The beatles Case Study

[The beatles]

You can so do this. But it's like weight loss- this isn't a crash diet, this is a lifestyle change. You've got to be in for the long haul. I'm seriously admiring you right now- you've faced up to some major harshness today, and looked head on at some rough numbers. But you *can* do this.

I highly recommend you sit down with your wife and go over these "goal setting" questions:
http://www.frugalwoods.com/2016/12/19/uber-frugal-month-the-ultimate-guide-to-saving-more-money-than-you-ever-thought-possible/

You guys need to make a game plan *together*. That's the only way you'll succeed- mutual accountability. The fact that you have two different 'types' of spendiness is actually a strength- you can keep each other in check this way if you're a team =)

Make sure you do the math on getting out of your cable contract. When we got out of ours there was a penalty but it was cheaper to pay that penalty than pay the remaining monthly payment on the contract. 

This is virtually always true. I've had this be true with breaking apartment leases even.

Thank you!

[Quidnon?]

I was pleasantly surprised when I saw my car loan balance.

I thought it was 4500 but its down to almost 3500 now.

It'll be paid off in 9 months.

Do you still think I should sell it?

Probably, as long as you aren't upside down in it.  Use whatever equity you can get out of it to buy a cheaper vehicle cash & drive.  Do not finance!

I blue booked it and its worth $13k from a private owner and $15k to a dealer.

Sell it.  Take it to a used car dealership tomorrow, but go armed with a price you are willing to sell it for.  After you have sold it, use a portion of your cash to buy an older car about $5,000.  Keep the rest for your upcoming snowball.  Do not splurge with it.

And something doesn't jive about your monthly mortgage payment, at that interest rate. It's not bad, but not great either.  Looks like your local property taxes are what is killing you, here.  What state is this?  And what would the property taxes on the rental be, above your HELOC payment?  This is important for a fair comparison, but I'm still leaning towards moving into the rental.  I know that I'm asking a lot of you to move out of your "dream home", but I suspect you moved out of it at one point in the recent past, and started down this death spiral with home ownership.

[The beatles]

ITEM MONTHLY | TOTAL | INTEREST RATE GARBAGE 36 CALE/INTERNET 114 WATER 50 GEICO AUTO 135 MASSAGE 70 AUTO LOAN 393 3591 6.54% MORTGAGE 1761 164,717 5.125% FUEL 200 GAS/ELECTRIC 150 GROCERIES 1100 EATING OUT 600 CAMERAS 25 PARENTS 0 30,K CC1 194 856 25.24% CC2 134 4495 24.49 CC3 25 505 23.24% CC4 25 452 10.23% CC5 20 692 18.49% CC6 75 797 24.15 CC7 (STORE CARDS) 100 2020 25.24 TOTAL 5196 44,455

It's actually kinda surreal to break it down like this.

If I get rid of all the debt payments, I could probably save several thousand dollars per year.[/td][/tr][/table]

[The beatles]

I was pleasantly surprised when I saw my car loan balance.

I thought it was 4500 but its down to almost 3500 now.

It'll be paid off in 9 months.

Do you still think I should sell it?

Probably, as long as you aren't upside down in it.  Use whatever equity you can get out of it to buy a cheaper vehicle cash & drive.  Do not finance!

I blue booked it and its worth $13k from a private owner and $15k to a dealer.

Sell it.  Take it to a used car dealership tomorrow, but go armed with a price you are willing to sell it for.  After you have sold it, use a portion of your cash to buy an older car about $5,000.  Keep the rest for your upcoming snowball.  Do not splurge with it.

And something doesn't jive about your monthly mortgage payment, at that interest rate. It's not bad, but not great either.  Looks like your local property taxes are what is killing you, here.  What state is this?  And what would the property taxes on the rental be, above your HELOC payment?  This is important for a fair comparison, but I'm still leaning towards moving into the rental.  I know that I'm asking a lot of you to move out of your "dream home", but I suspect you moved out of it at one point in the recent past, and started down this death spiral with home ownership.

New York.

And yes, property tax is horrible here.

For many people, their property tax is more than their actual mortgage payment.

We have STAR exemptions which I should be eligible for next year.

Property tax on rental is $375/month.

[Bracken_Joy]

So, parents offered to pay the IRS debt a while back.

Said no for a couple reasons, but mainly because I didn't want to give the IRS the extra fees and penalties they tacked on and also because it gIves the parents the ability to have a say in what we spend money on.

Should I revisit having them pay it?

No one has answered this yet ^^

Find out what the IRS says first. CALL THEM. Remember? You need hard numbers before you make any choices. See what sort of repayment plan they will work on with you.

[Quidnon?]

Should I revisit having them pay it?

No one has answered this yet ^^
[/quote]

No, because then they will be enabling the habit that begot the debt in the first place.  You can do this.

[MDM]

I added a lot more details, and dug down to get the exact amounts as requested.

Looking good.

Some points:
- You should be taking depreciation on the rental.  If you sell it, you'll have to do Depreciation recapture whether you take it now or not.
- Consider using the Free Debt Reduction Calculator for Excel (scroll down past the annoying DOCtoPDF download button and use the download "for Excel, OpenOffice, and Google Sheets".  Pick a payoff order that makes sense to you and do it.
- See Investment Order.  At this point you probably shouldn't go past step #2:
0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k up to any company match           
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.   
Even the HSA might save you "only" 15% while getting the high interest CCs paid off will save 25%.         

[The beatles]

I added a lot more details, and dug down to get the exact amounts as requested.

Looking good.

