Reader Case Study: Foresters, Bus Drivers and Farmers in the Upper Peninsula
Sam and her husband John both work as full-time foresters for the federal government and part-time school bus drivers for their local school district. They live in Michigan’s Upper Peninsula on an off-grid hobby farm with their dog, dairy goats, laying hens and Tibetan yaks. Sam’s family lives nearby and they’re very happy with their location and lifestyle. The only problem? Their jobs. Both Sam and John would like to disentangle themselves from their full-time government jobs in favor of self-employment and more time on their farm. But can they make the numbers work? We’re off to Michigan today to offer our advice!
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 comments section.
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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 74 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.
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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 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 Sam, today’s Case Study subject, take it from here!
Hi Mrs. Frugalwoods! I’m Sam, I’m 39, and my husband John is 41. We are child-free and dedicated to staying that way. We live in my dream location, kiddy-corner to my great-grandparents’ original homestead in a super-rural location. Our only “close” neighbors (on the same road) are my parents and one of my mom’s retired cousins – but I consider anyone within about a 3-mile radius a neighbor!
Sam & John’s Careers
We are both employed by the federal government as foresters and we share an office, which means we can also share our commute.
As a side hustle, a few years ago we both got endorsements for driving the school bus as subs for our local school district and John often drives sports teams to their away games. This side hustle gives us a little extra cash, a meagre investment into a personal healthcare fund (2% of very little money), and access to a 457 Plan. I also jokingly consider it a type of community service! I invest the maximum the online system allows me to contribute – something like 70% of my bus wages get direct deposited into the pre-tax 457 account so my actual take-home bus paychecks are often $10 or less.
While we are so incredibly blessed to have our steady government jobs, both of us feel disappointed with the bureaucracy, the inefficiency, and the inflexibility of the system we are bound by. There are aspects of the job we love – time spent in the woods every day, some favorite contractors that almost feel like friends… that’s about it though. We aren’t working with a cohort of people that share many of our interests and so we don’t really feel like we fit in with this crowd very well.
John’s Side Business
John especially struggles with keeping a positive attitude and has been toying with the idea of leaving government service to start his own independent woods business, which would likely be logging or selling firewood. He’s trying to figure out what option would be the best fit. He bought an old “iron mule” forwarder that’s used to bring pieces of trees from the stump to the roadside. He took out a loan from his TSP (Thrift Savings Plan – basically a government-sponsored 401k/roth 401k plan for those who don’t know) a couple of years ago to purchase the iron mule and has spent a lot of his free time since then getting familiar with the ins and outs of what it will take to succeed in that endeavor. He’s made some money from it already but found that he will likely need a second piece of equipment to set him up to be completely independent and (fingers-crossed…) productive enough that he thinks he could succeed –not making the salary we make now, but at least bringing home a satisfactory amount of income to support his fair share of our household expenses. He will not pull the plug on his government career until any loans he takes out to get started in his potential new career are paid off, so he can start with no business debt.
Sam’s Exit Plan
I am planning to stick with my government job at least until I reach age 45 – an arbitrary number I chose several years ago. When my performance evaluation comes up this year, I plan to approach my supervisor about whether there is any potential that I could transition my position to either a part-time or a permanent seasonal gig. I don’t really see him being supportive of that, so it’s highly unlikely to pan out, but I would LOVE to be able to keep my very respectable benefits package and continue contributing to my gov retirement plan with a 5% match. Any change, should he happen to be willing to support me in this, would be a long time coming and I suspect I might be close to age 45 by the time it ever pans out!
If that doesn’t happen – I am considering, upon reaching age 45, quitting the feds to drive the school bus as a permanent driver, which would provide some health benefits, continued access to the 457 plan, and give me so much more free time to pursue other interests. Just imagine – mid-days at home, summers off, 2 weeks off in December and 1 in the spring, several school holidays… It would be a DRASTIC cut in pay and a serious reduction in benefits, but some days I think the energy-sapping, soul-sucking nature of our current jobs might warrant a drastic change. I do think if/when John does quit, I will see a decrease in my work-related stress – I won’t be hearing his half of the complaints and frustrations we have about our very similar jobs! Our griping back and forth feeds the negativity like a hungry beast.
Investing for the Future
John and I are focused on contributing as much as we can afford into our TSP accounts while we still have good earning power, with the thought that we may need to draw from them to supplement future income. Knowing that we are growing ever closer to the day we might pull the plug on the government career path, in the past year we’ve each opened Roth IRA accounts, and I also opened a brokerage account through Vanguard, because (I think?) those funds, along with the Roth TSP accounts, will have money that is somewhat accessible to us if we need it, compared to the traditional TSP investment accounts. I am considering taking a couple mini-retirements in the next few years, maybe a month at a time if I can talk my supervisor into it, to see if the lifestyle I am envisioning for myself is one that would actually bring me more satisfaction. I think I could work it out to take off from my regular job and see if I can even handle considerably more time spent driving a busload of kids! Will I really utilize my extra time in a meaningful way? Will I feel more energized?
Sam & John’s Property
We bought our current property in 2015 as vacant land. We spent 3 summers of weekends building the infrastructure needed to move ourselves, our stuff, and our critter family here. We were amazingly blessed to have a family residence just up the road where we were able to live rent-free during this time, before my parents retired there – this, plus starting out with a yurt as a cheap second story on the house, allowed us to move in debt-free. After we moved in and spent 2 years in the yurt, we were able to take it down, add a “real” second story to the house (the first building project we hired a building contractor to help with) – and sell the yurt for almost what we paid for it. While our major infrastructure expenses have dropped since those initial few years, we continue investing in it: fencing, a shed to store John’s equipment, an addition to that shed to give the yaks some cover in a corner of their pasture… I am starting to suspect these are costs that will never end!
