Reader Case Study: A Baby, A Freelancer, And A Marketing Manager
Mary and John live in a coastal town in northern Massachusetts with their one-year-old daughter. Mary wants a more flexible career that would allow her to spend more time with their daughter. John recently transitioned to freelancing and the couple is trying to figure out how to account for his variable income. Additionally, they’d love to get out of the one-bedroom apartment they rent and into their own home. Read my disclosures here.
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.
Case Studies are updated by participants (at the end of the post) several months after the Case is featured. You all requested an easier way to track Case Study updates and I have heard your pleas :)! I’ve created this page, which lists and links to all of the updated Case Studies.
I probably don’t need to say the following because you folks 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. Other disclosures here.
With that I’ll let Mary, this month’s Case Study subject, take it from here!
Hi, Frugalwoods! My name is Mary, I’m 31 years old, and I’m the marketing manager at a book publishing house. My husband John is 35 and he’s a freelance graphic designer. We rent a one-bedroom apartment in the downtown area of a beautiful coastal town in northern Massachusetts along with our sweet one-year old daughter. John and I met after we graduated from college—he attended an art school here on the North Shore and I went to a nearby liberal arts school.
John’s background is in fine arts and we both really enjoy the local art culture. We love hiking, going to the beach, and walking around our cute town. On the weekends, you can find us going to our favorite café for doughnuts, hiking in the White Mountains of New Hampshire, swimming in the ocean (ok swimming is a strong word… I’m happy if I get thigh-deep in that frigid water), or hanging out with friends and family.
We’ve been married for four years now and, since the birth of our daughter, we’ve been re-evaluating our lives and contemplating the future more seriously. This is where you all come in! We’d love realistic advice on what’s feasible and wise, specifically regarding our careers and housing situation.
I’m the marketing manager at a publishing house and I’ve been here for almost ten years (I got this job the summer after I graduated from college!). While it’s not the highest-paying job for this type of work in our area, I have wonderful co-workers and a great boss. And because we’re a small team, there’s a lot of variety that keep things interesting. On any given day, you’ll find me writing back cover copy for our books, designing print advertisements, planning out details for shows and conferences, working one-on-one with authors, managing the production of our catalogs, or overseeing photo shoots (and that was just today!). There are a lot of things I like about my job, but there’s also a lot that I question. Since I’m on a small team, it can get stressful and I often feel a lot of pressure.
Deep down, I’m not that passionate about marketing, and I frequently dream about a career change to something I’m more interested in. I’ve always loved gardening and the outdoors, so I often toy with the idea of moving into landscape design, horticulture, or land conservation/ management. But the daunting thought of going back to school and starting fresh in a completely new career always makes me stall…
However this year, there’s been a new impetus for thinking about a career change: our daughter! Simply put, I’m having a really tough time juggling a demanding career and a baby. Sending our daughter to daycare every day still makes me feel pretty emotional, and I hate that I have limited time with her. In the mornings and evenings I’m trying to squeeze in as much time with her as I can, which often leaves me stressed and grasping to play catch-up with my other duties. My work has been suffering as a result.
In recent months, I’ve been more seriously considering a career change. We can’t afford for me to stop working, but I wonder about finding a job with either: a) more flexible hours/remote work or b) a school schedule, so that I can at least be home in the summers and on school vacations. John and I would love to have more children, and the thought of working full-time all year long while they’re young makes me really sad. I’d love to find a work situation that affords me the ability to be home more. Another consideration is that since John is now a freelancer, our family’s health and dental insurance is through my employer.
Enough about me, let’s talk about my husband: John is incredibly creative and hard working. Post-college he spent many years working as an art curator at various art galleries and also on his own paintings. In addition to curating and painting, he worked as an artist for Whole Foods for several years.
Since we got married, he decided that graphic design is a more lucrative and stable career for a family man, so he put himself through school over the last couple years, taking evening classes at Mass Art (this pulled from our savings quite a bit, but we didn’t go into debt).
He spent the last year working full-time as a graphic designer at a large company in Boston, but it was just on a contract basis. His contract ended this summer, and at the advice of friends and colleagues in the industry, he decided to switch to freelance work (where he has the potential to earn quite a bit more).
As of last month he is self-employed, working as a freelance graphic designer. He loves working from home as it affords him more time with our daughter and less time commuting. However, the first month’s pay is not what we thought it would be, so we’re a bit worried now.
We realize it’ll take time to build a client base, but just in case, he’s also on the hunt for a salaried position where he’d have regular hours, pay, and benefits.
The Upsides: Loving Where They Live and NO Debt!
