Emily and Chase live in suburban Kansas City with their two young boys. They’d planned to head out in July on a family adventure of Emily working as a travel nurse in different cities every three months, while Chase became a stay-at-home dad. But then, the pandemic happened. Today they’re looking for advice on how to proceed and whether or not their plan is still viable in light of the coronavirus.
What’s a Reader Case Study?
Case Studies address financial and life dilemmas that readers of Frugalwoods send to me requesting advice. Then, we (that’d be me and YOU, dear reader) read through their situation and provide 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. Visit this page for links to all 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. I am not a financial advisor and I am not your financial advisor.
With that I’ll let Chase and Emily, this month’s Case Study subjects, take it from here
Emily and Chase’s Story
Hello Frugalwoods! Chase (age 32) and Emily (age 30) here and we are excited to chat. We have two boys, ages four and two, and no pets (Emily is allergic and Chase isn’t a fan, so we work great together). We currently live in a Kansas City suburb where Chase works in youth sports and Emily is a nurse in the mother and baby unit at a hospital. Pre-pandemic, we’d planned to start a new chapter in July with Emily working as a traveling nurse and Chase becoming a full-time stay-at-home dad.
The Pandemic Hitch
Of course we devised this plan pre-pandemic, so there’s now uncertainty surrounding it, but we’re still committed to making it happen. Emily won’t take a position as a travel nurse until we feel it’s safe for our family and that we wouldn’t be putting others at risk. Here’s where we’re at right now, in light of the coronavirus:
- Chase still plans to quit his job by May 1st so that he isn’t required to sign another year-long contract. We don’t want to be tied to the Kansas City area any longer and he’s ready to move on from this job. Chase will continue to work and be paid through June 30th.
After June 30th, the plan is for Emily to pick-up additional shifts at her current job. Alternately, if needed, Chase will pick-up gig work, such as driving for Door Dash. If all else fails we will dip into our savings to cover our expenses.
- Emily’s prospective position with the Travel Nurse Agency is still secure. They don’t technically “hire” you until you accept a job through their network so it doesn’t matter if Emily makes the switch in July or many months later. Currently the available jobs in her category have been cut in half (from 40ish to 20ish) but they’re expected to rebound in a few months.
- We’d planned to sell our house before traveling, but that seems less likely now and we haven’t listed it yet. We could rent it out, but it’s a little too big to make it a rental (for the margins we want) and we’d prefer to sell. If needed, we could rent it for about $300/month over the mortgage.
- Depending on the timing of the sale of the house, we’re not opposed to selling it and living with friends or family before travel. Alternately, if the house doesn’t sell by the time we need to leave, we might lower the price.
Emily and Chase’s Background
We met during undergrad at a small college in Kansas and got married in 2013. We then moved to Iowa City for a year before moving to Kansas City in 2014 to start our current jobs. After moving to Kansas City, Chase quickly realized he didn’t like his job as much as he’d hoped he would.
We purchased our current home in July 2015 before our first son was born that November. We love our house, but our actual town has never felt like home. Sometime during 2015 we found ourselves stuck in a rut and not really knowing why. Luckily, in 2016 we discovered the FIRE movement (FIRE = financial independence, retire early).
The FIRE is Lit, The AirBnB Commences
On Valentine’s day 2016 we printed off all of our bank statements and stayed up half the night highlighting and categorizing to see where we’d spent every dollar the previous year. Ultimately, this was a huge wake-up call. We’d done a decent job of saving (Chase has contributed to his Roth IRA every year since age 19 and neither of us ever had credit card debt) but we were still spending way more than needed.
During 2016 and 2017, we greatly decreased our spending, learned more about investments and started an AirBNB in our basement… after Chase convinced Emily that all guests would not be serial killers. As for the AirBNB, we ended up having a perfect setup and loving it. Guests have a separate entrance with a lockbox to get their key, so sometimes we don’t even see them. We also read tons of blogs/books and listened to multiple podcasts that really shaped our new mindset and how we lived with the ethos of frugality, minimalism, and intentionality. The most impactful blogs include Frugalwoods, Our Next Life, and Mr. Money Mustache while our favorite podcasts are The MadFientist and Radical Personal Finance.