Sam & John’s Hobbies and Animal Packs
As to our lifestyle – John and I are just a pair of humans on planet earth with no kids and a small hobby farm. We love being outdoors. It’s always been a dream of mine to have a pack of dogs – or really, many animals of all kinds! When John and I met in 2008, I had 3 dogs and he had 1; we just said goodbye to our old dog a couple weeks ago at age 16; it feels to me like I’m saying goodbye to him and to our lives as young newlyweds at the same time. While John hasn’t been quite willing to sustain that number as we lose dogs to old age, he has agreed to let me start scouting for a new addition to the pack. For nearly a decade now he’s also been willing to join me in raising a micro-herd of dairy goats, and a flock of laying hens.
Plus, we just recently brought home some larger ruminants in the form of Tibetan yaks! I think they will thrive in our northern climate. Most summers we raise either pigs or meat chickens for the freezer. As a rule, we don’t consume meat if we don’t know/support the way it was produced, so this gives us a reliable source for the small amount we do consume. We have used the pigs to help us improve our pasture and supplement the soil nutrition with their manure – brown gold, LOL! Same with the meat chickens – we rotate both throughout the growing season with portable fencing to target the areas of our pasture most in need of their attention. We just acquired the yaks this fall because our primary pasture has come so far since we started this rotation that we think we can support an increase in the number of ruminant animals. Plus, we like the novelty of it. We’ll see how it goes.
When we raise animals for meat, we grow enough for ourselves and several friends, and get together to harvest them as a group in the fall – I’d love to be able to cover more of our own expenses (mainly feed) by increasing the number of animals we produce with each batch to spread the cost over a larger group of people, but with our current jobs it’s just too big of a workload to manage at butchering time.
In addition to our critters, I have a lovely, messy vegetable garden and happily spend much of my free time in the spring and summer with my hands in the dirt, coaxing food from the ground. We have planted mini-orchards across our property, with apples and plums, and are planning a final large apple planting in the coming spring, with up to 20 or 30 new trees – we installed protective fencing this fall in preparation. I have planted wine grapes and perennials like asparagus, blueberries, blackberries, and cranberries, with pockets of wildflowers in the mix to help support our pollinators. I crave more time and energy to spend growing plants, supplying more of our food and enriching the ecosystem through our management practices.
Additional hobbies, when we can find time for them: In the warm seasons we love to canoe and one big trip we did a few years ago was canoeing a portion of the “Voyageur’s highway” along the Minnesota/Canada border, paddling and portaging 210 miles over 9 days. We had planned to take a month to paddle a portion of the Churchill River in Saskatchewan in 2020, but we all know how that ended up… I’m hopeful we will put that trip back into the schedule.
I also LOVE to read, it’s basically an addiction for me – I give my kindle unlimited subscription a healthy workout!
Living that Off-grid Farm Life
Last year for my birthday I was gifted the AMAZING treasure that is my great-grandmother’s old treadle sewing machine (Did I mention we built off-grid, with a tiny PV system to power DC lights and a fridge/freezer? I haven’t been able to use my electric sewing machine since we moved into our house!). This past winter when the days were short and we spent more time inside, I had an amazing time kindling a love affair with this sewing machine and pieced together a couple of quilts and some dresses, along with my regular little knitting projects and recently I started up some embroidery projects as well.
I often don’t have the energy for it at the end of the work-day, but I enjoy working in the kitchen in my free time – in springtime when the goats freshen and everyone gets out on the tender green grass, there is a time of amazing abundance – milk and eggs for days! I especially love making chevre seasoned with my own fresh herbs (YUM!). In addition to caring for my animal critters I keep cultures of sourdough, kefir, and kombucha thriving in the kitchen. I’d love to make hard cheeses (We consume a TON of cheese in our household) but it is a much more time-consuming process than chevre and it’s just not feasible for me right now. In the early spring we do a little maple-sugaring – there’s a ton of potential to expand this if we had more time, but for now it’s small-hobby scale.
The Vehicle Fleet and the Future SAUNA!!!
In the last few years we’ve replaced both of our vehicles. We have a car for most of our trips – daily commute/running to town for groceries/road trips/etc, and a little Toyota pick-up truck for hauling loads or towing. My parents bought our old, full-size truck, and if we need to haul something big, they let us borrow it, we finally upgraded to a reliable tandem-axle trailer (with working trailer lights. And reflectors! New tires and no rust! What even is this luxury?!) for hauling lumber/tractor/bulk animal feed; we replaced our tractor with one that John swears will last us the rest of our lives, and poured a slab for a wood-fired sauna in the local tradition.
The sauna will be one of next year’s building projects along with yet ANOTHER shed to house the second machine John plans to acquire in pursuit of becoming an independent businessman (and to give him room to do maintenance out of the weather). We bought most of the supplies for the shed this fall and need to pour a foundation for it in the spring. When we built our home, we chose not to install (read: didn’t want to take out a loan for) a well and septic system, instead choosing to build a privy, and collect rainwater from various roofs across the property for all our water needs, using a cistern buried uphill from our house to gravity-feed water to our kitchen and bathroom faucets. We put in a simple greywater system to handle this wastewater, and for bathing we have an outdoor shower behind the outhouse (rarely used), and we sauna at my folks’ house twice a week whether we need it or not. Our house is perfectly sized for the two of us, but we can’t really accommodate visitors. When John’s parents come visit they often park their camper in the driveway, or stay at a hotel 15 miles away. I’d love to have a better option for sleeping quarters so we can have out-of-town friends come stay! Maybe another yurt is in order…?
What feels most pressing right now? What brings you to submit a Case Study?
1) With some big employment decisions looming, I need to know if we can actually afford to stop working our reliable full-time jobs. Is it stupid to give up lifetime health coverage at reasonably affordable rates, which we’d be eligible for if we stay with the feds ‘til traditional retirement age?
2) Additionally, my parents are nearly 70 and it’s likely a lot of their future care will fall on my shoulders – my brother lives 300 miles away. They don’t have long-term care insurance. They don’t yet have a will or estate plan. John and I might consider moving to their place in the future as it’s better-designed for aging-in-place compared to our current home. It also has enough room that I think the basement could be converted into living quarters for an in-home nurse if we could find an affordable way to provide that kind of care for them (and/or ourselves someday) if needed.
