Reader Case Study: The Long Road to Mustachianism

The battle of Mustachianism vs. Consumerism rages on, and we have made some serious headway lately, with almost a doubling of the blog’s readership in the past month and some funny appearances in major media.

But with new exposure comes new skepticism, and the need to explain the whole package from scratch to whole legions of people who have never heard of it before.

Can we crack through decades of established habit to allow people to lead richer, happier lives? Many newcomers to the blog don’t even realize how incredibly expensive (and inefficient) their lives are. To illustrate what we’re up against, check out today’s Reader Case Study:

Dear Mr. Money Mustache,

I discovered your blog a couple of weeks ago and have been reading it pretty much non-stop. I love your down-to-earth, practical and well-researched  advice and was hoping you might be able to do a reader case study on my situation.

My husband and I are 28 years old (married for 5 years) and feel like we’ve made a lot of good financial decisions. However, like many of your other readers, I’m sure, there is one out there that is still haunting us and preventing us from realizing our dreams.

When we were in high school, we were both given the opportunity to attend state schools free of charge through a state-funded scholarship program. However, being in the “I’m a teenager so I know everything” stage, we both chose to attend expensive private colleges where we thought we’d get better educations. Even with private scholarships and after having paid more than the minimums every month, we still owe a combined $150,000 on our student loans. We consolidated our private loans as much as Sallie Mae and the Federal Government would allow and are currently paying a 3.75% interest rate (variable of course… I think it’s prime+1%).

After starting to read your blog, we decided to try to pay off our student loans in 4 years. Doing the math, if he pays $2,000/mo. on his and I pay $1,000/mo. on mine, we can do it. Is this the right decision? Or should we be trying to invest some of that money? We currently have no money in stocks, bonds, or REITs, but have been considering starting small (until we get the hang of investing) and putting around $3K into the Vanguard funds you suggested in some of your posts.

Here’s what our financial picture looks like:

– Combined salaries: $157,000 before taxes ($86,000 me, $70,000 husband) (I take home around $2,200 every 2 weeks and my husband takes home around $1,800 every 2 weeks because health insurance comes out of his check)

– Savings: $31,000 ($25,000 of it is in a high-yield savings account earning .8% interest, while the other $6,000 is in a normal savings account earning a mere .2% interest). This is both our emergency savings and our savings for the downpayment on our next home (We are hoping to get to 20% so we don’t have to pay PMI next time around. Also, current market value on our house is approx. $10K-$15K less than what we owe).

– 2 cars (paid off) (I work 32 miles from home and husband works 40 miles from home. In our area, the jobs close to home pay less than half what we make traveling into the city.)

– Car insurance: ~ $140/month combined

– Mortgage and real estate taxes: $1675/month (unpaid principal balance of $206,029) (interest rate 5% + PMI). (As a side note, we tried to refinance but FHA regulations have changed since we originally got our mortgage and we were told there would be no significant advantage because our PMI would go up from $100/mo to over $300/mo, thereby cancelling out any savings) (We’re also hoping to move from our condo into a single-family home in the next 5 years)

– Internet + basic cable (cheaper to keep 5 channels of tv than to get rid of it due to cable company’s bundling) (husband works 2 days/ week from home, so high speed Internet is needed).

– Electric bill: ~ $120/month

– Gas bill: Between $6-$100 a month depending on how cold the New England winter is.

– Combined cell phone bill: $150/mo.

– Gas for the cars: ~$600/mo.

– Groceries: ~$500/mo.

Also, to throw another wrench in, I am going to community college part time to get trained in a completely different career. Anticipated remaining cost over the next 2 years is $16K.

Hopefully I’ve captured everything. I really appreciate your opinion and hope your readers can learn something from our situation.

Thank you,

All right, so we’ve got three main points here:

  • A fairly large student loan debt
  • The desire to save for a home
  • The desire to save for retirement

Balancing all this out, we have a powerful asset

  • An unusually large double-worker-no-kids income of $157,000 per year

How do you decide between these priorities?  Do we pay down the debt as a matter of principle? Do we save for retirement because the expected return is probably greater than 3.7%? Do we save for a downpayment to get into a bigger house?

All of these are good questions, but there’s one thing you need to do before any of that. You need to


I mean, HOLY. SHIT. The two of you are driving a combined ONE HUNDRED AND FOURTY FOUR MILES PER DAY, and yet ending up at the same place you started each night. WHY?? A commuting habit like this will cost you over $215,000 every ten years if you simply shift the money you currently waste on driving, towards paying off your student loans instead. In fact, your choice to live so far away from your work is a much bigger boat anchor keeping you from getting ahead than any amount of student loan debt could ever be.

So I’m going to start by having you move close to work. Like, right now. I mean your husband should be shopping for apartments on Craigslist even as you finish reading the rest of this article. You can shout the rest of it across the room to him as you read and he searches. It’s that much of an emergency.

You can rent out your current condo, and find a new rental in the city. Eventually the condo can be sold. Your new place might be smaller, but that’s fully appropriate right now – you are in debt, so it’s emergency payoff time, not luxury time.

Your new apartment can be at the midpoint between the two jobs, thus you can both bike, walk, or take the subway to work. In the worst case, one person can walk, while the other drives a short distance. This change alone will make the difference between “broke” and “millionaire” over just a portion of a typical working career. And yet it will change your whole life for the better. You’re about to get all your free time back! You get to experience the feeling of ending your workday, biking home, and still having some time in the evening to actually accomplish something. From this point forward, you will not give a shit about what the rush hour traffic on the interstate looks like. And you never will again, for the rest of your life! Congratulations!

Compounding the savings, you’ll be able to sell both of your cars, which are probably fairly new and expensive, and have between zero and one not-quite-as-new, efficient cars which don’t require collision insurance coverage.

Whew, that was intense, but I feel a lot better, don’t you? Without the outrageous drain of a crazy commute, you’ll finally have the chance to start keeping some of your own money.

Since your income is similar to that of  Mr. and Mrs. Money Mustache during our own Prime ‘Stashing Years, you’ll probably find that you have almost $100,000 per year available to save after expenses. To make the most of your high taxable income, contribute the maximum possible amount to tax-advantaged savings accounts like 401Ks and IRAs, using low-fee index funds as the vehicle.

Next, take your $25,000 emergency fund and throw it into that student loan. Your new lifestyle will be much lower cost, and you’ve got two incomes (plus the unemployment insurance system) backing you up, so there is no need to keep such a high buffer. That will save you about $925 per year of interest, further accelerating the payoff.

Meanwhile, you’ll have time to brush up on additional skills, such as

plus, miscellaneous training sessions for your Frugality Muscles, including

If you make these changes, you’ll magically find that within just 2-3 few years, you have wiped out the whole student loan. This will allow you to turn your attention to the house downpayment. At that point, the 20% savings will show up within a year and you will finally be in a position to really buy your first house.

But don’t feel rushed to do so – if your active urban lifestyle is as fun as I predict it will be, you might choose to continue renting for much longer and using the money you’d normally spend on a house for investments instead. Perhaps even until you are financially independent 7-10 years later! At that point, you will be able to move to the locale of your dreams, buy a house with some of the spare change in your pocket, and let the good times roll.

This reader did not mention whether or not kids are planned for the future, but if they are, changes like this are even more powerful if they are made at this stage in a person’s life. It is far easier to change your habits for the better and create a more efficient and less stressful lifestyle Right Now, than it is to do so once you have the added full-time job of one or more children around requiring all of your focus. Starting a family is much better done when you’re out of debt and not dependent on multiple incomes for survival.

There are many paths you can enjoy, thanks to your new Mustachian take on life.. but all of them lead through the same initial bottleneck: eliminating your life-draining commute, and getting out of your Debt Emergency before making any more major purchases.

Best of  luck, and if you like, keep us informed of how things are going  as you make progress!

(And if any of our old case studies are out there reading, please write in through the contact form and let me know how things are for you too – many people have been asking about how you’re doing!)


  • Grant September 15, 2012, 6:19 am


    This is why I love MMM!

    (also – I probably need someone to yell that at me, and possibly punch me in the face)

    • corcoran September 15, 2012, 8:05 am

      Grant, this is the time. Get your act together!

    • Nurse Frugal September 16, 2012, 4:09 pm

      I need to do some of that! It feels good every now and then to scream like your hair is on fire! Probably good cardio too!

    • Art Guy July 5, 2013, 12:39 pm

      Omigod – Spit out my food, laugh till I start choking FUNNY, but as always, completely on point.

      thanks MMM for your unique presentation skills that I alawya make me laugh & think deeply at the same time

  • Physics September 15, 2012, 6:25 am

    Ha, as I was reading the submitted case study, I was thinking to myself, “Oh boy, there is some all-caps, bold text coming…” and you delivered.

  • Stephen September 15, 2012, 6:38 am

    If they rent out their condo, they’ll probably have to refinance. Since that’s out of the question for now, maybe it would be better to put all the cost-cutting measures from the second half of this post into place, and at the same time put their condo on the market. In their case, taking a loss on the condo now will soon pay off if they move closer to work.

    Are their commutes even in the same direction? If not, they might want to start looking for other jobs, or ways to work remotely.

    • Lance September 15, 2012, 7:04 am

      My other question would be what is the new job going to be and is it going to be in the same area? Luckily with renting you can move every year after your lease is up so hopefully it won’t make too much of a difference.

    • Karawynn @ Pocketmint September 15, 2012, 7:16 am

      Wait, why would renting the condo require a refinance? Is this some rule I haven’t heard of?

      My question would be whether they can actually get a rental income anywhere close to their mortgage payment. In some places right now (like here, cough) that’s a completely laughable prospect.

      And given the typical difference between city and suburban rents, the result of (current mortgage + city rent – condo rent) could be a whole lot higher than just their current mortgage.

      Other unknowns: how small is their current place, and is getting a smaller one even feasible? What kind of cars and how old? A move into the city is certainly worth considering, but I think we’re missing too many numbers to be sure that it will work out so neatly.

      (All that aside, serious lolz on the ‘shout while he searches Craigslist’.)

      • This is my case study... September 15, 2012, 8:08 am

        Thanks Karawynn. I’m the person who the case study is about and you’re very right. Thanks for pointing out the missing pieces in my message to MMM. I have filled in the gaps in a comment posted below. Would love to hear your opinion given the rest of the story.

      • corcoran September 15, 2012, 8:18 am

        You make some good points Karawynn, here’s my thoughts.
        I think by saving on vehicle expenses: insurance (~$80 guess), $600/mo on just gas, combined with the maintenance (as a real cost) and depreciation (unrealized loss) they’ll be better off, if even only slightly. Like you said we’re missing specific details on the vehicles, but selling the vehicles and going with a used fuel efficient one should also give them a little more ‘stash.

      • Stephen September 15, 2012, 1:03 pm

        The details are in the loan docs. Many loan contracts have a clause about it being your residence. If the loan doesn’t allow renting (and the language might not be straightforward; consult your lawyer), you would have to refinance into an investment loan. You would also have to change your insurance.

        • Mason September 17, 2012, 11:15 pm

          Most loan contracts say something to the point of “I intend to occupy the property as my primary residence.” It usually isn’t specific in terms of timeline, and typically moving out of your primary residence and turning it into a rental does not require a refinance. A fannie/freddie loan wouldn’t require it as of four or five years ago when I decided to go in a different direction from running a branch office of a mortgage company. Things could have changed since then, but I doubt a mortgage company could force you to refinance because you decided to move.

          • jeff September 18, 2012, 5:31 am

            Depending on the type of mortgage, some definitely give rates depending on if its your primary residence or a rental property. However by now the mortgage underwriter has no idea if you actually occupy the unit.

            The main thing about renting is the condo or homeowner association bylaws.

  • Matt G September 15, 2012, 6:47 am

    It always ends up being the cars/commute.

    • Lindsey September 15, 2012, 2:45 pm

      Sometimes you can change your job by just asking. I asked and my boss was fine with me coming in only on Monday and Friday (coming in early and leaving early, to avoid traffic), but telecommuting the other days. And, since my job is measured mostly in writing output, I have managed to cram the 3 days into 2 days, so I now work 4 days a week with only 2 of those requiring travel…I love my job and I love my house and don’t want to change either, so cutting my commuting time and expenses to less than half of what they were is the compromise I can live with for now. I do realize not everyone has this luxury…if telecommuting doesn’t work for your job, what about four 10s? That still saves some…

  • poorplayer September 15, 2012, 6:57 am

    Greetings Mr. M – long time no see. Good advice for this couple, but I am wondering something that perhaps you’ll expand on. What do people who don’t like living in large urban areas do? I mean, some people live outside of where they work because they enjoy the serenity and natural beauty of rural life. Yet as we know, there are no jobs in rural America that pay big money – these are mostly in major urban areas. And some people like country living so they can grow gardens and save on their food costs that way. So they commute. How do you reconcile the desire to enjoy a simple rural lifestyle with the immediate need to maximize income through an urban-based job?

    • Mr RiskyStartup.com September 15, 2012, 7:15 am


      Easy. You make a sacrifice and live urban and cheap for a few years, and then retire and move to rural area which is cheaper. Other option is telecommuting of course.

      • Eschewing Debt September 15, 2012, 11:13 am

        While this logic sounds simple and easy at first- especially for those without kids- there is one huge item that must be considered: School Districts.

        Without going into the details as to the differences between urban and suburban schools, let me say that as a stay-at-home mom of 3 who taught for 5 years in a high school, I would NEVER EVER send my children to an urban school- EVER. Pretty much every mom I know would say the same. Suburban schools are simply that superior- without question.

        There are other options besides bicycling and walking if you prefer the suburbs for whatever reason you have. Most cities have decent public transportation now. A lot of commuters are using carpool vans. You mentioned telecommuting which is another great option. Many large companies are building offices in the suburbs that one could work at and still make a very good living.

        I’m not trying to argue with your logic- I think for a couple with no kids it is perfect. And I definitely think pretty much every couple I know can go down to one car or no car if they think outside the box. I’m just trying to say that once you have kids things change a little bit, and there is no one size fits all solution.

        • Mr RiskyStartup.com September 15, 2012, 11:39 am

          I hate to disagree, but at least in our case (city in Ontario, Canada), urban schools do much better. Actually, in Ontario, they do this very cool thing – they evaluate scores for each of the 2500 or so elementary schools and post them online. Based on those scores, 4 out of the 5 top schools in our city are urban, including the top one which is actually in the top 30 in Ontario (out of 2500).

          We had simmilar fears about urban living (at least my wife did, I grew up in Europe so I was happy with moving back to cozy condo). However, my wife is now converted – she is preaching to everyone about urban living. Because we made the change from suburban living (pool, yard, comute), she was able to retire at 36 when our son was born, spend hours in the beautiful public parks and pools, and our son has already seen more in his few years of life than most people will see in their lifetimes (he is going to be at the Grand Canyon next month for example).

          At the same time, my suburban friends are still spending hours commuting, working more to pay for the stupidest invention of all (single family home, my opinion – sue me), doing all the hard work… while their kids are raised by the daycares and nannies from the early age.

          I think that suburban living is great, but only once you reach Financial Independence and issues like commuting, daycare and mortgage interest are no longer in play.

          • Eschewing Debt September 15, 2012, 12:20 pm

            That’s awesome that Ontario has such great schools- you are lucky! Of course, I think you Canadians do many things great!