We are having an absolute BLAST with our baby girl. The best part of my day is coming home in the evening to spend time together as a family. And we’re never at a loss for fun things to do in our area.
There are always nature trails to explore nearby, the ocean to run in, easy access to a fun downtown, and trivia nights with friends at the local bar. We feel so lucky to live here and we’re within an hour’s drive to most of my family, which is great. Plus, we’re only 45 minutes from Boston!
Even though our finances are incredibly strained right now, we’re thrilled to be officially debt-free. We owe that to Frugalwoods for kicking our savings into high gear to pay off our student loans before our baby was born!
The Downsides: A One-Bedroom Apartment and Inflexible Schedules
The most challenging thing for us right now is me working full-time at a job with no schedule flexibility. It’s really hard on me emotionally to send our daughter to daycare. With our desire for more children, this situation makes me even more upset. For my husband, not having a stable salaried job is difficult for him. He feels a lot of pressure to work above and beyond regular hours because he’s not sure what next week or next month will bring. It’s the downside of working freelance.
Something else that we have a hard time with—and I recognize this comes from a privileged place—is living in a one-bedroom apartment without any yard or outdoor space. I’ve always loved being outside and I adore gardening. I would very much like to pass that along to my daughter. Currently we have to drive to get to trails or a park, and while we love our town, we’re ready to trade it for a place of our own with freedom to roam. Or at least, a place to sit outside in the grass whenever we want.
We’re also out-growing our current apartment. Right now, all three of us share a bedroom. Soon we’ll have to convert our living room into a bedroom for our daughter, but that will mean significantly less living space for us so we’re stalling. We feel like it’s time for a slightly larger space, especially with our plans to grow our family.
Where Mary and John Want To Be in Ten Years:
- Before our daughter was born, we were excellent at saving and barely spent any money. Over the last year, we’ve become very lax! Especially in the food arena because… well first of all, breastfeeding is no joke. I feel like I have the appetite of a linebacker. And with limited time with my daughter, I’ve been spending a lot less time in the kitchen this year! So we definitely need to reign this in.
- In 10 years, we’d like to still be debt-free, except for a mortgage. We’d both like to be on track for retirement savings, and have the recommended amount in our savings account.
- In 10 years, I’d love to own a house with some property and land to garden in.
- Hopefully we’ll have 2 or 3 kids, and ideally we’ll still live within an hour’s drive of family and close friends in this area.
- John would love to be somewhere stable on salary, at a job that he can see himself staying at for the long term, possibly until retirement. He’s tired of the job hustle, so he’d love to be settled with an established company that he enjoys.
- I would love to be doing something that I enjoy that has flexible hours so that I can be around for my children more.
Mary and John’s Finances
|Mary’s Net Income||$2,688||Mary’s net salary, minus health and dental insurance, 401k contributions, FSA contributions, charitable donations, and taxes.|
|John’s Net Income||$1,887||After taxes. This represents John’s first month as a freelancer, so this is lower than he’s used to making. Freelancing is off to a bit of a slow start. We hope that as he connects with more clients, his income will grow.|
|Mary’s Annual Bonus||$208||Year-end bonus|
|Monthly subtotal:||$4,783||Again, this is based off of John’s first month doing freelance work. We hope this will pick up steam!|
|Daycare||$1,460||5 days a week. We’ve shopped around, this is one of the best and most affordable in our area.|
|Rent||$1,200||This is really good for our area.|
|Groceries||$550||Includes household supplies like toilet paper, diapers, toothpaste, detergent, etc.|
|Eating Out/Restaurants/Coffee shops||$314||We’ve really let this slip since our baby was born! Both working full time, plus extra tired = more eating out and less food prep being done at home|
|Car expenses||$145||Gas plus routine car-related expenses|
|Internet & Cable||$144||Comcast bundle (we’ve tried calling and un-bundling to get rid of cable, but they tell us it will be the same price regardless)|
|Vacation/Travel Expenses||$127||Visits to John’s family in Ohio. We have a Chase Sapphire Preferred credit card that we’ve been racking up travel rewards points on (affiliate link).|
|Medical||$100||Copays and prescriptions|
|Home goods||$92||Miscellaneous home-related purchases from paint to pillows|
|Mary’s car insurance||$92||Through Liberty Mutual|
|John’s car insurance||$73||Through Geico|
|Cell phone service||$62||Consumer Cellular for both of us|
|Gifts||$54||Christmas and anniversary gifts|
|Utility Bills: gas (for the stove) and electricity||$42||Our landlord pays for heat|
|Personal Care||$24||Makeup, body oils, etc.|
|Alcohol||$20||Wine and beer|
|Entertainment||$12||Movies and art shows/museums|
|Monthly subtotal:||$4,631||This is very illuminating. And embarrassing.|
|Annual total:||$55,572||Trying not to have a heart attack…|
|Item||Amount||Notes||Interest Rate and Bank|
