by Adam Dawson
The final tally for our recent repairs/house issues is in. The well situation is touch and go at this point. There are some very expensive things we can try to improve our existing well that cost thousands of dollars. If those don’t work, we could get a new well drilled, which will be $15-$20k. I do NOT want to do this! Right now, the well is producing and seems to be keeping up with demand as long as we are very careful in our usage. So I’m thinking we should try to wait it out for a few months and see if we can get some rain. You can’t predict when the drought will resolve itself, but I also don’t want to take drastic action based on a problem that will probably fix itself eventually. It’s just a matter of how long we can make do in the drought. It’s hard to get good advice on this problem. The “Well Experts,” strangely enough, all seem to think that the services they provide, such as well drilling, well “rehab”, etc. are the answer to our problem. As they say, when all you have is a hammer, everything looks like a nail.
So here’s what we’ve got so far.
Well repair: $780
Water Delivery: $190 (4000 gallons)
Tenant Washer/Dryer (Austin): $547
When we bought the house, we had the Dave Ramsey $1000 emergency fund in the bank. As soon as we moved in, we had to replace the water softener ($500+). As you’ll remember, we have $300 in the monthly budget for increasing the emergency fund, but these recent issues have wiped it out. We have to start over. In the interest of full disclosure, we do have some other liquid funds in various places in the event of catastrophic disaster. I don’t really consider them “available,” but they do exist in the strictest sense of the word, so there are no surprises here:
1. The Indy rental house bank account has a few thousand dollars in it (as mentioned, this is part of our retirement, so we don’t plan to use it. But if our life falls apart it’s there)
2. Our monthly debt snowball (about $1200/month we are paying above the loan minimums)
3. Emily’s business account usually has a little money in there
4. Lastly, and we would never touch this, but it is there – the Austin tenants’ deposit. In Indiana at least (and probably in Texas too), the law requires this money to remain sequestered, so we won’t view this as available funds. But it is sitting in our savings account, and does protect us if the tenants decide to not pay rent or break their lease. (By the way, they’ve been great so far. They even paid September rent on the 1st of the month in person even though it was a holiday weekend.)
I’m glad for a couple of things. First, that we had at least some money in the bank to take care of these things. Second, that we have a buffer in our debt snowball that we can use if we need to. I’m thankful that so far, we haven’t had to take additional debt to deal with these problems.
Either way, it’s been a Murphy’s Law couple of months and it’s time to begin rebuilding our emergency fund. Now that we have a house, I’d like to get it to $5000 or so, but I anticipate that this will take some time. Some have suggested that we forego the debt snowball long enough to build the fund. I really want to stick to our schedule on debt payoff so I’m trying to balance both. November is coming up. It’s an extra paycheck month. Most of that is going to fund Christmas and holiday travel, but hopefully it will help us dig out a little bit.
If you can take the $1200 on debts, plus your $300 towards savings, you can be at that 5K by December 1st (you may have to tighten up some other areas to do it, but it would be worth doing). I would – it’ll make you sleep better. Then, instead of $300 per month towards savings, cut it to $150 and put that other $150 on debts. That will easily keep you on your payoff schedule, and you will have the security of having yourselves a bigger nest egg, plus still adding to it monthly.
Your numbers are looking good. I’m kinda jealous actually – we can only manage to save $50 a month towards our emergency fund right now (but we are at 10 months till our snowball is paid off, so that helps to keep it in perspective. That and we are a big family of 7 living on one income).
Janelle, very interesting idea. I’m going to run some numbers on this and think about doing something like you suggest.
Keep it up! 10 months to go!
If your security gland isn’t screaming over not having much in emergency savings, then I’d say you should stick to your debt snowball plan and gradually add to the savings. I know Dave Ramsey recommends just the $1,000 in savings as I way to make people feel the fear and get gazelle intense about paying off the debt. He’s always talking about 90% of most emergencies that come up can be resolved with $1,000. For the most part, that has been our experience give or take a couple hundred over our debt journey the past 2 years.