Some points:
- You should be taking depreciation on the rental.  If you sell it, you'll have to do Depreciation recapture whether you take it now or not.
- Consider using the Free Debt Reduction Calculator for Excel (scroll down past the annoying DOCtoPDF download button and use the download "for Excel, OpenOffice, and Google Sheets".  Pick a payoff order that makes sense to you and do it.
- See Investment Order.  At this point you probably shouldn't go past step #2:
0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k up to any company match           
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.   
Even the HSA might save you "only" 15% while getting the high interest CCs paid off will save 25%.       

Thank you.

I just downloaded the calculator.

[The beatles]

I may have been light on the food categories.

It's the 7th of the month and we've spent $640 on food. So we are on pace for  ... A lot

[Bracken_Joy]

Hoooooboy that's bad. Even by MY standards, and I get lots of facepunches on here for my food budget =P

Sorry to say, but until your debt is gone? No more eating out. You are burning your money in the fire of laziness. Plus destroying your health at the same time. Literally a no-win situation. (Except the restaurants- they're winning).

It's only been 7 days. Do you have those receipts? What are you buying? If you have them, literally list item for item what you bought and how much. It may open your eyes.

[1967mama]

I may have been light on the food categories.

It's the 7th of the month and we've spent $640 on food. So we are on pace for  ... A lot

*covers eyes waiting for massive facepunching to occur*

[Allie]

Oh my gosh.  What in the world did you buy?  Was it actually all food?  I hope it wasn't, I can't imagine how 2 adults, a toddler and a baby can eat $600 worth of food in a week. 

You and your wife can do so much better! 

[The beatles]

Oh my gosh.  What in the world did you buy?  Was it actually all food?  I hope it wasn't, I can't imagine how 2 adults, a toddler and a baby can eat $600 worth of food in a week. 

You and your wife can do so much better!

Merchant   Spending

Grocery Store   $357.90
PayPal   $115.16
Aldi   $87.79
Sakura   $42.47
Pizza   $37.23

Total   $640.55

(Paypal is what I use to pay for the office lunches on GrubHub)

[1967mama]

Would you be able to post a photo of your receipts from grocery stores?

Take the photo then click on attachments and other options below the box where you post a message on here. Click on choose file then click on photo library.

[The beatles]

Would you be able to post a photo of your receipts from grocery stores?

Take the photo then click on attachments and other options below the box where you post a message on here. Click on choose file then click on photo library.

Next week I can.

We just shopped yesterday but threw the receipt out.

[pbkmaine]

Oh my gosh.  What in the world did you buy?  Was it actually all food?  I hope it wasn't, I can't imagine how 2 adults, a toddler and a baby can eat $600 worth of food in a week. 

You and your wife can do so much better!

MerchantSpending

Grocery Store$357.90
PayPal$115.16
Aldi$87.79
Sakura$42.47
Pizza$37.23

Total$640.55

(Paypal is what I use to pay for the office lunches on GrubHub)

You are going to stop the office lunches, Sakura and Pizza, correct?

[LadyStache in Baja]

Beatles you're doing so good!  You're being so game with us, answering our questions and working with us!  I just know in 6 months you're going to be in a totally different place.  A good place. 

The thing is there is so much fat in your budget, this is really easy.  It's much easier than having a low income and being really frugal and still not having enough.  You have enough, you just need to learn how to not spend on stupid shit, and you're going to learn it.

[Pizzabrewer]

So, parents offered to pay the IRS debt a while back.

Said no for a couple reasons, but mainly because I didn't want to give the IRS the extra fees and penalties they tacked on and also because it gIves the parents the ability to have a say in what we spend money on.

Should I revisit having them pay it?

No one has answered this yet ^^

I'll answer.  Absolutely not.  You have incredibly generous parents but you have already burdened them enough with your financial irresponsibility.  Furthermore, you insulted their generosity by racking up additional debt after they bailed you out.  Until you have done everything you can to straighten out your mess you should not burden them further.  Sorry for the facepunch but there's no other way to put it.

[Pizzabrewer]

Mr Beatle:

I can't agree with the advice you've gotten to contact the IRS ASAP without further information.  I have to ask, are you just in arrears with payments to the IRS or are you also a year or 2 (or more) delinquent in filing?  You previously commented that you've kept your head down, does this mean you've neglected timely filing?

 I have some experience in this.  At one time in my life I was 4 years delinquent in filing and about to go 5 years before I got my shit together.  I was very surprised they never caught up with me earlier.  I went to an accountant and in about 2 weeks got caught up on all my filings.  If you are delinquent I recommend exactly the same--hire a CPA and take a week to do nothing but catch up.  And I mean *next* week, before they get crazy busy.  It really sucks but until you get your filings up to date you can do real harm to your position by contacting the IRS.

The other important part of hiring a CPA is that you should NEVER deal or negotiate with the IRS on your own when you're in this position.  You are in an adversarial situation and any answer you give to a specific question will be part of your file and their decision making process.  It's like going into court defending yourself without a lawyer.  If you DO decide to deal with them directly, and this is extremely important, any question they ask that you do not have a ready answer that will help your position, you MUST say "I don't know, I'll have to get back to you". 

Some nuts and bolts questions.  You have previously stated you are self-employed, you have also made reference to co-workers and an office staff.  Your budget also seems to indicate a regular paycheck.  This doesn't all jive without more info.  Are you a business owner with employees?  Are you an independent contractor?  What type of business do you have: a corporation (LLC, S-corp, etc?) or a sole proprietorship?  If a corporation, are the business taxes up to date?  Sales taxes current?  If you have employees, are all the withholding taxes paid-up to date (extremely important!)?

