2019 Expenses > 2019 Income – Help us close the gap

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
MotoTrojan
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Joined: Wed Feb 01, 2017 8:39 pm

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by MotoTrojan » Tue Oct 23, 2018 1:12 am

Do not take from the Roth. You’re better off moving $10K of it to a risk free asset, then depleting your emergency fund by $10K. If you have an emergency you’ll still have what you need. If not, you won’t lose the precious Roth space.

Momus
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Momus » Tue Oct 23, 2018 1:19 am

Ron Ronnerson wrote:
Mon Oct 22, 2018 7:08 pm

Our Expenses (monthly):
House Cleaning: $120 – done every 3 weeks
Stop this... Sahm should do it.

Cable/Internet: $160
$50/mo internet only plan, if you have time to watch cable, you have time to work a side hussle

Electric Bill: $150, switch all to LED bulbs and and all vampire drain needs to be unplugged, stop running computer/tv 24/7, unscrew a couple bulbs in your bath room/living room, you don't need 6 lights on at the same time.

Cell Phones: $70
Switch to mint mobile 2 people $30/mo

Gas for cars: $200
Bike or public transport?

Groceries/Household Items: $1,000
Too high, aim for $150/headcount. No more whole foods.

Vacations: $150
No, find a cheaper alt

Restaurants: $200
No, Sahm should cook. She get plenty of time.

Clothing/Shoes/Hair/Nails: $50
Umm...

Pets: $80 (cats are on a special diet due to sensitive stomachs)
Pet is a luxury...

Entertainment: $50
Find a free entertainment, parks, hiking trail, the beach...

Misc: $150
Cut it out
Any chance wife picks up a part time job that offer benefits? There are jobs like this.

Or, shop around yourself, it might be cheaper if you just find a minimum catastrophic insurance?
http://www.mrmoneymustache.com/2017/11/ ... -in-price/

Startled Cat
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Startled Cat » Tue Oct 23, 2018 1:37 am

As I stated above, I think it is perfectly reasonable to temporarily reduce your savings rate for this period to a still-healthy rate. Since you framed it as a cash flow problem, people are treating it as an exercise in cutting expenses. Nothing wrong with that, but I don't think it's particularly necessary in your scenario (especially since you will receive a pension, and maintaining a high savings rate is not as critical as it is for most of us).

I would be comfortable drawing down the cash savings a bit to help fill this gap. If necessary, I would borrow additional money at 0% using credit card balance transfer offers, knowing that I had Roth IRA funds to use as a backstop if I wasn't able to roll over the debt long enough to pay it back from cash flow. Only as a last resort would I actually withdraw Roth IRA contributions - but if it came to that, it wouldn't be a big deal, as it would be a relatively small withdrawal. In fact, you might just prefer to just withdraw from the Roth IRA if/when you need to dip into it rather than playing games with balance transfers, just to keep things simple. It won't matter very much in the long run.

I'd probably keep a small part of the Roth IRA in cash or short-term bonds in case I needed to make an eventual withdrawal, but again, we're talking such a small fraction that it's not terribly important to do that.

pennywise
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by pennywise » Tue Oct 23, 2018 5:35 am

celia wrote:
Mon Oct 22, 2018 8:57 pm
This looks like the case where someone can afford the health insurance, either through the employer or an individual policy, but would rather play games to cut his income in half.
While phrased a bit harshly, this is actually a pretty accurate summation of the situation. Yes, the plan is to game the system by artificially reducing taxable income so as to qualify for a benefit.

While OP is entirely within his rights to take advantage of the lack of inclusion of non-earnings in the establishment of the income qualifying level, the reality is that the reason there's a lower cost of health care is, well, to help people who are earning less. Ergo it's going to be hard to live on less to get cheaper health care if you can't get your budget down to the level that people who actually earn low enough salaries to get the benefit.

So if OP can't actually live on what it takes to qualify for cheaper health insurance, he and his wife need to either slash expenses, she needs to get a job or they need to decide to spend what they have to spend and quit trying to pretend to earn less to qualify for the health insurance. A budget that has to include a SAH spouse, cleaning help, eating out, fancy pet food and pricey cable isn't going to cut it.

onourway
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by onourway » Tue Oct 23, 2018 5:43 am

Regarding the TV/Internet service, we switched to YouTubeTV last year, and while the total savings is only about 1/3 of our original bill (~$105/month vs, $160/month), YTTV is ORDERS OF MAGNITUDE better than the cable box it replaced. Yes, we are missing some channels. So what. There is no shortage of things to watch in today's world. Not having to deal with a crummy cable box and crummy interface while saving $700/year? Priceless.

bigred77
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by bigred77 » Tue Oct 23, 2018 7:04 am

Spend down from your 50k in cash over the next 2 years and then rebuild the balance if you so desire once your wife rejoins the workforce.

It’s not even spending above your means, think of it as shifting a portion of your taxable assets to tax advantaged accounts (because that’s exactly what your doing) in addition to your regular retirement contributions.

donaldfair71
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by donaldfair71 » Tue Oct 23, 2018 7:37 am

Cable/Internet can be less than 100$ if you go 100/100 or 75/75, with Youtube TV or another streaming option.

Total Wireless can get you to about $60/Mnth for 2 lines unlimited, on Verizon Net.

Close to 2k savings alone.

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jharkin
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by jharkin » Tue Oct 23, 2018 7:39 am

Ron Ronnerson wrote:
Mon Oct 22, 2018 11:46 pm
I appreciate the comments about the cable bill being too high. I had called around over the summer to get quotes for Internet + streaming and didn't find that the savings would be as much as some people are saying they could be. I will renew my efforts and look into it again. Thanks very much.
I wouldn't kill yourself doing that. Most of the time these comments come from the younger folks in their 20s or from people who just don't watch a lot of TV.

We are in our 40s like you. My wife likes to flip channels 80s style to find something to watch when she is tired after the kids are in bed. She doesn't want to be bothered to have to search, or turn on to the appropriate streaming app... or have to research all the streaming apps to find out which ones have a show she wants to watch. If we "cut cord" I'd just end up subscribing to 4-5 services and pay as much and the family would end up frustrated.

$160 is not a bad bundle price for a full service package.. I think I pay $180 for 50mbps internet+full basic cable+land line phone.

BTW, we still get the paper delivered on Sunday. You know, the kind that's actually on "paper" and lands in your driveway. Not everyone is up on all the latest trends, and that's OK.

-------------

Honestly I think you guys have quite an ingenious plan to manage the health care situation. I'd loose the cleaning service but that's just me. If you completely give up eating out or switch to eating ramen to cut the food bill sooner or later you will go stir crazy. And don't listen to the people who question the cars. 2 corollas are far from an extravagance and stranding your wife at home with no car while you commute would be cruel.

You'll be fine. As others have suggested just float a couple years on that big savings cushion till she is back to work.

Leemiller
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Leemiller » Tue Oct 23, 2018 7:51 am

onourway wrote:
Tue Oct 23, 2018 5:43 am
Regarding the TV/Internet service, we switched to YouTubeTV last year, and while the total savings is only about 1/3 of our original bill (~$105/month vs, $160/month), YTTV is ORDERS OF MAGNITUDE better than the cable box it replaced. Yes, we are missing some channels. So what. There is no shortage of things to watch in today's world. Not having to deal with a crummy cable box and crummy interface while saving $700/year? Priceless.
Does this get sports/college football? I shudder to think what we pay for access to a few college games and HBO and not much else. I really need to cut our cable bill, which is close to OPs.

onourway
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by onourway » Tue Oct 23, 2018 7:56 am

Leemiller wrote:
Tue Oct 23, 2018 7:51 am
onourway wrote:
Tue Oct 23, 2018 5:43 am
Regarding the TV/Internet service, we switched to YouTubeTV last year, and while the total savings is only about 1/3 of our original bill (~$105/month vs, $160/month), YTTV is ORDERS OF MAGNITUDE better than the cable box it replaced. Yes, we are missing some channels. So what. There is no shortage of things to watch in today's world. Not having to deal with a crummy cable box and crummy interface while saving $700/year? Priceless.
Does this get sports/college football? I shudder to think what we pay for access to a few college games and HBO and not much else. I really need to cut our cable bill, which is close to OPs.
Sports is where YTTV puts most of their focus, so while they don't have everything, they do have a lot of sports channels and I see a lot of college games listed (although I don't watch them myself). You'd have to check their offerings in your area.