3) There are some acreages adjacent to our property that we’d love to buy –the highest ranking being 40 acres of vacant land that could provide us with timber assets, firewood, and recreation opportunities – its more rugged than our home place and just a really neat property we’d love to pursue if it becomes available. There’s an 80-acre parcel on the opposite end of our property with a little cabin that we’d love to acquire as guest lodging and additional pastureland, but the owner isn’t willing to negotiate down to a price we’d be willing to pay – and it’s not really something we NEED, just a place I covet! The original family homestead next door is likely coming on the market soon as my relatives who own it age, and I think there might be an opportunity to partner with a cousin to parcel out some of the acreage John and I would love to manage, while out-of-town family could keep the house for a summer home. Then, there’s my parents’ place, which doesn’t require any immediate decisions, but I think needs to be a consideration…
What’s the best part of your current lifestyle/routine?
Having my parents able-bodied and right next door allows us to fulfill the dream of raising a variety of animals while also having some flexibility to travel, since my mom can milk and do other chores as needed. We have also fostered a great chore-sharing relationship with another neighbor that allows us a ton of flexibility in the shoulder seasons. I love living in this incredibly rural area – we have thousands of acres of public land accessible from our driveway where we can explore – and right now we literally get PAID to spend our days in this amazing landscape. I love rambling around the woods with my dogs, I love milking my goats, I love the garden harvest and putting food by, making (and drinking) hard apple cider, visiting with friends and family…. We live an incredible life here.
What’s the worst part of your current lifestyle/routine?
While we are getting paid to work in a place we love, there’s an aspect of government employment that’s incredibly draining and so frustrating. When I get home at the end of the workday, I don’t have the mental energy I need to fully engage with my other interests. I just want someone to get the chores done, feed me dinner, and let me numb my brain with a trashy novel until bed-time! At the end of the week, neither John nor I feel fulfilled by these jobs, though granted we do find little moments of wonder and joy every now and then.
Sam & John’s Finances
|John’s net income – federal salary||$2,200||Gross pay minus: soc sec, fed tax, state tax, medicare, health insurance (140/mo),TSP(1080/mo), HSA (215/mo) , Roth IRA (100/mo) , retirement (towards “pension”, 215/mo)|
|Sam’s net income – Federal salary||$1,900||Gross pay minus: soc sec, fed tax, state tax, medicare, health insurance (140/mo), TSP (1080/mo), HSA (215/mo), Roth IRA (325/mo), retirement (towards “pension”, 215/mo) *My goal is to contribute the IRS max allowable contributions to the TSP each year, but I juggle it throughout the year to make sure we are covering our expenses. We always contribute more than enough to qualify for the full employer match.|
|John’s side hustle income – bus driving||$50||This is very irregular income. Avg net value after state/fed taxes, medicare/soc sec, and 457 contribution|
|Sam’s side hustle income – bus driving||$15||This is very irregular income. Avg net value after state/fed taxes, medicare/soc sec and 457 contribution (70% goes right into 457 account)|
- We paid cash for the land and have been installing infrastructure as we can afford it. We moved in late 2017.
|Item||Amount||Notes||Interest/type of securities held/Stock ticker||Name of bank/brokerage||Expense Ratio|
|Sam’s Traditional TSP||$183,500||Federal retirement plan, includes a 1% automatic employer match and up to an an additional 4% match into the traditional fund. We’re both fully vested in the match funds||50%G fund, 30% C fund, 20% S fund||TSP|
|John’s Traditional TSP||$163,000||Federal retirement plan, includes a 1% automatic employer match AND up to an an additional 4% match into the traditional fund regardless of which account we are investing in. We’re both fully vested in the match funds||50%G fund, 30% C fund, 20% S fund||Thrift Saving Plan (TSP)|
|Sam’s Roth TSP||$63,000||Federal retirement plan||50%G fund, 30% C fund, 20% S fund||TSP|
|John’s Roth TSP||$57,000||Federal retirement plan. We were invested 50%c/50% s until just a few months ago when we moved a big chunk of this into the G fund – John was very uncomfortable with the potential to lose a huge chunk of what these accounts gained in the last few years and talked me into converting 50% into Gov securities in the g fund||50%G fund, 30% C fund, 20% S fund||TSP|
|Sam’s HSA Investment account||$25,000||Set up to automatically invest any $ in the savings account above a balance of $5k||Devenir|
|John’s HSA investment account||$20,000||This is an estimate – John can’t figure out his log-in to see his account! We’re working on it…||Devenir|
|Joint Savings (emergency fund)||$18,500||Usually kept at 20k, this is the priority to keep full before the “project” account is grown||0.10%||Credit union||n/a|
|Sam’s federal “pension” (defined contribution)||$17,300||This is the amount Sam’s contributed. I assume it could be rolled over somehow, but I haven’t found info on what the rules of this are. Generally these contributions can be applied to an annuity based on years of service and High-3 salary. With 10 years of service, may be accessed starting at age 57 (with “penalties” for each year before age 65).
This 10-year requirement is a factor in our considerations for if/when to leave fed service, but I’m not sure how big a factor it should be… Sam will hit 10 years in late 2024, John a year later at age 45.
|n/a||FERS (Federal employees retirement system)||n/a|
|Sam’s pension from previous employer (defined contribution)||$15,000||This is the value of the account that could be refunded (includes my contributions and interest, minus 20% mandatory fed taxes – I think there would be additional tax penalties for withdrawal before age 59.5, and some state tax as well?).
I am fully vested in this plan and qualify for a small pension that could be available starting at age 55, based on years of service and high-5 salary. The estimated value ranges from about $130/month at age 55 to $350/month at age 66 – with options for a survivor benefits election
|John’s pension from previous employer (defined contribution)||$14,000||This is the value of John’s contributions that could be refunded/rolled over. He is fully vested in this plan and qualifies for a small annuity that could be available starting at age 55, based on years of service and high-5 salary.