            Here in the states I would go on a limb and say that is not the case. I will site a study done by MIT and published in Tau Beta Pi magazine in 2006 that shows that if we took urban and minority kids out of our testing, we would actually rank about 4th in the world for education, instead of a piddly 21st or whatever rank we are this year.

            Are there exceptions? I am sure there are. But as a general rule, the suburbs perform better here than the city schools.

            However, one thing we definitely can agree on: Wherever you live, financial independence is attainable if you are willing to control your spending and cut costs. I quit my job when my first was born at the age of 28 and couldn’t be happier with the life my family lives- we have been blessed- and a huge part of that is how we have controlled our spending so we don’t have to worry about money. I do agree with the spending in the ‘burbs that you cite, but we are blessed that I couldn’t care less about what the Jones’ are doing and how they are living:)

            • Jamesqf September 16, 2012, 11:59 am

              “…the suburbs perform better here than the city schools.”

              But you are doing the split the wrong way, based on the post that triggered this digression. It’s not suburbs versus cities, it’s suburbs AND cities versus rural.

          • Mr. Frugal Toque September 15, 2012, 1:27 pm

            “I hate to disagree, but at least in our case (city in Ontario, Canada), urban schools do much better”

            … on standardized tests.

            I’m not much on those sorts of standardized tests. If a school wants to – and many do – they can remove or gloss over parts of the cirriculum in order to drill test-specific material into the students.

            I don’t really buy into it. Most public schools in Ontario do quite well by their students and – other than those standardized tests – I don’t see any reason to value one particular area over another.

            • Mr. Risky Startup September 15, 2012, 2:05 pm

              Agreed, but that is the only measure they have at this time and it matches what other parents and teachers that I know in my city are saying.

              With that said, I in general believe that schools job is to provide some guidance and keep kids safe (and in Ontario, they are doing fine). Real education however happens at home with involved parents, support and real life experiences.

              I bet that if some of the kids from the failing urban schools in US were lucky enough to have their parents more involved (instead of struggling to make living) they would do better as well. Which, by the way, is one of the most important reasons for cutting down on consumerism and increasing financial independence.

              My sister-in-law is a teacher in one of those urban schools in US and I want to cry when I hear some of the stories… Teachers and schools cannot do much when underlining factor is poverty and lack of hope.

              Which reminds me, I just read the great story in NYT about schools in Kalamazoo, MI. I recommend it:


        • Emmers September 16, 2012, 11:15 am

          Dang. Stereotypes much? Some of the best school systems in the country are urban (ETA: or highly-dense-suburban; there’s not a lot of difference ultimately) – your hair’s on fire for the wrong reason! :-)

          • Mr. Money Mustache September 16, 2012, 4:32 pm

            Yeah, that urban vs. suburban school stereotype has GOT TO GO. Everything is a case-by-case basis.

            I live in the center of my own city and my boy attends the historic central school that’s 2 blocks from the central business district. It’s a great school.

            But these individual examples mean nothing. Ignore the standardized test scores, interview the principal, teachers, and some parents, watch the kids playing at recess. Volunteer in a classroom if you like. At this point, you’ll know if you have found a good school.

            • lilacorchid September 18, 2012, 9:36 am

              I totally agree. I live in the suburbs of the 50s in my city (the 1950 city limit is blocks from my house), and I am part of the core school district. We get all the programs that the inner city kids get (yay, 10 cent milk at lunch!), but my kid’s elementary school has 150 kids in it from K-6. It’s walkable from our house and walkable to my job if I had to go and pick him up due to illness.

              There are gems in every place; you just have to seek them out. And in the end, I believe a gifted child will excel academically anywhere as long as there are parents and community backing him or her up.

  • Mr RiskyStartup.com September 15, 2012, 7:23 am

    I think that in general terms, steps to Mustachianism are:

    1 Analyse your situation (budget and expenses tracking)
    2 Attempt to increase pay without increasing costs (ask for a raise)
    3 Cut expenses to the bone (yes, even downgrade housing if needed)
    4 Pay off the high interest debt
    5 Maximize beneficial savings (401K in US, RRSP in Canada).
    6 Pay off low interest debt (mortgage, student loans).
    7 Maximize savings until FI is reached.

    Did I forget anything?

    • Oh Yonghao October 22, 2014, 2:13 pm

      8 Enjoy life!
      9 Most of the best activities are free and include things like mountains, springs, rivers, parks, the public library, and socializing with others
      10 Learn!

  • Mr RiskyStartup.com September 15, 2012, 7:48 am

    How about this idea:

    1. Walk away from your condo, give it back to the bank. Bad credit, but who cares – within 12 years you will have clean credit again and million dollars in the bank.
    2. Sell both cars and any other accumulated crap. Get 1 used car.
    3. Move into a cheap tiny condo close to work (say $1000 per month for rent and utilities and maybe free Internet)
    4. Cut other expenses to the bone. Goal is to spend $2500 per month (rent included) and save $6000 per month (after paying off the student loan within 2 years at $6000 per month).

    So, with this plan, you end up with 1M saved within 12 years (in the year 6 or 7 you may have enough money to buy a house for cash if you want – but only if the house purchase is expense neutral versus renting the small condo).

    Best of all, if you manage to learn how to live off $2500 per month going forward, all you need to retire is $750,000 so you could become financailly independent by the time you are 38 or even earlier. I wish I knew what I know now when I was your age and income level :)

    You have all the ingredients needed for quickly reaching Financial Independence. Only question is how much sacrifice can you make to get there.

    Good luck!

    P.S. $600 for gas should buy 150 galons of gas per month or 1800 per year. That is just wrong on so many levels.

    • jump September 15, 2012, 8:28 am

      I disagree with your logic, being financially responsible doesn’t mean cutting corners such as defaulting on loans.

      • Mr RiskyStartup.com September 15, 2012, 9:08 am

        Well, I am of the belief that you should pay what you spend, but in this case, we are talking about someone who will work extra 5-10 years of their life thanks to this condo purchase versus tax deduction to the bank. Not to mention, who carries most of the blame for the situation where most mortgages are under water – you guessed it – greedy banks. So, why would banks not carry some of the blame and loss?

        I was in a simmilar situation (but with credit cards), and I wish I was smart enough to default instead of taking the high road. Even if I defaulted, I already paid in interest and payments more than I ever spent on the credit cards. Instead, I delayed my FI by 7-10 years and now I am 42 and still 10-12 years away from FI.

        Also, they may be able to speak to the bank and agree to settle the mortgage at a lower price (whataver they can get for it). So, that way bank will probably break even or still make a few bucks, and they will get their flexibility back. If they threathen to just walk away, banks are more willing to negotiate smart exit.

      • This is my case study... September 15, 2012, 9:12 am

        I agree with “Jump.” I believe in taking personal responsibility for my decisions. I made the decision to take on the mortgage so why should the bank have to take on my responsibility? If more people had this belief, there wouldn’t be a need for that nasty thing called “PMI.”

        Also, my neighbors are really nice people and doing something like defaulting and going into foreclosure would tank their property values.

        • Mr RiskyStartup.com September 15, 2012, 10:30 am

          Actually, reason why they have PMI is because banks want insurance on the money they land, and because their favourite customers are people like you – well enough to afford payments, not rich enough to pay their mortgages off quickly. They prefer people who are in shit just up to their necks. Anything over and they drown (hence PMI), anything under and you do not need the bank anymore.

          PMI would not be exist if the laws are enacted in US that require you to have 20% downpayment on the house you want to buy and that mortgage payment cannot take more than 25% of your take home pay. If those rules are enacted, there would be no housing crisis, no fiancial crisis and there would be much less unhappy people (except for bankers who make majority of their profits on people like you). If someone does not meet these minimum requirements, they should not own the house anyway.

          So, again, I come from the place where you do not eat if necessary, but you pay your debts. I was starving on occasion and yet I never missed any payments (my out of debt plan included negotiating with banks to cut my interest to zero and I paid my debt in full). However, if I was an American, and looking at the situation that was created by the GREEDY BANKS (and helped with the stupid people who thought that they can afford $500K home on a $75K income with 0% down) – then I would not feel so bad about banks losing a few bucks. F*** them.

          However, very noble of you to think of your neighbours.

          Still, I believe that your biggest issue currently is that you are unable to be flexible due to condo you live in and mortgage associated with it. If you do nothing about it, you will end up losing few more years and be at the very same spot. If you make drastic changes now, you will be better off.

          In any case, good luck! Good news is that you are in a good spot to get out of the trouble, and feeling of being debt free is AWESOME!

        • Hanah September 15, 2012, 11:14 am

          Kudos to you for putting your situation on the line – very brave! And for listening to all the comments.
          I agree with you that defaulting won’t work: for one thing, you’ll never get a rental with bad credit. Or, you will get a rental from Gary, Landlord of the Flies.

          • This is my case study... September 15, 2012, 6:56 pm


          • Emily September 17, 2012, 2:06 pm

            I disagree. We had to default due to not being able to rent or sell our home after we moved due to a job change. Despite the foreclosure, we were able to get a great rental in our new city with a fantastic landlord. Landlords typically don’t care about the default as long as you have a good reason.

            Bottom line – don’t be afraid that you won’t find a rental because you default. Obviously – you don’t want to be in that position and I certainly don’t recommend it – but if you find yourself there, don’t be afraid. You’ll find a place to live. :)

            • strivingforFI September 20, 2012, 9:24 am

              I agree with Emily. As a landlord times have changed and you can still get financially secure tenants even though they have defaulted on their home. Some times you lower your requirements to get a place rented, upscale place or not.

              You could always get the rental before you defaulted. Plus, even if you default and let the bank take the home, it could be well over a year before they actually take the house. All the while you could be saving that money. There are interesting blogs of people telling their story of letting the bank take the home all while they are not paying anything and saving money. Some even document their credit score hits.

      • saudisimon September 15, 2012, 12:15 pm

        A home loan is a contract with a large financial institution operating at arm’s length withthe best legal advice money can buy. If the state you are in allows a no-fault default, this should not worry you morally. This is not a moral issue, but a business decision. The bank would foreclose on you if you fell behind; you hand them the keys if the situation no longer suits you. Thatis what they signed up to.
        Poor credit rating shouldn’t worryyou if you are not going to buy on credit again, ever. Borrowing from little old ladies and family is different, I would argue.

        • Des September 16, 2012, 1:06 pm

          Saying it is not an issue of morality is like saying having sex before marriage isn’t an issue of morality. For some people, it’s a total non-issue. For other, though, it’s a big deal. If the OP feels like it is a moral thing, then for them it is (at the very least). At the end of the day, having a guilty conscience isn’t worth any amount of money.

      • Emmers September 16, 2012, 11:19 am

        It is really hard when we try to mix morality with finances. The whole question of “should I break a promise I made, to pay back this money” is just completely fraught with emotion — I don’t think people can evaluate that sort of thing rationally.

        With that said, I have a related question: What’s the point of PMI, if not to protect banks from foreclosures?

    • lentilman September 15, 2012, 4:41 pm

      In my opinion, if you borrow money you should pay it back. It’s just one of the things that goes into making you an honest person.

      • Mr RiskyStartup.com September 15, 2012, 6:43 pm

        Almost always true, but I make exception for crooked banks. Article just came out about Lehman Brothers bankruptcy – they will end up paying only 18% of the money they owe to investors (360 billion dollars, yes with a B).

        I think that stiffing the bank with the 21k loss on the mortgage in this case is justified. As someone said earlier, bank in question would foreclose on them and kick them on the curb if they lost their jobs or got sick and were unable to pay the mortgage.

        • Mike September 25, 2012, 4:16 pm

          You can always find a scapegoat when you want to rationalize. I think “strategic default” is just plain wrong. I also think the kind of person who willingly walks away from their agreed financial obligations *just because they can* is unlikely to have a lot of success in life.

          Despite what the media lead you to believe, lack of integrity and trustworthiness is pretty transparent over time, and there is a statistically very high correlation between integrity and wealth. Would you do business with someone who will just walk away when it’s not convenient for them? See MMM’s story about his real estate business partner for an example.

      • Fangs September 15, 2012, 7:21 pm

        businesses default all the time. Why do we hold individuals to higher standards?

  • FinanceViking September 15, 2012, 7:51 am

    Wouldn’t it make sense to pay down the condo mortgage until it is sold instead of wiping out the student loans? The mortgage has a higher interest rate. Also, they could probably get rid of PMI when their equity hits 20%. A 3.75% nominal interest rate on student loans isn’t very costly after inflation.

    Love the case study. Keep up the good work Mr. MM.

    • corcoran September 15, 2012, 8:31 am

      This is an interesting angle I hadn’t thought of and it’s definitely an option especially if renting it out doesn’t make sense in the long run!
      Their principle is $206,029, and they are short 10-11k FMV. They also have 25K sitting around. Dumping the 25K into the principle would make them 14-15K above FMV. After the move and selling the cars they’d have a little more to dump into it, and then I’m pretty sure they’d be close to their 20%. Voila! Their options are open with what to do with the property.

    • Bakari September 16, 2012, 7:05 pm

      I can’t believe it was this far down into the comments that anyone mentioned it (not to mention that MMM himself never did!)

      Mortgage and student loan balances are fairly similar.
      One debt has over 5% interest rate.
      The other has 3.75% interest rate.

      Unless I’m missing something, it seems rather obvious which one should get all of the excess money put towards it.

      Whether the house is underwater, whether they move and rent it out, whether they try to sell, none of this has any bearing on the fact that each month they pay more in interest on the mortgage than on the student loan, and that the more they pay it down, the less of their money ultimately goes to the bank.

      • corcoran September 17, 2012, 6:48 am

        I agree Bakari, the morning this was posted it wasn’t so far down! It’s just been buried by the replies to slightly earlier comments.

      • Undecided September 17, 2012, 12:53 pm

        The student loan interest deduction phases out starting at $60k(single)/$120k(married), while the mortgage interest is (in almost all cases) deductible, so for the case-study couple, the difference between the cost of the two loans may be much closer than the gross rates make it appear.

  • frugalscholar September 15, 2012, 7:52 am

    My children had the same college choices: 0 vs expensive. They chose the 0-cost option. My son–out of college 2 years with a positive net worth in spite of working at a very low paying job in education–says “Thank God you didn’t let me take on debt.”

    He has many friends obsessed with it–rightfully so.

    I’ve been reading your blog (recently discovered via ERE) from beginning to end. Even though we are not aiming to early retire (and being 58/60, we are out of the running), we are frugal by choice and love to read about it, seeing so little in our “real lives.”

  • This is my case study... September 15, 2012, 8:05 am

    Hi – I’m the person who this case study is about.

    After reading the post and the questions that I saw in the comments, I thought I’d pipe in. I probably should have clarified some of these points in my original email.

    Our neighbor is renting his condo (which is a cookie-cutter image of ours) for $1250 a month. Our mortgage + taxes, as shown above, is $1675/month. Plus a condo fee of $250/month. To rent it out would actually end up costing us $675/month.

    We are underwater on our mortgage so the maximum we could expect to sell it for would be $195K. If you add in approx $10K in realtor fees, we’d lose $21K.