The best part is their DVR is unlimited and automatic. You set it to record a specific show, series, event type, and it just records all of it automatically. When you open the program, it brings you not to a list of 1000 channels, but to a list of what you are most likely to want to watch now based on what's on live you will like and what it has recently recorded for you. We rarely use the guide anymore, and typically getting to what we intended to watch takes no more than 2-3 clicks. Instead of dealing with a slow, outdated DVR interface from the cable company, and hoping that it recorded the event at all.

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 8:18 am

fujiters wrote:
Tue Oct 23, 2018 12:08 am
"We have a four bedroom/four bathroom home on three floors."

For 2 adults and a child, this is a lot of house. I'd consider downsizing. Could you rent out your home and find a cheaper, smaller place to rent yourselves as a test?

Our house is 2150 sq. feet and is larger than we really need. However, when we purchased the home, my mother was living with us. She lived with us for 5 years in her 60s. As she's gotten older, the stairs have gotten to be too much and she's decided to move on. Additionally, the third floor served as an office for my wife. She worked from home 80-90% of the time during the past few years. Now that my mom isn't living with us and my wife isn't working from home, it's a bit extra space. However, our mortgage for this relatively large home is $1800. The apartment we used to live in (1100 sq. ft with 2 bedrooms and 2 bathrooms) rents for $3000 now. Also, my sister and her family live right next door to us and we have our parents nearby. It doesn't make sense to move in our situation. So I guess we'll live with the first-world problem of having a bit extra space.

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 8:20 am

Startled Cat wrote:
Tue Oct 23, 2018 1:37 am
As I stated above, I think it is perfectly reasonable to temporarily reduce your savings rate for this period to a still-healthy rate. Since you framed it as a cash flow problem, people are treating it as an exercise in cutting expenses. Nothing wrong with that, but I don't think it's particularly necessary in your scenario (especially since you will receive a pension, and maintaining a high savings rate is not as critical as it is for most of us).

I would be comfortable drawing down the cash savings a bit to help fill this gap. If necessary, I would borrow additional money at 0% using credit card balance transfer offers, knowing that I had Roth IRA funds to use as a backstop if I wasn't able to roll over the debt long enough to pay it back from cash flow. Only as a last resort would I actually withdraw Roth IRA contributions - but if it came to that, it wouldn't be a big deal, as it would be a relatively small withdrawal. In fact, you might just prefer to just withdraw from the Roth IRA if/when you need to dip into it rather than playing games with balance transfers, just to keep things simple. It won't matter very much in the long run.

I'd probably keep a small part of the Roth IRA in cash or short-term bonds in case I needed to make an eventual withdrawal, but again, we're talking such a small fraction that it's not terribly important to do that.
Thanks very much. Yes, I think the way I framed the question has caused confusion. I appreciate your suggestions.

Thegame14
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Thegame14 » Tue Oct 23, 2018 8:24 am

that housecleaning can easily go, and $1,000 on groceries/household goods seems like a lot, we are a family of 3 and probably don't spent more than $400/$500 a month.

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 8:37 am

pennywise wrote:
Tue Oct 23, 2018 5:35 am
celia wrote:
Mon Oct 22, 2018 8:57 pm
This looks like the case where someone can afford the health insurance, either through the employer or an individual policy, but would rather play games to cut his income in half.
While phrased a bit harshly, this is actually a pretty accurate summation of the situation. Yes, the plan is to game the system by artificially reducing taxable income so as to qualify for a benefit.

While OP is entirely within his rights to take advantage of the lack of inclusion of non-earnings in the establishment of the income qualifying level, the reality is that the reason there's a lower cost of health care is, well, to help people who are earning less. Ergo it's going to be hard to live on less to get cheaper health care if you can't get your budget down to the level that people who actually earn low enough salaries to get the benefit.

So if OP can't actually live on what it takes to qualify for cheaper health insurance, he and his wife need to either slash expenses, she needs to get a job or they need to decide to spend what they have to spend and quit trying to pretend to earn less to qualify for the health insurance. A budget that has to include a SAH spouse, cleaning help, eating out, fancy pet food and pricey cable isn't going to cut it.
The Affordable Care Act has some complicated language in it. This year, in 2018, we would have needed to keep our MAGI below $80k to qualify for a subsidy. Our expenses are $78k so it would have been simple enough. Next year, to qualify for a subsidy, we need to keep our MAGI below $66k. The reason is that the least expensive self-only insurance that my employer offers dropped a little bit in cost (maybe by a $100 a month or so) and the amount that the employee pays for insurance to cover only themselves can't exceed a certain percentage of salary. The rules ignore the rest of the family in the consideration even though they are fully breathing humans who also require healthcare.

The Affordable Care Act is convoluted/complicated. One dollar extra in income can make the entire family fall of the metaphorical "cliff." I honestly don't think it is very useful to ponder the true intentions of this long and complex piece of legislation. The system is what it is. To qualify for a subsidy, I need to have a MAGI below $80k in 2018 and below $66k in 2019 - even though we have some inflation and the cost to insure my family through employer-provided insurance has stayed just about the same in our case. Laws can be weird.

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 8:41 am

onourway wrote:
Tue Oct 23, 2018 5:43 am
Regarding the TV/Internet service, we switched to YouTubeTV last year, and while the total savings is only about 1/3 of our original bill (~$105/month vs, $160/month), YTTV is ORDERS OF MAGNITUDE better than the cable box it replaced. Yes, we are missing some channels. So what. There is no shortage of things to watch in today's world. Not having to deal with a crummy cable box and crummy interface while saving $700/year? Priceless.
Thanks. This is close to what I found the savings would be when I looked into cutting cable over the past summer. I found the cost would be $40-$50 less per month. Some make it sound as if we could save much more by cutting cable. We actually use the cable but I will definitely consider it. Thanks.

smitcat
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by smitcat » Tue Oct 23, 2018 10:00 am

"Our situation requires us to keep our income below a certain level so please bear with me as I explain the details.

• Family of three – ages: 44, 44, and 4
• I’m a tenured teacher in the Bay Area and my wife will be (mostly) staying home with our daughter until she goes to 1st grade in a couple of years

The problem: It’s hard to live in the Bay Area on $64k. Our expenses (including taxes) are projected to be $78k while income will be $64k after all the deductions. We expect around $5k in gifts but still have a gap of about $10k that we need to somehow close."

My advice would be to raise income now.
- wife works at home 85% of the time
- extended family lives right next door
- two parents working about 180 days a year now total.
- possibilities for extra tutoring, childcaring for others, freelancing etc are huge
- job circumstances will change in a few years , hopefully not for the worse but you never know
- the incomes your establish and grow now will last until you no longer require them.

I would not 'contort' my income and plans for a helthcare 'deal' that can be changed at any moment in time.

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 10:11 am

bigred77 wrote:
Tue Oct 23, 2018 7:04 am
Spend down from your 50k in cash over the next 2 years and then rebuild the balance if you so desire once your wife rejoins the workforce.

It’s not even spending above your means, think of it as shifting a portion of your taxable assets to tax advantaged accounts (because that’s exactly what your doing) in addition to your regular retirement contributions.
That's how I was looking at it - that if I use up cash while putting money into retirement contributions, it is just shifting taxable assets to tax-advantaged assets. However, there are lots of responses that indicate that our expenses should be brought down rather than tapping into the emergency fund. The difference in perspectives on how to approach our situation is interesting. By the way, thanks for the input. It's reassuring that I'm not the only one who viewed it as shifting assets.

marcopolo
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by marcopolo » Tue Oct 23, 2018 10:18 am

Ron Ronnerson wrote:
Tue Oct 23, 2018 10:11 am
bigred77 wrote:
Tue Oct 23, 2018 7:04 am
Spend down from your 50k in cash over the next 2 years and then rebuild the balance if you so desire once your wife rejoins the workforce.

