Author Topic: What would you do???  (Read 8147 times)

Mike58

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What would you do???
« on: January 11, 2017, 11:29:29 AM »
Hi everyone! I am hoping the very wise MMM readers on here can help point me in the right direction. Ill try and keep it simple and to the point.

I am 35 years old, married, 4 kids. my total take home pay every month is about $8,500 - after taxes and health insurance. I am not saving for retirement whatsoever. I have no savings. I want to - and I realize the importance of doing so, however, I am trying to dig my way out of debt. I currently owe about $38k on credit cards. I have 2 car loans - one I owe $23k and on the other one I owe $9k.  My mortgage is $2,100 a month. Groceries are $1,400 a month. Plus all the other common bills such as utilities and car insurance etc. I do get tax returns every year of about $8k - so that helps.

Here is the thing - I don't feel I'm living way above my means (ok, I guess I was for awhile hence the CC debt). I'm doing everything I can to get out of that debt but with the kids and their sports and wife and 2 dogs - geez - everything is just so freaking expensive. I want my wife and kids to have a good life - but this is affecting my happiness. I feel that I get nickel and dimed every month and they really add up. Its like I'm a walking checkbook. We have tried budgets - but it seems something is always coming up that isn't budgeted for. Its like I don't make nearly enough money - but yet I know the average family gets by on less. I love the MMM philosophy but need to get my family on board. Easier said than done. I have tried cash budgets, debit cards, etc and nothing seems to work effectively for us. I feel that I'm not a dumb person but as I reread my financial situation, I wonder, lol.

SO - a couple of questions for all of you. Am I totally financially screwed?  Also, if you were in my situation - where would you start? I know that sounds like a very vague question - but I'm just looking for some general advice from some very smart people that can provide a different perspective. Thanks.
« Last Edit: January 11, 2017, 11:44:32 AM by Mike58 »

overwhelmed

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Re: What would you do???
« Reply #1 on: January 11, 2017, 11:47:24 AM »

Step 1: fill this out (you can edit this post with the information)

http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/

The form was create to supply the other posters with the specific information needed to assist you with your questions. I'm sure there will be a lot of suggestions, advice & comments supplied with the full picture.


BTDretire

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Re: I need some advice...
« Reply #2 on: January 11, 2017, 11:59:17 AM »
How much of MMM have you read?
 The whole idea boils down to living on less than you earn.
 I would think your gross is around $125,000.
Their are plenty of families out there living on $25,000.
You have 5 times that much.
You have not made the decision turn things around

When you do, you will see every dollar as important
and whether it should go to reducing debt or to sports
for the kids, expensive food, restaurants a more expensive car than you need.
You need to have a family meeting and find a way to get the wife
on the eliminate debt bandwagon. The kids don't have a choice.
 The key, spend less than you make.
You can work your way out of debt in less than two years, one year
if you buckled down, might have to sell that $23k debt and buy a $6k car.
 Once you are out of debt, then you need to continue living on less than your
income so you can invest.
 Re: the $8k over payment on your taxes, I suspect you know that's coming every year
so you have already spent it before you get it.
 If I have any money like that, it goes into the Vanguard Total Stock Market Fund,
I don't spend it.
  Can you lower your utilities? Drop cable TV? Build a $5 antenna. Look at you insurance
shop around, raise your deductible.
Harsh, probably, it's a facepunch to get you serious about changing the way your family lives.

CheapScholar

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Re: What would you do???
« Reply #3 on: January 11, 2017, 12:04:40 PM »
Do you have a 401K or 403b option at your employer?  If so, start contributing to that TODAY.  If not, open an IRA ... TODAY!  These contributions are pre-tax for federal income tax.  You're getting SCREWED on your federal taxes!  And "refund" is a misnomer.  You're just giving the government an interest free loan.

Mike58

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Re: What would you do???
« Reply #4 on: January 11, 2017, 12:11:52 PM »
I am not offered any type of retirement from my employer, however, I do have a ROTH IRA and also a brokerage account. These both have less than $100 in them. I am focused on eliminating debt rather than funding those accounts. Perhaps I shouldn't be?

Mike58

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Re: What would you do???
« Reply #5 on: January 11, 2017, 12:14:07 PM »
And as far as the taxes go, yes - I do need to make some adjustments so that my "refund" isn't that extreme.