The annual statement says the estimated value ranges from about $160/month starting at age 55 to $460/month at age 66 – with options for a survivor benefits election
|John’s federal “pension”||$12,345||This is the amount John’s contributed. I assume it could be rolled over somehow, but I haven’t found info on what the rules of this are. Generally these contributions can be applied to an annuity based on years of service and High-3 salary.
With 10 years of service, may be accessed starting at age 57 (with “penalties” for each year before age 65). This 10-year requirement is a factor in our considerations for if/when to leave fed service, but I’m not sure how big a factor it should be… Sam will hit 10 years in late 2024, John a year later at age 45.
|n/a||FERS (Federal employees retirement system)|
|John’s Healthcare Savings Plan (HCSP)||$8,000||This is a holdover from a previous employer. As long as he is enrolled in an HDHP/HSA he can only use the $ towards vision/dental expenses. This money cannot be transferred or rolled over into any other accounts. Should we spend down the LEXFSA account next year and quit enrolling while we spend this account down…?||n/a||MSRS|
|John’s HSA savings account||$5,000||This is an estimate – John can’t figure out his log-in to see his account! I know it’s set up for the $75/month pass-through and the max IRS contribution||HSA Bank|
|Sam’s HSA Savings account||$5,000||$75/month pass through from insurance premiums, plus my contributions which I max out through an automatic payroll deduction||HSA Bank|
|Sam’s Roth IRA||$5,000||just opened this past year.||VTI (Vanguard total stock market ETF)||Vanguard||0.03%|
|Sam’s health care saving plan (HCSP)||$4,000||This is a holdover from a previous employer. As long as I’m enrolled in an HDHP/HSA I can only use the $ for vision/dental expenses. This money cannot be transferred or rolled over into any other accounts.||Vanguard funds: 17% total intl stock index, 63% total stock mkt index, 10% balanced index, 10% total bond market index||MSRS||Looks like all have admin fees of 0.65% annually, plus a 0.02%-0.07 “gross fund expense”|
|Sam’s 457||$1,900||Retirement account through the public school employees retirement system. If we switched to being regular drivers, we would also qualify for an employer match in a separate 401k plan, but we are not vested in any of that money as subs. This value includes an automatic 2% contribution into a “personal healthcare fund” out of my bus driver pay||50% State Street S&P 500, 50% Artisan Mid-cap growth||VOYA||I can’t find this on the website, but from Jan 1 through Nov 18 of this year, $31 in admin fees were distributed from the account|
|Joint Checking||$1,400||Our expenses are paid out of this account||0.05%||Our local Credit union||n/a|
|Sam’s brokerage account||$1,300||just opened this past year||VTI (Vanguard total stock market ETF)||Vanguard||0.03%|
|John’s Roth IRA||$1,200||just opened this past year||VTI (Vanguard total stock market ETF)||Vanguard||0.03%|
|“Project” Savings account||$600||this is where we try to save up in advance of bigger expenses – replacing vehicles, funding building projects, covering large regular expenses such as insurance, property taxes, etc. I’m still learning to balance this and we often pull from the “emergency fund” balance to cover the difference, but I am getting better every year.||0.10%||Credit Union||n/a|
|Sam’s LEXFSA||$500||I am able to carry over this balance each year (up to $500) as long as I re-enroll. Used for any dental or vision costs for either me or John over what is covered by my health plan, rather than paying out of our HSA balance.||FSAFeds||n/a|
|John’s 457||$500||Retirement account through the public school employees retirement system. If we switched to being regular drivers, we would also qualify for a 50% employer match of the first 2% contributions in a separate 401k plan, but we are not vested in that as subs||VOYA|
|Vehicle make, model, year||Valued at||Mileage||Paid off?|
|Toyota Tacoma 2006
Bought used a few years ago with a brand new warranty frame; has little-to-no rust. It’s mainly used for pulling the trailer and/or hauling any loads the car won’t handle, and commuting when the snow is too deep to get out to the main road in 2wd.
|Pontiac Vibe 2009
Used fir the majority of our driving miles each year.
|Misc canoes/kayaks (4 total)||$3,500||n/a||Yes|
|Honda Rebel 250 Motorcycle
This really should be sold, just one of those things we seem to never get around to. It’s fun to ride and a nice spare vehicle in the summer, but has only been ridden 100 miles cumulative in the last couple years.
|Groceries||$632||This includes everything we eat and drink, except for on big shared trips which I include with travel. This doesn’t include the cost of meat – that would mainly be covered in the farm costs for animal acquisition and feed. We patronize our small local grocery store for main weekly stocking, and every 3-6 months we stock up at bigger chains if we make a run to a bigger town. Some items we buy in bulk online (flour, olive oil, nuts and dried fruit).|
|Vehicles||$585||Includes pretty much everything we spend to keep vehicles on the road – insurance, registration, maintenance, parts, and fuel. This covers the car, truck, motorcycle, and trailer registration. We’re insured through Auto-Owners, brokered by our local insurance agent. Vehicle insurance alone is $170/month|
|Farm Infrastructure||$515||I split these out from the general farm expenses. Included here are larger infrastructure-type costs we’ve had in the last 4 years: replacing the tractor (John swears this one will last the rest of our lives…), a new trailer, building a machine-shed, installing an additional cistern, grain storage bin, bigger fencing projects. These costs should drop eventually, right?|
|Farm||$455||Includes hay/animal feed, misc vet expenses, animal purchases and stud fees, fence repair, perennial plants and pasture seed, general maintenance of access roads/cistern/tractor/etc. Some costs are offset when we share animal harvest with friends – they pay their share of the costs, but I don’t have consistent data on how much that’s actually been, somehow it’s all on scraps of paper scattered around the house (In 2020 it was at least $100/mo paid back for our pigs). Partway through 2021 I did finally start a ledger to track the money flow by livestock type. But it’s a work in progress!|
|Household Infrastructure||$262||Includes bigger purchases we’ve made in the last several years, such as a propane back-up heater, adding a small entryway to the house, upgraded batteries for our photovoltaic electrical system, a DC chest freezer, pouring a slab for the future sauna, and installing a concrete floor in the kitchen. The old batteries still have plenty of life in them and we bought a little charge controller and panel and moved the old batteries into the barn so we can have lights and a fan in my milk room.|
|Misc||$225||A lot of this is Amazon purchases that I neglected to log-in to determine what category they fall into and didn’t know off the top of my head when I was updating my spreadsheet (Which I sometimes get to 3 months after the fact).|
|Dogs||$214||Includes vet bills, rx/supplements for joint health and arthritis relief and food. Includes orthopedic surgery from 2018 that was pretty expensive but necessary for our then 6-year-old dog, and this past year we were up to $75-100/month for prescription pain relievers and seasonal allergy shots for the geriatric dog before he passed, so ::fingers crossed!:: this should be a smaller cost going forward – at least for a few more years until our 9-year-old starts having age-related issues.