|Savings Account 1||$17,158||This is our emergency fund & future “house downpayment” fund||Through Synchrony Bank, earns 2.12% interest|
|Mary’s 401k||$11,320||Started contributing in 2017.||Through Fidelity|
|Mary’s Profit Sharing Plan||$10,500||100% company funded, and I’m 100% vested|
|John’s 401k||$7,000||From his previous employer.||Through Fidelity|
|Savings Account 2||$5,000||This is Mary’s “Car Emergency” fund; it’s earmarked for car-related expenses and payments. I’m currently saving up to buy a used car.||TD Bank|
|Mary’s Checking||$1,500||Typically only keep enough in here for bills, rent, etc.||TD Bank|
|Baby’s 529 College Fund||$500||Started in Summer 2018||Through TD Bank|
|Mary’s FSA Fund||$500||Flexible Spending Account through Mary’s work. For out-of-pocket healthcare expenses.||Contribute set amount each paycheck automatically, pre-tax|
|John’s Checking||$400||Typically only keep enough in here for bills, etc.||Citizens Bank|
|Vehicle Make, Model, Year||Valued at||Mileage|
|Toyota Yaris 2010||$2,000||122,000|
|Mazda3 Hatchback 2005||$1,500||153,000|
|Total:||$3,500||Both cars are paid off!!|
Mary’s Questions For You:
Frugalwoods Friends, we would love to hear your advice!
- Is now a bad time for me to consider a new career?
- With my husband’s new foray into freelance work, our finances are incredibly strained right now. His take-home pay is lower than we anticipated, and while that’s only his first month, we have no choice but to build our budget around it until he acquires more clients (or gets a salaried job).
- With this in mind, is it bad timing for me to explore alternative career options? Our baby girl is growing so fast, I feel like I should start working toward something now. I’m just not exactly sure what that something should be.
- How can I find a more flexible career/working hours?
- Given my experience in the book world, maybe I should think about becoming a librarian? If I could get a job in the public school system, that would allow me more time with my daughter during the summer months.
- The only problem is, I’m not sure I’m all that interested in being a librarian. On the other hand, the careers I dream about (landscape design, horticulture, viniculture) wouldn’t necessarily afford me any additional time with my daughter or future children.
- What other job recommendations do you have for someone who wants more flexible hours/school hours?
- In addition to my possible career switch, is it feasible to tackle saving for a house?
- With our current job situation, is there any way we can handle this financially?
- One thought I’ve had is pausing my 401k contributions until we have enough money saved up. Is that wise?
- If we really want to buy a house in the near future, should I suck it up with my current job, and keep at it?
- How can we save more money?
Mrs. Frugalwoods’ Recommendations
Well done, Mary and John! I LOVE that they hustled to pay off their student loan debt before their daughter was born. I LOVE that they prioritized creating an emergency fund and retirement savings. I LOVE that they drive older, paid-off cars. I LOVE that they’re renting a one-bedroom apartment in order to save money. I LOVE that they love where they live.
And I LOVE that they’re taking the time and mental energy to consider what they want in life. It’s hard to be introspective when you’re working full-time and parenting a baby and just trying to get through the day. I commend Mary and John for carving out the space to be thoughtful about their future and about what they want their lives to look like. Many, many congrats on doing so well and getting so far!
I think Mary is essentially grappling with these three questions:
- How can she find a job with more flexible hours to allow more time with her daughter?
- Is freelancing the right fit for John?
- Where does buying a house fit into all this?
Should Mary and John Swap Places?
As I read through her Case, it struck me that Mary and John seem to want to switch places. Mary has a stable career with a great salary and benefits. John has a flexible schedule. To me, the most illustrative statement is where Mary identified they’d like to be in ten years:
John would love to be somewhere stable on salary, at a job that he can see himself staying at for the long term, possibly until retirement. He’s tired of the job hustle, so he’d love to be settled with an established company that he enjoys. I would love to be doing something that I enjoy that has flexible hours so that I can be around for my children more.
It sounds like they have one another’s dream jobs, it’s just that the wrong person is matched to the wrong job. If this ten year goal is what they truly want, then I think changes are in order. However, since they have a family to support, those changes will need to be incremental. Let’s figure it out together.
First of all, John made a great income in his first month of freelancing! Plenty of freelancers make negative dollars in their first months–or years–of self-employment. The fact that John made money (and not a small amount of it) is a great sign. I would also note that one month does not constitute enough data to determine whether or not freelancing will be financially viable for John. It’ll take a lot longer for him to establish a client base and determine how lucrative–and tenable–this work is for him. However, one month is long enough for John to determine that he does not enjoy freelancing.