JustGettingStarted1980

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Re: What would you do???
« Reply #6 on: January 11, 2017, 12:26:19 PM »
Hi Mike, I'd love to pitch in, but before I comment, I need to know more:

http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/


It seems like a pain in the arse, but the truth is simply writing the case study will actually get your organized, which seems to be part of the problem.

Regards

lbmustache

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Re: What would you do???
« Reply #7 on: January 11, 2017, 12:28:24 PM »
Hi everyone! I am hoping the very wise MMM readers on here can help point me in the right direction. Ill try and keep it simple and to the point.

I am 35 years old, married, 4 kids. my total take home pay every month is about $8,500 - after taxes and health insurance. I am not saving for retirement whatsoever. I have no savings. I want to - and I realize the importance of doing so, however, I am trying to dig my way out of debt. I currently owe about $38k on credit cards. I have 2 car loans - one I owe $23k and on the other one I owe $9k.  My mortgage is $2,100 a month. Groceries are $1,400 a month. Plus all the other common bills such as utilities and car insurance etc. I do get tax returns every year of about $8k - so that helps.

Here is the thing - I don't feel I'm living way above my means (ok, I guess I was for awhile hence the CC debt). I'm doing everything I can to get out of that debt but with the kids and their sports and wife and 2 dogs - geez - everything is just so freaking expensive. I want my wife and kids to have a good life - but this is affecting my happiness. I feel that I get nickel and dimed every month and they really add up. Its like I'm a walking checkbook. We have tried budgets - but it seems something is always coming up that isn't budgeted for. Its like I don't make nearly enough money - but yet I know the average family gets by on less. I love the MMM philosophy but need to get my family on board. Easier said than done. I have tried cash budgets, debit cards, etc and nothing seems to work effectively for us. I feel that I'm not a dumb person but as I reread my financial situation, I wonder, lol.

SO - a couple of questions for all of you. Am I totally financially screwed?  Also, if you were in my situation - where would you start? I know that sounds like a very vague question - but I'm just looking for some general advice from some very smart people that can provide a different perspective. Thanks.

70k in debt and not living above your means... hmm haha. The good news is you have a high income which helps significantly.

I would reassess your taxes - $8k is really high. Ideally you want to your refund to be really low, or even owe a bit of money. Does your wife work?

What are the interest rates on the credit cards?

What are the cars and how much do you owe on them? What are the payments/interest rates? Is it possible to sell one and buy a cheaper one? I am assuming with 4 kids you must either have a large SUV or minivan - is this the one you owe $23k on?

Since you feel "stuck" in a sense, you might want to look into Dave Ramsey's snowballing. Pay off the lowest owed amounts first, and then use that extra free money to continue paying off higher loans.

Mortgage sounds fine (I live in a HCOL so $2100 is rent for a 2 bedroom LOL), groceries sound a bit high - eating out a lot? 4 kids are a lot to feed though. There are some good tips around the forum for feeding large families a bit more cheaply.

Can you fill out a case study? Use something like Mint to see where all your money is going? Right now you only give us about $3500 of expenses (mortgage and food) and that means $5000 is suddenly vanishing someplace. That's a lot of money not accounted for!

Laura33

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Re: What would you do???
« Reply #8 on: January 11, 2017, 12:33:25 PM »
Mental exercise:  what would go if you got a 20% pay cut?  Say your take-home went from $8500 to $6800 -- what would you do (other than cut back on CC repayment)?  There's your starting point.  Do that, throw the rest at the debt.  Once that's gone, send that to investments.  Go on from there.

On managing the family, that's tough.  I'd start with the "how to convert your SO" thread -- you really can't make this work if your wife isn't rowing in the same direction.  But you also need to change your thinking on what it means to want the family to have "a good life."  That doesn't mean "buy things" or "do activities."  That means financial security, healthy food, college funding, not having a dad who is ridiculously stressed all the time, not being in a position of losing their home if a job goes away, etc. etc. etc. 

Mike58

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Re: What would you do???
« Reply #9 on: January 11, 2017, 12:40:27 PM »
Thanks for commenting.