Does anyone have opinions on pet insurance if we adopt a young dog? I looked into it a little bit in the past and it seemed like a racket if it didn’t include the basic vet check-ups, but then we adopted an accident prone dog, and started paying for expensive prescriptions for the old dog… Prior to that we rarely if ever had vet bills that were more than the annual check-ups so I was a little shocked by the mix of those 2 expenses!
|Hobbies and recreation||$175||Frankly I was shocked at how high this is! We don’t really do…well….anything that costs all that much money in our free time – I think an outrageous portion of this is BOOKS! This includes a Kindle unlimited subscription for $10/month. I sometimes buy hard copies of reference books on farm/home type topics, and I buy digital copies of books by my favorite authors that aren’t available in my subscription, and which I often read and re-read.
Last month I found out we have a small community library and I just got access to our regional online book system, so I should prioritize the free resources before buying any more books that aren’t going to stick with me permanently and provide useful reference.
I don’t think I can give up Kindle unlimited though – I read hundreds of books each year through that thing. Limiting my reading to books available through that subscription and getting everything else from the library is totally reasonable to me though, and I will prioritize that. Also includes yarn/sewing supplies, video downloads, xc skis, maple-tapping supplies, wine/cider brewing supplies, and tattoos.
|Household||$150||Includes cleaning supplies, propane fills, canning supplies, waste disposal, a shared phone (now $18/mo with Ting, thanks to Frugalwoods’ recommendation), replacement bedding, kitchen supplies, etc|
|Property Taxes||$130||Self explanatory. If we buy additional property this will obviously go up accordingly.|
|Homeowners insurance||$100||We just signed up for this last year with Michigan Farm Bureau, mainly for the liability aspect. Provides some coverage for “agricultural exposure” in addition to insuring the buildings and whatnot. Our local broker that we go through for auto insurance wouldn’t get us a policy due to this exposure. MFB quoted me auto insurance as well but couldn’t come close to our rates with auto-owners so we have 2 different insurance providers.|
|Life Insurance||$93||Sam has a small life insurance policy through Thrivent ($3/mo). Should be close to covering any funeral expenses. We also each have a pretty big group life insurance policy through work, paid as an automatic deduction from our paychecks but not accounted for in the income block above. Our thought when we enrolled was that if either of us dies, the other would be able to afford to at least semi-retire and maintain current lifestyle on the proceeds of that policy plus the retirement accounts of the deceased. We don’t plan to maintain this much coverage after we leave federal service. Looking for suggestions of what type (if any) of life insurance we should look into – and should we change now? or wait?|
|Gifts||$72||Christmas and bday gifts for 5 nieces/nephews, parents, 1 sibling, and occasional wedding and grad gifts.|
|Medical||$67||This is mostly for elective carpal tunnel surgery John had in 2020, and then some misc vision/dental expenses above the coverage of our insurance and flex spending account allocations. We choose to pay out-of-pocket, then save receipts to be reimbursed out of the HSA in the future.|
|Travel||$66||Airfare, campsites, airbnb, maps, includes food and gas for big shared trips we take together|
|Clothes||$50||Non-work clothes. Lately: hiking skirts, wool socks, wool undergarments, shoes/boots/sandals, and t-shirts.|
|Long term care insurance||$45||Automatic deduction from our paychecks, not accounted for in net income. Both of us signed up for FLTCIP (Federal Long Term Care Insurance Program) coverage when we started. It’s really basic coverage, something like $100/day for 2 years max, and we can take it with us when we leave this employer.|
|work||$32||Misc supplies – pants (we both hate the uniform pants offered by our employer, and since we have to wear them 5 days a week we are willing to pay for comfortable well-fit pants out-of-pocket), professional assoc. memberships, and covering the cost of boots above our boot allowance. In our climate we each need the option of wearing leather summer boots, rubber boots, insulated rubber boots, winter pac boots…|
|Flex Spending Account||$32||Automatic pre-tax deduction from Sam’s paycheck not accounted for in net income. This is variable each year depending on my annual election. I try to guess what dental or vision expenses we might need to cover|
|Donations||$20||Long-term I’d like this to go up, committing to charitable giving that supports our beliefs and best case helps out our local community. Right now we give to a small handful of non-profits for supporting our favorite hiking trail, rare livestock breeds, and some veteran support programs.|
Credit Cards: None
- Last year I applied for one of the cash back cards recommended by Frugalwoods and was denied (affiliate link). I think perhaps my credit history is too old? We haven’t had a mortgage, credit card, or any loans from a bank since around 2012.
- Should I apply for a regular credit card and try to develop a new history to qualify for one of these cash back cards?
Where Sam and John Want to be in 10 Years:
- We’d like to have our annual expenses below $40k, and be covering most if not all those expenses through part-time or seasonal work (Sam) and self-employment and/or part time work (John).
