Reader Case Study: Longterm Planning When You Have a Chronic Illness

Katie and Arden live on beautiful Cape Cod in Massachusetts and have a passion for travel, spending time on the water, renovating their home, and enjoying life. Katie has Cystic Fibrosis and would like our advice on how to plan for retirement while still living it up with her husband, friends, and family in the near term.

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.

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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 Katie, this month’s Case Study subject, take it from here!

Katie’s Story

Katie and Arden

Hello, Frugalwoods Nation! I’m Katie, I’m 30 years old and I work as a high school guidance counselor. My husband Arden is 35 years old and works as a solar installer. Our other family member is Panjami, an affordable cat who’s a bit of an attention seeker.

We live on Cape Cod in Massachusetts. Arden and I have a close-knit family and a great circle of friends. We spend a lot of time with everyone at regular potlucks, game nights, and family dinners. My husband and I also enjoy traveling, eating out at restaurants, spending time on our boat, picnicking on the water, and epic beach days. Cooking together, dancing, wine/cider tastings, and chocolate chip cookies dipped in milk round out our primary interests and hobbies.

We’re Also In School!

I’m currently taking classes to earn a special education administrative license, which I’m cash flowing through a 529 we set up for our future babies (we put $200 per month into that fund). I have just one class left but I love school and so I’m sure I’ll continue in some fashion. I received my undergraduate degree from Suffolk University in Public Relations and Journalism and I also have a Masters in Teaching and Curriculum from Boston University as well as a Masters in School Counseling from Bridgewater State.

Arden is also in school right now studying to become an electrician. We’re cash flowing his program as well at $1,000 per year. He has one year left until he can take the electrician’s exam. When he passes, this should lead to a substantial raise at his current job.

Health Issues and TTC

Katie and Arden’s adorable cat

I have Cystic Fibrosis and while I’m doing very well currently, it’s impossible to predict if/when my health will decline. This knowledge makes it really tough for us to prioritize retirement savings. Since it’s possible I will die young, it’s far too easy to fall into the “live it up” mentality through travel, eating out, and experiences.

Furthermore, it’s possible I will have to stop working early (prior to retirement age) due to my health. I’m struggling with how to best financially prepare for these potential outcomes and to balance that with our desire to enjoy life while we can.

Arden and I have also been trying to conceive (TTC) a baby for about three years and recently began pursuing fertility treatments. Thankfully, our health insurance will cover most of these costs. Due to my health issues, we have concerns that I might not be able to work for some or all of my pregnancy. I’m also aware that it would be very  difficult to work and raise a baby while doing everything else (including prioritizing my health). Given that, I’m wondering if there’s a way for me to stop working for awhile surrounding my eventual pregnancy and birth of our first child.

A quick note on our insurance:

  • Arden has a $500k 30-year life insurance policy that will bring us until he turns 60.
  • I have a $125k life insurance policy through my employer, but due to my Cystic Fibrosis I’m uninsurable through regular plans.
  • We both have long-term disability policies, mine is through my employer and Arden’s isn’t.
  • We receive excellent health and dental coverage through my employer.
  • I also have a short-term disability plan through work.
  • We pay for identity theft protection, but I’m unsure if this is worth the expense.

Katie’s Job and Volunteer Work

I volunteer as a Special Education Surrogate Parent for students in foster care, which I greatly enjoy. For my day job, I work as a guidance counselor at a charter school and have a two-hour round trip commute. I love what I’m doing, but with hoping for children of my own and my health concerns, the commute takes a lot out of me. Plus, I would appreciate the security and pay raise that would accompany a public school position with a union. I’d really like to find a job at a public school closer to our home.

Arden’s Art

Arden is an artist and would like to get back to making things and possibly developing a business plan to generate supplemental income from this work. He started making glass jewelry and selling items at craft shows when he was in high school, but began working at a solar company shortly after we met and slowly stopped making things as his time focused more on his day job. He’d love to be able to work 20-30 hours a week at his day job and make and sell art the rest of the time. To help facilitate this, Arden plans to build an art studio on the property of our primary residence (see details and cost estimate below).

Our Two Homes: Primary Residence and Rental Cottage

Arden and I own two homes: our primary residence on Cape Cod and our second “summer” cottage, which we rent out year-round, with the exception of the one to two weeks we spend vacationing there every summer.

Katie and Arden’s home

We owe $262,475.67 on our primary residence and have a 30-year fixed rate mortgage that terminates in 2046. We pay $186 in PMI monthly which kills me, but our interest rate is only 3.75%.We have an FHA loan so the PMI won’t drop off, we would need to refinance in order to accomplish that. The amount due each month is $1,890 but we currently pay $2,000 monthly, which will have us paying the house off four years earlier in 2042. We are considering paying $2,500 a month, which would allow us to pay off the house in 2034.

We are usually in the middle of a home renovation project on our primary residence and have been paying cash for these with bonuses or income from our rental property, We generally do two projects a year and end up spending between $5k-$10k yearly on renovations. Arden does all of the work himself so the cost is only for materials. Next up, we’ll be putting in hardwood floors and renovating an upstairs bedroom. After that project is finished, Arden would like to build an art studio for himself on the property, which we estimate will cost around $20k. Once the studio is built, these costs should greatly reduce (which’ll be in about three years).

Katie and Arden’s fabulous home

Our vacation cottage was our first home and Arden completely renovated it himself while we lived there. We vacation there every summer for one to two weeks and we rent it out weekly during the rest of the summer. In the winters, we have a full-time renter to cover the expenses in the off-season.

Since I don’t work in the summer, I manage and clean the property. This property brings in about $14k yearly after expenses and we have a 30-year mortgage with a 4.25% interest rate and no PMI. We owe $183,347.07 on this house and it’ll be paid off in 2046. We have been using the income to cash flow renovations at our primary home, but would like advice on what to do with this rental income in the future.

We feel good about owning these two homes because we plan to live in this area for the longterm and have no plans to ever move off the Cape. Almost all of our close family lives within 10 minutes of us and we are very family-oriented. This proximity will also be great for our future childcare considerations! We plan on remaining in our current home for the longterm and we are also very attached to our cottage. I could see us buying another property in the area in the future to use a second rental.

A Love of Travel

Katie and Arden with friends

Arden and I have been going on two international vacations every year for the past few years while trying unsuccessfully to start a family. We also spend a week at our cottage and go on weekend trips a few times a year and travel somewhere in the US. We plan on cutting this back to one international trip yearly, one US trip yearly (maybe), and switch to spending two weeks at our cottage.

Once we have a child this will probably be much less: I’m thinking two weeks at our cottage and maybe a couple weekends away (at least until our future kids are older). So I’d estimate this’ll be about a max of $2k yearly.

In 2018 we went to Spain, which cost $2,850, and to Scotland and England, which was $5,500. We also took weekend trips to Vermont, New Hampshire, Maine, Provincetown, and more! These weekend trips averaged $500 each. In 2019, we plan to visit Nashville, TN for around $1,000 and go back to Spain for about $3,000. This $4,000 total will cut our vacation costs in half for 2019.

Katie and Arden’s Near-Term Goals:

  • Finish renovating our primary home and continue to cash flow any minor renovations
  • Build an art studio in the backyard for Arden
  • Set up a simple, automatic system for our retirement savings
  • Get pregnant and have a healthy mom and healthy baby
  • Find a job closer to home (Katie)
  • Have no credit card balance… ever
  • Take one international trip every year
  • Take one domestic trip every year
  • Spend two weeks at our cottage every year
  • Pay off both of our homes early
  • Have little to no stress about money
  • Have bi-weekly meetings about our finances

Where Katie and Arden Want To Be In 10 years:

  • Finances:
    • Katie: I would like to be stress free related to finances: not using credit cards, no debt, having bi-weekly meetings with Arden, saving up for vacations/other goals and consistently paying extra on our mortgages.
    • Arden: I would like to have enough income that we have more flexibility with working, be on track for retirement, have no debt, and have one of our homes paid off.
  • Lifestyle:
    • Katie: I would like to be raising empathetic, well-adjusted children with good senses of humor, taking annual international and domestic vacations, and enjoying our cottage more.
    • Arden: I would like to have more free time, be raising children, and going on family vacations.
    • Kate + Arden: boating, enjoying the beaches, reading, cooking, dancing, etc!
  • Career: 
    • Katie: I would like to be working closer to home in a public school as a school counselor.
    • Arden: I would like to be working less and have more freedom to pick and choose what I would like to do. I will likely still be doing electrical and working in the solar field. I would also like to have my art studio built where I can make glass again and hopefully earn an income from that, which would allow me to be home more.

Katie and Arden’s Finances

Income

Item Amount Notes
Arden’s income – net including bonuses $4,510.00 Annual Salary:  $54,130.00. The $4,510 = total net including bonuses. I averaged in his 2x yearly bonuses, but weekly we receive much less. and it’s variable based on the week. Average $700 weekly take home so it’s usually only $2,800.00 monthly. A concern I have is that much of our income comes in at various points during the year and so we have a much smaller amount to work with in our regular weekly/monthly budget. Also, the bonuses are subject to change which could possibly reduce Arden’s income by about $20k, which is always a consideration.
Katie’s income – net $3,114.74 Annual Salary: $57,493.80 Paid bi-weekly. This is after taxes ($543.06), Family Health Insurance ($329.60), Family Dental ($25.66), STD ($21.80), LTD ($13.78), Katie’s pension 11%= $486.48 Life Insurance – 125k policy attached to work = ($7.48)
Cottage Income (gross; mortgage included under “Monthly Expenses”) $2,705.00 We made $32,457.13 in 2018. We only make a profit during the summer. Winter rental only covers the mortgage. We have historically used the extra income to pay for large purchases/renovations, but not sure where to put this money in the future once we are done renovating. NET profit for 2018 was around $14k.
Tax Return $417.00 Arden pays $18,729.59 yearly in taxes (this is so high because about a third of his yearly income is from profit sharing/bonuses). Katie pays $6516.72 yearly in taxes. Variable but we generally get about $5k back each year which we have historically used to pay down CC debt. I’m thinking about using the tax return to pay for a yearly vacation… or should we adjust our taxes to get more in our checks?
SREC credits from solar panels $166.00 We receive quarterly payments and will for 10 years. It averages to $500 a quarter ($2,000 a year)
Monthly Subtotal: $10,912.74 This varies greatly by month in light of Arden’s bonuses and the fact that the cottage only generates a profit in the summer months (it breaks even in winter).
Annual Total: $130,956.00 Including net take-home with Arden’s bonuses, the cottage income (before expenses), SREC income, average tax refund of 5k, and not including the deductions taken out, which are noted above

Monthly Expenses

Item Amount Notes (all values averaged over the last 12 months of expenses)
Primary Mortgage $1,891.42 30 year fixed rate 3.75%. We currently have 27 years left on the loan. This includes taxes and insurance.
Rental Cottage Mortgage $1,065.22 30 year fixed rate loan, 4.125% interest, no PMI. Includes taxes and insurance with 27 years left
Home Improvements $915.00 We are usually in the middle of a home renovation project but are paying for these with bonuses or income from our rental. Next up is hardwood floors and renovating an upstairs bedroom. After that Arden would like to build an art studio on the property which we estimate will cost up to $20k total. So these costs should greatly reduce in about 3 years. We pay for all renovations with cash from cottage income & bonuses. We generally do two projects a year and end up spending between 5-10k yearly on home renovations. Arden does all of the work so the cost is only for materials/missed work. 2018: Bought hardwood floors for $2,500, Completed upstairs bathroom 5k, 2 Mini-splits  -3.5k
Vacations $500.00 We have been going on 2 international vacations the past few years while trying unsuccessfully to start a family and spending a week at the cottage. We also go on weekend trips away a few times a year and travel somewhere in the US as well sometimes. We plan on cutting this back to 1 international trip yearly, 1 US trip yearly (maybe), and switch to 2 weeks at our cottage. Once we have a child this will probably be much much less (2 weeks at our cottage and maybe a couple weekends away until kids are older = max of 2k yearly. In 2018 we went to Spain ($2,850.00) and then to Scotland/England ($5,500.00) . We also went to VT, NH, ME, P-Town,  etc. for weekends that average around $500 per weekend. In 2019, we plan to visit Nashville, TN – $1000 and go back to Spain – $3000 which will cut our vacation costs in 1/2 for 2019.
Groceries and household supplies $400.00 We have been spending less on this during the past year and have been eating out much more but this will be the average once our eating out gets reduced. It may actually go up if we greatly reduce our eating out. Includes toiletries and household goods
Eating Out/Entertainment/Alcohol $400.00 This is a crazy area for us. This is usually from going out on dates and this cost is in excess of our spending $$
Katie’s Spending Money $400.00 We each get $100 weekly. We use this to cover eating out, $100 gas for my car, clothing, massages, homegoods etc.
Arden’s Spending Money $400.00 We each get $100 weekly. We use this to cover coffee, eating out, gas ($60-80), clothing, alcohol, gambling, etc.
Additional Health Insurance $322.00 Due to Katie’s extensive medical costs, we keep an additional insurance plan through MassHealth that covers most copays and greatly reduces our prescription costs but we could lose this at anytime
Extra payments on primary home mortgage $109.00 We’ve been paying $2k monthly but the minimum is $1,891 and are planning on raising that to $2,500 as soon as we are able to in order to pay it off in 15 years.
NY 529 College Fund $200.00 This is for our future children but Katie has been pulling from it to pay for continuing classes for her Admin certificate. It stays at $0 after each semester.
Gas for cars $200.00 We have two cars and Katie drives 2 hours roundtrip to work daily (Arden’s gas is only $60-$80 monthly and generally comes out of his spending money). Katie puts $100 of spending money towards gas but this is the excess cost.
Continuing Education $175.00 Arden is currently taking night classes to get his electrical license and will be done at the end of 2019; Katie is taking an administration certificate program with one more class. $6,000 = total 2018 cost. 2019 cost will be much lower at K- $1200 and A – $900. This should raise Ardens income about $10 an hour. Katie is not sure if Admin is something she is going to pursue at this point.
Cable/Internet $161.85 Comcast. I have looked into dropping our cable and just having internet but the cheapest is $110 a month just for internet and there are no other options in the area.
Cottage Utilities: Gas/Electric & Cable/Internet (only in summer) $148.08 During the winter these costs are paid for by our winter renter but I pay them through our budget and keep the winter utility $$ in the cottage account to have a small buffer Electric =496.52 Gas =780 yearly = $1277 total. We also pay for cable/internet during the summer which is about $100 a month for 5 months so $500. I just averaged the monthly costs but our costs monthly vary.
Gifts $125.00 I shop for Christmas ($1,000 total) year round and birthdays and weddings as needed. Trying to switch to homemade as much as possible.
Car Insurance $113.29 Geico. comp/collision. 2011 Honda Accord & 2008 Toyota Matrix
Katie’s mom’s electric bill $108.00 My mom pays for my cell phone and I pay for her electric, which was $1,295 for the year of 2018
Extra payments on rental cottage  mortgage $100.00 Trying to pay this off early.
Medical Expenses $100.00 This varies but includes medications and co-pays
Donations/Volunteering $100.00 We make regular donations to the Cystic Fibrosis Foundation, to anyone we know that asks us (any health related request) and around the holidays do a “White Envelope” for each other. Katie volunteers as a Special Education Surrogate Parent for students in foster care.
Utilities: Electricity for primary residence $99.08 Have solar but this past year have had higher than normal costs – average of the last 12 months.  $1189 in 2018
Utilities: Gas for primary residence $89.92 Gas hot water and heat. Will be lower in the future since we got mini-splits and it is raising our electric costs  = $1079 yearly
Medical Deductible (Arden) $83.00 Some years this is 0, but it can be up to $1000
Misc Bills $77.00 HOA Fees (105 + 65) Excise taxes ( A-$38.50, K- $60, boat- $15) Beach sticker ($45) Water ($100), Boat insurance ($246.00), Annual vet bill for cat ($100), Zander idenity theft insurance ($145)
Arden’s LTD $41.00 $486.12 yearly through Zander. Pay quarterly.
Arden’s Life Insurance $33.00 Auto withdrawn monthly. A $500K policy will bring Arden to age 60
Amazon Prime $5.99 I feel like we should cancel this and maybe spend less money on Amazon in general.
Bank of America monthly fee for an extra account $4.95 Not happy about this but I like to have my spending money in a different account
Cell Phones (two) $0.00 Arden’s work pays for his phone (Verizon). My phone (an iPhone 8 through AT&T) costs about $100 but I am on a plan with my mother so I pay her electric bill and she pays for my phone. My phone also is utilized as a health device as I have a Dexcom CGM and it tells me my blood glucose every 5 minutes.
Monthly Total: $8,467.80
Annual Total: $101,613.60

Assets

Item Amount Notes
Katie’s Pension $22,000.00 This is in a pension program and is not accessible until Katie is age 61. Mandatory 11% of Katies salary. If I work for 34 years until age 61, I will receive 80% of the average of my top 3 years of salary. I expect my highest earnings to be around $100k or possible $150k if I go into administration.
Arden’s 403b $7,653.79 Through his employer. Not currently contributing. Work would match 3%.
Katie’s 403b $2,791.24 Through employer. Not currently contributing. No employer match
Rental Cottage Checking Account $2,500.00 We keep a $1k emergency fund and cottage $$ in this account, the cottage mortgage is paid out of this. It’s through First Citizens.
Roth IRA – Katie $1,291.63 Individual Stocks through TD Ameritrade
Checking Account $900.00 We pay all of our bills out of this account. It’s through Bank of America.
Roth IRA – Arden $288.93 Individual Stocks through TD Ameritrade
Savings Account – Katie $100.00 $100 weekly goes into this account for Katies spending $$. It’s through Bank of America.
Savings Account – Arden $100.00 $100 weekly goes into this account for Arden’s spending money. It’s through Cape Cod 5.
Total: $37,625.59

Vehicles

Vehicle Valued At Notes (all are paid off)
Bayliner Element (boat) $12,000 Small speedboat
2011 Honda Accord $8,000 2011 with 150k miles
2008 Toyota Matrix $5,000 2008 with 90k miles

Debts

Item Amount Notes
Primary House Mortgage $262,475.67 30 year fixed rate mortgage at 3.75% interest. Includes taxes, insurance, and monthly PMI payment of $182.49. We have equity of around $90,000.
Rental Cottage Mortgage $183,347.07 All rental income goes into a separate account to pay for the cottage’s mortgage payment ($1265.22) and then I pull from the excess in account to pay for our home renovations/vacations, etc. We currently owe $183,774 on a 30 year fixed rate mortgage at 4.125% interest with no PMI and a payoff date of 2045. We have equity of around $50,000.
Medical (Allergy) Bill $620 0% interest. We didn’t realize that this was going towards Arden’s deductible.
Chase Credit Card $500 18.24% interest rate. We would like to only use credit cards while on vacation because we don’t have the best discipline with them. We try to pay off these types of bills as quickly as possible and  will likely do so within the next month or so.
Total: $446,942.74

Katie’s Questions For You:

  1. Retirement:
    • How much should we be putting into retirement every year and where? We feel like we’re behind on this and would like it to be as streamlined as possible. Below is what we currently have:
      • Katie will receive a pension at age 61 that will provide 80% of the average of her five highest earning years. A bit will come off due to taxes and picking the plan that will provide a portion of the pension for Arden when Katie dies so I think it should be around $60K a year projecting out a salary of around $100K. I’ve also contributed around $3k to a 403b (contributions are on hold) and $1,500 to a Roth IRA. My employer does not offer a retirement contribution match.
      • Arden has close to $8k in a 403b through work and his work provides a 3% match (contribution are on hold). He also has $500 in a Roth IRA (we started these IRAs with the best of intentions, but no plan on how to handle the contributions). Arden will also receive social security of around $18k per year at age 67.
  2. Family:
    • We’ve been trying to conceive for about three years and recently began pursuing fertility treatments. Thankfully, our health insurance will cover most of these costs. Due to my health issues, we have concerns that I might not be able to work for some or all of my eventual pregnancy. I’m also aware that it would be very difficult to work and raise a baby while doing everything else, including prioritizing my health.
    • Given that, I’m wondering if there’s a way for me to stop working for awhile surrounding the eventual pregnancy and birth of our first child. Is this an option for us?
  3. Katie’s Health:
    • In light of my Cystic Fibrosis, it’s impossible for us to predict if/when my health will decline. This makes it hard for us to prioritize retirement savings.
    • Since it’s possible I will die young, how do Arden and I balance our desire to travel, eat out, have fun, and live it up with longer term financial planning?
    • Additionally, it’s possible I’ll have to stop working early (prior to retirement age) due to my health. How do we best prepare for this from a financial perspective?
  4. Cars:
    • We own two paid-off cars: a 2008 Toyota Matrix (with 90k miles) and a 2011 Honda Accord (with 150k miles). Given theses ages and mileages, we anticipate needing at purchase at least one new-to-us car in the next two to four years.
    • How much should we save for this and where should we stash this money?
  5. Mortgages:
    • We’re considering increasing our mortgage pay-off on our primary residence to $2,500 a month (we currently pay $2,000 per month; $1,891.42 is what’s actually due each month). This increased monthly payment would allow us to pay off the house in 2034. Do you recommend this?