It’s not even spending above your means, think of it as shifting a portion of your taxable assets to tax advantaged accounts (because that’s exactly what your doing) in addition to your regular retirement contributions.
That's how I was looking at it - that if I use up cash while putting money into retirement contributions, it is just shifting taxable assets to tax-advantaged assets. However, there are lots of responses that indicate that our expenses should be brought down rather than tapping into the emergency fund. The difference in perspectives on how to approach our situation is interesting. By the way, thanks for the input. It's reassuring that I'm not the only one who viewed it as shifting assets.
I agree that this is exactly the right way to think about it.
I have to believe many of the people advocating some of the budget cuts are still not grasping the fact that your income is well above your expenses, and you have a healthy savings rate.
Once in a while you get shown the light, in the strangest of places if you look at it right.

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 10:20 am

jharkin wrote:
Tue Oct 23, 2018 7:39 am
Ron Ronnerson wrote:
Mon Oct 22, 2018 11:46 pm
I appreciate the comments about the cable bill being too high. I had called around over the summer to get quotes for Internet + streaming and didn't find that the savings would be as much as some people are saying they could be. I will renew my efforts and look into it again. Thanks very much.
I wouldn't kill yourself doing that. Most of the time these comments come from the younger folks in their 20s or from people who just don't watch a lot of TV.

We are in our 40s like you. My wife likes to flip channels 80s style to find something to watch when she is tired after the kids are in bed. She doesn't want to be bothered to have to search, or turn on to the appropriate streaming app... or have to research all the streaming apps to find out which ones have a show she wants to watch. If we "cut cord" I'd just end up subscribing to 4-5 services and pay as much and the family would end up frustrated.

$160 is not a bad bundle price for a full service package.. I think I pay $180 for 50mbps internet+full basic cable+land line phone.

BTW, we still get the paper delivered on Sunday. You know, the kind that's actually on "paper" and lands in your driveway. Not everyone is up on all the latest trends, and that's OK.

-------------

Honestly I think you guys have quite an ingenious plan to manage the health care situation. I'd loose the cleaning service but that's just me. If you completely give up eating out or switch to eating ramen to cut the food bill sooner or later you will go stir crazy. And don't listen to the people who question the cars. 2 corollas are far from an extravagance and stranding your wife at home with no car while you commute would be cruel.

You'll be fine. As others have suggested just float a couple years on that big savings cushion till she is back to work.
jharkin,

When you talk about flipping channels using the remote and reading a paper newspaper, I feel like you understand! I'm middle-aged and thought I was on pretty solid financial ground. However, there are many responses that seem to see it differently and perhaps they have a point.

In any case, we can't do without a 2nd car. I live far away from work and there isn't public transportation around.

We currently have an 8 month emergency fund. If we brought it down to 7 months while also cutting expenses a bit, I think we should be able to bring our MAGI down enough to qualify for the subsidy and still be fine in the long-run. It seems there is disagreement about this conclusion, however, so I do appreciate everyone's feedback and perspective. And thank you for yours!

marcopolo
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by marcopolo » Tue Oct 23, 2018 10:22 am

fujiters wrote:
Tue Oct 23, 2018 12:08 am
"We have a four bedroom/four bathroom home on three floors."

For 2 adults and a child, this is a lot of house. I'd consider downsizing. Could you rent out your home and find a cheaper, smaller place to rent yourselves as a test?
This seems like extreme overkill. This is a temporary cash-flow issue, not a long term deficit issue. The transaction costs associated with what you are suggesting would greatly exceed the current temporary cash-flow shortfall needs.
Once in a while you get shown the light, in the strangest of places if you look at it right.

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 10:22 am

marcopolo wrote:
Tue Oct 23, 2018 10:18 am
Ron Ronnerson wrote:
Tue Oct 23, 2018 10:11 am
bigred77 wrote:
Tue Oct 23, 2018 7:04 am
Spend down from your 50k in cash over the next 2 years and then rebuild the balance if you so desire once your wife rejoins the workforce.

It’s not even spending above your means, think of it as shifting a portion of your taxable assets to tax advantaged accounts (because that’s exactly what your doing) in addition to your regular retirement contributions.
That's how I was looking at it - that if I use up cash while putting money into retirement contributions, it is just shifting taxable assets to tax-advantaged assets. However, there are lots of responses that indicate that our expenses should be brought down rather than tapping into the emergency fund. The difference in perspectives on how to approach our situation is interesting. By the way, thanks for the input. It's reassuring that I'm not the only one who viewed it as shifting assets.
I agree that this is exactly the right way to think about it.
I have to believe many of the people advocating some of the budget cuts are still not grasping the fact that your income is well above your expenses, and you have a healthy savings rate.
Thanks, marcopolo. I am reassured further and truly appreciate it.

jtravisdavid
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by jtravisdavid » Tue Oct 23, 2018 10:23 am

Use $10k from checking/savings to cover the shortfall. Problem solved.

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 10:32 am

smitcat wrote:
Tue Oct 23, 2018 10:00 am
"Our situation requires us to keep our income below a certain level so please bear with me as I explain the details.

• Family of three – ages: 44, 44, and 4
• I’m a tenured teacher in the Bay Area and my wife will be (mostly) staying home with our daughter until she goes to 1st grade in a couple of years

The problem: It’s hard to live in the Bay Area on $64k. Our expenses (including taxes) are projected to be $78k while income will be $64k after all the deductions. We expect around $5k in gifts but still have a gap of about $10k that we need to somehow close."

My advice would be to raise income now.
- wife works at home 85% of the time
- extended family lives right next door
- two parents working about 180 days a year now total.
- possibilities for extra tutoring, childcaring for others, freelancing etc are huge
- job circumstances will change in a few years , hopefully not for the worse but you never know
- the incomes your establish and grow now will last until you no longer require them.

I would not 'contort' my income and plans for a helthcare 'deal' that can be changed at any moment in time.

Thanks for your perspective on this. I really appreciate your viewpoint. Our main focus isn't on healthcare. It's on trying to maximize time together as a family, especially while our child is young. Keeping costs down allows us to maximize that time together. Health insurance is one spending category, and a large one at that, so getting a handle on it furthers the goal. I could tutor and teach summer school but I don't do these things because that would take away time.

go_mets
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by go_mets » Tue Oct 23, 2018 10:40 am

Ron Ronnerson wrote:
Tue Oct 23, 2018 10:32 am
Thanks for your perspective on this. I really appreciate your viewpoint. Our main focus isn't on healthcare. It's on trying to maximize time together as a family, especially while our child is young. Keeping costs down allows us to maximize that time together. Health insurance is one spending category, and a large one at that, so getting a handle on it furthers the goal. I could tutor and teach summer school but I don't do these things because that would take away time.
Can't have it all.

Pick which is most important to you and maximize that.

.

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teen persuasion
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by teen persuasion » Tue Oct 23, 2018 11:08 am

Ron Ronnerson wrote:
Mon Oct 22, 2018 7:54 pm
OP here again. Any thoughts on accessing savings or Roth IRA contributions or getting a loan?

Some more information: While our MAGI for next year has to be below $64k for health insurance purposes, I'll be contributing over $30k to retirement accounts in 2019 (to 457b, 403b, and IRAs) plus $11k in pension contributions. My pension and wife's social security should cover our retirement expenses adequately. My job is very secure (I'm a tenured teacher with high seniority and excellent evaluations working in a school district that's facing a large teacher shortage) and we have about 8 months worth of expenses in our emergency fund.
If you are aiming to claim the Retirement Saver's credit, don't withdraw from your Roth IRAs - that may reduce your credit to zero. Check out the form and instructions for the credit.

