Reader Case Study: Former Commercial Fisherman, Future Travel Nurse, Adventurer Always
Amy is a former commercial fisherman and wildland firefighter turned nurse. After working on the frontlines of the pandemic in North Central Washington, this month she began her first travel nursing assignment. As she embarks on this new career path, she’s examining her finances–including her recent purchase of her first home–with the goal of making sustainable, long-term decisions about her future. Amy is a wilderness lover and adventurer and does just about every outdoor sport imaginable. She’s also considering having children, potentially as a Single Mom By Choice (SMC), which is another factor influencing her financial thought process. Join me as we dig into Amy’s finances and help her answer some of the questions she has about her future.
What’s a Reader Case Study?
Case Studies address financial and life dilemmas that readers of Frugalwoods send in 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 comment section.
For an example, check out the last 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.
The Goal Of Reader Case Studies
Reader Case Studies intend to highlight a diverse range of financial situations, ages, ethnicities, locations, goals, careers, incomes, family compositions and more!
The Case Study series began in 2016 and, to date, there’ve been 66 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.
I’ve featured single, married, partnered, divorced, child-filled and child-free households. I’ve featured gay, straight and trans people. I’ve featured men, women and non-binary folks. I’ve had cat people and dog people. I’ve featured folks from the US, Australia, Canada, England, South Africa, Spain, Finland and France.
I’ve featured people with PhDs and people with high school diplomas. I’ve featured people in their early 20’s and people in their late 60’s. I’ve featured folks who live on farms and folks who live in New York City.
The goal is diversity and only YOU can help me achieve that by emailing me your story! If you haven’t seen your circumstances reflected in a Case Study, I encourage you to apply to be a Case Study participant by emailing email@example.com.
Reader Case Study Guidelines
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 condemn.
There’s no room for rudeness here–the goal is to create a supportive environment where we all acknowledge that we’re human, we’re flawed, but we choose to be here together, workshopping our money and our lives with positive, proactive suggestions and ideas.
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 Amy, today’s Case Study subject, take it from here!
Hi, Frugalwoods! I’m Amy, a 33-year-old single woman living with my seven-year-old black lab Baxter. This month, I’m making a big career change by leaving my current job–as a nurse in a Step-Down ICU–to become a travel nurse.
I’ve been living in North Central Washington for the past two years and bought a house this spring. I worked as a Covid-19 nurse starting in March 2020 after having been a nurse for only six months! I love nursing and it has been mostly rewarding to work on the frontlines of this pandemic.
However, this latest outbreak of predominantly unvaccinated individuals has taken a toll on my mental health and so I’m becoming a travel nurse, both to be geographically closer to friends and family and to receive a significant pay increase. Travel nursing pays incredibly well, particularly now because almost all hospitals in the US are short on nursing staff.
I love to travel, especially to places where I can play outside (skiing/snowboarding, mountain biking, hiking, and rafting) and visit friends and family throughout the Northwest and Alaska. I don’t have any family in North Central Washington and I’ve only lived here for the past two years, so I don’t have a big social network here, especially due to the prior lockdowns and Covid restrictions. I’m excited to work as a travel nurse because I can work in areas that are closer to friends and family and be in great places where I can play outdoors.
Recreating outdoors is a huge passion of mine. It helps me stay healthy mentally and physically. Being an outdoors person is also part of my identity. I spend a hefty portion of my budget on outdoor equipment, such as new ski/snowboard equipment, a snowmobile, backpacking and rafting gear, etc. This is something I feel conflicted about because I want to reach my financial goals and be frugal, but I also want to have the gear that helps me recreate safely and efficiently as well as have fun.
I bought a house this spring after renting for a year and a half. The rental market here is surprisingly expensive and I’ve always dreamed of owning my own house so it made sense for me to buy at the time. I hadn’t anticipated leaving so soon but it still seems like a good investment. My area is relatively affordable for the West, but local housing prices have still been climbing at 6% on average annually. I hope that in the long run this house will continue to be a good investment.
My house was built in the 1940s and has lots of charm, but it does need some repairs and I’d like to do a remodel in the basement. I’ve enjoyed doing a few repairs already: I painted all the interior walls, repaired a leaky shower faucet and a leaky sink drain, and I’m in the process of painting the exterior of the house.