    My husband and I don’t work in the same city (if we did, we’d carpool) so we could get within biking distance to one job, but the other person would still have to drive 20 miles to get to work (public transportation doesn’t go within 15 miles of my work).

    It’s unfortunate that we both work in very high cost of living cities and even a studio apartment in either of the cities we work in would cost us a minimum of $1400.

    With these extra pieces of information, I don’t see how moving could help us.

    OK, so we could find new jobs closer to home. The problem is, we both work in niche industries that are difficult to transfer outside of the companies/industries we work for. That’s part of the reason I’m going back to school to be trained in the healthcare industry – because hospitals exist everywhere. That will increase our mobility options. (But there’s 3 years left until that will be a reality.)

    I love the mustachian way of life and am trying to embrace it, but I keep hitting walls like these.

    I’ve started biking for my in-town errands. The husband and I have started home-cooking all our meals and we’re trying very hard not to spend money on things that aren’t absolutely necessary.

    We’ve set clear goals and are willing to make sacrifices to meet them. Girls-nights-out have become girls-nights-in and, instead of going to a bar or the movies, we go for walks around the neighborhood. We got rid of our collision insurance on our 175,000 mile, 10+ year-old cars (can’t believe we didn’t do that sooner!!). I started forgoing my 2x/year salon visit for a visit to my mom’s house a few miles away so she can cut my hair.

    We’ve begun pumping $3K/month into our student loans in order to pay them down in 4 years.

    All of this information provided, what does everybody think? Is this the right decision? Should we be trying to invest that money instead? Should we be trying to get to that 20% paid-on-the-house so there’s no more $100/month PMI?

    Thanks MMM and MMM readers! I appreciate your advice!

    • Jesse September 15, 2012, 8:51 am

      A couple ideas spring to mind that may help…

      1. Your neighbour is paying $1250/mo and you’re paying $1925/mo – so you would cut your expenses by $675/mo if you sold your place and rented a condo in the same building. Sure you will need to sell at a loss, but you’ll end up saving that $21k in lower monthly expenses in 2.6 years, plus you’ll gain your freedom to move at any time (and you’re planning to sell this place eventually anyway..)

      2. Your husband is already working from home two days a week. Would it be possible for him to increase this to 3, 4, maybe 5 days a week? The more he works from home, the more you’ll save in fuel costs, and, if he can swing 5 days a week, it may allow you to move closer to your work.

      • Karawynn @ Pocketmint September 16, 2012, 12:06 am

        I agree with Jesse’s point 2 — even if he can knock it down to 4 days a week (crowd all the meetings into a single day), that could make a big difference both in time and money.

        Have your hubby show his bosses studies like this: http://newsroom.cisco.com/dlls/2009/prod_062609.html

        I don’t know what traffic in your area is like, but let’s conservatively say it takes 60 minutes to travel the 40 miles to work and another 60m home. If your husband stays home 2 more days, and (per the Cisco research above) spends 60% of that on work, his company will be getting 2h24m per week more work for free. That’s a pretty big incentive for a corporation.

        If they agree, your husband will have an hour and a half more free time every week, and he’ll save 160 miles worth of gas (in the ballpark of $20).

    • MoneyOCD September 15, 2012, 9:45 am

      Thanks for posting additional details.
      If I would be in your situation I would start paying off condo as fast as possible to bring mortgage to 80% of FMV and then refinance.

      Here is how I see your numbers
      Current FMV is $195k
      80% of above is $156k
      Current balance is $206K
      Amount to pay down is $50k
      You should be able to get to it in about 1 year if you are open to partially use you Emergency fund.

      $156k at 4% (going conservative there) for 30 years fixed will be about $745 P+I payment, add taxes (you did not say what they are) and $250 condo fee – you condo may become rentable for $1250 with possible positive cash flow as long as taxes are not more then $250/month.

      Also if condo lost value is it apprised for taxes correctly? In my area one can appeal valuation of the property based on recent sales or appraisal from refi. You may need to look into it

      ETA: if you can refinance to 3% instead of 4% mentioned above – that should shave additional $90 off your monthly payment.

      • Undecided September 17, 2012, 1:04 pm

        About PMI, I believe that lenders are required (other than for FHA loans) to agree to remove PMI when the balance of the loan becomes less than 78% of the original purchase price, regardless of equity at that time. So even if they’re far from 20% equity today, they may be closer to 78% of purchase price, and if so they may be able to get PMI removed regardless of being “underwater”.

    • Executioner September 15, 2012, 10:09 am

      Since you are paying 5% on your mortgage balance plus PMI, why not try to aggressively attack the mortgage balance for a while? Once you get to 20% equity you can dump the PMI. Plus, being in that position will get you added flexibility:
      1. You could refinance to a lower rate
      2. You could try to sell your condo if you chose to do so

      You will get more bang for your buck by paying down the 5%+PMI than you will paying down the student loans — especially since the Fed just committed to keeping interest rates low through 2015.

      Could your husband petition to work from home full-time? Or even 3 days a week instead of two? Reducing even one day of 80-mile driving per week would result in significant savings over the long term.

      Maybe you could move to a place closer to your employer since your husband has the work-from-home option. Or if you truly are looking to move into healthcare, you could move into a place close to his employer with hopes that you’ll find work at a hospital or clinic in the same area. This is something that you might need to plan on doing two or more years down the road if your current employment situation doesn’t allow for it. But having one person within biking distance and another with a 20-mile drive sounds a lot better than two commutes between 30-40 miles each way.

      You have a lot of options. Try to think of all possible solutions and eventually you’ll stumble on something that works. Your high income is a huge asset — you should constantly tinker with expenses to get the most out of it. Since you’re still young, any extra dollar you use NOW to pay down debt or invest will have that much longer to compound in your favor over the long term.

      I speak from experience here. My wife and I also live in New England, are dual-income-no-kids with similar incomes as you, and live within biking distance of my employer (and yes, I ride my bicycle in the winter too). We downsized from two cars to one — which we rarely use — because my wife has a job where she either works remotely (from home) or else travels on her employer’s dime (airplanes and rental cars). We aggressively paid off our own mortgage (around 200K) in under four years. The one anchor that you have that we didn’t is the large student loan debt. But I’d suggest getting the housing situation under control first before you decide to tackle the student loans.

      Good luck!

    • lecodecivil September 15, 2012, 10:13 am

      I’ll chime in on the loans vs. investments issue. I think paying off your loans is absolutely the best way to go. As long as you have them they are a drain on your net worth. Even when you’re paying your loans down they continue to grow a bit every month thanks to the devious operation of interest. (By the way, my student loans are jealous of your interest rate). So after investing in all the tax-advantaged vehicles MMM points out above, I would throw everything else at the loan until it was gone. Plus, it will feel great to not have it hanging over your head anymore!

      I’m going to rain on the parade now. The changes you’ve made seem like progress, but when it comes to the biggest decisions it seems like you are deliberately getting in your own way here.

      If you continue just making your monthly mortgage payment, over the next ten years you could pay upwards of $50k in interest (based on a very quick estimate). Selling now and taking a $21k loss would probably be a better decision because you would a) get out from under that mortgage, b) avoid future interest (which is always a lot bigger and badder than you think) c) be able to move closer to work, thus saving money, and d) be able to redirect those savings to other uses like your student loan, further reducing the interest you’ll pay in the long run.

      When it comes to moving closer to work, you are really shooting yourself in the foot by acting like moving wouldn’t help you. You both may not be able to bike to work, but this is a simple choice: Either you each drive over 30 miles each way, or ONE of you drives 20 miles each way. It’s not as good as both of you biking, but it is a HECK OF A LOT BETTER than what you’re doing now.

      It is also a bit of a hindrance that you live in high-cost cities, but even an expensive apartment closer to work will leave you in a better position than before. Say you have to get a much smaller, but much closer apartment that costs the same as your mortgage right now — that’s $1675/month. Hopefully it wouldn’t be a studio apartment, but you don’t need much more than that (and after all, this is about cutting down to only using what you need). The point is that even if it costs exactly the same, the commute is what’s killing you. You don’t have to save money with everything you do if changing something saves you money elsewhere. I know you want to be out of this situation NOW, but every change doesn’t have to be huge or obvious – it’s about little things adding up over time.

      Good luck! You’re on the right track!

    • Mike September 15, 2012, 10:46 am

      I still think you should sell the condo. I agree with MMM that the commute is killing you. You state that you would take a $21k loss if you sold. Using a 21 cent per mile cost assumption, you’re spending $7,500 per year commuting. By moving close to 1 job and cutting total household commuting from 140 miles per day to 40 miles per day, you will save $5300 per year or so on commuting, plus $525 per month on housing for a total savings of ~$12k per year. In 2 years you will have made back your loss, you will have a new career in healthcare and a fresh start. If you’re feeling sporty, you can try mitigating your condo loss by doing a for-sale-by-owner transaction to someone who is willing to forego the use of a sellers agent (I have done this but it’s just 1 data point and may not work for you). Use the $25k to absorb whatever loss there is and get it over with. Your update didn’t mention kids, so I assume there are none. No kids means you can take the risk of losing some money on the condo and the “hardship” of living in a $1,400 per month studio. Rip off the bandaid!

    • Ron September 15, 2012, 6:40 pm

      I’m probably in the minority, but given your additional information, I think your husband and you are doing quite well. You haven’t said that your goal is to retire in five, ten, or fifteen years. Instead, I suspect you want to have the peace of mind that greater economic independence provides, a goal that I believe is as admirable as early retirement. You also deserve credit for not having children until you’re on more solid economic ground. In terms of paying off your student loans as fast as possible, I’d suggest staying the course in part because the stock market has been on fire the last few years and months. It would be crazy to expect returns to be similar over the next 3-4 years, but you may be thinking 30-40 years. Still, unless there’s a replay of the 2008 market meltdown, when you do have disposable income to invest in the market, be sure to ease in through dollar cost averaging. Perfection shouldn’t be the goal. Keep up the good work.

    • Sara September 16, 2012, 4:42 am

      Why not put the money towards the mortgage. There is a higher interest rate than the student loan (currently) and when you are no longer upside down you have the potential to sell it and move to a smaller place. And do not assume that every city rental will be more. You may be able to find a studio or other tiny apartment that would work for you. Even if you only lost one commute you could still be way ahead after cutting out one car completely – gas, repairs, and insurance.

    • Bakari September 16, 2012, 7:20 pm

      “even a studio apartment in either of the cities we work in would cost us a minimum of $1400.”

      I don’t know where you live, but even in Manhattan, NYC, and San Francisco, CA the two most expensive rental markets in the world, there are lots and lots of studios for $1000 or slightly less.

      If you brought in less in rent than you spent on the mortgage by $675 – but, you also were able to reduce car expenses by $675 (realistic, seeing that you spend 600 on gas alone, which isn’t the only driving expense – see MMMs “true cost of commuting” post), you wouldn’t be losing money over all, you would be breaking even, while gaining 10 hours of free time every week (currently wasted commuting).

      You can’t find jobs in your fields in the smaller city you live in, but since you both work in big cities, couldn’t at least one of you find similar work in the city the other lives in? (assuming 5-day-per-week-telecommuting isn’t an option).
      In other words, try to set it up so that you both work in the same city, whichever city that is, and then that’s where you move to.

      • Jaclyn September 18, 2012, 1:09 pm

        They mentioned they live in New England and $1400 is completely reasonable for a studio apartment in Boston depending on which neighborhood you are in. Even when I was living in NY, I had trouble finding a studio for less than $1000. Especially one that I wasn’t worried about the health department condemning.

        • Yuriy September 19, 2012, 3:25 pm

          As long as they don’t have kids, another thing to seriously consider is getting a bigger apartment with roommates. Finding people that want to live with a married couple may be tricky, but doable. I don’t know about other places, but in the Boston area a multiple bedroom apartment is MUCH cheaper per-person than a one bedroom or a studio. In some towns an average 1 bedroom costs more than an average 2 bedroom.

      • mysticaltyger August 14, 2013, 7:56 pm

        $1000 per month apartments in San Francisco? You gotta be kidding. No way. I live in the SF Bay Area (Silicon Valley) and my studio rents for $915 per month and it is BELOW MARKET (because I’ve lived here 5 years and the landlord is nicer than most). No dishwasher. No laundry on site. Old building (but decently maintained). In short, this is a no frills apartment, although it is centrally located. Apartments further out are cheaper, but I walk to work every day!

      • Sara August 19, 2013, 7:00 pm

        In San Francisco? No, there really are not. Even when I was hunting for a studio about eight years back, units for less than $1000 were few and far between. And the rental market has skyrocketed since then. I just did a quick check of Craigslist and there’s nothing but a handful of rooms in shared apartments listed for that price. And those are looking kind of scarce.
        Things are rough here for renters right now.

  • This is my case study... September 15, 2012, 8:12 am

    Oh – I forgot to mention – We’re both looking for part time jobs as a temporary (4 year, maybe?) solution to get the debt paid down faster.

    • MoneyOCD September 15, 2012, 10:32 am

      Kudos for that!!!
      Reducing commute will go long way to free up time for additional part time jobs also.

  • Chris September 15, 2012, 8:12 am

    The cool thing about this scenario is that there’s some serious hope! If you take this advice seriously and live ninja style, for a few years, you’ll be back in business and able to save/invest some serious cash with your combined incomes. You’ll probably find a lot more happiness in the process as you bike more, drive less, and realize (like all of us mustachians do at some point) that being in command of your finances, allows you to separate yourself from money and find true happiness!!

    Good luck, I hope you succeed.

  • Nunayo September 15, 2012, 8:23 am

    FYI the FHA just recently decided to allow a borrower to keep the old lower PMI payment upon refinance. I had been told mine would triple, thus making the refi useless, but then the rules changed again, and I am refinancing and keeping the lower PMI payment.

    • Mark September 15, 2012, 9:51 am

      Could you post a link to info on this? I can’t find anything about it. I’ve been trying to refi for a while and the PMI increase is what’s holding it up for me.

  • This is my case study... September 15, 2012, 8:57 am

    Oh wow. Thanks! Sounds like my mortgage guy might be misinformed. I’ll check in on that for sure.

  • mike crosby September 15, 2012, 9:26 am

    Just that you read this blog and take seriously what MMM says, puts you ahead of 99% of your peers. I’m almost 60 and there’s many my age that still spend so frivolously and are in huge debt.

    With MMM doubling his readership in one month, I think this post resets the tone of what this blog is about and lets the new readers see the seriousness of debt.

    I had to move back to my parents’ home with my tail between my legs years ago. My dad took my paycheck, budgeted it and gave me $20/week spending money. I would ride my bike from MD to the tax court (my job) in DC on most days.

    Take this blog to heart, believe me in a few years you will have attained goals unimaginable.

  • dave in red bank September 15, 2012, 9:38 am

    Where are these magically cheap apartments in urban areas? While I 100% agree with moving closer to work, most people with long commutes do that to keep their housing costs down.

    It’s not a great strategy with the cost of fuel so volatile. I would bet plenty of foreclosures are the result of gas prices tripling/quadrupling since the late 90s.

    My recommend is to see if you can carpool. In NJ we have agencies around the state that match people with similar commutes. Maybe something similar where you are in New England.

    • Mr RiskyStartup.com September 15, 2012, 9:55 am

      If you compare just rent amount versus mortgage, then you are right. For example, I pay $1000 for the 1150 sq feet apartment rental, while my brother pays $1000 per month towards his mortgage on 2000 sq feet (mainly interest).