Buying Real Estate, Becoming Landlords
In January 2018, Chase read Rich Dad Poor Dad and the real estate light clicked (affiliate link). He read a few other books, then got hooked on real estate podcasts and realized we live in a great market to buy rentals. April-June of 2018 was quite busy for us as we purchased our first rental in April, our second child was born in May and we purchased our second rental in June (Emily was not the most stress-free person during that time). Since then, we’ve added two more rentals to the mix including a duplex. Now we have four units total with five doors, which we are managing ourselves.
In March 2019, Chase did not get a promotion/job change that was expected. At first this was devastating, but a few months later we realized it was a blessing in disguise. Although our housing is cheap and we make decent money, where we currently live is not where we want to raise our kids. That new job would have kept us here longer when we already knew we wanted to move. Although we’re ready for our next chapter, we’re extremely thankful for the financial opportunities of the last few years because without them we wouldn’t be able to even think about doing something crazy like…
Become A Traveling Nurse
In October 2019, we decided Emily would become a traveling nurse, which has been a dream of hers for a while, and Chase will transition to being a stay-at-home dad (gulp). The plan was for this new life adventure to begin in July 2020, but that was the pre-pandemic plan. We’re planning on doing this for around 1 to 3 years. This was an extremely exciting and nerve-racking decision. We both love to travel and think it will help our family grow closer together (with many bumps along the way). At the same time, taking two young kids all over the country with no place to call home is a stressful thought, but one we’ve fully embraced.
For travel nursing there’s no specified income because it’s based on the cost of living for the city where she’s working. However, there is a travel stipend, food stipend, and housing stipend that’ll accompany her hourly wage. Our best guess is that Emily will make between $50,000-$70,000 after all the stipends are paid out. Emily will work three days per week and the rest of the time we will explore new places as a family.
2020 is the final year before our oldest child starts kindergarten and it felt like it was now or never to embark on this journey. Looking at homeschool curricula, we think kindergarten and first grade could be manageable but after that we want to leave it to the pros (maybe that will change but that’s where we are now). Since we know the travel life will not be forever, we plan on getting rid of a lot of our things but also storing items we know we’ll want to have in the future. Obviously the more we store the more expensive the storage unit, so we’re trying to balance getting rid of stuff with the knowledge that we’ll be settling down again in the future and will need furniture, etc. Most of our family was not pumped about our decision but with technology, we believe we can stay close to them.
The Financial Plan
Rentals are our primary long-term financial play. Our goal is to net $5,000/month from our rentals and then live off of that income by the year 2033 (lofty goal, but still our goal). If we fall short of 2033, hopefully we’ll only be a few years away from FI (financial independence).
We purchased our current home (4 bed, 3 full bathrooms) in 2015 for $145k. It’s now worth between $170k-$200k and we plan to sell it before we travel. We are a little nervous that after we finish the travel life our new spot will be much more expensive and kill our savings rate.
However, we fully expect to be able to live in much tighter spaces with very few items (as we will while traveling). We know we want to live in a smaller town after our travel adventure and as of now, our plan is to move to a smaller town close to our families in Kansas. However, if we travel somewhere and absolutely love it, we’re not opposed to living there, at least for a period of time.
Where Emily and Chase Want to be in 10 Years:
- We’d like to be 3-7 years away from FI (financial independence)
- Earning $3,500/month after expenses (including savings for capital expenses) from our rentals and have the mortgages on the rentals greatly paid down
- Have $210,000 in our Roth IRA
- Have $50,000 in our brokerage and bank accounts
- Have our two kids age 14 and 12, with potential for another mystery aged child
- Spending a lot of time together with both our immediate and extended families
- Emily would still like to be in nursing
- Chase would ideally like to be an entrepreneur of some sort and managing our rentals (really not 100% sure on this one)
Emily and Chase’s Finances
|Chase’s Net Income||$4,400||Minus insurance, retirement and taxes|
|Emily’s Net Income||$1,692||Minus taxes (Emily works part-time and no longer gets retirement or benefits, but does get higher pay)|
|AirBNB in our basement||$450||Minus the $15 in snacks and drinks we provide.