The debt is between 2 cards. The first card is at 17.15% - $23k on that one. The other card is at 23.24%.

And yes - I will make adjustments so that my tax return isn't that extreme. I always looked at it as forced savings - but I know that's not the way I should look at it.

2014 Ford Fusion: Payment is $320 - owe about $9k. Rate is 4.54%
2016 Chrysler Town and Country - Payment is $440 - owe around $23k. Rate is 4.75%

We don't really eat out very much. We probably could reduce our grocery bill.


solon

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Re: What would you do???
« Reply #10 on: January 11, 2017, 12:42:54 PM »
I suggest you write to MMM himself, maybe he'll feature your case on the blog.

He'll eviscerate you - tear you apart - "facepunch" doesn't begin to describe it.

It'll be embarrassing, and it'll get you on the right track.

Mike58

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Re: What would you do???
« Reply #11 on: January 11, 2017, 12:44:15 PM »
Laura33 -great idea.

 The crazy thing is I know that if my pay were to be reduced 20% we would somehow make it. And yes - my CC repayments would have to be reduced.

Mike58

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Re: What would you do???
« Reply #12 on: January 11, 2017, 12:47:25 PM »
I wrote to MMM himself some time ago - he didn't respond. I understand he gets lots of emails. I think a face punch is what I need! I need to really change my mindset. I illogically have thought many times that I have an income problem - and not a spending problem.

Laura33

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Re: What would you do???
« Reply #13 on: January 11, 2017, 12:58:54 PM »
Laura33 -great idea.

 The crazy thing is I know that if my pay were to be reduced 20% we would somehow make it. And yes - my CC repayments would have to be reduced.

I meant what would you cut without cutting the CC repayments. :-)  That's where you put the extra 20%.

honeybbq

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Re: What would you do???
« Reply #14 on: January 11, 2017, 01:00:13 PM »
Welcome.

I'm going to pick on this tidbit: "I feel that I get nickel and dimed every month and they really add up. Its like I'm a walking checkbook. "

Can you explain further? Does your wife work? What do you get 'nickel and dimed' on? Who asks for what? Do you have joint finances with your wife? What has failed in the past about budgets?

The cars seem overly expensive. Groceries seem ok for a family of 6 with dogs. House seems reasonable. Where does the rest go? What did you guy with your credit cards?

You have a lot of self reflection and thinking to do. And being honest.

Dollar Slice

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Re: What would you do???
« Reply #15 on: January 11, 2017, 01:04:00 PM »
Do the case study questionnaire that people keep linking to. No one can help if we don't know where your money is going.

How much are you spending on gas? Kids' activities? Childcare? Cell phones? Cable TV? Restaurants? Alcohol? Hobbies? Etc Etc. These are the places you can cut to pay off your debt faster.

I live in Manhattan, my rent is identical to your mortgage, I take home slightly more than half your take-home pay, and I'm saving close to 25% of my income. And I'm *barely* mustachian (I eat lunches out, I take taxis, I go out to concerts all the time, etc.). What are you spending all that money on??

catccc

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Re: What would you do???
« Reply #16 on: January 11, 2017, 01:06:34 PM »
You can fix this but it takes a lot of discipline.  My family of four earns a gross income of about $100K, and in recent years that figure was closer to $85K.  DH was a SAHP for a while, now he works part time.  Our net worth just hit $712K in 2016.  We are aiming for $1M before I turn 40 in August 2019.

Our groceries cost about $420 a month and that is good whole foods, much of it is organic.  Granted, my family is 2 kids less, but two more kids wouldn't cost me another $1,000.

Last year we spent about $56K total, and $11K of that was private school tuition.  Both kids will be in public this upcoming school year, so our family's base spending is about $45K per year.  That includes flying to and staying at Disney for a week and a variety of other splurges.  Our rent is $1,400 a month, so 1/3 less than yours, but your mortgage doesn't sound unreasonable if you are in a HCOL area.  We drive old cars that we paid cash for when we bought them new in 2004 and 2005.  (The 2005 has higher miles since it is our main family car and we plan on replacing it in the next couple years.  The plan is to get to 200K miles first and then start shopping around.)

Never had debt, but with your income and some budget cuts, you can probably rid yourself of your debt quite quickly.

