Author Topic: Topic Title: Reader Case Study - Starting at 45 - Any hope?  (Read 9392 times)

robhortn

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Topic Title: Reader Case Study - Starting at 45 - Any hope?
« on: November 28, 2014, 12:23:42 PM »
I realize that I deserve a face punch, likely several.  I get that.  We are looking for help not because we are in dire straights but just because we realize "we need help".  We have a lot of debt, over 300k if you include our mortgage.  It seems insurmountable some days and some of you maybe remember facing that mountain wondering "where do I start?".

That's me.  I told my wife years ago, that we clearly are not good with money and that someone else, if they were given a look at our situation, could probably tell us where to start, and help us with direction that we otherwise might never have considered or even known about.

Income: Software developer, full time job, 100k/annually
Sporadic side income from freelancing as a softward developer/designer: 5k

Total gross annual income: 100-105k+ (fluctuates with side work but a minimum of 100k)

Expenses Monthly   
Visa 1   $120.00  (8% interest, balance 7k)
Visa 2   $115.00 (9% interest, balance 5500)
IRS   $200.00 (simple interest payment, balance 3000)
Visa 3   $35.00 (8%, balance 2200)
Visa 4   $135.00 (9%, balance $2600)
Care Credit   $52.00 (19%, balance 1k)
Medical bills   $85.00 (balance 2k)
Personal loan for home windows   $130.00 (22%, balance 3k)
Student loan   $54.00 (8.75%, balance 2k)
Signature loan at bank   $220.00 (9%, balance 9k)
Computer store card   $25.00 (16%, balance $130)
Sub total   $1,171.00
   
Electric   $360.00
Auto Insurance   $58.00
Home Warranty   $45.00
Water   $50.00
Auto Insurance   $17.50
Pest control service   $26.00
Trash Service   $21.00
Donations   $136.00
Sub total   $713.50
   
Pluralsite (computer based training for career)   $29.00
Microsoft Office 365   $9.95
Young Living Oils   $100.00
Sub total   $138.95
   
Groceries   $1,000.00 (food for 5 folks)
Fuel   $200.00
Allowances   $100.00
Home mortgage (1st 160k and 2nd HELOC of 60k, both interest only)   $862.00
Sub total   $2,162.00
   
Internet   $40.00
TV   $68.00
Entertainment:    $75.00
Cell phone   $216.00 (3 smart phones includes data plans)
Juice Plus   $121.00 (dietary supplements)
Sub total   $520.00
   
Sub total of all expenses   $4,705.45
Guaranteed income   $5,671.78
Difference from expenditure is possible monthly savings  $966.33

Clearly we can get that number to $1000/month in savings easily.

Assets:
Two vehicles paid off, 2003 Chevy Silverado and 2000 Honda Odyssey
Savings: 5k

Specific Question(s):
So my basic first question is I guess the classic, pay down debt each month now or put that savings to work?  My instinct is to pay down debt but I'm looking for advice.  And if I'm asking the wrong question at first, that's fine too.  I'm ready to take my first Mustachian steps but I just need to know where my next footfall should land.
« Last Edit: November 28, 2014, 03:56:32 PM by robhortn »

etselec

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #1 on: November 28, 2014, 12:44:10 PM »
Welcome! Asking for help is a great first step. And of course it feels overwhelming - you're paying 11 different kinds of debt, plus your mortgage, every month!

First, we need some more information from you. For each of the debt items in your budget, list out the total you owe, the interest rate, and the minimum payment (and how much you're paying, if it's more than the minimum). You can do this by editing your original post, to make it easier for everyone to follow.

Mathematically, the best thing to do is pay the minimums on everything and then throw all your extra cash at the highest-interest debt. Then once that's paid off, direct all that cash flow to the next-highest-interest debt, etc. Psychologically, some people find it easier and more rewarding to start with the smallest debt and pay that off first, which is exciting since you get the satisfaction of seeing your # of debt payments go down faster.

As for other budget items, there's a lot to cut that will make your debt paydown go so much faster. "Young Living Oils"? I've been living without those for years and I'm doing just fine. $1000 for groceries is astronomical (how many people are you feeding? any allergies or other dietary reasons this is so high?). $216 for cell phones is absurd. I don't even know what "Juice Plus" is but it's expensive and it can't possibly be necessary. What's a "home warranty" - is that homeowner's insurance? You can stop the donations until your hair is no longer on fire from debt.

With positive cash flow per your listed budget, I'm not sure how you accumulated all this random debt - are there missing categories in your budget, like vacations, or do you tend to just overspend your budget or have money "disappear"? As you pay down debt, be sure not to accumulate any new debt! You're in a serious hole, and you can dig yourselves out of it, but you may need to do some soul-searching as to how you got into this position and how you can change your money habits to make sure that when you dig yourselves out of this hole, you're out for good.

kpd905

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #2 on: November 28, 2014, 12:48:27 PM »
Two cell phones should cost you somewhere between $60-90 a month, not $216.  If this is for more than two phones, it is still too high.