I've been doing something like what you are contemplating, from the "shifting savings to retirement accounts" view. We contribute heavily to DH's 401k and HSA and Roth IRAs for both of us. The HSA and traditional contributions reduce AGI to drive our EITC and the state partial match higher, and they are refundable credits (that I use to partially fund the Roth IRAs). I recently shifted a chunk of our savings to my Roth IRA (earlier than planned), to reduce our Available Assets on the FAFSA for DS4 (the formula severely reduced the protected asset amount this year, so even a small EF is no longer protected). Emotionally I don't like our EF so small, but in a true emergency we can also access the Roth IRAs and HSA (for medical expenses we've paid OOP).

If this is truly a short term issue, then take a longer term look at the issue. Develop a multi year budget that accurately models the cash flow. See if you are safe spending from savings for a few years (while saving more to retirement), and then replenishing the savings when DW returns to work and benefits. If things balance out over the long term, great. If there's a shortfall, make some strategic budget cuts to close the gap: cleaning service, cable, high grocery bill. For reference, our grocery budget currently is probably $300 or less per month, for 2 adults + a teen running XC, and random visits from the older kids. Even when all 5 kids are/were at home, it didn't exceed $500/month.

WhiteMaxima
Posts: 1451
Joined: Thu May 19, 2016 5:04 pm

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by WhiteMaxima » Tue Oct 23, 2018 11:28 am

Our Expenses (monthly):

House Cleaning: $120 – done every 3 weeks ->cut $120 savings
House Repairs/Maintenance: $50 -> cut DIY
Cable/Internet: $160 -> Cut, keep basic ISP $100 savings
Electric Bill: $150 -> reduce All LED lights $100 saving
Cell Phones: $70 -> reduce to 35
Water bill: $35
Garbage: $20
Health Insurance: $226
Auto/Homeowner’s/Umbrella Insurance: $185 -> reduce $20 savings
Life Insurance: $150 -> reduce $50 savings
Gas for cars: $200
Car Maintenance/Repairs/Registration: $100 reduce DIY $20 savings
Groceries/Household Items: $1,000 reduce $500 savings
Vacations: $150 -> Reduce $100 savings
Restaurants: $200 -> cut eat at home $200 savings
Clothing/Shoes/Hair/Nails: $50
Pets: $80 (cats are on a special diet due to sensitive stomachs)
Entertainment: $50 -> cut
Union Dues: $100
Long Term Disability Taken from Paycheck: $30
Medicare: 130
Federal Taxes: $165 (about $1950 for the year)
California State Taxes: $15 (about $150 for the year - California taxes are low at our income level)
Misc: $150
TOTAL: about $6,500/month ($78k for the year)

You got around $1300 saving/month

nolesrule
Posts: 776
Joined: Thu Feb 26, 2015 10:59 am

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by nolesrule » Tue Oct 23, 2018 11:31 am

You have 3 options:

1) cut expenses instead of making excuses for why you aren't willing to cut expenses
2) take money from taxable savings you already have to cover all those expenses you aren't willing to cut
3) have your wife go back to work because you aren't willing to do #1 and/or #2.

I'm active on a budgeting forum and it's always funny to me how unwilling people are to cut back on their wants when they intentionally cut back on their income.

gclancer
Posts: 536
Joined: Sat Apr 27, 2013 10:34 am

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by gclancer » Tue Oct 23, 2018 11:43 am

finite_difference wrote:
Mon Oct 22, 2018 7:54 pm
Cut expenses by $5k/year and then spend $5k/year from savings. You are a tenured teacher so you are unlikely to lose your job, and when your wife starts working again you can rebuild your savings.
+1

smitcat
Posts: 1981
Joined: Mon Nov 07, 2016 10:51 am

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by smitcat » Tue Oct 23, 2018 11:46 am

Ron Ronnerson wrote:
Tue Oct 23, 2018 10:32 am
smitcat wrote:
Tue Oct 23, 2018 10:00 am
"Our situation requires us to keep our income below a certain level so please bear with me as I explain the details.

• Family of three – ages: 44, 44, and 4
• I’m a tenured teacher in the Bay Area and my wife will be (mostly) staying home with our daughter until she goes to 1st grade in a couple of years

The problem: It’s hard to live in the Bay Area on $64k. Our expenses (including taxes) are projected to be $78k while income will be $64k after all the deductions. We expect around $5k in gifts but still have a gap of about $10k that we need to somehow close."

My advice would be to raise income now.
- wife works at home 85% of the time
- extended family lives right next door
- two parents working about 180 days a year now total.
- possibilities for extra tutoring, childcaring for others, freelancing etc are huge
- job circumstances will change in a few years , hopefully not for the worse but you never know
- the incomes your establish and grow now will last until you no longer require them.

I would not 'contort' my income and plans for a helthcare 'deal' that can be changed at any moment in time.

Thanks for your perspective on this. I really appreciate your viewpoint. Our main focus isn't on healthcare. It's on trying to maximize time together as a family, especially while our child is young. Keeping costs down allows us to maximize that time together. Health insurance is one spending category, and a large one at that, so getting a handle on it furthers the goal. I could tutor and teach summer school but I don't do these things because that would take away time.
IMHO - there is only so much 'value' added' time you can spend with a daughter of any age. IMHO again there also exists value added time that your daughter will get form being with her peers at that time - learning with and from kids her age group.
There has been plenty of time to accomplish those key time budgets while pursuing a carreer and extended incomes in our experience.
Disclaimer is that our daughter is now 25 and we all believe that the balance we have enjoyed was pretty great for all invloved.

Ron Ronnerson
Posts: 983
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 11:58 am

gclancer wrote:
Tue Oct 23, 2018 11:43 am
finite_difference wrote:
Mon Oct 22, 2018 7:54 pm
Cut expenses by $5k/year and then spend $5k/year from savings. You are a tenured teacher so you are unlikely to lose your job, and when your wife starts working again you can rebuild your savings.
+1
This seems like a reasonable way to go about it. Thanks.

caffeperfavore
Posts: 100
Joined: Thu Aug 06, 2015 11:45 am

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by caffeperfavore » Tue Oct 23, 2018 12:02 pm

The Stages of Cost Cutting:

Stage 1: I can't possibly live without these things! There's little to nothing I can do. All these small changes don't add up to much anyway.
Stage 2: Maybe I'll try these couple of things, but that's the bare bones. I couldn't possible live without Desperate Housewives of West Toledo!
Stage 3: Ok, I'll try cutting some bigger stuff, getting rid of cable, shopping at Aldi/Lidl/Costco, etc.
Stage 4: Holy crap, I don't miss anything that I've cut! I'm not sweating the monthly bills anymore. Now, what else can I do?

You're in Stage 1. It's a process and it gets easier. Strongly recommend heading over to Mr. Money Mustache for some therapeutic face punches and a paradigm shift.

Ron Ronnerson
Posts: 983
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 12:22 pm

smitcat wrote:
Tue Oct 23, 2018 11:46 am
Ron Ronnerson wrote:
Tue Oct 23, 2018 10:32 am
smitcat wrote:
Tue Oct 23, 2018 10:00 am
"Our situation requires us to keep our income below a certain level so please bear with me as I explain the details.

• Family of three – ages: 44, 44, and 4
• I’m a tenured teacher in the Bay Area and my wife will be (mostly) staying home with our daughter until she goes to 1st grade in a couple of years

The problem: It’s hard to live in the Bay Area on $64k. Our expenses (including taxes) are projected to be $78k while income will be $64k after all the deductions. We expect around $5k in gifts but still have a gap of about $10k that we need to somehow close."

My advice would be to raise income now.
- wife works at home 85% of the time
- extended family lives right next door
- two parents working about 180 days a year now total.
- possibilities for extra tutoring, childcaring for others, freelancing etc are huge
- job circumstances will change in a few years , hopefully not for the worse but you never know
- the incomes your establish and grow now will last until you no longer require them.

