Eric and Ilsa have a story that may strike you as tragic.
He’s a 41-year-old physician and she’s a 39-year-old dentist. They have five children and a live-in nanny, and they’re flat broke.
Because together, they earn a paltry $25,000 per month (net).
In a financial advice article from the Globe and Mail that will instantly send you looking for the “satire” heading (spoiler alert: there’s not one), an expert weighs in on how Eric and Ilsa might be able to make ends meet on the pitiful net income of just $300,000 per year.
The couple are trying to build a $1 million home, which would be big enough for their family and require an $800,000 mortgage.
According to the experts, they can’t pull it off without running a $50,000 per month deficit, even after Ilsa, on maternity leave, goes back to work.
(At that point, the couple’s salary will increase from $360,000 per year to $450,000 gross.)
In an email, Eric explains the situation.
“Two professionals should be able to afford a modest house, but we can’t get the numbers to work and would appreciate some help,” Eric says, adding that he “earns $200,000 a year working in a medical clinic” and “$100,000 a year” from one day per week of teaching.
“I have no pension whatsoever, but like my parents, colleagues and mentors, I love my work and plan to keep going well into my 80s, so retiring is not a big concern, just living.”
Eric and Ilsa say their parents are willing to put a home equity line of credit on their own home to extend them the $1 million needed to build, and to finance their annual deficit. But over time, that annual deficit could add up to $1 million on its own, something Warren MacKenzie, principal at HighView Financial Group in Toronto, says would require Eric to take on one more day of work at the clinic.
(Between his two jobs, Eric reportedly works up to 80 hours per week.)
How can Eric and Ilsa, or anyone for that matter, not be able to handle life at their income level?
According to Mackenzie, it’s the expenses.
Here’s how their monthly disbursements break down.
Mortgage $3,800; property tax (both properties) $1,000; utilities $490; insurance $90; maintenance, garden $190; transportation $800; groceries $2,000; clothing $520; children’s activities $1,000; tuition $5,400; summer camp $600; child care $2,800; gifts, charitable $320; vacation, travel $2,000; dining, entertainment $200; sports, hobbies $200; miscellaneous (furniture, toys) $400; health insurance $50; cellphones $220; telecom, Internet $80; RRSP $3,000; professional associations $500. Total: $25,660.
What do you think about this situation, readers? Think you could make it on the income of Eric and Ilsa? How would you solve their problems? Sound off in our comments section.
[Image via ShutterStock]