Three months have passed since I committed to putting all major expenses on the table. The dialog and introspection that post inspired have created big progress in my finances.
My wife and I have gone from running a big budget deficit (requiring us to supplement my salary with the proceeds of the sale of our business) to having a new, dialed-in budget that allows us to live on my salary while accelerating our goals with freelancing income.
In April I laid out six hypotheses about my finances. Here they are, along with the status of each:
1. I should sell (or otherwise be rid of) my enormous home, moving into something much smaller and less expensive.
Kate and I have talked at length about this. As the real estate market recovers in our area, we’re probably within a year or two of being able to sell our house at a very small profit after expenses.
We’ve decided to stay in the house for a few reasons:
- My credit is trashed, so getting rid of the house would mean renting or getting into funky financing situations.
- We like our home and love our neighbors. Leaving the house would carry high emotional and quality of life costs.
- We’re not sure there’s much to be gained in terms of real cash flow, unless we did something drastic like moving in with parents or living in an RV for a while (both of which were discussed, however briefly).
The new budget effectively killed the discussion of leaving the house. Being able to live within our salary and use freelancing income to pay off the second mortgage has allowed me to stop seeing the house as a ball and chain on our finances.
2. I should absolutely not have any more children.
As a couple struggling with infertility, babies do not come cheap. It’s either adoption or IVF, both carry a hefty cost.
Bottom line: we don’t care about the cost. We want more kids, and we’d borrow to have them. Period. Very, very fortunately, we have savings in place to fund the next baby (or babies).
3. I should not continue to send my children to private school.
We’ve been back and forth about this all summer. We’ve loved our son’s school, but now is not the time for us to be spending $550 per month on kindergarten.
This decision has been a tough one for me, but it got much easier once I acknowledged two facts:
Of all my adult friends and family, I can only think of one person who attended private school. In other words, it would appear things work out just fine for public school kids.
A big part of sending my son to private school was ego. Yes, I like and value their educational approach, and we’ll miss that. But part of my desire to send him to that school was being able to say I was sending him to that school. Not a good reason to send $550 per month out the door.
4. I should cut my grocery budget to $100 per person, per month, and I should never eat out.
We’re in the middle of attempting this now. My wife has been a great sport, as grocery shopping falls to her. I’ve assured her I expect we’ll “fail” on this part of our budget for a few months while we learn to spend less on food.
Our first step in trying to get our grocery budget down is to only use cash to buy groceries. Every week my wife takes out $100 cash for groceries. When it’s gone, it’s gone. Suggested by my savvy sister, we expect the high awareness that comes with using cash to make the transition to cheap groceries easier.
We’ll still eat out – just much less often. We’ve come a long way from averaging over $300 per month at restaurants.
5. I should sell both my cars, use the proceeds of the sales to buy one less expensive van, and become a one-car family.
Actually, we’re keeping both cars. Neither is financed, both have relatively low carrying costs (although not as low as I tried to tell myself), and both can last us another ten years or so.
But our driving habits have changed: I walk or ride my bike as often as possible, and my wife uses our cheap-to-drive compact as her primary “around town” car. I have to admit it’s annoying to load our kids into the little car, but my wife is being a trooper about it.
6. I should drop, or drastically reduce my family’s health insurance coverage.
Boy, did this cause a stir. I was serious about letting go of my wife’s and my health insurance coverage, but I saw that our budget could work without adding that risk to our financial picture. The only change I’ve made is to move the kids to high deductible health plans at a savings of $160 per month. In October I’ll be able to shop a Health Exchange Marketplace for a plan to cover the whole family, including my “uninsurable” wife.
I expect this item in the budget to increase rather than decrease with the ironically-named Affordable Care Act. Where our coverage currently costs $650 per month, I’m bracing myself for premiums north of $1,000 per month. We’ll see how it all plays out.
So there you have the follow-up. Nothing that feels too drastic, just a commitment to live within our means and start generating momentum toward a positive net worth.