​We are Mark and Lisa Johnson, a couple in our late thirties living in Austin, TX, with our six-year-old daughter, Emma. After a decade in our current home, we’ve realized we need more space, a bigger yard, and access to better schools. So, we’re looking to move to the suburbs and buy a new house priced at $420,000. We’ll use $60,000 in equity from selling our current home and take out a $360,000 mortgage to make this move happen.

​But, as exciting as this is, we’ve had to face some harsh financial realities—Mark’s job stability isn’t as strong as we’d like, and Lisa is just starting a consulting business. We’ve been working through various scenarios to understand what’s truly possible, and we want to share a bit of our financial journey with you.

​Baseline: No Additional Income
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​Building Our Personal Financial Scenario
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​Let’s start with the baseline scenario—what happens if we purchase the new home without any extra income from Lisa’s consulting business. After selling our current home and using the $60,000 in equity for the down payment, we’d be left with a $360,000 mortgage. The monthly payment would be around $1,932.

​With our take-home pay at $94,000 annually, or $7,833 per month, we’d barely have anything left over after covering the mortgage and our regular expenses. We’d be living month-to-month, without much cushion for emergencies or unexpected costs. Honestly, it’s a bit nerve-wracking to think about how tight things would get. It gets more stressful when we take a closer look at the numbers.

What We Saw: Net Worth and Expenses

When we factored in the consulting income, the **Cash Flow Improvement Graph** showed a clear upward trend. With the extra $1,666 per month, we’re no longer on the edge financially. Our cash flow looks a lot healthier, and we’d be in a much better position to achieving all of our goals, including annual vacations and travel. Lastly, our retirement years are fully funded in this scenario.

Now, we just need to see how this scenario holds up with a stress test.



Scenario: Stress Test - Mark is Out of Work for One Year & Market Downturn (20% Decline)

We want to explore whether or not we could withstand some unexpected negative events. Mark is in a volatile industry, so we have to be aware of the possibility of him losing his job and being out of work. Modeling for a year would be a very conservative approach to ensure that we are planning for the possibility of hard times. We also asked “What if we have lower returns than expected on investments. Here, we modeled a 20% hit on all investments for two years, We felt that this would be a good test to see if Lisa’s consulting work coil dreally make it possible for us to take this big step for our family.

Losing Mark’s income for a year would be an extreme situation, but we would still be able to fund our goals with only a little help from our investments. Given the low probability of Mark being out of work for a full year, we feel really good about knowing we have this kind of flexibility in our personal financial scenario.
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What We Saw: Expense Comparison

The Stress Test revealed just how tough things could get. Our portfolio would take a hit from the market downturn, and with Mark’s income gone, we’d be operating at a loss each month. Even with the consulting income, we’d be forced to rely on savings or retirement funds to keep up with the mortgage and other bills. It’s not a scenario we want to face, but it’s important to be prepared for the worst, and it looks like we could still weather that storm.

Key Takeaways

This scenario gave us a lot to think about. The baseline scenario showed us just how risky this new home purchase would be if we didn’t have Lisa’s consulting income. We’d be cutting it so close that any unexpected expenses could throw our entire budget out of balance.

On the flip side, when Lisa’s consulting business brings in that extra $20,000 annually, our situation improves dramatically. We’re able to handle the mortgage, cover our expenses, and still work toward our financial goals. The consulting income really provides that extra cushion we need to feel secure about this move.

However, the stress test reminded us that even with careful planning, unexpected events—like job loss and market downturns—could put a major strain on our finances. Without Mark’s income, we’d be relying heavily on savings and Lisa’s side business to get by, but at least we’d have some buffer to help us through the tough times.

Making the Decision

This process has taught us the importance of having diversified income streams, especially when making big financial decisions like buying a new home. Lisa’s consulting income could be the safety net that helps us handle our new mortgage comfortably. While the baseline scenario shows how tight things would be without that extra income, adding Lisa’s consulting business gives us the room we need to keep moving forward toward our goals.

We know that planning for uncertainty is just as important as planning for success. With Lisa’s consulting income in play, and by staying conservative with our finances, we believe we can handle the new home purchase and be prepared for whatever life throws our way.

The Importance of Comprehensive Planning

It’s important to note that this case study presents a simplified financial scenario. In a more accurate personal financial scenario, we would incorporate as many details as possible, including specific expenses, financial goals, and the details of all debts and assets. This comprehensive approach ensures a more precise and tailored personal financial scenario.

The Role of Professional Advice

Despite our confidence, we recognized the value of professional advice. StartingOutPlan had equipped us with a solid understanding of our financial situation, but we decided to consult a financial advisor to validate our plan and ensure we hadn’t overlooked anything critical. This step reinforced our decision and provided peace of mind.

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