Reader Case Study: Hair on Fire!

fireToday we bring back the ever-popular reader case study series with an interesting twist.

First of all, our subject is a new reader, with sizable financial baggage from earlier decades, but plenty of potential for improvement. Equally notable is the fact that I have enlisted some outside help for the research and analysis.

During a recent trip, I ran into another blogger named Jacob Wade who, quite amazingly, actually likes  budgets. In fact, he feels so strongly about it that he named his financial blog iheartbudgets.net. We got to talking, and he enthused about how much he likes analyzing and solving detailed financial problems for other people.

“Oh boy, do I have a job for you”, I said. “I get emails from people with detailed financial problems every day, and although I still read every one, it pains me not to have time to respond to many of them.

Could Jacob’s enthusiasm be used to all of our advantage? I sent him a sample case study to test out his chops. I was pleasantly stunned by the results – he did a great job, and offers advice that even I would consider hard-hitting. Let’s dig into our dear reader’s story, then you’ll see the analysis with some joint recommendations by Jacob and myself.

[contents edited for length]

Dear Mr. Money Mustache,

I’m a recent reader of your blog, courtesy of your interview with Jesse at You Need A Budget, which is the budgeting software I’ve been using. I know that you’re all about retiring early, but I’m wondering what advice you’ve got for someone who wonders if they’re ever going to be able to retire at all!  Much of what you recommend we can still put into place, I know, and we are in the process, but I am unsure if our advanced age changes any of those tactics and strategies.

I’m not going to bother to tell you all the mistakes we’ve made in 27+ years of marriage and raising five kids.  I’m sure you know the drill, since we lived the basic “American Dream.”  We are now 53 years old. My question now is “What’s the best we can do at this point?”

This is where we are:

  • We have a home with a mortgage/equity loan that’s about $20,000 less than the list value of the house.
  • Our credit scores are low, partly due to not having any credit cards for the last ten years to show a history, and partly due to having late payments due to temporary unemployment, among other things.
  • We are the “OMG your hair is on fire” commuters; 45 minute commute for me, 55 for husband, we live in the middle of nowhere, and real estate in our area is not selling.
  • 4 of 5 of our kids are still in college, two live with us and commute, the (recent) graduate lives with us and has an entry-level job since he can’t find work with his degree.  Our commuters travel by bus 30 minutes to the WEST of us to go to school, we travel EAST to go to our jobs. Our employed graduate also travels west to his job, in the same town where the other two go to college. This makes moving a little bit more complicated.
  • Retirement: We both qualify for Social Security; however, I have met only the minimum number of quarters since I took 17 years off to home school our five kids, and my estimated benefit at age 67 is $524 a month. I have now been teaching at a charter school since 2006, and contribute to Massachusetts Teachers’ Retirement. I would need to work and contribute to that fund until the spring of 2026 to be fully vested.
  • My husband’s estimated Social Security benefit at age 67 is about $2000 a month. He has $20,000 in a 401K with his current employer, and two smaller accounts with former employers, one with a balance of about $4000, and one with roughly $500. I contributed briefly at work to a TIAA-CREF fund, and the balance is about $1000.
  • I have a newly minted Master’s Degree, which I was required to get in order to keep my teaching license, leaving me with loans of about 22,000.
  • Commuter son and husband have a Nissan Sentra and a Toyota Yaris, both paid for.  I am driving our 2005 Dodge Caravan, which is on its last legs at 180K miles with beaucoup mechanical issues.
  • We live in Massachusetts, so are among those few who still use oil for heat and hot water; we have electric appliances.
  • We own term life insurance policies, and have health insurance through my husband’s employer (a health insurance company).
  • We owe back taxes to the IRS and Mass DOR, and have had our paycheck withholdings changed recently to avoid this in the future.
  • Not necessarily in the same vein, but relevant – I am a Yankee who would love to penny-pinch, and my husband is a free spender who loves to buy things on sale and as little “rewards” for himself and others, and chafes at the yoke of a budget.  He is (grudgingly) on board with me now. We rarely disagree about anything except money.  :)

I guess that’s a grim enough picture for now; as you can see, our situation is a giant Charlie Foxtrot*.
I know you get tons of email; perhaps this one will be just different enough to intrigue you – maybe you can Mr. Money Mustache even the old and desperate!

CF in MA

Mr. Money Mustache’s Observations:

This story is a great example of what happens when you live a good, honest life, but just don’t get around to doing the math. Other than the $1200 of oil and gas that goes up in flames each month, the rest of this budget looks fairly moderate for a large household. But there is no way to cheat the numbers. Children cost money to raise, and if you want to raise a large number of them on an average income, something else has to give.

And most people don’t realize that car-commuting (even a 10-minute ride) is spectacularly expensive, so your 45-minute double commute is astonishing. A 2005 vehicle that is “on its last legs?”. I bought my 2005 car four years ago with 57,000 miles and it just cracked 80k this year. It is still brand-new and has many decades of life left! Commuting in a VAN? I use my van when I need to carry home 1200 pounds of steel beams I found on Craigslist for my house rebuilding project – not when I need to transport  one lightweight human across a vast distance!

Finally, while supporting adult children and “treating” oneself are nice options to have, from a financial perspective you don’t actually have these options. This is what has caused the long-in-the-making financial emergency.  The great news is that you can dig out of this hole much more quickly than you sank in.