The house has two bedrooms and two baths. It also has a large basement that has the potential to be converted into a basement apartment because it already has a bathroom and a wet bar with a sink and large fridge. Besides framing an additional bedroom, the basement would need an egress window. A third bedroom would add value to the home overall and a basement apartment would bring in extra income.
Amy’s Life as a Commercial Fisherman
Before nursing school, I was a commercial fisherman in Alaska and worked for the US Forest Service as a wildland firefighter and on a trail crew. I definitely had fun and learned a lot of valuable life skills doing these jobs. While I earned a good income from commercial fishing (though not so much from the Forest Service), I didn’t know about investing for retirement so I have no retirement savings from my 20s. I did save about $25,000 during this time but I then used it for tuition and housing during nursing school. I only started contributing to my retirement accounts at the age of 31. I’m playing catch-up now and I want some advice and/or reassurance that I’m saving adequately, especially if I want to achieve financial independence.
Amy’s Financial Goals
I don’t know if I necessarily want to retire early. However, I do want to feel financially secure. According to the FIRE calculator at Engaging Data, I could retire at the age of 49 assuming I continue to make an average of $100,000 per year and don’t make major changes to my annual spending. Travel nursing affords me the opportunity to make a lot more money and I want to make sure I save and spend my new income wisely.
Amy’s Parenthood Goals
While I’m excited to try travel nursing, I don’t plan on doing it forever particularly since I’d like to become a parent within the next seven years. I’ve always wanted to be a mom and the urge to have kids has only intensified since I’ve entered my 30s. Lately however, I’ve been more open to the idea of not having kids, especially since I don’t have a long-term partner and I have concerns about climate change. But even with those caveats, I still see myself having a child before I turn 40–with or without a partner–via adopting or conceiving as a single parent. Given that, I need to budget for this future expense.
What feels most pressing right now? What brings you to submit a Case Study?
I’m struggling to find a balance between my spending and saving. I have a lot of expensive hobbies such as skiing, snowboarding, snowmobiling, etc and I love these hobbies and they bring me great joy. I’ve splurged in the past two years on a used snowmobile and a used whitewater raft that I share with my parents. I’ve spent more on gear lately because I wasn’t able to replace a lot of my equipment due to living very frugally in nursing school. I want to meet my financial goals while also budgeting for recreational trips and equipment.
I don’t have a lot of savings since I used all of my savings to purchase my home. I know I was supposed to wait until I had enough for a down payment and emergency savings, but I felt urgency to buy now before home purchasing became out of reach. I may want to rent my house out for the longterm if I’m not planning on moving back. I currently have two renters.
What’s the best part of your current lifestyle/routine?
North Central Washington was a good place for me to start my nursing career. I’ve enjoyed working at the local hospital as it was supportive and I made many friends. I also enjoy the four seasons of outdoor activities here: biking, hiking, and boating in the summer; mountain biking in the autumn colors; access to many different ski and snowboard areas, both at ski resorts and in the backcountry; and enjoying the wildflowers and green hillsides in the spring. Our hills are covered in yellow balsamroot and purple lupine in the spring and it makes a fabulous backdrop for trail running and mountain biking!
I’m also really proud of myself for buying a house as it’s something I’ve wanted for a long time. I’ve found this area to be more affordable compared to living on the Western side of the state. I’ve enjoyed taking ownership of my home by learning to do various home repair projects and yard maintenance. It’s also really nice to have storage space for all my toys and outdoor gear and room to rent out or host family when they come to visit.
What’s the worst part of your current lifestyle/routine?
Before going to nursing school in Oregon, I lived in Bellingham, Washington. I thrived there and this is where my closest friends and my brother live. Even though I like living in North Central Washington, it’s hard not to feel lonely and like I’m missing out on nurturing relationships with my old friends.
Loneliness has compounded some of the emotional stress I’ve endured as a Covid-19 nurse. I’m starting to experience burn-out and compassion fatigue, especially now that our hospital is full of very sick, unvaccinated patients. I need more support from family and friends if I am going to continue working on the frontlines. Also, dating as a Covid nurse has been a challenge. I have been rejected due to potential dates’ fears that they will contract Covid from me; or, I reject them because they refuse to get vaccinated or wear a mask, which is something I take very personally after seeing the worst effects of Covid over the past 18 months.