I would not 'contort' my income and plans for a helthcare 'deal' that can be changed at any moment in time.

Thanks for your perspective on this. I really appreciate your viewpoint. Our main focus isn't on healthcare. It's on trying to maximize time together as a family, especially while our child is young. Keeping costs down allows us to maximize that time together. Health insurance is one spending category, and a large one at that, so getting a handle on it furthers the goal. I could tutor and teach summer school but I don't do these things because that would take away time.
IMHO - there is only so much 'value' added' time you can spend with a daughter of any age. IMHO again there also exists value added time that your daughter will get form being with her peers at that time - learning with and from kids her age group.
There has been plenty of time to accomplish those key time budgets while pursuing a carreer and extended incomes in our experience.
Disclaimer is that our daughter is now 25 and we all believe that the balance we have enjoyed was pretty great for all invloved.
It would seem that our own experiences, not surprisingly, shape our view of things. My dad was always working and then passed away suddenly when I was a teenager. It's been almost three decades since he passed but I still miss him and wish that we had had more moments together.

I have an MBA and, some years back, used to work in management at a financial company. I could likely make more money than I do teaching 5th graders. I am trying to spend my time in the ways that I think will leave me with the least regret in the end. I love my job teaching kids and truly believe in its importance. I also love my family and want to spend time with them - not just my daughter, but also my wife and extended family.

I think I've framed my question in a way that is not as clear as it could be. Our expenses (including taxes) are $78k while our gross income is $110k to $120k. We're trying to keep MAGI under $64k for just 2019 to make use of tax credits that become available under that threshold.

Ron Ronnerson
Posts: 983
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 12:28 pm

teen persuasion wrote:
Tue Oct 23, 2018 11:08 am
Ron Ronnerson wrote:
Mon Oct 22, 2018 7:54 pm
OP here again. Any thoughts on accessing savings or Roth IRA contributions or getting a loan?

Some more information: While our MAGI for next year has to be below $64k for health insurance purposes, I'll be contributing over $30k to retirement accounts in 2019 (to 457b, 403b, and IRAs) plus $11k in pension contributions. My pension and wife's social security should cover our retirement expenses adequately. My job is very secure (I'm a tenured teacher with high seniority and excellent evaluations working in a school district that's facing a large teacher shortage) and we have about 8 months worth of expenses in our emergency fund.
If you are aiming to claim the Retirement Saver's credit, don't withdraw from your Roth IRAs - that may reduce your credit to zero. Check out the form and instructions for the credit...

If this is truly a short term issue, then take a longer term look at the issue. Develop a multi year budget that accurately models the cash flow. See if you are safe spending from savings for a few years (while saving more to retirement), and then replenishing the savings when DW returns to work and benefits. If things balance out over the long term, great. If there's a shortfall, make some strategic budget cuts to close the gap: cleaning service, cable, high grocery bill. For reference, our grocery budget currently is probably $300 or less per month, for 2 adults + a teen running XC, and random visits from the older kids. Even when all 5 kids are/were at home, it didn't exceed $500/month.
Thanks for the pointer about not withdrawing fro the Roth for the Saver's Credit. That's helpful.

I will definitely look for making some cuts, particularly to our vacation and grocery expenses. Thanks.

FoolMeOnce
Posts: 327
Joined: Mon Apr 24, 2017 11:16 am

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by FoolMeOnce » Tue Oct 23, 2018 12:30 pm

marcopolo wrote:
Tue Oct 23, 2018 10:18 am
Ron Ronnerson wrote:
Tue Oct 23, 2018 10:11 am
bigred77 wrote:
Tue Oct 23, 2018 7:04 am
Spend down from your 50k in cash over the next 2 years and then rebuild the balance if you so desire once your wife rejoins the workforce.

It’s not even spending above your means, think of it as shifting a portion of your taxable assets to tax advantaged accounts (because that’s exactly what your doing) in addition to your regular retirement contributions.
That's how I was looking at it - that if I use up cash while putting money into retirement contributions, it is just shifting taxable assets to tax-advantaged assets. However, there are lots of responses that indicate that our expenses should be brought down rather than tapping into the emergency fund. The difference in perspectives on how to approach our situation is interesting. By the way, thanks for the input. It's reassuring that I'm not the only one who viewed it as shifting assets.
I agree that this is exactly the right way to think about it.
I have to believe many of the people advocating some of the budget cuts are still not grasping the fact that your income is well above your expenses, and you have a healthy savings rate.
To be fair, he posted a detailed budget and opened the door to suggested cuts. But, yeah, it seems many have missed the context of this exercise.

I agree with the posters above who suggest just using your 50k EF. No reason to withdraw Roth contributions for this. Those can be your backup EF if a true emergency strikes in these next couple years while your EF is down to $40k or $30k. And, being tenured, you are unlikely to face unemployment.

I would still take a look at that grocery/household items budget, though, regardless of your cash flow needs.

User avatar
celia
Posts: 8479
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by celia » Tue Oct 23, 2018 12:36 pm

Ron Ronnerson wrote:
Tue Oct 23, 2018 10:11 am
bigred77 wrote:
Tue Oct 23, 2018 7:04 am
Spend down from your 50k in cash over the next 2 years and then rebuild the balance if you so desire once your wife rejoins the workforce.

It’s not even spending above your means, think of it as shifting a portion of your taxable assets to tax advantaged accounts (because that’s exactly what your doing) in addition to your regular retirement contributions.
That's how I was looking at it - that if I use up cash while putting money into retirement contributions, it is just shifting taxable assets to tax-advantaged assets. However, there are lots of responses that indicate that our expenses should be brought down rather than tapping into the emergency fund. The difference in perspectives on how to approach our situation is interesting. By the way, thanks for the input. It's reassuring that I'm not the only one who viewed it as shifting assets.

Ahhh, but there's a HUGE difference depending on if you're going to shift taxable assets to tax-deferred or to Roth
. They are opposites, the way I look at it. Shifting into tax-deferred may make your balance sheet look better, but what you're really doing is increasing your future taxes, because the amount you shift will have growth over time. You may save $x in taxes now, but may pay multiples of that years later, especially if you will have income streams like a pension and SS. As I like to remind people,
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
With this view, your taxable dollars may be shifted, but they won't be able to pay for the same expenses as if they were still in taxable, because you will first have to subtract the taxes.

We have had a few posters here who were about to retire and 95% of their assets were in tax-deferred. They were severely limited in how they could cover their expenses and control their taxes, because they didn't have much tax-diversity in their portfolio.

Also, don't forget, that expenses may arise that aren't included in this budget. For example, do you spend on gifts or holidays or is that considered under Entertainment? What if an appliance needed repair or replacement? What if the HOA increased the dues? Although these may be paid from your emergency fund/taxable savings, there always will be other expenses you didn't budget for unless you have an "emergency" or "unknown" category.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

wtarbing
Posts: 5
Joined: Thu Aug 23, 2018 11:22 am

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by wtarbing » Tue Oct 23, 2018 1:24 pm

Ron Ronnerson wrote:
Mon Oct 22, 2018 7:08 pm

Our Expenses (monthly):
House Cleaning: $120 – done every 3 weeks
Cable/Internet: $160
Gas for cars: $200
Groceries/Household Items: $1,000
Restaurants: $200
Pets: $80 (cats are on a special diet due to sensitive stomachs)
As previously mentioned, start with your variable costs.

Cleaning - with your wife at home, cut this, save $1,440/yr
Internet/Cable - cut the cord? (Hulu/Youtube Tv = $40, snag internet for $60, Netflix $10?) something like this would shave $60/mo saving $720/yr
Dining - you should cut this in half, save $1200
Gas - i drive 60miles a day with my wife at home and we spend less than $100/mo on gas. i think with your wife now at home you can find room here
Groceries/HH - look for ways to cut back here, less ribeye/tbone steaks - more tacos, make your own cleaning solutions for under $1 instead of buying the packaged bleach sprays for $4 each.
Pets - $80 seems excessive, any way to reduce?