So let’s move on to Jacob’s analysis:


Home – $235,000
Retirement Fund Savings (401k and MTR) – $45,000
Cars – $7,000

Debts (Balances):

Mortgage – $167,000 at 3.5%
HELOC – $25,000 at 4%
Student Loans – $22,000 at 6.8%
Dell Loan – $2,500 at 16.66%
Personal Loan – $650
Staples CC – $500


To retire ever

Total Income $ 7,200.00 $ 7,200.00
Total Expenses $ 7,161.00 $ 3,504.00
Projected Ending Balance$ 39.00 $ 3,696.00 <-- Much better!
Other$ 110.00$ 110.00
Total Donations$ 110.00$ 110.00
Mortgage $ 1,330.00 $ 1,000.00 The goal is to be able to actually stop working at some point, so aggressive measures need to be taken. I suggest selling the house and moving MUCH closer to work (within 5 miles of both if possible). If possible, find something for $1,000 a month (about $130,000 15-year loan) or less.
Electric$ 200.00$ 100.00You can lower your electric bill if you implement the changes suggested in this MMM article. You stated that you have started hang drying clothes, now it's time to move on and get all CFL's bulbs and watch the A/C.
Oil Heating$ 700.00$ 200.00This bill is KILLING your budget. When you re-locate to a location closer to work, look for a natural gas furnace or another home with low heating costs. Otherwise you will literally waste $86,500 over the next 10 years on this. It's not worth delaying retirement AN ENTIRE YEAR to pay for this inefficient heating method.
Cell Phone Sprint$ 320.00$ -When moving, you are going to need to drop the cell phone family plan. I didn't see a line for reimbursement for this, and you cannot afford an extra $275 a month to pay for your family's cell phone usage. Move everyone to Republic Wireless and only pay for the adult plans.
Cell Phone Republic Wireless$ 23.00$ 46.00Looks like you got started with one line, just double it up here.
Netflix/Hulu/Other$ 40.00$ 40.00MMM: Huh? Netflix is $7.99/month. Between library books, learning new skills, and this, you will have plenty of entertainment.
Car Insurance$ 155.00$ 90.00Shop this around. We pay $78 for liability on our two used cars, there's no reason you need to pay any more than $90 a month for basic coverage. Since you have a used car, all the extra insurance is not necessary to cover scratches and dings and the like. (MMM Note: mine is $30/month for two cars and two drivers)
Internet$ 70.00$ 70.00Also worth shopping around - in your new area the competition might be better.
Land Line$ 35.00$ -Land line is not needed. (unless there's a business need for this)
Garbage$ 20.00$ 20.00
Medical$ 182.00$ 182.00
Student Loan 1$ 293.00$ 293.00We'll address this debt below.
Student Loan 2$ 130.00$ 130.00We'll address this debt below.
Life Insurance$ 91.00$ 91.00
Personal Loan$ 90.00$ 90.00We'll address this debt below.
Dell Loan$ 160.00$ 160.00We'll address this debt below.
IRS and State Taxes$ 700.00$ -You stated in email that this balance is now at $0
Paypal Loan$ 160.00$ -You stated in email that this balance is now at $0
ADT Security$ 50.00$ -Not necessary. Here's a direct quote from MMM: "These are a silly invention – the Timeshare Condos of the suburbs. Drop it, live free, and save $(50)"
Homeowner's Insurance$ 55.00$ 55.00
Total Bills $ 4,804.00 $ 2,567.00
Other Expenses
Food$ 900.00$ 400.00Check out MMM's advice here. You can reduce this bill to $400 a month easily and eat VERY well with a though-out meal plan and some smart shopping.
Gas$ 575.00$ 150.00Since we have cut your commute down to only a few miles, your gas bill should be VERY low ($50 a month or less). I padded it a bit to drive out and visit family.

MMM Note - and remember that "Gas" should never be used as an approximation of the true cost of commuting. You need to triple this number at least, just to account for the direct car costs. Adding in life costs, the bill is much higher again.
Eating Out$ 15.00$ -While you're in debt, this is a luxury that cannot be afforded. Take care of the DEBT EMERGENCY first, and then add this back in.
Spending Cash$ 25.00$ -Same as eating out.
Personal Items$ 85.00$ 85.00
Household Items$ 62.00$ 62.00
Clothing$ 60.00$ 15.00You don't need $60 of new clothing a month. $15 a month should take care of any clothing necessities with thrift shops, consignment stores and garage sales. Also leverage family and friends to organize a clothing swap (read: FREE CLOTHES) if additional garb is required.
Misc$ 40.00$ 40.00
Car Maintenance$ 50.00$ 50.00
Total Other Expenses $ 1,812.00 $ 802.00
Savings Buckets
Christmas$ 25.00$ 25.00
Emergency Fund$ 410.00$ -This will be addressed below.
Total Savings Buckets$ 435.00$ 25.00
Total Expenses $ 7,161.00 $ 3,504.00

Jacob goes on to write,

Dear CF,
Thank you for exposing your budget to all of us financial voyeurs.

There is a LOT going on here, and a lot to address below. The goal here is to make every hour of work from now until retirement count. So let’s get to it:

Housing: I won’t pull any face punches here. You need to move. Your heating bill and commute are absolutely killing your financial situation, and you will NOT retire anytime soon if you stay there. There is $980 potential savings PER MONTH or more in this transition (including commute and utilities), as well as cutting your commute time down to almost nothing, saving time and stress. This move is to help you take a sharp exit off the highway of Never Retiring Wastefulness and allow you to not work until you die.

In emails, you stated the house needs about $8,000 of updates to rent or sell. Since you have about $2,000 of other monthly savings lined up in this budget, you should be able to have this taken care of within four months, and be moved out in six or seven months. Savings on mortgage is at least $330 per month.

You also stated needing a replacement car soon. Please read this MMM post and PAY CASH for your next used-car purchase.

Food: If you are feeding a flock of adult children, they are going to have to chip in. There is no reason you two people can’t eat VERY well on $400 per month, and with proper planning, that could be $300. So many people cannot save enough to retire but are actually just eating their retirement meal by meal. For reference, the extra $500 a month spent on food would cost you over $86,000 over the next 10 years, and cause you to work an additional year for that inefficiency. Nothing tastes THAT good. Savings of at least $500 a month.

Debt: This debt is to be treated as a radioactive plutonium. You must neutralize it ASAP, and this will be your first priority. Here’s how I suggest you tackle it with your extra $3,700 a month.

Dell Loan – $2,500 at 16.66% (gone in month 1)
Personal Loan – $650 (gone in month 1)
Staples CC – $500 (gone in month 1)
Student Loans – $22,000 at 6.8% (gone in month 7)

With all the expenses saved from the above changes, you can kill this debt COMPLETELY in 7 months. The first 3 debts will be gone in the first month! Now you have another $673 a month to invest.

Investments: Once your consumer debt is gone, you will have about $4,400 a month to invest in index funds to get you to retirement. Investing this at 7% for the next 12 years with your starting balance of $45,000 puts you at about $1,100,000 at age 66.

Your annual expenses with the above budget are about $42,000 per year, and using the rule of 4%, this money would provide you with $44,000 annually. You can retire!