Also, my hospital hasn’t compensated nurses for putting ourselves at risk and dealing with the increased stress. For three months last winter, we received an extra $10 an hour if we were working in the Covid unit, but this quickly went away. Now, my employer occasionally offers double pay, but only if you work overtime. It was tough to work alongside travel nurses who were being paid four to five times as much as I was to do the same job, which is one of the reasons why I’m becoming a travel nurse now.
While I like living here, I miss living in a more environmentally-friendly atmosphere. When I lived on the Western side of the state, I rode my bike to commute to work, school and various other places. It was a fun way to stay fit and healthy and I saved a lot of money on gas and car repairs. My current location is not as bicycle friendly. Drivers aren’t used to seeing cyclists on the road and sometimes they’re even aggressive. My bike collects a lot of dust these days and I spend a lot more money on gas.
Where Amy Wants To Be in 10 years:
- I want to be well-established financially and able to meet my retirement goal by at least the age of 50.
- I want to be able to afford being a parent to at least one child, potentially on my own.
- I would like to have more rental income, either from owning more properties and/or by converting my house into two separate dwellings.
- I want to continue doing the outdoor sports I love.
- I may want to continue travel nursing and that may mean renting out my house and moving into a camper of some sort.
- If I have a child of my own, I want to share my love of the outdoors and recreation with them.
- I want to have the financial freedom to travel to see family and friends and go on outdoor adventures such as rafting in the Grand Canyon, ski trips to Alaska and Canada, camping in Baja California, Mexico, and many other adventures I have yet to dream of!
- I don’t anticipate continuing to be a travel nurse but I would like to continue being a nurse. There are many different jobs in nursing and I’m not sure where my career will take me next. When I graduated from nursing school, I wanted to be an ICU nurse and as a Step-Down ICU nurse, I’ve achieved this goal.
- However, I don’t know that I can continue in this role for many years to come if the pandemic continues the way it has or gets worse. There is too much heartache, frustration and stress in this job for me to continue for much longer. Luckily there are many different jobs I could do and I don’t anticipate making a career change away from nursing.
|Amy’s new monthly net income, which’ll be from October – December 2021, with potential for a renewal for another three-month contract.
This is an estimate as I haven’t been paid yet.
|$5,570||This is an estimate of my net income, using a Washington State tax estimator. My monthly gross will be $15,264.
I plan on maxing out my 403b and HSA contributions:
These three deductions combined = $7,632 per month, plus I’ll need to pay taxes, which I estimate at $2,212 per month.
|Travel Nurse Housing and Food Stipend||$4,650||This is not taxed.|
|Roommate Income (started in October 2021)||$1,300||Two roommates, one a longer-term, part-time renter who lives out of town and stays with me when she is working at the hospital. She pays $400 per month. The other is a full-time renter who pays $900 per month.
Before October 2021, I rented a room to a good friend who paid $200 a month and was only there a few nights per month. It’s been nice to have my whole house to myself but it’s time for some real rental income to offset my big mortgage payment.
|Pfizer Covid Vaccine Trial Study||$40||Started August 2020. I earn $5/week for diary entries recording my symptoms and $90/appointment for blood draws and testing.
This should continue for another year or so. I also got vaccinated super early which was a nice perk, especially being around Covid so much as a Covid nurse.
