Author Topic: Reader Case Study - How do I fix my antimustachian past?  (Read 7848 times)

sarahsmc22

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Reader Case Study - How do I fix my antimustachian past?
« on: May 15, 2014, 11:49:17 AM »
Hello all.

I've been reading Mr. Money Mustache for a couple of weeks and finally finished every  blog posted today. I've been playing the credit card game for years now and I think I've finally seen the light. I read Ramit Sethi's book "I Will Teach You To Be Rich", I've browsed blogs such as getrichslowly.org and recently finished NoMoreHarvardDebt. But I think this one actually speaks to me the most. I want to be financially independent. Not that I don't mind working, I actually love my job and enjoy going to work each day.

While I thrive to be a mini-mustachian, my history is making it incredibly difficult. So I'm looking for advice on what to do.
My situation:

Single, 29 year old woman, 5 year old daughter that I retain primary custody of. (Before anyone asks, custody/child support is not available to be revised.)

Annual INCOME: $45k roughly
Monthly take home: $2,850

EXPENSES:
Mortgage: $890 (includes taxes/insurance) (I tried to sell the house but after 8 months on the market, no bites. Also should note that with my custody arrangements, I'm not allowed to move out of state (Vermont).)
Heating oil: $150
Internet: $55 (required as I'm finishing up my bachelor's degree online, this is the cheapest option available in my town)
Car payment: $320 (I know, I know… and I'm underwater in the car too. I have purchased bicycles for my daughter and I, and only put about 5000 miles on a year, but CANNOT bike to work as it entails a freeway with a NO PEDESTRIANS/BICYCLES sign)
Food: $325
Gas: $100 +/-
Daycare: $130 (this will go down this fall to $55 when my child is in school fulltime, as part of the custody arrangement, I pay one week, he pays three a month)
Electricity: $65
Water/Sewer: $50
Cell phone: $67 (locked into new contract and checked out Republic Wireless, it’s roaming at my house)
Netflix: $8
Insurance: $140 (car with full coverage, life/disability)
Credit Card Debts: $300
Personal Loan: (I tried to consolidate credit cards last year and then subsequently lost my job) $207
TOTAL: $2,600

ASSETS:
Bought a home in 2008 at 6.5%, financed 100%. Refinanced through FHA streamline in 2011 at 4.75%
Currently owe $102k, house worth probably about the same (HUGE downturn in the market right after I bought it, starting to come back)


DEBT:
Credit card 1: $1500
Credit card 2: $3500
Credit card 3: $150
Credit card 4: $450
Credit card 5: $1000
Credit card 6: $300
Personal Loan: $7100
Car Loan: $12000 (car worth about $9000)
Student loans: $30000 (not currently paying and will finish with just over $35000 next year)

I have taken these credit cards out of my wallet and locked away and am no longer accruing more debt. I picked up a second job for a short period of time, but my custody arrangements changed making me unable to work it. I'm expecting an increase in my salary at the end of this year (sooner hopefully). And I typically receive $3000-4000 in tax refunds come the beginning of the year because of education credits, itemized deductions, child tax blah blah blah.

I'm slowly making progress and have cut out cable and pared down my insurance and food as much as I have been able to. I'm worried that I'll be on this cycle forever. I would like to get my ridiculous debt taken care of before I am required to start paying on the student loans (around Sept 2015).

What should I do?

Sincerely,

A Mustachian Want-a-be
« Last Edit: May 15, 2014, 12:30:19 PM by sarahsmc22 »

Exflyboy

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #1 on: May 15, 2014, 12:10:08 PM »
OK adding up your monthly payments you are completely spending your salary..

This is bad of course so there is very little you can do without earning more money, namely a second job. I assume as you are working on your Batchelors this is not feasable at present?

So what can you do?.. anything will help.. and whatever saving you can get, pay them toward your highest interest credit card.. than keep doing it till you paid them all off.