This is why I can't agree with the advice to call the IRS on Monday morning.  There are potential landmines in each of those questions.

Dude, I wish you the best.  I'm a fellow New Yorker now (just moved to the Syracuse area) and I hear you on the taxes.  BTW did you file for the STAR rebate?  We just bought our house in November, I filed for the STAR yesterday (it took less than 10 minutes) and will get the first check around September.  No reason you shouldn't get one then also.

[Bee21]

Holy moly, that food spending is diabolical.

It will get better tomorrow, once you send out that email about office lunches. Hell, they should be feeding you!

Food spending is the easiest to control, you can get great results very quickly, once you get organized. Organization and meal planning, plus reducing waste is the key in my experience. Batch cooking is great money and time saver, so are the premeditated leftovers. The 7 dollar store brought grilled chicken can be turned into several meals. Try this-  Day one. Chicken caesar salad. Day 2 chicken stir fry. Day 3. Chicken fried rice. Plus chicken soup from the bones with noodles and extra veg. For about 12 dollars worth of chicken, rice, veg and noodles, you can get 4 days of main meals. I did that last week because it's so hot around here and i didn't feel like cooking and there were no complaints.

What do you eat that it cost you over 600 in a few days??? I am really curious now.

 Can your wife cook? If she is busy with the kids, she should cook a large batch of bolognese sauce, a huge pot of  mild chili and a stew, freeze them in portions of 2 and that should feed you for dinners for almost 2 weeks for less than 30. Give it a go. It won't kill ya if you eat the same menu 2 weeks in a row. You can use these differently, ie spag bol or pasta bake. Stew with rice or noodles or dumplings. Chili w rice or cornbread. Nachos. Pie. Burritos, enchilladas. It is not rocket science, really.

Watch out those snacks, juices, fancy cheeses, dips, lunch meat, prepared food, organic whatnot.

Alcohol?

[MayDay]

We are a family of four and have definitely had times when I spend 3-400 in one go at the grocery store (in fact I did in December). The key, when you are on a tight budget (WHICH YOU ARE) is that now you are done at the grocery store for the month except for literally *critical food for the kids*. Like milk for the baby. Not packaged snack food.

Your wife's job (and you can/should help, but if she isn't on board as the SAHM than this is not going to be pretty) is to stretch the food you just bought and use all the pantry odds and ends.

Next week's grocery receipt should look something like:

Gallon of milk
2 bunches bananas (if you have no fruit in the fridge OR freezer) bananas are usually the cheapest fruit by far.
If you have no veggies, some carrots are cheap, then frozen veggies

Really that is about all.

Empty out you freezer and pantry. It'll suck. You'll eat some wierd stuff. But next month you'll be coming considerably more motivated to not blow the entire grocery budget the first week.

[RetiredAt63]

And you threw out the receipt?

Your categories are too broad.  It is not "groceries".

It is "meat, dairy, fruit, vegetables, starches, beverages, condiments".  And then itemize.  So meat would be

1 whole chicken   price per pound    price paid   #servings
2 pounds medium ground beef  price per pound    price paid   #servings
etc.

No deli meats, way too expensive for #servings

Condiments could be

1 large jar (# oz.) mayo     price per ounce   price paid
1 small jar (# oz.) mustard     price per ounce   price paid

And then you can figure out meal costs:
One batch meat sauce = ground beef plus can of tomato paste plus can crushed tomatoes plus can diced tomatoes = $X.  Makes Y servings so cost per serving is X/
Y

This is tedious, but there is Excel.  And without it you have no way of knowing how much your food budget is doing for you.

Another comment on food - buy store brands.  Kids like Jello?  Do not buy Jello brand, buy the store brand. Never buy pre-made, I cannot believe people have been suckered into buying pre-made jello and puddings (even worse, single servings) and so on.  They take almost no time to make, and are fun to do with the older kid.

Did I miss the kids' ages?  Preschool and young, but ages?  How much can they do? 

[RetiredAt63]

You have to do a 180^o turn in your *thinking* and the spending will follow.  You need to be a speedboat, not an ocean liner - be nimble, be quick, be agile, be responsive.  Not ponderous in making changes in direction.

Restaurant spending is still in your life, must go.  You spent a lot for probably not a lot in return.

Someone asked about your work life - what is your business, these office lunches, etc. Buying lunch for the office would be OK if it were a business expense charged to the business, providing your business accountant says it is OK.  It is not OK coming out of your personal pocket.

You are perfectly correct that if you can get your home spending under control those CCs will go fast.  Of course the debt to your parents and the debt to the IRA is much bigger (and I agree, first step is a good CA) so you will be a while getting to zero.  Step one is a zero net worth (as opposed to massive debt, where you are now).  Step two is getting the positive net worth, so that at some point in your life you are able to retire (ideally before 70).

You haven't said much about your wife, but a lot of this is going to fall to her.  Has she started reading MMM and the Journals?  She will find lots of useful information, and it will also help her be a speedboat instead of an ocean liner.

[ShoulderThingThatGoesUp]

Does your wife know what deep shit you're in?

[begood]

Oddly enough, I wouldn't be surprised if the hardest thing for you to face right now is telling your coworkers that you're not going to be buying lunch anymore. I'm sure that feels really revealing and personal, and you've kind of been the hero for those people by buying them lunch.

But you cannot afford to spend $150 a week on that. You just can't. That's $600 a month. You've spent $115 already in January, leaving you $485 that could be sent to one of your credit cards once you've accomplished the truly difficult task of letting your coworkers know that you can't buy lunch anymore.