This quick plan comes with a major safety margin:

  • the $2,000 per month of Social Security your husband can begin drawing at age 67
  • whatever you get from the teacher’s Retirement Fund
  • the fact that your new mortgage will be paid off in 15 years, dropping the future budget

Conclusion: Yes, this is a lot of change. No, moving won’t be easy, and figuring out the details of your kids housing and all that is going to be a challenge. But the status quo is what got you here, and changing the flow of money is what will get you out.

Comments: What would YOU do in CF’s position? Can she recover and earn a solid retirement in a timely manner?


MMM Note: Thanks again to my new friend Jacob for all of the help on this one, and you may see a few more case studies around here if we’re lucky.


*I think this is a witty polite way of saying “CF”, which of course means “Clusterfuck”. I thought this was a skilled use of swearwords, and it is one of the reasons I decided to take this case study. 

  • Mr. 1500 December 4, 2013, 1:21 pm

    Nice analysis and I’ll offer 2 more suggestions:
    1) Forget the CFLs. LEDs are where it’s at now. LEDs have no mercury, last longer and use less electricity. Only drawback is a bit higher initial cost. This will go down as CFLs are phased out.
    2) If they must have a landline, go with a VOIP provider like MagicJack. I’ve had mine for years. It’s very reliable and only costs $25/year for unlimited calls.

  • Stephen G December 4, 2013, 2:18 pm

    Honest question here about replacing lights with CFLs: notwithstanding an earlier commenter’s advice to get free CFLs from the state of MA, will the savings in electricity actually cover the cost of switching — especially if they go through with the move in the relatively near future?

    I guess the reason I ask is that I’ve never been able to make the math work out. Maybe electricity is just too cheap here in central Texas. It also probably doesn’t help that I haven’t seen the rated lifespan in the CFLs I’ve purchased. Grrr. Perhaps others have had better experiences?

    • Mr. Money Mustache December 5, 2013, 10:11 pm

      They pay for themselves pretty quickly: at $1.50/bulb, you just need to save about 14 kWh until the bulb becomes pure profit. It saves one of those “kilowatt hours” for every 20 hours you run it, so roughly two weeks of round-the-clock use, a month of all-day use, or 3-4 months of typical use in a busy living area.

      • Angry German December 6, 2013, 1:27 pm

        “a month of all-day use” ???

        Shouldn’t they be getting their light from that yellow object in the sky during the day MMM?

        In response to Stephen G – I’ve looked at the CFLs from many angles, and it’s all relative, and cumulative. If you’re losing CFLs before their “break even point” you simply need to buy better quality CFLs and write off the notion of breaking even, or find ways to use them less.

        To use a plumbing analogy, energy conservation is a game where you need to plug all the leaks, starting with the valves being left open, down to the water evaporating out of your bath tub. Depending on how you use them, CFLs are more analagous to a pinhole, or that pesky evaporation. But it all adds up.

        Another area to look at if you have college age kids is game consoles plugged in but turned off. A lot of the consoles made in the last 10 years use 5 watts continuous when off. If the kids aren’t home but their game consoles are, that’s 3.6 kWh per console per month (assuming they’re never used). Smart power strips are your friend, and a lot of utility companies have incentives to provide them cheap / free.

  • KruidigMeisje December 4, 2013, 2:23 pm

    I find it difficult to get (non MM) people to understand the benefits of foregoing short term pleasures (the only one they have, is their perception) to save for long term luxury of time and worryfree existence. The latte tastes so good!
    This is not about my family, they are aboard. But collegues and friends and such.
    Which are the examples and angles that get through their bias/skull?
    A lot of readers might use them to help family/friends/neighbours scratch their heads and look at their own finances to see if they can find some (initally small) budgetting gain which doesnt hurt so much.
    Which view do you have to present to get the anti-consumerism glasses on their noses?

    • Danny C. December 4, 2013, 4:14 pm

      I always go with the tax savings approach. Do you love paying taxes? No? Well, then, did you know that if you save money (401k, IRA, HSA, 529) it won’t be taxed? It’s short term enough to see the benefit while saving for the long term. Sadly, I still get responses like, “But then I’ll have more taken out of my paycheck”. That’s when I want to gouge my own eyes out.

    • Finnoula December 5, 2013, 3:56 pm


      This is my favorite write-up so far of tye thought process behind changing from a consumer memtality to a FI mentality. The important takeaway is that you can’t convince people to change their habits without encouraging them to think about long term goals.

      Many people won’t want to think about their financial situation no matter what you say. My roommate went through a rocky unemployed and underemployed period recently, but she now makes a bit less than I do per month. However, thinking about money makes her very anxious – she very much prefers to ignore her worries and ‘have fun’, by going out often to concerts and to buy expensive drinks. We don’t talk about money much anymore because I realized at this time in her life she has no long term goal, career wise, personal, or financial that would motivate her to change her behavior. She’s my friend but it’s not my problem to ‘convert’ her or anything.

      On the other hand I have many other friends, who much like me are just starting their careers and are reflecting about what they want to get out of their working years, and what their goals are. They have been much more interested in learning from people with more experience about lifestyle and investing options.

      • Kruidig Meisje December 9, 2013, 9:19 am

        That is a interested read indeed. Thx!

  • Jenn December 4, 2013, 2:55 pm

    How inspiring that the realistic answer to her question “What’s the best we can do?” is “Retire at 66 with over a million bucks!”.

    I’m only a few years younger and also have 5 kids – the oldest a freshman in college. I’ve always set the expectation that the kids will be on their own after college – now I’m even more motivated to emphasize that!

  • Ben December 4, 2013, 2:56 pm

    Great case study and GREAT news to CF in MA!! There is light at the end of the tunnel if you can now just stay on track. The comment I would like to make is on the kids living at home and having to begin shedding all of the unnecessary expenses that come with them. I know it is hard to ever see when they are your kids but it sounds like you are enabling them to live a life just like the last 27+ you have lived (and refer to as filled with mistakes). Not only will these drastic changes set you free to experience unchained financial freedom but it will allow them to truly have an appropriate example of how money should be put to work. This change is gonna be tough on them and you had better believe they are going to protest but be steadfast and communicate to them all that you are doing. They will love you all the more for it!
    Grow that Mustache Proud!