This is currently at $0 due to the pandemic, but we hope to open it up once things calm down. In past summers we’ve made between $800-$1,000 per month (the $450 here reflects the annual average, which includes the slower winter months).
|Rental Duplex||$361||Rent: $1,566
Saving for Capital Expenses: $200
|Rental House #2||$190||Rent: $775
Saving for Capital Expenses: $100
|Rental Townhome||$110||Rent: $725
Saving for Capital Expenses: $100
|Rental House #1||$60||Rent: $850
Saving for Capital Expenses: $100
|Item||Outstanding Loan Balance||Loan Terms|
|Mortgages on four rental properties (consolidated into one commercial loan)||$211,200||4%|
|Mortgage on primary residence||$115,000||4%; 30-year fixed|
Non-Real Estate Assets
|Item||Amount||Notes||Name of bank/brokerage|
|Roth IRA||$48,000||Retirement Investments: SWTSX, SWPPX, BRK/B||Charles Schwab|
|Brokerage Account||$34,000||Taxable investments: SWTSX, SWPPX||Charles Schwab|
|Chase 403b||$27,500||Chase Work Retirement||PEERS|
|Bank Account||$25,000||Checking Account: Earns 1.75%||CACU and GSCU|
|Emily 401K||$24,000||Emily Work Retirement||TIAA|
|LLC Bank Account||$7,000||Checking Account||CACU|
|Cash||$500||Box In Closet|
|Vehicle make, model, year||Valued at||Mileage||Paid off?|
|Chevy Impala 2016||$10,000||90,000||Yes|
|GMC Terrain 2010||$5,000||92,000||Yes|
Non-Mortgage Debt: $0
|Mortgage on primary residence||$1,020||Mortgage is $920; we pay an extra $100/month towards principal. This includes homeowners insurance and property taxes.|
|Charitable Donations||$680||We give to our church, two missionary friends, a local homeless shelter and sponsor a child from Peru|
|Medical Bills/Health Insurance||$516||Chase has free insurance through work (high deductible) while Emily and kids are on Christian Healthcare Ministries Insurance at $343/month. Once Chase quits his job, he’ll join this insurance plan and the total will be $516/month.|
|Groceries||$449||We shop at Aldi’s and get 6% cash back|
|Car||$364||Gas, maintenance, taxes, tags, new tires (shocked it’s this high)|
|Utility Bills||$343||Electric, Water, Gas, Trash, Internet|
|Restaurants/Eating Out||$288||We (Chase) fell off the wagon in 2019. Would like this to be under $100|
|Insurance||$184||American Family: Car and Life|
|Household Supplies||$120||Both kids have bad eczema and we get special lotion/soap that we now all use (and love). We don’t buy napkins or paper towels but instead use t-shirt scraps from a t-shirt quilt Emily made.|
|Vacations||$118||Went on a few close weekend getaways and one full week trip (airlines through credit card points)|
|Home Goods||$94||Paint, stain, decorations, mulch, wood for barnwood door that Emily built from scratch, bird feeders, flooring|
|Gifts||$72||Birthday, Christmas etc. for family and friends (we have a regift box that we pull from too)|
|Entertainment||$50||We love board games and parks but do have a zoo pass and take the kids a few other places and try to escape with no kids on occasion|
|Misc||$40||Weren’t sure where to put a few things|
|Clothing, Accessories||$31||We like to think this is $0 but we do buy things now and then|
|Kid Related||$27||No more daycare payment, so this is just for clothing and diapers (we do cloth diapers but still have occasional disposable)|
|Personal Care||$27||We both get a couple haircuts a year and one massage but Emily cuts Chase’s hair most of the time and the kids hair all of the time|
|Cell Phone||$12||One work phone fee (other phone still graciously paid for by parents)|
|TV/Subscription||$10||Purchased an antenna for $20 a few years ago (so primarily watch for free) but don’t watch much tv outside of sports. Sometimes rent a movie (when library doesn’t have it) or pay a friend for their ESPN Plus account|
Credit Card Strategy
- The American Express Blue Cash Preferred, which offers 6% cash back on purchases made at grocery stores/supermarkets, 3% back on gas, and 1% back on everything else. It also has a couple other 6% and 3% categories that do not affect us (annual fee of $95 but very worth it).
- The Chase Freedom, which offers 5% on rotating categories every three months and 1% on everything else (no annual fee).