Tell them tomorrow. You can even buy them lunch tomorrow so they don't have to plan ahead. That would then leave you $435 to send to one of those high debt credit cards - Dave Ramsey would say send it to the one with the smallest balance; others recommend sending it to the one with the highest interest rate.

I know it's going to be hard. But once you have done that, you will have six hundred more little green workers every single month to do your bidding,

[Bracken_Joy]

Oddly enough, I wouldn't be surprised if the hardest thing for you to face right now is telling your coworkers that you're not going to be buying lunch anymore. I'm sure that feels really revealing and personal, and you've kind of been the hero for those people by buying them lunch.

But you cannot afford to spend $150 a week on that. You just can't. That's $600 a month. You've spent $115 already in January, leaving you $485 that could be sent to one of your credit cards once you've accomplished the truly difficult task of letting your coworkers know that you can't buy lunch anymore.

Tell them tomorrow. You can even buy them lunch tomorrow so they don't have to plan ahead. That would then leave you $435 to send to one of those high debt credit cards - Dave Ramsey would say send it to the one with the smallest balance; others recommend sending it to the one with the highest interest rate.

I know it's going to be hard. But once you have done that, you will have six hundred more little green workers every single month to do your bidding,

Yep. Those lunches alone are more that you are netting from your rental every month. That is crazy.

[Iplawyer]

So, parents offered to pay the IRS debt a while back.

Said no for a couple reasons, but mainly because I didn't want to give the IRS the extra fees and penalties they tacked on and also because it gIves the parents the ability to have a say in what we spend money on.

Should I revisit having them pay it?

No one has answered this yet ^^

No - you need t sell your rental property.  With money in hand - sit down with the IRS and talk to them.  Take an attorney with you if want.  Offer your actual taxes plus interest as an Offer in Compromise.  They might take it - and at least they'll be negotiating with you.  And you'll have one advantage - tell them you have a source so that you can pay them in cash once you come to a number.  That is a good dealing point with the IRS.  Then pay them what you negotiate and be done with it.  And make sure that you are on a paycheck or quarterly basis keeping up with what you owe so that you never get in this situation again.  But - DO NOT LET MOMMY AND DADDY GET YOU OUT OF THIS. You and your wife got yourself here - get yourselves out.   And you can ignore this - but IRS debt doesn't get smaller and go way - they will eventually act to get their money and the easy target is your rental.  So take care of getting it on the market for a quick sell NOW.  Even if you don't have your rental they have more draconian ways of getting what you owe.  Take care of this now so it doesn't grow bigger and swallow you. 

[Trifle]

Beatles -- I just wanted to add my encouragement to you and your wife.  Fantastic that you have stepped up to the plate and are making these changes!  You have the real MMM forum heavyweights giving you advice here -- the best of the best. 

You haven't said much about your wife other than that she is on board.  This is not going to be an easy road for her.   Have you checked out the thread yet on helping spouses convert to the new mindset?  Right at the top of "Ask a Mustachian" -- thread is called "How to Convert your SO."  There are also tons of resources for her (as the SAHP/family CFO) on this forum:  Shopping, cooking, child care, home economy, you name it. 

You are young and have good income.  You can do this, and we are all rooting for you! The two of you will emerge from this as diamond-hard superheroes. 
 

[The beatles]

//ADDED//

Furniture Loan: 276 per month, total due: $1,950, 25% interest

[The beatles]

Mr Beatle:

I can't agree with the advice you've gotten to contact the IRS ASAP without further information.  I have to ask, are you just in arrears with payments to the IRS or are you also a year or 2 (or more) delinquent in filing?  You previously commented that you've kept your head down, does this mean you've neglected timely filing?

 I have some experience in this.  At one time in my life I was 4 years delinquent in filing and about to go 5 years before I got my shit together.  I was very surprised they never caught up with me earlier.  I went to an accountant and in about 2 weeks got caught up on all my filings.  If you are delinquent I recommend exactly the same--hire a CPA and take a week to do nothing but catch up.  And I mean *next* week, before they get crazy busy.  It really sucks but until you get your filings up to date you can do real harm to your position by contacting the IRS.

The other important part of hiring a CPA is that you should NEVER deal or negotiate with the IRS on your own when you're in this position.  You are in an adversarial situation and any answer you give to a specific question will be part of your file and their decision making process.  It's like going into court defending yourself without a lawyer.  If you DO decide to deal with them directly, and this is extremely important, any question they ask that you do not have a ready answer that will help your position, you MUST say "I don't know, I'll have to get back to you". 

Some nuts and bolts questions.  You have previously stated you are self-employed, you have also made reference to co-workers and an office staff.  Your budget also seems to indicate a regular paycheck.  This doesn't all jive without more info.  Are you a business owner with employees?  Are you an independent contractor?  What type of business do you have: a corporation (LLC, S-corp, etc?) or a sole proprietorship?  If a corporation, are the business taxes up to date?  Sales taxes current?  If you have employees, are all the withholding taxes paid-up to date (extremely important!)?

This is why I can't agree with the advice to call the IRS on Monday morning.  There are potential landmines in each of those questions.

Dude, I wish you the best.  I'm a fellow New Yorker now (just moved to the Syracuse area) and I hear you on the taxes.  BTW did you file for the STAR rebate?  We just bought our house in November, I filed for the STAR yesterday (it took less than 10 minutes) and will get the first check around September.  No reason you shouldn't get one then also.

Thanks Pizza Brewer.

Yes, the withholdings are all set up properly now and everything is in line.