After your batchelors get a second and/or a better paying job.

Whats wrong with Airvoice wireless?.. $10 a month... good for talk and text, why do you NEED a smartphone? What would it cost to buy out of your contract vs Airvoice at $10 a month?
Netflix/.. why?
is your heating oil and average?.. Presumably thats zero in the Summer?

Frank

sarahsmc22

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #2 on: May 15, 2014, 12:12:33 PM »
I should note that I live in the brisk winters of Vermont and use heating oil. Even after replacing my furnace a few years ago that $150/heating oil estimate is probably low as I go through around 800-1000 gallons/year.

Jack

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #3 on: May 15, 2014, 12:18:44 PM »
  • Cut the groceries to no more than $200/month
  • Rent out a room in your house
  • Turn the thermostat way down this winter
  • Check your water usage. $50/month seems high (that's what mine costs, and my city has some of the highest rates in the country). You should be using no more than 2-3 CCFs/month for a 2-person household.

ZiziPB

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #4 on: May 15, 2014, 12:21:48 PM »
Quote
I should note that I live in the brisk winters of Vermont and use heating oil. Even after replacing my furnace a few years ago that $150/heating oil estimate is probably low as I go through around 800-1000 gallons/year.

1000 gallons will be more like $300 per month, so you should double your estimate.  Heating with oil is crazy expensive (been there done that).

There is probably a little bit that you can do in your budget to lower your expenses (cell phone, groceries, netflix) but it won't help much while you have your car loan and the house.  How much would it cost you to rent instead of owning the house?  Can you find anything with heat included for less than $1200? Can you move in with relatives for a while?

Ottawa

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #5 on: May 15, 2014, 12:23:53 PM »
Don't be alarmed but, your hair is on fire!!!!!

The housing situation is a consideration.  At 890+150+65+50= $1150 per month housing cost - what is the (all in) rental cost in your area?  You should research this for a small house/apartment.  Perhaps also, this could be located within biking distance of your work because; You have a car emergency.  You need to sell that since it is costing 320+100+(insurance 100?) = $520 per month car costs.  If you can sort these situations out STAT you will have $1670 per month minus rent.  The extra money from this will assist you with paying off a loan.  Can you take out a loan with which to consolidate all your credit card debt?  If not, then you need to aggressively pay off the highest rate credit card.  As each CC is paid off - you need to cut the card up.




sarahsmc22

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #6 on: May 15, 2014, 12:29:29 PM »
Thank you for your response. Unfortunately, renting out my house is a no-go. Rent is actually higher in my area (extremely ridiculous cost of living here in New England) and also the fact that the house was purchased through a state program that put down the downpayment. Because of this, I cannot rent it out or have people live with me until it is technically paid off (the portion of downpayment).

ZiziPB

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #7 on: May 15, 2014, 12:41:35 PM »
Quote
And I typically receive $3000-4000 in tax refunds come the beginning of the year because of education credits, itemized deductions, child tax blah blah blah.

I would suggest you adjust your withholding so that you have more money available on a monthly basis and start paying off those credit cards starting with the highest interest one.

skunkfunk

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #8 on: May 15, 2014, 12:50:40 PM »
Why does it matter if Republic is roaming? They use VOIP when you are at home. They also do not charge for roaming.

You are doing a great job with your expenses. That is impressive, especially for New England. The only things that really stick out at me are the car payment and the food. You need to find a way to get rid of that car. Could walking away from it be a possibility? This might be stupid, but you won't be taking any more loans right? If you get rid of that car payment and get a cheap one with liability only and great fuel economy, you will save a few hundred dollars per month.