If he doesn’t like the hustle and the administrative aspects of freelancing, then he should accelerate his search for a salaried position. There’s no reason to grind away at freelancing if it makes him frustrated and anxious. Not worth it!
In terms of timing, I encourage John to consider that the job market is great right now. If John thinks he wants a salaried position, he should find it now. There’s never a guarantee that a good job market will remain good and, if it were to tank in a few months/years, that could make John’s job search more challenging. Since they live relatively close to Boston (and perhaps can use the commuter rail?), I imagine there’s a robust job market available to him. Alternately, if John does think the freelance life is for him, he should give it some time to see how his income shakes out. One thing I’ll offer ironclad advice on is…
Don’t Both Become Freelancers
Plenty of couples are dual freelancers, but it requires agility and quite a bit more in savings than Mary and John have. At present, Mary and John are living almost paycheck to paycheck, which can quickly become dangerous with fluctuating freelance income. Freelance invoices aren’t always paid on time, contracts don’t always go through, and work often isn’t paid for ahead of time. Freelancing can mean several months of no money followed by large infusions of cash all at once.
This is fine if you have the liquidity to float yourself for months (or years) at a time, but not so fine if you’re dependent upon your monthly income to pay your bills. Because of the mercurial nature of freelance income, I advise Mary and John to first figure out what John wants to do vis-a-vis freelancing before Mary takes a leap into a more flexible career.
Further, the family’s benefits are through Mary’s job. When considering dual freelancing (or reduced work hours that don’t qualify her for benefits), they should do the calculations to game out what they could expect to pay for healthcare through the Affordable Care Act.
Dual freelancing (or one person freelancing and one person working part-time) is feasible, but I recommend they first save up at least a year’s worth of living expenses to buffer them from potential zero income months and potentially higher healthcare costs.
Another factor to consider with freelancing/part-time work is that they’d need to start saving into independent retirement accounts. There are several options for this (solo 401k, Roth IRA, IRA, and SEP IRA) and it wouldn’t be a big deal to select one and start saving. It’s easy to stop saving for retirement when you’re freelancing because your employer is no longer automatically withholding your monthly 401k/403b contribution, but you’re still going to retire some day and you’ll still want savings!
Mary’s Desire for Flexible Work Hours
I keenly feel Mary’s articulation of wanting more balance and flexibility, particularly while her baby is young. I wish there was a magic bullet, or a perfect career for every parent craving flexibility, but of course, there’s not. What there are, however, are lots of options.
A note of caution: part-time or flexible hours usually come with part-time or flexible pay, which is to say, either not a lot of pay or very irregular pay. And of course, no healthcare or retirement or FSA benefits. But, these jobs can give you back your most precious resource: your time.
I know Mary has considered becoming a librarian for the possibility of working school hours, but she also articulated that she’s not sure she’s all that interested in the career. Since I imagine it might require a master’s degree in Library Science, it’s tough to see a viable return on the time and money she’d need to invest in pursuing that degree.
If Mary is serious about working in the public school system, I highly recommend she take a look at the jobs her local district is advertising. What qualifications are needed for a school librarian? What about a reading assistant? Or a teacher’s aide? How about substitute teaching? I wouldn’t pursue a degree program without first identifying exactly which job she’d be qualified for and exactly how much she could expect to be paid.
I also note that school hours for staff don’t necessarily align exactly with school hours for kids. On the other hand, having the same vacations and summers as your kids would be a tremendous boon from both the perspective of spending time with your kids and the perspective of not scrambling for childcare during all of those days off (not to mention that school lets out a lot earlier than work and so you’ve got to cobble together after-school care and sometimes before-school care too).
All that to say, Mary’s idea of working at a school is spot on in terms of allowing more time with her kids and alleviating the challenges of finding childcare around a school schedule. The more flexible she is in terms of what job she does and how much money she needs to make, the easier it’ll be for her to find a position. She already has a BA, so she very well may be qualified for more positions than she realizes. However, it’s almost certain these positions would represent a significant pay cut from her current salary.
Beyond working in a school, there are loads of other part-time/flexible jobs out there and I hope readers will offer their thoughts because I know a lot of you work them! I’m always reticent to recommend my own part-time/flexible career as a writer because it took me years to actually earn any money. I wrote for free for several years before ever getting paid. And even then, I wasn’t paid very much. Now that I’ve been at it for five years, I do earn an income, but it’s not a consistent or stable income–it fluctuates monthly and it’s calibrated on how many hours I put in. I write because I love to write, not because it’s a stable source of money.