- We’d like to have enough money saved up that we can cover any deficits without having to touch the principal from the investments we are making now.
- I want to be providing a much larger portion of our household needs from my own personal inputs – not from spending money.
- I want to grow more, healthier forage to feed our livestock who in turn feed us.
- I want to grow more food in my garden.
- I want to spend more time hiking the woods with my dogs!
- I want to maintain the relationships I have with my family and friends. My nearest friend lives an hour away, and most are more than double that distance, so I want to continue to be in a position where I can meet up with them each at least annually if not more often – these are my chosen people, who energize me, make me laugh, and feed my vision for a better version of myself. They are worth the drive! Ideally, I’ll have a comfortable place for them to stay so they can come visit me as well.
- I don’t want to be employed full-time and John should no longer be working for the federal government. My best-case scenario is I am a permanent-seasonal or part-time employee at the same location I work now – this will keep me working in the field (“field” both as in literally working outdoors, which I love, and in a forestry profession), with less job-related stress and more time/energy for my other lifestyle goals, while keeping a large portion of my employee benefits – including providing good health insurance for both myself and John.
- Second best for me: I am driving a school bus to meet my fair portion of our financial needs, with some health and retirement benefits included for myself, and I have the time and energy to invest in my love for the outdoors, along with my other lifestyle goals.
- John will ideally be self-employed, running a business he can operate in the black. While it will require him to invest an incredible amount of time and effort, I think he will be so much more fulfilled at the end of the day. This man was not built to be a government wonk! A secondary option is that he drives the school bus part-time, with some health insurance and retirement benefits for himself. There is decent potential he could have a sort of blended option where he drives the bus and operates his business either seasonally when school is out, or part-time – that might be a great starting point for him to get his feet wet in the world of self-employment and would give him health coverage if I leave federal service.
Sam & John’s Questions for You:
1) Regarding our finances:
- Can we actually afford to stop working full time and reasonably have enough money to focus on the best parts of our current lifestyle?
- What key items am I forgetting to include in these grand schemes?
- Does anyone have suggestions for great online courses targeting aspiring small-business owners/entrepreneurs? I have 1 requirement for John before he pulls the plug on his federal job – he needs to know the basics of managing the books for a small business – or hire someone who does! This is not something either of us has any experience with.
2) Regarding my parents:
- Should I approach them about putting their house and property into a trust for me and my brother while they are still young, able-bodied, and mentally healthy?
- Should I look into straight-up buying them out so they can’t be forced to sell off the home as an asset if/when they need care above what their funds (or my brother and I) can provide?
- I am hopeful this need is a long time in the future, but nursing care is hard to access in this rural area. What are some options to be aware of that might help me find or provide quality care for them as they age – especially if I can keep them in their home? What are the considerations if they need to move to a nursing facility?
3) Regarding real estate:
- How do we prioritize which (if any) nearby properties we should consider purchasing?
- The rental market in this area is basically non-existent, so investing in any of the residential options strictly as a rental property for income wouldn’t be feasible – however I do like the idea that I could help aid my mom and dad’s future care by offering housing to a care provider who could maybe also provide care to others in our aging, rural community to help offset costs? Is that at all realistic?
4) How many dogs is TOO MANY dogs? (LOL!)
Liz Frugalwoods’ Recommendations
I love the lifestyle Sam and John have carved out for themselves! Woods! Animals! Farm stuff! Very much up my alley and I adore how clear they are on how they like to spend their time. Their story is a great illustration of identifying your priorities and then making your money support those goals. Let’s dive into Sam’s questions!
Sam’s Question #1: Can we afford to stop working full time and still have enough money to focus on the best parts of our current lifestyle?
I’m going to answer Sam’s question with a few follow-up questions:
1. How much money would they make driving the school bus full-time (or more regularly than now)?
We’d need to know what this dollar amount would be in order to determine its feasibility.
2. What’s the projected income from John’s logging/firewood business?
This goes to Sam’s very wise requirement that John develop a business plan. He needs to identify who his customers are, how much he anticipates bringing in, what overhead and expenses will be, and whether or not this business model is still viable when diesel is really, really expensive (as it is right now).
Without the answers to these two variables, it’s tough to say if they’ll be able to cover their expenses. However, I do have a few other ideas for Sam and John to toss around:
Don’t Quit Together; Also Reduce Expenses
First off, under no circumstances should Sam and John both quit their jobs at the same time. If they can ensure that Sam’s salary will cover their expenses, John could quit to focus on building up his business while Sam continues to work to support them both. In that event, they’d need to explore how to reduce their spending.
Current monthly spending: $3,920
Income without John’s salary:
|Sam’s net income – Federal salary||$1,900|
|John’s side hustle income – bus driving||$50|
|Sam’s side hustle income – bus driving||$15|
This means Sam and John would need to essentially cut their monthly expenses in half, which I don’t think is possible given a number of their fixed expenses. Their groceries and vehicles costs alone total $1,217 and that’s before getting to feed for the animals and other farm-related costs. Given that, I’m not sure it’s actually possible for John to quit his job unless they’re able to radically alter their top line budget items of groceries, vehicles, farm infrastructure and farm supplies.
Without drastically altering their vehicle or farm spending, they wouldn’t be able to cover their expenses on Sam’s salary alone. However, we haven’t yet addressed their pre-tax deductions, so I want to turn my attention to their assets now.
Sam & John’s Assets By Class
Here’s the breakdown of where Sam and John have their money:
- Retirement: $533,745
- Healthcare-related accounts: $67,500
- Cash: $20,500
- Investment Account: $1,300
What this asset breakdown illustrates is that Sam and John have done a fantastic job over the years of contributing pre-tax money (out of their paychecks) to tax-advantaged health and retirement accounts, which means they’re in great shape on both of those fronts. Let’s do a quick check-in with our favorite oversimplified (but helpful) retirement rule of thumb, courtesy of Fidelity:
Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67 (source: Fidelity).