Mrs. Frugalwoods’ Recommendations

Katie and Arden

I commend Katie for putting together this thoughtful reflection on where she and her husband are in life and where they’d like to go. It’s not easy to set goals or plan for the future and Katie brought a level of introspection that’s remarkable. Katie is upfront about her Cystic Fibrosis and her mortality, which speaks volumes to her judgement and character.

I’m impressed with how thorough she and Arden were in mapping out not just their plans for the next few years, but really for the rest of their lives. I’m inspired by her optimism and fortitude to make these tough decisions and to be willing to open up her life for all of us to reflect on and offer advice. Thank you, Katie, for being a brave and confident voice.

Katie knows herself well–always the first step in financial management–so I’m going to dive right into her questions.

Katie’s Question #1: Retirement Planning

Katie is spot on that she and Arden are behind on retirement savings. No reason to sugar coat this. At ages 30 and 35, they have some catching up to do. But I’m not worried–I know they can do this. What Katie articulated is that she and Arden would like a simple, straightforward way to save for their retirements and, thankfully, we can offer that for them today.

Katie and Arden’s awesome house

I advise that Katie and Arden begin contributing to their employer-sponsored 403b plans. Today. As in, right this minute. If they do nothing else, this’ll be the single greatest positive impact on their futures. Why do I think the 403b plans are the way to go versus their Roth IRAs? Several reasons:

  1. Arden’s employer offers a match. When your employer offers matching retirement funds, that is FREE MONEY people. In almost every instance, you should contribute to a matching retirement plan. I have an entire post on why, which Katie and Arden should check out so that they have a deeper understanding on the topic: 401ks Are Your Friend. They really are. Sidenote: a 403b is identical to a 401k, it’s just what it’s called when you work for a nonprofit/educational institution.
  2. Katie and Arden should be able to set up automatic contributions to their 403b plans. The advantage here is that they’ll never see this money and thus won’t ever be tempted to spend it. The money will scuttle right out of their paychecks and straight into their 403bs with zero chances to be spent along the way. I love automatic contribution systems for this very reason! It takes the work and the mental anguish out of saving. So, Katie and Arden, speak with your HR departments today and get those automatic contributions set up.
  3. Katie noted that they’d opened Roth IRAs–which don’t get me wrong IS a good thing–but then didn’t have a plan for how to contribute money to them. This is why I’m so in love with the automatic contribution to the 403b idea: takes all the effort out of it.
    • Sidenote: It’s possible that the tax liabilities would pencil out better with the Roth IRAs, but I would say that’s not very likely. Katie and Arden should feel free to research this, but if it’s all a wash tax-wise, I’d go with the more straightforward approach of automatic contributions to their 403bs. Plus, Arden has the fabulous opportunity to get that match from his employer!

How much should Katie and Arden each contribute to their 403bs? 

  • I can’t offer a specific answer here, but I will reiterate Katie’s assessment that they’re quite behind on saving for retirement.
  • What I might suggest is to set the lofty goal for both Katie and Arden to aim for maxing out their accounts.
  • What does maxing out mean? It means contributing the maximum amount to a 403b that’s allowed by the IRS, which for 2019 is $19,000 per person per year (which would be $1,583.33 per person every month). This is a lot of money, don’t get me wrong! But Katie and Arden make great salaries and could have the room in their budget to make this happen.
  • If $19k each feels unmanageable, that’s ok too! Katie and Arden can see that dollar amount as a goal and something to work towards over the next few years.

How much money do Katie and Arden need in order to retire?

This is another question that only Katie and Arden can truly answer, but there are some general guideposts they can reference.  Fidelity outlines this rule of thumb:

Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.

Applying this rule, Katie and Arden should have saved one times their combined gross salaries, which would be 1 x ($54,130 + $57,493.80) = $116,238. While this might seem insurmountable right now, I’m not worried about Katie and Arden. While they have some catching up to do–and I do recommend prioritizing retirement savings–I’m confident they’ll get there. We’re going to address where this money might come from in just a moment, so fear not!

They should also factor in that Katie might either elect to–or need to–stop working due to pregnancy, childcare, or her health. Keeping that in mind is another reason to bump up the 403b contributions to the max right now.

Don’t Count On Katie’s Pension

I know it’s tempting to count on a pension and to calculate that as part of retirement. And it very well might be part of their future. However, since Katie noted that her pension requires her to work at the same job until she’s 61, I encourage her to take into account how far into the future that is. Katie mentioned that she’d like to change jobs now (in order to reduce her commute) and so, if it were me, I wouldn’t count the pension as something to rely on in retirement. There’s also the risk of her employer defaulting on the pension, something we’ve sadly seen happen far too often in recent years.

Updated with additional pension information from Katie:

My pension is tied to the state of MA, not just my current position. So as long as I remain in an MA school system I will still be part of this pension plan, which is my intention. The state could go down (that would be very, very bad), but is less likely than a specific company going under. If I work to 61, I would get 80%; disability retirement brings you to age 60 on the chart and then just how many years which is a lot less but I would still get something. I think your advice in that area is still applicable due to me not necessarily being able to make it to 61. 🙂

My updated advice in light of this additional info:

I agree with Katie that the state of MA is much less likely to default on its pension program than a private employer. Plus, since Katie intends to remain working within the MA public school system, she has a much greater likelihood of seeing payout of this pension. That being said, it’s still a gamble since the money isn’t hers until age 60. Conversely with a 403b, the money is always hers, whether she stops working next year or in 30 years.

  • Every pension plan is different and so I really can’t offer much specific insight here.
  • Since your pension is through the state of MA (a large employer), I am betting that someone is an expert on it. Google around and see who/what info you can find and then see if you can meet with that person to run your numbers and do some estimates.
  • Broadly: in SOME pension plans, what you want to look for are tables showing what percentage you will receive based on the number of years you work for the employer and your age.
  • However, this all varies by pension plan and there are inflation adjustments with some pension plans and NOT with others. If there’s not an inflation adjustment, it could mean that inflation would gobble up your pension. Eek!
  • The big caveat with your pension plan is if you stop working prior to whatever that minimum age/number of years worked is. If you want/need to cease working around your pregnancy/birth (which will hopefully be soon 🙂 ), then you might not qualify for any pension pay out (or not much).
  • That last reason is why I’m so pro-403b and pro-emergency fund in your situation. No matter what you do employment-wise, the 403b and the emergency fund are all yours.

Updated 2/9/19:

Katie had a few follow-up questions for me about 403bs (I love it when people have follow-up questions :)!) and so I’m including my responses here to help anyone else who might be wondering the same thing:

  • With a 403bs, it doesn’t matter if you leave your current employer. A 403b (or 401K) is yours. ALLLLL yours. Some employers require a vesting period before you’re able to avail yourself of their matching plan (or even participate at all), so you should check that out with Arden’s employer. I personally have two 403bs from two different past employers (neither of whom I’ve worked for in years) and they’re both just hanging out in my account, growing bigger every year. Yes, I should probably roll them over, but the salient point is that the money is still mine, even though I no longer work for either of those employers.
  • You must be age 59.5 in order to withdraw from a 403b (or 401k) without penalties. I will note that there is an exception to this rule, called the Roth Pipeline and my good friend The Mad Fientist has this excellent article on the topic. As Mad Fientist outlines, the basic premise is to”slowly convert the tax-deferred accounts (401(k) and Traditional IRA) into a Roth IRA, without paying any tax on the conversion.” In general, you want to wait until 59.5 to withdraw from it. A 403b/401k is a traditional retirement savings vehicle, which means you access it at traditional retirement age (unless you perform a Roth Pipeline).
  • One of the best things about 403bs/401ks is that they reduce your taxable income. Your contributions to them are pre-tax and so you are not paying taxes on the money you put into them at the time you put the money in. You WILL pay taxes when you withdraw the money. However, this usually works to your advantage because you’re withdrawing from a 403b/401k AFTER you’re retired, so your income tax level is typically MUCH lower than it was during your working years. So, you save on taxes now and pay less in taxes later.
  • Check out my post on 401ks as I think it outlines a lot of this in what is hopefully plain English :). Let me know if any parts of it are confusing!

Katie also had a follow-up question about paying off their mortgages early. Here’s my response:

  • I totally agree that paid-off mortgages would reduce your monthly spending and give you a form of longterm security.
  • However, the challenge is that you can’t (easily) liquidate a house to pay for groceries, medical expenses, etc. It’s a lot of money tied up in one type of asset and it’s an asset that you can’t leverage unless you sell it. And if you sell it, you then have nowhere to live.
  • If you do want to pay down your mortgages early, what I recommend is FIRST building up a robust cash emergency fund while also taking advantage of Arden’s 403b match.
  • A lot of this comes down to what you and Arden are comfortable with and how you want to use your money. The advice I give is what I would do if it were me, but at the end of the day, it’s not me, it’s you :)!

Katie’s Questions #2 and #3: Could Katie stop working surrounding the birth of their first child and how should they plan for the potential of a forced early retirement for Katie?

Katie and Arden’s lovely home

I combined these questions because they both address the same root question: Katie’s salary. More specifically, Katie and Arden’s dependence on her salary. At their current spending level, I know Katie and Arden can see it wouldn’t be feasible to eliminate Katie’s income from their lives. Here’s the quick math:

Katie and Arden spend (on average) $8,467.80 per month and their monthly income (on average) is $10,912.74. Katie’s monthly net take-home pay is $3,114.74. If she were to stop working, their new monthly income would be $7,798 (current total income $10,912.74 – Katie’s income $3,114.74 = $7,798). Since they spend $8,467.80 per month, this would put them in debt to the tune of $669.80 per month. Not feasible.

However–and I know Katie knows exactly where I’m going with this–if she and Arden are able to commit to reducing their monthly expenditures, it will be entirely possible for her to stop working if/when it becomes imperative that she do so. I want Katie to have options. To have the option to be home with her future children if she so chooses and the option to prioritize her health when she needs to. I don’t want Katie to be in the position of needing to work long past when it’s healthy or safe for her to do so. Let’s get down to making that happen for her!

Live On Arden’s Salary

Before we get to everyone’s favorite feature–the expense review!–let’s discuss how to consider the absence of Katie’s salary. If I’m reading her thoughts correctly, it sounds to me like Katie is saying it’s WHEN she’ll need/choose to stop working, not IF. In light of that, one of the most straightforward ways for Katie and Arden to plan for this eventuality is to start living on Arden’s base salary every month (plus their rental income).

Arden makes good money, but a challenge with his income is that he receives periodic bonuses and so his take-home pay fluctuates quite a bit. This can make it tough to plan and so what I would do is live only on his base salary and funnel his bonuses into retirement/other savings accounts. This way, if an anticipated bonus doesn’t arrive one year (or is less than anticipated), Katie and Arden aren’t in danger of going into debt or not being able to pay their bills. This approach would make the bonuses fabulous but not mandatory for their survival.

Since the advice to live only on Arden’s base salary somewhat conflicts my previous advice to max out their 403bs… what I would do are several (not just one!) practice months of not spending a penny of Katie’s salary. Test out what it’s like to only spend Arden’s income. This is the only true way to analyze how it’ll be possible for Katie to stop working.

Research Arden’s Health Insurance Options

Katie noted that she and Arden are both covered by her employer’s health and dental plans. If Katie were to stop working, the family would need to migrate to Arden’s employer’s plan. I imagine Katie has already done this, but, she should thoroughly research the plan offered by Arden’s employer to ensure it would adequately cover her Cystic Fibrosis, fertility treatments, and maternity care. Further, she should calculate the change in benefit payments every month if they switched to Arden’s health and dental plans.

Expense Review

Everything we’ve talked about thus far leads us to the bottom line that Katie and Arden need to reduce their spending in order to meet their goals.

Katie and Arden’s wedding

In every 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 identify areas where you might be able to save, but only you can decide what 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.

I’ve gone through their expenses and created two spreadsheets (below) to demonstrate areas where they might be able to save. I did so with the goal of gaming out two scenarios:

  1. The ability to max out their 403b contributions.
  2. The ability to live off of Arden’s salary.

Since these are somewhat conflicting goals, I made not one, but TWO spreadsheets outlining different possibilities for Katie and Arden. The first spreadsheet shows how they could save enough to max out their 403b contributions every month, which as we noted above, would be $1,583.33 per person per month (a total of $3,166.66 each month).

Scenario 1: 403b Max Out Budget

Item Current Amount Mrs. FW’s notes Proposed New Amount Amount Saved
Primary Mortgage $1,891.42 Fixed expense, no change. $1,891.42 $0
Rental Cottage Mortgage $1,065.22 Fixed expense, no change. $1,065.22 $0
Home Improvements $915.00 Katie noted she anticipates these costs reducing in the next three years. I am concerned about the $20K price tag she cited for Arden to build an art studio and so I’ve written notes on that below. For now, I’ll leave this as is since it sounds like they’re in the middle of several projects. $915.00 $0
Vacations $500.00 Katie said that their 2019 vacation plans will cut their vacation spending in half, which is good! I too love travel and I want Katie and Arden to be able to experience the world. But they can’t mortgage their future in order to do so. Taming this spending will help immensely. $250 $250
Groceries and household supplies $400.00 This is a great price for groceries and household items for two people. Katie noted, however, that it’s likely so low due to the next line item: eating out. $400 $0
Eating Out/Entertainment/Alcohol $400.00 Whoa buddy! I am cognizant that Katie and Arden want to enjoy life, but right now they are spending a whopping $1,200 PER MONTH between this category and their individual spending money line items. I think they already know what I’m going to say here: time to reduce these amounts. Not eliminate, but reduce. By a lot. $100 $300
Katie’s Spending Money $400.00 Same notes as above. I don’t think they need to completely do away with this fun money, but $1,200 per month just isn’t tenable at their current salary levels and their dire need to catch up on retirement savings. $50 $350
Arden’s Spending Money $400.00 Same notes as above. I don’t think they need to completely do away with this fun money, but $1,200 per month just isn’t tenable at their current salary levels and their dire need to catch up on retirement savings. $50 $350
Additional Health Insurance $322.00 Fixed expense, no change. $322.00 $0
Extra payments on primary home mortgage $109.00 Cease these extra payments ASAP. I’ve written notes on why below. $0 $109.00
NY 529 College Fund $200.00 Once Katie is finished with her current program, I would put these contributions on hold until their kid(s) are born. $0 $200
Gas for cars $200.00 I am hopeful that Katie can find a job closer to home. A two-hour roundtrip commute doesn’t sound fun and the gas is certainly expensive. I’ll leave it as is for now, but if Katie can change jobs, this could be greatly reduced. $200 $0
Continuing Education $175.00 Katie’s notes: “Arden is taking night classes to get his electrical license and will be done at the end of 2019; Katie is taking an administration certificate program with one more class. Total 2019 costs will be $2,100.”

I’lll leave this as is for now, but after their programs are finished, this line item can go to $0.

$175.00 $0
Cable/Internet $161.85 Katie’s notes: “Comcast. I’ve looked into dropping our cable and just having internet but the cheapest is $110 a month just for internet and there are no other options in the area.”

I encourage Katie to keep after Comcast to try and finagle a cheaper rate for just internet. I was able to do that when we lived in Cambridge by calling them and (nicely) negotiating a better price. It’s worth a call! If $110 is the best they can do for internet, Katie and Arden should go ahead and drop cable because they’ll save $51.85 a month!

$110 $51.85
Cottage Utilities: Gas/Electric & Cable/Internet (only in summer) $148.08 Fixed expense, no change. $148.08 $0
Gifts $125.00 Katie’s notes, “I shop for Christmas ($1,000 total) year round and birthdays and weddings as needed. Trying to switch to homemade as much as possible.”

Katie’s inclination to switch to homemade is spot on. While $1,500 per year for gifts isn’t astronomical, it’s more than they can afford right now, especially as they consider increasing their 403b contributions and living on Arden’s base salary alone. I have a number of posts on how to give thoughtful, frugal gifts that might help:

$50 $75
Car Insurance $113.29 This isn’t awful, but I’d advise Katie to shop around and see if a better rate might be available. Since they have older cars, it’s possible they could find a cheaper deal. $113.29 $0
Katie’s mom’s electric bill $108.00 Katie’s notes, “My mom pays for my cell phone and I pay for her electric, which was $1,295 for the year of 2018.”

Time for a new cell phone plan! Katie said she has an iPhone on AT&T and so she should look for an MVNO (that’s a wireless reseller) who offers AT&T service. It’s totally possible to port a number out of AT&T (as long as you’re not under contract). I did this a few years ago with my iPhone and am now paying $19.99 per month through BOOM Mobile.

Katie should get her mom onto this cheaper plan as well. No reason to be paying so much for cell service every month! A few other popular MVNOs are: Ting, Mint, and Republic Wireless.

I advise Katie to stop the electric bil/phone bill trade off, unless there are extenuating circumstances and Katie wants to help her mom out by covering this bill for her. The new amount I’ve listed would be for one cell phone on a cheaper MVNO plan.

$20 $88
Extra payments on rental cottage  mortgage $100.00 Cease these extra payments ASAP. I’ve written notes on why below. $0 $100
Medical Expenses $100.00 Fixed expense, no change. $100.00 $0
Donations/Volunteering $100.00 This might be an area where Katie and Arden could consider contributing some of their weekly spending money. Or not. Just throwing out different ideas. $100.00 $0
Utilities: Electricity for primary residence $99.08 This seems really high, especially considering they have solar. I’m wondering what’s behind this? I encourage Katie and Arden to do an energy audit to try and figure out where all of this expense is coming from. I’ll leave it as is, but I recommend getting an energy use monitor to try and figure out the root cause of this bill. $99.08 $0
Utilities: Gas for primary residence $89.92 Fixed expense, no change. $89.92 $0
Medical Deductible (Arden) $83.00 Fixed expense, no change. $83 $0
HOA Fees (105 + 65) Excise taxes ( A-$38.50, K- $60, boat- $15) Beach sticker ($45) Water ($100), Boat insurance ($246.00), Annual vet bill for cat ($100), Zander identity theft insurance ($145) $77.00 I’m not sure that the identity theft insurance is worth it. I’m not an expert on this, but seems like something that could be eliminated. $65 $12
Arden’s LTD $41.00 I think longterm disability insurance is a great idea given the physical nature of Arden’s job. I commend them for having this! $41 $0
Arden’s Life Insurance $33.00 Fixed expense, no change. $33 $0
Amazon Prime $5.99 Katie’s note, “I feel like we should cancel this and maybe spend less money on Amazon in general.”

This isn’t a huge line item, but if Katie thinks it might help them save more to not have the temptation of Amazon Prime, then I’d suggest trying an experiment. Get rid of Prime and keep track of shipping costs and figure out where the better deal is.

$0 $5.99
Bank of America monthly fee for an extra account $4.95 I highly recommend Katie and Arden find a different bank. There are plenty of banks that offer multiple checking/savings accounts with no fees. Don’t pay fees on something like this! I happen to use Fidelity and I have multiple accounts, which I’m not charged for. There are lot of other banks that offer this as well. $0 $4.95
Cell Phones (two) $0.00 See my notes above under “Katie’s Mom’s Electric Bill.” $0 $0
Current Monthly Subtotal: $8,367.80 Proposed New Monthly Subtotal: $6,471.01 $1,897
Current Annual Total: $101,613.60 Proposed New Annual Total: $77,652.12 $22,764.00

Their monthly income is, on average, $10,912.74. This monthly income amount factors in Arden’s bonuses, which aren’t consistent, as well as their rental income, which only comes in during the summer months. Katie and Arden would need to judiciously save these bonuses and rental income in order to smooth out their earnings throughout the year.

If Katie and Arden decided to reduce their spending to the above proposed $6,471.01 per month, they’d be able to both max out their 403bs (at a total of $3,166.66) and still have $1,275.07 leftover every month to put into a savings account to build up an emergency fund.

Scenario 2: Live on Arden’s Base Salary Budget

To help Katie visualize what their spending would need to look like in order for her to stop working, I’ve gone through their expenses again and made even deeper cuts than in scenario #1.

