Reader Case Study: Is Having a Stay-At-Home Parent Financially Feasible for the Longterm?

Holly, Josh and their kids on a hike

Holly is a music therapist living in Virginia with her husband, Josh, their three young children, two guinea pigs and one dog. They love hiking and spending time together as a family. Josh is a stay-at-home dad, which suits their family perfectly. Holly’s question is whether or not this is sustainable from a financial perspective. They are naturally frugal and don’t spend much, but wonder if they’re saving and planning well enough for retirement. Join me as we dive into Holly and Josh’s finances to see what advice we might be able to offer!

What’s a Reader Case Study?

Case Studies address financial and life dilemmas that readers of Frugalwoods send in requesting advice. Then, we (that’d be me and YOU, dear reader) read through their situation and provide advice, encouragement, insight and feedback in the comments section.

For an example, check out the last case study. Case Studies are updated by participants (at the end of the post) several months after the Case is featured. Visit this page for links to all updated Case Studies.

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There are four options for folks interested in receiving a holistic Frugalwoods financial consultation:

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To learn more about one-on-one consultations with me, check this out.

Please note that space is limited for all of the above and most especially for on-the-blog Case Studies. I do my best to accommodate everyone who applies, but there are a limited number of slots available each month.

The Goal Of Reader Case Studies

Carson in some leaves

Reader Case Studies highlight a diverse range of financial situations, ages, ethnicities, locations, goals, careers, incomes, family compositions and more!

The Case Study series began in 2016 and, to date, there’ve been 93 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.

I’ve featured single, married, partnered, divorced, child-filled and child-free households. I’ve featured gay, straight, queer, bisexual and polyamorous people. I’ve featured women, non-binary folks and men. I’ve featured transgender and cisgender people. I’ve had cat people and dog people. I’ve featured folks from the US, Australia, Canada, England, South Africa, Spain, Finland, the Netherlands, Germany and France. I’ve featured people with PhDs and people with high school diplomas. I’ve featured people in their early 20’s and people in their late 60’s. I’ve featured folks who live on farms and folks who live in New York City.

Reader Case Study Guidelines

I probably don’t need to say the following because you all are the kindest, most polite commenters on the internet, but please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not condemn.

There’s no room for rudeness here. The goal is to create a supportive environment where we all acknowledge we’re human, we’re flawed, but we choose to be here together, workshopping our money and our lives with positive, proactive suggestions and ideas.

And a disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises. 

I encourage everyone to do their own research to determine the best course of action for their finances. I am not a financial advisor and I am not your financial advisor.

With that I’ll let Holly, today’s Case Study subject, take it from here!

Holly’s Story

Josh and Holly at their wedding in 2012

Hi Frugalwoods, I’m Holly, age 33, a happy hiker living in Roanoke, Virginia with my husband of 10 years, our 3 young kids, 1 dog, and 2 guinea pigs. I work as a music therapist in a state psychiatric hospital. I’m very happy with my career choice as a music therapist because it allows me to help others, play music all day, and work regular, daytime hours with benefits.

My husband Josh (age 32) has a degree in Greek and Latin but never quite figured out what he should be when he grows up, so for now he’s doing the most important work of staying home to care for our three children, who are ages 3, 6, and 8. He also works part-time in the summer as an usher for our local minor league baseball team and as a pet-sitter/dog-walker intermittently throughout the year.

Holly & Josh’s Hobbies

Josh and I love to hike and it’s a big part of why we moved to Virginia from the Midwest. We spend as much of our free time as possible exploring the mountains and are consistently in awe of God’s amazing creation.

We’re also very active in our church. I play the piano and organ, Josh is on the council, and we both sing in the church choir. Our older kids go to the local public school, and our 3-year-old goes to a private preschool three mornings per week. Our life might seem simple (boring?) to some, but for us it’s perfect.

The Simple, Good Life

As a child, my family moved from one apartment to another every few years as my super-strong and resilient single mom did an amazing job finding places she could afford. Now that I have my own family, I feel so blessed that my children have a house to call home in a nice neighborhood perfect for daily walks with our beagle. We redid our deck last year and added a small balcony off of our bedroom.