Emily and Chase’s Questions for You:
- Now that the coronavirus has impacted the entire world, do we need to reconsider our plans completely? As in, should we not quit our jobs, sell our house and travel the country as a global pandemic and potential financial crisis are upon us?
- What signs/factors should we look for to know when the timing is right to travel? Should we wait an extra couple months, six months, a year?
- Before heading off on our travel adventure, how much of our stuff do we sell vs. put in storage vs. donate?
- Neither of our current vehicles has enough room to fit our needed items for travel. What to do?
- Do we purchase a pick-up truck or van?
- Which vehicle do we trade in or do we try and store two vehicles while we travel and then sell whatever we travel in upon completion?
- If we store two and sell what we travel in, pickups have much higher trade-in value but are also much more expensive. Minivans have better gas mileage and better leg room for everyone, but their resale value is not as high.
- Do we explore the idea of RV living? We’re not opposed to this, but we’re very nervous about the learning curve.
- How do we get plugged in socially since we’ll only be in one spot for three months at a time?
- Recommendations for insurance/health share plans? Preferably with tele-health options.
Mrs. Frugalwoods’ Recommendations
First off, I want to congratulate Emily and Chase for their excellent financial decisions over the years. They’ve put themselves in an enviable position with no debt, several rental properties, retirement investments, taxable investments, a manageable mortgage, and low expenses. They’re a great example of what’s possible when you get your financial life in order. Before we delve into today’s topics, they should feel proud of the choices they’ve made.
The Pandemic Changes Everything
Unfortunately, and with regret, I have to tell Emily and Chase that despite all their planning, despite all their savings, and despite all their diversified revenue, the time for this change is not now. The top line (or the bottom line?) in my opinion is that now is not the time to quit their jobs, try to sell their house, and travel the country.
Not only are we in the midst of a global pandemic, the economy is in a state of high uncertainty. I’d characterize this as basically the worst time in the last, oh, 100 years or so for making this kind of change. Under normal, non-pandemic circumstances, I’d be cheering Emily and Chase on. My recommendations would be devoted to their questions about which vehicle to travel in, whether to sell or store their stuff, and so on. But right now, there are just too many uncertainties in the world.
The Double-Edged Sword
The issue right now is that this isn’t just an economic downturn (such as the 2008 recession) and this isn’t just a health crisis–it’s both at the same time. Since we’re in a period of economic uncertainty, I can’t see how this is a good time for anyone to quit their job (unless they’re fully financially independent). If it were me, I would have Chase sign another year-long contract for his position. I totally get that this is not what he wants to hear. I completely understand that he was done with this job years ago and that he and Emily have carefully planned this life change for months now. Unfortunately, this plan is not compatible with a pandemic (I mean, few things are).
Here Are My Concerns About Chase Quitting His Job And Emily Becoming a Travel Nurse:
1) Rental properties are not recession (or pandemic)-proof.
It’s possible their tenants will stop paying rent. At present, Emily and Chase have a carefully tended portfolio of rental properties. However, if one (or more) of their tenants were to lose their jobs–and not qualify for an adequate amount of unemployment insurance)–they very well might stop paying their rent. Without rental income–but still with mortgages, taxes, and insurance to pay–Emily and Chase would dearly need his income. Additionally, Chase and Emily manage their rentals themselves, and they’d need to hire a property manager for the time that they’re traveling, which would further eat into their profits.
2) The AirBnb probably isn’t coming back for quite some time.
I love Emily and Chase’s ingenuity in creating an AirBnB property in their home and it’s this type of creative diversification that makes financial independence possible. However. It’s very hard to predict when services like AirBnb will ramp back up. At this point, it’s a demand-side issue: no one wants to stay in an AirBnB right now because no one is traveling or leaving their homes.
Even if the country were to re-open tomorrow, it’s unlikely Chase and Emily would see sustained occupancy throughout the summer because:
- People are scared and still might not be willing to leave their homes except when absolutely necessary;
- Most people have incurred a financial hit and won’t be going on vacations (or business travel) for awhile;
- Epidemiological models indicate it’s possible (if not likely) that another round of coronavirus will ravage the country after things re-open (and hence more people have the chance to get infected).
All in all, this is just an awful confluence of factors–none of which are Emily and Chase’s fault, but all of which make their plan seem particularly un-viable right now.