Sam and John are both roughly 40, so we’ll go with 3x net salary, which would be ($49,980 x 3) = $149,940. This means they are in superb shape with $533k in retirement!
The challenge we’re now running into now is that all of these (excellent) pre-tax contributions come at the detriment of their cash-on-hand. This wouldn’t be a problem at all if they both planned to continue their work for the federal government, but it does make John’s transition to self-employment a bit more difficult. Their $20,500 in cash is an absolutely perfect emergency fund–it’s about five months worth of their expenses, which is precisely what most experts recommend (the standard is anywhere from three to six months worth of your expenses). However, that amount doesn’t give them a whole lot of cushion for John to quit his job. But there are things we can do to help!
Ways to increase their cash on hand:
- Reduce any expenses that are reduce-able
- Work more hours as bus drivers
- Decrease pre-tax contributions to retirement and health savings accounts
I don’t think I’ve ever suggested anyone consider #3 before, but Sam and John have done such a great job of contributing to retirement and HSAs over the years that they’re slightly out of balance in terms of their cash on hand (again, assuming John quits his job). If they were to both stay in these jobs for the duration, I probably wouldn’t change a thing. I also don’t suggest Sam cease (or reduce) her pre-tax contributions forever, but, it could be a way for them to float their expenses while John ramps up his business.
Sam’s current pre-tax monthly contributions:
- TSP: $1,080
- Roth IRA: $325
- HSA: $215
- Retirement (towards pension): $215
Sam also pays for $140 for health insurance, which I assume will double once she is also paying for John’s coverage? They’ll want to figure out that dollar amount before John leaves his job.
If Sam pauses some of her pre-tax contributions, I recommend she continue contributing enough to qualify for her employer’s match as that’s free money.
Transitioning to Self-Employment for John
1) Set A Net Profit Timeline for John’s Business
I recommend that they set a timeline for when his business will need to start generating a net profit (minus his expenses, of course). I don’t know what timeline is reasonable, but if they decide on, say, one year, then at that point they’d assess his income and determine if the business will be viable for the longterm. If it’s not viable at that point? He will need to find another job that mirrors his current salary.
2) Learn While You Earn
If at all possible, the most financially stable way for John to develop his business would be while he’s still working full-time. I know it’s not ideal to do research on nights and weekends, but it would allow them to shore up their cash reserves in advance of him quitting.
3) Don’t Borrow $$ From Your Retirement Fund Again
Sam noted that John borrowed from his TSP in order to purchase equipment for his business and, in the future, you want to avoid doing this if at all possible. Retirement accounts are not designed to advantage early access of the funds, which is another reason why I suggest Sam and John slow their roll with putting so much money into these accounts. In an ideal world, you want to build up a large enough cash reserve to pay cash for the capital expenditures for John’s business.
4) Are Government Grants/Subsidized Loans Available?
Another avenue for John to explore is the availability of government grants or subsidized loans for small, agricultural businesses. I don’t know about Michigan, but I know these are super prevalent in Vermont. John and Sam are already experts at navigating government bureaucracy and paperwork, so I suggest they research this in earnest.
Another Idea: What about Private Forestry?
Have Sam and John considering going into private forestry? Or consulting for a timber company? Or similar? From their write-up, it sounds like they both enjoy the “being in the woods” aspect of their jobs, just not the “government paperwork” aspect. In light of that, I’d be curious to hear if they’ve looked into other forestry (or forestry-adjacent) positions outside of the government?
Might there be an opportunity to consult part-time or only during certain seasons? This could enable them to leverage their education and experience in exchange for more free time throughout the year.
Sam’s Question #2: What about my parents?
From Sam’s line of questioning regarding her aging parents, it sounds like she hasn’t discussed a lot of this with them. I know it’s challenging to broach financial and health issues with family, but I think Sam needs to get a better sense of what her parents are envisioning for their future. At the very least, Sam should ask them to work with a lawyer to draw up a will and estate plan. That is the first step and I strongly, strongly, strongly encourage everyone to do this and to HIRE A LAWYER!!! It will be money well spent. In my opinion, your final will and testament is not the time to DIY in order to try and save $$$.
For guidance on how to have this conversation, I recommend Sam check out the book, Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents About Their Finances by Cameron Huddleston (affiliate link).
Sam’s Question $3: How do we prioritize which (if any) nearby properties we should consider purchasing?
Sam, my friend, you are a gal after my own heart. I 100% understand the urge to BUY ALL THE FOREST!!!! Some people want to buy shoes and handbags, we woods-dwellers want to BUY THE TREES AND SAVE THEM ALL!!!!! I too am constantly looking at properties for sale, despite the fact that I already own 66 acres and do not need more, but… THE TREEEEEEEESSSS!!! At any rate, non-rural people usually do not understand this urge, but I do, on a deep level.
Feelings aside, Sam and John don’t have the cash for this right now. Particularly not if John quits his job.
John and Sam will need to focus on one major financial change at a time: either John transitioning to self-employment OR real estate purchasing.
Once John is established in his new career and is cash flowing the business, Sam and John can consider saving up enough cash to put a downpayment on more land. The mention of a mortgage brings me to another topic:
Sam and John’s Credit Score and the Need for a Credit Card
Ironically, because Sam and John have done such a stellar job staying out of debt, it sounds like they don’t have a very good credit score. This is one of those totally dumb financial things. A credit score essentially indicates how good you are at carrying debt. Creditors want to know if you can repay debt on time and the only way for them to know that is for you to have debt. My husband and I ran into this issue when we were applying for our first mortgage because we’d never had any debt.
I think it’s weird and ironic that the better you are at not having debt, the lower your credit score is likely to be. This could be an issue for Sam and John if they intend to get a mortgage for future real estate purchases and/or if they need to secure loans for John’s business. I am extrapolating this about their credit score based on the facts that:
- They don’t have a mortgage (and never did)
- Sam said their application for a cash back credit card was declined
I didn’t ask to see their credit score, but I’m assuming it’s low.