There is nothing I love more than sneaking out onto the deck to do yoga or enjoy a few quiet moments sitting on the deck furniture my husband rescued from the side of the road. Josh and I are both naturally frugal, and he does an incredible job managing our finances. I have basically no idea what our bills are (seriously, a solar salesman asked me about our electric bill and I could not even give him a ballpark guess) or how he makes our small budget work, but I am eternally grateful that he does.

What feels most pressing right now? What brings you to submit a Case Study?

Latte and Pam the piggies being petted

My primary reason for submitting a case study is to find out if what we’re doing is actually working. When Josh first started staying home with our kids three years ago, it was because we were moving across the country and knew they’d need extra (short-term) support for the transition. Then, when our finances remained balanced and we realized how much more smoothly our home could run with him at home, we chose to continue.

The Questions:

As our youngest child approaches kindergarten in a year and a half, we wonder if Josh should continue staying home (before and after school care is still expensive) or if he should look at re-entering the work force in a more full time-ish way. If so, what should he do? He previously worked in the library and enjoyed that work, he also worked for many years as a retail supervisor and did not love that work.

Neither of our parents paid for our college educations. I was lucky enough to earn large scholarships to my small school and paid the rest out of pocket. Josh had student loans that we paid off four years ago. I’m not super inclined to save a ton of our money for our children’s educations because I believe that students invest their time and energy where they invest their money and because I don’t want to pressure them into attending college if they are interested in a different career path. Is this stupid? Should we be saving more for this anyway?

There’s also a tiny part of me that knows that the financial aid I received because my mom didn’t have a lot of money is a big part of why I was able to pay for school out of pocket. I’d hate to save a bunch of money for my kids’ educations and have that result in them having to pay more (already inflated) money for their educations.

What should we be doing with our finances that we’re not? I appreciate the advice I’ve read on Frugalwoods that it’s often better to save money than to pay off mortgage debt quicker, but it’s so hard not to want that payment to go away sooner.

What’s the best part of your current lifestyle/routine?

All of the time our family gets to spend together. I have generous benefits as a state employee and they allow me leave time to attend school programs, stay home to help when the kids are sick, and enjoy camping trips in the summer or long road trips to see our family.

What’s the worst part of your current lifestyle/routine?

As an optimist, I struggle to identify a worst part. I worry that maybe someday I’ll burn out in my work and wish I’d gone to grad school, but mostly I can’t justify the time away from our family or the financial investment right now.

Other than that, I sometimes wonder if we’re trying too hard to save money and should just spend more now on fancier experiences for our kids or vacations or something? But as a naturally frugal person, I struggle to do anything that’s “not a good deal.” Even if I knew for sure that I had more disposable income, it would be a challenge for me to dispose of it.

Where Holly Wants To Be In 10 Years:

Daisy and Holly kayaking

1)    Finances:

  • Same place?
  • We should have our mortgage halfway paid off by then.
    • It would be fun to have it fully paid off, but that seems unrealistic.

2)    Lifestyle:

  • Same place?
  • I can’t think of anything I personally want to change other than getting my kids out on bigger hiking trails since they’ll be ready to do that.

3)    Career:

  • Unknown.
  • Right now I love what I do, and I need to stay with the state for two more years to vest my Virginia Retirement System. After that, I could potentially work in a different setting, but I don’t feel like I have to necessarily.
  • In 10 years, Josh would like to be working in his dream job, and he needs help figuring out what his dream job is.

Holly & Josh’s Finances


Item Monthly Gross Income
 (total BEFORE all deductions)
Deductions & Amount Monthly Net Income
(total AFTER all deductions are taken out, such as healthcare, taxes, employee parking, 401k, etc.)
Holly’s Music Therapy income $4,158 Health and dental insurance: $61
Retirement contributions: $454
Taxes: $626
Josh’s MiLB Usher income (6 mo/yr) $175 Taxes: $25 $150
Josh’s Dog Care income $150 $150
Holly’s Organ Playing income $80 $80
Monthly subtotal: $3,397
Annual total: $40,764

Mortgage Details

Item Outstanding loan balance Interest Rate Loan Period and Terms Equity Purchase price and year
Mortgage on primary residence $146,882 3.13% 30-year fixed-rate mortgage $121,118 $183k; purchased in 2019

