Last time, we talked about how to get your significant other on your side before quitting a job. This time, we’re making it personal. You see, Mrs. RB40 has been complaining about her job more than usual. She is in a 6 month long leadership training program and it’s adding a lot of stress to her work. Quite a few of her coworkers retired earlier this year and they haven’t been able to hire any replacements yet. There is a lot more work for the people still working and things aren’t going to change anytime soon. This summer has also been extremely busy for both of us and we all feel wrung out.
Mrs. RB40 also turned 40 earlier this year and I think she’s having a mini midlife crisis. She has been practical for many years and seeks financial security of a stable job. Lately she has been talking more about her neglected creative side saying she wants to give it more time. She actually enjoyed putting together the bulletin board project that I delegated to her (for the co-op preschool.)
So can she quit the Human Resource department and devote her time to folding origami at home? Of course, this is a shot of my own medicine. Now, I know how she felt when I told her I wanted to quit my job. J I want to be supportive, but she has to do a little more work to convince me.
First of all, I’m not sure how serious she is about quitting her job. It seems like the general malaise that everyone goes through when work is overwhelming. Would the situation improve after her training is over in October? Is her company planning to hire more people at some point? Her work load would reduce a bit and she’ll be less stressed with more co-workers.
As a man, it’s in my nature to want to fix things when I hear there is a problem. However, I found this isn’t necessary what women are looking for. Sometime they just want to complain a bit and I should just listen with a sympathetic ear. Is this one of those occasions or is it time to rework Mrs. RB40’s exit strategy? Mrs. RB40 isn’t the best communicator and we need to sit down and have a serious talk about this. It’s up to her to convince me that she is serious. For now, we’ll just make some estimates and if she’s serious about quitting then we’d have to do a retirement dry run.
Let’s go over our finance and see how we’ll handle the loss of Mrs. RB40’s paycheck. I’ve been tracking our expenses for many years now and I’ll use 2014 numbers here. It’s really useful to be able to pull these numbers whenever we need. If you’re not tracking your cash flow, I highly recommend it.
We spend about $4,500 per month. That’s a comfortable level for us. Let’s dig in a little deeper. We’ll just go over the big ones and see if it’s possible to reduce them.
If Mrs. RB40 is set on staying in Portland, we would consolidate our properties and move into our duplex. Unfortunately, the proceeds from the property sales won’t be quite enough to pay off the mortgage at the duplex. We’ll need to empty our cash savings to get rid of the mortgage all together. Even with no mortgage, our housing cost will still be around $1,000/month due to property tax, utilities, maintenance, and insurance.
This is mostly the cost of preschool. We could reduce the number of days Jr. attends preschool and stop going to lunch bunch (noon to 1 pm.) That would reduce the cost to about $200/month. Another option is to take him out of preschool altogether and educate him at home until he goes to kindergarten in 2 years. If both of us stay home, we’d have plenty of time to spend with him. I think preschool is good for the kid so I probably wouldn’t cut back completely unless we really need to.
Not much we can do here. I think we’re pretty reasonable with our grocery spending.
We’ve been traveling more in this year so our expense is higher than previous years. We could cut back on traveling for a while if our income is reduced. We can probably reduce this to about $100/month.
Health Insurance: $?
Currently, we’re on Mrs. RB40’s employer sponsored health insurance plan and we’ll need to find our own coverage once she quits her job. I browsed around a bit at the state’s insurance marketplace website and it looks like we can get a mid tier coverage plan for about $500/month.
Alright, so far we reduced about $1,800 from our monthly budget. I think we can probably cut another $200 from all the other categories so the estimate is a reduction of $2,000/month. Unfortunately, we’d have to add in $500 for health insurance. Our bare bones monthly expense would be about $3,000/month. Would our reduced income cover that?
Currently, our take home income is about $5,500 per month.
- RB40’s paycheck: $2,800
- Rental Income: $100
- Online Income: $1,700
- Dividend: $700
- P2P: $50
- Misc: $150
Here is our projected income without Mrs. RB40’s paycheck
- Rental Income: $500 – We could rent one unit of the duplex out as a vacation rental. I’m pretty sure we can get at least $500/month.
- Online Income: $2,500 – I’ll stop contributing to my i401k and junior’s 529 account. This will increase my take home pay.
- Dividend: $700
- P2P: $50
- Misc: $0 – Can’t really count on these. I’ll just put $0 for now.
Okay, our projected monthly income is $3,750. That’s enough to cover the projected monthly expense of $3,000. The big problem I see here is that I’m not sure how much I can count on the online income. It is good now, but who knows what it’s going to look like in 2 years?
Anyway, it looks like we can handle it financially for at least a few years. The cash flow will be positive so we can keep adding to our dividend portfolio.
If Mrs. RB40 is serious about this, then we would go ahead with the plan and try it out for 6 months to a year while saving all of Mrs. RB40’s income. That will give us a chance to restore our emergency saving. Once we save up one year worth of expense, then Mrs. RB40 can pull the cord when it’s convenient for her.
What’s the worst case scenario?
As mentioned above, the worst case scenario would be if my online income is reduced. I might have to find a part time job to make ends meet. Mrs. RB40 might have to go back to work in some capacity. Alternatively, we could move to a cheaper location like Mrs. RB40’s hometown or try living in Thailand for a while. Actually, the worst case scenario isn’t very daunting to me at all. I’m sure we can make money somehow.
In conclusion, Mrs. RB40 could retire early, but we need time to prepare. Our finance won’t be as secured without her salary, but it looks like we can get by. Our saving rate will be reduced quite a bit and we won’t be able to help out with RB40 Junior’s college education as much. Okay, this is running a little long. Let’s close up with a response from Mrs. RB40.
Mrs. RB40’s remarks – I’m not sure how much I really want to communicate with Joe right now because it just lands me more work! My training program is over in just a few weeks. In fact, I’m supposed to be working on a project for that with a deadline tomorrow, and now instead of working on that, I have to provide comments for Joe’s post! My general work malaise will pass. I like most of what I do. It is just near the end of the fiscal year and extremely busy right now, so it doesn’t help when I come home after a difficult day wanting to take a break and asked to do more. We’re in the process of interviewing people for some open positions, so hopefully there will be some standouts who we can bring on board. If Joe stops creating more work for me, then maybe I won’t have as much to complain about. Sorry, but I am really busy right now, and don’t want to spend time on this. Ask me again after October 10. I might have a better answer for you.
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.