What is juice plus?  Is it really just juice that you pay $121 a month for?  That and the Young Living Oils have you paying $221 a month for basically snake oil.

As etselec said, we need to know the balances and interest rates of the loans and credit cards.
« Last Edit: November 28, 2014, 12:51:50 PM by kpd905 »

Rezdent

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #3 on: November 28, 2014, 01:01:36 PM »
Hi,
Can't make a recommendation about the debts without knowing the rates, although I suspect that some are high and others higher.
Also, how many people being fed, housed on these bills?  Is that grocery bill for just 2?

Looks like you've got about 10 different balances out there between CC and other loans.  Yet you're showing a 900$ monthly surplus? To me this suggests that you are spending more than income.  Is there spending not accounted?

Kaspian

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #4 on: November 28, 2014, 01:15:03 PM »
Credit card debt needs to go.  The interest rate is likely mental (higher than any investment return would be) and you're just throwing money away by paying minimums.

What's going on with the electric bill?  For two people? Are you running some sort of midway in the backyard?

That "Essential Oils" thing really should go.  $1200/year is way too much unless it's treating a skin condition or something.  Is there any way you can dilute it so it lasts longer?  I use a few drops of tea tree oil when I wash, it's expensive ($15/bottle) but helps keep my skin clear and painful acne off my back.  One bottle lasts for months.  And I've found cutting 5 drops to 3 makes it last way longer with the same skin benefits.

robhortn

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #5 on: November 28, 2014, 01:29:30 PM »
Welcome! Asking for help is a great first step. And of course it feels overwhelming - you're paying 11 different kinds of debt, plus your mortgage, every month!

First, we need some more information from you. For each of the debt items in your budget, list out the total you owe, the interest rate, and the minimum payment (and how much you're paying, if it's more than the minimum). You can do this by editing your original post, to make it easier for everyone to follow.

Mathematically, the best thing to do is pay the minimums on everything and then throw all your extra cash at the highest-interest debt. Then once that's paid off, direct all that cash flow to the next-highest-interest debt, etc. Psychologically, some people find it easier and more rewarding to start with the smallest debt and pay that off first, which is exciting since you get the satisfaction of seeing your # of debt payments go down faster.

As for other budget items, there's a lot to cut that will make your debt paydown go so much faster. "Young Living Oils"? I've been living without those for years and I'm doing just fine. $1000 for groceries is astronomical (how many people are you feeding? any allergies or other dietary reasons this is so high?). $216 for cell phones is absurd. I don't even know what "Juice Plus" is but it's expensive and it can't possibly be necessary. What's a "home warranty" - is that homeowner's insurance? You can stop the donations until your hair is no longer on fire from debt.

With positive cash flow per your listed budget, I'm not sure how you accumulated all this random debt - are there missing categories in your budget, like vacations, or do you tend to just overspend your budget or have money "disappear"? As you pay down debt, be sure not to accumulate any new debt! You're in a serious hole, and you can dig yourselves out of it, but you may need to do some soul-searching as to how you got into this position and how you can change your money habits to make sure that when you dig yourselves out of this hole, you're out for good.

For groceries we are feeding five people and that number does not include just food honestly.  That's spending at the grocery store, be it household supplies, etc in addition to food.  So perhaps the name is misleading there.

Home warrantys cover the loss of major appliances, septic problems, furnace issues, etc.  For that fee, plus a service charge when things break ($65 service charge) you get things replace if they break. So fridge goes out, $65 replaces the entire thing.  Furnace, same deal.  Its basically another form of insurance.

We have made a lot of choices over the years that have just been "bad".  Conversations such as "we'll use credit just this once for x" and then that conversation repeats.  One day you feel the weight of it all, take a step back and ask, "what in the world are we doing?".  Kinda where we are at.

robhortn

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #6 on: November 28, 2014, 01:33:11 PM »
Two cell phones should cost you somewhere between $60-90 a month, not $216.  If this is for more than two phones, it is still too high.

What is juice plus?  Is it really just juice that you pay $121 a month for?  That and the Young Living Oils have you paying $221 a month for basically snake oil.

As etselec said, we need to know the balances and interest rates of the loans and credit cards.

Juice Plus is basically a dietary supplement, powdered vegetables if you will to help get a person to the vitamin levels they don't get from their diet.  The phones are three smart phones so that includes a data plan as well as "paying for the phone", both costs included in the two year contract.

Rezdent

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #7 on: November 28, 2014, 01:53:24 PM »
Thanks for adding the debt info.

If this were me, I'd sit down with  the wife and talk.  I would consider this an emergency.   At 45 you still have time to turn this around...but only if you get aggressive.
The good news is your relatively high income will allow you to reverse rather quickly.
First you've got to stop digging deeper into the hole.  Second, you'll need to dig out.  Third, you need to live under your means until you have a stache.

