What Would Dave (Ramsey) Do?

[Joyous_5]

Hi All,

Here I am, once again looking for advice and ideas . . .

I have been freelance writing (magazines/newspapers and some writing for businesses) as my sole income sine 2008. Since then I've added nonprofit marketing work as a consultant. I currently work about 15 hours a week as our son is 3 and only has a few hours of daycare a week.

Last year we moved into a different house (more privacy, off a busy road, quieter=yay!) but have had one thing break after another at this place including the furnace which needs to be replaced this year or next. That might have all been okay financially but both of our vehicles also died in 2012. Now we are in a place where our expenses are greater than our income.

I think we have three choices:

1) I find a second part-time job, which I can do in the evenings/on Saturdays to help pay the bills
2) Sell my husband's new (used) truck which we purchased from his father (would save us about $400/mo if you count registration, inspection, insurance, etc.) and go to one vehicle
3) Keep going as we are and draw off a small inheritance my grandparents left me until our son starts school in two years.
4) Sell my suspense novel, "Epidemic," get off-the-wall reviews and end up on the best-seller list and rejoice! (okay, that one is maybe a little less than practical.)

We are planning to take Dave Ramsey's FPU course beginning later this month. In the meantime we're just cutting down on expenses as much as possible, selling stuff on Ebay, I'm trying to get more writing work, etc.

What would you do in our circumstance? Is there something here I've overlooked? I'm also open (though not excited about) accepting a part-time job during the day, putting our son in childcare and then working on writing/marketing in the evenings. But the childcare thing is a BIG negative, cost-wise. It will practically eat up half of what I make unless I find a really well-paying job.

Thanks in advance for any insights. Everyone here always has such good ideas and feedback--I appreciate it.

[bunnys]

I would sell the truck.

If that wasn't enough, I'd then do a cost-benefit analysis re: the additional part-time job and see if the would REALLY be worth doing.

[fidgiegirl]

I'd say of the possibilities you offer, I'd consider them in this order:

-Truck
-Sell novel - seriously! Who cares if it doesn't make it to the best seller list?! It could provide needed income, although I suppose if you didn't have the computer to do the publishing that would be another sink. But if you already do, well, that money's already gone, so leverage your tool! We have several forum members who are self-published. I wonder if they would offer tips?
-Part-time job, but only very selectively. As bunnys and you yourself said, it would have to be super duper worth it.
-Inheritance only as strictly necessary.

Remind me - in a past thread, I think we all suggested taking on an additional child to do home child care - was that on the table or off?

[Joyous_5]

I'm thinking that the truck is the best bet--just feel bad asking my husband to sacrifice (yet again) so I can pursue this dream of writing. Though honestly, when I showed him the math with a full-time job and full-time childcare he agreed it was ridiculous. We're in a small town so the best paying work is a 50-minute commute, then the car gets more miles/more wear, etc.

Thanks for your ideas, Fidgie--you're right, there's certainly no downside to publishing my novel. There are publishing on demand places now which make it much more affordable and even a publisher which a friend sold her book through which offers no advance, but royalties on all the books you sell. It would be passive income at this point--even if it wasn't a lot.

I'm also teaching (first time ever!) some adult freelance writing classes this month. I'm looking forward to that! Childcare--ehhhh--it's really not me, but maybe I'll meet a parent at my son's preschool who needs a few hours. I find it exhausting to work with kids (feel bad saying this as a mom); the writer in me, I guess. But I'm open to all ideas and suggestions at this point (well, as long as they're legal and moral!) :)

[fidgiegirl]

Well, since you invoked his name, remember Dave's mantra: live like nobody else now so you can live like nobody else later.

[try2bfrugal]

I guess it depends how much day care is where you live, but day care is so expensive by me that unless someone has a relatively high paying job it is not really worth it for many jobs after factoring taxes, commute costs, needing more convenience foods, etc. When my kids were little I went to school nights and weekends so I could get a decent job once they started school.

I would think long term about your finances, like which way would you come out ahead the most over a ten year or longer period. That might be cutting expenses now, living off the inheritance money and going to school for something where you could eventually make double or triple what you do now.

If it were me I would probably not spend time on the novel since that is really a long shot and more of a hobby. That is something you can work on when you have your basic income and outgo in a better place.

[awakenedsoul]

I think Dave would say to do #1 and #2. $400. a month is a lot! That's what you said you will save if you sell the truck. I found that once I started following Dave Ramsey's steps, things really snowballed ( in a good way.) I bet without the stress of the truck, you'll attract more money and work. It's nice that you have the inheritance money if you need it. I would keep that as my emergency fund.