Item Current Amount Mrs. FW’s notes Proposed New Amount Amount Saved
Primary Mortgage $1,891.42 Fixed expense, no change. $1,891.42 $0
Rental Cottage Mortgage $1,065.22 Fixed expense, no change. $1,065.22 $0
Home Improvements $915.00 Katie noted she anticipates these costs reducing in the next three years. I am concerned about the $20K price tag she cited for Arden to build an art studio and so I’ve written notes on that below. For now, I’ll leave this as is since it sounds like they’re in the middle of several projects. $700.00 $215
Vacations $500.00 Katie said that their 2019 vacation plans will cut their vacation spending in half, which is good! I too love travel and I want Katie and Arden to be able to experience the world. But they can’t mortgage their future in order to do so. Taming this spending will help immensely. $0 $500
Groceries and household supplies $400.00 This is a great price for groceries and household items for two people. Katie noted, however, that it’s likely so low due to the next line item: eating out. $400 $0
Eating Out/Entertainment/Alcohol $400.00 Whoa buddy! I am cognizant that Katie and Arden want to enjoy life, but right now they are spending a whopping $1,200 PER MONTH between this category and their individual spending money line items. I think they already know what I’m going to say here: time to reduce these amounts. Not eliminate, but reduce. By a lot. $0 $400
Katie’s Spending Money $400.00 Same notes as above. I don’t think they need to completely do away with this fun money, but $1,200 per month just isn’t tenable at their current salary levels and their dire need to catch up on retirement savings. $0 $400
Arden’s Spending Money $400.00 Same notes as above. I don’t think they need to completely do away with this fun money, but $1,200 per month just isn’t tenable at their current salary levels and their dire need to catch up on retirement savings. $0 $400
Additional Health Insurance $322.00 Fixed expense, no change. $322.00 $0
Extra payments on primary home mortgage $109.00 Cease these extra payments ASAP. I’ve written notes on why below. $0 $109.00
NY 529 College Fund $200.00 Once Katie is finished with her current program, I would put these contributions on hold until their kid(s) are born. $0 $200
Gas for cars $200.00 I am hopeful tha Katie can find a job closer to home. A two-hour roundtrip commute doesn’t sound fun and the gas is certainly expensive. I’ll leave it as is for now, but if Katie can change jobs, this could be greatly reduced. $200 $0
Continuing Education $175.00 Katie’s notes: “Arden is taking night classes to get his electrical license and will be done at the end of 2019; Katie is taking an administration certificate program with one more class. Total 2019 costs will be $2,100.”

I’lll leave this as is for now, but after their programs are finished, this line item can go to $0.

$175.00 $0
Cable/Internet $161.85 Katie’s notes: “Comcast. I’ve looked into dropping our cable and just having internet but the cheapest is $110 a month just for internet and there are no other options in the area.”

I encourage Katie to keep after Comcast to try and finagle a cheaper rate for just internet. I was able to do that when we lived in Cambridge by calling them and (nicely) negotiating a better price. It’s worth a call! If $110 is the best they can do for internet, Katie and Arden should go ahead and drop cable because they’ll save $51.85 a month!

$110 $51.85
Cottage Utilities: Gas/Electric & Cable/Internet (only in summer) $148.08 Fixed expense, no change. $148.08 $0
Gifts $125.00 Katie’s notes, “I shop for Christmas ($1,000 total) year round and birthdays and weddings as needed. Trying to switch to homemade as much as possible.”

Katie’s inclination to switch to homemade is spot on. While $1,500 per year for gifts isn’t astronomical, it’s more than they can afford right now, especially as they consider increasing their 403b contributions and living on Arden’s base salary alone. I have a number of posts on how to give thoughtful, frugal gifts that might help:

$25 $100
Car Insurance $113.29 This isn’t awful, but I’d advise Katie to shop around and see if a better rate might be available. Since they have older cars, it’s possible they could find a cheaper deal. $113.29 $0
Katie’s mom’s electric bill $108.00 Katie’s notes, “My mom pays for my cell phone and I pay for her electric, which was $1,295 for the year of 2018.”

Time for a new cell phone plan! Katie said she has an iPhone on AT&T and so she should look for an MVNO (that’s a wireless reseller) who offers AT&T service. It’s totally possible to port a number out of AT&T (as long as you’re not under contract). I did this a few years ago with my iPhone and am now paying $19.99 per month through BOOM Mobile.

Katie should get her mom onto this cheaper plan as well. No reason to be paying so much for cell service every month! A few other popular MVNOs are: Ting, Mint, and Republic Wireless.

I advise Katie to stop the electric bil/phone bill trade off, unless there are extenuating circumstances and Katie wants to help her mom out by covering this bill for her. The new amount I’ve listed would be for one cell phone on a cheaper MVNO plan.

$20 $88
Extra payments on rental cottage  mortgage $100.00 Cease these extra payments ASAP. I’ve written notes on why below. $0 $100
Medical Expenses $100.00 Fixed expense, no change. $100.00 $0
Donations/Volunteering $100.00 This might be an area where Katie and Arden could consider contributing some of their weekly spending money. Or not. Just throwing out different ideas. $0.00 $100
Utilities: Electricity for primary residence $99.08 This seems really high, especially considering they have solar. I’m wondering what’s behind this? I encourage Katie and Arden to do an energy audit to try and figure out where all of this expense is coming from. I’ll leave it as is, but I recommend getting an energy use monitor to try and figure out the root cause of this bill. $99.08 $0
Utilities: Gas for primary residence $89.92 Fixed expense, no change. $89.92 $0
Medical Deductible (Arden) $83.00 Fixed expense, no change. $83 $0
HOA Fees (105 + 65) Excise taxes ( A-$38.50, K- $60, boat- $15) Beach sticker ($45) Water ($100), Boat insurance ($246.00), Annual vet bill for cat ($100), Zander identity theft insurance ($145) $77.00 I’m not sure that the identity theft insurance is worth it. I’m not an expert on this, but seems like something that could be eliminated. $65 $12
Arden’s LTD $41.00 I think longterm disability insurance is a great idea given the physical nature of Arden’s job. I commend them for having this! $41 $0
Arden’s Life Insurance $33.00 Fixed expense, no change. $33 $0
Amazon Prime $5.99 Katie’s note, “I feel like we should cancel this and maybe spend less money on Amazon in general.”

This isn’t a huge line item, but if Katie thinks it might help them save more to not have the temptation of Amazon Prime, then I’d suggest trying an experiment. Get rid of Prime and keep track of shipping costs and figure out where the better deal is.

$0 $5.99
Bank of America monthly fee for an extra account $4.95 I highly recommend Katie and Arden find a different bank. There are plenty of banks that offer multiple checking/savings accounts with no fees. Don’t pay fees on something like this! I happen to use Fidelity and I have multiple accounts, which I’m not charged for. There are lot of other banks that offer this as well. $0 $4.95
Cell Phones (two) $0.00 See my notes above under “Katie’s Mom’s Electric Bill.” $0 $0
Current Monthly Subtotal: $8,367.80 Proposed New Monthly Subtotal: $5,681.01 $2,687
Current Annual Total: $101,613.60 Proposed New Annual Total: $68,172.12 $32,244.00

This outlines some pretty dramatic cuts to their spending, but, it does get their monthly expenses down to a level that would be manageable on Arden’s base salary alone, which is outlined in the next spreadsheet:

Household Income Without Katie’s Salary

Item Amount Notes
Arden’s base net income – NOT including bonuses $2,800.00 Annual Salary:  $54,130.00. The $4,510 = total net including bonuses. I averaged in his 2x yearly bonuses, but weekly we receive much less. and it’s variable based on the week. Average $700 weekly take home so it’s usually only $2,800.00 monthly. A concern I have is that much of our income comes in at various points during the year and so we have a much smaller amount to work with in our regular weekly/monthly budget. Also, the bonuses are subject to change which could possibly reduce Arden’s income by about $20k, which is always a consideration.
Katie’s income – net $0.00 In this scenario, Katie is no longer working.
Cottage Income (gross; mortgage included under “Monthly Expenses”) $2,705.00 We made $32,457.13 in 2018. We only make a profit during the summer. Winter rental only covers the mortgage. We have historically used the extra income to pay for large purchases/renovations, but not sure where to put this money in the future once we are done renovating. NET profit for 2018 was around $14k.
Tax Return $417.00 Arden pays $18,729.59 yearly in taxes (this is so high because about a third of his yearly income is from profit sharing/bonuses). Katie pays $6516.72 yearly in taxes. Variable but we generally get about $5k back each year which we have historically used to pay down CC debt. I’m thinking about using the tax return to pay for a yearly vacation… or should we adjust our taxes to get more in our checks?
SREC credits from solar panels $166.00 We receive quarterly payments and will for 10 years. It averages to $500 a quarter ($2,000 a year)
Monthly Subtotal: $6,088.00 Again, this varies greatly by month in light of Arden’s bonuses and the fact that the cottage only generates a profit in the summer months (it breaks even in winter).

The above illustrates Katie and Arden’s net monthly income on Arden’s base salary alone (without factoring in his bonuses). The reason I eliminated the bonuses for this exercise is for clarity. Kate and Arden need to be able to live on his base salary alone should those bonuses be eliminated due to a financial downturn of the broader economy, a financial downturn at his company, new management at his company, a change in bonus structures, etc. To be safe, and to ensure they can swing this, I want Katie and Arden to project as conservatively as possible. Then, they can be super duper excited when Arden receives a bonus, as opposed to facing a crisis if he doesn’t.

If Katie and Arden decided to make all of the scenario #2 reductions in their spending, their monthly expenses would total $5,681.01. Their income minus Katie’s salary would be $6,088.00, which means they’d have $406.99 leftover every month for emergency fund savings. Unfortunately, what this budget doesn’t include are retirement savings, which is a bit of a problem. However, there’s a solution! Arden’s bonuses could all be put towards his 403b account. Might not sound like an exciting way to use a bonus, but, it would mean that Katie could stop working and their finances would be in decent shape.

It’s also likely they’d pay less in taxes if Katie quit her job, but then on the other hand, their health insurance premiums might be higher. And then there’s the potential cost of children.

Renovations And Arden’s Art Studio

Katie and Arden’s gorgeous home

One of the largest line items in Katie and Arden’s budget is for renovations. I know that Arden would like to build an art studio on their property, but at $20k, that would put a serious damper on both their retirement savings and the ability for Katie to stop working.

But I love the idea of Arden making art! I wonder if there’s a way for Arden to create art without a dedicated studio? If there’s a halfway solution that he could employ–the basement, the garage, a friend’s house?–while he develops a business plan, perhaps he could then cash flow the building of a studio through sales of his art. I’d be nervous about such a major expenditure without a clear revenue plan attached to it.

Another consideration here is their boat. Both a boat and an art studio are luxuries and so I wonder if there might be a reckoning here over which is more important. Perhaps not and perhaps the answer is that both are important, but I just wanted to throw that out there for consideration.

Katie’s Question #4: New-to-us Cars?

I am giving Katie and Arden a standing ovation for their excellent car-related decisions. Owning two reliable, paid-off, older cars is FABULOUS. They have no car payment, which frees their money up for so many other things!!!!

Katie and Arden

Also, I’m thrilled that they buy used cars!!! Buying a new car is a horrendous idea and buying a car you can’t afford is a similarly horrendous idea (with the caveat that sometimes a person must have a car in order to get to work and doesn’t have the liquidity to buy in cash). But if you DO have the liquidity–or the option to WAIT and save up–you will put yourself miles ahead financially.

All that to say, they’ve done an excellent job in the car department thus far and their 2008 Toyota Matrix (with 90k miles) and 2011 Honda Accord (with 150k miles) are just getting broken in. Come on, guys, these things are barely driven ;)!!! Mere babies. My husband and I have a 2010 Toyota Tundra (with 140k miles) and a 2010 Toyota Prius (with 129k miles) and we have zero plans to replace either of these cars anytime soon. Seriously, there is no need to replace a car every few years!!! I do recommend that Katie and Arden create a savings account of cash (more on that below), but I don’t think that buying a car should be at the top of their list of ways to use that money.

Here’s more on why buying (and keeping) used cars is such a great idea:

Katie’s Question #5: Paying Off The Mortgages Early?

As I noted in the above spreadsheets, I personally wouldn’t prioritize paying off their two mortgages at accelerated rates primarily because they’re so behind on retirement savings. In my opinion, all of their extra money should be funneled into their 403bs. This debate is as old as the hills and people fall into one camp or another, but for what it’s worth, here are my thoughts:

  • A paid-off house is a wonderful thing, but you can’t use a paid-off house to buy groceries or pay for health insurance if you’ve lost your a job (you might be able to get a Home Equity Line Of Credit, but that’s not a guarantee and certainly not if you’ve lost your jobs). A paid-off house is an illiquid asset (unless you’re able to sell it quickly, which is an unknown).
  • There are opportunity costs to paying off a mortgage. Namely, you’re missing out on the potential investment returns you’d enjoy if your money was instead invested in the stock market–specifically in 403bs in Katie and Arden’s case. Mr. FW and I choose to hold mortgages on both our primary residence and our rental property because, mathematically, our money is better deployed in the stock market thanks to the average annual rate of return (7%) that you can expect after many decades of remaining invested in low-fee index funds. Essentially, money is better leveraged in the stock market than in a paid-off house.
  • If you have a low fixed interest rate mortgage, then from a mathematical standpoint, I wouldn’t pay it off early. I view holding a mortgage–and having money properly invested in diversified assets (aka low-fee index funds)–to be a much less risky decision.
  • A mortgage is an excellent hedge against inflation. Inflation is when money becomes less valuable and the neat thing about a mortgage is that it’s denominated in the dollars you originally paid for the house and so, over time, as inflation increases (which generally happens), the money you’re using to pay off your mortgage is “cheaper.” Essentially, it’s not bad to hold a mortgage and it’s actually a fine component of a diversified portfolio of assets. Paying off your mortgage to the detriment of investing is a lot like putting all of your eggs in one basket.
  • It’s not that it’s a bad thing to pay off a house–it’s just that it comes at the expense of other opportunities to grow wealth. Many of us who are early retired/financially independent choose to hold mortgages–even though we could afford to pay them off tomorrow–for the above reasons. Bottom line: financial independence can happen with a mortgage; but it absolutely cannot happen without cash on hand.

I want to make a note about the 529 for their future children as well. I’ll tell them what I tell everyone: you can take out loans to pay for college, but you cannot take out loans to fund your retirement. It’s very much a “put your own oxygen mask on first” type of situation. Parents need to ensure their own retirement is solid before starting to save for their kids’ higher education. If Katie and Arden have more discretionary money in the future, setting up 529s or other savings vehicles for their future kids could be wise. 529s can be a good idea as contributions are sometimes tax advantaged (you don’t get a federal tax deduction, just a state tax deduction in some states), but this is really dependent upon your income tax rate and the laws governing your state. When the time comes, Katie and Arden should certainly do more research into 529s and decide if that might be right for them.

Overall Asset Allocation

I’ve dug into a lot of specifics thus far and I want to close with a broader view of Katie and Arden’s finances. We’ve already noted that re-starting 403b contributions should be a top goal for them. Equally important is to build up an emergency fund.

Build an Emergency Fund

Katie and Arden

Without an emergency fund to handle the unforeseen–but entirely predictable–“emergencies” of life, such as a car breakdown, a roof repair, or a job loss, you’re at constant risk of sliding even further into debt. An emergency fund serves as your buffer against financial catastrophe and is a mandatory part of everyone’s finances. Yes, everyone!

An emergency fund is typically three to six months’ worth of your expenses held in an easily accessible checking or savings account. At their current rate of spending, that would be $25,403 to $50,806.80. However, if Katie and Arden are able to decrease their monthly spending through one of the scenarios I projected above, they can save up a smaller  emergency fund. The less you spend, the less you need to save.

Once they have this emergency fund built up, they’ll need to keep it that way. It’s not to be spent on birthdays or Christmas or dinners out. It’s there in case of a true financial emergency and, if utilized, should be replenished with the next paycheck.

Obliterate Debt

Katie and Arden have two piddly debts hanging around their necks and I recommend they wipe them out next month by utilizing some of the savings ideas outlined above. In particular, the $500 in credit card debt at a 18.24% interest rate MUST GO.

No More Credit Cards

Katie noted that they don’t want to have credit card debt ever again and also that credit cards are sometimes tough for them to manage. In light of this, I recommend doing away with using credit cards entirely. The easiest way to avoid credit card debt is to not have any credit cards

A few other notes:

  • If Katie and Arden haven’t met with an attorney to create a will and estate plan, they should do so soon. Mr. FW and I did this last year and it delivers great peace of mind to know that your affairs are sorted.
  • I’d advise Katie to stop pursuing degrees and certificate programs. She is imminently qualified and I think she and Arden can better use that money elsewhere.
  • An idea I had to help reduce expenses while traveling: house swapping! I know next to nothing about this, but it occurs to me that perhaps they could swap houses and save while venturing to exotic locations.
  • Once they have a solid emergency fund established and have set up their 403b contributions, Katie and Arden might consider purchasing another rental property that Arden can fix up. Katie noted that they might like to do this in the future and, since they have a proven track record as landlords and Arden is extremely handy, this might be a good investment for them.
  • Another option would be to put extra money into taxable investments (i.e. low-fee index funds), but if they decide to do this, they’ve got to commit to NOT liquidating it and spending it. One of the ways to ensure longterm financial success is to orient your investments to play to your strengths and not prey on your weaknesses.

Summary:

All in all, Katie and Arden are in wonderful shape. They have multiple options available to them and they have the salaries to make a number of different lifestyle scenarios pan out. Here’s my quick summary of what I would do if I were them:

  1. Begin 403b contributions
  2. Reduce monthly expenses
  3. Test out living on Arden’s base salary to explore the viability of Katie quitting her job
  4. Build up an emergency fund
  5. Consider another rental property or taxable investments for added diversification down the road
  6. Enjoy life!

Ok Frugalwoods nation, what advice would you give to Katie? 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 (mrs@frugalwoods.com) your brief story and we’ll talk.

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152 Responses

  1. Caroline Bowman says:

    These two are in such great financial shape already, despite very serious possible life challenges ahead, I’m very impressed! It might be a good idea for Katie, while she is still working and not imminently having a baby, to try and line up a role that is more part-time in nature, so that as and when she takes a break from her current role (and honestly, given her health specifically and having a baby generally, this would be ideal if it can at all be a possibility, not forever, but for a while, it’s huge and life-changing, this baby business!), she can later go back into a meaningful role that is both closer to home and less-than-full-time in nature. It sounds like Katie finds her career personally fulfilling and there must be ways of parlaying all her experience and additional academic study into something that will better suit her a year or two down the road. Essentially, there can be a middle ground between ”Katie never works again and they have no second income” and ”Katie commutes 2 hours and puts her baby into childcare the day after it is born” (I might be exaggerating slightly!). It’s super-easy to say of course, but if they can work towards that, that might help with ”having it all” (as in, the ”all” that they want).

    The discretionary money reflects 2 fun-loving adults who are not yet bogged down with kid expenses, so I’m inclined to let that go slightly… of course, I’m not US-based so I’m not sure whether 400 per month each is a lot or not, but even reducing it by a third each would help I think.

    • Katie says:

      Hi Caroline,
      Thank you for your thoughtful response. I think a part-time position would be a great fit for me after kids and pre kindergarden. I think if we are able to lower our expenses as suggested, this would provide some income as well as TIME- which is most important when raising children. Especially if I could find a part time position that provided great healthcare, as my husbands benefits are dismal! I do enjoy my work and always planned on being a working mom. Now that I am closer to that, and more aware of my health, I feel like a part time position would be more fulfilling.

      Thank you,
      Katie

  2. Brittany says:

    First off- love how you shared this so openly and I’m rooting for you!

    I don’t have direct input on your questions, but one thing you said stood out to me — “I have just one class left but I love school and so I’m sure I’ll continue in some fashion.”

    I caught this because I can SOOOOOOOOO relate. I’m a bit older than you and went down that path, so here is my cautionary tale. I’m also in education, and I also got a masters in administration but didn’t particularly want to work in administration. I had a lot of ideas about how I wanted to impact education, and the only way I knew to advance professionally was to keep getting certificates and degrees. So… I got a PhD. Honestly, even at the time, I knew getting a PhD is almost never a good decision financially. But I loved school, and so I thought that in the scheme of things it was a minor financial disruption in order to do what I loved. I failed to appreciate exactly HOW BAD of a decision it is until it was too late.

    Luckily, my degree was paid for by a fellowship and I have no student loan debt (NEVER go into debt for a graduate degree). I thought this meant the financial impact was minor- the true financial impact didn’t hit me until I had my daughter during the program. Then it hit me again when I approached the end of my program and started to look for jobs. While I didn’t “pay” for my degree, the difference between my fellowship stipend and the amount I would have been making had I stayed in the workforce means that my degree cost me APPROXIMATELY 250,000 IN LOST WAGES. I do like school, but if I think of that as “discretionary” money to do something I “enjoy” … suffice it to say, I can think of waaaay more enjoyable things to do with 250,000. Plus, I failed to account for how four years out of the workforce would derail my retirement savings.