I'm estimating you can reduce costs by ~6k if you do the above simple steps.
Hope this helps.

smitcat
Posts: 1981
Joined: Mon Nov 07, 2016 10:51 am

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by smitcat » Tue Oct 23, 2018 1:26 pm

Ron Ronnerson wrote:
Tue Oct 23, 2018 12:22 pm
smitcat wrote:
Tue Oct 23, 2018 11:46 am
Ron Ronnerson wrote:
Tue Oct 23, 2018 10:32 am
smitcat wrote:
Tue Oct 23, 2018 10:00 am
"Our situation requires us to keep our income below a certain level so please bear with me as I explain the details.

• Family of three – ages: 44, 44, and 4
• I’m a tenured teacher in the Bay Area and my wife will be (mostly) staying home with our daughter until she goes to 1st grade in a couple of years

The problem: It’s hard to live in the Bay Area on $64k. Our expenses (including taxes) are projected to be $78k while income will be $64k after all the deductions. We expect around $5k in gifts but still have a gap of about $10k that we need to somehow close."

My advice would be to raise income now.
- wife works at home 85% of the time
- extended family lives right next door
- two parents working about 180 days a year now total.
- possibilities for extra tutoring, childcaring for others, freelancing etc are huge
- job circumstances will change in a few years , hopefully not for the worse but you never know
- the incomes your establish and grow now will last until you no longer require them.

I would not 'contort' my income and plans for a helthcare 'deal' that can be changed at any moment in time.

Thanks for your perspective on this. I really appreciate your viewpoint. Our main focus isn't on healthcare. It's on trying to maximize time together as a family, especially while our child is young. Keeping costs down allows us to maximize that time together. Health insurance is one spending category, and a large one at that, so getting a handle on it furthers the goal. I could tutor and teach summer school but I don't do these things because that would take away time.
IMHO - there is only so much 'value' added' time you can spend with a daughter of any age. IMHO again there also exists value added time that your daughter will get form being with her peers at that time - learning with and from kids her age group.
There has been plenty of time to accomplish those key time budgets while pursuing a carreer and extended incomes in our experience.
Disclaimer is that our daughter is now 25 and we all believe that the balance we have enjoyed was pretty great for all invloved.
It would seem that our own experiences, not surprisingly, shape our view of things. My dad was always working and then passed away suddenly when I was a teenager. It's been almost three decades since he passed but I still miss him and wish that we had had more moments together.

I have an MBA and, some years back, used to work in management at a financial company. I could likely make more money than I do teaching 5th graders. I am trying to spend my time in the ways that I think will leave me with the least regret in the end. I love my job teaching kids and truly believe in its importance. I also love my family and want to spend time with them - not just my daughter, but also my wife and extended family.

I think I've framed my question in a way that is not as clear as it could be. Our expenses (including taxes) are $78k while our gross income is $110k to $120k. We're trying to keep MAGI under $64k for just 2019 to make use of tax credits that become available under that threshold.

"It would seem that our own experiences, not surprisingly, shape our view of things. My dad was always working and then passed away suddenly when I was a teenager. It's been almost three decades since he passed but I still miss him and wish that we had had more moments together.
I have an MBA and, some years back, used to work in management at a financial company. I could likely make more money than I do teaching 5th graders."

Yes - I guess we have similar experiences. My Dad joined the Navy as his family had no money to support him.
When he got out he worked rotating shift work to suplly us (family) with thibsg we needed , he died of complications from being in Nagasaki within two weeks after the bomb. I really wish i had more value added time with him but he tried and it was good as he could.
My MBA led to a higher hour job which we 'traded' for spending time and teaching many kids - a business we find rewarding.
But the thing I have learned the most is that its not how much time you have its how you use that time. Now that my 'kid' can look back and does we do not regret anything - there could have been more time but there likely could not have been more valued time.

Ron Ronnerson
Posts: 983
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 2:35 pm

wtarbing wrote:
Tue Oct 23, 2018 1:24 pm
Ron Ronnerson wrote:
Mon Oct 22, 2018 7:08 pm

Our Expenses (monthly):
House Cleaning: $120 – done every 3 weeks
Cable/Internet: $160
Gas for cars: $200
Groceries/Household Items: $1,000
Restaurants: $200
Pets: $80 (cats are on a special diet due to sensitive stomachs)
As previously mentioned, start with your variable costs.

Cleaning - with your wife at home, cut this, save $1,440/yr
Internet/Cable - cut the cord? (Hulu/Youtube Tv = $40, snag internet for $60, Netflix $10?) something like this would shave $60/mo saving $720/yr
Dining - you should cut this in half, save $1200
Gas - i drive 60miles a day with my wife at home and we spend less than $100/mo on gas. i think with your wife now at home you can find room here
Groceries/HH - look for ways to cut back here, less ribeye/tbone steaks - more tacos, make your own cleaning solutions for under $1 instead of buying the packaged bleach sprays for $4 each.
Pets - $80 seems excessive, any way to reduce?

I'm estimating you can reduce costs by ~6k if you do the above simple steps.
Hope this helps.
Thanks for the suggestions. I appreciate it. We're open to reducing expenses. We will definitely work on reduction to grocery and vacation expense categories. I'm open to cancelling cable if the savings are worth it. We can also shave a bit off dining and will see if there is an alternative, less expensive food for cats with sensitive stomachs. I car pool and my wife doesn't commute. I'm not sure if we can easily find much savings in that category.

sailaway
Posts: 414
Joined: Fri May 12, 2017 1:11 pm

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by sailaway » Tue Oct 23, 2018 2:43 pm

Ron Ronnerson wrote:
Tue Oct 23, 2018 2:35 pm
wtarbing wrote:
Tue Oct 23, 2018 1:24 pm
Ron Ronnerson wrote:
Mon Oct 22, 2018 7:08 pm

Our Expenses (monthly):
House Cleaning: $120 – done every 3 weeks
Cable/Internet: $160
Gas for cars: $200
Groceries/Household Items: $1,000
Restaurants: $200
Pets: $80 (cats are on a special diet due to sensitive stomachs)
As previously mentioned, start with your variable costs.

Cleaning - with your wife at home, cut this, save $1,440/yr
Internet/Cable - cut the cord? (Hulu/Youtube Tv = $40, snag internet for $60, Netflix $10?) something like this would shave $60/mo saving $720/yr
Dining - you should cut this in half, save $1200
Gas - i drive 60miles a day with my wife at home and we spend less than $100/mo on gas. i think with your wife now at home you can find room here
Groceries/HH - look for ways to cut back here, less ribeye/tbone steaks - more tacos, make your own cleaning solutions for under $1 instead of buying the packaged bleach sprays for $4 each.
Pets - $80 seems excessive, any way to reduce?

I'm estimating you can reduce costs by ~6k if you do the above simple steps.
Hope this helps.
Thanks for the suggestions. I appreciate it. We're open to reducing expenses. We will definitely work on reduction to grocery and vacation expense categories. I'm open to cancelling cable if the savings are worth it. We can also shave a bit off dining and will see if there is an alternative, less expensive food for cats with sensitive stomachs. I car pool and my wife doesn't commute. I'm not sure if we can easily find much savings in that category.
Then how are you currently spending $200 on gas? That is over 50 gallons at current Bay Area prices. How are you averaging over 50 miles a day without commuting? If neither of you has a daily commute, do you need two cars?

Most of your responses point towards you wanting permission to spend your savings, and certainly other posters have given that permission. But if you want to cut costs, there is a lot of low hanging fruit.