Will be filing for the star rebate this week.

[Khaetra]

You haven't said much about your wife other than that she is on board.  This is not going to be an easy road for her.

It sure will be hard for her!  The $10 here and the $20 there has to stop as well, so no makeup/beauty products and no trips to the salon because that shit adds up fast!  You had better make sure she is 110% on board with no spending whatsoever and getting out of debt.

[BTDretire]

Any chance you can transfer the balances of CC2 and CC7 to CC4?
That will give you an extra $77 to apply towards CC6.

[The beatles]

Holy moly, that food spending is diabolical.

It will get better tomorrow, once you send out that email about office lunches. Hell, they should be feeding you!

Food spending is the easiest to control, you can get great results very quickly, once you get organized. Organization and meal planning, plus reducing waste is the key in my experience. Batch cooking is great money and time saver, so are the premeditated leftovers. The 7 dollar store brought grilled chicken can be turned into several meals. Try this-  Day one. Chicken caesar salad. Day 2 chicken stir fry. Day 3. Chicken fried rice. Plus chicken soup from the bones with noodles and extra veg. For about 12 dollars worth of chicken, rice, veg and noodles, you can get 4 days of main meals. I did that last week because it's so hot around here and i didn't feel like cooking and there were no complaints.

What do you eat that it cost you over 600 in a few days??? I am really curious now.

 Can your wife cook? If she is busy with the kids, she should cook a large batch of bolognese sauce, a huge pot of  mild chili and a stew, freeze them in portions of 2 and that should feed you for dinners for almost 2 weeks for less than 30. Give it a go. It won't kill ya if you eat the same menu 2 weeks in a row. You can use these differently, ie spag bol or pasta bake. Stew with rice or noodles or dumplings. Chili w rice or cornbread. Nachos. Pie. Burritos, enchilladas. It is not rocket science, really.

Watch out those snacks, juices, fancy cheeses, dips, lunch meat, prepared food, organic whatnot.

Alcohol?

I think the main problem is pre-packaged crap.

Our pantry and freezer is chuck full of it.

Gummie bears, cookies, chips, popcorn, cereal, granola bars, juice packets, apple sauce packets, dried apple pouches, frozen dinners, apple pie, brownie mixes, apple cider, fruit drinks, coke, sprite etc.

[The beatles]

Mint really is super useful.

I'm going month by month and seeing expenses and food is definitely the largest.

This is for December...

Your Spending

MERCHANT   SPENDING

Total   $2,652.04
    Export to CSV

Staff lunch   $717.84
Grocery Store   $616.12
Aldi   $300.69
Grocery Store   $185.65
Burger King   $146.23
Dave & Buster   $120.50
Cheese   $86.20
Mcdonald   $72.94
Walgre   $71.75
GrubHub   $64.06
Pf Cha   $63.65
Pizza   $53.84
Thai     $50.76
Pizza   $44.12
Taco Bell   $29.48
Pizza   $16.39
Burger King   $11.82

[The beatles]

Any chance you can transfer the balances of CC2 and CC7 to CC4?
That will give you an extra $77 to apply towards CC6.

There's very little room on any of the cards.

[The beatles]

So, parents offered to pay the IRS debt a while back.

Said no for a couple reasons, but mainly because I didn't want to give the IRS the extra fees and penalties they tacked on and also because it gIves the parents the ability to have a say in what we spend money on.

Should I revisit having them pay it?

No one has answered this yet ^^

No - you need t sell your rental property.  With money in hand - sit down with the IRS and talk to them.  Take an attorney with you if want.  Offer your actual taxes plus interest as an Offer in Compromise.  They might take it - and at least they'll be negotiating with you.  And you'll have one advantage - tell them you have a source so that you can pay them in cash once you come to a number.  That is a good dealing point with the IRS.  Then pay them what you negotiate and be done with it.  And make sure that you are on a paycheck or quarterly basis keeping up with what you owe so that you never get in this situation again.  But - DO NOT LET MOMMY AND DADDY GET YOU OUT OF THIS. You and your wife got yourself here - get yourselves out.   And you can ignore this - but IRS debt doesn't get smaller and go way - they will eventually act to get their money and the easy target is your rental.  So take care of getting it on the market for a quick sell NOW.  Even if you don't have your rental they have more draconian ways of getting what you owe.  Take care of this now so it doesn't grow bigger and swallow you.

Agreed.

We are looking into selling it now.

We have to figure out a few things though.

Roof definitely needs to be replaced. Also, there is renters in there (month to month).

[LadyStache in Baja]

You guys eat out so much!  You need to make a plan for that together.  Can you be in charge of dishes and clean-up if your wife promises to cook 3 meals every day?

Just a heads-up....I know advertising makes it seem like prepackaged crap is normal, but its not.  We literally buy 0 single-serving pouches of anything, and in fact no packaged food at all beyond an OCCASIONAL box of ritz crackers or cereal.

[LadyStache in Baja]

Oh, and no more juices or soft drinks.

Learn how to make lemonade and sweet teas.  It is VERY easy.

For example, take a stick of cinnamon, put into a pot of water and boil.  Then add one spoonful of sugar per cup (approximately, adjust to your tastes).  Drink hot, or pour into a pitcher, refrigerate and drink cold.

Blend any soft juicy fruit (like mangoes, pineapple, etc, whatever is at the store) in a blender with lots of water.  Add sugar to make sweeter.  Bam, homemade fruit juice.  May not actually be cheap.  But the side benefit is that since it takes effort to produce you will consume less.

Lemonade: 1/4 lemon juice + 1/4 cup sugar + pitcher of water.  Stir.  Bam, yummy lemonade. 