Stop digging in deeper. Interest on these loans are dragging you down.
I would cut ALL discretionary stuff this month, supplements, oils, entertainment. Jettison everything possible for the next month too.   would also try to avoid buying any groceries and eat whatever is at the house.  That would boost your surplus to maybe 1400, depending on your pantry.
I would immediately take this month's surplus and pay off the small high interest loans..The computer loan, the window loan...
Then throw any remaining funds at the highest interest loan - Care Credit?
Next month, reevaluate your spending and continue to throw all surplus to each highest rate loan.

1967mama

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #8 on: November 28, 2014, 02:09:56 PM »

First you've got to stop digging deeper into the hole.  Second, you'll need to dig out.  Third, you need to live under your means until you have a stache.



Rezdent: this is excellent! Simple, succinct explanation of what to do and how to do it. Tucking this away in my own motivational files! Thanks!

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #9 on: November 28, 2014, 02:22:31 PM »
It seems fairly obvious to me that there is a lot of spending going on that you have not accounted for in your itemised list - presumably that is where all those credit card bills come in. Clothes?  Entertainment?  Eating out?  Kids activities?  You need to get a grip on the whole of your spending.  Can you look back at what each of the credit cards and personal loans has been used for?

Once you have worked that out, you need to get your SO on board.  There are threads here about how to do that - and how not to do it, too (lentils5eva and ioseftavi have a great thread on doing mustachianism as a couple).  Then between the two of you get the other members of your household (3 kids?) on board.  Track everything for at least a month.

You have a very good income at over six figures, but if your SO could start earning too that would be great.

As others have said, you start making progress by going for the easy wins on your expenses and put those easy wins to your highest interest debt: if you do that this month you will start seeing immediate progress. You then carry on optimising expenditure and paying off the highest interest debts.  I make it that you have $37,430 in consumer debt, and that you could fairly easily be paying off $2,000 of it per month.

LadyMuMu

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #10 on: November 28, 2014, 02:40:05 PM »
Unless you think your furnace is going to go, I think you really ought to consider dropping the home warranty. Those make sense when you first buy a house and don't know what is just limping along and jerry-rigged to get the home to sell. At $45 per month, that's $540 per year--about the cost of replacing an appliance per year. I've never had to replace more than one appliance per year. Become your own home warranty company by saving an extra $45 per month instead. And, as you know, the home warranty doesn't cover all the expenses of a repair/replacement and, in my experience, is a pain to work with.

If you're still unwilling to part with homeowners insurance, than shop around. $540 per year is quite high for a house with a $160K value. As a comparison, the one we got when we bought our house was $200 per year.

Also, there's a ton of stuff not accounted for in your budget--an probably the cause of your consumer debt. Here's a few categories: clothing, dry cleaning, dental expenses, regular medical expenses, sports/kids activities, baby sitters, hair cuts, auto repair, birthday gifts, holiday presents, books, newspapers, etc.

kpd905

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #11 on: November 28, 2014, 02:51:03 PM »
Two cell phones should cost you somewhere between $60-90 a month, not $216.  If this is for more than two phones, it is still too high.

What is juice plus?  Is it really just juice that you pay $121 a month for?  That and the Young Living Oils have you paying $221 a month for basically snake oil.

As etselec said, we need to know the balances and interest rates of the loans and credit cards.
Juice Plus is basically a dietary supplement, powdered vegetables if you will to help get a person to the vitamin levels they don't get from their diet.  The phones are three smart phones so that includes a data plan as well as "paying for the phone", both costs included in the two year contract.

At $1000/month for groceries, you should be getting enough fruits and vegetables to drop the dietary supplements.

I plugged all your loans/credit cards into here (not including your mortgage): http://unbury.us/#name_0=1&balance_0=7000&payment_0=120&rate_0=8&name_1=2&balance_1=5500&payment_1=115&rate_1=9&name_2=3&balance_2=2200&payment_2=35&rate_2=8&name_3=4&balance_3=2600&payment_3=135&rate_3=9&name_4=5&balance_4=1000&payment_4=52&rate_4=19&name_5=6&balance_5=2000&payment_5=85&rate_5=0&name_6=7&balance_6=3000&payment_6=130&rate_6=22&name_7=8&balance_7=3000&payment_7=200&rate_7=0&name_8=9&balance_8=2000&payment_8=54&rate_8=8.75&name_9=10&balance_9=9000&payment_9=220&rate_9=9&name_10=11&balance_10=130&payment_10=25&rate_10=16&

If you go with Avalanche mode (highest interest first) you can play with the monthly payment amount and see how long it will take to get rid of them.

Paying the minimums will have them paid off by September 2017, and paying about $5000 in interest.