    It is hard to explain how the culture of PhD-level academia affects people until you’re living it and affected by it, but nearly everyone in my program (and most people I know in other PhD programs) ended up taking very low-wage work as adjunct instructors or researchers on professors grants, because PhD programs are like cults that don’t let you leave (only slightly kidding here – check out the blog the professor is in). I’m proud that I broke free and transitioned back to “regular” work with a livable wage and retirement benefits, but it was very, very hard to find a job that paid even what I made before I started the program. Employers aren’t particularly impressed by my degree. If anything it makes them cautious that they’ll have to pay me too much money (little do they know what a small stipend I willingly accepted). People with actual work experience get hired before me. Luckily, I did (and I can not understate how challenging this was) find a job with slightly better pay than I had before I started the program, but it is nowhere near enough to make back the lost wages.

    Like I said, I thought I was sacrificing a bit to do what I loved, which is sort of true, but my priorities changed massively after I had my baby. After that, I realized that the absolute most important thing, more than doing what I enjoy, is being able to provide a baseline level of financial security for my family. I care about my work, but I did meaningful work without the degree. And I do enjoy school, but I can take a free class on coursera, or read books from the library, or take a cheap community ed class to get the “fun” of school without sacrificing my family’s financial well-being.

    The ONLY way more school would be positive is if you get into the job you want (don’t do it beforehand or you’ll look like a very expensive hire), your employer pays for it, you are able to do it while you’re working so you don’t disrupt your career growth and retirement savings, and it directly moves you up the salary ladder.

    Anyways, I’m probably reaching WAY beyond what you meant and I’m 100% projecting myself onto you here (ha), so if that isn’t something you’re considering then disregard everything I’ve said! Just wanted to share because I recognized myself in that line and I can not agree enough with Mrs FW’s recommendation “I’d advise Katie to stop pursuing degrees and certificate programs. She is imminently qualified and I think she and Arden can better use that money elsewhere.” You’re super-qualified, you put in the hard work, now is the time to use those qualifications to meet your financial goals :).

    • Katie says:

      Hi Brittany,
      Thank you for your response! While I have no aspirations of a PhD, my family wouldn’t be surprised if I told them I had decided to get one! So I appreciate your advice to stay away!!!

      Best,
      Katie

    • Melanie says:

      This advice is spot on. I have toyed with the idea of a PhD, also in education, but the opportunity costs are simply too high. Academia is saturated and not lucrative. While it would be wonderful to have a greater impact, I don’t want that to come at the expense of my family’s happiness.

      Katie, this is not to say “don’t do it,” but rather, be VERY VERY thoughtful if you do.

    • Whitney says:

      That is such useful advice! Very interesting and helpful!

    • Shannon says:

      Yes, yes, 100% yes! When I was figuring out what to do after undergrad, I faced the exact same dilemma. I’m one of those weird people that likes school, so I thought for sure I’d go on and do some more (I considered PhD programs, MD programs, even PhD/MD programs). Since I was in a STEM field, I would have even gotten school paid for as well as a (minimal) stipend for any of the PhD programs, so I wouldn’t have gone into debt. My future husband and I talked extensively about this, and he eventually asked the question that stopped me in my tracks–what are you going to do with that degree? The truth was, I didn’t really want to be a professor or a doctor or even really a researcher (I like science, but I would have had to specialize way too much for any of those fields). I was pursuing them because I thought school would be fun and it seemed like the logical next step.

      In the end, I went into industry. A lot of my friends did not. Six years later, many of them are finishing up their PhD’s, and a lot of them are now realizing they don’t want to go tenure track (or that the area is too saturated)/don’t really know how to use that degree. I’ve had a couple ask about coming to work where I do, and while I’m sure their starting salary will be higher than mine was because of the degree, I doubt it will be higher than mine is after six years in my field (and they probably also don’t have the savings that I’ve managed to build up in those six years).

      So while graduate programs are definitely the answer for some people, I truly believe you should only go into them if you know what you want to do with the degree once you get it. It may be free/cheap at first glance, but it can really set you back financially if you’re not careful.

      • Shannon says:

        I forgot to add–I eventually realized that it wasn’t school I liked so much as learning new things. Turns out you can still do that even while continuing to work your day job and without paying money :). For example, I’m learning French now through a combination of Dueling and Pimsleur from the library (and plan to do a long weekend in Quebec at some point to get some real world immersion since it’s within driving distance for me). Or maybe Arden could teach you some of his home improvement skills if that’s where your interests lie. I’ve also taught myself various programming languages and a lot of financial skills through library books.

      • Shannon says:

        I forgot to add–I eventually realized it wasn’t school that I liked as much as learning new things. Turns out you don’t need school or, indeed, anything you pay for to do this! For example, I’m currently learning French with Pimsleur disks (from the library, of course!) and Duolingo. I’m also hoping to do a long weekend at Quebec some time in the future (much closer than France so I can actually drive which definitely makes it more frugal). Plus this gives me a good excuse for a vacation!

        Maybe Arden can teach you some of his building skills if that’s where your interests lie. Or there are lots of good resources at the library for learning more about finances/investing which I’ve always enjoyed. I’ve also taught myself programming through online self-study courses. Basically, there are lots of possibilities out there–you strike me as a very smart, capable woman so I’m sure you can pick up anything you set your mind to.

    • Kristine says:

      Your experience is fascinating. One can actually look up professor salaries for public universities online. I actually make way more money than any of my college professors, so it’s not a surprise that it was so difficult to transition. And yeah, the stipends are tiny. I’m sharing this with a friend, for sure.

      • Brittany says:

        That is such a good point. I didn’t realize you could look up salaries until after I’d started my program, but in education, with the exception of the top-ranked universities, public school teachers nearly always make more than education professors.

    • brooklynexpat says:

      Yup. I got a PhD in Victorian Literature. Of my many friends and fellow Victorianists, only 3 have jobs as tenure track professors, and this is considered really good job placement. The rest are adjuncts, higher ed administrators, or have left academia. I finished almost three years ago and have been slowly working my way into high school teaching through temporary leave replacement gigs– which is difficult to do with three kids including an infant. I’m optimistic that I will find something permanent eventually, but the degree is far from a career-booster (employers question if you’re really interested in taking a “lower status” job and it’s hard to convince them otherwise).

      That said, I don’t regret the degree. I learned an immense amount, did work I’m proud of, and grew and developed as a writer and a teacher. A graduate school schedule is also ideal for having kids when you want to be home but still maintain intellectual/professional commitments. And I also was funded for my MA or PhD– if I’d taken on any debt I would now feel very differently. Best decision I ever made was turning down the Ivy League MA (to the tune of 100k) for the lower-tier fully funded program.

    • Buffalo Chip -tamer of the urban wilds says:

      Spot on comment, Brittany! Many years ago, I had the idea that I wanted to go to law school. But I did the math. I figured a law school would cost about 100K (back then) and I would lose about $150K in earnings from a secure job. And in the end my starting salary as an attorney would be, oh, about what I was already earning. Needless to say I skipped it. But that could’ve been a quarter million dollar mistake.

      Plain truth is higher education is often a very poor deal.

  3. Arden and Katie have an excellent household income and are in a solid cash flow situation, which should make aligning their finances with their goals very attainable. I agree wholeheartedly with many of Mrs. FW’s primary suggestions, particularly the goal of either maxing out the 403b’s or of ultimately living on just Arden’s income.

    The secret sauce behind maxing out your dual 403b accounts is the income tax savings. By my count, your household’s taxable income is something like $131,297.36, but that’s just an approximation since the annual salary numbers provided were net, not gross. After subtracting the $24,400 standard deduction for married couples filing jointly, that puts your current taxable income at $106,897.36. Using the 2019 Federal Income Tax brackets, that puts you in the 22% bracket and would result in a total Federal income tax of $15,234.08/year.

    That said, contributing $19,000 each to your respective 403b’s would lower your current taxable income by $38,000 from $131,297.36 to just $93,297.36. After subtracting the $24,400 standard deduction for married filing jointly, you’re looking at a total taxable income of just $68,897.36. That would put you in the 12% tax bracket and would result in a total Federal income tax of just $7,879.68/year, annual savings of $7,354.40!

    This doesn’t even factor in the savings on your state income tax, which is could be another several thousand dollars.

    This hidden $7,354.40 in reclaimed taxes could be used to fund lifestyle goals like Arden’s art studio or your love of travel. You could also use it to boost your emergency fund savings, pre-pay your mortgage to save on interest, or invest. Last but not least, you could always use it to restore some of the discretionary spending reductions that would otherwise be necessary in Mrs. FW’s table for the Max Out scenario above.

    Whether or not you pursue this route, I would highly recommend calculating your likely tax burden and adjusting your withholding accordingly to ideally zero out your tax return at the end of the year. This is doable, as we are on our 4th year of receiving small refunds of less than $20. Doing this will give you more full control of your monthly budget cash flow and your overall financial situation.

    You may also want to consider opening a high-yield online savings account to be used for the purpose of setting up a dedicated savings account or “sinking fund” to fund your annual travels. I use and highly recommend Ally Bank, which currently offers a 2.20% interest rate with zero fees of any kind. This would enable you to potentially earn 2.20% interest annually on the money you are otherwise loaning to the U.S. government by overpaying your annual taxes. This may enable you to nix that pesky $5/month fee from Bank of America, to boot.

    The $186/month or $2,236/year PMI (technically known as MIP) you are paying on your FHA primary mortgage will total $60,372 over the life of the loan. If your equity is >20% or close to it, I would recommend shopping around to see what refinancing options and interest rates are available to you. You may be able to find conventional loans at or near your current interest rate of 3.75% which would represent a significant savings once you’ve made your money back on the refinancing cost.

    With interest rates rising over the near-term, the sooner you explore your options the better. If you can find a decent interest rate, you may want to consider using any savings you identify as a result of this case study into paying down the mortgage quickly to hit that 20% number and refinancing before pursuing other savings goals.

    In terms of expense reductions, there are multiple quality cell phone carriers available with solid plans at sub-$20/month price points as Mrs. FW mentioned. Pursuing this would represent an easy savings of nearly $1,000/year from your current plan.

    And while I love Zander as an insurance provider, the $145/year in identify fraud protection insurance is likely unnecessary. The three major credit reporting agencies now all offer complimentary identify fraud protection policies of ~$30–$50K in addition to free credit report locking services, which I highly recommend taking advantage of.

    Your car situation is a great one — two vehicles with excellent fuel economy, reliability, and plenty of life left. Our primary family vehicle is a 2003 Pontiac Vibe, the twin of the Toyota Matrix. We bought it with 90,000 miles and have driven it all over the country while fulfilling our love of domestic travel. We’re now at 165,000 miles and have had to perform no repairs other than standard maintenance like tires and brakes. I agree with Mrs. FW here — no immediate upgrades needed, although a healthy emergency fund for protection against maintenance and repairs is a good idea, just in case.

    You guys are in pretty good shape and your income affords you plenty of opportunities to put some serious money away for your future quickly while still maintaining the lifestyle that his important to you. I wish you well!

  4. Daisy says:

    I am going to be honest and admit that I haven’t read through the entire post, particularly the expense breakdown.

    I did want to jump in and add my thoughts about living with chronic health issues. I cannot echo Ms. FWs advice to plan for the possibility of living on one salary enough. Prior to having kids my husband and I lived off his salary while banking mine for a future house purchase. This ended being one of the best things we ever did. We saved a lot, but also learned to live well below our means. A few years later I gave birth to a child with profound disabilities and complex health problems. I am now in my fifties and have spent the better part of the last twenty years at home caring for my son because that is what life demanded. In the end the choice about working or not working wasn’t really mine to make- at least not if I wanted what was best for my son’s health. Learning to live on one income early on made that transition relatively seamless.

    The upshot is that for all of us the possibility of life throwing curveballs exists. If one is already living with a chronic health issue then the possibility of health changes that interfere with employment is exists as some level. Sometimes life makes choices on our behalf that we wouldn’t have made ourselves. It had never been my plan to be a stay at home mom caring for a medically fragile child, but circumstances that made that decision for me. Living frugally before the health care storm hit us made living through a brutally stressful time less difficult. Intentionally living below our means also has allowed us to continue to thrive for the last 20 years as we journeyed (on one income) with our now 20-year old complex-care son.

    I am so very glad your health is stable now and my wish is that will remain so for decades. Ideally you will be able to realize all your dreams – children, cottages, travel, meaningful work. I would, however, plan your finances with the wiggle room to leave your work if your health status shifts. It might be the greatest gift you give both yourself, but also your family. What you don’t want is the added burden of financial stress while also coping with a downturn in your health.

    All the best and thanks for sharing your story.

    • Crew Dog says:

      “I would, however, plan your finances with the wiggle room to leave your work if your health status shifts. It might be the greatest gift you give both yourself, but also your family. What you don’t want is the added burden of financial stress while also coping with a downturn in your health.”

      Ditto. I was in excellent health – until I wasn’t. I currently live with one diagnosed chronic illness and two more probable but undiagnosed chronic illnesses. This has forced me to withdraw from a PhD program I had nearly finished (ABD), which means all the time I spent preparing for my post-PhD career was a waste of time, energy, and money.

      Not to be a downer, but what I did not hear Katie mention is any of the following possibilities:
      a) Pregnancy could temporarily or permanently degrade her health;
      b) The child could have health issues;
      c) If Katie were to die young (God forbid), who would raise their child(ren), and how would Arden afford that?

      In order to avoid financial catastrophe, those are scenarios which should be considered. Also, in any of those scenarios, Arden and the child(ren) would probably lose Katie’s health benefits if Katie is unable to continue to work.

      Yes, it is great to enjoy eating out, traveling, etc. while one’s health still permits it – I am very grateful for the things I did when I still could. But I am even more grateful that my spouse and I made financial plans that secured our future, so that we are FIRE now and my inability to complete my degree and resume working is not affecting us financially.

      I would encourage Katie & Arden to plan for a worst-case scenario, so that they are financially prepared should it happen. The question is whether living on one income (and not maxing out retirement savings) or living a long life without sufficient savings is the more probable worst case. Or, another way to look at it would be to evaluate which scenario makes Katie & Arden most uncomfortable, and make the decision of which of Mrs. Frugalwoods’ spending plans to follow accordingly. Or consider a hybrid plan: living on Aiden’s salary, but maxing out only Aiden’s retirement account (because he gets matching funds) and then putting any “extra” monies into Katie’s retirement as able.

      • Elaine L. says:

        My life motto has been to prepare for the worst and plan for the best. I agree Katie and Aiden are doing great but should put aside for emergency and not spend so much. I planned young (because I saw my Dad miss out on his retirement goal due to illness) to be able to retire early to a vacation destination and one of my plans was to have a mortgage free home by the time I wanted to retire. I thought and still do think this is the key to a financially stable retirement.
        I also had a child with a chronic illness which certainly threw a kink into my life plans. Other things in life also happen that we don’t anticipate or plan for (such as divorce) which certainly affects one’s finances, and not in a good way.
        These types of life circumstances are possibilities in all of our lives. Planning is essential in being able to withstand hardships but optimism and enjoyment of life needs to be balanced into the equation, as well.
        Katie and Aiden seem to have a good handle on balancing life’s possibilities and with some adjustments for saving, should have a very happy life. Wishing them all the best and praying for continued good health and their plans for expanding their family soon.

  5. Brandy says:

    I have an FHA loan and was able to have it appraised at my expense which took off the PMI. Perhaps Katie can call her lender to see if this is an option.

  6. Roger says:

    As usual, Mrs. Frugalwoods advice is spot on. I have a couple of specific suggestions related to her advice:

    1) If you have good T-Mobile coverage in your area, then consider Mint Mobile. I’m paying $15 per month for 3 GB of data and unlimited Text and Calling. I have to prepay for a year ($180) to get this price.

    2) I recently used a trick to save on cable. The cable bill is probably in one of your names (Katie for example). The next time you go on vacation, Katie calls and cancels the service. When you get back from vacation, Arden can call and sign up as a new customer with new customer pricing. It helps if you own all your own cable equipment when you do this to avoid the hassle of returning and getting equipment. I only get internet and I have my own cable modem so it’s easy for me.

    Good luck!

    • Katie says:

      Hi Roger,
      Just went down and took your advice regarding cable/internet! Now our bill will be $94 and got to keep a similar package but with more basic cable. I also went out and bought a modem so that in itself is going to save us $13 a month.

      Thanks!
      Katie

  7. Deb says:

    In Reading their case study it does seem like they have alot going on for their lives to be stress free, especially with her illness. Trying not to remain focused on illness is difficult, I was a full-time caregiver to my Mom with cancer, she passed in 2013. I don’t want to sound huldrum on this post either, but your time together is what’s important, life is very short. I would sit down with the wonderful list you’ve made here and decide which is best to let go of that’s draining you all financially. I have Master’s as well, unfortunately for me, I have not found employment since being a full-time caregiver to my Mom. At the same time, I was laid off of employment during my Mom’s illness. My spouse had to take a job overseas, we were apart for a year and a half. We’re retired military, so that’s something we became used to. In 2011, my spouse found full-time work back here in the U S., But I had been laid off. We had to drastically budget, but we didn’t get to much over our heads together with financial burdens, so I was able to not work and take care of my Mom. Illness does provide a sense of live it up momento, but it also places things in perspective of what’s more important, time. I could’ve kept going to get my PhD, I still think about it, but then I think time with my spouse is wayyyy more important than that PhD, and us retiring for the second time in our fifties (retired military) is so much better than holding onto a monetary means causing more stress. It’s a tough choice, but I would take that list and say “ok, this can go” the less you have, the less stress. It’s a drastic measure, and can be scary, but like the polar plunge, just close your eyes and jump in.

    • Katie says:

      Hi Deb,
      I am so sorry about the loss of your mother. I know it was awhile ago but that doesn’t make it any easier and I am glad that you got to spend so much time together, even if it wasn’t in the best of circumstances.

      I think your idea of letting go is a good one and I see many discussions in our future to simplify. I have been reading a lot lately about minimalism and we are naturally heading in that direction.

      I can resist continuing school…I can!

      Best,
      Katie

      • Crew Dog says:

        Katie,

        Another option, once you’re where you want to be financially, is to take fun classes from the local community college or extension program at a local university. They’re usually much cheaper, and can scratch the learning itch. You or Arden could also take classes that might help you start a side hustle.

  8. Mrs. Frugalwoods has some great advice here. I just have to say I’m extra impressed by the income produced by the cottage – that is freaking awesome. Also completely agree with not paying off the mortgages early at this point.

  9. Claire says:

    Wow, you guys are awesome at tracking your expenses! Also, your home is lovely and if I were ever in the Cape would definitely rent one of your AirBNBs.

    In terms of banks, I would recommend Charles Schwab. It doesn’t charge an ATM withdrawal fee, there is no charge for a bank account, and they have really good customer service. I also just set up an emergency fund there (thanks, Mrs. Frugalwoods!).

  10. Emily says:

    I just learned about formal house sitting – essentially pet sitting or watching after another family’s house for free – that’s offered through a program called Trusted House sitters. This may be a good opportunity to vacation in places outside of their immediate friends and family network without having to pay for lodging, and they’d get to snuggle with a pet when they’re missing Panjami!

    On a side note, their house is absolutely stunning!!

    Mrs. FW, thanks for such a thorough post!

  11. Marilyn says:

    I looked up the average life span of a person with cystic fibrosis and it is 37. For women with the condition, it is lower. I am shocked that Katie is trying to have children (plural!) and doing fertility treatments to boot, which are punishing even on healthy women. And, if Katie did conveive, how would she deal with the growing fetus that will fill her rib cage and may interfere with her already compromised breathing? Does Arden fully comprehend what raising a child, or two by himself will mean? How will he work fulltime, do his construction hobby, manage the rental, and take care of an infant or two? How will they deal with Katie’s loss of income if she has to quit her job to raise the children or if she becomes incapacitated? Plus their two mortgages are enormous burdens. OMG, get real, people. Enjoy your life as it is working for now but prepare for the future as well. I wish you the best but, as a cancer patient myself, I wish you would deal with the reality of your situation.

    • Cara says:

      I was thinking the same way. Fertility treatment are not to be taken lightly; perhaps Katie’s body knows best and getting pregnant would be harmful. Why try to override that? If, after taking into consideration all Marilyn brings up, you still feel compelled to have a child, what about adoption, or fostering?

      • Katie says:

        Hi Cara,
        I recommend listening to Matt and Doreen eggcellent adventures to learn more about infertility and people’s experiences. We have definitely considered adoption and fostering and are open to adoption in the future but right now we are trying to have a child through fertility treatments.

        Best,
        Katie

    • julie says:

      Yes, that is the average life span and it is increasing due to new research. There are numerous people who have cystic fibrosis and start families. I would imagine that Katie is working closely with her medical team about any concerns and dealing with the reality of her situation.

      • Katie says:

        Hi Julie,
        Thank you! In particular, there is a drug that should be available next fall that is extremely promising as it is raising lung function on average more than 10%!