  • JD December 4, 2013, 2:56 pm

    I agree about the LED lights; every light I have to replace gets replaced with an LED. It’s easier to do it that way, buying one or at most two at a time. The oldest one is over 3 years old, gets about 8-10 hours of use a day, and is still going strong.
    We also like our electric heat pumps (we have no access to natural gas) and find our bill stays lower than our co-workers’ heating and cooling bills. Don’t know if that would be so in Mass., but it works for us in Florida.
    Definitely the kids need to be sat down and the cold hard facts put out for all to see. The kids should be finding any way they can to help contribute to the expenses, and if they can’t make money, they should be helping to save — finding cheaper methods of doing things or moving out if at all possible ( a good idea anyway for the older ones even if there were no financial issues with them living at home).
    Selling the house, well, I agree they should, but it could be tough. I speak as someone with immediate kin who struggled for 2 years to find a buyer for a nice home in a good neighborhood, in good shape, offered for less than the appraised value. Our real estate market in our town isn’t slow, it’s dead. Some areas of Florida were the third highest in the nation for short sales and foreclosures, and markets in many areas are still very, very slow. A short sale can be a nightmare around here, too — the banks can make it next to impossible to short sell unless the seller just quits paying on the house for months and risks a foreclosure instead. I had other kin and friends have that scenario happen to them, too. But if CF’s family can find a way to sell, I would say do it, and find a cheaper place to live with a shorter commute, if there is any way at all to do that.

  • Sue December 4, 2013, 3:30 pm

    Besides, living very simply, I suggest creating residual income and preferably multiple steams of residual income. That combined with retirement accounts and SS can really create true financial security. My partner and I have created residual income so that I was able to semi-retire before 40 and he can fully retire after his debt is paid off in three years. Neither of us plan to touch our retirement funds except for emergencies.

    I suggest reading “Your Money or Your Life” and “Multiple Streams of Income”. Both excellent reads.

  • Frugal in DC December 4, 2013, 6:49 pm

    Not sure if it’s been mentioned already, but hubby needs to separate the notion of rewarding or treating himself/others from spending money. And buying unnecessary stuff on sale is obviously not a sound way to save. I know I’m preaching to the choir here.

  • Laura December 4, 2013, 7:00 pm

    +1 for more reader case studies and their follow up!

    • SZQ December 5, 2013, 6:54 am

      Ditto! Love to read the case stories and feedback on their progress would be even better!!

  • Kim December 4, 2013, 7:52 pm

    Great job Jake! You do have a talent for budgets. I think the hardest part for them will be cutting off the kids. I’m sure it will be an adjustment for everyone, but the kids will appreciate not having to spend their adulthoods taking care of Mom and Dad because they are broke. If they continue to live at home, they certainly need to pitch in. Also, if the son in the workforce isn’t making much money, maybe he needs to get a get a side gig or another job to help pay the bills until his parents can get moved. I see this as a great lesson so that the kids hopefully won’t repeat the same mistakes.

    • Jacob December 5, 2013, 10:58 am

      I think it should be framed that way in the family meeting as well. These changes are so the kids WON’T have to support their broke parents, but rather get to enjoy their fully-funded, retired parents and vice versa.

  • CTY December 5, 2013, 12:14 am

    The analysis & comments are incredible! Keep more coming.
    Just a thought for CF. She needs to find a job teaching under Title One. My son did this. The program will forgive student loans (for BA & MA Ed) & they will pay your mortgage or rent in full if you live within 5 miles of where you teach. My son paid his way through his BA-so no loans there–but they are paying for his MA Ed. Mortgage/rent free enables a lot of savings. Under 5 miles to work & riding a bike is a snap! This would solve their housing woes, $22,000 student loan, commuting costs and get in exercise. My son will buy a house in a different neighborhood once his daughter starts school in 4yrs. CF has no public school needs so no worries there.
    Also, son #2 needed an apartment while doing college. I recommended he rent a room from his brother–why pay rent to a stranger? He did this for 1 yr to establish residency for “in-state tuition. All of CF’s kids need to be pay rent–even if they need to take a loan for it! There are no free rides!

    • Joy December 5, 2013, 10:39 am

      What’s this about them paying your mortgage? I haven’t heard about that one. We live within 5 miles of where she teaches, so I’m VERY interested. I can’t find anything about this.

      My wife works in a title 1 school and was able to get a GNND house thanks to her job, and is on track for the $17,500 grant in 5 years.

      Also, there is a grant to pay the balance of the loans after 10 years of ontime payments for public sector workers.

      I know several people who have been denied these grants on technicalities, though, and government programs are not guaranteed to be around 10 years from now. So they can’t be the full plan!

      • Joy December 5, 2013, 11:10 am

        OK, I called the Dept of Ed and they said that is a state program. I called my state (Oregon) and they had never heard of it. What state is your son in?

        • CTY December 6, 2013, 11:45 pm

          The state of Utah was going to re-pay is BA loan (but he took no loans0< Utah would also pay for his MA Ed. He ended up moving to CA, they is paying for the MA Ed. CA pays housing if living w/in 5 miles of work.

      • Robin December 7, 2013, 8:37 pm

        Hi Joy,

        I’m in Oregon, too. I’ve known about the Teacher Next Door program for a long time but I’d sort of forgotten about it because I could never find any properties around where I work. Because of your post, I just looked it up again and typed in the zip code for the city I teach in, and there was one property listed! I’m excited! It’s actually a great little house I would be happy to move my family into but the listing expires tomorrow night so I doubt I’ll make it. The site says I have to have a HUD-registered broker. I contacted one tonight but who knows if it can all happen that fast. Anyway, I hope this house isn’t a rarity and there will be other properties available in the future.

        I was wondering what you meant by your wife being on track for the $17,500 grant in 5 years. Is that related to the house or to working in Title 1 school? I’m at a Title 1 school as well. I really need to figure out how to get on the plan to reduce my student loans as well.

        • Joy December 8, 2013, 5:19 pm

          Hi Robin,
          Good luck to you!!!

          We were able to do ours under the line like that – it can be hard to get it done so fast, but WE DID IT! This process takes persistent follow through. If you are ready for that, it can happen.