I think it’ll be crucial for Mary to make that distinction: does she want to do something she loves to do? Or does she want to do something that’ll give her the flexible, part-time schedule she craves? I want there to be a way for her to do both–and there very well might be–but if there’s not, then I think it’ll be illuminating for Mary to decide which is more important to her right now. And there’s no right or wrong answer to that.
I’ll spitball a few ideas for Mary:
- Work as a nanny and care for another child at home along with her own daughter. This wouldn’t pay as much as her current job but it would eliminate their monthly daycare cost, which would decrease their monthly outlay by $1,460.
- Explore becoming a dental hygienist. This is an in-demand career that often offers flexible hours and good pay.
- Work from home as a customer service representative. A lot of companies outsource their customer service and allow folks to work from home and on diverse schedules.
I’ll be honest here: I do not know anything about Mary’s dream jobs (landscape design, horticulture, or viniculture), but none of them sound particularly part-time. However, I wonder if they’re seasonal? Would it be possible for her to work spring to fall and have the winters off? Would that provide the type of balance she’s looking for? Would their daughter’s daycare allow them to enroll and un-enroll her depending on the season? Similar to the research I suggest with regards to public school jobs, it can’t hurt for Mary to scope out jobs in these fields and see what qualifications they require, how much they pay, and what seasons/hours are expected.
Alternatively, if Mary instead worked a job just to work a job, but had the summers off, could she scratch that horticulture itch by working in a community garden with her kid(s)? Could she volunteer at a farm with the kid(s) when they’re not in school? In other words, is there a way to incorporate these activities into her life without making them her day job?
Saving For A House
Mary and John want to buy a house. I totally get that and I’m impressed they’ve made it work with a baby in a one-bedroom apartment for this long. Woohoo! However. As Mary sagely articulated, this is one too many goals right now. Either they want to save for a house OR Mary wants to find a part-time/flexible job that pays less. Either they want to save for a house OR John wants to continue freelancing with the attendant freedom and lower pay that it entails.
Since they’re living nearly paycheck-to-paycheck at present, there’s just not a lot of room here without: 1) increasing their incomes; 2) decreasing their spending (which we’ll get to in a moment).
This is really a question of what’s more important to them: career flexibility or a house? There’s no right or wrong answer. If Mary and John decide that more than anything they want to buy a house, the fastest route to making that happen is as follows:
- Mary stays at her current job
- John finds a higher paying salaried position
- They save up a downpayment like frugal fiends
Perhaps they do these three things for a few years, buy a house, and then take a step back to reassess Mary’s career.
To Mary’s question on pausing 401k contributions to save up for a house, I say no. In my (admittedly harsh) opinion, if you have to stop saving for retirement in order to save for a house, you can’t afford that house. Buying a house is not a necessity. I would argue that saving for retirement is. Not everyone will agree with me on this hardline approach, but I think it’s dangerous to stop saving for your longterm future.
Mary and John’s Expenses
I am so glad Mary asked about their spending because her story resonates with me. Before kids? She and John were frugal mavens, saving money and paying off debt like a boss. After a kid? The good old habits start to slip. This was my experience. My spending increased after my kids were born and it has yet to stabilize or return to our pre-kid lows.
It’s just a result of the seismic changes kids bring to life. So don’t beat yourself up, Mary! It’s all good and it’s all very expected and normal and you’re in good company. I think it’s awesome Mary identified this increase in their spending and it’s commendable that she’s asking for help. I want to highlight what Mary said about their spending:
I can’t tell you how many people report this to me after either participating in a Case Study or taking my Uber Frugal Month Challenge. I myself am shocked at my own spending every month when I share my expenses here on Frugalwoods. I’m always like, WHO spent all this money?!? WHO took my credit card and bought candy corn!!!??? Oh right, it was me… so yeah, tracking your spending is the first step to a financially fulfilling and stable life. You cannot set goals without knowing the basics of your income and your expenses. If you’re not tracking your spending, I use and recommend the free expense tracker from Personal Capital (affiliate link).
In every Case Study, I point out that what you choose to 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.
Savings Accounts Side Note
One of the easiest ways to optimize your money is to keep it in a high-interest savings account. With these accounts, interest works in YOUR favor (as opposed to the interest rates on debt, which work against you). Having money in a no (or low) interest savings account is a waste of resources because your money is sitting there doing nothing. Don’t let your money be lazy! Make it work for you! And now, enjoy some explanatory math:
- Let’s say you have $5,000 in a savings account that earns 0% interest. In a year’s time, your $5,000 will still be… $5,000.