|Monthly subtotal:||$11,560||October – December 2021, with potential for renewal for another three-month contract. This is an estimate as I haven’t been paid yet.|
|Annual total:||$83,640||Previous income of $48,960 (from January – September 2021) plus three months of travel nursing income, which I estimate at $34,680 net.|
|Item||Outstanding loan balance||Interest Rate||Loan Period and Terms||Equity||Purchase price and year|
|Mortgage||$297,469||3.20%||30-year fixed-rate mortgage||$2,500||$330,000; purchased March 2021|
|Item||Outstanding loan balance||Interest Rate||Loan Period/Payoff Terms|
|Federal Student Loan||$5,459||4.45% interest||In Covid-related forbearance. My parents want to pay my student loans for me but we’ve waited to see if the current administration would forgive them. Payments are set to resume due January 31, 2022.|
|Loan from Parents||$4,500||0% interest||Loan from my parents to help with closing costs on my house. I pay them $100/month.|
|Federal Student Loan||$2,846||3.76% interest||In Covid-related forbearance. My parents want to pay my student loans for me but we’ve waited to see if the current administration would forgive them. Payments are set to resume due January 31, 2022.|
|Perkins Loan||$2,840||0% interest (5% if I am no longer a nurse)||Deferred and not accruing interest. Will be paid off in full after five years of working as a nurse (Sept. 2024).|
|Item||Amount||Notes||Interest/type of securities held||Name of bank/brokerage|
|Roth IRA||$15,740||Contributions maxed out last year and this year. I contribute 20% of my net income until I max this out.||FIOFX 2045||Fidelity|
|403B||$11,900||I contribute 15% of my gross income to this account. My employer would have matched my contributions starting Jan. 2022 which is 2.5 years after my hire date. I’ll have a 401k with my new employer and they match contributions after six months.||VTRLX 2050||Fidelity|
|Emergency Savings Account||$6,850||I used all my emergency savings when I bought my house so I could put 10% down. I have been contributing 10% of my net income to this account. My goal is to have $10,000 saved. I feel financially secure in my career as a nurse because we’re in such big demand right now. But maybe I should increase this for unexpected housing expenses, especially if I’m away and need to hire someone for repairs? Or make a separate savings account for such expenses?||0% for the first 6 months; after 6 months of consecutive deposits with no withdrawals, the rate increases to 2% up to $2,500||Numerica Credit Union|
|Vehicle make, model, year||Valued at||Mileage||Paid off?|
|Toyota Tacoma 2000||$9,000||180,000||Yes, it’s paid off. It’s not the most fuel efficient truck but it comes in handy for hauling my snowmobile, household/garden stuff, camping, I can sleep in the back, and more.|
|SkiDoo Summit 2007||$3,000||3,500||Yes. Big purchase for me. I use it to get up closed roads in the winter for backcountry snowboarding. I am a powder hound.|
|Mortgage & Escrow||$1,592|
|Rent||$1,000||Oct-Dec rent for travel nursing. I’m renting a small studio so I can have a quiet space to sleep during the day since I will be working night shift.|
|Sports & Hobbies||$500||Snowboarding equipment, mountain bike maintence and parts, etc. Many one time purchases. Last year was a big splurge year as I needed to replace a lot of my gear that I had been trying to repair and hold together during nursing school. I want to replace a few more things this winter. I’ll also buy two ski passes this winter to two different ski areas since I won’t be near my home mountain as much and I already paid for a pass at my local resort.|
|Groceries||$475||I eat a special diet that is more expensive than the frugal vegetarian diet I used to eat as a college student. This also Includes toiletries and alcohol though I did just quit drinking so maybe this will go down.|
|Other Shopping||$250||Household goods, toiletries not included in groceries. This also includes one time purchases for my house.|
|Home Furnishings||$230||Several one time expenses including my first new bed and mattress this year after sleeping on a $50 Craigslist mattress and free bed frame for nine years. Also invested in a quality couch that will hopefully last many years to come and bonus, it doesn’t collect dog hair.|
|Utlities||$219||Water/Sewer, electricity, garbage/recycling, and internet|
|Gas||$200||My truck isn’t the most fuel efficient and I drive to visit friends and family every month or so.|
|Doctor/Health||$150||Counseling and other Co-Pays|
|Eating Out||$120||This includes any food I eat outside of the house, including vending machines. This also includes restaurants visited on vacation or treating my parents to a nice meal when they visit.|
|Gifts & Donations||$120||Christmas gifts ($330/year), PBS & NPR ($10/month), various coworker & friend donations, and gifts for family and friends for birthdays, etc.|
|Mom & Dad Loan||$100||See Loans for details|
|Clothes||$69||I was very strict during my five years of school and only wore used clothes from thrift stores or hand-me-downs from friends. I’m slowly replacing my worn-out clothes. My weight fluctuates a lot too. I was up a size during nursing school, then back down a size, and now I’m back up a size. Thanks Covid and nursing stress!|
|Auto Insurance and Registration||$68||Allstate|
|Auto Service, Parts, and Registration||$65||oil changes, parts, repairs|
|Mobile Phone||$61||I know, Mrs. Frugalwoods is going to recommend I change cell phone plans. 🙂 Verizon family plan Unlimited talk/text/data. Had to buy a new phone when I switched from AT&T? I might have been duped by the salesperson but was told I couldn’t use my iphone 5 when I switched so I upgraded to an iphone 11. Hopefully this phone lasts me a long time. I currently get $20 off for being a nurse but give my parents $10 off their accounts so I get the other $10. Phone will be paid off Jan. 2022 and total phone bill will drop to $39/month. The interest rate is 0% so I don’t feel any hurry to pay this off.|
|Home Repair/Maintence||$50||Paint, plumbing, tools, garden and lawn supplies (many of these are one time purchases)|
|Nursing Expenses||$29||Insurance, license fees, and continuing education courses|
Credit Card Strategy
|Card Name||Rewards Type?||Bank/card company|
|Citi Cash Back||2% Cash Back||Citi Bank|
|AK Airlines||Airline Miles||Bank of America|
Note: the credit card links are affiliate links.