That said, given your well situation and the uncertainty of that, my security gland would be in overdrive and I would probably be focusing on dumping all available money into savings and taking a step back from the debt snowball for at least 3-4 months. Having no running water is definitely an emergency and facing a possible $15,000 fix to that problem can’t be ignored.
If you don’t prepare at least somewhat for the possibility of needing a new well, you’ll just end up taking on more debt when you might have been able to avoid that. I know you can’t predict whether or not it will come to that just as none of us can predict major expenses around the bend, but the indicators are there and the professionals have given you their opinion and early warning.
We had to delay the debt snowball at least 4 times during our payoff due to unexpected and larger than $1,000 emergencies, but it only extended our payoff by 2 months. I found I got even more intense after a setback trying to make up for the delay and tried even harder to curb spending. While the house isn’t on fire, this potential well expense is a MAJOR issue and I think it’s time you guys got really serious about your budget. This is NOT the time to be comfortable during your plan and it sounds like you guys have been just riding along and making little changes here and there. I’m afraid life needs to become really uncomfortable for you in the short term so you can save this money up and DON’T TAKE ON MORE DEBT.
We’ve never really had something like this before. My security gland is mostly just in shock/confused.
I’m going to consider some options. Thankfully, in November we should have some leeway, so really we’re looking at what to do in the next 8-10 weeks. On that short of horizon we might have a little more tolerance for pain.
Dave Ramsey does advocate for a $1000 EF, but I’m guessing he’d say you need a bigger EF if you own rental property. You are paying down the debt and saving well right now. The question is: what will you do if the well fix doesn’t work? Its pretty much out of your hands whether or not you’ll have to come up with $10-15k, so I think you need to figure out exactly where that money will come from. Hope for the best, but plan for the worst. Can you cut your monthly outgo by $500-1000 to start buolding up your reserves? Houses cost quite a lot to maintain – you should plan on 1% of house value per year. If your homes are worth collectively $300k, then that’s $3k per year. Start now and save that every year. Then when wells dry up or roofs get old or plumbing goes, you have the funds to take care of it. Based on your entertainment spending over the past 4 months, you could find that $500-1000 per month to save. And figure out where you’ll get $15k if you need it. Then once your finances are back in order, you can go back to spending more on restaurants and lunches.
You can do this!
I don’t like it. But you’re probably right that instead of sticking my head in the sand on the well, we should probably figure out where the money will come from if we need the new well.
the Gulf of Mexico has been awakened and although we are far from the coast, we have 2 to 7 inches of rain in the forecast for the next 3 days! Hallelujah.
I was once in a similar spot as you – 10 years ago my income was cut in half when I changed careers, but I never actually brought my spending down to the levels needed. I get that it is REALLY hard to do. Once you’re used to eating lunch out, it’s hard to start brown bagging it. It’s hard to change to a cheaper gym and cut the cable.
But I finally started to see how precarious my situation really was. It was VERY precarious. If I had gotten sick or lost my job, I would have lost my condo. Once I put my mind to it, though, I was able to cut expenses to the core and pay it my debt in two years. Then I worked to build up my 8 month emergency fund. Once you’re past the debt, your outlook will change dramatically and when crises happen (like a dry well) you’ll be annoyed, but not panicked.
My experience is how I know you can do it! And why I so passionately feel that it’s time for you two to really look at those expenses and see how much you can cut out. You need to get mad and scared at where you are, and make big changes! You really can get there. The view from the other side will make it worthwhile to go through the pain now.
I’ve always felt that the DR $1k EF should be $5k. Especially so if you are a homeowner or if one has kids or something along those lines. For me, I couldn’t imagine having less than a $5k buffer if I was a single renter.
I feel you. We had a water pipe burst and had no water for about a week (UGH!!). Nothing like these type experience to renew your appreciation of running water. Won’t take it for granted for a long time… Murphy has also took up permanent residence in our house, it seems. 2013 is definitely not our year. Crossing my fingers over here that you get rain.