      However, my rent covers insurance, taxes, water… then my comute is 1/5th of my brothers, he pays 5 times more for his utilities, he has yard to deal with, snow removal, more expensive groceries…. We walk to the parks, pools and stores, whle he has to spend $20 in gas to get to Costco. He puts 20K miles on his 2 cars (each, his wife drives one), while my wife and I maybe put 10K combined…

      Still, I agree – there are cities out there where rents are ridiculous. Just last week I read in NYT about first time renters in NY paying $3000-4000 per month for small apartments. I only hope they make 4 times as much money as average person does :)

      • Jamesqf September 16, 2012, 12:11 pm

        This is quite variable, depending on the house and the person. At the other end of the scale, my mortgage + taxes + insurance on a not-small place is about the same as rent for a midscale apartment in the nearest city. My groceries cost the same as in that city, ’cause that’s where I shop, but I get a bunch of garden veggies & fruit for free. The yard work and snow removal are classed as recreation and exercise… And the commute is walking into my office and turning on the computer.

    • Bakari September 16, 2012, 7:22 pm

      They are on craigslist.

      There are plenty of studios in such high cost areas as NYC and SF for 1k.
      If you are willing to have roommates, you can spend even less.

      • mysticaltyger August 14, 2013, 8:02 pm

        A lot of those ads are COMPLETE SCAMS at least in SF….or the areas where those apartments are located are very scary/high crime/or completely unlivable.

  • rjack September 15, 2012, 9:48 am

    “Also, to throw another wrench in, I am going to community college part time to get trained in a completely different career. Anticipated remaining cost over the next 2 years is $16K.”

    I question the need for this. Will the additional education have a good ROI given that you are already making a decent salary? If so, is there some way to learn for less?

    • This is my case study... September 15, 2012, 10:03 am

      Thanks rjack.

      It’s partially about money and partially about hating my current job. (Money isn’t everything – especially if you’re miserable. But I’m willing to stick it out a few more years to get to a better place financially.

      In the first year of my new career, I’ll be taking about a 50% paycut, but within the first 4 years of working in my new career, I should be up close to what I’m making now (maybe $75-80K/yr) and I’ll have more flexibility in terms of moving farther away from the high cost-of-living city.

      Plus, it may put me in a better situation to take a leave of absence from work and care full-time for my aging parents in the future (they’re in their mid ’60’s now, but Alzheimer’s runs in the family and has a tendency to kick in in the early ’70’s). Having a medical degree and background could allow me to care for them, keeping them out of the nursing home and giving them a better quality of life. (If any of you have ever dealt with nursing home costs, you know how big a deal that could be.)

      • rjack September 15, 2012, 12:16 pm

        Thanks for the additional info. Here are a some questions to ask yourself:

        1) How do you know that you won’t be miserable in your new career?

        2) In your existing situation, do you hate the work, your co-workers, or both? Can you modify your existing situation to make it more enjoyable?

        3) Can you do something that is more closely related to your existing career and make a lateral move without the need for more education?

        I hope this helps!

      • GayleRN September 15, 2012, 12:47 pm

        The naivete about the healthcare industry is breathtaking. First of all, the chances of reattaining your current level of income is 0. Yes ZERO. There is very little hiring going on in healthcare. There are plenty of schools that will mislead you about this, taking your money for training under the big fat lie they are telling you about there is always plenty of jobs in health care. It is not true. Staffing is being steadily eroded, quietly by attrition. Raises are about 2% but they take that away on the benefit side. Those big incomes that some claim are generated by working as much overtime as is humanly possible. It will not put you in any better position to take a leave of absence to care for your parents as most hospitals go very strictly by the FMLA laws and nothing else. They are not in the least interested in your personal situation.

        If you insist on continuing down this path I insist that you corner every one of your preceptors in your clinical rotations and ask them if they would do it again and why or why not. I guarantee that it will be an eyeopener.

        So my question is why do you not just work with the current situation with your current high income and make it a goal for early FI which will enable you to enjoy your kids when you have them and care for your parents when they need you without asking permission from any employer because you won’t have one. You will free up the money you are currently spending on yet more school (in order to cut your income in half yikes) and extend your working life. Picture what you want life to look like in 10 years. That picture should be financial independence.

        The key is to START SOMEWHERE NOW. You have several good choices for step 1. Pick one and face punch it until it is a dead issue, never to rise again.
        I would start by capping your emergency fund at some comfortable level and start throwing money at a debt. You have enough to pick from. You seem reasonably mathematically adept so you can figure this out.

        Secondly, I forbid you to even consider any investments other than an index fund in a Roth IRA at this point. you are ripe for the picking for an “investment advisor”. Start learning about investments which will take you a while and keep you busy while you pay off that ridiculous debt. By that time you might have a nice little paid off rental property in that condo and be able to rapidly acquire the house of your early retirement dreams. You will eventually discover some style of investing that you understand and can make work for you on a regular basis.

        Thirdly, frugalize your life. your monthly bills are ridiculous. There is plenty of information here to address that and keep you busy also.

        • This is my case study... September 15, 2012, 7:03 pm

          ASN would be the degree with an RN after passing the boards. I’d ultimately be looking to work in an acute care settin as opposed to a nursing home or other long-term care setting.

          • AnnW September 15, 2012, 8:03 pm

            That’s a good choice, for the rest of your life. RN’s are scarcer than anything these days. Keep with it and good luck.

          • Irishmam September 17, 2012, 7:33 am

            Please check the job situation for associate degree RN’s in New England area. Most acute care settings require a BSN. New grad BSN’s, even with CNA experience are moving out of state for work. It will take you a long time to earn your current wages as a nurse….it is not the cash cow many assume it is.

        • barb September 16, 2012, 11:02 am

          Listen to Gayle RN……….stay out of health care.
          If you feel you need to help your family…..wait till they get sick/hurt.
          You cannot predict they will get….whatever, if ever!

          Stay at your jobs and make it work.
          Your attitude is the only thing making work unbearable.

          Dump the condo NOW.
          Carpool , learn to cook and get rid of that student loan asap.
          Stop being a consumer.
          Find like minded frugal people to make this journey bearable/fun.

          • Emmers September 16, 2012, 11:26 am

            Barb – How can they carpool when they work in completely separate cities? OP said above that she’s going into the healthcare field in part so that she has more *flexibility* in where she’s able to work — potentially allowing them to move closer to the other city, sell one car, etc.

            • barb September 17, 2012, 4:51 pm

              Carpool with others, anyone, going in the same direction!

              Healthcare does not give you flexability.
              I work in health care….it is very hard.
              Nights are killers, standing , walking , running onhard hospital floors cripple staff.
              Ask any podiatrist who the majority of their pts are.

      • Mike September 18, 2012, 11:36 am

        You may find the below linked post (and the whole blog) helpful. This guy has made a study of what makes people satisfied in their careers. It boils down to autonomy, competence and relatedness. FWIW, I think this is also why people choose to pursue early FI. They are not getting one or more of those three things from their work situation, but they recognize that given FI they can elect to continue or discontinue their search for career satisfaction on their own terms, which leads to the realization that the process of reducing consumption and simplifying your life brings all three attributes into focus in your life. Just a hypothesis. At any rate, thanks for sharing your story and good luck!


  • Geek September 15, 2012, 10:08 am

    @This is my….

    I am still in a place you’re at, in a way – I have a couple of expenses that I keep justifying. This is natural, we like our lives! It’s easy to suggest things when you’re already sitting pretty, or being critical of someone else.
    And it’s easy to become a suggestion-blocking complainypants when you feel people are too critical. That’s fair, you’ve been put on defense.

    That said, didn’t you come here for a face-punch?

    Take a deep breath and think about what you CAN do, that is an intermediate step, since it seems you are not willing to get rid of a car, and cheap studios don’t seem available (perhaps your fellow mustachians would help you hunt for some on craigslist ;) )

    -You CAN pay off 25k in a scary variable loan right NOW. As Triple-M suggested, DO IT! Variable rate loans are TERRIFYING.
    You CAN take at least one huge step. Which step can you do? There could be more.

    -Can you rent out a room? You can be picky with tenants. Easier:If your mother rents now, can she rent the room from you? Then you’ll both save money, and you’ll get increased food economy if you cook together.
    -Can you move in with mom and rent out your condo? You “lose” 675 a month, but you can still afford to pay your mom some rent and build equity. And I’m sure you can do a better job negotiating a decent rent price from tenants than your neighbor!
    -Can one of you bicycle take the bus (combined) now?
    -Can you drive partway to work together, and park your second car on the street somewhere? Eg drive 10 miles together, then separate for the last 22 and 30 miles. Save 20 miles a day, and depending on your cars and efficiency, a gallon of gas. This will also transition you slowly to a less-car lifestyle. If say you work in completely different (straight line away) directions, I will believe you.
    -Can you do something else for a car solution?
    -Can you eat more frozen vegetables?
    -Can you eat more chicken and olive oil, and less beef?

    • CL September 15, 2012, 11:41 am

      I love Geek’s response to This is my’s comments. It’s true that TIM did not have all of her details in the original case study. She and her husband are working in different cities, not working in the same one, as MMM and commenters have assumed. The MMM blog is the land of the Face Punch, though, so she should have been ready for some hardcore MMM ranting. If she wants to feel better about the ravening MMM wolves who fall on tasty morsels like TIM, she should go read Money Diaries on Ramit Sethi’s website. She’s doing better than the average debt-ridden American, but that doesn’t cut it in the land of the Face Punch.

      1) It seems to me that they should live near where she works, where there is no public transportation for 15 miles around. Her husband telecommutes 2 days a week, so he’s only driving 3 days per week to work. If they moved near her workplace, he would be driving 40 miles round trip. That would take them from 32 miles X 5 days X two trips + 40 miles X 3 days X two trips = 560 miles of commuting to 20 miles X 3 days X two trips = 120, which is 21% of what they are doing now. In my lavish scenario, they get to keep one of the 175k mile, 10+ year old cars. Their gas expenses will go from $600 to $129 per month. Their after-tax, after health insurance take-home is 104k. Their household is spending 7% of their take-home on gas right now. 129 still exorbitant by MMM standards, but it’s still a lot better than what they’re doing now. $5,652 annual savings

      2) They need to sell their condo immediately. I understand that they are underwater on their mortgage, but that doesn’t mean that they shouldn’t sell. It makes no sense for her to rent out the condo, since it will be costing her $675 per month. If you only have a 21k hit from the mortgage bubble crisis, you can consider yourself lucky. That’s not money that you are losing by selling. It’s money that you have ALREADY lost. My parents’ house went from $350k to $250k, although they had paid off the mortgage ages and ages before the crisis hit. (The monthly condo fee makes the condominium especially unattractive.)

      3) She can throw her emergency fund at her debt. That is a no-brainer. Debt is an emergency. She’ll still have 6k in cash as just-in-case money and save $925 per year in interest.

      Those three steps will be Ramit Sethi-style “Big Wins.” They also don’t require her to impact her lifestyle too much and they are pretty easy.

      Smaller wins which require a little Badassity and hardship:
      1) Cutting down on their food costs – $500 a month is a lot – MMM is feeding his family of three on $83 per week with an organic and gluten free diet.

      2) Finding a cell phone provider that won’t charge them 150 per month. My parents have our cell phones bundled with our Internet and land line plus a 20% discount through my dad’s old employer. Bundling is a good way to save a few 10s (Hamiltons) which will promptly go into debt repayment. Ideally, you would go the ultra-Mustachian route and get a $10 phone with prepaid cards to save a Benjamin per month. Change the ZIP code to your ZIP code. http://www.tracfone-orders.com/bpdirect/tracfone/Start.do?action=view&market=GSM4&aid=&vid=&vc=&sahcid=&com=&zip=46032&locale=en&siteType=TR&gotoPhonelist=true&AID=

      3) I understand that she wants to be happier and more mobile. She should go to community college and get another certification so she has the freedom to help her parents. However, I highly doubt that the moment to spend $16k is when you have $150,000 in student debt to pay off. It won’t make sense until they are out of debt to spend that cash, especially since she’ll be making 50% of her salary when she starts her new career.

      I understand that her gas and electricity bill should be scrutinized, too, but we shouldn’t overwhelm her with badassity. It’s better for her to figure out how to eliminate the commute than to get overwhelmed with everything and not make any changes.

  • Insidious September 15, 2012, 10:39 am

    ‘Should we invest or reduce debt?’ seems to be a recurring theme.

    Investing = Risk + Potential Return
    Eliminating debt = No Risk + Guaranteed Return

    The only time investing while having debt makes any sense is if there is a reasonable CERTAINTY that your return will exceed the cost of the equivalent debt, by an amount that makes the RISK worthwhile.

    IMO, savings accounts, stocks/mutual funds and even bonds don’t even come close to being worthwhile ‘investments’ right now (risk far exceeds reward). So what are you planning on investing in?

    On the other hand, my solar system is returning 13% (panels bought at less than $1/watt, used inverter, self installed) and completely protects me from increases in electrical prices (reduced risk + reduced expenses = win).

    My ‘deep pantry’ is an even better ‘investment’ reducing ‘inflation risk’ and ensuring that I rarely have to buy food stuffs that aren’t on sale.

    Little things add up, like Course French Sea Salt $3.49/26 oz (+tax) -vs- $42.90/55 lbs (no tax, free shipping) [SaltWorks.us] 63% savings, totally inflation hedged. yes, MMM there is cheaper salt.. my gourmet cook wife won’t use it.. =)

    • Emmers September 16, 2012, 11:42 am

      You should always invest up to the amount of the free employer match, because of the principle of Free Money. Beyond that, yeah, it can be very good to aggressively tackle debt.

  • Chaz September 15, 2012, 11:14 am

    First time poster here. $157,000 yearly combined is a lot! On paper it should be not terribly challenging to “retire” in 10 years. Sometimes you have to be a bit more “extreme” if you want financial independence in a reasonable amount of time. I’m a pharmacist (unmarried) and I pay rent to my parents – I don’t go out or see the ladyfriend as much as I want to, but my eyes are on a bigger prize.

    I think the general consensus here is that something must be done about the commute. I drive 2.9 miles to work every day (an advantage of living at home) because I’m too scared to bike to work (irrational fear of New Jersey drivers) and too lazy to run. I need a steel-toed boot to the face. That said, 30 and 40 miles is too much! If you don’t mind sharing where you live (just the general metropolitan area) – maybe you can find a multifamily to live in and rent out the other sides? Someplace that’s closer than 10-15 miles from work?

    I hate my job too – so I’m digging in where I can. I like the idea of paying down the current condo to 80% loan-to-value and then refinancing and renting it out. It just sucks that you don’t like your job AND after you clock out your “reward” is 30 miles of traffic. And I also question the need to get part-time gigs or go to school part-time. You guys make decent money already. Your house is probably really nice and in a pretty neighborhood, but if you kind of downgrade that, perhaps all the other areas of your life will get better.