Debts: $0


Item Amount Notes Interest/type of securities held/Stock ticker Name of bank/brokerage Expense Ratio
403(b)- Holly $28,798 Former Job Empower Retirement
401(k)- Josh $20,081 Former Job Merrill Lynch
VRS Hybrid Plan- Holly $19,354 Current Job Virginia Retirement System
Roth IRA- Josh $19,025 $100/mo. Betterment
Roth IRA- Holly $12,456 Betterment
Chase Checking $6,456 Main Account Chase
Roth IRA- Holly $6,139 Started with Former Job, $133/mo. Touchstone Investments 0.24%
Emergency Fund $5,538 $50/mo. Earns 3.10% interest SmartyPig
Member One Savings $1,665 Secondary Local Account, cash access “Earns” .10% dividend MemberOne
Car Insurance Pre-pay $236 Pre-pay savings acct. to cover next bill, $60/mo. Earns 3.10% interest SmartyPig
Member One Checking $234 Secondary Local Account, cash access MemberOne
Phone Bill Pre-pay $121 Pre-pay savings acct. to cover next bill, $30/mo. Earns 3.10% interest SmartyPig
Total: $120,103


Vehicle make, model, year Valued at Mileage Paid off?
2014 Honda Odyssey $13,000 80,000 Yes
2008 Honda Civic $2,700 170,000 Yes
Total: $13,500


Item Amount Notes
Mortgage $980 ~$80 extra/mo. to make 1 additional payment per year
Groceries $370 Used Credit Card spending categories
Church Offerings $300
Shopping $292 Used Credit Card spending categories
Automotive $288 Used Credit Card spending categories
Gas $280 Used Credit Card spending categories
Restaurants $237 Used Credit Card spending categories
Preschool $150
Electric Bill $100
Car Insurance-Allstate $86 Saved ahead in SmartyPig to pay upcoming 6 mo. premium
Entertainment $85 Used Credit Card spending categories
Mortgage (annual additional payment) $75 Yearly, one time additional payment, usually after tax return
Animal Supplies/Bills $60
Water Bill $51
Internet $40
Travel $40 Used Credit Card spending categories
Health & Wellness $33 Used Credit Card spending categories
Cell Phones $30 We pay for 2 lines on a family plan with Holly’s mom, saved ahead in SmartyPig
Monthly subtotal: $3,497
Annual total: $41,964

Credit Card Strategy

Card Name Rewards Type? Bank/card company
Chase Freedom Unlimited 1.5% cash back on all purchases, 3% on dining Chase Bank (affiliate link)

Holly’s Questions for You:

  1. From a financial standpoint, is it feasible for Josh to remain a stay-at-home dad when our youngest child goes to kindergarten?
  2. If it’s not feasible for Josh to continue staying home, what should he do?
  3. If Josh continues to stay home, can I still retire someday? When I’m 65? Sooner?
  4. Should we pay off our mortgage more aggressively? Save for retirement more aggressively? Both? Something else?
  5. Should we be saving for our kids’ college?

Liz Frugalwoods’ Recommendations

Holly and a cow on a hike

I love Holly’s optimism and joy! It shines through in her writing that she and Josh have created a life they love! And what’s so telling is how little they spend on this life. I find their story inspirational and a salient reminder that “the good life” can be a frugal, mindful life.

Holly and Josh have what so many people struggle to attain:

  • They live in a place they love
  • They are grateful for their simple, joyful routines
  • They engage in their hobbies often and with their children
  • They enjoy a great work/life balance, which enables them to have a relatively low-stress lifestyle and plenty of time together as a family

Thank you, Holly, for reminding all of us that it’s very possible to live a very good life on very little money. And now, let’s dive in!

Holly’s Question #1: From a financial standpoint, is it feasible for Josh to remain a stay-at-home dad when our youngest child goes to kindergarten? 

As I see it, the primary issue with Holly and Josh’s finances is that they’re spending $100 more than Holly earns every month. Holly reports their spending as $3,497 and their income as $3,397. This is, as I noted, a very low income for a family of five. In fact, they’re very nearly at the Federal Poverty line, which in 2023 is an annual income of $35,140 for a family of five. I say that to illustrate how fantastically well Holly and Josh are managing on such a low income.