I am not special.  If I can achieve this level of financial security, I'm pretty sure most people can.

Cpa Cat

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Re: What would you do???
« Reply #17 on: January 11, 2017, 01:17:26 PM »
Budgets often don't work if they're not based on actual spending. People create a fantasy of what they should be paying without considering what they are actually spending and how to lower it.

Your first step is to track your spending. Not in a haphazard way, but by actually importing and classifying your transactions somewhere. Mint.com is a popular site, but you can also use Quicken or some other product. If you're good with Excel, it can be done there - by exporting all of your bank and CC activity to spreadsheets and classifying/sorting - but it doesn't provide an easy-to-use format or reports.

I remember when we decided the grocery budget was too high. My husband said, "You spend too much on groceries! Spend less!" I reacted defensively, "You don't know how much groceries cost these days!" It turns out we were both right. When we sat down and actually looked at our grocery receipts together, we found many items that were unnecessary or more expensive than what we assumed. We started pricing out meals - how much does each meal cost, and do we think that meal is worth the price? We were able to frame a goal for per-meal cost and eliminate those meals that were too expensive. We cut out most snacks. We cut out a lot of extras. Point being - savings didn't come from a general statement, it came from specifically addressing each item.

How much is your cable bill? Is it worth it? What do you lose if you cut to lower cost option? Is it worth it? What would life look like if you canceled cable completely and just used Netflix?

How much is your cell phone bill? What options are out there?

How much do sports cost? Are they worth it? Do your kids think they're worth it? If your kids had to eliminate only one paid activity, what would they choose? Is it an easy choice for them?

How much do you spend on a haircut? Is it worth it?

How much do you spend on random BS? Is it worth it? What do you have to show for it?

How much did you spend on Christmas for each of the kids? Roughly two weeks later, which gifts were worth it? What did you spend on each other? Was it worth it?

You have to look at your real spending and address each thing. The discussion shouldn't be accusatory, just evaluative.

Mike58

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Re: What would you do???
« Reply #18 on: January 11, 2017, 01:36:41 PM »
I will fill out the case study questionnaire very soon. Thanks everyone for the helpful comments. I have a lot of looking in the mirror to do. Others feel free to continue commenting.

Jakejake

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Re: What would you do???
« Reply #19 on: January 11, 2017, 01:41:03 PM »
"I want my wife and kids to have a good life"

That line struck me. How do you define having a good life? What's important to you?

samsonator54321

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Re: What would you do???
« Reply #20 on: January 11, 2017, 01:59:55 PM »
I have some advice that will hopefully help persuade you and your family that you can and should make cuts to your spending.

First plug your household income into this calculator http://money.cnn.com/calculator/pf/income-rank/
It's based on US census data so if you aren't from US it won't be as accurate.

Based on your take home someone in this thread  guessed your salary was 125k.  So if you use that number you come up with 16%. Which means 84% of Americans households make less than what your family makes! 

When talking to your family I'd recommend comparing yourself down instead of up. What I mean is if your neighbor/friends/family spend more than you it's easy to say well I'm spending all my money and still don't buy as much as them. I must not have any room for cuts.  But in reality you should be comparing yourself downwards to people who spend less.  Then the thought process becomes whoa I'm wasting a bunch of money!

This seems silly but I like to think about what a king from the Middle Ages would think of our lives now. It really puts the whole income ladder into a more "relative" perspective.  What I mean is if a King (the richest of the rich back then) saw that families that make say 50k can still 1. Have house with heat. 2. Have a working car 3. A cell phone. 4. A nearby store to get groceries, then they would think almost everyone nowadays is rich.

It's really about maximizing the utility of everything. Once you have a working car (5-10k) range anything over that is often waste. You get the value/utility of having something that gets you from point a to point b after that it's just luxury/show. This concept applies to fancy designer clothes, eating out, jewelry etc.
« Last Edit: January 11, 2017, 02:09:48 PM by samsonator54321 »