I feel like we need a local mustachian to go over to your house and teach your wife how to cook.

[wenchsenior]

Oh, and no more juices or soft drinks.

Learn how to make lemonade and sweet teas.  It is VERY easy.

For example, take a stick of cinnamon, put into a pot of water and boil.  Then add one spoonful of sugar per cup (approximately, adjust to your tastes).  Drink hot, or pour into a pitcher, refrigerate and drink cold.

Blend any soft juicy fruit (like mangoes, pineapple, etc, whatever is at the store) in a blender with lots of water.  Add sugar to make sweeter.  Bam, homemade fruit juice.  May not actually be cheap.  But the side benefit is that since it takes effort to produce you will consume less.

Lemonade: 1/4 lemon juice + 1/4 cup sugar + pitcher of water.  Stir.  Bam, yummy lemonade. 

I feel like we need a local mustachian to go over to your house and teach your wife how to cook.

Or just stop drinking sugar water.

[The beatles]

You guys eat out so much!  You need to make a plan for that together.  Can you be in charge of dishes and clean-up if your wife promises to cook 3 meals every day?

Just a heads-up....I know advertising makes it seem like prepackaged crap is normal, but its not.  We literally buy 0 single-serving pouches of anything, and in fact no packaged food at all beyond an OCCASIONAL box of ritz crackers or cereal.

Do you have kids?

[Bracken_Joy]

Plenty of people on the forums have sub-$400/month grocery budgets with 4+ person families. Should be especially easy since your kids are so young- you still have a ton of power to shape their tastes.

Here are some threads you may benefit from reading:
http://forum.mrmoneymustache.com/ask-a-mustachian/cutting-grocery-budget-for-family-of-five/
http://forum.mrmoneymustache.com/ask-a-mustachian/how-much-do-you-spend-on-groceries/
http://forum.mrmoneymustache.com/ask-a-mustachian/groceries-for-a-family-of-3/

And best of all, a challenge thread:
http://forum.mrmoneymustache.com/throw-down-the-gauntlet/stick-to-a-grocery-budget-2016/

[The beatles]

Plenty of people on the forums have sub-$400/month grocery budgets with 4+ person families. Should be especially easy since your kids are so young- you still have a ton of power to shape their tastes.

Here are some threads you may benefit from reading:
http://forum.mrmoneymustache.com/ask-a-mustachian/cutting-grocery-budget-for-family-of-five/
http://forum.mrmoneymustache.com/ask-a-mustachian/how-much-do-you-spend-on-groceries/
http://forum.mrmoneymustache.com/ask-a-mustachian/groceries-for-a-family-of-3/

And best of all, a challenge thread:
http://forum.mrmoneymustache.com/throw-down-the-gauntlet/stick-to-a-grocery-budget-2016/

Thanks. Reading them now.

Wish people would post a sample daily menu their family eats, including drinks and snacks.

[GetSmart]

Was there a previous post that outlined how you got to this place?  I feel like there’s a lot of info missing. Sorry this got long....

This is what I don’t get.  It seems that you own your own business and you have employees.  So you are getting a conventional paycheck, correct ?  And yet you’re looking for sidework at $10/hour ?  Can you not just increase your business ? Do you have too many employees ? What type of business is it that you as the owner are only paying yourself about $30 / hour?  Can you give yourself a raise ? (only to pay down the debt of course - or actually give yourself a raise and have it all withheld to pay off the tax debt). Can you ‘hire’ your wife to do at home bookkeeping or something ?

I’m assuming that you didn’t always have a conventional paycheck and that is how you got behind on the IRS estimated payments maybe ?  Also assuming that you have an accountant doing your business taxes and making sure that you are filing on time / filing at all / filing properly by taking advantage of all deductions.  You can go back 3 years and re-do if they were not done correctly.

You should not be buying your office staff lunch ever much less 3x a week for heaven’s sake !!  However, what was spent in 2016 should be an office expense out of petty cash or something else - ask your accountant - not out of your after-tax personal paycheck.  Please take advantage of your rightful deductions.

So your business did well enough to give yourself a $6000 bonus and you spent the entire thing on things you can’t categorize (shopping, food, uncategorized) - cause it’s Christmas? -  instead of paying off your first 3 CC’s.  YIKES - this just makes my frugal brain hurt!  Is there anything you bought with this spree that you can still return - 90” TV - really - wtf - who needs that ?

Do you have more than one car?  Your insurance seems really high, but it depends on what you’re driving, how old, etc. - this is an easy one to reduce.

Shop at grocery store only type stores; not Target where it’s too tempting to buy crap when you have no self-control.

You’re paying a late fee on your mortgage !  Is that every month?  or just last month?  WHY?  Set up your mortgage as an auto pay to go out as soon as your paycheck clears (use direct deposit) - most of your other bills should be set up this way also.  That way all your bills are paid first - then you can think about buying food.

Are you throwing out a lot of food? Is the baby still in diapers? You really need to separate what is actual food (and only buy real food - no packaged snacks, juice boxes or other bs) and what is cleaning supplies, baby supplies, toys, etc.  It’s incomprehensible how one can spend that much on food in one month, so it’s probably not all food - and get rid of the sugar - you’ll all feel better.

The good news is that you probably have everything you could possibly need for the next 10 years and don’t need to buy one more thing.  Mortgage, taxes, utilities, insurance and food (cooked at home) are your only categories and most of those can be reduced by a lot.