Everybody’s favorite reading chair

Their spending is also very low; but, it’s not low enough. You can run a deficit for a little while, but it will eventually catch up with you when you’ve depleted your savings. In other words, it’s not a sustainable path for the longterm and it’s something Holly and Josh should work to rectify now.

To bring their spending into alignment with their income, Holly and Josh have three options:

  1. Reduce their expenses
  2. Increase their income
  3. Do both

The option they choose is entirely up to them. Let’s start with option #1 and an overview of where they could save more money every month. To get a sense for where reductions are possible, I first categorized all of their spending as Fixed, Reduceable or Discretionary:

  • Fixed expenses are things you cannot change. Examples: your mortgage and debt payments.
  • Reduceable expenses are necessary for human survival, but you control how much you spend on them. Examples: groceries and gas for the cars.
  • Discretionary expenses are things that can be eliminated entirely. Examples: travel, haircuts, eating out.

Now that we know which items have leeway, I went through and assigned a “Proposed New Amount” to each line item. Only Holly and Josh know which items are priorities and which items they can reduce, but the below spreadsheet gets this exercise started for them:

Item Amount Notes Category Proposed New Amount Liz’s Notes
Mortgage $980 ~$80 extra/mo. to make 1 additional payment per year Fixed/
$900 They can’t afford this extra $80 per month.
Groceries $370 Used Credit Card spending categories Reduceable $370 This is so low, I’m not going to reduce it any further!
Church Offerings $300 Discretionary $0 This is a tough one. I understand the importance of tithing, but at this point, Holly and Josh are giving away money they simply don’t have. I encourage them to consider reducing this amount and finding other ways to give of their time and talent to their church. It does not make sense to put yourself into debt by donating money.
Shopping $292 Used Credit Card spending categories Reduceable $200 I’m not sure what this category encompasses–I encourage Holly and Josh to dig in and see what’s actually in there.
Automotive $288 Used Credit Card spending categories Reduceable $288
Gas $280 Used Credit Card spending categories Reduceable $280
Restaurants $237 Used Credit Card spending categories Discretionary $0
Preschool $150 Fixed/Reduceable $150
Electric Bill $100 Fixed/Reduceable $100
Car Insurance-Allstate $86 Saved ahead in SmartyPig to pay upcoming 6 mo. premium Fixed/Reduceable $86 I encourage them to shop this around to see if there’s anything cheaper.
Entertainment $85 Used Credit Card spending categories Discretionary $0
Mortgage (annual additional payment) $75 Yearly, one time additional payment, usually after tax return Discretionary $0 This is not something they can afford.
Animal Supplies/Bills $60 Fixed $60
Water Bill $51 Fixed $51
Internet $40 Fixed $40
Travel $40 Used Credit Card spending categories Discretionary $0
Health & Wellness $33 Used Credit Card spending categories Discretionary $20
Cell Phones $30 We pay for 2 lines on a family plan with Holly’s mom, saved ahead in SmartyPig Reduceable $30
Monthly subtotal: $3,497 Proposed New Monthly subtotal: $2,575
Annual total: $41,964 Proposed New Annual total: $30,900

Celebrating 1 family hike each month for a year

As you can see, since Holly and Josh have relatively low Fixed expenses, it would be entirely feasible for them to bring their spending under their income. It’s a pretty bare bones budget, but, it’s a template for what they could do if they want Josh to continue to serve as stay-at-home parent. If they followed this budget, they’d be on track to save an additional $9,864 per year.

There’s no “right” or “wrong” answer here. Rather, it’s a question of what Holly and Josh value most.

  • Do they value the things they’re currently spending money on?
  • Or are they willing to cut some of their expenses in order to facilitate the wonderful situation of having a stay-at-home parent?
  • The only wrong answer is to continue spending more than they make. Aside from that, it’s in their hands to decide.

Holly’s Question #2: If it’s not feasible for Josh to continue staying home, what should he do?

This is something only Josh can answer. I think it’s going to require a deep conversation between Holly and Josh about what they value in their current lifestyle and how that would change if he went back to work. As I just outlined, it is financially possible for Josh to continue in the important role of stay-at-home parent; but, it will require an even greater level of frugality than they’re currently practicing.

The kids at Henry’s hiking themed bday party

→It’s also true that no decision has to be final.

Holly and Josh could try implementing the uber frugal budget outlined above and see how it feels.