Amy’s Questions for You:
- Should I rein in the spending on my outdoor recreation/hobby items?
- How can I budget for bigger ticket expenses while also achieving financial independence?
- How should I budget for home expenses?
- I’ve read that I should set aside 2% of the property’s value each year for future repairs. Is this how the homeowners in the Frugalwoods community save for house maintenance?
- How should I fund the basement remodel at my house?
- Should I take out a loan or save up to pay all cash? I could do some aspects of the construction myself but I don’t have the skills for framing, dry wall hanging, or using a concrete saw for the egress window. I’d love to learn some of these skills but I know I will be slow and make mistakes along the way.
- Any suggestions for doing this project affordably as a single person with limited construction skills?
- How should I save and spend my new increased salary?
- As noted above in my income spreadsheet, I’ll net approximately $11,560 per month for the next three months at my first travel assignment. This is a sizable increase from my prior pay.
- While this first assignment’s pay is incredible, it may not be what I make in the future and most travel assignments last three months.
- I could potentially work three travel assignments, take three months off per year and have one month between each assignment. Even if future travel assignments pay less, I estimate I could net at least $100,000 per year as a travel nurse–and more if I take less time off in between jobs.
- Suggestions for health insurance and how to navigate this large expense?
- Being a Covid-19 nurse took a significant toll on my mental health and to cope, I was seeing a counselor once a week. Prior to travel nursing, I paid $0 for counseling sessions via my hospital’s health insurance.
- My travel nurse agency offers insurance through United Healthcare for $115/month but my counselor is not in-network. If I were to pay out-of-pocket, visits would cost $250. I decided to go with an HSA plan, which would at least allow me to pay for out-of-network providers tax-free.
Liz Frugalwoods’ Recommendations
Amy is doing great! She’s at an exciting transition point and has made excellent financial decisions to get to her current position. I also want to thank Amy for her service as a nurse on the frontlines of this pandemic. I am so grateful to her–and all of the healthcare professionals–who consistently risk their own lives in order to care for their patients. Thank you, Amy! And folks, if you’re not vaccinated yet, please get on it!
Let’s dive right in:
Amy’s Question #1: Should I rein in the spending on my outdoor recreation/hobby items?
My short answer to this is a simple NOPE. The point of working and earning money is to develop the ability to spend that money on your highest and best priorities. There’s no point in working hard and earning money and never spending it on the things that matter most to you.
The goal of mindful frugality is to operate through the lens of prioritization.
Successful, longterm frugal people know their priorities and happily spend on those things. Successful, longterm frugal people are also able to identify things that don’t bring them a sufficient return on their investment and then cut those things out of their life. It’s not about saving all of your money, it’s about saving most of your money and spending on what matters the most to you. From Amy’s write-up, it sounds like outdoor sports are a huge priority for her. She said:
Being an outdoors person is also part of my identity.
That’s a powerful statement. It’s evidence that Amy knows herself well. She knows what she values in her life and she spends her money accordingly. Where you spend your money and time = what matters most to you. Amy’s figured that out, which is fantastic!
Short Term vs. Long Term Goals
The counterbalance to everything I just said is Amy’s ultimate goal. If her ultimate goal is to reach financial independence as fast as possible, she would need to make sacrifices in her spending in order to get there. However, from her write up, that’s not her goal. It sounds like Amy prefers to extend the time horizon of her financial independence goal in order to better enjoy the journey. This is no “correct” answer here, it’s just a question of priorities, which is something only Amy can discern.