3) Emily and Chase don’t have enough in savings for Chase to quit his job right now.
Emily and Chase have a TON of money in savings and they’ve done a fantastic job building up their investments. However. They’re not financially independent yet and without Chase’s job, they stand to run a pretty significant deficit every month, as outlined below:
|Current monthly income||$7,263|
|Minus Chase’s net income||-$4,400|
|Minus AirBnb income||-$450|
|New monthly income:||$2,413|
Their current monthly spending is $4,445. Given that, if Chase were to quit his job on May 1st as planned, they’d be looking at a $2,032 deficit every month (the difference between their new monthly income and their expenses). They noted that Emily can pick-up additional shifts at her current job and so, if that could make up the $2,032 difference, that’d be ideal. I’m not clear on why Chase would want to pick-up gig work at this time since it seems that would unnecessarily expose him to the virus and would earn significantly less than he currently makes.
4) This is a terrible time to try and sell a house.
Very few people are moving right now. This is, again, a victim of the double-edged sword: because of coronavirus, real estate agents can’t offer open houses or in-person home tours. And because of the spiraling economy, few people are interested in incurring the expenses of buying a home. It’s hard to see how Emily and Chase would be able to sell their house right now and it seems they’d lose a lot of money if they had to reduce the price by or try to rent it out.
5) Traveling and moving (with kids) in the time of social distancing sounds awful.
On the non-financial, non-health side of things, I’d encourage Emily and Chase to think hard about what their daily life would be like if they did travel around the country with two little kids right now. Emily would be working in a healthcare setting and so presumably would need to go through a process of decontamination when she got home every night. Chase would presumably be stuck inside all day in a strange city with two little ones.
Since all schools, daycares, playgrounds, parks, museums, etc are closed right now, it seems like it might be a difficult and lonely existence for Chase and the kids. Where they live now–at the very least–they have a routine and a comfort level with their home and neighborhood. Additionally, they have ample space inside for the kids to play and they have allllllll the toys. If they were moving every three months with limited possessions and limited ability to leave their rental, it seems that could be a very challenging situation. Moving every three months would be exciting during normal times, but it seems it would be incredibly stressful, complicated, and lonely during a pandemic.
Wait a Year and Reassess
If it were me, I would put a pin in this plan for a year. In a year, Chase and Emily will–at the very least–have the benefit of a year’s worth of data on how their rentals and AirBnb are performing, the landscape of their jobs, the real estate market and the viability of selling their home, and whether or not the country has returned to a semblance of normal. Plus, with another year of saving, they’ll be in that much better shape financially.
This is Not Their Fault: It’s Just Bad Timing
None of this is their fault and it’s just plain bad luck that a global pandemic broke out a few months before they planned to leave on this adventure. I hate to give them this news today and I wish I could paint a more optimistic picture, but I fear it’s just too risky to quit their jobs, try to sell a house, and travel around the country right now. I hope they will come back to us in a year and I hope at that time we can focus their Case Study on what they (and we!) all want to talk about: their awesome life plan to work as a travel nurse and see the country together as a family.
Emily and Chase have put in so much hard work to get to where they are today and I would hate for them to lose all they’ve gained by quitting jobs and moving during a time of such intense uncertainty. If we were only dealing with one of the factors (pandemic or economic), we might be able to find a solution for them right now. But given the interplay of the two, I just can’t see a way forward that’s responsible and not reckless.
This is a very personal decision and only Emily and Chase know what’ll be best for them. If I were in their shoes, I would do the following:
- Have Chase keep his job and sign another year-long contract, knowing that this is not what he wants to do, but that this is the most responsible choice given all the uncertainty in the world right now.
- Do not put the house on the market right now.
- Have Emily keep her current nursing position and look into taking on additional shifts to cover the potential loss of Airbnb income for at least the rest of the summer (if not beyond) a well as the possibility of their tenants defaulting on rent payments.
- Continue saving and investing wisely as they’ve been doing.
- Continue planning for travel nursing next year.
- Reassess in April 2021 and take into account where we’re at with the pandemic, what the economy is doing, and their local real estate market.
Ok Frugalwoods nation, what advice would you give to Emily and Chase? We’ll all reply to comments, so please feel free to ask any clarifying questions!
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