- Let’s say you instead put that $5,000 into an American Express Personal Savings account that–as of this writing–earns 1.70% in interest. In one year, your $5,000 will have increased to $5,085.67. That means you earned $85.67 just by having your money in a high-interest account.
And you didn’t have to do anything! I’m a big fan of earning money while doing nothing. I mean, is anybody not a fan of that? Apparently so, because anyone who uses a low (or no) interest savings account is NOT making money while doing nothing. Don’t be that person. Be the person who earns money while sleeping. Rack up the interest and prosper. More about high-interest savings accounts, as well as the ones I recommend, here: The Best High Interest Rate Online Savings Accounts.
I think it’s also important to question if your savings rate will help you to achieve your long-term goals. 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 long-term financial plan, I encourage you to take my free 31-day Uber Frugal Month Challenge.
Whether Mary and John choose to reduce their spending depends on:
- If they want to buy a house.
- If John wants to continue freelancing.
- If Mary wants to change careers to work less and hence, earn less.
If Mary and John want to do all three of these things, reducing their monthly spending is mandatory.
In the spreadsheet below, I’ve identified areas of discretionary spending in order to illustrate how much they could save:
|Item||Current Amount||Mrs. FW’s Notes||Proposed New Amount||Amount Saved|
|Daycare||$1,460||Fixed cost; no change unless Mary elects to watch another child(ren) at home along with her own daughter, in which case this would drop to $0.||$1,460||$0|
|Rent||$1,200||Fixed cost; no change||$1,200||$0|
|Groceries||$550||Looks good to me since it also includes their household and baby supplies.||$550||$0|
|Eating Out/Restaurants/Coffee shops||$314||This is an area where I know Mary and John know they have room to save ….||$0||$314|
|Car expenses||$145||Since John is now working from home, I wonder if there’s an opportunity to save more on gas? I’ll leave it as is for now, but it’s something for Mary and John to explore if his freelancing work continues.||$145||$0|
|Internet & Cable||$144||Mary said she tried to unbundle and Comcast resisted, but I strongly urge her to try again.
When we lived in the Boston area, we paid $59.95 to Comcast for internet only. I realize that was several years ago, but it provides a frame of reference.
If Comcast won’t unbundle, then Mary and John should consider canceling their service altogether and signing up anew as internet-only customers.
|Vacation/Travel Expenses||$127||Since this is for visits to John’s family in Ohio, it’s tough to cut. This really goes back to the overarching question of how badly they want to buy a house.
If that’s their primary goal this year, I think they should have a frank conversation with John’s family about the fact that they need to save for a house and can’t travel.
This doesn’t mean they’ll never travel again, just that they’re prioritizing a downpayment right now.
|Clothing||$100||Depending on how hardcore frugal they want to be, enacting a clothes-buying ban is an option.
For reference, I have several posts on how to source cheap/free used/hand-me-down baby clothes.
|Medical||$100||Fixed cost; no change||$100||$0|
|Home goods||$92||This goes back to the overarching question of how badly they want to buy a house. If that’s their primary goal, this should be eliminated.||$0||$92|
|Mary’s car insurance (through Liberty Mutual)||$92||I’m wondering why Mary and John have their car insurance through two different providers? I wonder if they might get a discount if they bundled them with the same company? Worth exploring!||$92||$0|
|John’s car insurance (through Geico)||$73||See notes above.||$73||$0|
|Cell phone service||$62||Time to convert to the wonderful, money-saving world of MVNOs (companies that re-sell wireless service at deep discounts).
I pay $10.65/month with the MVNO Ting, which re-sells T-Mobile and Sprint service (affiliate link). MVNOs are the TJ Maxx of the cell phone service world–it’s the same service, just a whole lot cheaper. Here’s my full post on MVNOs.
|Gifts||$54||If they want to buy a house–and that is their highest and best priority–then they need to cut out everything extraneous in order to reach that goal.||$0||$54|
|Utility Bills: gas (for the stove) and electricity. Our landlord pays for heat.||$42||This is awesome! Mary and John have a great deal with their landlord paying for their heat!||$42||$0|
|Personal Care||$24||For this expense, and all the below expenses, my comment echoes what I said above: if they want to buy a house–and that is their highest and best priority–then they need to cut out everything extraneous in order to reach that goal.||$0||$24|
|Alcohol||$20||See notes above.||$0||$20|
|Salon||$20||See notes above.||$0||$20|
|Entertainment||$12||See notes above.||$0||$12|
|Current monthly subtotal:||$4,631||Proposed new monthly subtotal:||$3,754||$877|
|Current annual total:||$55,572||Proposed new annual total:||$45,048||$10,524|
At present, Mary and John’s monthly income is $4,783 and their monthly spending is $4,631, giving them a monthly savings of $152. I realize this is likely to change due to John’s variable freelance income, but as Mary noted, we have to work with the numbers we have.