Throw $2000 a month at them and they'll be gone by June 2016 and you'll pay $2500 in interest.

Right now your minimum payments and the extra money you have at the end of the month totals $2137.  Drop the oils and the juice, get your groceries down to $600, and you'll have $2758 to throw at the debts, getting rid of them by January 2016.
« Last Edit: November 28, 2014, 03:08:33 PM by kpd905 »

Catbert

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #12 on: November 28, 2014, 03:01:43 PM »
In addition to what others have said, if your credit is good try for balance transfer cc offers.  Try to transfer your high interest bills (19-22%) to a 0%, low transfer fee card.  Only transfer what you know you can pay off during the introductory period.

Since there are 5 of you and 1 income I assume you have a SAHM and 3 children.  Look for other threads here about low cost meals and grocery shopping hacks.

Have you had much luck with your home warrenty?  My limited experience has been that they aren't worth it.  YMMV.  They pick the repair person and focus seems to be on repairing things just enough to get through the insurance period.  Or whatever breaks somehow isn't covered.  As LadyMuMu said for $540 a year you might be better off saving the money and dealing with it yourself.   

Fancy supplements and skin products gotta go.

LLCoolDave

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #13 on: November 28, 2014, 03:31:33 PM »
I would recommend reading some Dave Ramsey. I'm not sure if there is anyone better at motivating people to get out of debt. The investment advice is not so great. You can pick and choose. Buy the Total Money Makeover book and you are good to go. He has a free podcast as well that can keep you motivated. 45 is still pretty young to turn things around. The more you want it and are willing to make changes the earlier you can retire. Best of luck.

robhortn

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #14 on: November 28, 2014, 03:45:46 PM »
Offering some clarity here on our grocery budget.  For our family what that number means is:  all household expenses including food.  So for us that is any household item (soap, detergent, napkins, paper towels, cleaning supplies, etc).  Can you buy it monthly at Wal-mart for your home?  Probably in our "grocery" budget. 

We include our pet budget in that as well (we have two cats and a dog).  So feeding a family of five (my wife and I and two kids, in addition to my mother who lives with us) in addition to keeping the house "supplied" seemed ... to me .. to be pretty ok.  But I don't have a moustache yet (well not a financial one, ha!)

Also as much as possible we eat whole food and/or as close to organic as we can as well.  So in our home there aren't things with lots of preservatives, etc.  Nothing with long shelf-lives ... we kind of see that as our health tax if you will, since because of living healthier lifestyles we rarely need a doc.  The Care Credit ended up being for some dental services which our current plan did not cover and we had to make up the difference with that at the time.

Thanks again for all the advice - my wife and I are already talking about the feedback you all are providing.  It's much appreciated!

rmendpara

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #15 on: November 28, 2014, 04:39:39 PM »
Simple case of living for too long on too much.

Income is not the problem, because anyone can learn to live on any income (high or low).

Start with the basics. Don't try and tackle 18 different goals. You need focus.

As an example:
- "I want to pay off any debt with over 10% interest rate by the end of 2015."
- "I want to pay off any non-mortgage debt by the end of 2016."
... you can see where I'm going with this

Bad habits are holding you back, so reversing bad habits and starting good habits is the best way to right the ship. First, sit with spouse and determine a list of 1 yr, 5 yr, and 15+ yr goals. Where do you want to be personally and financially in those time frames? Then, try and set challenging & realistic goals to start moving in that direction. Nothing will be fixed overnight, but if you don't start you'll never get there.

Good luck!

Spondulix

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #16 on: November 28, 2014, 04:40:38 PM »
I'm curious why you're on an organic diet but still need the vitamins. I'm wondering if this is psychological or if it's really been verified by blood tests, medical, etc.

Who are you donating to?  You're in your own emergency right now with all that credit card debt. Why not help yourself for a while? Is it an option to donate your time vs your money?

Is there a medical reason for the pest control or is it psychological? Any way of doing your own treatment?

What is entertainment? (Tv and internet already constitute a lot of entertainment) Any way you could drop one of the three?

Groceries - do you know about the vegetables/fruits where you gain no benefit by buying organic? An organic onion is a dollar, where as a regular one is 25 cents.

Just dropping these would gain you almost $800 a month - that would get rid of three of your credit cards in less than a year!!

Home Warranty   $45.00
Pest control service   $26.00
Donations   $136.00
Young Living Oils   $100.00
Groceries   $300 (30% reduction)
Entertainment:    $37.50 (50% reduction)
Juice Plus   $121.00 (dietary supplements)

MrFrugalChicago

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #17 on: November 28, 2014, 04:59:33 PM »
Where do you live? What do you develop? How long have you been working? As a fellow software developer, 100k sounds very low. I think I hit 100k about 4 years out of college, many of my friends hit it within 1 or 2. If you are 45 I would assume you could do well over 100k.