    • Katie says:

      Hi Marilyn,
      I hope that you are doing well with your treatments! I deal with the reality of my diagnosis everyday and while I appreciate your concern, I am taken aback …
      I have not asked for advice regarding my reproductive organs only for my finances. While I understand that putting my life out on the internet opens us up to judgement, the internet can sometimes make it easy for people to hide behind the screen and say things that should be perhaps thought and not said. Having children is not something that we are taking lightly, nor should be taken lightly by anyone, and my doctors are in full support! If they did not believe my body was capable, then we would have gone in a different direction. Since your google search was your first exposure to CF, please take my word for it that the experience of someone with this disease is individual and there are wonderful drugs on the horizon that will hopefully allow many to live much longer than before thought. Forgive me if I come off as being a bit sensitive, I’m sure the fertility drugs aren’t helping!
      I’ll think of moving to Florida, as I’ve heard that that is where you go while waiting to die

      • Kristin Kane says:

        Katie, you rock. 🙂

        I was taken aback by this as well, and I am just an innocent reader and am not you or in your situation. Thank you, Julie, for reminding us to leave the medical analysis to the medical professionals.

        Other commenters did a great job of sharing how their personal experiences with illness, continuing education, children, etc. may relate to Katie’s situation and talked about how they handled it or what they wish they had done, rather than telling Katie “I wish you would”. There are much more respectful ways of sharing your thoughts and helping Katie out!

        • Mrs. Frugalwoods says:

          Thank you, Katie, Julie and Kristin for your responses. I’ll reiterate that this is a judgement-free zone and that the goal of Reader Case Studies is to offer constructive, positive advice and feedback. Katie has not asked us for medical opinions and so we will leave those conversations to her and her doctors. Let’s bring compassion, empathy, and support to this conversation; not criticism, judgement, or anger.

      • Diane says:

        Hi Katie,

        Well said! Totally on point and eloquently stated.

        Love the pictures of your stunning home — you and Arden have a real eye for making beautiful spaces. I was wondering if helping other people in similar ways could fulfill the idea of “making art” and and also bringing in a side income.

        All the best to you and your family. <3

      • Rosalie says:

        Katie, this response shows a lot of grace and restraint. This comment was really out of line. Oh and I agree with Diane below — I would love for you to design my space! Your lighting fixtures in particular are really well-chosen and interesting.

    • Elaine L says:

      Marilyn, perhaps you should thoroughly research cf as a disease, and know about the new, available, and future treatments, as well as Katies health status, in particular, before making such harsh and hurtful statements.
      That said, every pregnancy, and every life carries with it risks of illness, accident, and various other tragedies,
      All life ends in death, some sooner than others with no guarantees of length or quality for anyone.
      Also many people with illnesses far outlive the statistics.
      With all of that said if everyone made family planning decisions based on what could go wrong society would behave died out long ago.
      This is my first time on this post and for the most part it’s been very inspiring, informing, and helpful. Sadly, sometimes the worst is brought out in people who can hide behind the anonymity of the internet. I would hope you’re not as mean in person and rethink how your statements come across in the future.

      • Marie says:

        I think we should be kind to Katie, but also to Marilyn. I am an RN and see illness every day, so I see some of her points. That said. Katie carries to best health insurance (not her husband) so she will probably need to work, even part time, to have that. Also, as mentioned before. If they could “trade” their cottage for an overseas home, for two weeks a year, that might help with international travel. Best to you all.

  12. Katie Camel says:

    Katie and Arden, you have the loveliest home! Katie, I love that you’re planning ahead, knowing the unpredictability of CF. If it gives you any hope, I’ve cared for patients much older than you with CF who’ve received lung transplants, so I suggest planning for tomorrow while still living for today. However, living for today doesn’t require spending like there’s no tomorrow in order to enjoy it. 🙂 I think Mrs. FW has given wonderful advice! I agree that you’re spending far too much per month, especially considering that you have credit card debt that you could easily knock out simply by cooking great meals at home and spending less on Amazon. Another suggestion I have relates to your Comcast bill (I too have Comcast – grr!). Do you own or rent your modem/router? If you’re renting, you can find a cheaper alternative by purchasing a combination modem/router that’s Comcast compatible on Amazon for around $70. Just plug in those terms to your search, but make sure it contains BOTH router and modem. I did and it saves me $13/month in rental fees.

    Once the credit card debt is paid off and you’ve reduced your spending, I’d suggest living off your husband’s income and banking those bonuses for a rainy day. This practice run will determine whether or not you can afford to leave your job (my guess is you can) AND it will help you build additional savings.

    Anyway, good luck! I hope you make some great changes to your financial future and have those babies!
    Katie

    • Katie says:

      Hi Katie,
      Thank you very much! Not living and … spending like there is no tomorrow has always been the problem!!! 😉 I think making our financial life work off of my husbands income is a great idea and we are going to start working towards this.

      Working on making babies!

      Best,
      Katie

      • Chris B says:

        Chiming in – as a PhD in the sciences, I can confirm the comments about culture. The real impact is years of lost income/ retirement in exchange for less than stellar ROI in the workforce. I am personally very happy with my choices, but something to be aware of.

        Also I second the compliment on your home. Wow. Please consider selling that amazing wine glass chandelier on Etsy…. (per FW, use a spare room for your workshop …;-)

      • Walnut says:

        Hi Katie,
        One way my husband and I have previously worked toward the one income scenario was to split my direct deposit between our checking and savings account. We’d only direct as much cash to checking as we needed to pay the bills and as we got more creative and efficient with reducing our spending, we’d switch a larger percentage to the savings account. If we fell off the wagon one month it was easy to transfer the cash back to checking, but we’d make it a challenge to see what we could eliminate from our budget to move an extra 5% of my paycheck to savings. It was a fun game for us.

        • Katie says:

          Hi Walnut,
          I like your method! I also just got a visual tracker to start saving up our 6 month emergency fund which I am excited to get going on.

          Thank you for the tip,
          Katie

  13. faithless says:

    Most of your money appears to be going towards luxuries – travel, eating out/entertainment, expensive house decor projects, unnecessary study (i.e. for Katie’s own entertainment, which she isn’t immediately going to use get a pay rise), massages.

    That’s fine if those are your goals, but if you want to save up to be able to not work for childcare/health reasons you need to cut back in some or all of these areas.

    Also, I always thought if you’re having to put travel costs on your credit cards, you can’t afford the holiday!

    Work out what is most important to you both, and prioritise spending/saving for that, cut back on everything else. Are you willing to give up regular entertainment expenses for foreign travel? Or are your wood floors your main want?
    Someone says ‘you can afford anything you want, buy not everything you want’.

    Put all of the excess money into a savings account ready for when you need it, seeing that grow towards your goal of funding your life when you are looking after kids and not working will hopefully be motivating to continue. Maybe have a visual chart of your goal, with colour in segments for each $500 step closer you are getting to your goal.

    Best of luck.

  14. Monica says:

    Great that you are reaching out ! Agree with advise from Mrs. Frugalwoods to STOP paying down mortgage quicker. Your extra money would be so much better used by investing in an index fund (approx 8%) interest, than paying down a debts that are 3-5% interest. Is just MATH! Also, I live just outside of Boston and have two teens and your take home is significantly (35K?) more than mine ever has been! I would follow all of Mrs. Frugalwoods advice and try to catch up with retirement and cut expenses such as eating out so often etc. I am 58 and have just over $1Million in retirement funds. I have always tried to save the maximum allowed into my employers 403b- when my kids were little, I did have to cut back due to absurdly high daycare costs. I was also able to save around $50K for each kid in a 529. Apparently I am naturally frugal. Also- Verizon has prepaid plans that are a pretty good deal. I pay $40 for my line (includes a $5 discount for autopay), and then $30 for additional lines for my kids. All lines have unlimited text and minutes, each line has 3Gb of data. I was using Ting for a while with each kid having 1 Gb of data, but in the end, due to a lot of minutes and data use Tina actually ended up costing more. I like Verizon because I travel a lot and it does have the best coverage.

  15. Denise says:

    I wanted to leave another option for cell phone plans. Since they are already Comcast internet customers, Comcast has Xfinity Mobile, only available to their internet subscribers, which has free texting and calling, and you only pay for data. My husband and I are on it, and if we don’t use any data that month our plan is free. If I do use data (usually because I get lost a couple of times and have to bail myself out with GPS) it’s only $12/gig. It has certainly been sufficient for our needs, but we are living in a big city with tons of hotspots and we rarely need to use data, so it might be different in their area. They are a reseller and it is on the Verizon network. You can also bring your iPhone, provided you unlock it. https://www.xfinity.com/mobile/plan

    Best wishes to you Katie and Arden!

  16. frenchmama says:

    Hi Katie,

    I just wanted to say: you and Arden look so happy together! 🙂 If you focus on things you love to do together for date nights–like eating, yum!– maybe a fun date night change could be to attempt a gourmet/new recipe together at home? Definitely requires more planning and effort, but it’s definitely going to be really memorable (hot tip: keep a backup frozen pizza in the freezer just in case!)

    Personal spending was so hard to reduce in the beginning for me–now, I keep a picture or list of my financial goals in my wallet so that I have to confront that every time I want to spend money. Over time, that’s one small habit that really helped me become more intentional about impulse purchases and grabbing a coffee when I was out. The other habit I’ve developed is to calculate how many hours I have to work (net!) to pay for something I think I really want. Usually, if I figure out the math, the item suddenly becomes a LOT less attractive!

    But really, you’re doing so well to be thinking so far ahead, so kudos to both of you!

    • Katie says:

      Hi Frenchmama!
      Thank you for your response! Date nights cooking at home is a great idea and one we will take to heart and to our stomachs! Good ideas for the psychological aspects of reining in spending!

      Best,
      Katie

  17. Tara says:

    I don’t know much about CF, but I do have an old coworker, a teacher, whose daughter has the disease and she is now a successful pediatric doctor in neonatal medicine at a hospital in Long Island. I know there have been strides in the disease so it’s crazy that people try to be armchair doctors and I apologize for the negative comments on this post judging you.

    Child rearing is EXTREMELY personal and really NO ONE’s business except the couples involved, (and outside of a pregnant individual getting high/drunk all the time, there is no reason for anyone to get involved in a woman’s pregnancy!). My mom’s friend’s daughter has serious Crohn’s Disease and having kid as someone with Crohn’s can be fraught with health issues, but she had four and is a great parent. The same can be said about women with Type 1 diabetes, but there are many moms out there who have kids by choice knowing full well the complications that can await. Anyone who is not the mom-to-be (or second parent if present) has no right to question a person’s desire to have kids (or lack of desire to have kids for that matter).

    I don’t have much to add in terms of budgeting, but I would agree with Liz on her suggestions about getting spending under control so you can prepare for a time in which your income may have to go away. I also GREATLY SECOND the idea of researching your husband’s health insurance. I currently work in a job where only I get coverage, so if my husband were to lose his job, we would be SOL until he got a job that covered him and our son. Health insurance, especially one that works for your level of health coverage needed, is PRECIOUS in our American world so I can’t stress that enough. More than likely, you’ve already got that covered if you’re thinking that way so ignore that if you are!

    You two are both lucky in that you both seem to have a high level of income at such a young age, plus you already own two homes! That’s bananas and awesome! If you can bring that spending down as Liz outlines, it can ensure you have tons of money saved up and are prepared for a time when you may have to leave your own employment.

    • Katie says:

      Hi Tara,
      Thank you for your thoughtful response! We had looked at my husbands insurance previously and found it extremely lacking which is why we are on mine but this stage of our lives is making us have a lot of discussion around getting to a place where insurance coverage can be under Arden as my employment is more vulnerable due to my health and making babies. It would greatly reduce my stress level if I didn’t need to consider health coverage when making employment decisions. We are going to pick up the benefits sheet again this afternoon though to check again. Arden will have his electrical license within a year and he may start looking for a different job at that time with better benefits.

      Best,
      Katie

      • Laurie Villotta says:

        If he is part of a union you are set for health and dental insurance. Excellent coverage with little cost. I would urge him to really consider this. If this does happen then you could drop your health insurance and put all that money away into an emergency fund. Health insurance will always be critical for your needs and if you do become pregnant and stay home you will be set. The stress alone in not having to worry about what will happen with health insurance is such a reilief.

  18. Candace says:

    I would drop the identity theft insurance in favor of spending on a one time cost (not counting thaws) of a credit freeze and a good shredder. Identity theft insurance helps you out after someone has stolen your identity – a credit freeze stops anyone from opening credit accounts in your name. Admittedly credit takeover isn’t the only kind of identity theft but it is the most prevalent.

  19. Soggysuzzi says:

    Many great ideas here so I won’t repeat, but I would encourage you to dump B of A. Look at what is happening with Wells Fargo at this moment and folks are furious (no phone transfers, payments, problems with ATMs, etc.) Consider not one but two different banks. Use one for your main bank and just write a check to fund the second. Federal Insurance on your funds tops out at all banks and credit unions so spreading it around gives you additional protection. Paying for an extra account is not necessary and you should deal with this pronto. Also, as an aside, I have NEVER paid for checks in my life. You have to have them for property taxes, income taxes, and other governmental type payments. When setting up a new bank account when they ask you about checks say that you will just take whatever the free ones are. They all have them. It helps to deal with the bank’s Personal Banker (or whatever they call this person sitting at a desk rather than a cashier) when setting up a new account. And, who cares what the checks look like? Do you really need a cute picture of a doggie on your almost never used checks? Whomever you write them to won’t care what they look like as long as they cash. Minor save, but they all add up. Also, check for time deposit returns. Smaller banks around here have better deals on interest than the national majors.

    Best of luck to you both. You obviously are doing a great job of looking at all your life and financial issues and I feel you will succeed at whatever path(s) you choose.

  20. Sam says:

    I think Marilyn’s reply is realistic. My concern is also for the potential risk of CF in her children. I knew a family where 3 out of 4 children had it. As a medical professional, I have seen entire families decimated by genetic diseases that wrecked the families and so on. However, I also applaud this couple’s willingness to live life as normally as possible.

    As a teacher, I have good health insurance, and as I retire, it moves into good coverage in my Medicare years. I also have a disability insurance policy which guarantees 75% of my school income. The fact that this couple is young helps with their longterm debt, but the risk of Katie’s CF makes income reliability vital for their finances. So – is there good disability insurance, good longterm coverage, etc. If so, then good for them. As someone with a chronic condition – not CF – I also have to think ahead. My husband and I have good overall financial safety nets.

    One thing that Katie needs to think about is a legacy should something happen to her. My legacy to my husband – who is younger – is that my teaching retirement fund allows me to choose an option which deducts about 25% from what I would otherwise get, and upon my death, he continues to receive what I received for the rest of his life. If he dies before I do, it reverts back to the maximum, which increases on a yearly basis. If her teacher’s retirement has an option like this, she needs to make sure that her husband (and any future children) are both survivor and beneficiaries of her pension.

    We all need to be cognizant of our present, past, and future. Living in the here and now is a great way to live – memories are so helpful in tough times, and can create a psychological safety net in many ways. Learning from past mistakes helps plan for the future.

    Altogether, I wish this young couple the best in their endeavors. Having a child is a major risk, but it is also someone, a new generation. Should Katie die, Arden will have an heir and a memory, hopefully without CF. Life is difficult and they seem to be making the best of a difficult situation.

    • Katie says:

      Hi Sam,
      We had genetic testing on my husband shortly after getting married and he is not a carrier of CF so we do not need to worry about passing on the disease. If he had been, we would have chosen a different path to parenthood.

      I have always been good at safety nets and we are covered by short and long term disability coverage. The long term would bring me to age 65 with 60% of my income. This policy is tied to my current employment but I will always buy in to whatever coverage is available. I plan of picking that same plan as you so that I get a bit less in retirement and support my husband but I don’t believe I can set that up now but I am going to make a call to see. I have him listed as my beneficiary. Right now if I died, my husband would receive $500 a month from my pension plan.

      We have a wonderful life and are excited to share it with children. While the unpredictability of having a chronic illness can be stressful, right now I am planning on living to about 80 and don’t see anything immediate to prevent that.

      Best of luck to you as well!

      Katie

      • Laurie Villotta says:

        If you stop working you will no longer have STD and LTD as it is tied to your employer. The same is true for life insurance through an employer. If you were to get sick and not be able to go back to work all of these benefits are gone. Or if you are gone for an extended period of time it will all run out sooner vs later.

        • Katie says:

          Hi Laurie,
          If I had to stop working due to being sick, I would go out on Short and then Long term disability which would take me to age 65. You are correct about the life insurance but I am uninsurable through traditional plans so I don’t think there is anything I can do about that. I would never leave my employment willingly unless I was receiving disability.

  21. Effie says:

    Hi Katie,

    I too have a serious chronic health condition (autoimmune disease), am trying to be frugal and I really relate to your situation. Though I am about 10-years older than you, so I thought you might find by experience a little helpful. Please ignore if not.

    I was lucky enough to be able to have 2 healthy kids, but I found pregnancy and taking care of my kids very hard on my body. I choose to keep working and not become a stay at home mom, in part because looking after the kids on a bad-day for me is really tough. It’s getting easier now my kids are older but when they were little, it was hard for them to understand when all of sudden I couldn’t pick-them up or take care of them because I wasn’t physically capable. Whereas my day-job is physically easier for me to do as it’s mainly desk-based; also as I am in the UK I can take quite a lot of payed sick-leave when I have a disease-flare up and also so I can attend medical appointments. When I was on maternity leave many of my regular medical appointments were difficult for me to attend with my kids, as in the UK kids are not allowed to accompany parents into treatment areas (which makes sense, as you can’t take care of a baby or toddler whilst attached to drip!) . My husband had to take a lot of time off, during my second pregnancy and maternity leave to look after our kids when I wasn’t capable as we had no nearby family to help.

    That being said even though my second pregnancy caused a serious and irreversible decline in my chronic disease (which also caused the premature birth of my daughter). I won’t change a thing and having the kids was the best thing we ever did.

    Having a healthy emergency fund was vital to us getting through the second pregnancy and maternity leave – for much of the time we were just surviving and knowing we could spend to help get through it was really important. We needed extra money for additional childcare for my son and I spent a huge amount of money on taxis as I couldn’t drive (or walk more than 50 m) when things were very bad. Having a small extra “being ill emergency” fund that I have ear-marked for another flare-up is a really important safety net for me; as is keeping our regular outgoing lower than my husband’s take-home pay. I am hugely fortunate to have amazing life-insurance (including a allowance for both of my kids till they are 25) and an early ill-health retirement plan via my employer.. Do you know if there is any ill-health early retirement scheme linked to your pension? Basically if my doctor and employer decided I am no longer fit to work – I will be retired at on my full-pension as if I was 67 – payable for life; which is another reason I choose to keep working – as I would never be able to get private insurance to provide the same cover. This part of the scheme is very well hidden – but once I asked about it I found out what I would be entitled too – should the worst happen.

    Good luck with everything

    • Katie says:

      Hi Effie,
      Thank you for sharing your experience. We are starting on creating a 6 month emergency fund now and I can’t wait until that is complete! SO there is a disability related pension that brings you up to age 60 on the retirement chart but gives a MUCH smaller percentage than if I am able to work the full 34 years to get my 80%. For example if I can only work 10 years total, I would get 14.5% of my salary and at 20 years I would get 29%.

      Best,
      Katie

  22. Chris B. says:

    Hi Katie and Arden, Thank you for sharing your story and details about your life (you are SO much together that it is lovely to see). I’m sharing a few comments in case it’s helpful to you both.
    1. My husband has a similar situation- asbestos in his lungs and a possibility of a shorter life. Knowing this drives us to plan better and, indeed, he has more joy in him than anyone else I know! We prioritize: #1 TIME together (note – this can be accomplished for free, at home, cooking dinner or in front of a fire in our wood stove or walking our dogs), and #2 maintaining/protecting our ability to make our own choices and have options.
    For us, this means – living below our means, no debt including home. Sorry, always disagree with FW here – nothing beats not owing anybody anything…however I do agree 100% that Katie and Arden should hold off on this one.
    2. There is great satisfaction in creating a place of security for your family, protection from the storm…that said it is really REALLY hard! ! It means telling yourself no. A lot. No now, for yes later, if that makes any sense. The TOP priority is what will get done, and that is ours, everything feeds into that. You two have a lot going on, and it’s not clear to me what your first, top #1 no matter what objective is: travel and spend on “incidentals” now? stabilize the home front (emergency fund) as we call it 🙂 ? education? baby and security for baby and mom? You guys decide and focus on that only, and you’ll move mountains together!
    3. One last thing – do not go off of what other people appear to do or have. It is not a good barometer, since your goals are your own, and also you can’t know the full situation someone else is in. My husband and I have seen storms,and I want to express that that old fable about the ant and the grasshopper (anyone?anyone?) is legit advice. Like you, about 4 years ago we had a mortgage no kids and plans for all kinds of things ! Yay! One example: We had a $2K dental bill at the same time as a major vehicle problem and a job layoff, in winter with a $600 gas bill (wow). I worked for a startup company with us paying our own insurances. The only way we and our relationship survived this type of “everyday life happening”in a cacophony of a mess was to be focused on the goal and have reserves in place. Trust me, you want a buffer of security for yourselves. To echo FW’s advice, having real estate is great, but it will not put food on your table or gas in your car. Skills, education, friends, DIYing, toys (boat, whatever 😉 are great, but at some point you need MONEY. You will be glad for it.
    4. Have a child – FW is a judgement free zone, right people? Right?? Right. Ok, so go ahead! You do not need permission from random, anonymous, internet people … and certainly ANY loving household is a BEAUTIFUL place for a new little person to be born into. Good luck! 🍀 your family (of 2, 3 , or 5…) will all be served well by pulling strong together as a couple to get a secure foundation for yourselves. YOU get to decide what is best for your future.
    Kind regards – Chris B.

