Shawn and Mary Kate DeRose live comfortably on a combined $133,000 income.

The short version:
Right now the couple make $133,000. They are highly in debt (read: living beyond their means)
The wife got a deal to work half-time for half the pay, which would bring them DOWN to $110,000.

But here's what they're trying to decide: Can they afford to live on only $110,000 -- they have two children, after all!


(MONEY Magazine) -- Shawn and Mary Kate DeRose live comfortably on a combined $133,000 income. They pay their debts, save for retirement, even have room to splurge on dinners out and high-end gym memberships.

But the birth of their second child, Regan, in May has Mary Kate, 33, a literacy coach for a school district, thinking of dialing back to part-time work. "In a perfect world, I'd be able to spend more time with my girls," she says.

Her employer will let her go half-time for half pay: $32,600. But is that enough -- along with the $78,000 that Shawn, 33, earns as an assistant principal -- to support their lifestyle?

With a $3,600 monthly debt load that includes payments on a mortgage, home-equity loan, auto loan, and credit cards, their budget will be tight, warns Alexandria, Va., financial planner Tim Wesling.

They'd need to cut debt by $500 a month and other expenses by $1,300, he says. That's more than the DeRoses had bargained for.

"We really have to think about it," says Mary Kate.
Their Goals

1. Meet current expenses on a smaller monthly income: $8,600 rather than $11,000.

2. Keep saving enough for retirement. Right now they have $7,500 in cash, $38,500 in retirement funds and $2,100 in college savings accounts.
What They Must Do

1. Cut the debt. The DeRoses are paying 7.8% on a $63,000 home-equity loan. They could refinance and shave more than 2 percentage points off that rate, reducing their minimum payment by $200 a month. Wesling also wants them to nix the $300 a month they put on credit cards (for meals out, clothes, and the like).

2. Take the ax to expenses. The couple will save $500 a month on day care, but that still leaves them with $800 to cut. They might get rid of their older car and reduce costs across their budget to do it.

3. Keep saving. Shawn should continue stashing 10% of his income for retirement even as the couple trims elsewhere. As he gets raises, he should direct the cash to retirement and the home-equity loan.

Here's a chart that went with the story:

The things I would be able to do with $11,000 a month...

That's what I was thinking.

You can buy a lot of comfort for $5000 a month!

Their "debt load" of 3600 seems to include house, car, loans, and credit card debt.

She hasn't gone to part-time yet -- so she's still pulling in 11,000 a month.

So that $7,500 a month is being spent on food, utilities, entertainment, and high-end gym memberships -- and let's not forget "stuff".

I realize that SOME of that is going to savings -- but looking at how much they have saved, they don't seem to be very impressive savers. Most of that money is being spent every month.

Matthew

My Lord, have mercy on me.  I can only dream of what our family could and would do with 10K a MONTH.  We could pay off our house in less than 2 years AND still have more each month than we make right now.  Amazing what some people think is a "tight budget", a "struggle", and a "sacrifice."

If she quit her job and stayed home and raised the children, they would probably end up with more disposable income than they have now--or at least more than the part time job would pay.  They would pay less in income tax, they would pay no child care, she wouldn't have to eat out for lunch every day, transportation to work would be greatly reduced, and we could go on and on and on.

My cousin used to work for Enron or one of those companies that went haywire yrs ago, she got a huge paycheck and bonus, paid off a bunch of things and stayed home to have, in her early-mid 30's, her daughter and raise her. Spouse went to work and made a little more than this couple and my uncle and aunt were lamenting they only survive, somehow, on $125,000 a yr!!

My response, that must be nice!@ at that time, I wa making a little less then $30,000/yr