          The first house we found with GNND was about to close the bid period and we were able to get a HUD certified realtor to submit our bid and a mortgage broker to preapprove my wife quickly. Call around, you may be able to find another one if this one can’t help you. Don’t be afraid to call your broker and realtor again if things are getting close to the wire. They have a lot of other clients, and need to be reminded that deadlines are looming.

          If your bid is accepted, you’ll have two business days to get everything signed formally and back to them, so that can help a bit with the preapproval time needed.

          In our case, we got that first one rolling and everything seemed to be going fine. But it was on a well, which caused all sorts of issues since the appropriate testing hadn’t been done, and the repairs needed weren’t something HUD would do and the lenders couldn’t let us do them as part of a rehab loan since law required it fixed prior to sale.

          That one fell through 3 months into the process and it was heartbreaking. We lost about $700 in the process, though our earnest money was returned.

          Then we put a bid on another house that was about to expire, and didn’t get into the lottery for it because our paperwork from the first house wasn’t fully processed.

          The next day we put in a bid on another house that was going to expire the same night. We had MAJOR issues finding someone who could lend on it, get this, because the AMOUNT WAS TOO LOW! The list price was only 66,000.

          A mortgage broker friend of ours wrote a preapproval letter for a higher amount but realized after we submitted it that he couldn’t actually do this kind of FHA loan for so low.

          Then we tried to go with conventional financing and our credit union. That didn’t work out because of the condition of the home. We had to keep proving we had higher and higher amounts of money in reserve in order to fix everything on their list in cash at closing.

          We finally found a bank that specialized in small, high cost loans and had experience with GNND financing, through the listing realtor of the home. (Homestreet Bank). They were able to not only do the FHA loan, but get us an FHA 203k to do major repairs before moving in.

          We ended up with a new kitchen, new floors, new appliances, new water heater, electric panel, heat pump, cadet heaters, tub surround, and some reconfigured/added closets and outlets for $75,000 total loan, (not counting the free 33000 silent mortgage that gets forgiven) bringing the appraisal up to 109,000! We paid for about 6000 of the work ourselves, in cash.

          This house is perfect for our family, aside from being a tiny bit too small (no office, which is a prob since we both do lots of work from home). It’s 960 sq ft, 3 bedrooms, 1 bath, for our 2 teens, one dog, one cat, and 2 adult family.

          Our house payment including mortgage insurance and PITI is only $604.57/month. There are not rentals that cheap anywhere around here. Our former place was $1550/month, bottom of the barrel for the city we were in.

          This was well worth the 8 straight months of stress. Everything about our lives is more sustainable now.

          Keep watching those listings if you don’t get this one. Sometimes nothing comes through for a while, other times there are several places listed. If you don’t get this one, keep checking!

        • Joy December 8, 2013, 5:21 pm

          As for the 17,500, yes, that is for teaching in a title 1 school for 5 years. There is paperwork to submit annually, but I’m not sure you actually have to do it until the end of the 5 years.

          The 10 year forgiveness of the balance of loans is for anyone in public service who has not slipped into deferment or forbearance and has made 120 consecutive, ontime, full payments on a qualifying repayment plan. (Income based counts).

  • Matt December 5, 2013, 7:51 am

    Awesome assessment and I think its right on the money. The real key here I think will be actually making the necessary changes. The psychological impact of such a profound change might be daunting for them – I know it would be for me. I would love to hear about their progress (if they actually follow the suggestions).

  • Little House December 5, 2013, 7:51 am

    You rock with budgets, Jake! I think your analysis is terrific, and this particular one was difficult. Hopefully CF will take your advice. I think the hardest parts for them will be selling the house, cutting off the kids, and getting her husband 100% on board and committed to change. But, their kids are adults and if they sit down and explain what’s going on, the kids can’t balk. I’m sure they’d like to see mom and dad retire and not have to worry about taking care of them in the future…because that could happen if things don’t change for them. I wish them luck and gumption!

  • T.Lord December 5, 2013, 8:09 am

    The kids should be in on the discussion! (In the household, and here on MMM ;))

    I’m of mixed mind, when it comes to how I picture myself one day treating the kids I don’t yet have. On one hand, I want to provide for them, and on the other to teach them various things such as the importance of working. A middle ground, in other words: Neither coddling nor extraordinarily harsh. At least by the standards of the the ’70s-into-’90s US, I think that’s a fair description of how my parents treated my siblings and I. (Which means less coddlesome than some kids I’ve seen since, and more crazily luxurious than nearly anyone in all of history — Hey, I’ll take it.)

    So — I got a lot of help from my parents in paying for college, and in giving me a place to crash during my first job hunts as well as a few other stretches. But I ended up paying rent, which only made sense, even if just as a spur not to stay too long. I’d like to hear what the adult-student kids here are thinking wrt their best role in the household. Are they paying rent? Part of the budget discussion? This is not meant to imply that either generation is doing something wrong, only to raise the question. Given the debt here, maybe the kids could be pooling together at least a helper payment each month to (say) chip away at the most troublesome bits. “We’ll get $250 together each month from tutoring or whatever to go toward the most pressing of the household debts.” Something like that.

    Mom and Dad may *hold* most of the debt in their names, but the real unit here seems to be the household, and they should be (and maybe they are) having frequent pow-wows and progress reports.

  • Joy December 5, 2013, 10:36 am

    One more thing:

    Since she is a teacher, if they sell or get the house foreclosed, then rent for a few years, she will probably qualify for the Good Neighbor Next Door program from HUD.

    I’m pretty sure the requirement is that you or your spouse can’t have owned a house in the previous year.

    This allows you to buy a HUD foreclosure for HALF PRICE in a “revitilization area” that you work in.

    The listings can be few and far between, depending on the area, and it is a lottery to get the bid.

    Basically, you get a lender to prequalify you, then you watch the website like a hawk. You have 7 days to submit the offer, then there is a lottery as to who gets to attempt to buy the house.

    Since we weren’t yet legally married and my house was just in my name, my wife was able to qualify and get the THIRD house we attempted, plus funds to fix it up. (The first one turned out to have problems that HUD should have noticed before listing it, we didn’t win the lottery on the second one, and the third worked out).