galliver

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Re: What would you do???
« Reply #21 on: January 11, 2017, 02:32:41 PM »
So...sports are great...for healthy habits, for challenging oneself, for fun. But as far as I know, these benefits can be attained from fairly inexpensive, local/school participation. From what I've heard, what gets really expensive is traveling teams and leagues (not sure if you're at that level...yet). And many people do those in hopes that their kid will eventually get a sports scholarship. At this point, I wanted to link an article from the Chronicle of Higher Education called "The Myth of the Sports Scholarship," but unfortunately it is now behind a paywall now. But the crux of it is this: for most (unless your kid is showing cream-of-the-crop, 1%? 0.1%? talent and dedication, right now), pouring money into sports is a gamble, not an investment, at least when it comes to college funding prospects. So, perhaps when it comes to considering what a "good life" is, consider the tradeoff between sports now and a college fund later? [I'm not saying take them out of sports. See first sentence. Just...moderate the involvement in the paid versions.]

Also, consider that the fact you are probably comparing your lifestyle to those around you, which is what is making it seem normal, whatever level it is at (most of us do-we'd think gold plated toilets were normal if everyone had them. We'd also think not having running water was perfectly natural if that's the environment we were in). BUT, everyone around you is most likely "normal" and in debt as much as you are, living paycheck-to-sizable-paycheck, etc. Alternately, they managed their money differently (well, let's face it, better) up to this point and don't have the massive debt payments pulling you down and the interest just...vanishing from your pocket...imagine how much better you'd feel about your budget if the car & CC payments were going to savings/retirement instead. Look at how much  you are spending in interest alone...buying nothing, except maybe time in debt.

Which means that to make progress, you need to live differently from the rest of your community, for a while, to turn your situation around. Without a case study, no one can really tell you yet what that means...but it's quite possible you won't quite feel normal next to everyone else for a while. But it can be temporary...though who knows, you might get used to the changes you make!

Fishindude

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Re: What would you do???
« Reply #22 on: January 11, 2017, 02:57:48 PM »
You are house and car poor like a huge percentage of Americans.  Those cars you are presently driving and home you are living in aren't yours, they belong to the banks.  Every dime you make is going out in payments and you've probably used the cards for a long time to pay for other stuff you didn't have the $$ for.

That's a ton of high interest credit card debt and will be tough to get out from under without some drastic changes.   I'd recommend selling both automobiles and getting a couple paid for cheapos.  That frees up a bunch of $$ each month to start attacking the card debt.  You should also think hard about selling the house and getting into something cheaper if there is something in the area.

It's going to take big changes like this that make you and your family a bit uncomfortable to break this pattern of living on borrowed money.   

SimpleCycle

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Re: What would you do???
« Reply #23 on: January 11, 2017, 03:10:46 PM »
I agree that the case study is a good start, but I suspect you don't actually know where your money is going.  So where to start is to figure out where it's all going using a tool like mint.com or even regular pen and paper tracking.

1967mama

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Re: What would you do???
« Reply #24 on: January 11, 2017, 03:44:57 PM »
Posting to follow

lbmustache

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Re: What would you do???
« Reply #25 on: January 11, 2017, 04:14:35 PM »
Thanks for commenting.

The debt is between 2 cards. The first card is at 17.15% - $23k on that one. The other card is at 23.24%.

And yes - I will make adjustments so that my tax return isn't that extreme. I always looked at it as forced savings - but I know that's not the way I should look at it.

2014 Ford Fusion: Payment is $320 - owe about $9k. Rate is 4.54%
2016 Chrysler Town and Country - Payment is $440 - owe around $23k. Rate is 4.75%

We don't really eat out very much. We probably could reduce our grocery bill.

I would sell the Fusion and get something cheaper. I don't know the mileage or trim level of your car... but ballpark looks like the value is $10k or a little over for that one. I'm picking this one for a reason (see below).

HOWEVER, if you don't want to sell your car, I again recommend Dave Ramsey's snowball (http://www.daveramsey.com/blog/get-out-of-debt-with-the-debt-snowball-plan) because it seems that you feel frustrated with a lack of results.

Here is what I would do following the snowball method. Your tax refund is approx $8k, correct? Scrape up another $1k alongside the refund, and pay the damn car off. Whew! That's $9k of debt off your back.

Use that $320 you are not using for a car payment anymore(woohoo!), to start aggressively paying off the credit cards. You will see the tangible results that you want!