    • Katie says:

      Hi Chris,
      Thank you for your thoughtful response! I think my security gland would also feel much more comfortable without a mortgage payment. 🙂 It is so hard to settle on only one major goal at a time!!! Right now, we have decided the goal is going to be getting a solid 6 month emergency fund together which will both stabilize the home front as well as prepare us more financially from any financial outlay from getting pregnant and getting settled with a baby.

      Best of luck to your family!

      Katie

  23. Mandy says:

    Kate and Arden, I love you guys! You have a beautiful life and home together. Thank you for sharing. I cannot wait to hear updates down the road. You have so many interests and that’s great!! I am 35, when I was 30, I was just like you. Family, friends, work, home improvements, travel, pets, rental home, creative interests, school, freezing my eggs and more. We had very “full lives”. I didn’t even realize it at the time. To be honest I may have been forcing more than I could handle bc I worried about not being able to do certain things after becoming a mom (we live so far from family/potential childcare). I think the concern for your future health has a lot to do with your adventageous goals for your career, home, free time. It’s certainly a time for growth and potential but this seems to be expensive, and maybe straining? You guys work hard for your money and are super thrifty. I hope in the next few years you will be streamlined in your interests, and allow it to happen organically (I.e. don’t give up anything in haste) after this new top priority on retirement savings. We prioritized our time and the money savings naturally flowed. We have so much more flexibility. Maybe it will be boating, or travel that you put on the back burner for a few years, or the long drive to work or time as a student. Maybe you will find ways to combine interests. Sail to another port to sell Arden’s designs?? That might be an unrealistic idea but my point is to be intentional with your time. In fact, You should be a snob about who gets your valuable time!! 🙂 best of luck -Mandy

  24. Sally says:

    Hi Katie. I am not sure if you were kidding about moving to Florida, but as a lifelong New Englander I moved here 2 years ago and regret it every day! Stay on the Cape where you have a strong support system.

  25. Laura says:

    Hi Katie. I relate very much to your love of learning! Have you looked into Coursera? They offer a lot of free or low cost courses in a kinds of topics. There are a bunch of other similar platforms like Udemy that I haven’t used but have heard good things about.

    • Allie says:

      I came to recommend the same thing, I have taken some AMAZING high-quality classes on Coursera. And they have the structure/pacing of an in-person class (though no in-person classroom, of course)

  26. Rachel says:

    Your house is beautiful! I agree on the art studio. I’m an art school grad, and have a lot of friends who sell their art. Even for those selling in galleries, it’s a very unstable income. The cost of materials, hours of labor into a piece, and shipping costs all add up. It’s so rewarding to sell your art, but I wouldn’t count on it being enough to work less hours. When your husband gets his electrian license, I would think he could turn that into a very profitable side gig!

  27. Katie says:

    Hi Laura,
    I haven’t heard of that! Thank you for the recommendation.

    Best,
    Katie

  28. Gem says:

    Hi Katie,
    Thank you for sharing your life on here! I am an avid follower of FW and the advice on here from the FW’s, the case studies and readers has changed my life.
    I can’t add anything of real value that hasn’t already been said, but I am moved by your story, think you have a real eye for interiors (side hustle?), and wish you all the best in your future endeavours. Life is unpredictable and you are doing the right thing in looking to the future but also making every day a good one in both big and small ways. That’s all we can do in the end. Thank you for adding to my life today Katie 🙂

  29. Diana E Sung says:

    1) As the 37 year old sole income provider for our family of four with two (TWO) chronic illnesses, I want to thank Liz for showcasing this case study and Katie for rocking it out there as a young woman with health issues who doesn’t fit society’s mold for “the sick”. I love you both so, so, so much right now, especially given the unusual (for Frugalwoods community) collective pearl clutching regarding your health and family planning above. NEWSFLASH: You can be young and active and (mostly) healthy and still be dealing with a serious health issue. I love Katie’s willingness to face this issue head on! She asked for financial advice–not medical–in some ways because she understand how her disease might impact her life in the next 1-50+ years. THANK YOU THANK YOU THANK YOU (again)
    2) Katie: Does your district offer 457 plans? The plans are pretty much just like 403s, but without the 59.5 age restriction for access. I switched this year (it’s only been available in the last 18 months or so). Some districts even let you do both–if you end up trying to max out your retirement. I also highly recommend Principal FI (https://principalfi.com/) for some educator-specific financial advice (there are posts on pensions, career ladder options for educators, etc.).
    3) Republic Wireless has a 50 % discount for educators on phone plans.
    4) Can I stay in your cottage? I love the Cape Cod area, and you all have great home decorating tastes!

    • Katie says:

      Hi Diana,
      Thank you so much!!!
      I was a bit surprised that people think it is appropriate to comment on both my ability and desire to procreate and found it rather hurtful. I think I have given having children more thought than most, and will be an excellent mother. While my husband and I are both “spenders”, I am also the nerd and believe I would have been more inclined to be a “saver” if I didn’t have CF. Which is why I reached out. Finding a balance is important – one that I have always struggled with. Now that we are trying to have children, our priorities are shifting, and setting up a stronger financial foundation means much more to us than it has in the past. I have always been on the lookout for how people have the “balance” in this area and didn’t find much out there which led me to write in to Ms. Frugalwoods.
      Unfortunately, no – I do not currently have access to a 457 plan but I will look out for that in the future. Thank you for that website – I will check it out.

      Best of luck to you and your family!!!

      Love,
      Katie

      You are always welcome at the Acorn Cottage – https://www.airbnb.com/rooms/3731662?s=51

  30. JD says:

    I just wanted to say I agree with Mrs. FW and, can I please come live with you? Your house is AWESOME!

  31. Rachel says:

    Hi Katie,

    Great job on pulling all your expenses together! I wanted to give a suggestion for more frugal travelling. Like you, my husband and I love to travel. There may be a way to exploit both of your skills in order to travel for free, or at least more cheaply. One example I am thinking of- you have an eye for design (based on your beautiful photos), and your husband has many handy skills. You might be able to advertise yourself to people who own Airbnbs- offer one day of work for a week of room, or something like that. Or look for opportunities on work/share sites like WorkAway. It may or may not be feasible for you, but something to think about.

    Another option for the art studio. Until/ if you decide to complete that project, would Arden be able to rent time at a nearby studio? I had a friend that loved glass blowing, and rented an evening a week at a studio in the city. She was able to make several pieces and pay her rental fees with the pieces she sold, so there wasn’t a net increase on her budget. If Arden could do that, and also make enough pieces to sell in addition, you could put the extra income from his art pieces towards travel savings. That way, you aren’t reliant on the income from his art, but it could be used to finance your hobbies.

    Best of luck with TTC. My husband and I are also beginning that journey, and it can be daunting and overwhelming at times. Hugs and best wishes!

    • arden says:

      hi Rachel, it would nice if there were studios available. There are a few around cape cod but they are mostly private and are not coops. they also are set up for a different type of glassblowing. They are gaffering studios as I do torch work and require a very different set up. I also don’t think that I would have the time to make pieces sign up for shows and travel back and forth to a rental space while working full time at this point. I appreciate these suggestions and encourage more. I hope I don’t sound like I am deflecting and reasonable advice.

  32. Katie says:

    This case study is very inspiring, Katie and Arden have done such a great job so far. I had an idea while I was reading through the case study, I know that Arden is the person with the 403b match, so what if he started contributing to his 403b to get the match, and then Katie slowly increased her contributions until her 403b is maxed out. That way they would kind of be testing out living on Arden’s salary, or at least a much lower amount due to Katie’s increased 403b contributions. And then that money is already invested and can compound no matter what Katie’s work situation is. It also might be easier to stick to a budget with less money coming in. Just a thought, there’s already a lot of great advice here!

  33. Trace says:

    Hi Katie and Arden,

    You are both awesome, you have done so well to get yourselves into this financial position so young!

    I’d like to say please do ignore the unfortunate comments, its your life and your body no one else’s. I applaud you for being so open about your medical condition, its very tough having a hidden condition.

    My thoughts which you are welcome to consider or ignore!:
    You don’t appear to have an emergency fund. Particularly with variable income I would make this my number 1 priority of at least $1000 rising to 3 months expenses.

    Pay down debt – it looks like your only debt other than mortgage is the credit card. I would get this gone as a priority and sacrifice a months eating out to do so. I would have this as priority number 2. Unless you get any benefits like travel related things I would get rid of it. I have a debit card so the same functionality as a credit card but its my money no one else’s so no risk of debt. Not sure if you have these in the States.

    As you have a cash flow positive rental I see this as equally important in retirement as an income stream. Yes it would be great to maximise your retirement savings particularly where they are employer matched but you potentially already have an income stream you can live on so this would be my number 3 priority.

    Saving for time of work during and post pregnancy. I live in NZ where we get paid parental leave it can start when you are still pregnant. Short of moving to New Zealand I suggest you start saving for 12 months expenses so you can do what you need to do health and life wise without being worried. Do take into account your rental income surplus as income so it means the amount you need will be less.

    Being a life long learner I totally understand your need to continue your education. I strongly encourage you to find projects etc to research and learning which can be done for free. It might not be more letters after your name but as long as its challenging you intellectually I hope your need is met;-) I find lots of projects through work to research and really enjoy it!

    Renovations, your house is beautiful and I can see the effort you have both put into this. Can I suggest instead of Ardern taking time off work and forgoing income you finish the inside renovations on your non work days. This is a way to save money. Re the artist studio, just wondering if you could find one for free on online sites and repurpose it. This could be hours of fun finding something and I am sure Liz will be able to point you in some really good directions. Might be some cost involved but a great way to do it for a lot cheaper.

    All the very best for getting ahead, getting pregnant to and having a very long happy life:-)

    Trace

    • Katie says:

      Hi Trace,
      Thank you for your thoughtful response!
      The credit card is already paid off!!! The emergency fund is our #1 now – we are going to put aside 25k asap. NZ seems lovely and much more family friendly than the US. 12 months of expenses would be around 50k so that is definitely something to strive for!

      All the best to you as well!
      Katie

  34. Heidi says:

    Hi Katie – I LOVE your confidence with facing your health concerns and mortality. I support you and your health choices! My partner has a chronic long-term illness that is unpredictable; so I read your case study with great curiosity. Thoughts (disclaimer: I am Canadian; so my values may differ on that scale)

    -Fill out whatever forms you need to at your employer to reduce the amount of the tax return you get. You are loaning that money to the government INTEREST FREE for a year. You are better off having it on your cheque, able to direct it to your retirement, health needs, children, etc., and have it earn YOU interest.

    -Sell your boat. Full stop.

    -I believe another commenter mentioned the free online education courses. You are so well-qualified that it makes my head spin. I am impressed 🙂 Now, if you want to pursue education because it is of interest to you or a form of entertainment, that’s another conversation you need to have with yourself. Maybe you already have!

    -The Cape sounds amazing and so does your social network. I would be spending money on amazing food, drinks, and outings too. But is that more important than your other concerns, re kids, art studio, second rental property, etc.? 1200 is a crazy amount to me to spend on that each month.

    -prioritize your travel. I love travel, but I would never be able to save money for other things (like my partner’s health needs and my own educational needs) if I travelled as much as I wanted. Maybe simplify this? Like, you could keep the boat, but cut out travel for a year or two and “travel” is now boat trips, you know?

    -This may be where our values differ, and that’s okay. I am so sorry late stage capitalism is such a bitch. Your health needs should be supported and paid for by a public health system, as well as any OBGYN needs you may have as you pursue your dreams of a child. Health care under our public system could be marginally better, but we are stuck in a neo-liberal extractionist hell too. So that being said, this comment is for other readers of this: Let’s vote to change the system! People like Katie are what matter, and let’s endeavour to create a society that values people over profits. //end rant

    Good luck, Katie! And to your partner too – I cannot wait to see what he does with his art. 🙂

    • Katie says:

      Hi Heidi,
      Thank you for your responses! Taxes have changed and this is the first year of this, so we are going to see what happens when we file and then change forms as needed. I agree that we will be better served having the extra money in our checks – especially since so much of our income comes in chunks and we don’t have enough on the weekly! No more education for me – I wanted to finish everything prior to having kids and much of my masters level education was free so we should be good!

      Our values are in alignment – my values towards healthcare are only out of alignment with my government! I dream of a day where I do not need to worry about my access and ability to afford healthcare in order to live. My medications cost over 30 thousand dollars a month without insurance – never mind the regular specialists and doctors visits that are required to give me the best opportunity to remain healthy. I need to work with 5 different pharmacies every month in order to get the medications I need as insurance requires specialty pharmacies. Time I could much better spend in different areas of my life! Healthcare should not be tied to employment and should be comprehensive and treated as a basic human right.

      Best of luck to you and your partner!

      Best,
      Katie

  35. Best Bun says:

    I almost never comment on blogs but your story touched me in so many ways. Your positive outlook, your daily joy with your husband, and your constant search for solutions make you a very wealthy woman. I am old enough to be your mother and have come to realize that sometimes the everyday world can be a beautiful place despite the ugliness that tries to bring us down. Bless you and know that you have won no matter what comes up.

    Best wishes from Best Bun.

    • Katie says:

      Hi Best Bun,
      Thank you for your comment! We have a wonderful life and the perspective I have on life is only enhanced from my experience and I am very grateful. I am so privileged to know how important it is to appreciate every moment and have such wonderful family and friends to share my life with.

      Have a wonderful night!

      Katie

  36. Joseph Beckenbach says:

    Hi, Katie!

    An idea for Arden’s art studio: pay for building it out only from net profit of art sold. The art business is only going to “move the needle” if it’s more than pocket-change; if it’s more than pocket-change, it should be enough to fund the studio. It will also encourage Arden to treat the art business as a real business.

    As I recall, new journeymen back in the days of the guilds would spend a year’s income, spread across four years, to gather/make their tools and prepare to operate independently of the masters who trained them. I suspect Arden’s already put together a good kit in preparing for electrician; why not do the same for artist?

    • Arden says:

      Thanks Joseph.
      Thats a good idea. When I made glass art as a “full time” job many years ago I did do pretty well when I worked a reasonable amount of hours and booked more than 1 or 2 shows at a time. I have all the tools I need but not the facilities. The building I want to build would not only serve as an art studio but also an additional living space and a greenhouse. I fully agree that if I’m going to make it more than a hobby I need to take it seriously as a business at any level of a financial supplement. I’m not totally sure of the 20k price tag as many of the building materials would be sourced from work and many other places. It would also be a long project and the cost would be broken into smaller chunks over a few years. It would be a nice idea to have my old studio available again but it it not possible at this point. Thank you for your feedback, it is great advice I wish I was given and realized 15 years ago.
      Arden

      • Anne says:

        You may want to look at other facilities that are available. Not sure where you are located on the cape, but the Sandwich glass museum has artists doing demos, and I think they have free studio time for tour guides.

  37. Christina says:

    Hi Katie and Arden,
    Thank you so much for sharing your story! I wish I had been so thoughtful about my finances in my thirties. You two look so happy and your homes are beautiful!

    As always, I love Mrs. FW’s advice. As a fellow educator though, I would caution you to carefully research your 403b options. Public school employee 403b options are notoriously bad and can’t be considered in the same category as university or hospital 403b options. The NYT did a great series of articles a couple years ago about the high fees and predatory practices of some k-12 educational 403b providers – often insurance companies pedaling annuities disguised as mutual funds. The fees can be outrageous and really impact your savings and growth rate. If you have access to a 457 Plan (as someone else mentioned above) I would look into that and carefully review the 403b – If Vanguard or Fidelity is available, for example. My husband and I are both teachers and lost a lot of money and time because of terrible 403b plans.

    I wish you both all the best with your future plans!

    • Katie says:

      Hi Christina,
      Thank you so much! I don’t have a lot of confidence in my works 403b. Also, what happens when I shift jobs? I don’t feel that I understand this topic enough – any recommendations for learning more?
      I do think though that setting up the match from Arden’s work should be set up ASAP.

  38. Lindsey says:

    I am responding to this as someone born with a cardiac defect that led to a surgery where part of my lung was damaged and the lifelong medications I have to take have killed off one kidney and left the other less than fully functional. Early on, my husband and I made two decisions that we, now in our 60s, have never regretted. (I should add that my husband had a hard go with cancer in his late 20s, early 30s, so we had those medical expenses and also some after-effects from chemo.) First, although we didn’t want to, one of us always held a government job because of the insurance. Early on, when I was healthier, I held the job; later he did. This gave us security and also the financial freedom of not having to pay for private insurance. The second decision we made was to travel early and often, knowing that someday I would probably be too debilitated to go to places like a yurt excursion to Mongolia or the Trans-Siberian train and two months in what was then the U.S.S.R. When we got a hankering to go someplace, we found a way to make that happen. Sometimes it meant renting out our house (not so easy before B&B rental sites and not even internet), sometimes it required both of us to take on extra short-term gigs to make the money. All the time it required being mindful of our spending—for example, every time I thought about getting a fancy coffee or we wanted to go out to a restaurant, we’d say to each other, “Do we want to eat out here or in Singapore?” Or whatever place we wanted to visit next. My point is, assume you won’t be well enough some day, because that may happen from your illness or a random strike like cancer. These days we rarely travel because I am now in a wheelchair on many days, and when we go it is someplace more handicap friendly, such as London. We probably live more modestly than we would if we had travelled less, but neither one of us has any regrets that we did it while we were young and relatively healthy.

  39. Robin says:

    Hi Katie and Arden,
    As a SE MA resident, with relatives on the Cape, I know all too well the cost of living in such a beautiful place! Cable/internet choices are tough, and a TV antenna usually gets minimal, if any reception! I like the idea of bargaining with them, you never know, plus a modem/router purchase can be a long term solution. NewEgg.com frequently has refurbished ones for @ $35 that are compatible with Comcast. We switched from a “Major Bank” to a credit union and saved fees. Do you belong to MTA? They have many discounts in car insurance, cell plans, travel and I believe they offer financial planning. As far as cars go, you have two “young” cars with (relatively speaking) low milage, hang on to them. My college age daughter drives a 1998 Camry and doesn’t plan on giving it up! LOL! I agree, also, with not paying down your homes. I once was told that multi billionaires make cash purchases when interest rates are high, but always borrow money when the rates are really low. That way they can invest their cash into the stock market, etc.,where their rate of return is higher. In other words, increase your retirement contributions as aggressively as you can, especially when your employer matches it! I’m jealous of all the travel you have been able to do, I wish we did more before having kids. I was wondering if you would consider online or local tutoring once you have a child or if your health is not at it’s peak? I’ve hired tutors for my son, for math, and got chatting with the tutor. She loved the flexibility it gave her. My teacher friend also tutored evenings and weekends for extra cash. Or maybe another online/work from home opportunity? My sister-in-law had a teaching degree she decided not to use. Instead, (after several company closures/layoffs!) she decided to open a business writing for small publications, such as her alma matter’s newsletter, and for a previous employer’s newsletter. It took a while to build up a strong, repeat clientele, and some places only pay monthly, but she is able to work anytime, anywhere, as long as she has her laptop! I wish you both joy and hope for the future! (BTW sell the boat and use it to fund the art studio,…we have a few artists/artisans in my family, and they do very well down the Cape and on the mainland! )

    • Katie says:

      Hi Robin,
      Thank you for your thoughtful response! I am not currently eligible to be in the MTA as I work for a charter school but will once I transition to a traditional public school. I will definitely consider tutoring and have been tossing around private college counseling in my head as well as something I could do from home. I am going to look up getting a modem tonight – thank you for that recommendation!

      Best,
      Katie

  40. Jenni says:

    Have you thought of working for an online/virtual school? I am a special Ed teacher, and that has allowed me to work from home.

    • Katie says:

      Hi Jenni,
      I have heard of tutoring online, say through Vipkid but don’t know anything about teaching virtual schooling – please tell me more! Are you tied into the public system in anyway? What are benefits like? Salary?