    Teachers, firefighters, police officers, and EMTs qualify for this program:

  • Ellie December 5, 2013, 11:30 am

    It may not be so easy for CF and husband to move, and certainly not closer to Baahston. But that heating bill! Yowza! It would be worth the money spent to find an alternative to heating oil. Someone above mentioned electric baseboard heaters. We have them in our finished basement and they put out a lot of heat (on the rare occasion when we need them). They are liquid-filled and self contained. Just require installation by a licensed electrician. That and some kind of a stove, would save a bundle.

  • Paris December 5, 2013, 11:36 am

    Oh brother… What an interesting post. I am thinking about some solutions that hope they help.

    1. You need to talk to your husband first and if he can not put his act together, you need to take over the finances. you can assign an spending budget for him , so he will live the rest of your money untouched, or, that is what I did and worked REALLy good. I separated our finances. I am staying home now for the past two years with my kids. So, we opened separate bank accounts. Every money that comes in to our home gets calculated this way.
    30% to IRS for the taxes. We owe some back taxes.
    30% in to a savings account which is in another bank, so, not easily accessible.
    60% remaining gets divided by two and each one of us gets the half.

    Each one of us are responsible for the half of our joint bills. Like rent and utilities. The rest of the money, can be spent how we want it. This was a huge wake up call for my husband. I ended up saving tons of money on my half and created a nice savings account that is over flowing in to my VanGuard retirement account.
    My phone costs $30 per month while my husband is paying $130 per month. It is not bothering me anymore
    My husband on the other hands, had to dig in to his credit cards to be able to spend at the rate he was. He is finally learning ow to watch his spending. He paid off his credit card now and reduced his bills drastically. So proud of him.

    2. It is nothing mentioned about what your kids will do when you move. I would help them rent an apartment together in that west side of town and offer to pay for the half of their rent for six months or so. That will make you feel less bad and also gives them time to adjust and take charge. I believe this will be doable since your own move will save you tons of money.

    3. Not sure how bad your credit already is, but a shortsale might be an option to not spend the $8000. In reality, this is a money you don’t have. I don’t believe a shortsale damages you credit that bad. It is a process, but you can at least plan for a move. You will need to bring your husband up to date and tell him that you want to be able to retire sometimes and it is time to not be scared of the changes and do something about it. After all, your kids are grown and it is your turn to live your life.

    4. I would rent a small place with low rent, electric and utility bills very close to your work places. This will reduce your bills drastically.

    5. We are a family of four moved in to a 1000 sq home from a 3750 sq house. So I know how you feel. It is doable. Our kids are 12 and 6 and they share a room. I just informed everybody that we are not rich anymore and need to save for their college. They understood. So a meeting with your children is crucial.

    6. Again, a family of 4 eating almost only Organic food our monthly budget is $600. This is high since we eat only organic meat vegetables and fruit. So, your food budget needs to be recalculated. We live in San Francisco area. Not an inexpensive place.

    7. For heating, I recommend parabolic electric heaters. You can place one close to where ever you are seating and it keeps you warm. Our electric bill is around $35 per month this way. We never warm up the whole house. Just the room we are seating in. This is very easily done in a $1000 sq home. Just get rid of that huge oil bill. You can do it even before you move.

    8. Most of your debts appears to be for your kid’s education. You need to slowly ask them to participate and again, after they move, offer to pay half for a while till they can take over. It is their responsibility. I understand it is tough times for new generation to find jobs. But this approach will help them to develop thicker skin and prepare for life. You will still help them if they need help of course. But it will not be your responsibility. It should be theirs.

    9. After moving, see if ou can sell the two cars and buy one hybrid. This will be possible with all the savings you will have which will come with moving. You guys should either bike, or carpool together.

    10. Phones and other small bills and expenses should be changed slowly and replaced by less expensive option. Start an automatic transfer to the savings account and raise the amount gradually as you go. But make sure you create one and fill it up will $1000 for emergencies ASAP. So you can get rid of your credits cards. I would cut them all but one.

    Good luck and I truly hope I helped a little. I know it is it easy. But you live only once and you want to live a better life.


  • zelda01 December 5, 2013, 4:09 pm

    The housing cost looks typical Boston-area cost. I will give one more comment on the heating oil issue.

    It is *painful* paying for heating oil, for the people in this area who don’t have access to natural gas (and many don’t). I see some others have commented on possible alternatives, so I will throw in an example. What my friend did was create a spreadsheet with calculations for potential costs per heating method:

    Option #1 – Oil. $315/month
    Option #2 – Propane. $435/month
    Option #3 – Natural Gas. $130/month (not possible in his area, but a comparison)
    Option #4 – Wood. $200/month
    Option #5 – Electricity. $450/month

    So lucky for him, his chimney was of the type where he could put in a wood stove for winters. So he does sort of a hybrid version of the above with the wood stove, some heating oil, and a little electricity (in the form of space heaters when needed).

    It might be helpful to explore different possibilities, and come up with a hybrid method that would reduce heating costs.

    • Mr. Money Mustache December 5, 2013, 7:24 pm

      For people who aren’t about to sell their houses and move, check out Geothermal heat too (aka a ground-source heat pump). Our friend Mr. Frugal Toque upgraded his oil furnace to this new source for about $30k, and it saves him thousands per year. Excellent ROI.

      • Free_at_50 December 7, 2013, 9:51 am

        Another right on point. We have geothermal in the home we now own for heat, cooling, and water heater and it is fantastic! Low cost to operate and no outdoor compressor and fan running, making noise like we had with our heat pump in our former home.

      • reader in the rockies December 9, 2013, 6:31 am

        Not sure about the heat pump idea. We had one installed 6 or 7 years ago. Should be cheaper to operate. This was an outside air exchange pump. We have had a lot of trouble with the system, to the point that it has essentially been rebuilt. To make matters worse, natural gas prices have dropped a lot, so that the “emergency heat” natural gas furnace is now turned on all winter. We went through last summer without A/C (growing our mustache) and it was fine. In other words, our heat pump is now a not so pretty ornament next to the house.

        After our problems I did an online search, to find that the heat pumps have a known history of wearing out and needing extensive repairs. I should have checked this before buying. I don’t want to keep paying for repairs, when an efficient natural gas furnace is so cheap and so reliable to operate.