If they decide to enact all of the above proposed savings, they’d save $1,029 per month, which is $12,348 a year.
Of course the other end of this equation is to increase their incomes, which coupled with reduced spending, would allow them to save even more.
Quick note: One expense I didn’t see that I highly recommend Mary and John get is renter’s insurance. This is typically inexpensive (in the range of $10-$20 per month) and very worth it.
Asset Allocation and Money Management 101
In addition to an expense review, I’ve started including an overall asset allocation review in most Reader Case Studies to help folks track where they are. Below are the basic money management steps I advise just about everyone to follow. I’ve made notes of where Mary and John are on each step and where they can focus more attention.
- Track your expenses religiously. Know exactly what you’re spending every month. If you’re not tracking your spending, you can sign-up for the free service Personal Capital, which is what I use and recommend for expense tracking (affiliate link). If you’d like to know more about how Personal Capital works, check out my full review.
- Pay off high interest debt. List all of your debts in a spreadsheet and sort by interest rate. Prioritize paying them off in order of highest interest rate first.
- Mary and John are done with this! Many congrats on paying off their student loans!!!!
- Build an emergency fund. An emergency fund should be kept in an easily-accessible bank account, such as a checking or savings account, NOT in investments, retirement funds, or cars/houses/expensive china. An emergency fund is money you can access immediately in an emergency. I recommend saving three to six months’ worth of expenses (meaning three to six months worth of what you spend every month, which is why it’s important to do #1: track your expenses).
- Mary and John currently spend $4,631/month, which means they should target an emergency fund in the range of $13,893 (three months of spending) to $27,786 (six months worth).
- They are spot on as their emergency fund is at $17,158. Well done!
- Contribute to retirement accounts. Especially if your employer matches your contributions, putting money into a 401k or 403b is a no-brainer. Here’s more on why: 401ks Are Your Friend: Demystifying Personal Finance Part 3.
- Mary gets a gold star for contributing to her company’s 401k plan.
- If John continues freelancing, he should set up some sort of retirement account. Options include: IRA, Roth IRA, SEP IRA or One-Participant 401(k) (often called a solo 401k). The latter are retirement accounts geared specifically towards people who are self-employed.
- Start investing! Investing in the stock market is how you grow your wealth. Without this crucial step, you won’t reap the advantages of compounding interest and you’re unlikely to build your net worth in a meaningful way. I personally invest in low-fee total market index funds through the brokerage of Fidelity. Vanguard offers a similar product. You can do this yourself (it’s just like any other form of online banking) and there are more details here: For the Love of Frugal Hound, Manage Your Money Yourself! (by following The Simple Path to Wealth).
- Mary and John aren’t quite here yet, which is totally fine. Whether or not they start investing (beyond their retirement accounts) depends on the buying-a-house question.
- If they plan to buy a home in the near future (say, in the next five years), it’ll likely make the most sense for them to keep their money liquid in an interest-earning checking/savings account.
- You don’t want to invest money you’re going to need in the near future. Investing is a long-term proposition.
- Explore other options for investing in order to achieve diversification. After completing steps 1-5, you should continue investing in your low-fee index funds (and rebalancing them) on a regular basis (I recommend automating this process) and you can also start to look around for diversification options. This might include, for example, real estate. Mr. FW and I rent out our home in Cambridge, MA for a profit. Renting a property can be a fabulous financial decision and it can also be an absolutely abysmal one. It depends on many factors, including the rate of return you’d receive. For more on renting out properties, I recommend the site BiggerPockets, which discusses real estate investing.
- Analyze your income. Concurrent with all of this should be an analysis of your net income (that means the dollar amount you bring home every month, minus taxes and any other withholdings). In some cases, the best route to financial stability will be to increase your income while also lowering your expenses. Income is the crucial second piece to this equation and, the more you make, the more you can save. That’s a solid math fact.
The Many Accounts Of Mary And John
One question I have is why Mary and John have four different checking accounts at three different banks? It’s not bad to do this, but to me, it’s confusing. Here’s the rundown:
|Savings Account 1||$17,158||This is our emergency fund & future “house downpayment” fund||Through Synchrony Bank, earns 2.12% interest|
|Savings Account 2||$5,000||TD Bank|
|Mary’s Checking||$1,500||Typically only keep enough in here for bills, rent, etc.||TD Bank|
|John’s Checking||$400||Typically only keep enough in here for bills, etc.||Citizens Bank|
I commend them for having the bulk of their cash in a high-interest savings account, but I question why the rest of their money is elsewhere? If it were me, I’d consolidate into that one account in order to streamline and earn interest. This is really just a personal preference though. At the very least, I suggest Mary move her “car emergency fund” into a high-interest earning account.