      Thank you in advance for elaborating!

      Katie

  41. Katie says:

    Hi Ms. Frugalwoods!
    Thank you so much for your recommendations…a couple of follow up questions:

    Retirement Planning:
    I understand your reasoning for the 403b route and will set up Arden’s match ASAP. We used to do that but put it on hold while paying off our cars, boat, and solar loan over the last couple of years. I am going to see if it is possible to have at least part of the bonuses sent to his 403b automatically as well since it would be easier than getting that money pulled out of our monthly budget.

    I need more help…If I am able to work until retirement I will safely pull 60k yearly so 5k a month from my pension and in 27 years (if we aren’t paying off our mortgages early) I will be 58 – we will have two fully paid off homes. This is in addition to whatever Arden saves – so 18k ($1500 monthly) from social security and say he saves 1/2 the amount you recommend or 10k a year over the next 30 years = 300k plus interest (say it even makes no interest) – In the best case scenario I feel like we would be good – what do you think?

    Obviously I am not planning for the best case… We plan for the worst and hope for the best!

    If I am planning for having to retire early, and I am investing in a 403b – isn’t there penalties if I need to take out my money early? This makes me think that it may not be the best place for my money…Also, what happens when I switch jobs? What if the 403b offerings at my work are not good? How do I know for sure if they are good or not good?

    Say I invest 1/2 the amount you recommend as well so 10k and retire early at 45 so I have 150k invested plus interest. Then I need to make early withdrawals..

    Also, I think I may just be in the other boat when it comes to paying off mortgages but say I need to retire early at 45 so mid way between here and when pension retirement can occur….

    If we pay off our 30 year mortgages in 15 years instead of 30, our expenses are reduced significantly (about 3k a month) at the same time we lose most of my income. I wouldn’t receive a full pension but would be eligible for 29% of my salary with 20 years in (projecting a 100k salary = 29k yearly) which is a lot less than the full pension, but our expenses would also be greatly reduced which seems doable (without eating out, vacations, and renovations)

    Thank you in advance for your additional feedback in this area!

    Best,
    Katie

    • Mrs. Frugalwoods says:

      Hey Katie! Thank you for the follow-up questions! Let me take a stab at addressing them and feel free to comment with more questions/clarifications:
      -403bs: It doesn’t matter if you leave your current employer. A 403b (or 401K) is yours. ALLLLL yours. Some employers require a vesting period before you’re able to avail yourself of their matching plan (or even participate at all), so you should check that out with Arden’s employer. I personally have two 403bs from two different past employers (neither of whom I’ve worked for in years) and they’re both just hanging out in my account, growing bigger every year. Yes, I should probably roll them over, but the salient point is that the money is still mine, even though I no longer work for either of those employers.
      -More on 403bs/401ks: Yes, you need to be age 59.5 in order to withdraw from a 403b (or 401k) without penalties. I will note that there is an exception to this rule, called the Roth Pipeline and my good friend The Mad Fientist has this excellent article on the topic (as Mad Fientist outlines, the basic premise is to”slowly convert the tax-deferred accounts (401(k) and Traditional IRA) into a Roth IRA, without paying any tax on the conversion.”) But in general, you want to wait until 59.5 to withdraw from it. A 403b/401k is a traditional retirement savings vehicle, which means you access it at traditional retirement age (unless you perform a Roth Pipeline).
      -Still more on 403bs/401ks: I forgot to mention (and I’ll edit the post to include this) that one of the best things about 403bs is that they reduce your taxable income. Your contributions to them are pre-tax and so you are not paying taxes on the money you put into them at the time you put the money in. You WILL pay taxes when you withdraw the money. HOWEVER, this usually works to your advantage because you’re withdrawing from a 403b/401k AFTER you’re retired, so your income tax level is typically MUCH MUCH lower than it was during your working years. So, you save on taxes now and pay less in taxes later. Does that make sense?
      -Check out my post on 401ks as I think it outlines a lot of this in what is hopefully plain English :). Let me know if any parts of it are confusing!
      -Mortgages: I totally agree that paid-off mortgages would reduce your monthly spending and give you a form of longterm security. HOWEVER, the challenge is that you can’t (easily) liquidate a house to pay for groceries, medical expenses, etc. It’s a lot of money tied up in one type of asset and an asset that you can’t leverage unless you sell it. If you do want to pay down those mortgages early, what I recommend is FIRST building up a really robust cash emergency fund while also taking advantage of Arden’s 403b match.
      -A lot of this comes down to what you and Arden are comfortable with and how you want to use your money. The advice I give is what I would do if it were me, but at the end of the day, it’s not me, it’s you :)!

      • Mrs. Frugalwoods says:

        Answer part 2 ;): Regarding whether or not the 403b offering at your employer is good:
        -The way most 401k/403b plans work is that your employer provides a list of investments to choose from. 401ks/403bs are invested in the stock or bond market and often, you get to choose where it’s invested.
        -Get this list from your employer and see if there’s a Total Market Index Fund. This is a Fund that’s invested across the entire stock market, which is a diversified way to invest (it’s how Mr. FW and I invest).
        -Complicating matters slightly, this fund won’t necessarily be called a “Total Market Index Fund.” It might be called S&P 500 Index Fund, Large Cap Broad Index Fund, etc. Look for the word “index”–this is usually (though not always) what you want. You’ll have to read through the options and then do a bit of research on what you discover, but you can do it!
        -Sidenote: if you have a financially-savvy co-worker, you could discuss this with them as they may have already done the research.
        -If there’s not any type of Total Market Index Fund, it’s highly likely that it’ll still be a good idea to save into your 403b for the simple reason of the fabulous tax savings (see my notes above on that).
        -Then when/if you leave your employer, you can roll this 403b into an IRA and select some sort Total Market Index Fund to invest in at that time.

        • Mrs. Frugalwoods says:

          Answer part 3! Your pension:
          -Every pension plan is different and so I really can’t offer much specific insight here.
          -It sounds like you’ve already done the herculean task of reading through all of your pension plan documents, so congrats!
          -Broadly: in SOME pension plans, what you want to look for are tables (such as the one you emailed me) showing what percentage you will receive based on the number of years you work for the employer and your age.
          -However, this all REALLY varies by pension plan and there are inflation adjustments with some pension plans and NOT with others. If there’s not an inflation adjustment, it could mean that inflation would gobble up your pension. Eek!
          -Since your pension is through the state of MA (a large employer), I am betting that someone is an expert on it. Google around and see who/what info you can find and then see if you can meet with that person to run your numbers and do some estimates.
          -I really can’t give much advice beyond this because pension plans are all unique and are notoriously complex. I don’t want to lead you astray!
          -The big caveat with your pension plan is if you stop working prior to whatever that minimum age/number of years worked is. If you want/need to cease working around your pregnancy/birth (which will hopefully be soon 🙂 ), then you might not qualify for any pension pay out (or not much).
          -That last reason is why I’m so pro-403b and pro-emergency fund in your situation. No matter what you do employment-wise, the 403b and the emergency fund are all yours.

          • Kate says:

            I’ve worked for the state of MA twice, both less than ten years which was what it takes to be vested. I left about 6 years ago, so take this for what its worth, and you may already know this. but I was able to roll over my deferred compensation into an IRA when I left. Unless something has changed I’m assuming you could do the same.

  42. totoro says:

    Please don’t be put off by Marilyn’s comments. You have thought about this. You know the facts. Pregnancy does not impact mortality rates for those with cystic fibrosis. Although the average lifespan might be 37.5, many live far beyond the average and the numbers are improving at a far greater rate than the average population survival stats. In Canada, where I live, the average lifespan is actually 51. The difference probably comes down to health care access, and you have this. I’d say with the amount of joy and connection you have in your life your odds are way better than average.

    • Katie says:

      Hi Totoro,
      Thank you for your comment! I have always been (relatively) very healthy and I don’t envision that changing, but I also think it is wise to start planning more for the future and ensure our financial security for any future situation in order to reduce stress – which is why I wrote in. 🙂 CF related: I am very excited about the new Vertex (triple combination) drug coming out next year and I hope people in Canada will have access bc it is looking really really good! I have excellent health care and an abundance of joy so I think I will be fine. Marilyn’s comments were hurtful but also say much more about her life and experience than my own so I only wish her the best.

      Best,
      Katie

  43. Kathy E. says:

    Does your state employer offer a 457 deferred compensation retirement plan? A BIG advantage is the ability to make withdrawals before age 59.5 without penalty. A description of these plans can be found at https://www.goodfinancialcents.com/457-plan-rules-distributions-successful-retirement/

    • Katie says:

      Hi Kathy,
      Currently I work at a charter school and a 457 is not an option. Maybe it will be when I transition to a traditional public school though so I will keep that in the back of my mind

      Thanks!
      Katie

  44. Sharon Mullery says:

    I think you are in an excellent financial position. I am not really in a position to give financial advice. I’m poor, I’ve always been poor but I’m happy and at the moment I’m comfortably poor (can’t go wild but covering my modest lifestyle expenses and have some to save). Our pensions set up is entirely difficult so I’ll leave that for those who know the ins and outs of US.

    However I have a number of health issues and whilst not as severe as your own, they aren’t going to get any better. I had to have a total hip replacement 4 years ago. At that time there were no other signs of arthritis in my body and it was thought to be a one off – I have never had a car and apart from when my sons were small enough to be in a pram, I’ve carried everything that came into the house (shopping, bags of cat litter, fruit trees, bags of sand and cement to repair the garden wall) has come in carried in a rucksack on my back.

    Last year I turned 60 and the problem I had with my shoulder, which I thought was from painting my mum’s fences, was diagnosed as arthritis. The slight problem I have with my knees is also arthritis and I may eventually need replacement knees. If our wonderful NHS has been destroyed by then, I will have to manage without new knees. I also have diabetes, eczema and dermatitis, a compromised immune system and long term depression including full blown PTSD following an accident.

    However as I said, I am happy and I’m not moaning, I just want to offer the advice I have. In the past year, coping with my right shoulder has been a continual process of elimination, learning different ways to do things and working on how to do solve any other challenges (don’t have problems or difficulties – always keep the language positive). Having been made to feel an old crock within 3 weeks of turning 60, I decided to go back to having ‘creaky knees’ and ‘a slight problem with my shoulder’. I will not be defined by my illnesses.

    My son married last year and I had started to grow my hair long again. I love long hair. I love it when I put it up. I love it when it tumbles down. That went. When you have to start putting plates away one at a time and everything above shoulder height is an obstacle, long hair is out. Long hair is lovely if washed and brushed and kept in order. I knew that the weight of it would be too much, so now it’s cut short regularly by mum’s hairdresser who comes to her house and is inexpensive. I would say that for many years I cut my own hair, sitting on the floor, using two mirrors to do the back – I could do a bob, a graduated bob, or have a short pixie cut. My last previous hairdresser visit was for my son’s 21st when I was 50.

    Adapting – I do most of the washing up with my left hand and any other similar jobs. I love to embroider, but have made a few differences to my style – a shorter thread, less hours and longer breaks. I taught myself to embroider with my left hand several years ago to avoid cramp from using one hand for too long, but it’s best for backgrounds and simple repetitive stitches, not fine work. I am prioritising which embroidery projects I start – no more making Christmas cards to use up scraps. In the short term my embroidery will help to keep my fingers supple. In the long term, I won’t be able to do it any more. I’ve already had to give up working on coloured cloth as my eyes can no longer cope.

    I enjoy growing my own food. I only have a tiny back yard, so it isn’t much but I have a ‘five year plan’ to make alterations so that I can consider. These will be low or no cost and will have to be done slowly. Recovering from the hip operation taught me to do things in 15 minute sessions and to alternate standing and sitting jobs. Most of my meal prep is done sitting at the kitchen table.

    I have accepted the need for frozen chopped onions. I know this will seem like a ridiculous luxury to most of you. I thought it was so lazy, it has taken me nearly a year to change. At last I realised that I was avoiding cooking many of our favourite meals as chopping the onions was my starting point. I have been reading a column for people with chronic illnesses and their advice and good sense has been invaluable.
    It’s okay to use a jar of bought sauce if that means you can make a meal.
    There are ways to put a duvet in it’s cover by making a giant swiss roll of it.
    Prepare on good days for the days when you can do nothing.
    Write a done list, not a to do one because you need to remind yourself of what you have accomplished when you think you ‘have done nothing’

    I’ve had to replace several items this year and all have been changes for the better. My new to me refurbished laptop is half the size of the old one and a quarter of the weight (you would think a laptop weighs hardly anything – I now know they can be heavy and the weight increases as I use them).

    I have a 5 year plan for my kitchen too. When I downsized back to this (my original house) 4 years ago, I paid to have the repairs I could no longer manage myself done. I thought the kitchen had lots of life left in it but started a list of changes to incorporate into my next and final kitchen. I am aware that people often fail to make adaptations they consider they can manage without and then by the time they realise they do need them, they are too old and ill to be bothered with the hassle of changing things.

    My ‘new to me’ kitchen (my last one cost 500 pounds with me helping Mr and Mrs Builder and a lot of second hand stuff – only needed 2 new units even though the damp damage meant they were all rotten) will have pan drawers – all my pots and pans will be kept there., not in wall cupboards. Second son got my two cast iron pans when he left home – I knew then they were too heavy for me to use. I learnt when my first son was born (total non-sleeper, about 3 hours a night and screamed the house down if you tried to put him down) that you can put the kettle on a swan neck tap and fill it one-handed. The lever taps are better than ones you have to turn when your grip starts to go, you can even turn them on and off by nudging them with your elbow. I discovered a gadget for my mother (like a wide pair of tongs with several round indentations on the insides) which opens anything from a drink/ vinegar bottle to the very wide beetroot jars. It’s like magic – mum sent me back to get one for myself and one for her cleaner.

    As for having a child/ children, as someone else has said, it knocks you off your feet and changes the game completely – for everyone. You make the house safe, your super intelligent child can take out the safety things out of the electric sockets. You replace the ‘good’ ones with super cheapies that lie flat against the socket, child tries to prise it off using his knife (the one to cut his food up.) You already placed everything above 4 foot – second child drags across the toy vacuum cleaner (eldest boy got a toy ironing board – we don’t have boy and girl toys) and uses it to stand on to get at the ‘out of reach things. They are always ahead, you learn, adapt, let go of what is non-essential. I had to teach mum that she was overusing the ‘n’ word. She was yelling no at her partner’s great-grandchild every few seconds. No is an absolute, only to be used when the child is in immediate danger – like putting it’s hand in the fire. She said it so often the baby was holding her hand near to things, just to make mum yell – she thought it was a game. If the child ate a dog biscuit, it would not kill her. If she did not like it she would spit it out. When her mother said that it was ‘for dog-dog’ (explaining) she immediately turned around and gave it to the dog.

    I sprained my ankle before Christmas. Luckily I had already had several home deliveries at both houses (I am my mother’s carer and I split my time between two houses), which everyone made fun of. I was finding it too difficult to put things in or out of the trolley and shopping (which I hate with a vengeance) was taking up too much time I hadn’t got. I am going to find preferred (more ethical) providers going forward and replace some products. However we all (me and mum at her house, third son, his live in girlfriend, 3 visitors and the 3 grand-chinchillas at mine) had enough food (have only needed one delivery each in January and some bread and milk). I looked at everything else on my to do list and crossed off all the non-essentials – people who sent a Christmas card at the last minute didn’t get one back, the ones I had been carrying in my bag expecting to meet my cousin did not get posted. Everyone had food and a token present (even the chinchillas and one for the visitor’s cat).

    Don’t ask how I sprained my ankle. I’ve reached the age where bruises appear and take ages to go (sometimes I can match them to various items of furniture. Not a clue and we are now at the original 6 week ‘resolving itself’ period. I have been ‘inspected’ and my physio has gone off to see which aids (grab rails, perching stools and an extra rail on the stairs) might be available (I was lent some equipment after my hip operation) BUT my house has too much stuff in it (suspect majority belongs to son and girlfriend) and is a trip hazard.

    I know that mum has held onto a lot of things for 10 or even 20 years after she last used them so I’m doing it differently. I have got rid of a lot (mainly donated to various charities) over the years . However I have now set a new goal of halving my stuff (hoping they will let some things go too). I’ve always sewn (designed doll clothes and dressed my brother’s teddy when I was 8, made nearly all my own clothes from the age of 17, made extra curtains and sheets from material and offcuts to keep the house warm when my husband was made redunddant, patched and recycled clothes for the boys and more recently helped out with anime and fancy dress outfits).

    My old faithful machine died a long while ago (still kept it for years as it was excellent for standing on to paper ceilings) and the new one I bought has hardly been used. Everything I have sewn recently (including a circular bird cage cover cut from a 90″ sheet) has been sewn by hand. I gave a lot of general craft stuff away last year. This time the recipient (she runs a sewing/ craft group for young mums so they don’t get isolated and depressed) is going to come for two sewing machines (3 if I can persuade mum to part with the other one – it still has the foot pedal taped on, the way I prepared it for moving to her bungalow 3 years ago), sewing accessories and notions + a starter pack of embroidery threads (over 200 of each) and more craft stuff for her sister’s nursery school pupils. It is all going to good homes and I won’t miss it a bit.

    I have a skip list (dumpster I think you call them) for broken/ rejected by the charity shop/ more than 3 items for the council to take away. I am letting go of a piece of furniture I love but my sons hate which hasn’t been right since we moved and is falling to bits (and is too bulky and dominates the room it is in. I have lists for things to donate. I’m going through everything I own asking what I want to keep rather than trying to save everything (lots of it has been discarded by other people – I was 50 before I got to choose a table or a sofa of my own).

    Think I’ve rambled on for far too long. Look at everything you have, everything you do. Decide what you want to eliminate, be ruthless. Keep the things that set your soul on fire. Prepare for what you can, adapt when you cannot, keep positive. Adjust, learn (in the widest sense) work out how to do things as they become difficult, find ways round challenges, use what you have ( my new garden plan with use existing raised beds made even higher with large (1m x 0.5m x 0.5m) bags of soil on top. The other side (raised bed was knocked down several years ago) will have old bins for fruit trees and raised bed using old metal frame garden chairs (left behind by a previous owner) supporting a builder’s plank with more soil bags on top). The metal base (honeycomb weave) of my son’s old bed frame will be painted and used to grow things up. I may try to colonise part of the backs (area behind the houses but ours is a dead end at my end). My father in law used to grow potatoes on the railway embankment behind his garden.

    You are a lovely couple, I’m sure everything will turn out fine.

  45. Kristin says:

    Just a note about the credit card advice-if you do plan on traveling internationally, do NOT get rid of your credit cards, just keep them only for travel. There’s been too many times that I’ve been abroad and had to use a credit card when my debit had a hold due to foreign charges despite me letting my bank know I would be traveling, or been in places where debit cards aren’t accepted. You don’t want to get stuck with no way to pay. Plus,, it’s way more secure and more easily replaceable if it does get stolen, and some cards waive foreign transaction fees

  46. Lynne says:

    Hi, I don’t have any specific financial advice, just a life observation. When I was 10 years old, I was diagnosed with an autoimmune disease, and my parents were told I wouldn’t live to be 20. When I was 20, I was told I wouldn’t live to be 30. I’m now 63 years old. I truly understand the temptation to not plan for retirement as strictly as you might if your future health were not so uncertain. I made that mistake, and am paying for it now in that my finances are not as stable as they could have been had I not believed I would not be here now. It sounds like you are doing a great job of striking the balance between enjoying life now (while you are still relatively healthy), and saving for the future, because we never, ever know what it will bring. Good luck to you in the future, it really seems that you are on the right track, and things just need a little tweaking!

  47. Mother who had an illness says:

    I have found that CHOICES are part of life.
    If you have kids, you give up some travel. If you want 2 homes, you give up other things.
    If you want an art studio, you give up eating out all the time.
    I have no idea what to say about your illness, that just sounds very difficult.
    Your rental sounds profitable, good idea with that.
    I’d say give up eating out, make an art studio, halve the travel, have local, short trips away on a low budget.
    Kids- maybe just have one if ill? I know it’s not my business, but having kids is not always easy.
    Maybe focus on the good free things in your life? Each other, budget holidays, cooking together, relaxing, appreciating your health when you have it? Holiday in your cottage in the off season, ie the cheap season.
    I have had kids and I have not been overseas for so long, but that’s ok, I made choices.
    I was healthy as a parent of young children, but when my kids were teens, I had an illness. It was very hard. I’d recommend only one child if you know you will have an illness, or maybe accept that you can’t always have everything? Make choices, and be grateful for what you have?
    Good luck, appreciate what you have, learn to live simply. Life is ok without overseas travel and eating out all the time.