While I was writing this I see you added a furniture loan ??  Good grief.  And you also have a 401k loan - how much is that?  I’m guessing you just bought this house within the last year or so? And instead of using the HELOC from the rental for the 20% down payment you used it for upgrades and put down the minimum - so now you're paying PMI also?

You need to distinguish between wants and needs; just because you want it and want it now - that attitude has to go.  But it can be done.  I’ve known people in deeper holes than this.

[CheapScholar]

My mother in law is always buying my 7 year old son pre packaged crap food.  Fruit by the foot and gummy treats.  Applesauce in non recyclable pouches.  It drives me effing crazy.  Mostly because of the environmental cost of the crap.  In defense of Beatles, I see first hand how kids get hooked on the stuff.  It's colorful packaging, convenient to eat, and often loaded with sugar.  When I'm making lunch for my son he gets a cut up apple or banana and I compost the cores and peels in my backyard. 

[Bracken_Joy]

Plenty of people on the forums have sub-$400/month grocery budgets with 4+ person families. Should be especially easy since your kids are so young- you still have a ton of power to shape their tastes.

Here are some threads you may benefit from reading:
http://forum.mrmoneymustache.com/ask-a-mustachian/cutting-grocery-budget-for-family-of-five/
http://forum.mrmoneymustache.com/ask-a-mustachian/how-much-do-you-spend-on-groceries/
http://forum.mrmoneymustache.com/ask-a-mustachian/groceries-for-a-family-of-3/

And best of all, a challenge thread:
http://forum.mrmoneymustache.com/throw-down-the-gauntlet/stick-to-a-grocery-budget-2016/

Thanks. Reading them now.

Wish people would post a sample daily menu their family eats, including drinks and snacks.

I have links for that as well =)

http://dontwastethecrumbs.com/real-food-menus/
http://thriftyfrugalmom.com/200month-menu-plan-for-our-family-of-5/#sthash.mbXzyf4i.dpbs
http://www.frugalmamafiles.com/2013/07/meal-planning-how-we-live-on-75-week.html
http://www.wisebread.com/what-to-eat-every-day-a-month-of-frugal-meals
http://www.livingonadime.com/easy-family-menu-ideas/
http://www.gracefullittlehoneybee.com/30-frugal-meal-ideas/

[RetiredAt63]

I feel like we need a local mustachian to go over to your house and teach your wife how to cook.

I noticed that too.  Given the fake-food spending, she needs to step up to the plate.

I keep asking the kids' ages.  Unless the little one is super little (i.e. 0-3 months) she can do things at home.  I was in a sleep-deprived fog the first few months of Mommy-hood, so have zero expectations for someone in those circumstances.  After that, time for her to get her act together.

Good general books for her:
Leanne Ely - Saving dinner and Saving dinner the low-carb way, and SavingDinner.com
Once the basics are in place: To make life easier and get you invnovled in meal prep:
Mimi Wilson and Mary Beth Lagerborg - Once-A-Month-Cooking Family Favorites
Any crock-pot recipe books

Fruits are full of sugar, I would go even less for the fruit juices than Wench senior posted.  In the summer when it is hot, a bottle of RealLemon^TM and water and a bit of sugar go a long way, if lemon prices are high in your area.

What we hope to see posted on January 15:
Staff lunch   $150 (already done, no more)
Grocery Stores (all your grocery stores)   $100 (you have so much stuff already, only perishables)
Burger King   $0
Dave & Buster   $0
Cheese   $0
Mcdonald   $0
Walgre   $20 (onlyh pharmacy stuff, only if you have nothign equivalent at home)
GrubHub   $0
Pf Cha   $0
Pizza   $0
Thai     $0
Pizza   $0
Taco Bell   $0
Pizza   $0
Burger King   $0

[The beatles]

This is what I don’t get.  It seems that you own your own business and you have employees.  So you are getting a conventional paycheck, correct ?  And yet you’re looking for sidework at $10/hour ?  Can you not just increase your business ? Do you have too many employees ? What type of business is it that you as the owner are only paying yourself about $30 / hour?  Can you give yourself a raise ? (only to pay down the debt of course - or actually give yourself a raise and have it all withheld to pay off the tax debt). Can you ‘hire’ your wife to do at home bookkeeping or something ?

I dont want to get into details of my exact business, for privacy reasons.

But to put it simply, I do NOT have employees. I am self employed and work with other self employed people, under a company umbrella. So I, and other self employed people, share secretaries and office staff and their expense is pooled and split.

I’m assuming that you didn’t always have a conventional paycheck and that is how you got behind on the IRS estimated payments maybe ?  Also assuming that you have an accountant doing your business taxes and making sure that you are filing on time / filing at all / filing properly by taking advantage of all deductions.  You can go back 3 years and re-do if they were not done correctly.

They were actually always done properly.

I never (to my knowledge) made a mistake on taxes and a local tax firm always filed them.

A little while ago the income tax came out to be quite large one year, and I wasn't able to pay it all. I do not do quarterly taxes, I pay it all in one lump sum. It was a mistake.

You should not be buying your office staff lunch ever much less 3x a week for heaven’s sake !!  However, what was spent in 2016 should be an office expense out of petty cash or something else - ask your accountant - not out of your after-tax personal paycheck.  Please take advantage of your rightful deductions.

I looked into this. Accountant says because of the structure and who receives the food, I am not allowed to deduct the lunch expense.

So your business did well enough to give yourself a $6000 bonus and you spent the entire thing on things you can’t categorize (shopping, food, uncategorized) - cause it’s Christmas? -  instead of paying off your first 3 CC’s.  YIKES - this just makes my frugal brain hurt!  Is there anything you bought with this spree that you can still return - 90” TV - really - wtf - who needs that ?