Additionally, while I love that they are thinking ahead and opened a 529 college savings plan for their daughter, the cold hard truth is that they need to prioritize saving for their retirement above saving for college. You can take out loans for college, but you cannot take out loans for retirement.
Credit Card Strategy
Mary and John wisely have a Chase Sapphire Preferred credit card they’ve been carefully using to accrue travel rewards points (affiliate link). Way to go! I’m a proponent of responsible and strategic credit card use.
Since Mary and John are able to pay this card off every month, they’re earning points for a future vacation just by buying the stuff they were going to buy anyway. Nicely done! For more on my credit card strategy, check out The Frugalwoods Guide to a Simple, Yet Rewarding, Credit Card Experience. I also wrote this guide on how to find the best credit card for you.
In a lot of ways, Mary and John’s Case Study is an analysis of time versus money. They are doing an excellent job, but they will need to make some tough choices regarding what matters most to them. It’s not possible for them to do all the things they want to right now, but with time and focused prioritization, they should be able to make it all happen. I am rooting for them and I know they’re going to be awesome!
Here’s my brief summary of advice to Mary and John:
- Determine if John wants to remain a freelancer.
- If not, he should prioritize getting a salaried job now while the economy is in great shape.
- Decide how important it is to them to buy a house.
- If it’s their top goal, Mary needs to stay at her current job and John needs to earn more.
- They also need to enact the savings I outlined above.
- Based on the results of #1 and #2, Mary should assess her possible career change.
- How much does she need to earn?
- How important is it that she find fulfilling work that she loves?
- Is she willing to work a potentially less satisfying, lower-paying job in order to allow more time with her daughter?
Ok Frugalwoods nation, what advice would you give to Mary? She and I will both reply to comments, so please feel free to ask any clarifying questions!
Would you like your own case study to appear here on Frugalwoods? Email me (firstname.lastname@example.org) your brief story and we’ll talk. User Generated Content Disclosure: Reader comments and responses are not provided or commissioned by Frugalwoods or its advertisers. Responses have not been reviewed, approved or otherwise endorsed by advertisers. It is not the advertiser’s responsibility to ensure all posts and/or questions are answered.
Update from Mary on 2/17/20:
First of all I want to extend a huge thank you to Mrs. Frugalwoods and the Frugalwoods nation for all the great advice you gave! Participating in this case study was very enriching, as it helped us hone in on what we really want. As you readers may remember, one of the biggest questions I was dealing with at the time of the case study involved my work, and wanting to be home with my baby girl. Well, I am so happy to report that we figured out a great solution, and it’s not what I expected!
At the time of our case study, my husband had just launched his own freelance graphic design business. Since then he’s been doing very well with it, and because he works for himself, he can essentially work at any time of day that he chooses. So after a couple of months of this work under his belt, we made the decision to pull our daughter out of daycare two days a week, so she can stay home with daddy those days! Since he’s watching her two days a week, he then works in the evenings and on the weekends to make up the difference. This has honestly been such a life-changing move. My husband loves having the extra time with her, and our daughter is much happier having the extra time at home as well! We noticed that immediately she is not sad about going to daycare any more, probably because it’s only three days a week now. Additionally, keeping her home these two days means that we are saving a whopping $600 a month! Yes, you read that right. I immediately set up an automatic payment to funnel those savings directly into our savings account.
So while I am not the one staying home with our daughter (which was my dream), I noticed that I am so much happier now knowing that she’s home with us more than she is at daycare. This extra family time has made all the difference for us.
Now what about my career dilemma? Through the process of participating in the case study and reading everyone’s helpful advice, I realized that I really shouldn’t leave my current line of work. I’m in a marketing/communications role, and I’ve been doing this for ten years. The more I thought about it, the more I realized that going back to school at this time, or starting fresh in a new career is just not for me right now. Instead I’m committed to building my current skills even more, and I’m pursuing a similar role at a new company–possibly a place with options to work remote occasionally, or a place that is more supportive of parents hours.
We’ve also been cutting back our spending where we can, although I have to admit I haven’t been tracking it very diligently lately, so I don’t have specific numbers to report. (Sorry for all you frugal financial voyeurs!) But with the incredible daycare savings, we’re making great progress on our finances. We’re still debt-free, and are looking forward to our frugal family vacation to France in June–which we’re paying for almost entirely with credit card points we’ve been saving up! Woo!
So thanks again for the encouragement everyone. And happy frugaling!
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