  • Is it reasonable for them?
  • Or is it just too restrictive?

Josh could also get a job and they could asses how that feels. If Josh were to start working, they should evaluate:

  • How much they’ll pay in before/after school care
  • How they’ll handle kid sick days, school vacations, school half-days, and summer vacation
  • How much Josh will need to spend on gas to commute to his job
  • Any other impacts to their budget created by Josh working.
    • For example: will there be less time to prepare meals and thus an increase in costs for prepared foods/take-out?

Another thought is for Josh to get a job that aligns with the kids’ schedules… in other words, a job at their school. Having the same hours, commute and vacations as the kids would alleviate a lot of the scheduling stress of having two working parents. Schools are often hiring for a range of positions–custodians, administrators, substitute teachers, teacher’s aides, and of course teachers themselves. This is definitely something to consider since it might enable them to maintain much of their current fabulous family life balance. Substitute teaching in particular would be very flexible. Certainly not lucrative, but flexible! Since Holly’s job provides the family’s insurance, Josh has the flexibility to take a part-time position that likely wouldn’t come with benefits.

Holly’s Question #3: If Josh continues to stay home, can I still retire someday? When I’m 65? Sooner?

1) Research Holly’s Pension!

Holly running in a field

What jumped out at me is that Holly is a state employee and has a pension. This is something for Holly to dig into and research ASAP. If Holly is guaranteed a state pension after a specified number of years of service, that dramatically improves their retirement outlook. A pension is kind of like the holy grail of retirement because–with some pensions–it’s guaranteed income for the rest of your life. Of course, pension systems can default, but state and federal pensions are generally more reliable than private companies. All that to say, Holly should get the handbook, ask a lot of questions and figure out the precise terms of her pension.

Setting the pension aside, Holly might also qualify for Social Security. However, this is something to research since some pensions preclude you from taking Social Security. Holly should also investigate if her employer offers any other retirement plans, such as a 457.

2) Retirement Investments: $86,499

Between their various 401ks, 403bs and IRAs, Holly and Josh have socked away an impressive $86,499 in retirement! They should feel really proud of this! Saving so much on such a low income is commendable. Let’s see how this stacks up against Fidelity’s Retirement Rule of Thumb

Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.

Since they’re in their early 30’s, we’ll go with 2x their income, which would be $81,528 ($40,764 x 2). Woohoo! That means Holly and Josh are right on track. The caveat, of course, is that this would entail they continue to keep their expenses very low.

To answer Holly’s question, if she and Josh are comfortable with keeping their expenses low throughout their lifetime, they’ll be fine. Plus, since their income is so low, they’re very likely to qualify for generous subsidies on things like health insurance through the Affordable Care Act.

→Again, the wild card is the pension. Knowing what that provides should give Holly and Josh even greater peace of mind. But, if they’re able to continue investing for retirement and don’t touch that money until they retire, they should be just fine.

Holly’s Question #4: Should we pay off our mortgage more aggressively? Save for retirement more aggressively? Both? Something else?

Sunrise at Dragon’s Tooth

In short, NOPE on the mortgage. Holly and Josh actually need to stop paying extra on their mortgage as it’s causing them to spend more than they earn each month. There’s no world in which that calculation makes sense. And I want them to understand that having a mortgage is not a bad thing. It’s actually a good thing for a number of reasons:

  1. If your mortgage has a low, fixed interest rate–which Holly and Josh’s does at 3.13%–your money will be better utilized elsewhere:
    • The stock market (where Josh and Holly’s retirement accounts are invested) returns a historical average of 7% annually. This does not mean 7% every year, but 7% on average over time. Of course past performance does not guarantee future success, but in the absence of a crystal ball, it’s all we’ve got to go on…
    • 7% is greater than 3.13%, which means their money would be better leveraged in the stock market (aka in their retirement investments).
    • In other words, it’s an opportunity cost to pay off a fixed, low interest rate mortgage.
  2. A house is an illiquid asset:
    • If you use all of your extra cash to pay off your mortgage, you’re stuck with a large, immoveable asset.
    • Sure, you can sell the house, but then you need to pay to live somewhere else.
    • Remember:
      • You cannot use a paid-off house to buy groceries
      • You cannot use a paid-off house to pay medical bills
  3. Having all of your money tied up in a house means that your investments are not diversified:
    • You’re putting all of your financial eggs in one basket and a house is not guaranteed to appreciate.
  4. A mortgage is an excellent hedge against inflation:
    • Inflation is when money becomes less valuable and the neat thing about a mortgage is that it’s denominated in the dollars you originally paid for the house and so, over time, as inflation increases (hello, right now!), the money you’re using to pay off your mortgage is “cheaper.”
    • Look no further than the current skyrocketing mortgage interest rates to understand why Holly and Josh’s 3.13% is so attractive.