    Forgive me for oversimplifying, but you want to avoid the following daily routine:
    1. wake up in the morning to get ready for work
    2. 45 minutes in traffic
    3. 8 hours of mind-numbing work
    4. 45 minutes in traffic
    5. errands – you probably have to refuel at least once a week, right?
    6. part-time gig/part-time school
    7. free time??????? <- will this exist?
    8. before going to bed, worry about a bunch of things

    somehow many of these problems can be mitigated by somehow solving the commute problem. and that might mean living in a less desirable (relatively) area. and unfortunately, delaying the purchase of that second house. sometimes a minor dream must be sacrificed temporarily in order to improve all other areas of your life.

    • MoneyOCD September 15, 2012, 11:31 am

      I am all for part time gig, especially if it is along lines of new career – that will allow to testdrive new job setting and may help to save OP $16k if she will find that it is not what she was looking for.

      If it will work out for her – then she will do part time something that she likes and get extra money on top of that.

    • Lindsey September 15, 2012, 2:59 pm

      When I see people saying they want to leave a lucrative position because “I hate my job” I wonder what planet they are on. Only recently did we come to the conclusion that work should be more than a means to an end, that it should also make you happy. I am happy that I get a paycheck. Some weeks I can find meaning in what I do and in other weeks not…My father was a hod carrier; I don’t think he liked it or the landscaping he did as a second job. But he saved like a demon, never hired someone to do what he could do ( and this was before you could find instructions for everything, including doing your own open heart surgery, on the internet) and retired by 45. He had 40 years of retirement before he died, which was when he did things that fulfilled him.

      • Emmers September 16, 2012, 11:45 am

        Without going into too much identifying detail, I had a friend who left a lucrative career because it was literally in the business of denying care to sick people. He’s now in a much better place — lower paying job (same field), lower cost of living, less soul-sucking career. It’s not *always* the wrong decision.

      • Greg September 17, 2012, 12:54 pm

        As Emmers points out, not all “lucrative” jobs are personally rewarding, and some can be soul-crushing.

        As for your father, he sounds like the original Mustachian!

    • et September 15, 2012, 3:52 pm

      2.9 miles is an easy walk. No need to run or bicycle. Listen to something interesting on the way.

      • bogart September 15, 2012, 8:28 pm

        Feasible if it’s walkable (e.g. not an interstate), sure …

        • Emmers September 16, 2012, 11:47 am

          OP mentioned that they live in New England. Will it be walkable during the winter? (i.e. are the sidewalks cleared, or would it be 3 miles of shoveling?)

  • mary w September 15, 2012, 11:22 am

    I agree with several other commenter that paying down your mortgage until you can get rid of PMI is better at this point than paying off student loans. Also DON”T move and rent out your condo until you are satisfied with the loan you have. You can refi as a principle residence for a lower interest rate than you can as a rental. (Once you have the loan, however, you can move out without having to redo the loan.)

    After that, I agree with MMM that you should move closer to somebody’s work. When doing the math on renting out your condo remember that many things that aren’t tax deductible on your residence are deductible on a rental (e.g., HOA fees, insurance, maintenance, repairs). At your tax rate that will really make a difference.

    • Mr RiskyStartup.com September 15, 2012, 12:09 pm

      Great point about tax implications/benefits of renting out their condo!!!

    • Rich September 16, 2012, 8:57 pm

      If you get a “principal residence” mortgage loan and then rent it out instead of using it as a principal residence, the bank can call the loan, because you just lied on your mortgage loan application.

      Yes, some people get away with it. No, that doesn’t make it OK.

      If you intend to rent it out, talk to the mortgage company about it, so you can make sure you get the right kind of loan.

      • Bella September 17, 2012, 9:30 am

        Just because you rent out somethign that used to be a principal residence – doesn’t mean you lied on your mortgage documents. You could have all intentions of living there till you die – and you are not required to refinance just because you turn it into a rental. Yes, they could call in the note if they found out you were renting – and usually the clauses say that – but the reality is that the risk is that they would not be able to refinance with a business loan and would have to sell to pay off the note. If they have 20% equity and continue to pay the bills – it’s unlikely that a bank will call in the note – or that they wouldn’t then be able to refinance as a business loan (yes with a higher interest rate of about 1% more). Now, if they are underwater or have less than 20% equity – that is a significant risk – but once you pass the – can I just get a business loan if it gets called in – they’ll be fine.

        • Rich Schmidt September 18, 2012, 3:05 pm

          If their intention is to live there, you might be correct. But that’s not what “mary w” was suggesting. She was suggesting refinancing as a principal residence for the lower interest rate, then moving out and renting it. That won’t fly with most lenders, because you just signed legal documents with them stating that you would use it as your principal residence.

          We moved last year and started renting our old house. When we went to change the insurance, the lender stopped the process and said we couldn’t rent it… even though our mortgage loan documents clearly stated that we could. (We already had tenants moved in at this point.) After much frustration, we ended up having to refinance with an investment property loan (with a different lender, because we were so frustrated with the old one) in order to get the right kind of insurance on the property.

          • Mr. Money Mustache September 18, 2012, 3:25 pm

            That’s an odd story, but I suppose it is something to watch out for in your own loan.

            Most of my own rental properties had primary residence financing on them at one point or another, because they were houses we used as primary residences when we first bought them. The banker who originated the loans even knew about it, and reassured me that it was no problem from the bank’s perspective. I know several other people with the same history.

            So, yeah – in general it is probably rare that you’ll run into trouble when moving out and renting your own house, but I guess it is possible.

  • Eschewing Debt September 15, 2012, 11:33 am

    Another great way to save money is to learn to coupon. I know you guys always get angry when the word “couponing” is brought up, but I have literally saved thousands by couponing. I feed my family of 5 for $250/month and we eat healthier than ever (when you get your toothpaste for free, you can afford the organic meat). Learning to coupon was a huge blessing, and this couple can easily save $300/month- AND eat healthier- just by learning to coupon.

  • MB @ 12 Year Career September 15, 2012, 11:38 am

    Keep fighting the good fight, MMM. I considered myself ahead of the curve prior to reading this blog, and my mind has still been blown on a number of occasions by the connections you have made and the scenarios you have illustrated for readers.

    I’m excited for the couple in this case study, now that they have discovered your site. Good luck to them!

  • Hanah September 15, 2012, 2:02 pm

    A couple of other thoughts on the commute. While it may be too expensive to be within walking distance of work, life can still be improved and costs decreased by living a little further out and using non-car transportation.
    First, if you move, can one of you take some public transit to work? My experience in Toronto (average house price $500K) was that if you’re willing to ride a subway for 30 min, you can rent a nice place for $1200. A 30 min transit commute is MUCH better than a 45 min drive. A transit pass may seem expensive, but once you consider depreciation/maintenance/insurance/not sitting in traffic it’s a heck of a lot less than driving. And $1200 a month in rent is a LOT less than what you’re paying now, especially since your utilities/insurance/taxes will be lower.
    Also, a five mile bike ride (one-way) is a 30 min bike trip. So if you can find something in your price range within 5 miles of work, without atrocious streets, then you’re set. And broaden your mind when you think of what an “atrocious street” is. A fairly busy urban street may be intimidating at first, but you’ll get the hang of it (I did!). Basically the only non-bikable road is one with a speed limit over about 25 mph with no bike lane or shoulder. Otherwise, get yourself a helmet, a compressed air horn, a handlebar mirror and get out there. You can do it!!
    Finally, can you live in a smaller place? I’m not sure if you mentioned whether your condo is 1 or 2br, but if the latter, how about switching to the former for a few years? Maybe you have too much Stuff? If you want advice on downsizing, this is a good blog: theminimalistmom.com. She and her husband were on the verge of moving to a bigger place in Vancouver (average house price $1 mill), but it turned out she just needed to get rid of some Stuff.
    Good luck!

  • GayleRN September 15, 2012, 2:07 pm

    The easy decision is to throw 2K per pay period at this school loan for about 36 months while they grow their stubble. This can be done right now without making any other changes. It may not be the optimum solution which can be argued about ad infinitum, but it is easily executable, low hanging fruit and can be put into play with auto payments RIGHT NOW. TODAY. IN THE NEXT 5 MINUTES. Stop with the over thinking already. As they further optimize their budget they can find more money to throw at the next project, but right now this is the one they feel is dragging them down. Over the next year or two they can grow their mustaches and probably have available about 2.5k every 2 weeks to put toward FI. At 65K a year it should not take very long to get there.

  • Mrs. Pop @ Planting Our Pennies September 15, 2012, 2:31 pm

    Thanks for showing this case study! This couple has a surprising amount in common with Mr. PoP and I – though we’ve got a lot more assets and not the insane student loan debt, thank god.

    Sometimes I wish we had the options of getting rid of one or both of our cars, but sadly we work in completely opposite directions in an area where public transit is truly awful. Until one or both of us can work from home, it seems like we’re doomed to keep our cars.

  • Andy September 15, 2012, 3:08 pm

    My advice would be: take a deep breath and tackle one thing at a time. I’m working full time/working on my masters/have 3 kids and MMM’s punches in the face tend to overwhelm me sometimes too. When you’re trying to orchestrate a massive lifestyle change all at once it’s easy to get bogged down in the details and quickly lose focus. Here are two helpful hints (from this site and elsewhere) that really helped me:

    -Get everything into Mint.com (all accounts, investments, everything), and religiously use their trends feature. Mint.com will help you take MMM’s advice and “optimize that transaction right at that moment.” Find big areas of waste and eliminate them.

    -Focus on eliminating waste in the short term and lifestyle change in the longterm. (short term = a month or two, long term = a year). Maybe the long term goal is to live close to work but moving is expensive. Continuously pursue that goal but in the meantime find a way to cut those wasted costs today. So you can’t get rid of the commute this instant? Well, figure out how to cheapen it this instant. Start identifying and eliminating waste and you’ll realize you’re saving hundreds a month without breaking a sweat. Do some of the big things MMM suggested and you’ll be saving thousands a month.

    I’m relating these from my personal experience. When I first found MMM I was overwhelmed by how out of reach FI seemed. But, by integrating the MMM lifestyle a bit at a time, it’s starting to be in reach. Retired at 35? Probably not. Retired at 40? Maybe, especially as I start to embrace the bigger changes.

    Good luck!

  • frugalscholar September 15, 2012, 3:54 pm

    The comments are so good that I have little to add. I just remembered that Joe Dominguez (YMOYL) said “There is no such thing as Job Charming.” So going to school to chase after another job may not be the best course.

    Also–it seems that going to school/getting part-time jobs just exacerbates your situation: stressed out life with little time. Instead of working more/ going to school, you should learn the simple art of frugality. Savings are tax free.

  • first post September 15, 2012, 4:06 pm

    To everyone who think’s they are doomed to keep their cars, I recommend Chris Balish’s How to Live Well without Owning a Car. Many times when people think the public transport in their area is bad, it’s simply that they just haven’t even tried it (as was the case for him in Saint Louis, MO).
    I live in Saint Louis, where you “can’t live without a car” and I manage to make it work. Sure, things take longer to do, but I get to read a book on the bus and live cheaply because I have no car payments or gas to worry about.

    • Gerard September 17, 2012, 7:32 am

      I just read this. It’s not bad. Very similar to what people on this site say regularly. (I didn’t learn much because I’ve never had a car, but it’s nice to get your view validated by others sometimes.)

  • Bobcat Slim September 15, 2012, 5:22 pm

    Okay 2 questions:

    1. If the student loans were at a higher interest rate, say 8%, should they still put money in their 401K/Roth while they are trying to pay off their student loans?

    2. Same with paying off a mortgage, should any amount of money be going into a retirement or savings account while paying it off?


    • Steve Adams September 16, 2012, 11:33 am

      For a simple senario:
      Option 1) Pay off debt: $10k, yearly savings $800

      Option 2) 401k etc: $10k, pretax (at 30% marginal rate for state and fed) becomes $14.3. To get 800 per year you need a 6% return from the 401k.

      What risk is there you won’t get 6%?
      What risk is there you’ll pull cash from the 401k early?
      What risk is there you’ll give up the saving habit once the debt is paid down?
      What satisfaction/freedoom will you gain by having the debt gone?

      For my having no more student loan debt was a great marker of progress. Having an extra 10k in my 401k wasn’t very motivational at all.

      Good luck!

  • Happy September 15, 2012, 6:11 pm

    Great post MMM and as always the comments add so much . Dear Case Study People, you are both 28 and no kids. Please understand how much easier it is to make these changes without kids. You’ve been given lots of ideas and variations. If you are planning kids, then you only have a few years to act. (don’t plan for kids after 35! it may end in heart break since fertility goes down in a big way). This is my only additional suggestion… understand that the next few years are crucial in determining your outcomes for the decades ahead and dig deep and go for it. Big and small changes all help: If you are overwhelmed the big three are housing, transport and food. You now have knowledge and income, you’re in a great place, just do it!. PS we’d love to hear how you get on.

  • Marcia @Frugal Healthy Simple September 15, 2012, 6:38 pm

    Shit, this is a total slap in the face. We haven’t been biking lately, what with the baby and all, and now commute 52 miles a day (total between the two of us). Gotta hop back on our bikes. Yikes.

    See, it’s always good to get reminders on how you can get better after a slip!

  • This is my case study... September 15, 2012, 6:54 pm

    Thank you all for your comments. I can count on you for some great advice.

    I know a couple of you asked if we could work more days from home. Unfortunately no. My husband is made out on the amount of days they’ll let him work from home and my contract prohibits working from home.

    Also, another part to the new career is that my job isn’t stable. My contract renews every couple of years (coming up for renewal again in the spring) and it’s never known if I’ll have a job or I I’ll have to take a paycut to stay or if nothing will change.

    Some of you asked about children. Unfortunately, we have no children. We suffered through infertility and 6 costly infertility cycles over the past 2 years. But, perhaps it is a sign. We’re putting the treatment on hold for several years and focusing on our financial situation.

    I’m hearing some really awesome advice here and can’t wait to start implementing it. It can all be a little overwhelming, but it’s exciting too. The future holds so much promise.

    • bogart September 15, 2012, 8:27 pm

      I’m so sorry to hear about your difficulties in having kids — fellow infertile here now a mom to an IVF-conceived baby after pretty extensive treatment. Regardless of what path(s) you pursue or how choose to balance having a child with other goals, it can be a really tough row to hoe.

    • Happy September 16, 2012, 7:22 am

      I do apologise, I hope my comment wasn’t too insensitive: I made an assumption because you mentioned moving to a family home. Of course a couple is just another family shape.

    • lilacorchid September 18, 2012, 9:57 am

      Sorry to hear about the IF. I’m another IFer… we did two IVFs, decided we hit our limit (more mentally then financially which is saying a lot) and got lucky on our last try. As someone else said, IF is a tough row to hoe. Best of luck on completing your family as you two see fit.

      The advice is a bit overwhelming, but this is a great place to crowdsource a solution! I would probably sell your condo too; no point in throwing good money after bad.

  • Bc September 15, 2012, 9:11 pm

    My husband and I have $17k combined in student loan, car note, and cc debt and we can’t think of doing anything else until it’s completely gone. I have borrowed dozens of personal finance books from the library on budgeting and killing debt, when I see the investment ones I think “not yet, but soon!”. For us it’s debt first, then plump the savings, then get into investing. Along the way of we have kept up with putting 15 percent of our gross away for retirement and adding to our son’s savings, But we decided to suspend our household savings until the debt is gone in 6 months. When we’re back to saving we’ll be socking away 50 percent total of our gross.