[lhamo]

I would sell the truck -- this post from Mister Money Moustache might help convince your DH that it is the right/budget conscious thing to do (warning, some strong language over at MMM!):

http://www.mrmoneymustache.com/2012/09/04/its-never-too-late-to-ditch-your-gas-guzzler/

I think that is what DR would recommend, too.

Next, look at other ways to boost your PT income without adding to childcare costs. The evening job is one option, if you can manage that and not have your life/marriage fall apart. Another option would be to look for someone with a child of similar age to yours to trade off child care with -- maybe one have the kids mornings and one afternoons, or alternating days or part days. Then you can focus on scaling up your writing work on the days you don't have the kids, while not having to pay for the extra care. And while two three year olds might be a bit of a challenge, as they get a little older they can pretty much entertain themselves if they are friendly. Obviously this depends on you being able to drum up the writing business as an income generation strategy, but this could easily add another 10-15 hours of work time to your schedule if you planned it right.

The inheritance is there as a buffer, and I don't see anything wrong with tapping into that for large, one-time expenses that you haven't managed to save up for. Obviously better if you can save it, but if you need to use it to avoid going into debt, I think that seems reasonable.

The good news is you only have a couple more years before your little one starts school, and then you will have a lot more freedom to generate income. Hang in there! It will go faster than you think.

lhamo

[Mighty Frugal]

Before you self-publish why don't you try to find a literary agent to take on your novel and get it published by a publisher?

I vote for number 4

go for it!!!!!!!

[Joyous_5]

Heee hee, I liked MMM's idea of printing out a photo of him . . . to knock some sense into the reader! I also like the idea of trading childcare. I can't think of anyone I could do this with at present, but with this new preschool it's possible we'll find another parent. Free childcare would be great! Thanks for your feedback and ideas . . . time certainly is going fast and I'm not wishing it away~it's a great period of life. :)

[Joyous_5]

Thank you everyone for the helpful advice. Still in negotiating phase with hubby but he did offer to bring his truck to the local dealer who buys vehicles outright to see what he'd offer. I'm mostly worried about the dumb thing breaking down (have had to do two repairs in the few months we've had it). After a year of both vehicles breaking down left and right (expensive repairs, too) I shiver when I hear the slightest noise.

I may have to dip into inheritance to offset the cost of replacing our furnace. But it would still leave us with about 1/2 of that money. And hey~that's 1/2 that we didn't have last year at this time!

Thanks again--and I am pursuing the book thing, absolutely. It's completely written (2008) and I've re-written/edited/tweaked it a lot since then. I've made a list of 50 literary agents and publishers who work with unagented publishers and am going to work my way through the list.

[fidgiegirl]

Joyous_5, conventional wisdom would say you'll get more for the truck on the private market. I would hate for you to give it up and not maximize the return for doing so!

[mamalatte]

There may be federal or state tax credits or rebates for replacing the furnace--worth looking into. Definitely agree with others send out the novel and see what happens! Staying home with little one in the pre-school years has huge non-monetary value, in addition to saving the $$ cost of childcare. If you are not that into the babysitting idea, which I totally understand, do you have any skills like gardening or organizing or teaching piano or tutoring or dogwalking that you might be able to do for some extra cash in and around your neighborhood? Since you are a writer, I've seen ads for paid online "blogging" but wasn't sure if those deals tend to be scams or not.

[bunnys]

I agree w/ Fidgie. I just bought a new car and I know the worst part of it was the anticipation of dealing with the sharks. I know that selling your car is another one of those shark-infested waters. But there is SO MUCH information on the internet that teaches you about all the scams that are scary and regularly used so that if you do sell it privately you will protect yourself against being shafted.

There is nothing that will make you feel more empowered selling it privately than being really well-informed.

[Joyous_5]

These are great tips--thanks! We've decided to list the truck privately and will check out info on how to do so, and also will check into refunds or tax credits for the furnace. That's wonderfully helpful.

Now I have a Part II of my initial question: What is the next step in the Dave Ramsey plan? Let's say we put all our money together: savings, some stocks we sold recently and small inheritance. We could then set up the $1000 emergency fund, pay off our car and our new furnace. We'd have a small amount left--so would the next step be to continue adding to that money ($209 that would have gone for car payment, etc.) to our savings to build up the 3-6 month emergency fund? It's sort of a scary idea to let our savings get so low! Any ideas from those of you familiar with his plan?

[awakenedsoul]

Would you be debt free? The baby emergency fund is $1,000. After that you set up the larger emergency fund. I like to have a year's personal expenses in mine. I think Dave says 6 months. In this economy, if I remember correctly Suze Orman says 8 months...a year if you're self employed. When I had my business, that meant having a year of business expenses in savings, as well. You could look on his website and check the steps. They're in all of his books, too.