The answer is YES! Do it today. John is very likely to need a business credit card and so they should get started with building up their credit score ASAP boss. Having a credit card open for many years and PAYING THE BALANCE IN FULL every single month is an easy way to build up your credit. You do NOT need to keep a balance on your card for this purpose; you should pay it off in full every month, but should aim to keep the card open for many years. This behavior demonstrates to creditors (ie mortgage brokers, banks) that you are able to responsibly manage debt, which is what they want to know before they extend you a loan or mortgage.
What Kind Of Credit Card To Get?
I normally recommend folks get a cash back or travel rewards card; however, you must have a good credit history in order to qualify for those. But fear not! There are several categories of credit cards designed for people with bad/no/poor credit. The two options most relevant for Sam and John are:
- Credit-Building Cards
- Secured Credit Cards
If at all possible, you want to go with a credit-building card as those operate more like a regular credit card. However, if your credit history is too minimal (or your credit score too bad), you may need to start out with a secured credit card.
According to Forbes:
A secured credit card requires you to make a cash deposit to the credit card issuer to open your account. With a secured credit card, the amount you deposit, or use to “secure” the account will be equivalent to the line of credit you receive. In other words, a $500 deposit will get you a card with a $500 line of credit.
A secured card is not ideal because it ties up some of your cash, but it is a great way to start with credit building. My husband reminded me that his first credit card was a secured card and that after about a year of successfully using and paying off that card, he was able to open up a regular credit card. Essentially, you can use these types of of credit cards to stair-step your way up to better credit and better credit cards that offer you rewards (such as cash back or travel points). Sam and John, if you need to start with a secured card, that’s no problem at all–go ahead and do that and then apply for better cards after you have a proven track record of paying that card off.
Here are some specific cards Sam and John can consider:
1) Credit Building. Start here and see if you qualify for either of these:
- Petal® 2 “Cash Back, No Fees” Visa® Credit Card:
- I like this one because it doesn’t have an annual fee
- Plus, you can earn 1% cash back on eligible purchases right away and up to 1.5% cash back on eligible purchases after making 12 on-time monthly payments (although after a year with this card, Sam and John should be able to apply for a better cash back card)
- Petal® 1 “No Annual Fee” Visa® Credit Card:
- This one also has no annual fee but doesn’t offer the opportunity for cash back.
- It is, though, supposedly available for people with worse credit, so if they don’t qualify for the Petal 2 card, they very well might qualify for the Petal 1.
2) If you don’t qualify for a credit-building card–don’t worry–you can try for a hybrid Secured/Building Card:
- Self – Credit Builder Account + Secured Visa® Credit Card:
- This is a combined credit builder account and secured card
- No credit check. No credit history required.
- If you make at least 3 monthly payments on time, have $100 or more in savings progress in your account, and are in good standing, you’ll automatically be eligible for the Self Visa® Credit Card, without a credit check.
- Your savings progress from your Credit Builder Account acts as your refundable security deposit.
3) If you don’t qualify for that card, move onto Secured Cards:
- Applied Bank Secured Visa® Gold Preferred® Card:
- This is not ideal because it has an annual fee of $48, but, that’ll be $48 well spent to improve your credit history if this is the only card you qualify for.
- Secured Sable ONE Credit Card:
- This one looks pretty good as there’s no annual fee and you can get a dollar-for-dollar match on all cash back at the end of your first year. Additionally, it says that they can auto-review you to an unsecured card in a little as four months
- You can also earn 2% cash back on everyday purchases at Amazon, Uber, Uber Eats, Whole Foods, Netflix, Spotify, and more! Plus, 1% cash back on all other purchases.
- Up to $10,000 credit limit
- Prosper® Card:
- This one has an annual fee of $39, but it’s waived for the first year if you sign up for AutoPay before your first statement
Once Sam and John have a credit card, they should use it every month and pay it off every month. Additionally, they should keep in mind their credit utilization rate, or debt-to-limit ratio. Every credit card has a “spending limit” attached to it, which is the maximum amount you’re allowed to charge on that card per billing cycle. To improve your credit score, you don’t want to spend all the way up to that limit.
According to NerdWallet:
Many credit experts say you should keep your credit utilization ratio — the percentage of your total credit that you use — below 30% to maintain a good or excellent credit score. Credit utilization is a major factor in your credit score, so it pays to keep an eye on it. View the 30% rule as a good guideline, but be aware that using even less is better for your score.
Once Sam and John have a track record of responsible credit card usage, they should be able to get a higher spending limit as well as a better credit card (as in, one that offer rewards such as cash back).
NOTE: all of the credit card links are affiliate links.
Sam’s Question #4: How many dogs is TOO MANY dogs?
There are never enough dogs!!!!!
- John needs to create a business plan to determine the viability of quitting his job. If at all possible, he should “learn while he earns” and not quit his job until the business is ready to go.
- Sam should look into reducing her pre-tax contributions to retirement and HSAs while they’re in this phase of building up cash to both cover their expenses and fund John’s start-up costs for the business.
- Explore the availability of government grants or subsidized loans for small agricultural businesses in Michigan. There may well be a wealth of programs available for John’s business.
- Do not borrow from a retirement account again.
- Explore private forestry or part-time consulting (if they haven’t already) and consider if this might deliver the work/life balance they’re looking for.
- Read the book, Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents About Their Finances by Cameron Huddleston (affiliate link), and schedule a time to have a serious conversation with Sam’s parents about their plans for the future.
- Apply for a credit card today to start building up their credit score. Pay it off every month (be sure to use it!) and be mindful of their debt-to-limit spending ratio.
- Hold off on real estate purchases until John’s business is successfully earning an income and they’ve saved up enough cash for a downpayment and created a credit history that enables them to qualify for a mortgage.
Ok Frugalwoods nation, what advice do you have for Sam? We’ll both reply to comments, so please feel free to ask 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.
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