One question on expenses:
Electric   $360.00   (wtf is this, how do you use this much electric? It's really hard for me to spend 150 in the summer with AC blasting.)

Now for expenses. Let's get rid of the silly stuff.

Computer store card   $25.00  (this balance is so little, just kill it)
Home Warranty   $45.00 (drop it. Insurance is on average a net loss. You need less insurance and save for your own emergencies)
Pest control service   $26.00  (why do you need this every month? Keep your place clean and you will be fine)
Donations   $136.00 (donations are a luxury when you are out of debt. This goes away for now)
Young Living Oils   $100.00 (these will not make you more healthy. You have permission to add a $20 a month gym membership instead. Will do a lot more for less money)
Juice Plus   $121.00 (juice plus does not do anything. Eat veggies every day, you will be fine).


There is $453. That + your current savings is $1500 a month. Put into smallest debt and snowball until all non-primary mortgage debt is gone.

Calvawt

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #18 on: November 28, 2014, 05:12:57 PM »
Many have already commented on the groceries, phones, and other expenses, so I won't pile on what that.  I more want to encourage you to make some of these incremental changes.  It can be hard at first, but you posting and sharing the burden was the first step.  Face punches aside, MMM posters want to see everyone turn the corner and improve their finances.

I would encourage you to set some dates to pay off several of those loans and credit cards.  You should be able to knock out many/most of them in the next year.  Once you have it down to a just a few, you have some choices on how to proceed.  I would eliminate all debt that has an interest rate over 4-5% before saving for retirement.  It just has a better guaranteed return.  If you have a 401k or 403b match at work, don't wait to save enough to get that free money!

Please keep us updated on your expense slashing and debt payoff journey.  Good luck.

NaturallyHappier

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #19 on: November 28, 2014, 06:33:49 PM »
Work on the debt first.  Take the 37K in consumer debt and get a 5 year bank loan with a reputable bank to pay those cards and other high rate loans off.  The payments on the new loan should be a little more than half of what you are paying now assuming 4.5% rate.  Then take the extra cash and use it to pay down the loan faster.  You should be able to get out of all debt but your mortgage by June of 2017.  Combine that with some cost cutting that others have mentioned and you can be out of the debt death spiral even sooner.  Once that is done you can put all that money you were spending on debt into savings and investments.  Then you will have others paying you for the use of your money instead of you paying to use other peoples money.

http://www.bankrate.com/calculators/mortgages/loan-calculator.aspx?loanAmount=37000&years=5.00&terms=60&interestRate=4.50&loanStartDate=11%2F28%2F2014&monthlyPayments=689.79&monthlyAdditionalAmount=600&yearlyAdditionalAmount=0&yearlyPaymentMonth=+Nov+&oneTimeAdditionalPayment=0&oneTimeAdditionalPaymentInMY=+Dec+2014&pDate=Nov+28%2C+2019&show=true


NaturallyHappier

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #20 on: November 28, 2014, 06:59:16 PM »
Sorry,  I was a little off on the rate.  The website gave me mortgage refinance rates instead of person unsecured debt rates.  I thought is seemed very low.  The rate would be more like 7%, but still would get you moving in the right direction.

http://www.bankrate.com/calculators/mortgages/loan-calculator.aspx?loanAmount=37000&years=5.00&terms=60&interestRate=7&loanStartDate=11%2F28%2F2014&monthlyPayments=732.64&monthlyAdditionalAmount=450&yearlyAdditionalAmount=0&yearlyPaymentMonth=+Nov+&oneTimeAdditionalPayment=0&oneTimeAdditionalPaymentInMY=+Dec+2014&pDate=Jun+28%2C+2017&show=true

Goldielocks

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #21 on: November 28, 2014, 07:40:36 PM »
There is totally hope for ER.  After all the Simple Math shows what 7 years can do.

The others are offering solid financial, detailed recommendations.  I can't beat what they are saying.

My two cents is to allow  yourself to dream a little, and imagine / plan what it could REALLY look like to do this well, (with your DW), and see if you can't get yourselves there that much faster with a clear vision.

The challenge is being willing to completely re-fit your life, if you want FIRE.   If you are just looking to retire at 60-65, then you have more freedom to take it less aggressively.  (lower saving rates is still possible -- you have 15-20 years!)

I would start looking at your situation from a blank slate, and add the most important elements.

1) Five person family (That is terrific! Awesome! What an amazing thing to start with!)
2) Income of 100k+, not likely to go down in next 10 years.
3) Wife may be able to take on some income now or eventually, part time -- what about starting in 5 years?

Now - you need to live somewhere:
 A If you start with a target savings rate (until FIRE),   say 60% savings rate  (40% spend) = $36,000/yr spending  (maybe less after health care and taxes, but you get the idea) = $3000 per month.