Ottawa

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #9 on: May 15, 2014, 12:51:41 PM »
Thank you for your response. Unfortunately, renting out my house is a no-go. Rent is actually higher in my area (extremely ridiculous cost of living here in New England) and also the fact that the house was purchased through a state program that put down the downpayment. Because of this, I cannot rent it out or have people live with me until it is technically paid off (the portion of downpayment).
Do you mean you aren't allowed to sell your house?  If you are - you might take a small loss...but surely a small apartment rental would be much less than $1670 per month?

sarahsmc22

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #10 on: May 15, 2014, 01:00:20 PM »
Thank you for your response. Unfortunately, renting out my house is a no-go. Rent is actually higher in my area (extremely ridiculous cost of living here in New England) and also the fact that the house was purchased through a state program that put down the downpayment. Because of this, I cannot rent it out or have people live with me until it is technically paid off (the portion of downpayment).
Do you mean you aren't allowed to sell your house?  If you are - you might take a small loss...but surely a small apartment rental would be much less than $1670 per month?

I could sell because of the work that I put into it. But after 8 months on the market, I couldn't even get an offer. Apartments in my area without utilities are roughly $1400+/- for a 2 bedroom.

sarahsmc22

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #11 on: May 15, 2014, 01:03:18 PM »
Why does it matter if Republic is roaming? They use VOIP when you are at home. They also do not charge for roaming.

You are doing a great job with your expenses. That is impressive, especially for New England. The only things that really stick out at me are the car payment and the food. You need to find a way to get rid of that car. Could walking away from it be a possibility? This might be stupid, but you won't be taking any more loans right? If you get rid of that car payment and get a cheap one with liability only and great fuel economy, you will save a few hundred dollars per month.

I wasn't aware that they didn't charge for roaming or the VOIP... I'll look into the cancellation costs for AT&T. Thank you.
I did wonder if I could get a parent to help with paying off enough equity into the car to get rid of it, but essentially then I'd have to ask for enough to buy a cheap car as well as I have no savings anymore. Technically instituting another payment.

Thegoblinchief

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #12 on: May 15, 2014, 01:28:39 PM »
Airvoice is cheaper than Republic and doesn't require buying a new phone.

I'd basically +1 the advice you've already gotten.

What are you getting your degree in?

And there is no alternate route to work? Google Maps has cycling specific directions.

For heating, it depends on the layout of the house and your electricity rates, but it might be worth investigating ductless mini-splits. Oil prices will likely only get worse.

sarahsmc22

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #13 on: May 15, 2014, 01:43:19 PM »
Airvoice is cheaper than Republic and doesn't require buying a new phone.

I'd basically +1 the advice you've already gotten.

What are you getting your degree in?

And there is no alternate route to work? Google Maps has cycling specific directions.

For heating, it depends on the layout of the house and your electricity rates, but it might be worth investigating ductless mini-splits. Oil prices will likely only get worse.

My degree is in Accounting. I currently work as a staff accountant and will most likely get promoted to full account manager within the year (probably coinciding with graduation). After that is finished, the office will pay for me to get certain designations (CPA, ACI, etc.) with bonuses for obtaining them ranging from $500-2500, which I will probably look into as well.

I checked out google maps. There is a route to my office, it goes around the long way. It may be possible on flex days, but the route says it'd take about 45 minutes. Unfortunately, daycares don't open until 7:15 to drop my daughter off and I must be at work by 7:30. I was considering a scooter of some sort though... technically I could walk my daughter to daycare in enough time.

I hadn't ever heard of the ductless mini-splits. I'll look into that as well. Are they noisy, do you know?

Cromacster

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #14 on: May 15, 2014, 01:57:08 PM »
I hadn't ever heard of the ductless mini-splits. I'll look into that as well. Are they noisy, do you know?

No, they aren't noisy.  They work similarly to a central AC system.  A unit sits outside, and you have a few wall units connected to it inside your house.  They are connected by a pipe, which circulates some sort of refrigerant.  They can be used for heat in the winter and AC in the summer.  Very efficient little buggers.  Depending on who you ask, I've heard they don't work in extreme cold.  Though I have seen companies claiming they work at -10F (whether this is extreme or not is debatable).  You could always supplement with your oil heat as needed.  Probably run you 3-5k to get started with such a setup......so probably not your priority at the moment.