    I see people saying to tackle your mortgage first but you could sell your house if you had to, the student loans are just dead weight. I would take an extra job, sell some household stuff, and put every extra dime you find towards them to try to get rid of them in 3 years.

    Your housing actually sounds kind of manageable for a pricey New England area. But if a major change in this area makes sense in the future you should heed MMM’s advice. My husband and I are commuting wimps, he walks to work, I work from home and our son attends a preschool 2 miles away from our current very comfy rental. We have one car and mornings and evenings are a breeze. We have been renting in order to follow his academic career but we also won’t buy until we’ve saved up an enormous stash which we think we’ll be satisfied with in another 4 years. Anyways life without the commute is good and cheap! Highly recommend it!

  • Irishmam September 15, 2012, 10:10 pm

    Please check the job situation for RN’s in the New England area. As an RN and RN educator in the New England area, I am currently advising adults who ask about going into nursing as a second career to carefully check the job situation. There are not many jobs out there for ASN RN’s. Most hospitals require a BSN and many new grads are having difficulty in securing jobs. Of my senior students that graduated this year with BSN’s, only 2 got jobs in the New England region. The rest of the graduating class had to go out of state. Of my ASN students, community college educated, second career, most got jobs in doctor’s offices. Nice hours, but not the salary you are expecting to achieve. With your current high income it will take you many more years of education to attain that same salary as a nurse. I am sorry to give you this reality check, but unless you have the flexibility to move away from New England, or are willing/able to contend with lower salary than you currently make, I would seriously think about your career change.

  • Jamesqf September 15, 2012, 10:37 pm

    There is one significant point on which I’d quarrel with MMM’s recommendations. He suggests moving into the city (not knowing at the time that the couple worked in different cities, with a home located somewhere between), which would be ok for saving money… But then he suggests exercising frugality muscles by “doing plenty of outdoor recreation”. Now how the heck are they supposed to do this when they’ve moved into a city? Unless you consider the crosswalk dash a competitive sport, of course :-)

    • Anna September 16, 2012, 11:09 am

      Most cities I’ve lived in have decent parks–not sure where this couple is living but I would not say city living automatically means outdoor recreation is impossible.

      • Emmers September 16, 2012, 11:57 am

        Agreed, that’s a pretty bizarre assertion to make. I walked *way* more when I lived in a city than I do now in the ‘burbs. (Shame on me for that, though!)

        • Jamesqf September 16, 2012, 12:31 pm

          You’re dividing the world differently than I do. For my, ‘burbs are part & parcel of urbs: they’re both city, and the rest of the world is rural.

          Of all the city/suburb places I’ve lived in, there are only two in which I could have decent (by my standards) outdoor recreation: San Jose and Lausanne. In both cases, I was living very close to a distinct urban/rural, and in San Jose was lucky enough to have an employer who thought putting their research lab in the middle of a thousand-acre nature preserve was a good business decision.

          • Mr RiskyStartup.com September 16, 2012, 1:06 pm

            That is a good point. However, in my neck of woods, suburbs are areas where developer buys a cornfield, sticks 50 homes on 10 acres and they are at least 20 minutes drive from the urban area.

            I agree with you about adding another classification – rural. I have no objections to rural living (even I can appreciate beauty of unspoiled nature), but I approve of rural living only for people who embrace it fully. Friend of mine has a small farm, and while she still commutes to the city for meetings, social events etc, she actually grows her own food (chickens, eggs, vegetables, fruits), so that her commuting costs (monetary and enivormental) are offset by the savings she makes by living the rural lifestyle.

            What I personally dislike (no offense to those who are doing it, this is just my opinion) are those who feel that Earth is their bitch – they build 5 bedroom homes for 3 people families, they grow perfect little lawns by using chemicals, waste money on their own pools and playsets when fraction of that money could be used to build shared public parks and pools and then they cap it by driving 30 miles to work in 15 MPG truck powered by the blood of US soldiers in Iraq… Sorry, there is no excuse for such waste.

            If majority of people would be a tiny bit less wasteful and greedy (when it comes to personal space, property etc), there would be enough money left over to eradicate hunger and diseases that kill 21,000 children PER DAY.

            If I had it my way, gas would be taxed to the point of galon of gas costing $20-$30. That would fix this suburb vs. urban issue very fast (not to mention enviromental issues we are facing)… And taxes collected would go towards eradicating powerty that is causing urban areas to be less desireable. Answer to bad schools in urban areas is not taking your kids out of them, but making them better by bringing more affluent kids back in. My own son is going to attend regular average public school even though I can afford private school…

            Getting off my soapbox now… :)

            • Emmers September 16, 2012, 7:04 pm

              I AGREE WITH YOUR SOAPBOX. So, so much.

            • Jamesqf September 17, 2012, 11:48 am

              I agree with the big picture of your soapbox, while disagreeing on details – I’d tax gas so as not to supply resources to religious fanatics, don’t think that “affluent” kids are inherently any smarter or better-behaved than poorer ones, etc.

              It is, after all, just as easy to grow up poor in a rural area as in a city – I certainly did. I think the benefits of rural life, and particularly of growing up rural, are things that go beyond money. We are part & parcel of a living ecosystem – Gaia, if you like – and city living makes it very hard to realize that we depend on this system for our existence.

              I read an article recently that really opened my eyes to the obliviousness of urban culture (though that wasn’t the author’s intent :-)) with this: [quote]My tour guide mentioned that parents were required to participate in some school programs. One of these was a field trip to a sit-down restaurant.

              This stopped me in my tracks. I thought: What kind of a lame field trip is that?

              It turned out that none of the families had ever been to a sit-down restaurant before. The teachers had to instruct parents and students alike how to order off a menu, how to calculate the tip.

              I was stunned.

              Starting To See

              That night, I told my roommates about the crazy thing I had heard that day. Apparently there were people out there who had never been to something as basic as a real restaurant. Who knew?[/quote] http://www.informationclearinghouse.info/article32406.htm

              Now what sort of world is it in which “a real restaurant” is regarded as one of the basics of life? I can’t remember having eaten in such a restaurant until I went off to college, yet I could plant a garden and cook anything that came out of it, milk a cow, rebuild an engine, hunt & cook anything from squirrels to deer… and do calculus & physics, read Latin, French, and English…

              Well, that’s MY soapbox for today :-)

            • Mr. Risky Startup September 17, 2012, 2:17 pm


              English language is a recent development for me, so maybe I did not explain it well. I absolutely think that kids in the “poor” areas are as smart as any other child. In fact, many of the brilliant people are in fact result of the less than affluent upbringing.

              However, problem is that kids from the broken homes, who live in the areas where basic survival is the number one priority, end up not doing so well at school (which is completely justified given their situation).

              Then, because these schools have to deal with kids that are hungry, abused and have little parental support, they end up graded badly. Then, because of that, affluent families move out of the area, which then leads to even less financial support for these schools, which in turn costs them some of the best teachers…

              It is a catch 22 – and only way to fix it is to support the community in a way to minimize number of kids who are in poverty. And, support starts with being part of those communities. “Escaping” to suburbs for better schools only perpetuates the problem in the first place.

              Hope this explains my stance better.

            • Bakari September 17, 2012, 2:37 pm

              @ Mr. Risky Startup

              There are ways the downward spiral of inner-city schools could be addressed.
              Of course, supporting the communities (and not fleeing them) would help, but there are also definitely institutional level changes that could make a huge difference.
              Like having public schools be fully funded on the state or federal level. When half of the public school budget is paid by local taxes rich neighborhoods have public schools with a computer for each student, while poor neighborhoods the teachers have to bring paper from home if they want to make copies (no exaggeration!)
              And like abolishing the absolutely insane practice of cutting funding to low performing schools, as if the staff was deliberately having children fail, and punishing will make them try harder.

              But probably the biggest difference would come from making pre-school and kindergarten both free and mandatory.

              Incidentally, as a parent, one can give their kids a much better shot at success by sending them to preschool and kindergarten, and being involved in their education, regardless of what school they go to. Most kids in “bad” schools don’t have those advantages, and that is WHY they are bad schools. Lots of individuals learn a lot and go on to college who went to supposedly “bad” schools

            • Mr. Risky Startup September 17, 2012, 2:47 pm

              AWESOME article BTW…

            • Mr. Risky Startup September 17, 2012, 3:13 pm


              I agree with you 100%. I was mainly talking about personal responsibility, but you are absolutely right about many other changes that are required.

              I am lucky – I live in Canada (Ontario) where we have free kindergarten and schools are funded publicly… Our teachers make 90K on average, our social programs make it almost impossible for someone to hit the levels of poverty some people experience in the US.

              But my sister in law is a 1st grade teacher in the US, where she has a 100K Masters degree and gets paid $30K per year, and has to bring her own craft supplies and work with kids whose stories tear your heart out when you hear them.

              Indeed, until (average) Americans stop being so fucking selfish, start paying enough taxes to provide simple bottom line rights for all (enough food, housing, healthcare and basic education), there is no way of going forward. America is still the most powerful country in the world – and as such nobody should go hungry, sick and homeless. There is no excuse!

              It is simple math – there is just so much cash to go around, and if wealthier people take bigger chunk, there is less to go to the less fortunate.

              P.S. If someone comments how everyone has the equal opportunity in the US to reach American Dream and if they don’t it is their fault, see the article jamesqf just posted in the comment above. Rich people are greedy and they own the politicians, middle class is kept in a blissful ignorance by the reality TV and plenty of comforts so they are not doing anything about it, and poor have hard enough time surviving.

            • Eschewing Debt September 17, 2012, 6:00 pm

              I agree that we are in a catch 22 situation in the states in regards to education. I taught for 5 years in suburban and urban settings across the nation- I have seen first hand the difference between suburban and urban schools, and it is truly sad. I am not stereotyping, I am speaking from experience. The data just happens to support what I have experienced: Inner city schools have higher drop-out rates, higher teen pregnancy rates, higher class sizes, higher poverty, etc.

              I have no idea what the solution is- the problem is much bigger than just “rich kids needs to stay in the city.” And while I admit that might help, I also am willing to admit that I am not willing to use my kids as guinea pigs to test the theory. Instead, I will do my best to put them in the best schools I can. I don’t care if that isn’t politically correct. Again, I have seen first hand what is going on in inner city schools in Denver, Charleston, and Seattle- and I don’t want that for my kids.

              Will I be involved in my kids’ education regardless of where they go to school? You bet I will. I’m their mom and I plan on being plenty active in their lives. I wish all parents were as passionate in their kids lives, but that’s another problem that I have no solution for.

              I really think we agree on this- I am enjoying your thoughts on this James and Mr. Risky Startup.

            • Mr RiskyStartup.com September 17, 2012, 6:50 pm

              Good points. It is a little unfair for me to preach, when my choices are between safe premium school and save average school which is what we have in my neck of woods. I know that some of the inner city shcools are even physically dangerous place.

              Also, I do not really have the right answer on how to fix education in US, but it makes me sad to hear the stories.

              Here is the pie-in-the-sky approach:

              1. Cut the consumtion to minimize dependancy on dictators like those in Saudi Arabia.
              2. When you do not depend on others, tell the rest of the world to go to hell. Only get involved as a part of UN mandate and only as peacekeepers for countries that ask for your help.
              3. Cut Pentagon budget by 50%, raise taxes and use it for education and reduction of poverty. Yes, if there is a tough school, hire a teacher for every 2-3 students if you must. More jobs and less kids who will end up poor. Make any drastic step needed. Make schools sanctuaries for chidlren regardless of their wealth. Do not just throw equal money and demand results – demand results and throw as much money as needed until results are met.
              4. Provide free schooling from the earliest age until end of high school. Provide subsidies so that people can go to college and university affordably (it is crazy that some people pay $30-40K per year of school! For that much you can hire your own teacher!).

              Long term costs of lousy education are unbelievable. It will take years to fix, and countdown will start once Americans decide to do something about it. Good luck!

          • jet September 16, 2012, 8:16 pm

            Outdoor recreation in a city is easy – ride a bike!

            • Bakari September 16, 2012, 8:27 pm

              or walk, or run, or go to any of the dozens of parks that are all over the city. or skate (which requires lots of well paved roads). or gardening in your backyard if you live in a house, or in a community garden if you live in an apartment.
              We all know you love life in the country James, but you aren’t going to convince the world that it is the only acceptable way to live life, I don’t know why you keep trying!
              Besides, if your way of living is really superior, you should keep it a secret. If everyone who lives in a densely populated urban area moved to rural areas, soon all rural areas would become suburbs.

          • Kay February 22, 2015, 10:11 am

            Check out Minneapolis, MN, Madison, WI, and from what I hear, Seattle, WA and Portland, OR. I’m carless in Minneapolis and can walk less than a mile to enjoy a lake walk, bike 3 to 5 miles to be hiking in the Mississippi river wildlife refuge, etc. There are 4 beautiful lakes with canoe and bike rentals within a few miles. When I want a wilder nature experience I rent a share a car and drive between 45 min. And 3 hours to visit places like Lake Superior and the 30o+ mile superior hiking trail. Saw a bald eagle at the local city park just 8 blocks from my city home last Fall. Just sayin, :)

      • Mr RiskyStartup.com September 16, 2012, 12:18 pm

        Exactly. We live in a condo and there’s a high concentration of amazing parks and pools nearby all connected by sidewalks and bike trails. We have a protected forest nearby with hiking trails, 55 kilometers of walking trails including beautiful 5k riverside park… even a small hill park for biking and hiking (our area is otherwise flat).

        My friends in the suburbs have no bike lanes, no parks, no public pools – only wide open cornfields (so they spend thousands each year to maintain back yards, pools, family rooms). It says something that when we do playdates with other parents, they get into their gas guzzlers and drive 25 minutes to reach our parks while we walk, bike or take 5 minute drive (in our 55mpg diesel car) for the most distant parks…

        Did I mention zoos, community centers, sports fields, libraries… then fresh markets, public events, concerts, symphony, best restaurants, grocery stores within walking distance, neighbourhood Italian deli, awesome condo back yard with shared benches, flower beds, BBQ (we donate $20 per year towards beautification and BBQ maintenance)… Then neigbours who average 80 in age, who adore our son so we have 30 more pairs of eyes watching him, awesome italian lady who sends home made pizza every once in a while, constant stream of teddy bears for our son…

        Again, unless you have an idilyc ranch at the base of the mountain, with small creek running through you property, where you raise your own animals and grow your own food… single family homes (aka McMansions) in a suburb that looks just like any other, with houses within shouting distance from each other, are just stupid in my opinion, at least until you retire and have no need to drive everywhere every day.

        Urban living offers you more opportunities for richer life experiences, travel, you can make more drastic lifestyle changes… not to mention more social interactions (at the elevator, shared BBQ, park, public pool, library…).

        • Jamesqf September 16, 2012, 1:15 pm

          “…unless you have an idilyc ranch at the base of the mountain, with small creek running through you property…”

          The creek’s on the other side of the road from me, otherwise you’ve just about nailed it :-)

          I can walk or bike maybe a mile or so down that road, and be on a trail that will lead me to 10,000 ft mountains, from which I can get to the Tahoe Rim Trail, which leads to the Pacific Crest Trail… About the same distance in the other direction, and I’m in fairly desert mountains with wild horses &c.

