Author Topic: Reader Case Study- Help!  (Read 1853 times)

c3clark1

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Reader Case Study- Help!
« on: February 07, 2014, 08:21:30 PM »
I am a single mother with 2 kids and no help from child support


Income: Salary- $2,610/ month after taxes and pension contribution

Current expenses:

mortgage (including ins. and taxes)- $385 (this is a 25 yr balloon at 4.5%, which I hope to refinance after getting a new roof this summer)
daycare- $600 ( a few more years with this one)
student loan- $200
car payment ( I know, I know, punch me in the face)- $350
car ins.- $116
gas/ service- $100
utilities- $200 ( includes gas, electric, trash, and internet, I live in the extreme north, utility costs are higher and the winters are cold, so not a lot of wiggle room here)
cell phone- $25
food- $450 ( this includes diapers and again, I am in the rural north, so costs are higher and there arenít a lot of options to shop around. Iíve attempted to cut this down and no matter what I try am never successful, even though we rarely eat out)
kids activities- $40 ( dance and gymnastics class)
health ins.- $215
entertainment- $50 (netflix and babysitter 1x per month for a night out)

total- $2531

savings- appr. $80


Assets:
savings- $6000- for the aforementioned roof
equity- $10,000
pension- I am a teacher, so I have an undetermined amount in my pension fund, but no other retirement savings besides


Liability:
auto loan- $15,000 ( I had to refinance for the value recently when I had to replace the entire engine! 3 year loan)
mortgage- $41,000
student loan- $35,000 ( after teaching for 10 yrs. there is possibly an option to get this partially wiped out, so Iím not concerned with paying this down)

The biggest problem is obviously the car and the need to save more to repair my roof, but even the $80 per month that I should have left over always gets eaten up. Last year medical expenses for the year were over $1000 after my son had a trip to the ER for a bead stuck in his nose :/ I feel like I live a pretty frugal lifestyle and feel stuck until I get the car paid off and get rid of my daycare bill. I would like to save more for home repairs and start saving for retirement. Help!

If you want any additional information in order to post a response please ask :)

« Last Edit: February 07, 2014, 09:04:54 PM by c3clark1 »

Cheddar Stacker

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Re: Reader Case Study- Help!
« Reply #1 on: February 07, 2014, 09:36:58 PM »
1) How bad is the roof? Do you know anyone who might be able to pitch in for a DIY job? Dad, brother, sister, friend, cousin - church/community outreach type group. If you need to shell out $6-8K for this thing, look into every possible way to reduce that cost. If you can pay for only materials and some pizzas/beer/soda you will cut your costs in half. Savings - maybe $3-4K.

2) Student loan - I wouldn't pay anything extra if it might be forgiven.

3) You need to sell your car. You have no real choice here unless you want to hopefully save $80/month in your budget. You net about $31K/year, and you have a $15K car loan. This is not ok, not at all. You are likely upside down on the car, but I have no idea since you didn't give any details as to what it is. Take all the savings from your DIY roof job and use it to pay off the difference between your car value and car loan. Savings - $350/month.

4) Buy the cheapest car you can find, as long as it has seat belts for you and your 2 kids, and it will get you to where you're going somewhat reliably. Pay cash if you have any left. Get a loan however you can if you have to, but you shouldn't have to because I'm talking $1,000 on Craigslist, not $7,000 at a dealership.

5) Carry only the car insurance you are legally required to have. If you have a $1K car, you don't need any extra coverage on it. Savings - maybe $75/month.

6) Food - You need to read this if you haven't already http://www.mrmoneymustache.com/2012/03/29/killing-your-1000-grocery-bill/ . You are obviously not spending $1,000/month on groceries, but it will give you some ideas. Here's my main thought on the food - eat cheap stuff that's nutritious enough, and never, ever eat more than you need, or throw any food out. Don't go to the grocery store when you have leftovers, or when you have edible items that can be turned into a meal.

7) Swallow your pride and take advantage of whatever social safety nets might be available to you. Food stamps, WIC, earned income credit on your tax return - the last one could allow you to reduce your tax withholdings which would increase your net pay. If you have a tax refund coming, use it to make this car transition happen. It's quite possibly waaaay more important than your roof.

You are correct, you do live a fairly frugal life, except for the car which is absolutely killing you.

If you make as many of these changes as possible things will look a lot better. Then when the daycare/diaper costs disappear you will have plenty of extra funds. When that happens, don't be tempted to pamper the kids with too many expensive activities. Parks/libraries are free.

Good luck!

Stache In Training

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Re: Reader Case Study- Help!
« Reply #2 on: February 07, 2014, 11:13:37 PM »
I agree with everything Cheddar Stacker said.  The car is killing you, downsize, and you'll have no payment, and lower insurance payment too.  That alone will make a huge difference.

Next thought, is to basically be creative with food.  Only buy things that are on sale.  Seriously, only on sale.  You'll have some "creative" meals, but they'll be cheap. And cut coupons!  A lot of people forget about coupons.