Basenji

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #15 on: May 15, 2014, 01:58:56 PM »
I hadn't ever heard of the ductless mini-splits. I'll look into that as well. Are they noisy, do you know?

No, they are awesome. We have them and got the idea from living in Japan where they are very common. Our work as air conditioners and heating (although when it goes below 40 we turn on the old-fashioned radiators). But they aren't cheap...

http://www.fujitsugeneral.com/end_user_home.htm

sarahsmc22

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #16 on: May 15, 2014, 01:59:38 PM »
I hadn't ever heard of the ductless mini-splits. I'll look into that as well. Are they noisy, do you know?

No, they aren't noisy.  They work similarly to a central AC system.  A unit sits outside, and you have a few wall units connected to it inside your house.  They are connected by a pipe, which circulates some sort of refrigerant.  They can be used for heat in the winter and AC in the summer.  Very efficient little buggers.  Depending on who you ask, I've heard they don't work in extreme cold.  Though I have seen companies claiming they work at -10F (whether this is extreme or not is debatable).  You could always supplement with your oil heat as needed.  Probably run you 3-5k to get started with such a setup......so probably not your priority at the moment.

Interesting. Thanks for the update. It can get as cold as -30*s in the winter here, so not sure if that would damage a unit, but I suppose it's still worth looking into.

former player

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #17 on: May 15, 2014, 02:00:24 PM »
You currently have a "surplus" of $250 per month.  That will go up to $325 in the fall when your daughter starts school and your daycare costs are reduced.

As your daughter's father's contribution to daycare will also be reduced in the fall, there should be some scope for him to pay his savings ($225 per month?) towards some of her other costs.  If court arrangements can't be changed, a little moral blackmail (eg via her grandparents) might be the alternative.  But I understand that this can be impossible/difficult/sensitive.

Winter heating: don't heat bedrooms, heat the bed (hot water bottles, or electric blankets if you must).  I remember ice on the inside of my bedroom windows in winter, it isn't pleasant but won't kill you or your daughter if you are currently healthy.  (Top tip: if you fold tomorrow's clothes up in the bed, you can get dressed before you get out of bed in the morning and the clothes will be warm to put on.)  In the rest of the house heat one room only, and only to the level where you can sit in it wearing thermal underwear and two sweaters.  Make sure water pipes are insulated so that they don't freeze.  On really cold nights, if you leave one cold water tap on the ground floor slightly dripping (collect the water from it to reuse) it will keep the water in the system moving and reduce the chance of uninsulated/less well insulated pipes freezing.

If you have an open fire/woodburner, you have several months over the summer in which to scrounge wood/kindling for winter heating.

What do you own, apart from the house and car, that you can sell?  Try craigslist or a garage sale.

You have $14,000 in credit card and personal loan debt, not counting mortgage, car loan and student loans.  If you could get rid of this, you would be $507 of taxed income better off each month, which would be the equivalent of a $6,000 per annum after tax pay rise.  If you have family who can help you with this, now is the time to ask them for help: you could offer them interest at less than you are currently paying the credit card companies and both of you would be better off by cutting out the middle man.

You already have the principles of mustachianism sorted, and although things are tight your income is still slightly more than your outgoings.  The rest is just a matter of a little bit more optimisation, and time.  Good luck.

Cromacster

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #18 on: May 15, 2014, 02:04:21 PM »

Interesting. Thanks for the update. It can get as cold as -30*s in the winter here, so not sure if that would damage a unit, but I suppose it's still worth looking into.

Wouldn't damage it.  It just won't be able to heat your house :)

totoro

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #19 on: May 15, 2014, 02:07:45 PM »
I know you can't rent your house out right now but how much would it rent for?   How much of the down-payment do you need to pay off to be allowed to rent it out?