          I do agree with you about suburbs, but as I keep trying to point out, suburbs are just another kind of city. The real difference is between (sub)urbs and rural.

          • Gerard September 17, 2012, 7:40 am

            Although if your definition of “rural” requires the presence of 10,000-foot mountains, there’s nowhere rural in the eastern half of the continent. :)
            Maybe I have low standards of outside-ness, but I live in the most densely-populated hectare of Canada, but right next to my complex is a ravine park with herons, owls, and foxes, from which I can cycle or walk for hours (and it connects to a bike path that runs for hundreds of kilometres!). Yes, I can occasionally see the CN Tower through the trees, but somehow I manage to live with that.

            • Jamesqf September 18, 2012, 1:04 pm

              Yeah, that’s true about the mountains. I’m amused by my east-of-the-Rockies aquaintances who talk about high elevations, when I’d have do dig a fairly deep mine to reach them.

              But the mountains aren’t really necessary. I’m sure folks in Maine – or Newfoundland, Labrador, most of the Maritimes, lots of Quebec, &c – could do rural quite well. Being able to e.g. paddle/portage a few hundred miles of lakes & streams would be fine with me.

        • Use it up, wear it out... September 17, 2012, 8:19 am

          Don’t forget, in many urban areas, hiking, camping, canoeing, and other outdoor activities may be just a (reverse) commuter train ride away. In New England, the Appalachian Mountain Club has some very active chapters, and at least the NYC one has a large selection of offerings available by carpool or regional bus / rail, and they supply equipment! The double bonus is you get to meet more people where you live who also love the outdoors.

          • Jamesqf September 17, 2012, 2:05 pm

            Err… Meeting more people is not, IMHO, a bonus. I prefer the days & places when I can go all day without meeting anyone.

  • Rob September 16, 2012, 8:50 am

    One of the things MMM never seems to mention is the additional time value of money with regards to a commute. Even if your hours were not particularly scare you should still regard the opportunity cost of a commute at about $10 a hour (it is an hour you could be doing something in, be it spending time with people or earning more money). So if it takes you 1 hour each way for each of you say, that is about:

    $10*4*250 = $10,000

    a year on top of physical costs. MMM estimates these to be $21.5k a year so your total commuting costs are $31.5k a year after tax. You say you bring home a total of $104k a year (adding the two weekly receipts and multiplying by 26) which goes down to $72.6k after commuting costs or 70% of what you think you are getting.

    The great thing about progressive taxation is that people who commute further tend to pay higher tax as a result. Once you consider that your commute hardly seems worthwhile. And this is assuming that your time is worth $10 an hour (if you could earn more working part time, that is the value of your time).

    If you could be earning $25 a hour in 3 saved hours, a shorter commute would pay you an extra $18,750 without losing any free time.

    • Steve Adams September 16, 2012, 11:37 am

      Great catch!

      • Mr. Money Mustache September 16, 2012, 4:28 pm

        Agreed – I normally like to point out the value of the wasted time, but in this case the post was getting pretty long and complicated already.

        Bottom line is: considering value of your time and cost of the vehicle, it is almost always a bad bet to sign up for a car commute. Instead, I suggest following this algorithm

        – if your job is in an expensive city, live in a small apartment nearby, or share a nice house with fun housemates
        – if you want a different situation, start shopping around, considering all other cities and jobs
        – once you advance in that field, your options open up significantly
        – once you’re financially independent, you get to choose where they work. The work comes to you.

        Those are the rules. There are always options available, but you have to accept that as a given and find them, rather than lambasting Mr. Money Mustache with all the reasons you don’t have any options!!

        • Karen September 19, 2012, 5:55 pm

          I agree with you in principle, MMM. We had the option to follow your formula– we were living in Central Ottawa, with a house in biking distance of work (my husband biked all seasons).

          But he was a country boy at heart, and longed for space to breathe.
          Almost 4 years ago we decided to move outside of Ottawa (to Manotick) if we could keep the budget the same, and though it forced us to acquire a 2nd vehicle and to commute 20 minutes, we found other ways to compensate.

          Here’s how we did it:

          Garden – we have a huge garden — massive amounts of beans, tomatoes, zuccinni — feel free to take some since our freezer is over flowing

          Solar – we used the Ontario government Microfit program to obtain a 20 year contract. We now sell approximately 45 KW of solar energy to the grid at a whopping 80 cents a KW, bringing us in an additional 12 grand a year!

          Geothermal – our house is heated entirely off of fossil fuels. Our heating costs are 1/3 of what they were in our city home.

          Home-centred environment — our city house was 900 square feet, with a patch of lawn. Here we have 3 acres of gorgeous woods. Last Saturday we hosted 40 or so friends for a BBQ. We are much more home-oriented, and save a ton of money that way.

          Woodstove – we supplement our geothermal with wood, harvested from our 3 acres of wood. Our heating costs are much much lower than in the city.

          But most importantly, we are not feeling “deprived” while still be exceedingly frugal. Our country home is more than 60% paid off, even though we are making an after tax income of 45000.

          I agree that we should live close to work. But if we’re made for country living and you are hard workers — you can still obtain your financial goals!!

          Love your blog, MMM!

  • JaneMD September 16, 2012, 9:16 am

    I don’t think MMM was wrong about telling them to ditch their cars and move closer to work. Nowhere did the case study person state their condo was in the perfect halfway point between their two places of employment. Even 5-10 miles from work is perfectly bikeable on this blog, so none of this really makes MMM’s answer an issue.

    Is the condo under a first-time homebuyer loan? There is usually a 5 year primary residency requirement – however, a relative living there is often an exception. You can also apply for an renters exception or get that refinance, which should be better than you think since the government doesn’t want people to foreclose. We have an underwater condo out of state and rent it out. With HOA fees and utilities, the rent is $300 short per month. However, SOMEONE ELSE is paying most of our mortgage! They are building equity for us.

    My suggestion – move closer to your job and sell one car (-$40 insurance) .You can get to $50/month in gas for your husbands 3 days (40 mile round trip=120 miles a week, inefficient 20mpg car x $4/gallon = $24) Change your internet to the lowest highspeed internet available – $35, particularly if he’s reading documents or code. Use that hour you used to commute to make some meals and drop your another $100 off your grocery bill. Rent a smaller/utilities included apartment (-200 rent, -180/electric and gas)

    Congrats, you have now saved about $1100 a month covering the $675 ‘loss,’ someone else is building your equity, and drop the $21K and the car money into your school loan or condo loan.

  • This is my case study... September 16, 2012, 9:32 am

    Thanks again, everyone.

    To answer a couple of reader questions, our cars get 23 mph on average (mixture of hwy/city driving for our commutes). Trade in value is about $1000 on each. When they die, we’re goin to be looking to find a smaller, much more fuel efficient car to replace them.

    We did buy our home under a first year homebuyer FHA loan. So we may be stuck here for another year if the reader was right about the 5-year rule. All of our family in the area own their homes so we don’t have any family looking to rent.

    Based upon one reader’s suggestions, I’m calling banks/credit unions in the area to see if they offer the FHA short refinance for underwater loans, and if we would qualify. For others in a similar situation, there’s a refi program out there for people whose loans are underwritten by Fannie Mae or Freddie Mac that allows you to refinance if you are underwater. Ours wasn’t, but maybe it can help some of the other readers.


    • Ryan September 16, 2012, 7:50 pm

      We also have an FHA loan and got the 8k first time homebuyer tax credit – the ‘waiting period’ for it to be your primary residence is 3 years, not 5.

      Your story is remarkably similar to mine. Our household income is $109k/yr and we have $180k in student debt between us. My wife went to a private college for both undergrad and masters – and she is a high school teacher. In retrospect the masters degree was a pretty terrible investment. She was actually pursuing a PhD when we married, and after alot of discussion she abandoned it.

      The ‘income based repayment’ plan is an option for about 93k of the student loans – this is the program under which if we paid for 10 years, the balance would be forgiven – provided she remained a public school teacher or other public employee that entire time. I don’t like this option because our income is high enough that the monthly payment is still huge, and it really makes us feel like she is tied to her job.

      I myself have been close to e-mailing MMM and asking whether paying off this huge amount of student debt is better than investing the yearly max in my 401k. I currently have $0 in retirement investments, and my wife has pension + a small amount in a 457 plan. We are 30 and just had our first child.

      My situation is somewhat different than alot of what I’ve read here and other ERE blogs in that I didn’t graduate college until I was 25 and have just now started making a substantial income. I feel like those 4-6 years have really cost me.

      Anyway thanks for the story and thanks MMM for the good advice.

      • GregK September 17, 2012, 11:33 am

        Ryan’s right — it’s 3 years, not 5, for the FTHBTC.

        • JaneMD September 20, 2012, 11:31 am

          Ours is 5 years. I’m sure there are different versions of the loan out there and it may have changed since we got ours in 2007. We are also (hopefully) getting a refi through our bank that is government supported.

    • Jamesqf September 16, 2012, 8:47 pm

      “…our cars get 23 mph on average (mixture of hwy/city driving for our commutes). Trade in value is about $1000 on each. When they die, we’re goin to be looking to find a smaller, much more fuel efficient car to replace them.”

      I’d suggest the time to look is now. You are not financially attached to those cars (no outstanding loans &c), and apparent not emotionally attached. So (assuming none of the move closer/telecommute options pan out) keep an eye on Craigslist for older economy cars, like mid-90s or earlier Honda Civics, Geo Metro, etc. When you find a good deal on one, grab it, and sell the lower-mpg one of the current two.

      • Leslie April 2, 2013, 3:47 pm

        My ’95 Honda Civic gets 40 mpg on a bad day, on a good day I’ve gotten as much as 48 mpg, which rivals some of the newer hybrid vehicles. It also has 292k miles on it. My previous ’92 Honda Accord got 30 mpg, and it was in rough shape. I’d swear by my Honda’s since over the last 9 years I was never left stranded. I’ve done 95% of the work on it myself to keep costs down, these cars pay for themselves in a short amount of time.

  • Des September 16, 2012, 1:27 pm

    I’m late to the comment game, but I wanted to chime in that you should definitely focus on the student loans and NOT paying down the mortgage right now. Yes, the interest rate is much higher on the mortgage when you factor in PMI, but you can always walk away from the mortgage. The student loans will haunt you forever.

    You both make great salaries *because* you work in niche industries. If either one of you were to lose your current job, there is a good chance the next one wouldn’t pay as well. If you both lose your jobs, you can walk away from the condo, but you can never walk away from the student loans. It is a precarious financial situation. I would say pay them down to a more reasonable level (like $30-40k) before focusing on extra mortgage payments or investing. You don’t have to pay them all the way off as long as they stay low-rate, but just get them to a less-risky level – to one you could handle if you both had average-paying jobs. After that, if you still have PMI, kill that before investing because I’m betting the effective “rate” you pay for PMI is double digit.

    • Bakari September 16, 2012, 7:37 pm

      What do you mean by “you can walk away?”
      Yes, you CAN just allow your property to be foreclosed on, but it will have consequences. Your credit will be shot for at least the next 10 years.
      And you are out the entire amount of the downpayment and any principal / equity you put into it between purchase and foreclosure.

      But you CAN simply stop paying your student loans too. The consequence would be the same. Shot credit. But unlike in the house situation, where you have nothing to show for it in the end, the bank can’t take back your diploma or the knowledge in your head.

      But why is this even relevant? They make more than enough to never have to default on either loan. If they were to become unemployed they could get the student loan deferred until they are employed again (not so with the mortgage)

      Given that, why not pay the loan with the higher interest rate down first?

      • hickchick September 16, 2012, 7:59 pm

        Defaulting on a student loan is MUCH worse than foreclosure. Defaulting on a student loan can mean wage garnishment, interception of tax returns, property seizure, and (if you don’t have that much) garnishment of food stamps or social security benefits. Oh, and none of that has to go through the courts.

        • Bakari September 16, 2012, 8:24 pm

          They can only intercept tax refunds, which can only happen if you get a refund.
          They can only garnish up to 15% of wages (and only if it is above minimum wage)
          If you are making enough income to have tax refunds and have wages to garnish, then why default on any loan in the first place? You could just pay them. If you aren’t making enough to pay them, you can get a student loan deferred, but not a mortgage.
          “property seizure” – like seizing your house, which has 10 – 100k of equity in it that you don’t get back (the amount in this example isn’t clear from the numbers, because we know what they still owe, and what it would sell for today, but not the original price, the amount of down payment, or how long they have lived there).
          If it was a 300k house, then foreclosure would cost the equivalent of 7 years worth of maximum wage garnishment (on 86k), but all at once.

          Again, student loans get deferred if you lose your job. There is no reason to “walk away”.
          A mortgage does not get deferred, so you have to resort to the drastic measure of taking a loss on all equity you put into it.

          • hickchick September 16, 2012, 8:47 pm

            So you’re suggesting just forbearing payments on the student loan for a period? Always a possibility.
            Just keep in mind if the loan actually does default the guarantor or DMCS can also add up to a 25% collection fee in addition to hiking the interest rate. And then there’s the fact that it never ends. I don’t know a thing about foreclosure, but I do know a little about student loans, and they will follow you to the grave.

            ETA …and you wouldn’t believe the number of people I talk to with $100K + salaries that just can’t afford to put $150 a month toward their student loans.

            • Bakari September 16, 2012, 8:53 pm

              I’m not suggesting just not paying, I’m saying that if you are unemployed or injured you can officially request deferment. Its not like you just stop sending in payments, it is legal. They will continue to charge interest, but there shouldn’t be any penalty.

            • JaneMD September 20, 2012, 11:58 am

              The only thing that definitely forgives student loans is death. Oh, and if your spouse dies with loans, the surviving spouse still has to pay them.

            • Sarah November 27, 2012, 10:27 am

              This is really a reply to Jane MD, but there was no reply button below her post. If you have government backed student loans, no one (including your spouse) has to pay them back when you die unless you were incredibly foolish and consolidated with your spouse (absolutely no benefit to doing that.) This may not be true with private student loans, but if you have those, you have greater issues.

  • Holly Thrifty September 16, 2012, 1:52 pm

    Let’s beat up this couple for being honest, for at least making an attempt and being willing to subject themselves to nasty comments.

    Thanks to them for showing an example of people TRYING instead of all the whiners who want loan forgiveness, bankruptcy or a hand out to get out of the mess they put themselves in.

    I live in the poorest city in America–not my opinion–it’s a fact. There are no well paying jobs. I am willing to work for 50% less pay to reduce my commute. My husband is self employed around this community. If we move, we’ll increase our housing cost by 50%, increase taxes and he’ll have to build his business from the ground up. Or, I can use my gas efficient, 2005 Honda Civic and drive to work everyday and remain DEBT free while stashing tons of money away for my early retirement.

    MMM get off your high horse and stop blasting those who have long commutes which IS our best option.

    • Mr. Money Mustache September 16, 2012, 4:13 pm

      Relax there Holly Thrifty.. I don’t claim that a zero commute is always the best option. There are always exceptions to every rule and maybe your own situation is one of them.

      But in most cases of long commutes (maybe 99% or more), people have not done the math properly and are losing massive money in the long run by choosing an inefficient place to live. It seems to be the case for this case study as well.