→Paying off a mortgage might feel good psychologically, but it very often is not mathematically or financially prudent.

Asset Overview

Lemonade stand at a yard sale

To answer Holly’s question about what they should do with any extra money, let’s run through the rest of their assets.

Remember, the #1 job for any extra money is to get their expenses in alignment with their income.

  1. Cash: $14,249

Your cash equals your emergency fund and your emergency fund is your buffer from debt:

  • An emergency fund should cover 3 to 6 months’ worth of your spending.
  • At Holly and Josh’s current monthly spend rate of $3,497, they should target an emergency fund of $10,491 to $20,982:
    • This means the $14k they have in cash is right on target. Woohoo, well done!

Your emergency fund is there for you if:

  • You unexpectedly lose your job
  • Something horrible goes wrong with your house that needs to be fixed ASAP
  • Your car breaks down and must be repaired
  • You’re hit with an unexpected medical bill
  • Your dog gets quilled by a porcupine and has to go to the emergency vet

As you can see, an emergency fund is not for EXPECTED expenses, such as:

  • Routine maintenance on a car, such as oil changes and brake pads
  • Anticipated home repairs, such as boiler servicing/chimney sweeping
  • Planned medical expenses

An emergency fund’s reason for existence is to prevent you from sliding into debt should the unforeseen happen. It’s your own personal safety net.

→Since an emergency fund is calibrated on what you spend every month, the less you spend, the less you need to save up.

This is also why it’s so critical to track your spending every month. If you don’t know what you spend, you won’t know how much you need to save. I use and recommend the free expense tracking service from Personal Capital (affiliate link).

Why So Many Accounts?

Pam the piggie

My only quibble with Holly and Josh’s cash position is their SIX different accounts. If it’s meaningful to them to have this many accounts, then stick with it. But from my perspective, it’s confusing and adds a lot of extra admin work. If it were me, I would move all $14k into one high-yield savings account. The fact that some of their cash isn’t earning interest is untenable. They need to leverage every penny they can to make their budget work.

For example, as of this writing, the American Express Personal Savings account earns a whopping 3.50% in interest (affiliate link). This means in one year, their $14,249 would earn $499 in interest!

Credit Card Strategy

Holly and Josh get an A+ on their credit card strategy. They have the Chase Freedom, which is a no-fee, cash-back card, which is brilliant. Cash-back cards are the easiest rewards to get and use because you know you’re going to use cash. Travel rewards are nice, but not everyone travels enough to utilize them fully. Most importantly, Holly and Josh pay their card off IN FULL every month. Very well done here!

Find Your Expense Ratios

Something missing from Holly and Josh’s assets spreadsheet are the expense ratios on their retirement investment accounts. This is a critical bit of data that they need to look into for each of their accounts. Expense ratios are the percentage you pay to the brokerage for investing your money and, as they are fees, you want them to be as low as possible.

As Forbes explains:

“An expense ratio is an annual fee charged to investors who own mutual funds and exchange-traded funds (ETFs). High expense ratios can drastically reduce your potential returns over the long term, making it imperative for long-term investors to select mutual funds and ETFs with reasonable expense ratios.”

In light of their importance to Holly and Josh’s overall long-term financial health, I encourage them to locate the expense ratios for all of their retirement investments. And, to keep them in mind if they ever decide to invest in taxable investments.

I’ll use Vanguard’s total market low-fee index fund, VTSAX, as an example of how to find an expense ratio. You’re going to like this because it’s a three-step process:

  1. Google the stock ticker (in this case I typed in “VTSAX”)
  2. Go to the fund overview page
  3. Look at the expense ratio.