Yeah, it was a mistake.

Do you have more than one car?  Your insurance seems really high, but it depends on what you’re driving, how old, etc. - this is an easy one to reduce.

1 large sized SUV.

You’re paying a late fee on your mortgage !  Is that every month?  or just last month?  WHY?  Set up your mortgage as an auto pay to go out as soon as your paycheck clears (use direct deposit) - most of your other bills should be set up this way also.  That way all your bills are paid first - then you can think about buying food.

It's been late the last few months, but not crazy late. 10 to 15 days.

Are you throwing out a lot of food? Is the baby still in diapers? You really need to separate what is actual food (and only buy real food - no packaged snacks, juice boxes or other bs) and what is cleaning supplies, baby supplies, toys, etc.  It’s incomprehensible how one can spend that much on food in one month, so it’s probably not all food - and get rid of the sugar - you’ll all feel better.

We don't throw away food due to expiration dates. But our kids will eat part of an orange and throw the rest away. Or open a banana and then not want it and we have to throw it away.

Yes, still in diapers (and pull ups).

While I was writing this I see you added a furniture loan ??  Good grief.  And you also have a 401k loan - how much is that?  I’m guessing you just bought this house within the last year or so? And instead of using the HELOC from the rental for the 20% down payment you used it for upgrades and put down the minimum - so now you're paying PMI also?

Yeah, just bought the house a year ago.

Yeah, loan for couches.

[The beatles]

I feel like we need a local mustachian to go over to your house and teach your wife how to cook.

I noticed that too.  Given the fake-food spending, she needs to step up to the plate.

I keep asking the kids' ages.  Unless the little one is super little (i.e. 0-3 months) she can do things at home.  I was in a sleep-deprived fog the first few months of Mommy-hood, so have zero expectations for someone in those circumstances.  After that, time for her to get her act together.

Good general books for her:
Leanne Ely - Saving dinner and Saving dinner the low-carb way, and SavingDinner.com
Once the basics are in place: To make life easier and get you invnovled in meal prep:
Mimi Wilson and Mary Beth Lagerborg - Once-A-Month-Cooking Family Favorites
Any crock-pot recipe books

Fruits are full of sugar, I would go even less for the fruit juices than Wench senior posted.  In the summer when it is hot, a bottle of RealLemon^TM and water and a bit of sugar go a long way, if lemon prices are high in your area.

What we hope to see posted on January 15:
Staff lunch   $150 (already done, no more)
Grocery Stores (all your grocery stores)   $100 (you have so much stuff already, only perishables)
Burger King   $0
Dave & Buster   $0
Cheese   $0
Mcdonald   $0
Walgre   $20 (onlyh pharmacy stuff, only if you have nothign equivalent at home)
GrubHub   $0
Pf Cha   $0
Pizza   $0
Thai     $0
Pizza   $0
Taco Bell   $0
Pizza   $0
Burger King   $0

Oldest is 4.  Youngest is almost 2.

[Rezdent]

So, parents offered to pay the IRS debt a while back.

Said no for a couple reasons, but mainly because I didn't want to give the IRS the extra fees and penalties they tacked on and also because it gIves the parents the ability to have a say in what we spend money on.

Should I revisit having them pay it?

No one has answered this yet ^^

No - you need t sell your rental property.  With money in hand - sit down with the IRS and talk to them.  Take an attorney with you if want.  Offer your actual taxes plus interest as an Offer in Compromise.  They might take it - and at least they'll be negotiating with you.  And you'll have one advantage - tell them you have a source so that you can pay them in cash once you come to a number.  That is a good dealing point with the IRS.  Then pay them what you negotiate and be done with it.  And make sure that you are on a paycheck or quarterly basis keeping up with what you owe so that you never get in this situation again.  But - DO NOT LET MOMMY AND DADDY GET YOU OUT OF THIS. You and your wife got yourself here - get yourselves out.   And you can ignore this - but IRS debt doesn't get smaller and go way - they will eventually act to get their money and the easy target is your rental.  So take care of getting it on the market for a quick sell NOW.  Even if you don't have your rental they have more draconian ways of getting what you owe.  Take care of this now so it doesn't grow bigger and swallow you.

Agreed.

We are looking into selling it now.

We have to figure out a few things though.

Roof definitely needs to be replaced. Also, there is renters in there (month to month).

You may not be able to sell that rental right away, but I suggest that you get some assistance with talking to the IRS right away - needs to be done asap.  As in PRIORITY #1.
I don't recommend asking your parents for help paying this because:

1.  You really won't have a firm number or payment plan until negotiations.  If you get good assistance and tackle this head-on right away then you may be able to reduce some of the penalties.

2.  It's tempting to just borrow to get rid of the IRS - but avoiding the IRS is how you got here.  Facing this (with competent assistance) is the way forward.

3.  Having your parents pay it doesn't change the underlying dynamics very much.  Youll still owe the money.  You've already been bailed out once, and are back into serious trouble.  Without a major overhaul, you will quickly be back in dire straits.  But if you change the underlying problems (living beyond your means and ignoring issues) then everything else will snap into place and you will be able to pay it yourself along with the other bills.

[Bracken_Joy]

One potentially controversial piece of advice- take steps to ensure you do not have a third child until your financial house is in order. You are on the edge of ruin as it is. (the nearly 2 year old, with previous child spacing, makes me wary that this could be upcoming). Assuming she's a similar age, you and your wife are young enough that a one year delay before any further children should make no difference in eventual number of children, etc.