I enjoy your writing, and you two seem to have a great relationship. But, I really wish you would make a decision on how you present your financial situation (either totally including or excluding rental properties and Emily’s business). It really muddies the water when you state you have a few thousand dollars in the rental house account that you could use if necessary – but yet you don’t include rental house expenses in your budget. And is Emily’s business account money really up for grabs for personnal use? And what about the reverse – should you be considering putting money into her business instead of say, eating out? I have no doubt you guys will get your debt paid off and it would be great if you could share the whole picture with us.
This didn’t bother me much. I’m assuming that the rental houses – the rental properties separate from the TX property – are operating under their own budget – the rental income covers the rental expenses, so those aren’t coming out of Adam & Emily’s income from their jobs.
Also, I can understand having a “disaster” fund. I have one, too. It’s for if I lose my job or I’m seriously injured and need cash while I wait for the disability insurance to kick in. But I have a smaller “slush” fund I can raid for an unexpected car repair or appliance replacement. However, I wouldn’t touch the rental security deposits unless the tenants trash the place. You do NOT want to get into the habit of “borrowing” from that account – it will become another debt you have to pay back, but at the risk of legal consequences if you can’t come up with the cash to return the deposit to the tenant.
But, I can see how not having the full picture can frustrate some. I just find the little nugets of information entertaining – like a puzzle or something 🙂
good comments here. @Zebbie – I got to thinking that maybe it seems confusing or flip-floppy on the blog because it reflects our real life. Maybe these other sources, in real life, are supposed to be outside our monthly income/outgo, but sometimes they sneak in. I think that’s probably what you’re picking up. It’s not really a matter of what we’re sharing or not sharing, it’s the fact that we haven’t been consistent on how we treat all of the different areas day to day.
It is kind of a puzzle. And I continue to think that over time, the picture will end up being pretty clear for readers who keep up with the blog. The pieces will fall into place a little at a time.
I sort of like seeing the whole, messy, sloppy financial picture. I also really like that you’re not ignoring your retirement funds. Maybe it would be helpful to summarize some key figures in regards to the rental properties in the sidebar? I think outstanding debt obligation, amount of positive/negative cash flow, and savings account might be simplistic enough. After all, we’ll cheer you on when debt obligations on your rental properties dip past milestones and we’ll also cheer when positive cash flow results in boosts the savings accounts for those properties.
You’ve mentioned that you would like to buy out your partner on one of the rental properties – why not quantify the number it would take to accomplish this and set it as a savings objective?
Many of us struggle with the balance between retirement saving, debt repayment, and “fun” expenses like travel, charity, etc and we read blogs like this to put perspective to our own challenges.
Walnut, thanks for chiming in. It seems like people have differing viewpoints on how much we should share.
I think a summary of our financial picture could be useful. When we talk about rental properties, etc. I sometimes wonder if people get the idea that we are way better off than we actually are. hopefully this admission that our emergency fund went as dry as our well clears some of that up. I also think that watching what Claire went through with the readers here has made me nervous to share some of the “extracurriculars” – ie, anything not strictly about monthly budgeting and debt repayment. But lately, the commenters have been pretty kind and supportive and the encouragement is nice. It’s weird, you think you won’t be affected by comments on a blog, but this is a community here, and you get, I guess, involved in it. So what everyone says, positive and negative, really does become part of our household conversations. We didn’t really expect this. But it’s been cool.
I would cut back on the debt repayment and save up for possibly drilling a new well. If it turns out you don’t need a new well then take what you’ve saved up and put it towards your debt.
Also, are there any quick, cheap things you can do now to reduce water usage? For example, replacing showerheads with low-flow showerheads?
There is also the japanese style bucket shower. You rinse quickly. Soap up. And use a single bucket over your head to rinse off again. Very little water. Or a sailor shower, which is similar, but can use more water than the bucket, which is always measured.
we pretty much have low-flow faucets and high efficiency appliances. we are trying to economize showering and minimize toilet flushing. the tenants have been great too.
The well seems to be keeping up with us this week. I really don’t think we’ll have to drill. But as I said before – maybe i’m just sticking my head in the sand.