 

genselecus

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #20 on: May 15, 2014, 02:16:06 PM »
I think people have covered your expenses pretty well, but you need to look into two things ASAP:

1. Bring in a family member, friend, or friend of a friend to rent out your second bedroom (I am assuming you have a 2BR place). If rents are as high as you say they are, you should be able to find someone that is willing to cover $600+ per month. That's going to help a lot and even if it means you buy a trundle bed for your daughter to sleep in your bedroom with you, I think you've got to do it. I did some quick Google searches on FHA loans and it looks like you can rent out a portion of your home with no issues. The FHA loan just requires that you live in your home, which you'll be doing. Naturally, you'll want to do some research on this before you put an add on Craigslist. Make sure when you find someone you get references, and run a credit check and background check, etc. as they'll be living in your home.

2. Look at the option of refinancing your home again. You've got $6,900 of credit card debt, $7,100 for a personal loan, and $12,000 on a car loan. If your house is worth enough, and your income is high enough, you may be able to get approved to refinance at a higher amount to remove at least your credit card debt. You'll want to identify the highest rate loans and determine if the rate is higher than a mortgage would be (I assume the student loans are pretty similar, the car loan may be around 5%, and the credit card and personal loans are probably somewhat to very much higher than a new mortgage would be). If you can get rid of the $14k worth of higher interest loans, and bring them to a 5% rate, you'll probably be far better off. Of course, you'll need to take into account all of the variables such as closing costs and the difference in monthly payments.

You are in a major crisis mode, and I laud you for putting yourself out here on the forum to fix the problem. That said, you cannot solve this problem with little measures, you need cheap cash and you need it now. Get a roommate and get a low interest loan to replace your current high interest loans. I just went through a process with my father that was pretty similar and it has been painful, but he's made some real progress. Most importantly, he's put into place the ability to dig himself out of the hole.

Best of luck to you.

homeymomma

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #21 on: May 15, 2014, 02:19:58 PM »
I agree with faellie. You've done a great job keeping your expenses low enough to maintain a surplus, even on such a low salary. Dedicate your entire surplus to your highest interest debt each month and keep whittling away. Dedicate that entire tax refund to debt as well (assuming you can't adjust your withholding). It sounds as though your salary has good potential to increase when you finish your degree. I think you're at the point of diminishing returns when it comes to reducing expenses. You'll get much more effect when your salary increases. I'd never recommend having no car, as we are a two car family and I can't see having kids without at least one car, but I know that people on here do it. Just make sure it works for YOU before you pull trigger and sell, especially in VT with the extreme weather there.

My first reaction to your post also was to rent your house out and get a studio close to work or whatever, but sounds like that is not an option. Try to get a roommate if that's allowed... Can't tell how strict your rules are there. Also I'd suggest asking parents for a low-interest loan if that's an option, to replace your highest interest ones.

I think your biggest enemy will be debt fatigue. Without a big salary to knock out the debt, your tactic will have to be slow and steady. I takes a lot of patience and dedication (I know!) but it sounds like you are already dedicated so you're halfway there. You can do it!

Jack

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #22 on: May 15, 2014, 02:28:04 PM »
Thank you for your response. Unfortunately, renting out my house is a no-go. Rent is actually higher in my area (extremely ridiculous cost of living here in New England) and also the fact that the house was purchased through a state program that put down the downpayment. Because of this, I cannot rent it out or have people live with me until it is technically paid off (the portion of downpayment).

I have a similar deal on my house. I believe it says I'm required to be an owner-occupant. However, I'd still be an owner-occupant if I had a roommate (and I suppose technically I did for a while, since my wife and I lived here before we got married). Are you sure your terms say you can't rent out a room? Other than letting the car get repossessed or working an additional job, it really does seem like your best bet for better cash flow.

Christof

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #23 on: May 15, 2014, 02:56:00 PM »
Unfortunately, daycares don't open until 7:15 to drop my daughter off and I must be at work by 7:30.