B  Then subtract a lean but reasonable food budget (say $700 per month, which gives you a bit of flex room),
C Then subtract $'s budget for kids, you, wife -- maybe $500/month all together for all misc. spending on anything that could be put off  / school / fun / education / cell phones / vacation / household costs / fuel?, etc.

That leaves you with $1800 per month for home + transportation.

With that challenge - dream and research a little -- what could the new place look like?  what will it afford you?  Can you get transportation WAY down and then spend $1400/mth (plus $200 in utilities) on a nice 3-4 bedroom townhouse to rent?  Is anything available that allows biking / walking options or good transit for everyone?

Once you have a "maximum" savings picture that is possible for your area -- adjust it a little and show your DW what various spending and living levels look like. 

 You need to talk about this a lot together, and dream big, to make it happen.


Good Luck!


Another Reader

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #22 on: November 28, 2014, 08:25:27 PM »
Your house is a ticking time bomb.  You are paying interest only on the first mortgage and a HELOC.  When will the loans start amortizing and what will the payments be then?  What is your plan for absorbing the much higher payments?

I agree with the other suggestions.  You need to cut out all extraneous spending until the debt monster is slain.  There's a lot of sloppiness - a lot of the little debts could be paid off in a month or two.

A healthy diet should provide all the nutrients you need.  If it didn't, the human species would have disappeared long ago.  Why not cut the supplements and juice out for a few months to see if it makes a difference?

Finally, if you are concerned with what you consume, why do you allow a pest control company to dump toxins all around your property?  Whatever the pest, there is a cheaper and healthier way to deal with it.

BlueHouse

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #23 on: November 29, 2014, 04:29:22 AM »
Grocery shopping is a huge black hole for me as well.  A lot of impulse buying occurs. I suggest whoever does the grocery shopping turn t into a pay-by-cash only system for a few weeks. Get a list together, leave charge cards at home and bring enough cash for what you need. You will be shocked by how much you return to the shelves and how much you don't need when you know you have to use only the amount allotted. If you don't have enough, put some back. If you still can't get ther, walk away from the cart and go home. I had to do that multiple times before I could break the habit enough to actually buy anything.  I bet you can cut that grocery bill by 1/3 just by going cash. Afterwards, you'll wonder where the money was going before.

UnleashHell

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #24 on: November 29, 2014, 05:27:10 AM »
I
Expenses Monthly   
Visa 1   $120.00  (8% interest, balance 7k)
Visa 2   $115.00 (9% interest, balance 5500)
IRS   $200.00 (simple interest payment, balance 3000)
Visa 3   $35.00 (8%, balance 2200)
Visa 4   $135.00 (9%, balance $2600)
Care Credit   $52.00 (19%, balance 1k)
Medical bills   $85.00 (balance 2k)
Personal loan for home windows   $130.00 (22%, balance 3k)
Student loan   $54.00 (8.75%, balance 2k)
Signature loan at bank   $220.00 (9%, balance 9k)
Computer store card   $25.00 (16%, balance $130)
Sub total   $1,171.00
   
Electric   $360.00
Auto Insurance   $58.00
Home Warranty   $45.00
Water   $50.00
Auto Insurance   $17.50
Pest control service   $26.00
Trash Service   $21.00
Donations   $136.00
Sub total   $713.50
   
Pluralsite (computer based training for career)   $29.00
Microsoft Office 365   $9.95
Young Living Oils   $100.00
Sub total   $138.95
   
Groceries   $1,000.00 (food for 5 folks)
Fuel   $200.00
Allowances   $100.00
Home mortgage (1st 160k and 2nd HELOC of 60k, both interest only)   $862.00
Sub total   $2,162.00
   
Internet   $40.00
TV   $68.00
Entertainment:    $75.00
Cell phone   $216.00 (3 smart phones includes data plans)
Juice Plus   $121.00 (dietary supplements)
Sub total   $520.00
   
Sub total of all expenses   $4,705.45
Guaranteed income   $5,671.78
Difference from expenditure is possible monthly savings  $966.33

Clearly we can get that number to $1000/month in savings easily.



Savings.
Electricity. you can save $60 a month by turning the fucking lights off! Seriously - also look into reducing ac use and getting different light bulbs. but not using as much is the best start.
Donations. Scrap that. you've got an emergency. $136
Living oils. $100
juice plus $121
you have enough room in groceries at $900 a month to eat very healthy. Plenty of beans! less meat. more veg. oh yeah - $900 a month - not $1000
Cell phone... $216 for 3? how the hell.... I have 4 and even with phone repayments I'm running 160 (and i'll be getting rid of that soon too). you can look around and save 50 min in this category.

So theres an extra  $567!!

add that to your 966 and we'll call it a nice round 1500 a month extra.


So now take some of your savings and add that to your monthly payments and pay off the following

Care Credit   $52.00 (19%, balance 1k)
Personal loan for home windows   $130.00 (22%, balance 3k)
and this  Computer store card   $25.00 (16%, balance $130) (because its stupid and annoying).