      Part of the commuting trap gets sprung when people forget to look at the big picture. Look around at other cities, and other states, always comparing the factors of adventure, quality of life, salary, cost of living, and culture. Most of us (especially the young ones) are not stuck in any particular city.

      My wife and I moved to a different city, state, and country to find our own ideal lifestyle – but even then we are on the fifth residence and third city in this new country, as we moved around to balance life and work over the years. Moving is easy, and it’s good for the soul as it reminds you that you DO have power over your own situation.

      • GregK September 17, 2012, 11:51 am

        Moving is also a great reminder that you have way too much Useless Crap. Nothing makes me more appalled at my lack of Mustachianism than hauling a box of crap into and out of a moving truck.

        • Use it up, wear it out... September 17, 2012, 12:11 pm

          My main uneasiness at the idea of moving is that it breaks community ties. For me, at least, one of the “other things” I want to do with my time when I’ve achieved FIRE is spending time with friends and family. It’s hard to build up a community of friends if you move too regularly.

        • Lina September 17, 2012, 12:50 pm

          With every move I leave more and more crap behind me. Because I am tired of hauling stuff back and forth I am also buying less stuff. So there is still hope for you. :D I have had difficulties to get rid of books but now I even give away books. I have difficulties to throw away stuff so I give it to different charities.

          • Miniwing October 14, 2016, 9:28 am

            Late reply here, but books are always my Achilles’ heel. They are counter intuitive to my new found mustacianist lifestyle, but my library was built up by father for 30 years and I had my own large book collection before he passed. I got a new job across the country for only 12 months and putting the books into storage was significantly cheaper than moving that many boxes and pounds. I would look into cutting it down, but over half of the books are 100+ years old or very detailed how to books. It is definitely hard to part with such things even though the internet is just as useful if not sometimes faster.

  • Chaz September 16, 2012, 5:51 pm

    You know, MMM… one thing most people don’t address is choice of primary residence. For example if I remember correctly your primary is a $400k large home in the suburbs. For most people starting out, I don’t think that’s a wise choice. I don’t classify “housing” as a necessity – well it IS a necessity but it should be well planned out.

    For example, I graduated from pharmacy school at age 24. I went to an in-state school, so I saved up EVERYTHING I made in the first few months of work to pay off my loan balance (I worked 5 years while in school at 20hrs/week). I had no debt. So far so good, but the first thing I did wasn’t to look for a house. We’re at 2011, so post-bubble, kind of a seller’s market. I lived in a relatively nicer area in the suburbs, so anything around me was at least $300k. A slightly “shittier” area would probably start off at $200k min. Anyways, I roomed with roommates for 1 year and now I’m renting at my uncle’s house. It’s fall 2012 and I just closed on my third single family rental (each one worth about $125-130k, 20% down payment), each renting at $1200 (well the third one is vacant because it just closed a week ago). Now I’m still sitting on 30k cash awaiting my next purchase.

    I’m not trying to boast. The point that I’m trying to make is:

    Even NOW I’m still not thinking about home ownership. I actually want to – here’s how: Get an FHA loan on a multifamily (duplex, triplex, fourplex, etc.) and rent out the other side(s). If you rent out the other side you can have your accountant depreciate that and it can even reduce your income taxes. The tenant can help mitigate the mortgage payment, if you purchased in an decent area.

    What I’m saying is likely not going to apply to this case study but just in general, I feel like people overlook primary residence choice and kind of just pick one that they can “afford” and one they like, right off the bat. Commute is a big one, but housing is even bigger. FHA loan on a multifamily in a solid area – one with a diverse economy, population growth, the house being relatively new, you’re looking at about 16-22k including closing costs, and building a retirement basket right off the bat.

    Now your residence is truly an investment – not exclusively the bank’s investment, but your own.

    • Mr. Money Mustache September 17, 2012, 2:40 pm

      I agree Chaz – for people with the goal of financial freedom single family houses should be just one choice in a range of options including renting an apartment, owning a multi-family building and renting out some of it, living with roommates, etc. There’s no predefined superiority of any of these options, and should always do the math before making any one choice.

      The only correction I need to make is that no, the MMM does not live in the suburbs.. my large luxury house is right next to downtown :-) .. but you’re still right that owning such a costly house is usually unwise from a financial perspective, and I wouldn’t recommend that people in pursuit of wealth spend so much until they can really afford it.

  • RMS September 17, 2012, 6:30 am

    Thanks for sharing! I live in New England also so I understand their pain. If you are not willing to live with roommates or live in an RV or boat like MMM, then housing is really expensive in the city where the jobs are. Our rent is $1400 per month for about 900 sf.

    I am guessing that it will be hard to rent the apartment out when it is not near the city centers or nearby suburbs. 30 miles is far away! I vote to sell if you can!

    My other half and I live in a rental right now in the city where we work. We used to have a roommate but I think it wasn’t enough space for her so she moved out. We were saving $7200 extra per year from her but it’s fine also without her. We take the subway and bus to work (mainly because it’s hard for me to want to bike early in the morning – or do anything).

    Although our combined pre-tax is lower than the featured post ($125,000), we have only about $20,000 in student loans from undergrad with low interest rate. The rest of our liquid assets ($30k) are growing in stocks at a higher rate than the loan and also partly in a 1.5% checking account that can be used as the 20% down for a place in the city. Housing in the one mile radius that we want to live at (where we rent now) starts at around 250k and up (~500 sf).

  • Joe @ Retire By 40 September 17, 2012, 9:47 am

    Go a bit easy on them. They just started reading MMM only a few weeks ago. It takes time to come to your senses after years of living the regular lifestyle. :)

  • Edward September 17, 2012, 10:48 am

    I always wonder why people want to invest instead of paying down debt? Is it because paying down debt isn’t sexy? It doesn’t really get the greed-factor all hot and aroused as the prospect of making returns does? Given the bottom line for long-term total wealth, paying off the debt first is a no-brainer!! I don’t care if it’s the highest interest rate first (which it should be!) or the lowest–pay it ALL OFF. NOW! Don’t buy *anything* else *ever* until it’s gone.

    It seems the jump in readership at MMM has transported a lot of the “I know, but I need to keep my lifestyle” drama queens over from sites like “Get Rich Slowly”. They can make excuses and justify any crazy expense, and they’ll probably get into lots of arguments with the hardcore MMM “flex-your-muscles ’cause we’ve graduated to a higher level than wanting stuff” members. One expression that is sorely lacking in the PF world advice these days: Suck it up, buttercup!

    I mean, often I won’t even buy a $3 used DVD because I picture MMM standing behind me, twirling his whiskers with one hand, and the other hand cocked and ready to punch me in the face if I don’t put it back on the shelf. *That* is the mindset to work toward! A $150 cell phone bill should make you feel like you’re uncontrollably bleeding from every orifice in your head while your hands are caught in a red-hot waffle-maker!

    • This is my case study... September 17, 2012, 12:22 pm

      Woah, Edward! Easy!

      It’s easy to slam someone from behind the anonymity screen of the internet, but try to remember that there’s a real person at the other end of this conversation.

      I have just found this wonderful resource an am looking to MMM and his more experienced readers for ways to put it all together and make it work. Call it a fact-finding mission to determine the best course of action before just jumping into whatever sounds like the best plan at the time.

      I’m very thankful for the great advice I’m hearing and am taking it to heart. Just ease up a bit, please.

    • Jamesqf September 17, 2012, 1:56 pm

      I think in many cases, the choice to invest rather than pay down debt is based on flexibility. If I have money in investments (mutual funds &c), and I have unexpected needs, I can easily sell off a bit. If I used that money to pay down low-interest debt like student loans or a mortgage, I couldn’t easily re-borrow any of that money to meet a sudden need.

      • Uncephalized September 17, 2012, 5:03 pm

        Not to mention that as long as you have the mental fortitude not to keep racking up debt through consumer spending, it’s perfectly reasonable to make minimum payments on low-interest debts while prioritizing investments as long as the ROI on the investment is higher than the interest rate on the debt (preferably significantly higher, since ROI on debt repayment is guaranteed whereas investments carry risk).

    • BonzoGal September 17, 2012, 4:38 pm

      Edward, I second that emotion. This is the place for frugality-laden FACE PUNCHES, not head-pats and false reassurances. One rises stronger and smarter after a Mustachian punch, for sure.

      The words “I can’t…” change to, “Well, I can, but I don’t want to…” and then to, “Actually, now that I’ve been shown the error of my ways, I CAN!”

      • Matt (Semper Fia August 24, 2016, 10:21 pm

        If I weren’t married, I could save 80% of my pay, easily. Don’t tell my wife I said that, lol.

  • Clint September 17, 2012, 6:53 pm

    And I disagree with Edward and Bozo. If you’re going to be so directly combative, do it with a little humor the MMM way, and don’t treat this site as a club in which some are not worthy to be members. This is a thoughtful person looking for help. Be a little thoughtful (and civil) in return. And I’d leave the face punching to MMM; he seems to pull it off better. Some of these comments have gotten as nasty in tone as the direct opposite comments you find on the CNN and Yahoo sites.

    • CL September 17, 2012, 8:35 pm

      +1 Actual face punches fall under MMM’s purview

    • BonzoGal September 18, 2012, 3:33 pm

      Clint, I meant that this is a place for Mr. MM to deal out Frugality-Laden Face Punches. Sorry if that was unclear. Mr. MM sometimes gets bashed for being too harsh to his readers or those who seek his advice, but that is his (hilarious and badass) style. I do NOT mean to encourage meanness by commenters! I love reading the comments and cringe when people start jumping on other commenters.

      • Clint September 19, 2012, 10:38 am

        And I apologize for mistakenly lumping you in, but Edward’s comment was one of those cringe-inducing ones for me.

  • George September 17, 2012, 8:55 pm

    I like MMM’s advice.

    The only thing I would do different is that for me I found that to pay off student loans you have to concentrate all firepower you have between the two of you on one thing and thing only.

    Thus, if your primary target is the student loans, I would get the apartment like MMM says, sell both cars to pay down the students loans. I would elect to stop all 401k or retirement withdraws (even if you are getting a match with your employer) so that you have more money to put towards the student loans.

    Cut TV (even if you only save $10 per money) put that towards student loans. The amount you were paying on gas is a joke. I would apply all of your emergency fund money except maybe $1000 towards paying-down your student loans. Oh yeah, and that $150/month for cell phones, seriously? WTF. With all this money you have, these loans shouldn’t stand a chance against you. After all this extra money going towards the loans, you should be gone with them in a year or two. Remember, student loans do not disappear in bankruptcy, they are with you for life until they are paid off.

    Is your house worth anything more than what you owe on it. If so, try to sell it and apply that money towards the student loans.

    See only through this 100% pure focus are you going to kill that beast off fast. Also with all these early payments, your month student loan payment will still be the same but you will also notice that the portion of that payment going towards paying principal will also very rapidly rise.

    Once the student loan is gone (and it will be soon if you put everything you can towards it), then focus on your next goal (probably a downpayment for a house near your jobs and kids). At this point, you will be about 30 years old, and can you apply all the money you saved from your now paid-off student loans towards savings for a house.

    Also you can then start your retirement 401k withdraws again, later on you can put in extra to the 401k to make up for what your skipped for the first two years in paying off that student loan. I would not even think about investing at all until at least you have a house with no other debt, and probably you should not even invest at all until your mortgage is fully paid off as well.

    See you cannot be paying out your money 800 different ways and ever expect to get anywhere. Remember 100% focus on one thing. Do a quick kill of the student loan and move on with your life.

    Don’t listen to these people who talk this: “ooo this investment pays 5% and the loan interest is only 3% thus, put the money towards investments instead, yeah im so cool, I am so sophisticated and smart because I figured out that 5% is greater that 3%” Forget all that because when you pay that beast of a student loan off, its like a huge weight has just been lifted from your shoulders. You never get the same sense of happiness when you have 100k in investments but 120k in student loans. Its complicated to write about why this is, its just something you feel.

  • John September 18, 2012, 4:47 am

    MMM–your are dead wrong to suggest this family would have $100k left for savings on a $157k gross income. You are not accounting for living expenses. Please do the math.

    • Mr. Money Mustache September 18, 2012, 3:03 pm

      Wow, it’s not every day I hear from a person who is so much better at early retirement math than me! You must have retired at 15 years of age, to be able to cut up my own calculations with such confidence.

      I have a better idea: instead of me doing the math, how about you do it. Double-income family with no kids and $157k gross, living in CO for the sake of having a typical state income tax rate. Both maxing out 401ks every year so the first $34,000 of savings is tax-free and taking the standard deduction of $11,900 on top of that.

      What amount of annual spending would they have to live on, to be able to save that extra $66k per year in after-tax accounts?

      Write about it on your own early retirement blog, which is surely much more advanced than mine, and I’ll be happy to link to it!

      • John September 19, 2012, 12:54 pm

        MMM–I did not mean to sound abrupt. When I put the numbers into a 1040 calculator and take out $34000 pretax for Colorado, I get under $80,000. Can two people really live a dignified life on $14,000? I don’t think so.

        • dave September 19, 2012, 5:44 pm

          I suppose that depends on one’s definition of a dignified life.

          I am a vet, every year I go to Mexico for a few weeks and work with vets from there. They make 1/10th of what I do, and from what I can tell live very dignified lives. The difference? Housing is far cheaper, they never eat out, and most importantly they don’t buy shit they don’t need. It’s all a matter of your perspective and conditioning.

          Mr. Money Mustache really needs to consider running for President. Whoops…not born in the USA, our loss.

          • Mr. Real Estate July 19, 2016, 2:49 am

            almost 4 years later I’m reading your comment… never even thought about him not being able to run for president because not being born here. Bummer guess it’ll be trillary…

  • LovingBeingAlmostDebtFree September 23, 2012, 11:42 pm

    My husband has to travel 4.5 hours a day to and from work.
    The reality is, that to rent even the cheapest studio close to where he lives would be $400 per week. $630 if we wanted the cheapest 2 bedroom apartment. (We have 2 kids).
    For renting out our house, we would get $200 a week, so we would spend at least $200 per week to live close to work.
    The train ticket is $55 per week. And my husband uses that time on the train to do ‘overtime’. So that it isn’t completely wasted.

    While living closer to work would be ideal – where we live, it is not a financially viable option.

    Living in our RV – the closest place we could live would charge $250 per week. And he would still need to spend $55 per week on the public transport ticket. (Our goverment subsidizes the cost of the train ticket, so that it is just expensive to travel if you live close to the city, as if you live far.)

    We chose to buy where we are, because it would mean we could be mortgage free by 35 and start saving towards early retirement. Living anywhere closer would give us at least another $300,000 in debt (a conservative estimate). Which would stick us in the rat race for longer.

    We also are able to have a larger amount of land where we are – so we have been able to plant many food producing species, plus have chickens/rabbits for eggs and meat.

    I am absolutely loving reading this blog. But realise that until we are through the GFC – moving closer to work, or finding a job closer to home, may never happen.

  • Goonie0 September 26, 2012, 2:34 pm

    MMM et al – Assuming that one’s modified adjusted gross income is above $110k for a married couple filing jointly, there would be no tax deduction for contributing to an IRA. In that case, is your recommendation to stash as much as possible into your 401(k) and IRA accounts primarily to save as much as you can for retirement regardless?


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