Have you considered looking for a different job? It sounds like your current job is costing you quite a bit of money. Or, Have you actually asked to come in 30 minutes or so later. That time might suddenly become more flexible if you offer something in return, such as working 15-30 minutes longer without salary. Or it might not be such a hard limit at all, if you can offer a good reason, even without offering anything in exchange.

sarahsmc22

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #24 on: May 15, 2014, 03:44:02 PM »
Wow, a lot of good ideas to consider. Mustachian's are awesome. I'm going to see what I can do about getting family to finance, but nobody in my family is what I would consider frugal and savings aren't something that was lauded to us as children (my sister filed bankruptcy with $80k in credit card debt at the age of 26). Thank you everyone for your input. I look forward to reporting back in a few months with some (hopefully) better news.

seattlecyclone

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #25 on: May 15, 2014, 03:59:53 PM »
I think you're doing pretty well overall. You have a $250 monthly surplus even after paying $1,700/month on various debts. What are the interest rates on your credit cards, student loans, and car loan? In general that will determine which loans you should prioritize and how strongly you should attack your other expenses to get those loans out of the way.

Credit cards are usually the highest-interest loans. I'm guessing that your current $300/month payment barely pays the interest on those. Am I right? I would advise you to put every spare cent toward eradicating your credit card debt. Generally the "mathematically optimal" thing is to start with the highest interest rate and work your way down. However because credit cards 3, 4, and 6 have such low balances, you may want to just get rid of those first. You could have those paid off in less than four months using just your $250 monthly surplus in your current budget.

Once you have done that, you'll have three fewer minimum payments to worry about, which will give you some extra wiggle room in your budget if you have some unexpected expenses one month. This will in turn help make sure you don't have to charge more things to the credit card when something unexpected happens, you'll just skip the "extra" payments for a little while.

I do agree with the previous poster who suggested you adjust your tax withholding. $3-4k/year is a pretty big interest-free loan to give to the government, especially when you're busy paying interest on your own loans. You could have an extra $250/month right now to use on your credit cards, you just need to fill out a new W-4 form at work.

SDREMNGR

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #26 on: May 15, 2014, 04:14:30 PM »
I don't think you are as aware of how bad your situation is if you aren't willing to do things that you may deem extreme.

1. Get a roommate asap.  Loan restrictions say you have to keep ownership and cannot rent it out, assuming that you are not living there.  Having a roommate is not the same as renting it out.  If you are paranoid about it, you can call the lender but there is pretty much zero chance that they would audit given your mailing address will not change.   This extra income will be substantial and the start of you getting your credit cards paid off.  At $600/mo, that is $7200 extra income to pay off your credit cards.   You will have it paid off in 2 years roughly.

2. Netflix?  I know it's only $8, but it's $8.  Every dollar should be going to repay debt.

3. Heating bills are ridiculous.   Invest in a used heating blanket for you and your daughter.  Heat the bedroom with a oil heater at nights only and heat the house to a nice 50 degrees during use.  Turn off when out.  You can save $100 easily.

All these things are extreme because you are in an emergency situation.   Before you think you are too rich to do such things, know that I am walking the walk and am renting out 2 of my bedrooms even though my net worth is close to 7 figures but I really really want to FIRE within 3 years so I'm pulling out all the stops and I am doing much of the same things as I proposed.

Get rid of netflix and download or stream free movies via your internet.  Also there must be slower Internet options for cheaper.
« Last Edit: May 15, 2014, 04:17:29 PM by SDREMNGR »