Ron Ronnerson
Posts: 983
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 2:46 pm

celia wrote:
Tue Oct 23, 2018 12:36 pm

Also, don't forget, that expenses may arise that aren't included in this budget. For example, do you spend on gifts or holidays or is that considered under Entertainment? What if an appliance needed repair or replacement? What if the HOA increased the dues? Although these may be paid from your emergency fund/taxable savings, there always will be other expenses you didn't budget for unless you have an "emergency" or "unknown" category.
Gifts and other random things that come up are part of the $1800/year miscellaneous category. You're right about needing a category for appliance repair/replacement. I will add that to our budget and appreciate you mentioning it. HOA dues have remained constant since we moved into our home nine years ago. If they change, I'll adjust that in our budget.

Ron Ronnerson
Posts: 983
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 3:37 pm

sailaway wrote:
Tue Oct 23, 2018 2:43 pm
Ron Ronnerson wrote:
Tue Oct 23, 2018 2:35 pm
wtarbing wrote:
Tue Oct 23, 2018 1:24 pm
Ron Ronnerson wrote:
Mon Oct 22, 2018 7:08 pm

Our Expenses (monthly):
House Cleaning: $120 – done every 3 weeks
Cable/Internet: $160
Gas for cars: $200
Groceries/Household Items: $1,000
Restaurants: $200
Pets: $80 (cats are on a special diet due to sensitive stomachs)
As previously mentioned, start with your variable costs.

Cleaning - with your wife at home, cut this, save $1,440/yr
Internet/Cable - cut the cord? (Hulu/Youtube Tv = $40, snag internet for $60, Netflix $10?) something like this would shave $60/mo saving $720/yr
Dining - you should cut this in half, save $1200
Gas - i drive 60miles a day with my wife at home and we spend less than $100/mo on gas. i think with your wife now at home you can find room here
Groceries/HH - look for ways to cut back here, less ribeye/tbone steaks - more tacos, make your own cleaning solutions for under $1 instead of buying the packaged bleach sprays for $4 each.
Pets - $80 seems excessive, any way to reduce?

I'm estimating you can reduce costs by ~6k if you do the above simple steps.
Hope this helps.
Thanks for the suggestions. I appreciate it. We're open to reducing expenses. We will definitely work on reduction to grocery and vacation expense categories. I'm open to cancelling cable if the savings are worth it. We can also shave a bit off dining and will see if there is an alternative, less expensive food for cats with sensitive stomachs. I car pool and my wife doesn't commute. I'm not sure if we can easily find much savings in that category.
Then how are you currently spending $200 on gas? That is over 50 gallons at current Bay Area prices. How are you averaging over 50 miles a day without commuting? If neither of you has a daily commute, do you need two cars?

Most of your responses point towards you wanting permission to spend your savings, and certainly other posters have given that permission. But if you want to cut costs, there is a lot of low hanging fruit.
I'm just doing a round estimation on gas expenditure. I fill up about 3 times a month. It's 10 gallons per fill up and gas costs around $4/gallon. My wife has a car too so I rounded our expenses for gas to around $200. We might take a road trip once in a while also. Perhaps I have over-estimated a bit how much we're spending and should track this more precisely since I can't say what the average is down to the penny.

It was pointed out to me by some people that I may have given the impression that my income was $64k instead of $110k-120k so I wanted to clarify that since it makes a difference when we're talking about expenses of $78k. It's not that I don't want to cut anything. I welcome the suggestions. However, like anyone, I do have my priorities on what to target first when making cuts. Actually, I've mentioned earlier in the thread that I really like the suggestions to make some cuts along with use some savings. I don't plan to just use up savings to close the entire gap even though some people have suggested doing that.

Here is the current action plan:
I will cut the following: vacation, grocery, and dining
I will look into the possibility of cutting: cable and phone plan if the savings are worthwhile, and food for cats if an acceptable alternative is available for cats that vomit easily
I don't want to cut: house cleaning (which used to be every other week and has been reduced to every three weeks since my wife stopped working) and 2nd car

In addition to the above, I am asking about spending some savings because I have a short-term cash-flow issue and an 8 month emergency fund. My job is very secure. Since, I'm trying to close a $10k gap for 2019 only, would it be okay to use some savings in addition to cutting expenses to achieve the goal? Or should all $10k come from cutting expenses? For more context, our retirement accounts will be increasing substantially during the year. Does that matter?
Last edited by Ron Ronnerson on Tue Oct 23, 2018 5:05 pm, edited 1 time in total.

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sergeant
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by sergeant » Tue Oct 23, 2018 4:03 pm

Don't put the cat out, rent all your rooms, start eating cheap ramen etc... just take it from your EF. It's that easy.
Lincoln 3 EOW!

curmudgeon
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by curmudgeon » Tue Oct 23, 2018 6:20 pm

Personally, I wouldn't hesitate to spend down from your Roth/savings in this scenario, especially if it will only last for 2-3 years, since your net savings are still substantial. Essentially what you are doing is a Roth "de-conversion". The net effect is moving money from Roth to tax-deferred. The magnitude of the subsidy makes it worthwhile even though you will pay some higher taxes later. If you can do it by reducing your EF instead of withdrawing Roth contributions, so much the better.

The ACA cliffs and subsidies make for some odd twists and turns, but the dollars involved are pretty substantial. I'm retired, but have some similar tradeoffs; if it weren't for the ACA cliff, I'd be doing much larger Roth conversions now. I will (most likely) pay more taxes in the future when RMDs and SS come together, but the dollars in hand today outweigh than in my opinion.

If you spend down the EF to do this, I'd just say to make sure you have options for cash access that won't trigger additional AGI if something came up (premature car failure or the like). In your situation with the Roth contributions available, it's probably not a problem, but it could be trickier for someone who has most of their resources in either a taxable investment account with embedded cap gains or tIRA/401K.

Sandi_k
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Sandi_k » Tue Oct 23, 2018 7:55 pm

We had a cat that threw up a lot, too. And she had a preference for chewing on plastic and EATING it.

Someone suggested she might have a sensitivity to grain and fillers in the cat food, so we tried a multitude of cat food brands until we found one that she liked, and which reduced the yakking. Best of all, our elderly tomcat likes it too, and he seems to have much fewer hairballs once we made the swap.

We've been feeding them Authority brand dry cat food and Authority Grain-Free wet cat food. Available from PetSmart - and waaaay cheaper than IAMS or Science Diet. You might try it, and reduce the cost of kitty. ;)

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 7:57 pm

curmudgeon wrote:
Tue Oct 23, 2018 6:20 pm
Personally, I wouldn't hesitate to spend down from your Roth/savings in this scenario, especially if it will only last for 2-3 years, since your net savings are still substantial. Essentially what you are doing is a Roth "de-conversion". The net effect is moving money from Roth to tax-deferred. The magnitude of the subsidy makes it worthwhile even though you will pay some higher taxes later. If you can do it by reducing your EF instead of withdrawing Roth contributions, so much the better.
Thanks for the feedback, curmudgeon. I think we'll try to reduce expenses some and then close the rest of the gap by using emergency fund savings. I'm thinking that we won't have to withdraw anything from our Roth IRA accounts but it's good to know that we do have contributions available that we could use if needed.
curmudgeon wrote:
Tue Oct 23, 2018 6:20 pm
The ACA cliffs and subsidies make for some odd twists and turns, but the dollars involved are pretty substantial. I'm retired, but have some similar tradeoffs; if it weren't for the ACA cliff, I'd be doing much larger Roth conversions now. I will (most likely) pay more taxes in the future when RMDs and SS come together, but the dollars in hand today outweigh than in my opinion.
I think this is a significant point. In our case, the subsidy is over $14k after-tax dollars if we can get our MAGI low enough. If we put enough into retirement accounts and withdraw from savings and/or cut expenses, we qualify for the credit. It seems like the prudent thing to do.

I agree that even if we had to withdraw a little bit from Roth accounts and pay a higher tax rate later, it seems worthwhile in light of the size of the tax credit involved. I'm hopeful that we don't have to touch our Roth accounts, though. With the pension I'm expecting, our Roth IRAs are particularly good to have.

