In Naked With Cash, seven anonymous Consumerism Commentary readers publicly track and analyze their finances on a monthly basis. For almost a decade, I tracked my own finances on Consumerism Commentary; now I’m sharing the benefits of public accountability with the participants. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series. This month, the participants are discussing education.
JW is thirty-one years old and a father of two. He works in retail and is underemployed, and his wife and kids are on state medical plans. Their household income is supplemented by SNAP (food stamps). Read his bio for more information about his family’s situation.
His goal is to be able to provide for his family while still tithing 10% of his income to his church. JW is on Team Neal, with Certified Financial Planner Neal Frankle. Get up-to-date on JW’s progress by reviewing his update from last month.
JW’s own analysis and comments are followed by feedback from Neal Frankle and budgeting expert Jacob Wade from iHeartBudgets.
JW’s comments and analysis
College and education planning. We currently do not plan on paying for school in the least bit for our children. We do have a savings account for each one. We add $5 each month to the six-month-old’s and add $25 per month to the four-year-old’s account. This funding may or may not go toward school.
My wife and I both paid for school via grants, scholarships, and loans. Neither of us had any family financial support other than help getting to and from school. Since graduating I have learned a good amount about the scholarship process and how to successfully obtain them. I plan to help my children develop what they need to be successful in obtaining scholarships and grants to pay for school.
While at school my wife racked up $15,000 in student loans and I racked up $20,000. When we got married we had $12,000 and $16,000 left to pay. We paid only the minimum on these until all of our other debt was paid off. After struggling to make my loan payments I learned about the Income Based Repayment (IBR> plans and have been on one for the last three years. Currently we have $3,338 and $15,450 still due.
Her loan has a rate of 5.45% and mine has a 0.39% rate. That $3,338 is right at the point where I am trying to figure out how to pay it off before the year end. There are some competing priorities for that extra money. This will be something we plan out during our Family Planning Conference in October.
Money making efforts. I have had a few items posted on Craigslist and eBay. While I have had a few people express interest, they resulted in no sales this month. For items that don’t sell I look at the list price, my description, and even my pictures. There is usually something to improve. After re-listing a few times with improvements, I’ve had no luck this last month. There has just not been enough interest in what I have listed. I have some other things to still list so I might mix up what I have listed.
Top spending. The car decided to have an issue this month. The symptoms made it look like a head gasket needed replaced. The fear was it was going to be a cracked head. We looked at used vehicles and ran the numbers on our car. This is where the updated value of our car comes from this month. It turned out to be a pump that was spraying the head. This would have caused the head to rapidly heat and cool likely causing it to crack had it been ignored. The total cost of the repair was $206. I spent from the car repair fund, which we add $65 to each month. We potentially saved $700 to $1,700 by not waiting for the head to crack.
Prescriptions. My wife resumed her Rebif treatments for multiple sclerosis this month. The costs of treatment are covered by a grant through a pharmaceutical company. Without the grant the cost would be $2,810 per month or $33,718 per year. This prescription by itself would max out the $10,000 cap for the best available family health insurance policy through work. We would also no longer qualify for the full grant (a partial grant might be available) with an insurance policy. Rebif is also the least expensive of MS treatments.
Job hunt. I was called back for a second interview for a position I interviewed with last month. After three weeks and not getting response from the HR department I got an email saying I was not selected, but hours after the email went out, I got a phone call to schedule the second round interview. They do plan on a third round of interviews soon.
I also had an interview for a position that I’ve interviewed for before. The last time around the timing was not right. It was right before our baby was born and would have required me to move and then move the family out a month later (causing me to miss her birth). Both positions are IT roles.
Rental. We have begun looking at rentals in this area. This is something we can make work with sacrifices in other areas such as saving towards our next vehicle, eating out, personal spending, saving toward mini-vacations. That spending would need to practically disappear. Also, we would reduce our accelerated student loan payments. These categories account for up to $1,050 each month.
A common rule-of-thumb is housing expenses should be between 25% to 35% of income. I even found 28% recommended here at Consumerism Commentary. The $1,050 we could make available would be above that rule-of-thumb, but we set a budget less than that and we are looking at it including rent and utilities.
Feedback from Neal Frankle, CFP
I have no problem with your decision to stay out of your childrens’ education funding. I actually think you are doing your kids a great favor by making them responsible for their own schooling. I am also glad that you have an understanding of the grant system and plan to help your children obtain this funding. I do want to discuss a few other ideas.
In your check-in this month, you provided background on you and your wife’s student loans. While you have done a very good job towards extinguishing this debt, the loans took a great deal of effort and hard work to take care of. And as hard as you’ve worked, you still have student loans. This is a burden I’m sure you’d prefer your children not have.
I would like to hear more about your plans to help your children avoid needing student loans to get through college. Certainly your goal to help them obtain grants helps, but I’d like to hear more. What are your thoughts about community college? What other ideas do you have?
Well done on your plans to pay off the debt before year end. What are the other priorities? Are these family or financial issues? Do you need help ordering these alternatives?
Kudos for continuing your job search. And I love the tenacity you demonstrate by your continued attention to all opportunities. Keep it up.
Your idea of buying a rental property intrigues me. I take this to mean that you are considering buying a rental property. I love real estate as an investment but I do suggest you proceed with caution. It’s critically important to make sure you have enough cash flow to hold on to the property during periods of vacancy and to keep the property maintained.
I wouldn’t be too concerned about the 25% to 35% rule as that pertains to personal housing rather than housing as an investment. But I do think it is very important that you look at this rental as a business. Make sure you have enough resources (time and money) to get you through the tough times. With your current cash flow somewhat restricted, I’d like to hear more about this idea. Have you run the numbers assuming fix up costs and vacancies?
Feedback from Jacob Wade
Grants and scholarships helped my wife immensely to get through school with minimal debt as well. Well, by minimal I mean $24,000 in student loans for a $120,000 education. So yes, definitely pursue those if possible. It sounds like paying for their education is not much of an option at this point, but I’m glad you are putting a little away each month, as every little bit counts, and the longer you save the better.
Also, it sounds like you have some promising interviews coming up. What are you doing to prepare for those? I know this process has been long and hard, but it’s best to approach each interview like it’s the first of your job search, with confidence in your ability to kick butt! Definitely excited to hear about these opportunities next month. And I hope you can work something out with the rental, but don’t rush it. I recommend securing a job before making that leap.
Feedback from Luke Landes
After asking the Naked With Cash participants for feedback about the series, I heard that at least some were interested in commentary from me. The experts generally cover everything, but I’ll add my thoughts as well.
The experts have already pointed this out, but student loans have been a burden for your family, and you should do what you can to make sure loans are not as much of a burden for your children. There’s good news: your children are still young and you have lots of time to prepare them for the future. It’s clear you prioritize higher education as a concept, and that will make your children’s ability to qualify for scholarships down the road easier for them.
I’m glad you were called back for a second interview for the one job, but I’m concerned that this job hunt process has been long and stressful. It doesn’t surprise me that the human resources departments you’re dealing with move slowly, but your efforts for finding a new job have been going strong since January.
Granted, you are working now and the need to find a new job isn’t immediate, but I’d like you to analyze yourself in this area. Here are a few questions to ask yourself.
- How do you perform in interviews?
- Are you able to showcase how you are a perfect match for each position?
- How well are you communicating your ability to perform in these roles at a high level?
Keep up the progress! I’m looking forward to seeing how a new rental changes your financial picture and how you address any new challenges.