        • Mr. Money Mustache December 9, 2013, 10:18 am

          Good point – with natural gas so cheap in the US for the foreseeable future, simplicity and reliability of equipment becomes one of the biggest factors. And gas isn’t all that bad, environmentally, compared to heating with coal-generated electricity or fuel oil. This is why my own traditional heat is still gas-based. Solar comes first, since a South-facing window is automatic, asts for many decades, and never malfunctions, then gas makes a great cheap backup.

    • 9 O'Clock Shadow December 6, 2013, 8:52 am

      Google the Mitsubishi Heat Exchanger called the Zuba. It heats and cools from ambient air temperature, and is rated to heat and cool a home in -30 to +30 degree weather (Celsius).

      It is designed to compete with Geothermal, and runs purely on electricity, with the electric bill being about $200 CDN per month. And no digging! Digging can be a permit issue if they are in a well water area..

      The message boards from about 3 years ago show a high-side installation cost of $15K CDN, including ductwork for a 2000+ Sq. Ft house. This is Southern Ontario where we get +40 Celsius to -30 Celsius over the course of the year.

      If they had this, their house would have a pretty unbeatable feature over other homes in the area (better asking price). We have an oil furnace and will replace with Geothermal or the Zuba when we rebuild. Getting tired of warming our butts with what environmentally feels like a hobo tire fire in the furnace.

  • Bobwerner December 6, 2013, 1:14 pm

    Love the budget makeover articles. My concern is that most people will not follow the very good advice given. But since advice is what was asked for i will offer some suggestions. I think in general that Jacob’s advice is o.k.. I myself would be much more agressive. I’m in the same age category and live nicely on around $1,800 a month. On the extreme side is EER at $600 a month.

    So I would suggest a major hair cut here and really knock one out of the park and be able to retire in just a few years.

    Additional budget tweaks I would suggest — Cut total mortage + ins + taxes to $500 a month by buying a $100K home on an interest only plan. (You keep the principal payment and invest it at 10%) This saves an additional $600 per month.

    Cut donations – Really!? Your in debt up the wahzoo and your giving money away? Huh? $110 month

    Cut another $100 on utilities.

    Cut $40 on netflix/hulu and $70 on internet

    Cut $90 on life insurance

    Cut $200 more on food (my family of 3 eats very well on $200 per month)

    Cut another $60 on personal items.

    This amounts to another $1,270 in monthly savings.

    Your monthly expenses at this rate would be $2,234. Meaning your monthly savings would be around $5,000 or $60,000 a year. Since your annual expenses would be around 25K, for each year you do this you can retire for 2 1/4 years. Amazingly, if you count your social security income, you could retire in just 4 years. Each year after that would be a cushion. If you went all the way to 67 you would have in excess of 2 million in investments, so your net income from SS and investments would be in the area $230K.

    So it is up to you my friends —- choose wisely!

  • John December 6, 2013, 1:23 pm

    Excellent analysis, Jacob and MMM. To CF: $320 a month for cell phone service? Craziness! That’s almost the amount of rent I pay in my area. Check out ting.com or Republic Wireless and save the ass-clown rates for other people.

  • SCott December 6, 2013, 8:21 pm

    I live in the Denver burbs,(and only pay over $100 a month on gas and electric in the dead of winter), but I used to live in CT. I had enormous gas bills when I moved into my 1950s CT house also. So the first thing I did was turn the thermostat down, I eventually settled on 55 as that seemed to produce a reasonable bill and wasn’t terribly uncomfortable. At night we’d turn the thermostat to 45 and my wife, infant son, and I would turn a space heater on at around 64 in our bedroom. Electric is an expensive form of heat, but if you’re only heating one room it’s way cheaper than oil.

    The next thing I did was hit the basement with a $4 can of Great Stuff expanding foam and a caulk gun. I found numerous 1/2″ and larger holes in the sill plate that were allowing cold air to get sucked into the house. I sealed those up along with putting a bead of caulk on the entire sill plate (a major source or air intake).

    The next fall (I should have done this earlier) I hit the attic to check out the insulation. I found about 2 inches of 50s era fiberglass batts (code now would be somewhere around 18″) a completely uninsulated whole house fan, and numerous other egresses into the space. Again, a can of great stuff and some caulk along with pieces of insulation allowed me to close up all the spots where air was getting sucked into the attic. I then rolled out some plain old fiberglass batts (blown would have been better, but there really wasn’t a diy option at the time, home depot and lowes rent free machines now) across the entire attic. After that I used heat shrink window film on every one of our 50s era windows. At this point, I believe our bill was reduced to about $100 dollars a month even with a slight temperature raise (maybe 60f).

    This plan takes very minimal diy skills, costs less than $500 and repays you within a season. Also, you can generally write the cost of the insulation off in your taxes. Right now the biggest thing you can do is wear a sweater, stocking cap and mittens in the house while you turn the thermostat to 55f.

  • Mark December 7, 2013, 6:45 am

    Depending on wife’s age, she doesn’t have to wait 20 years to vest retirement, but probably only 10 years, meaning possibly only 3 more years of work instead of 13, or any number in between. However, the pension percentage of final pay improves up to age 65.
    (years worked x final 3 year average salary x age factor)
    From Mass Teachers Retirement site:
    “Specifically, you will be eligible to receive a retirement allowance if your effective membership date is: BEFORE April 2, 2012, and you:
    have 20 or more years of creditable service, regardless of your age, OR
    are at least age 55 and you have 10 or more years of creditable service.”
    Also, if they don’t move, Mass subsidizes energy improvements up to 75 percent of costs up to $2,000. They should get the free energy audit ASAP, since even if they do move, it would probably pay for itself, as well as show them how to work on next house.
    Good luck

  • bobwerner December 7, 2013, 3:36 pm

    Forgot to mention to have a home energy audit done. Most utilities subsidize these. So for $100 you will know where every leak is on your house and where to put insulation. They will also give you a nice cost structure plan for considering improvements. It is very realistic to be sub $100 on heat. That is mone on a3000 sq ft. home. It is zero here today and 70 in my house.

  • Tory December 7, 2013, 4:49 pm

    We live in NH-same issue w oil heat and no access to gas, and our elec costs are through the roof.