Screenshot below for reference:

And done! Woohoo! To give you a sense of whether or not your investments have reasonable expense ratios, the following three funds are considered to have low expense ratios:

  • Fidelity’s Total Market Index Fund (FSKAX) has an expense ratio of 0.015%
  • Charles Schwab’s Total Market Index Fund (SWTSX) has an expense ratio of 0.03%
  • Vanguard’s Total Market Index Fund (VTSAX) has an expense ratio of 0.04%

You can also use this calculator from Bank Rate to determine what you will pay in fees over the lifetime of your investments, based on their expense ratios. If you find that your investments have high expense ratios, it is WELL worth your time to investigate moving to lower-fee funds.

For their Roth IRAs, at the very least Holly will want to move hers out of Touchstone Investments as 0.24% is WAY too high of an expense ratio. With their 401ks/403bs from former jobs, it will likely make the most sense to roll them into IRAs so that Holly and Josh can select their own brokerage and low-fee funds.

Holly’s Question #5: Should we be saving for our kids’ college?

A great adventure

Nope. At Holly and Josh’s current income level, there’s just no room for them to save for college. But that’s ok. If their income remains low, the kids should qualify for all sorts of needs-based assistance. Additionally, it’s crucial to remember that this is a “put your own oxygen mask on first” scenario. While you want to provide for your children, you must provide for your own retirement.

Kids can take out loans for school but you cannot take out loans for retirement. The scenario you want to avoid is that you pay for your kids’ college and then have to move in with them in your old age because you didn’t save enough for retirement. I’m not saying that’s going to happen to Holly and Josh—that’s just my standard cautionary tale around saving for college.

And, saving into their retirement accounts won’t affect their kids’ financial aid prospects for college as retirement vehicles (401ks, IRAs, etc) aren’t considered by the FAFSA. So, no worries there!

→With any extra money, Holly and Josh can consider maxing out their contributions to their Roth IRAs.

A Roth IRA is:

  • A retirement account that’s post-tax
  • That means you pay taxes on the money you put into a Roth IRA, but you don’t pay taxes when you withdraw the money in retirement.
  • A Roth IRA grows tax free.
  • You need to be age 59.5 before you can withdraw money penalty-free (although there are exceptions).

In 2023, the IRS-set contribution limit to an IRA is $6,500 ($7,500 if you’re age 50 or older). That means Holly and Josh could contribute a combined $13,000 to their Roth IRAs each year.

Not So Fast… First, Save For A New Car!

However, before Holy and Josh consider contributing more to their Roth IRAs, they should save up for a new-to-them car. Their 2008 Honda Civic in particular might not have much longer to live. I’d start squirreling away money for that now so that they’re able to pay cash for a used vehicle when the time comes.


  1. Henry and Cooper

    Review the “Proposed New Amount” expense spreadsheet to determine where you can reduce your spending:

    • It is not tenable to continue spending more than you earn.
  2. Stop paying extra on your mortgage every month.
  3. In terms of Josh getting a job outside of the house, consider what you value about his role versus your expenses:
    • Explore if a position at the kids’ school might provide the best of both worlds.
    • Calculate any increased costs associated with Josh working outside of the home.
    • Remember that no decision is final and you can try out the reduced budget first to see how it feels.
  4. Research Holly’s pension ASAP and determine whether or not either/both of you will be eligible for Social Security.
  5. Consider consolidating the six cash accounts into one high-yield account.
  6. Start saving for a new-to-you car since the 2008 Honda Civic might not be long for this world.
  7. Locate the expense ratios for all of your retirement investments:
    • Move to lower-fee funds if needed
    • Consider rolling your old 401ks/403bs into IRAs so that you can control the funds they’re invested in
    • Check out the book, The Simple Path to Wealth by JL Collins, for an investing 101 primer (affiliate link)
  8. After getting your spending into alignment with your income and saving up for a new-to-you car, consider putting any extra money into your Roth IRAs.
  9. Feel very proud of the wonderful life you’ve created and keep us posted on what you do next!

Ok Frugalwoods nation, what advice do you have for Holly? We’ll both reply to comments, so please feel free to ask questions!

Would you like your own Case Study to appear here on Frugalwoods? Apply to be an on-the-blog Case Study subject here. Hire me for a private financial consultation here. Schedule an hourlong or 30-minute call with me here, refer a friend to me here, or email me with questions (

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