lemonlime

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #27 on: May 15, 2014, 04:21:03 PM »
I am in a similar boat as you but a bit further down the road in terms of paying off debt. I want to offer you some encouragement and hope (though I'm not all the way there yet myself). There is a way to do this. I know there are a lot of Dave Ramsey haters on this forum, and I personally don't agree with his politics, but his message is very empowering for those of us trying to get out of debt but feeling like there is no way to do it. I discovered MMM first, realized my hair was on fire, and now listen to Dave Ramsey's radio show over the internet to keep me motivated on paying off the debt. In the meantime, I keep up with MMM's blog posts and forum to keep me inspired and to get new ideas for ways to be frugal, self-reliant, and keep perspective on what is really important.  My husband and I have made serious progress in the last seven months (since finding MMM) and see a clear path to reach our financial goals. It's really amazing what starts happening once you get focused and start pushing ahead - it's almost spooky. Even with set backs and not being perfect, you can do this, and opportunities to move you forward will find you. You've got this! Just start, and keep an open mind, and don't give up.

sarahsmc22

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #28 on: May 15, 2014, 05:22:20 PM »
I think you're doing pretty well overall. You have a $250 monthly surplus even after paying $1,700/month on various debts. What are the interest rates on your credit cards, student loans, and car loan? In general that will determine which loans you should prioritize and how strongly you should attack your other expenses to get those loans out of the way.

Credit cards are usually the highest-interest loans. I'm guessing that your current $300/month payment barely pays the interest on those. Am I right? I would advise you to put every spare cent toward eradicating your credit card debt. Generally the "mathematically optimal" thing is to start with the highest interest rate and work your way down. However because credit cards 3, 4, and 6 have such low balances, you may want to just get rid of those first. You could have those paid off in less than four months using just your $250 monthly surplus in your current budget.

Once you have done that, you'll have three fewer minimum payments to worry about, which will give you some extra wiggle room in your budget if you have some unexpected expenses one month. This will in turn help make sure you don't have to charge more things to the credit card when something unexpected happens, you'll just skip the "extra" payments for a little while.

I do agree with the previous poster who suggested you adjust your tax withholding. $3-4k/year is a pretty big interest-free loan to give to the government, especially when you're busy paying interest on your own loans. You could have an extra $250/month right now to use on your credit cards, you just need to fill out a new W-4 form at work.

Thank you. I think I will look into this. My income is different this year and I'm not eligible for anymore $1000 student credits, but I should be able to figure out a rough estimate of what my total tax should be.

sarahsmc22

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #29 on: May 15, 2014, 05:23:16 PM »
I am in a similar boat as you but a bit further down the road in terms of paying off debt. I want to offer you some encouragement and hope (though I'm not all the way there yet myself). There is a way to do this. I know there are a lot of Dave Ramsey haters on this forum, and I personally don't agree with his politics, but his message is very empowering for those of us trying to get out of debt but feeling like there is no way to do it. I discovered MMM first, realized my hair was on fire, and now listen to Dave Ramsey's radio show over the internet to keep me motivated on paying off the debt. In the meantime, I keep up with MMM's blog posts and forum to keep me inspired and to get new ideas for ways to be frugal, self-reliant, and keep perspective on what is really important.  My husband and I have made serious progress in the last seven months (since finding MMM) and see a clear path to reach our financial goals. It's really amazing what starts happening once you get focused and start pushing ahead - it's almost spooky. Even with set backs and not being perfect, you can do this, and opportunities to move you forward will find you. You've got this! Just start, and keep an open mind, and don't give up.

Thank you for the encouragement.

Daleth

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Re: Reader Case Study - How do I fix my antimustachian past?
« Reply #30 on: May 15, 2014, 05:51:40 PM »
I agree with the posters saying to get a roommate. I've never heard of a mortgage that said you couldn't have a housemate. They just say you have to live there yourself, which you will, as opposed to renting the whole house out to someone else.

How amicable are things with your ex? Does the custody agreement say anything ably having roommates? That's the only possible obstacle I can see--your mortgage terms are not going to have anything to do with this.

I would recommend you rent only to women and you do a criminal background check on potential tenants (charge the tenants for this--it's like an application fee). With federal fair housing law you are allowed to "discriminate" (refuse to rent to men) if what you're renting is a room in your home.