    What we and many of our neighbors use are pellet stoves. You can make your own pellets to burn and you can also purchase stoves that sit in your window, so no fireplace needed. An incredibly less exp option.

  • Mr Complainy Pants December 8, 2013, 7:07 am

    I would say overall a very good budget but for one weakness. There is no line for misc. I tracked my spending for years and my misc averaged 500€ a month. No matter how hard I tried I could never get it under that amount. I’m sure there was some optional stuff in there but for the most part they were bills that had to be paid.

    It ranged from everything from dental work to car repairs to everything and anything in between. For example the wife just recently needed a root canal (125€) the switch from summer to winter (move from a warm to a cold climate) required everything from new winter tires to thermo socks (ahhhh warm feet) to replacing all our light bulbs with LEDs(less than expected as I really shopped around) To an upcoming wedding meaning flights hotel etc
    (and being older I refuse to stay at peoples house). This aspect of budgeting I found the hardest to manage.

    But my point here is that for this couple is that they are more likely to be Complainy pants than Mr Mustache and they need to be realistic on what can and can’t be achieved So a few words from someone whose been there.

    1. Get the kids independent as fast as possible, and more importantly no bail outs. One sister in law is forever buying stuff for the grandkids the other (on number 4 of 12) hasn’t spent a penny and even with Christmas coming I don’t see that changing. All her kids are 100% independent and know there is no money in the bank of Mom and Dad.

    2. Move – your housing costs are killing you

    3. Ditch the cars, get an older gas efficient one, yes one car with two jobs and kids will be a huge pain in the ass but the savings are worth the hassle. Where you draw the between age and repairs I don’t know. Do you drop 3 grand rebuilding an engine as happened to friends after they bought an older car
    or do you put that into a newer car even if it means a few years of payments but no repairs.

    Edit Andrew Hallam in his great book Millionaire Teacher walks through how he did it, highly recommended.

    4. Use Dave Ramsey to get debt free, no matter what you think of him it works!

    5. Pay yourself first, debt than savings

    Finally understand your DNA is more Complainy Pants than Mustache so accept that at times it will be two steps forward one back. For myself even after 10 years of budgeting and frugal living I still struggle with all of this. Simply pt I love shopping and spending money still makes my heart race. Hense the CP (complainy pants) label. But the difference from 10 years ago is I’m much better at managing our money and you too will find that overtime you’ll overcome and conquer.

    Good luck CP (Complainy Pants)

  • Lactofermentgurl December 10, 2013, 10:00 pm

    Ah, Massachusetts oil heat. I grew up in a oil house and I wore a parka inside all winter long. My parents still keep the heat at 50 – 55, and use kerosene filled space heaters to heat only individual rooms. So until you move, turn the thermostat way down. After all, discomfort is temporary. And an added plus to 50 degree house: it does wonders for your metabolism. Your body adapts. In fact, thanks to my early training, to this day, I cannot sleep with heat on.

  • Carolyne Thrasher December 11, 2013, 9:38 pm

    Wow! That is fantastic advice except I think one thing is missing. Family. Why ditch the kids? Obviously the kids need to stop consuming and start producing but the strongest asset I see is that there are SEVEN capable adults not just two. Yes 4 are in college but a college degree today does not necessarily translate into future adequate wages. I would call a family council, lay out the details, ask everyone to put their future on hold for 1 year and together come up with a way to ensure that all 7 adults come out stronger in the future. Our western mindset tells us that being “independent” is all that. That’s a load of bull. Who knows maybe this family has every part necessary for starting a major kick ass business and they could all be multimillionaires in 10 years. Or maybe they all have the desire to help orphans in Ethiopia and they all move out of the US and start an orphanage. C’Mon don’t throw out the concept of family just because the kids are over 18. I’m not just talking smack. Currently I am a SAHM but I can do that in this economy because my elderly parents bought a house with my husband and I. Instead of spending $8000+/mo to live in assisted living my parents will age in place with my husband and I. It is a complete win-win financially but even better are the emotional and social aspects. We get a 3600 square foot house on .42 acres for taking care of two of the best people in the world. In addition, I’m also an avid gardener and you can grow a lot on .42 acres. So don’t discount the power of family.

    • Nd February 3, 2014, 9:41 pm

      Thanks for this comment, I read all the way through the comments, and though this came up a very few times, it seems most readers don’t consider that generational segregation and independence is not necessarily the only or best way. I know 18 and out/ retired parents should not need help from kids idea is popular. and it’s fine. But that is a very specific (and recent) culturally developed idea ( just like buying cars and crazy ammounts of clothes and plastic junk). It is not in itself good.

      I spent 10+ years growing up in a three generation household, and we were all better for it. Sure, it was tough to move halfway across th country while I was in middle school and to fit six people in a 2 bedroom house. Etc. but it’s also mustachian and family oriented.

      Not trying to be critical — but thinking way outside the box on this can be great. Also — this family seems to have homeschooled. That’s countercultural and family oriented. Maybe sticking together can help them all be more financially stable.

  • Chuck @ Tortoise Banker December 18, 2013, 10:49 pm

    Jake… Tough love! I work in a bank and sometimes have to give tough love too… Had to tell a lady she aught to sell her truck… And get rid of the 34000 truck loan!

  • Kristin November 22, 2014, 8:08 pm

    The case study and the comments were very interesting. I’d love to hear how they’re doing now. If they’re in the greater Boston area, the idea of getting a cheaper house or even one the same price anywhere close to the city seems overly optimistic. Even one-bedroom condos can cost more. On the other hand, if they have empty bedrooms, and if they are comfortable sharing space with strangers, they could rent out rooms at about $550 or so a month, possibly more depending on the situation. Craigslist is full of ads like that. That and carpooling or taking commuter rail might help.

  • kindoflost August 30, 2016, 8:01 pm

    The common theme on all these case studies is the “boiling frog metaphor”. We can’t believe people make those decisions because, learning about the situation only now, we are thrown into their “boiling water”. It took them years to “achieve” their status, so for them is normal. But I bet that if they are reading this blog paying attention, they probably know most of the answers before asking the questions.

  • stellamarina January 15, 2017, 2:38 pm

    So……just reading through this old post because it came up on the random picks. I feel like I just read a novel to find the last chapter has been removed from the book! What did they do? Inquiring minds want to know.


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