So the next month you now have an extra 200 - so its now 1700 to attack debt with

so what you can on this
Student loan   $54.00 (8.75%, balance 2k) - even throw another 300 from savings and get rid of it.

so 2 months in and your debt looks like this.

Visa 1   $120.00  (8% interest, balance 7k)
Visa 2   $115.00 (9% interest, balance 5500)
IRS   $200.00 (simple interest payment, balance 3000)
Visa 3   $35.00 (8%, balance 2200)
Visa 4   $135.00 (9%, balance $2600)
Medical bills   $85.00 (balance 2k)
Signature loan at bank   $220.00 (9%, balance 9k)
that's 910 a month and you now have an extra 1,750 a month to throw at it. Hit the visa 4 next - 2 months further and its gone and your extra is 1,900 - by then visa 3 might only be a month
then you have nearly 2k a month to pay down this crap.
 medical one month.

6 months in and It looks like this...
Visa 1   $120.00  (8% interest, balance 7k)
Visa 2   $115.00 (9% interest, balance 5500)
IRS   $200.00 (simple interest payment, balance 3000)
Signature loan at bank   $220.00 (9%, balance 9k)

now that's a much more manageable figure. Crank up the freelance gig for a bit and you are going be rid of most of your consumer debt by year end at that rate of payment. Its not easy and you have to be disciplined.
In the meantime you need to look for income elsewhere (I'm thinking maybe the wife - can't tell if that's an option). also look for 0% balance transfers and move the higher interest debt when you can - still pay it all down though.
you have to get your wife on the same page though and go though some rough projections as to why you can't have a new car of eat ribeye steak once a week.
stick to it and by next xmas you are nearly out of the first hole!
a year of that and your credit record could indicate that a refi to sort out the mortgage and heloc might be in order. then you can be looking at adding to your 401k and getting the benefit of that.

Its the number of lines of credit that's overwhelming. once you start dealing with it then you can see what you can do with the money - ie put it to work for you.

trust me - it can be done. I use mint to track everything and I have a list of credit cards on there that now (apart from one) all reads zero. and that's a lovely number.


MayDay

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #25 on: November 29, 2014, 05:51:49 AM »
1000$ a month between groceries, walmart/target, and pets for a family of five is pretty reasonable for the average American family.  But until you break it down to what is household, what is pets, and what is food, it's hard to tell which of those you are overspending on. 

If you are spending 490 a month on food and 400 a month buying chlorox wipes and disposable toilet bowl cleaner and 3 rolls of paper towels a week, the advice will be very different than if you are spending 750$ on food and 50$ on household supplies.

I have a family of four (2 kids, SAHM) and when really broke down the details of our grocery spending, spereately from our household supplies, we saw some glaring overspending and were able to reduce our grocery spending by a good chunk.  And we eat almost all local or organic food, whole foods.  We spend about 400 a month when we are very on top of meal planning.  It EASILY creeps up to 600-700 a month.

 I don't know the ages of your kids.  If you have a really little ones, maybe your wife doesn't have the bandwidth to manage a total overhaul of her grocery shopping.  If so, this is a super opportunity for you to take a huge task of her hands, and handle the shopping and cooking for a while.  Plan out a week of cheap meals, make half of them crock pot meals, and do a bunch of prep on the weekend or in the evening once the kids are asleep. 

Seperately, if you are spending a lot in household goods, post a list of what you bought at Walmart/target the last month and we will all happily analyze it to death for you ;). Seriously though, the biggest things for us are reusable rags for cleaning, making cleaning stuff (mostly just a spray bottle of vinegar, water, and a splash of EO) and doing without all the misc. little junk that tends to get picked up at the store if you aren't viligent. 

Metta

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #26 on: November 29, 2014, 07:19:01 AM »
Since you have asked, I will deliver my own face punch. You have two multi-level marketed products that have dubious efficacy in your list: Juice Plus and Young Living Oils. So someone in your family is susceptible to either pressure from friends to buy these products or is not employing their skeptical mind and Google-fu to find out about them. Juice Plus was marketed to me a long time ago and I did my research, found out that their claims don't hold up, and rejected it. Aromatherapy is similarly dubious. At least lets say that it hovers on the line between claims that can be supported by weak evidence and outright nonsensical claims.