TallBoy29er
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by TallBoy29er » Tue Oct 23, 2018 7:58 pm

bye bye cats. :moneybag :twisted:

Ron Ronnerson
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 7:59 pm

Sandi_k wrote:
Tue Oct 23, 2018 7:55 pm
We had a cat that threw up a lot, too. And she had a preference for chewing on plastic and EATING it.

Someone suggested she might have a sensitivity to grain and fillers in the cat food, so we tried a multitude of cat food brands until we found one that she liked, and which reduced the yakking. Best of all, our elderly tomcat likes it too, and he seems to have much fewer hairballs once we made the swap.

We've been feeding them Authority brand dry cat food and Authority Grain-Free wet cat food. Available from PetSmart - and waaaay cheaper than IAMS or Science Diet. You might try it, and reduce the cost of kitty. ;)
Thank you! We definitely will give it a try!

quantAndHold
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by quantAndHold » Tue Oct 23, 2018 8:18 pm

Ron Ronnerson wrote:
Tue Oct 23, 2018 10:11 am
bigred77 wrote:
Tue Oct 23, 2018 7:04 am
Spend down from your 50k in cash over the next 2 years and then rebuild the balance if you so desire once your wife rejoins the workforce.

It’s not even spending above your means, think of it as shifting a portion of your taxable assets to tax advantaged accounts (because that’s exactly what your doing) in addition to your regular retirement contributions.
That's how I was looking at it - that if I use up cash while putting money into retirement contributions, it is just shifting taxable assets to tax-advantaged assets. However, there are lots of responses that indicate that our expenses should be brought down rather than tapping into the emergency fund. The difference in perspectives on how to approach our situation is interesting. By the way, thanks for the input. It's reassuring that I'm not the only one who viewed it as shifting assets.
It sounds like you’re currently putting more into retirement accounts than you will ever actually need in retirement, given your spending level and projected pension. If it were me, I would be comfortable drawing down the emergency fund for a couple of years.

Momus
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Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Momus » Tue Oct 23, 2018 8:55 pm

Ron Ronnerson wrote:
Tue Oct 23, 2018 3:37 pm
sailaway wrote:
Tue Oct 23, 2018 2:43 pm
Ron Ronnerson wrote:
Tue Oct 23, 2018 2:35 pm
wtarbing wrote:
Tue Oct 23, 2018 1:24 pm
Ron Ronnerson wrote:
Mon Oct 22, 2018 7:08 pm

Our Expenses (monthly):
House Cleaning: $120 – done every 3 weeks
Cable/Internet: $160
Gas for cars: $200
Groceries/Household Items: $1,000
Restaurants: $200
Pets: $80 (cats are on a special diet due to sensitive stomachs)
As previously mentioned, start with your variable costs.

Cleaning - with your wife at home, cut this, save $1,440/yr
Internet/Cable - cut the cord? (Hulu/Youtube Tv = $40, snag internet for $60, Netflix $10?) something like this would shave $60/mo saving $720/yr
Dining - you should cut this in half, save $1200
Gas - i drive 60miles a day with my wife at home and we spend less than $100/mo on gas. i think with your wife now at home you can find room here
Groceries/HH - look for ways to cut back here, less ribeye/tbone steaks - more tacos, make your own cleaning solutions for under $1 instead of buying the packaged bleach sprays for $4 each.
Pets - $80 seems excessive, any way to reduce?

I'm estimating you can reduce costs by ~6k if you do the above simple steps.
Hope this helps.
Thanks for the suggestions. I appreciate it. We're open to reducing expenses. We will definitely work on reduction to grocery and vacation expense categories. I'm open to cancelling cable if the savings are worth it. We can also shave a bit off dining and will see if there is an alternative, less expensive food for cats with sensitive stomachs. I car pool and my wife doesn't commute. I'm not sure if we can easily find much savings in that category.
Then how are you currently spending $200 on gas? That is over 50 gallons at current Bay Area prices. How are you averaging over 50 miles a day without commuting? If neither of you has a daily commute, do you need two cars?

Most of your responses point towards you wanting permission to spend your savings, and certainly other posters have given that permission. But if you want to cut costs, there is a lot of low hanging fruit.
I will cut the following: vacation, grocery, and dining
I will look into the possibility of cutting: cable and phone plan if the savings are worthwhile, and food for cats if an acceptable alternative is available for cats that vomit easily
I don't want to cut: house cleaning (which used to be every other week and has been reduced to every three weeks since my wife stopped working) and 2nd car
Almost EVERY savings is worth while. That $10-100 here and there adds up quick. Every dollar you spend now is worth $8 in 30 yrs (Assuming 7% return). Do you really want to waste 50k in the future for every $6000 you spend this year? I don't. In just 10 yrs, your networth is 500k less for retirement.

Ron Ronnerson
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Location: Bay Area

Re: 2019 Expenses > 2019 Income – Help us close the gap

Post by Ron Ronnerson » Tue Oct 23, 2018 9:50 pm

Momus wrote:
Tue Oct 23, 2018 8:55 pm
Ron Ronnerson wrote:
Tue Oct 23, 2018 3:37 pm
sailaway wrote:
Tue Oct 23, 2018 2:43 pm
Ron Ronnerson wrote:
Tue Oct 23, 2018 2:35 pm
wtarbing wrote:
Tue Oct 23, 2018 1:24 pm


As previously mentioned, start with your variable costs.

Cleaning - with your wife at home, cut this, save $1,440/yr
Internet/Cable - cut the cord? (Hulu/Youtube Tv = $40, snag internet for $60, Netflix $10?) something like this would shave $60/mo saving $720/yr
Dining - you should cut this in half, save $1200
Gas - i drive 60miles a day with my wife at home and we spend less than $100/mo on gas. i think with your wife now at home you can find room here
Groceries/HH - look for ways to cut back here, less ribeye/tbone steaks - more tacos, make your own cleaning solutions for under $1 instead of buying the packaged bleach sprays for $4 each.
Pets - $80 seems excessive, any way to reduce?

I'm estimating you can reduce costs by ~6k if you do the above simple steps.
Hope this helps.
Thanks for the suggestions. I appreciate it. We're open to reducing expenses. We will definitely work on reduction to grocery and vacation expense categories. I'm open to cancelling cable if the savings are worth it. We can also shave a bit off dining and will see if there is an alternative, less expensive food for cats with sensitive stomachs. I car pool and my wife doesn't commute. I'm not sure if we can easily find much savings in that category.
Then how are you currently spending $200 on gas? That is over 50 gallons at current Bay Area prices. How are you averaging over 50 miles a day without commuting? If neither of you has a daily commute, do you need two cars?

Most of your responses point towards you wanting permission to spend your savings, and certainly other posters have given that permission. But if you want to cut costs, there is a lot of low hanging fruit.
I will cut the following: vacation, grocery, and dining
I will look into the possibility of cutting: cable and phone plan if the savings are worthwhile, and food for cats if an acceptable alternative is available for cats that vomit easily
I don't want to cut: house cleaning (which used to be every other week and has been reduced to every three weeks since my wife stopped working) and 2nd car
Almost EVERY savings is worth while. That $10-100 here and there adds up quick. Every dollar you spend now is worth $8 in 30 yrs (Assuming 7% return). Do you really want to waste 50k in the future for every $6000 you spend this year? I don't. In just 10 yrs, your networth is 500k less for retirement.
I think life is about balance. What you propose could be taken to an extreme. We live in the Bay Area on one teacher's salary and save $30k-$40k per year. We're expecting six-figures per year between social security and pension. The house should be paid off in 30 years and we'll be on medicare. While I can see how cutting cable will help tackle our 2019 cash flow issues, I'm just not quite as compelled by how much an extra $100 or so per month will compound over 30 years. I think the post directly above yours sums up why I feel this way: We'll probably have more money than we will need during retirement. So, what's the point of increasing savings even further? What if I don't make it another 30 years? I'm already 44 and there are no guarantees, after all.

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