[Joyous_5]

Yes, we'd be debt free (except the house). But going from what we have now in savings to only $2000 ($1K pf that being the emergency fund) seems so, I don't know, irresponsible! I know logically it's not--more of a fear response, I suppose. I keep thinking about what my grandparents (who were very frugal and well-off) would do in my situation. I want to make the "right" choice with the money they left me. I dreamed of taking my husband and son on a trip someday with part of the money (my grandparents were also world travelers). But they also bought their house with cash and never carried debt. So maybe I should re-label this post, What Would my Grandparents Have Done? :)

[awakenedsoul]

Usually what happens is that you can build that savings account up each month. When I got out of debt, I had $250. a month I was no longer paying in interest on my car, SBA loans, and credit cards. I also cut my expenses by $10,000. a year. So, I quickly built up a cash reserve. Once you have the large emergency fund in place, I believe the next step is to pay off the house. The idea is not to spend the money on wants: vacations, (sorry) new clothes, treats, splurges, etc...
You are redirecting your energy, and it works quickly. I was amazed at how much faster I got out of debt on his plan than I expected. You build momentum. Applying the old loan payments to savings really makes it happen fast!

[Joyous_5]

Thanks for an inside glimpse, AwakenedSoul--I did just get to that part in the book last night, where he talks about what to do if one already has a significant amount in the bank. It's a leap of faith, in some ways, isn't it? But it would be exciting to see our savings going up, up, up instead of down, down, down, that's for sure! Do you mind if I ask what type of things you did to cut your expenses so significantly? It feels like we're getting down to bone around here (well, I'm exaggerating a bit!) and am curious. Also, how long did it take to build up your cash reserve? In the book he says maybe 2ish years, but obviously it depends how much one is ultimately shooting for--just wondering what your average was. Hope I'm not being too nosy!

[awakenedsoul]

Mine built up almost immediately. I had a windfall right after I paid off the debt. It's so connected. I received a check for $25,000. I paid off my credit cards, auto loan balance, and SBA loans. My house was already paid off. I had $10,000. left over that I put in my emergency fund. After that, I made big changes in my life. I closed my dance/yoga studio, paid back my students their tuition, and got refunds on my insurance and studio rental deposit. I put that money in my emergency fund. I sold my floor, and applied that to the emergency fund, too. Then I started really cutting my expenses. I started taking the bus and bicycling for errands, shopping at Costo once a month, growing my own food, making my own soap and laundry powder. I stopped spending money on clothes, classes, and shopping. I canceled my phone and got a Jitterbug cell phone for $15.00 a month. I canceled my television. I started walking, hiking, and knitting, which are all cheap hobbies. I quit buying books and ordered them from the library. My life circumstances changed, and I was able to retire at 47. I had expected to work until my 90's. I've kept up the discipline and I now make saving money and reducing my spending my top priority. I do yoga in my living room every day.
I have started splurging on travel. I budget $1,000. a year for two nice trips to Carmel. But, it's a luxury, and I would give it up if I needed the cash. I have a tiny house and very low utilities, which also helps.

[ToomuchStuff]

What is the next step in the Dave Ramsey plan? Let's say we put all our money together: savings, some stocks we sold recently and small inheritance. We could then set up the $1000 emergency fund, pay off our car and our new furnace. We'd have a small amount left--so would the next step be to continue adding to that money ($209 that would have gone for car payment, etc.) to our savings to build up the 3-6 month emergency fund? It's sort of a scary idea to let our savings get so low! Any ideas from those of you familiar with his plan?

I did a quick google search of what he calls the "baby steps":
WHAT ARE THE DAVE RAMSEY BABY STEPS?

1,000 to start an Emergency Fund ($500 if less then 20K annual income)
Pay off all debt using the Debt Snowball (smallest debt to largest, ignore interest rates unless two identical)
3 to 6 months of expenses in savings
Invest 15% of household income into Roth IRAs and pre-tax retirement
College funding for children
Pay off home early
Build wealth and give! Invest in mutual funds and real estate.

The whole point of the thing is once you have paid off your debts, you are both debt free, and have a habit of putting money towards a goal. That should allow you to build up your emergency fund and other goals quicker. (new habits)

[frugalone]

Coming into this late, but I'd say sell the truck.

[Joyous_5]

Thanks very much, TooMuchStuff--that was nice of you! And Frugalone, we just put the truck on Craigslist and are planning to add to our local paper tomorrow. Keeping my fingers crossed!