Amy’s already done the math on this and shared:
According to the FIRE calculator at Engaging Data, I could retire at the age of 49 assuming I continue to make an average of $100,000 per year and don’t make major changes to my annual spending.
It sounds like that’s a number that works for Amy, so I say, go for it! I think she’s spot on that whether she decides to actually retire then or not, she will not regret being financially secure.
Amy’s Question #2 How should I budget for home expenses?
Amy’s next two questions are kind of unanswerable at this stage because we don’t know her ultimate plan for this house.
In my opinion, the answers hinge on whether or not she decides to pursue travel nursing for the longterm and whether or not she plans to return to live in this home.
There’s a big difference between a property being your home and a property being a full-time rental. I think the next year will be a time for Amy to consider which route she’d ultimately like to pursue.
Amy’s in a sort of limbo in terms of being a landlord. She’s renting out her place, but the rent isn’t covering her mortgage (not to mention a maintenance reserve). She’s also paying to live elsewhere as a travel nurse. I commend her for having tenants to offset some of her costs; but, this isn’t a tenable long-term situation.
A few questions I have for Amy:
- Do you plan to live in your house, along with your tenants, in between travel gigs? If not, would you consider transitioning the property into a formal rental (whereby you never live there and you instead turn a profit)?
- Do you have formal, legal leases signed with your tenants? If not, please consult with a lawyer/property manager and get them signed ASAP!
- What is your plan if the house needs a major repair in the near term and you need to re-house your tenants for a period of time? For example, the water heater blows up and floods the first floor and you need to put your tenants in a hotel while it’s being fixed. As a landlord, you need to cover the cost of the water heater repair as well as the hotel stay. Don’t fret, I’m not trying to freak you out! Read on…
These three questions get at the heart of Amy’s landlord limbo and I want to reflect on #3 for a bit.
When you’re a homeowner–and doubly so when you’re a landlord–you need to plan for a lot of expenses over the long term.
Things break and have to be repaired. And while you personally might be wiling to live in a house where, say, one of the toilets doesn’t work, you can’t do that if you have tenants. There’s a higher threshold of maintence required when you’re serving as a landlord. This is why you need to build up a maintence reserve for any property you rent out (and I would argue, any property that you live in too). This reserve is intended to cover all the expenses that are inherent to home ownership. One of the challenges here is that home expenses are lumpy–some years you’ll spend $0, other years you’ll spend a significant amount.
There are a couple different ways to determine how much money you need in a maintence reserve:
- As a percentage of the rental income.
- As a percentage of the property’s value.
- Save all profit at the beginning in order to build up a reserve.
Since Amy is just starting out as a landlord and has no maintence reserve, I’m going to suggest #3. The challenge is that she’s not turning a profit on her rental at this point, but, all is not lost! Amy is earning a lot more in her new job and so, most of that should go into savings at this stage. Let’s skip around real quick to….
Amy’s Question #4: How should I save and spend my new increased salary?
Woohoo! Congrats to Amy on securing this travel nursing gig. I am THRILLED to see that nurses are being paid this well and DELIGHTED to brainstorm with Amy on how to deploy this newfound funds.
Catch Up on Retirement
Amy is already doing the #1 thing I’d recommend: catching up on retirement. She’s correct that she’s behind at this point, but her plan to max out her 403b in this calendar year is brilliant. The IRS dictates the amount you can contribute to your 403b/401k each year and in 2021, it’s $19,500. Since 2021 is rapidly drawing to a close (!!!!), Amy is super smart to stock up her 403b in these final three month of 2021. The clock will restart in 2022 and she can again fully load her 403b, spread out over the 12 months of 2022.
Red Alert: Beef Up the Emergency Fund ASAP!!!!
The only red flag that gives me true concern in Amy’s case is her lack of a robust emergency fund. If she didn’t own a house, I’d say her $6,850 emergency fund is perfectly reasonable, if a bit small. However, since she owns a house and especially since she’s renting it out, she needs to sock away more money into liquid savings.
Putting cash into her retirement accounts and HSA is wise, but, that’s illiquid money that she can’t access in the event of the aforementioned water heater explosion example.