My family was burned this year with the lack of adequate EF. I’ve decided to split my snowball 50-50 until I get at least $5k in savings. For us, this time, it was car issues – but I never want to be put in that situation if I can avoid it!
At 190 per 4000 gallons, I would skimp like mad on water rather than make a change that might not even be necessary. The gap between 190 and 15-20k is so huge that you shouldn’t even feel bad later about “wasting money” on water if you do have to go the deeper well route.
It’s still expensive – with the 2 of us and 2 renters, based on our previous usage, I think we could spend $300-$400 a month on water. Thankfully we’ve been able to find some ways to conserve and the well is covering most of our needs if not all currently. So the total supplemental water delivery shouldn’t be that much.
Waiting out the well would be something I’d do. Of course, I can control our water usage because I don’t have tenants. So, they may end up negating your efforts but give it a shot while thinking about where the money will come from.
1. Navy showers (with the plug in to take advantage of idea 2.)
2. Use your grey water for things like flushing toilets or watering trees or ornamental plants (not veggie garden, just in case.)
3. Use a laundromat for your clothes washing
4. wash dishes by hand.
My friend had a failing septic system so cut the water she was putting into it by doing these things. They managed to make the septic system last an extra 2 years until they sold their house. Sure, the new owner had to think about the issue and it probably reflected in the purchase price, but my friend avoided the mess and upheaval!
Supposedly using a dishwasher and NOT washing the dishes by hand before putting them in the DW is more efficient… But, of course, this assumes the dishwasher will actually get all the food gunk off the dishes 😛
They could also get a rain barrel. Granted, it won’t do much good if there’s a drought, but it sounds like they’ll be getting some rain the next few days. That water can be used for the lawn.
We are getting rain now! It’s supposed to rain 3-4 inches today! Hurricane! The best part is that the upstream regions are supposed to get even more rain, which should help our aquifer situation.
I actually set up a small rain barrel outside, re-used a brine barrel from an old broken water softener. The water quality isn’t good enough to use for our household needs, but I have been using it for the garden between rains. Which means I’m not using our well water to irrigate.
The dirty secret is that I accidentally left the soaker hose turned on all night once a few weeks ago. I calculated this might have wasted like 1300 gallons. I think this contributed to running the storage tank out of water. So well irrigation is no longer allowed at our house.
We also experimented with having a bucket in the shower to catch the water that ran while we waited for it to get warm, and using that for watering plants and goats. Our issue – which you’ll notice is a trend in our lives – is that we aren’t very disciplined at things that require us to do something consistently day after day. So catching shower water in a bucket is the same as budgeting and pulling cash out at the ATM or meal planning or going to the gym. If we have to do something every day the same way, it’s unlikely to happen.
At least on the irrigation, we have a xeric landscape in the front, so no lawn watering is needed.
Between our house, the tenants’ house, and the carport, we do have quite a bit of roof area, so I’m interested in a rainwater harvesting system. It’s a big expense that could really be awesome, but as you know we won’t be spending our money that way anytime soon. The main expense is the collection tank.
Also interested in re-plumbing the house to re-use graywater in toilets and irrigation. depends if this is our forever home. it’s not an investment that will pay itself back financially, would be purely for our own indulgence, and to reduce the load on our septic.
Edit: this comment is in reply to CanadianKate – it’s kind of strange how the website orders/nests the comments.
We are definitely in water conservation mode. When you realize that every gallon you use is 4 cents out of your pocket it’s easy to conserve. We have low flow faucets, have ended irrigation of the garden, started collecting rain for the garden, cut down on toilet flushing, reduced clothes washing, reduced the number of showers. My research did indicate that dishwashers generally use less water than handwashing. I suppose we could use a small basin and really conserve water by handwashing, but we’re not that desperate yet 🙂
Changing my shower and hygeine water use (turning the water off while shaving/brushing teeth, taking shorter showers), has really been a difference. I can’t say that I like it, but I can definitely tell I’m using much less water.