  48. Tracy says:

    Regarding the 403b, there is an IRS exception to the 10% penalty for early withdrawal if you become disabled. It’s worth checking out. I would also beef up your emergency fund asap. It doesn’t have to be your CF, any kind of accident makes you vulnerable. I became disabled after a car accident with 5 young kids, and lost 60% of my income. We were not at all financially prepared. I’m sending lots of prayers to you for a beautiful, healthy life with lots of children!

    • Katie says:

      Hi Tracy,
      Thank you for your response! I will look into your tip about the IRS exemption. A 6 month emergency fund is our #1 step right now.

      Best to you and your family!
      Katie

  49. Rach says:

    Hi Katie- great planning and dreaming for your future. Sometimes too many ideas can result in analysis paralysis. I wonder if combining some desires might help. Eg. Put $4000/ yr away into a fund to build Ardern’s studio but if you have become parents then spend the $ on enabling you to take time out from work. Similarly I think you could consider the holiday home as Katie’s retirement fund and slowly increase the rate at which you are paying it off. I agree with Mrs FW about maximising Ardern’s retirement savings to get the employer matching. Bless ya

    • Crew Dog says:

      “I think you could consider the holiday home as Katie’s retirement fund and slowly increase the rate at which you are paying it off.”

      That’s a really good idea! Once it’s paid off, it’s a much bigger income stream (potentially), plus if the need arises to sell it Katie & Arden would have the equity. Or, if Katie becomes unable or chooses not to work any more, they’d have one less debt to worry about. And the money’s not tied up in a retirement account with whatever restrictions would come along with that. Only caveat I would have is that houses are not immediately liquid, so they would still need an emergency fund.

      • Katie says:

        Hi Crew and Rach,
        I think looking at the cottage as a part of my retirement is a great idea. Do you think it makes more sense to put extra on that one or our primary first?

        What we are tossing around in our heads today:
        -Put $100 a week into Ardens 403b- this would be $5200 a year plus the $1500 match. A start for consistent contributions. Look into putting bigger chunks of money in with the bonuses.
        -Quickly get an emergency fund of 25k – this would be 6 months of true expenses (in an emergency we wouldn’t be taking vacations or doing house projects)
        – lower our expenses – when arden and I reviewed what we wanted to cut back – it came to 19k a year
        -aim to pay off one of our homes off in 15 years instead of 30 (which one?) it would take about $500 extra for our primary each month or the cottage.

        What do you think?

        • Anne says:

          Hi Katie,

          You should probably talk to a tax advisor about the implications of where you put those funds. You could end up over the standard deduction with large medical expenses, in which case it would be advantageous to be able to deduct mortgage interest. Or you may be able to deduct interest on your rental property as a business expense (along with depreciation). Contributing to 403b can be tax advantageous, but if for various reasons you want to go a different route, make sure you’re not unknowingly disadvantaging yourself tax-wise.

          Also, it may be time to do some basic estate planning. If something were to happen to Arden and Katie inherited the life insurance, the large cash asset could keep her from getting government disability support if she needs it. Estate Lawyers will often suggest establishing a trust so that an individual with special needs can have access to the estate without losing government benefits.

          • Katie says:

            Hi Anne,
            Thankfully due to my excellent insurance plans we never meet the medical limit but who knows with the change in the tax laws…we will find out soon. We have historically been over the standard and with the rental I expect that to continue. That is an interesting idea about a trust. I am no longer in the social security system due to my career in education which operates with a pension only and I don’t think my pension or long term disability policy would be affected but definitely something for me to check on. Thank you for killing Arden off – it was about time!!! : )

            Best,
            Katie

        • Stephanie says:

          I would plan on having something go wrong if you end up having to touch your emergency fund even if it is not your house.Different friends had their water heater and roof fail during a period of unemployment. Plus car repairs due to a fallen tree.

  50. Retired Prof says:

    I think it takes a lot of courage to put all this info out there to seek help in getting your finances together. I may be more risk averse, but I think in the efforts to be gentle and kind, Ms. FW is underselling just how risky these spending choices are. There are so many luxury items and ‘wants’ here (renovations! eating out! travel! an art studio! education for fun!) before getting a secure financial footing under yourself.

    The lack of emergency funds and savings is a serious problem because you are one ‘bad’ event (job loss, medical catastrophe beyond what insurance will support, etc.) away from financial instability and insecurity. Katie having CF is almost a red herring, as the same would be true if she didn’t have a chronic illness. If the “Katie stops working” budget looks scary, then good! It should. This is a reality to be prepared for (for Katie OR Arden) as something that could just happen at any time. It’s not just about being behind on retirement savings. You are behind on TODAY savings that operate as a buffer for bad luck.

    Also, it’s unclear whether the money listed as profit and cash flow in the cottage rental is being saved for long-term maintenance and expenses as things need to be fixed, repaired, or to deal with future loss of income related to repairs or a significant downturn in the vacation rental market (which may happen at the next housing bust). The fact that “winter” and “summer” rentals are being calculated differently suggests that Katie and Arden may not be fully accounting for how well this property rental can be cash flowing in the long term. I’d look more carefully into this to make sure that this cottage is truly a source of passive income moving forward and not yet another risk of luxury (a second, vacation home) that doesn’t pay for itself more than investing the same $ would.

  51. John says:

    Regarding paying down the mortgages:

    1. I agree with everyone who said prioritize 3-6 months emergency savings, then AT LEAST enough in retirement savings to get the 3% match, and probably a lot more.

    2. If you get to the point that you have extra money and want to pay down the mortgages early, focus on one at a time. The reason is that paying off one mortgage frees up a lot of extra cash. Once one is paid off you will then have a lot more money available to pay down the other mortgage faster. You can also stop making the extra payments any time you need to. When you are paying extra on mortgages you don’t realize the benefit until it is totally paid off. Focus on one mortgage so you realize the benefits earlier.

    Now, how to choose which mortgage to pay off first:

    At some point, the deductions on your primary home mortgage will fall below the standard federal deduction of $24k for filing jointly. At that point you are no longer receiving any tax benefits from the mortgage.

    Rental expenses (interest, insurance, etc) are always deductable from income. The standard deduction never comes into play.

    Assuming the mortgages are equal (balance remaining, interest rate, insurance cost, etc), you should pay off your primary residence first. Of course they are not equal. You really need to set up a spread sheet and run though both scenarios. You also have to consider the PMI on your primary residence. My gut is that it will make the most sense to first refi your primary residence to get rid of the PMI, then pay down the RENTAL first, because its balance is so much lower than your primary residence. You will end up paying more taxes this way, but will probably pay less overall because you can pay it off so much faster. It will also improve your cash flow earlier in life. The PMI is just money down the drain though. With all of your upgrades to the house, you might already be at the 80/20 loan to value you need to refi.

    I’m not a tax expert, just a guy with one rental and a primary residence. Run the numbers for both options.

  52. Elise says:

    Congrats on your willingness to share so openly!

    For your near-term goals, you could try putting a dollar amount on the cost (some things might be rough approximations) and rank order them. It’ll be easier to prioritize those things that are a lower ROI for you: maybe saving for the art studio is more important than vacations…or not, it’s up to you. It seems like paying off the credit card would be a quick win.

    Also, don’t let perfect be the enemy of good! You could wait until you have time to figure out the max you could automatically contribute to retirement or just set up automated retirement account savings of a couple percent today and then increase that number later.

    • Katie says:

      Hi Elise,
      Thank you for your response! I like your idea of a ranking system. We just set up Arden’s retirement for $100 a week with will be $7500 a year including his match to get things going.

      Best,
      Katie

  53. I concur with Mrs. Frugalwoods that most of your financial planning/cashflow is GREAT, with the exception of retirement savings. Retirement savings must be your No. 1 priority, especially given that Katie has a chronic medical condition that makes it highly likely she will have to retire quite early. Every spare dollar/dime should be going to retirement, period. I would put 100% of your cottage profits into retirement. I would recommend you max out your retirement contributions at your respective jobs. AND I would recommend you follow Mrs. Frugalwoods’ recommendations on where to economize and also put THAT into retirement.

    If you are looking for any extra income, given Katie’s school counseling background, I would suggest a side business of private counseling (for example, consulting to families on college application strategies). The fact you live on Cape Cod means you live close to many wealthy families (either year-round or summer visitors) whom I bet would pay premiums for this service—especially during the summer when Katie is off work anyway!

    I am a cancer survivor so I understand the need to maximize income/savings should the worst-case medical scenario happen, and you pass away in your working years and leave behind a spouse/children. That is why savings should be your No. 1 priority. Good to see you have the life insurance policies too.

    You are doing a lot right! Congrats! Fingers crossed you succeed in the fertility quest!

    • Mrs. Frugalwoods says:

      Oooooh I love the idea of Katie doing private counseling with families–Cape Cod definitely strikes me as a great area for that sort of thing. My sister (now a university lecturer) did something similar when her kids were young: she tutored high schoolers in AP science courses in the evenings after her little ones were in bed. It was a great way for her to supplement their family income while she wasn’t working full-time. The fact that she’d been a high school AP science teacher made her the tutor of choice in their town! I could see Katie striking a similar arrangement.

      • It is a great side business for sure and even a very profitable year-round business! Low overhead (you can do it in your home, at a library, or at Starbucks) and a high potential billable rate without the need for things like liability insurance/accident bonds like you would need at most storefront businesses and/or general contractors. I was talking to a relative who started a (now failed) construction franchise, and he said if he had to do it over again, he would have just become a math/science tutor thanks to high billable rates/low overhead! (He is a retired chemical engineer!)

    • Katie says:

      Hi! Thank you for your response. I have thought of doing private counseling but have no idea how to market or what to charge. I did create a website however (see the link below) in a course I took and thought to utilize it with my students at work but I wasn’t allowed to use it as I owned it instead of the school…but perhaps that was for the best! 🙂 Let me know if you have any tips regarding the possible side hustle!

      http://mycollegeandcareerplan.weebly.com

  54. Jake says:

    Why are their properties not listed in their assets? Do they not have some equity in their homes? I see the mortgages in the debt summary…

  55. Sarah says:

    Great suggestions here from Mrs. Frugalwoods, as always. In addition to her suggestion about a Will, one thing to consider is streamlining your accounts a bit and ensuring that you are both beneficiaries / joint account holders. From your Assets list – not including 403bs – I see accounts at:
    1. First Citizens
    2. TD Ameritrade
    3. Bank of America, and
    4. Cape Cod 5
    That’s a lot of different banks! I would recommend moving everything you can to a brokerage like Schwab:
    1. Checking Accounts x2
    2. Roth IRAs x2 (plus better options and lower fees than TD Ameritrade), and
    3. Savings Accounts x2
    All could be consolidated into 1 place. This would also make it easier if – god forbid – Katie had a medical emergency; Arden would have access to everything, and one less thing to think about during a stressful time.

  56. Cindy says:

    I recommend working as long as you can Katie. If your health starts to fail while you’re working, you’ll qualify for the short and long term disability policies through your work. My compensation was dependent on how much I was earning the three years before my health changed and I could no longer work full time. If I have a good month (I get paid my commission once every quarter) I won’t qualify but the rest of the months I do and get almost what I used to make for that month. All policies are different but had I quit for non health reasons my payout would be nothing since it’s hard to prove what I would have been making.
    I can’t say whether or not you should have kids, but if I were you I’d have one then wait a while before trying to have another. My RA came about after my first, then I was pregnant again before I could be diagnosed, and what that left me with was a chronic illness with two children under 2, I couldn’t get out of bed let alone care for two babies. I could barely hold them. I could barely do anything.
    I was forced to change my life for my health, and it’s much better now. The disability income is the one biggest factor for my peace of mind.
    I agree with Mrs. F on everything else-good luck and enjoy your current health!! Oh yes and I’d have travelled more if I could do it all over again. Children limit what you can do and where you can a lot. My first couldn’t sleep anywhere but her crib in her room so we went nowhere for years after we had kids!

  57. Millionaire Gardener says:

    Hello Katie,

    I work as a Pension Counselor for a city government. I’m not qualified to give financial advice but I have handled disabilities and deaths and I had a few thoughts that might help Arden and you. I skimmed the comments; I hope I’m not giving duplicate information.

    I would meet in person with a counselor from your pension plan to find out exactly what you would receive if you became disabled today and what Arden would receive if you passed away. Meet IN PERSON and bring Arden or a family member or friend who is a good listener and note taker. Make sure your beneficiary forms are up to date.

    If you are not vested yet, ask some probing question. For instance, if it takes 10 years to vest in your plan and you have 9 1/2 and go on an unpaid leave for 6 months, could you buy that leave in order to vest? What would happen to your medical coverage during that unpaid leave? Don’t ask too many questions at once. Get the person’s business card and ask if you think of additional questions later.

    Social Security! Your situation is exactly the reason we pay taxes. Meet with someone from Social Security IN PERSON again with a loved one who is a good listener and note taker and find out what you would receive if you were disabled today and what Arden would receive if you passed away. My understanding (from general reading not as a part of my job) is that if you have children Arden would get a benefit both for them and as your widower who is caring for them (there’s a family cap) until they turn 18. If you pass away and don’t have children, he may be able to collect social security as a widower 2 years earlier than normal and then switch to his own benefit later.

    Mrs. Frugalwoods mentioned a will and estate plan, you probably want to think about a durable health care POA and living will.

    If you have to stop working involuntarily, don’t underestimate your attachment to you job. Seek help if you start to feel depressed. I’ve seen many people who were more attached to their job than they knew.

    I hope you continue to do well and wish Arden and you the best!

    • Melissa says:

      I second all of this! I in no way practice this area of law, but a significant part of your future is resting on what benefits you’ll get if you’re disabled. And in my limited experience, it isn’t straightforward and there are lots of bureaucratic complications. For social security, you may not be approved and may have to appeal and even if you eventually win, you won’t get any money until disability is awarded. So definitely find out these possible problems now so you can plan for them! I like the idea of both you and Arden going in person to meet with advisors. You may also want to talk to a reputable attorney who specializes in disability law and social security (maybe your doctor will have a recommendation?).

      You don’t want to learn when it’s too late that you’re not entitled to what you thought you’d get. My motto is hope for the best, prepare for the worst.

      Good luck! It’s clear that you’re putting a lot of thought into your future. It is difficult to plan and prepare for everything, but you’re doing a great job and have an excellent start.

  58. Dannelle says:

    Hi Katie,

    Thank you so much for sharing, my husband has CF too and we are in a similar planning mode so this post has been super helpful for me as well! My husband is also pretty healthy but being mindful of the risks is wise. If you haven’t had to have treatment in a while I would see if you could work with a broker to get life insurance. We were denied a few times before finding a company that would consider us. I know that’s a huge hurdle for anyone with a CF diagnosis.

    After a few years of trying to start a family we decided that our family will just be the two of us and with that in mind have been working to pay off all non-mortgage debt by the end of this year while investing about 25% of our income (with 15% outside of employer plans that can be accessed before 65) since his income makes about 70% of our household revenue. We also have a four-month emergency fund. Our budget is pretty slim with unneeded expenses and we focus on putting about 3-4% of our income towards experiences (vacations, events, dining out).

    Would you consider selling your cottage? It’s quite lovely but could give you a large pad to meet some of your other goals. Basically, if you had the money the cottage would bring in from being sold sitting in the middle of your kitchen table would you go buy a cottage or focus on your other goals? If you would focus on your other goals considering selling it. You could always save up to buy another rental once you had a clearer picture of how your work and family life was going to look like. Just a thought!

    You are paying attention and being intentional and that alone will go a long way!

    Best to you both!

    • Katie says:

      Hi Dannelle!
      Thank you for writing!!! Please let me know who you used for life insurance! In regards to selling the cottage – it brings in about 15k in profit every year and if we sold it we would only net around 35k – I see the income as being very helpful if I ever need to taper down employment and I love real estate and would buy a house everyday of the week if Arden let us! 🙂

      Best to you guys as well!

  59. Stephanie says:

    Will Arden be able to inherit Katie’s retirement fund? If not, I would focus on his retirement and being prepared to live on a lower salary, perhaps looking into part-time or contract options for Katie for the future. I know a lot of educators who move to contract work as they retire or leave their day job, and it often pays really well, while really allowing you to use that knowledge. I also wonder if Arden has an option for an HSA plan. I don’t know if it would be worth it for Katie’s plan, since she has good insurance right now, but it would be a great way to save for future health costs or to use to cash flow costs that aren’t currently covered. If you file taxes jointly, he would be able to use the account for Katie’s medical bills even if she’s not on the plan itself. And if there is leftover at some point, it can be rolled over into retirement. It is also offers the tax benefit of being pre-tax contributions that will lower your taxable income.

  60. Millionaire Gardener says:

    Hello Katie,

    2 More Thoughts –

    Unions and Sick Leave Banks –

    You mentioned that you wanted to find a public school job with a union. Check if the union for any school system that you are considering has a sick leave bank. Usually there is a formula where you must donate time (sometimes only 1 day) in order to receive donated sick time if you run out. This is more valuable than the equivalent amount of money as it can help to preserve your status as an employee. Will Arden be eligible to join a union once he has an electrician’s license? Trade unions still have excellent benefits.

    Full Time to Part Time Work Status – Check with Social Security, your pension plan, and your disability insurer as to how changing from full time to part time status will affect your benefit calculations prior to accepting part time work. It may be smarter to work as long as possible full time and then stop working.

    Again, I hope you continue to do well.

    • Katie says:

      HI!
      Thank you for your advice – most public schools do have a sick leave back which sounds like a wonderful benefit and one I will definitely participate in. We don’t have an electrical union near us but definitely something to think about. I’m not eligible for social security anymore but I will definitely call my pension program to inquire. Alot to think about!

      Best,
      Katie

  61. Matt Taylor says:

    I recently had an initial meeting with a “retirement distribution counselor,” who approaches retirement funding from the point of view that it’s not the total accumulation of $$ that matters when you retire, but rather maximizing the final income stream in your retirement. While these sound similar, they are not necessarily the same, nor do they lead to the same strategies, especially in choosing Roth v. regular IRA’s.
    To illustrate, he asked if I would loan him $50K for 30 years, under the condition that he would tell me the interest rate when he came to pay back the loan. “Of course not,” I replied. He followed up with, “But isn’t that a bit like what the government is doing with traditional IRA’s?” The point being that you don’t know what the income tax rates will be in 10, 20, or 30 years. You may be in a lower relative tax bracket than right now, but what if the actual tax rates of the brackets have increased?
    He encouraged me to look at the historical income tax rates of the U.S. (which have been relatively low for several decades), look at the growing federal deficit, and ask myself if I think future tax rates would go down, stay the same, or go up. If I think they will go up (and I think it’s hard to argue otherwise, given the growing deficit), I should consider “locking in” the current tax rate via Roth IRA contributions, to avoid surprises down the road.
    He also pointed out that when initial clients proudly show him the balance sheets of their 401k or traditional IRA accounts, he asks, “How much of that money is yours?” “All of it” is not the correct response, because the final value depends on the tax rates in effect at the time of withdrawal.
    Plus Roth IRA’s are not subject to Required Minimum Distributions. So, you should probably have a mix of retirement accounts, allowing you the maximum flexibility, but I think I’m going to start favoring the Roth accounts more than I have in the past.

    • Katie says:

      Hi Matt,
      Thank you for your perspective – I find the topic very interesting and am looking forward to understanding more about the different options. In addition to the tax bracket issue, when you are paying taxes on the traditional it includes paying on the accrued interest but with the Roth the interest is never taxed – no?

      Best,
      Katie

      Best,
      Katie

      • Matt Taylor says:

        Katie, you are correct. I forgot to mention the fact that any interest and/or gains inside a Roth IRA are not taxed, because you already paid the tax when you contributed to the account.
        The IRS website (https://www.irs.gov/publications/p590b#en_US_2018_publink1000230969) says:
        “Are Distributions Taxable?
        You don’t include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). You also don’t include distributions from your Roth IRA that you roll over tax free into another Roth IRA.”

        So, chalk up another advantage for Roth IRA accounts!
        Best,
        Matt

  62. Elaina Barbaree says:

    Hi Katie,
    This is ashamedly tardy but I just now got around to reading through everything.
    First off, the world needs more conscientious parents like you! I hope the best for your fertility treatments.
    I don’t have a lot to say about the financial side of things but one thought crossed my mind; what about managing other rental properties in the vicinity of your own cottage as a side hustle?
    I cleaned houses for a time when I first quit work to be a SAHM. I would time it so the baby would either sleep in a portable crib while I was cleaning or I would carry them in a Bjorn type thing while vacuuming and dusting, even in the kitchen (not cleaning the bathroom obviously). Your own place is so beautiful it would be a good testament to how you care for another person’s rental property. I made good money doing that for quite some time. Once I had two kiddos, the job became impossible. But by that time, I didn’t need the extra income because my husband’s remodeling business had taken off.
    Anyway…just a random thought.
    All the best to you and your husband!
    Elaina

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