I really don't care when my friends or family do things that have dubious effectiveness unless those things have evidence of harm as well. Everyone finds what works for themselves in their own lives and we all need things that provide comfort.  In this case, you've come calling to ask our advice. My guess is that if you have fallen for two MLM schemes offering products that have very little evidence, you've probably fallen for other things in the past and this is part of the financial hole you are digging out of. You need to employ your good brains in some skeptical research before falling for the next one that comes around. Here are some sites you can use to find out what the skeptical argument against something is. Then you can make your own choices based on the evidence you find:

MLM Watch on Juice Plus: http://www.mlmwatch.org/04C/NSA/juiceplus.html

Center for Skeptical Inquiry on aromatherapy (including Young Living Essential Oils): http://www.csicop.org/si/show/whats_that_i_smell_the_claims_of_aromatherapy/

Science-Based Medicine (for all your skeptical medical needs): http://www.sciencebasedmedicine.org

QuackWatch: http://www.quackwatch.com

At the very least before embracing something new, make sure it's not harmful. What's the Harm:  http://whatstheharm.net

Ziggurat

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #27 on: November 29, 2014, 07:29:43 AM »
Lots of great replies here, for me there's a "work on first" that I haven't seen:  you seem to have a problem with needing "insurance" for everything.  Pest control, home warranty, alternative health food/oils etc, cell phone contracts, microsoft 365: these seem to be driven by fear, or in some cases perhaps out of wanting to avoid later decisions.

It's understandable. We all do it to some extent.  Life happens and some bad shit will come our way. Sometimes we'll need a bit more cell phone than we thought, or the fridge breaks early.  But for your financial health you need to turn your past behavior on its head.  Only buy "insurance" (of any kind) for things that would be financially catastrophic events.  Go minimal on everything else. Accept the fact that sometimes you will pay a little extra later because your decision wasn't quite right. Don't pay all the time.

Milizard

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #28 on: November 29, 2014, 08:26:52 AM »
It seems fairly obvious to me that there is a lot of spending going on that you have not accounted for in your itemised list - presumably that is where all those credit card bills come in. Clothes?  Entertainment?  Eating out?  Kids activities?  You need to get a grip on the whole of your spending.  Can you look back at what each of the credit cards and personal loans has been used for?

Once you have worked that out, you need to get your SO on board.  There are threads here about how to do that - and how not to do it, too (lentils5eva and ioseftavi have a great thread on doing mustachianism as a couple).  Then between the two of you get the other members of your household (3 kids?) on board.  Track everything for at least a month.

You have a very good income at over six figures, but if your SO could start earning too that would be great.

As others have said, you start making progress by going for the easy wins on your expenses and put those easy wins to your highest interest debt: if you do that this month you will start seeing immediate progress. You then carry on optimising expenditure and paying off the highest interest debts.  I make it that you have $37,430 in consumer debt, and that you could fairly easily be paying off $2,000 of it per month.

+1 
~This

You've got a lot of good advice from others, but I would stress this.  You listed your recurring expenses in your budget but didn't address any of the irregular expenses that have caused you to spend more than you earn to the tune of 10's of thousands of $$.  Sure, there's some easy  reductions that can happen in your committed expenses, but I suspect that this area is your true downfall.  You need to be very aware of where this money is going and scrutinize ALL purchases if you ever want to truly tackle this debt. 

Say to yourself:

What is this?
Do we truly need it?
Is there a cheaper option?
Do we need it immediately?  (Often, if you delay a purchase, a cheaper option will pop up, or you will find that you really didn't need it at all.)

MKinVA

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #29 on: November 29, 2014, 09:27:18 AM »
Rob, I didn't see any life insurance for you and I think I remember you said you dont have any. What happens to your family if you die?

Suit

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #30 on: November 29, 2014, 01:15:28 PM »
Another thought that I'm not sure if someone above has mentioned yet: Can you make your sporadic freelancing less sporadic and more of a reliable side-hustle? If you cut your expenses and get more freelancing income you could quickly do away with the debt.

Unique User

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Re: Topic Title: Reader Case Study - Starting at 45 - Any hope?
« Reply #31 on: December 02, 2014, 11:48:12 AM »
Everyone else has covered the obvious areas, have you looked at TMobile for your phones if you don't want to go the Ting/Republic route?  I think I saw it is 4 lines for $100 a month.  Not as low as you could go, but still much lower than you are. 

Along with cutting out all the unnecessary items mentioned previously, like the MLM stuff, pest control, etc, you might want to go a bit extreme with your electric bill and food bill.  Take a inventory in your freezer and pantry and make plans on how to use all that stuff up.  Shop at Aldi, buy in season, buy marked down meat/produce, meal plan, eat cheaper foods.  If you have to do organic, only buy the dirty dozen, organic bananas are a waste.  Eat at home for every meal. 

Turn the lights off, unplug everything not in use, turn down the heat and put on a sweater. 

If you have to buy any clothes, go to thrift stores.  The only clothes we get new are work clothes.  If I can't find clothes for the kiddo at Goodwill, we hit Plato's closet.  Make your own cleaners, ditch using disposables.  Stop buying period. 

You can do it, I'm 45 and we think we have 6 years left.  We also have had years of sporadic income, so we are playing catch up.  You don't mention the ages of your kids unless I missed that.