Amy, you want to have enough cash savings to cover the water heater explosions of the world. Because when you own a house, something will always happen that needs money thrown at it. I can’t even list the number of things that broke at our house in the past few months alone: the washing machine, the dryer, the oven…. ok maybe I can. Point is, something’s always going to happen and since Amy’s not there to fix it herself, she’ll need to hire someone.
Money Coming in!
Amy will net approximately $11,560 per month for the next three months at her first travel assignment. This is AFTER her pre-tax contributions to her HSA, 403b and health/dental insurance. Hooray! We have money to work with here!
Next up, her monthly expenses clock in at $5,309, which gives her $6,251 leftover every month for the next three months. I strongly suggest she funnel this $18,753 straight into her emergency fund. This’ll give her $25,603 in her emergency fund, which is a great start to building her property maintence reserve fund.
Saving liquid cash will also be of use to Amy on her parenting journey. However she reaches parenthood, kids are expensive and having extra money squirreled away will be useful!
Once things have settled out in Amy’s life and she knows:
- Her plan for her home
- Her career trajectory
- Where she wants to live
- How she’ll become a parent
And once she’s caught up on retirement and has a robust emergency fund/baby fund/home maintenance reserve, she should start researching taxable investments. I recommend the book The Simple Path to Wealth: Your Road Map to Financial Independence And a Rich, Free Life, by: JL Collins.
Now, let’s jump back to…
Amy’s Question #3: How should I fund the basement remodel at my house?
My initial response here is to wait. I suggest Amy first determine her longterm plan for this house:
- Is she going to return to live in it full-time?
- Is she going to use it as a partial rental/partial home when she’s not travel nursing?
- Or is she going to make her permanent residence elsewhere? If so, does she want to sell this house or turn it into a longterm rental?
Her response to these questions will dictate the nature of this basement remodel. In general–and without knowing the answers to these questions–it sounds like remodeling the basement to add another rental location would be great.
However, I don’t know the market rate for rentals in her area.
I suggest Amy research this to determine how much value another bedroom/auxiliary apartment would add. Once she’s clear on her longterm goal for this property and IF she determines the basement remodel is likely to deliver a great return on her investment, I think she should cash flow the remodel and hire out the work she can’t do and do the work herself that she can.
She’s in a great position now to save up a lot of money and think carefully about where she wants to live in the future. If it were me, I’d put a pin in starting the basement remodel for at least a year or two. The last thing Amy wants to do is sink a bunch of money into a remodel that she’s unlikely to recoup her costs on–either through additional rent and/or increased property value.
Amy’s Question #5: Suggestions for health insurance and how to navigate this large expense?
I think Amy’s very wise to contribute pre-tax money to her HSA and I honestly think her $115/month for insurance sounds pretty reasonable. I’m a huge proponent of therapy and I encourage Amy to either pay her out-of-network counselor or find a new, in-network therapist that she likes. The only other consideration here is for Amy to explore the various options with this insurance the next time there’s an open enrollment period. Is there a high deductible plan that would cost less every month? Since Amy’s on her way to saving quite a bit of money every month, this might be tenable for her in the next year or so. Something to look into!
I said most of my thoughts on her expenses under #1, but I’ll highlight a couple things I think Amy could reduce if she chooses to:
- Cell phone plan: Amy is spot on, I am going to suggest she switch plans! With an MVNO, she should be able to pay in the range of $10-$15 per month. This is quite possibly the easiest way to reduce your spending without sacrificing anything. Here’s my MVNO how-to: How to Save Money on Your Cell Phone Bill with an MVNO: I Pay $12 a Month
- Continue with your plan to max out your 403b and HSA in this calendar year. Well done!
- Funnel all leftover money every month into your emergency fund.
- Make conscious, mindful decisions about your spending. Spend on what matters; save on what doesn’t.
- Formalize the relationship with your tenants via a lease (if you haven’t already).
- Spend the next year (or two) discerning what you want to do with your house. Consider if this is where you want to live for the longterm or if you’d like to turn it into an actual rental.
- Be mindful that the current rent isn’t covering expenses and isn’t a feasible longterm situation. Although, it is great for the short term while you determine if travel nursing is your longterm plan!
Ok Frugalwoods nation, what advice would you give to Amy? We’ll both reply to comments, so please feel free to ask questions!
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