcare/a loss of a salary–and for their future plans to buy a car, move cross country, and buy a house. That being said, only they can decide what they want to eliminate and how that will impact their quality of life. They are also already doing a bang-up frugal job, so we are mostly trimming around the edges at this point. Here goes:
- Travel/Vacation: at $650 per month, this represents their largest area for saving. Eliminating this line item would net them $7,800 in savings per year. Plus, I can tell you from experience that traveling with a baby is not, uh, among the greatest experiences of my life… ;). Even a reduction in this category could represent tremendous savings for them.
- Groceries/Pharmacy: $450 per month is actually quite good, but could probably be reduced with some serious frugalization. I refer them to this post for guidance: Our Complete Guide To Frugal, Healthy Eating.
- Health/Fitness/Co-pays: $185 seems like a lot per month, but as Mrs. FrugalBrooklyn noted, this was higher due to her pregnancy. I imagine those co-pays should reduce now. If they are paying for a gym membership or similar, now would be the time to cancel that and explore the many and varied ways to exercise for free!
- Restaurants/bars: this $100 should be fairly easy to eliminate now that they have a baby on board ;). While we do occasionally take Babywoods out with us, it’s just not quite the same and having a kid can be a great motivator for enjoying at-home dinners and cocktails! That’ll be $1,200/year saved.
- Personal/professional development: I’m wondering if there’s any way to have this $75/month covered by their employers? Depending on what the specific costs are, seems worthwhile to explore if reimbursement is available.
- Discretionary: Hard to say since I’m not 100% sure what this encompasses, but seems like another area ripe for reduction. This would be another $1,200/year saved.
- Gifts: I’d say now is the time to embrace the ethos of frugal gift giving in order to reduce this $50/month (also known as $600/year) expense. Here are some posts for inspiration:
- Clothing/Gear: Time to enact a clothes-buying ban! This’ll be $40/month ($480/year) saved.
- Personal Care: Not a huge line item at $35/month, but could be reduced with home haircuts–here’s how for short hair and long hair.
Since the FrugalBrooklyns are gunning for quite a few expensive larger goals, and looking at a dramatic reduction in income through either childcare or the loss of one salary, I think carefully assessing every line item will be a help to them. This exercise will hopefully illuminate for them where they are spending in alignment with those longterm goals and where they can save more.
The other end of this equation–income–should also be considered and if the FrugalBrooklyns are able to find higher paying jobs, or take on side hustles, they’ll be able to save more and hence, reach their goals more quickly.
In summary, I advise the FrugalBrooklyns to do the following:
- Prioritize their goals. They’ve done a great job of outlining a lot of fabulous longterm plans. Now’s the time to crunch numbers and figure out what they can reasonably accomplish in the near-term and what will need to be delayed a tad until their savings can catch up with their dreams.
- Decide on childcare arrangements. Whichever path they choose–staying at home or hiring a nanny–that choice should be made soon. Mrs. FrugalBrooklyn should allow for plenty of time to discuss options with her employer and/or they should begin looking for a nanny (or nanny share) immediately. In hearing from my parent friends who live in the city, nannies and daycares often have lengthy (6 months or more) waiting lists and so they’ll want to get their names in ASAP if they do plan to hire out childcare.
- Assess the viability of moving to LA. How much lower will their cost of living truly be taking into account the possibility of buying a home? Owning a car and driving much more frequently? Planning for a move back to NYC at some point?
- Examine their needs for a car. Could ZipCar or car rental serve their purposes while in NYC? If they do decide to buy, I strongly encourage they explore the used car market and also test out street parking before paying for a garage spot.
- Look for ways to increase their savings (through spending less, earning more, or both). Whether they decide to pay for childcare or have Mrs. FrugalBrooklyn stay home, they’re going to experience a rapid decrease in their savings rate. At their present rate of spending, without Mrs. FrugalBrooklyn’s salary, they’d save just $163.26 per month. In light of their other goals, they’ll need to find more areas from which to trim expenses (and/or increase their income).
Ok Frugalwoods nation, what advice would you give to Mrs. FrugalBrooklyn? She and I will both reply to comments, so please feel free to ask any clarifying questions!
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Update from Mrs. FrugalBrooklyn on 11/13/18:
Thank you to everyone so much for their amazing comments and ideas, which gave us a lot of food for thought! In general everyone’s comments helped us prioritize.
I’m happy to say that we were able to make some great decisions with everyone’s help:
- On LA versus BK- It helped so much to understand that LA will most likely not be cheaper than BK, and that we have a pretty good set-up here. That being said, we are still on the lookout for jobs in LA and still plan to move, because the job market for urban planning is on more of a growth trajectory and we do have family there. If it doesn’t work out, then we will be perfectly happy to stay in the NYC area and have looked at other parts of the region as well for potentially lower costs of living especially if we plan to buy.
- On buying a house in LA – we realized that buying a home in LA would not be a good financial move for us especially not anytime soon because housing prices are so high. We decided that if we move to LA, we would continue to rent a model apartment.
- On buying a car – we decided to buy a used car! A 2014 Subaru Outback, which was previously a lease, and had really low mileage and wear and tear. We paid in cash and realized that our frugality enabled us to be able to purchase the car!
- On childcare – we decided to do a nanny share, where we employ one nanny and she takes care of two children, which was a middle ground financially and care-wise between daycare and an individual nanny. I did decide to extend my maternity leave to almost 6 months, which was a really special time with our baby.
- On the job situation – I’m happy to report that I was able to obtain a better paying job upon return from maternity leave, which yielded a 15% pay increase! That’s been helpful for our financial situation.
- On expenses – we’ve kept many our costs down and are continuing to find ways to decrease our spending. In many ways, having a baby helps (eating out and entertainment costs have decreased) but we did go on a few cross country and an overseas trip, which added to our expenses. We don’t anticipate any big ticket traveling until next summer, so we hope to frugalize by traveling locally and frugally.
Thank you everyone for all your advice. We will continue to prioritize our goals and we are currently happy in Brooklyn so will continue being the FrugalBrooklyns that we are.