(The more "prudent" option in this scenario would be to throw the $8k at one of the credit cards, but that has less immediate satisfaction because you still have all this debt hanging over your head. I want you to have tangible results to keep you motivated to pay the rest of the debt off.)

CheapScholar

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Re: What would you do???
« Reply #26 on: January 11, 2017, 04:43:00 PM »
You're much better off than Beatles, that's for sure.  Does your wife work?  Again, back to the point about the IRA.  If you contribute $5,500 to a traditional IRA then you're reducing your federal tax dollars at your highest bracket.  That's a HUGE benefit in my opinion.  You can't get these years back!  I'm one year older than you and have a household income of about 145K.  Because both my wife and I max out our 403bs at 18K we significantly reduce our tax liability.  At your income I see no reason why you can't simultaneously fight your debt AND start preparing for your retirement.

You'll get lots of great advice on this board.  I have a child and a dog, as well.  I'm sure some people here will tell you to knock it off with sports for your kids.  I disagree (if your kids enjoy it).  Make smart and reasonable decisions.  Don't spend thousands to be on a travel baseball team.  But also don't deny your kids reasonable priced opportunities to enjoy sports/learn about teamwork/make friends. 

jmwagner5

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Re: What would you do???
« Reply #27 on: January 11, 2017, 05:27:56 PM »
If you are looking for a facepunch then I think the reality of it all is that you are living way beyond your quite substantial means.  You could save 20% of that take home pay and be saving more money than most people on this planet get PAID in a month. 

Okay, now that the facepunch is over, I agree with those above saying that you need to figure out where your money is going and cutting back on grocery bills for starters. 

You mention that you want your kids to have a good life but you do them a real disservice by not teaching them good financial habits now.  Odds are that they won't have your income when they are adults, so you are not helping them lead a good life if you don't teach them better money habits as kids. 

bugbaby

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Re: What would you do???
« Reply #28 on: January 11, 2017, 06:03:23 PM »
Please Write a Case Study.

An easy way to figure out your expenses is to sign up on Mint.com. Upload your bank and credit accounts. Then go to Trends and do a spending report for 6 months or whatever you like.

This should take 30 minutes total.

Sent from my Nexus 5 using Tapatalk


Freeme

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Re: What would you do???
« Reply #29 on: January 11, 2017, 06:53:09 PM »
When I first found MMM we were 47K in credit card debt. one of the things that made a big difference for us was using YNAB. It allowed us to really see where our money was going. I had a meeting with my family and no one really wanted to come along but it was a goal we were going to achieve. Chase has a credit card Slate that is 0 interest and 0 transfer fees for 15 months. Try to open one in each of your names and transfer those high interest cards. Question every item you buy or use. We cut all non essential items. Hiked outdoors instead of the gym and so on. Constantly looked for fun free activities so my family would not feel so deprived. Took 2 years to pay off but totally worth it. I cook almost all food from scratch no convenience items. It was a complete overhaul in every way.

ltt

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Re: What would you do???
« Reply #30 on: January 11, 2017, 06:55:38 PM »
Agree with others to do the case study.  We have 4 kids.  I know of no woman with 4 children who works outside of the home because there is absolutely toooooooooooooo much to do inside the home.  Plus, with day care/after school care, it would make no sense. 

How old are your children? 

$1400 for groceries is very high....does it include diapers, formula, etc.   Also, and others won't agree, but $2100 for the mortgage--ouch! 

meandmyfamily

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Re: What would you do???
« Reply #31 on: January 11, 2017, 07:12:55 PM »
We also are a family of 4 trying to get out of debt and save.  First thing first:  https://www.irs.gov/individuals/irs-withholding-calculator

Change your withholdings but only if the extra will go to debt repayment every month.

Then read the entire thread about the Beatles on this page for help with groceries.  We spend between $800-$950 a month of just groceries and we are trying to get that lower.  That doesn't include household stuff.  We really like YNAB for keep track of our spending.  Take out cash for groceries and when it is gone it is gone.  Shoot for $1,000 the first month.

Take all your credit cards and cut them up or something where you can't get to them.  Then roll them to 0% balance transfers and pay them off.  Chase and Citibank are great for balance transfers.

I find a lot of inspiration from this blog:  http://www.frugalwoods.com/

Take what works and leave the rest for now.

Your mortgage is very very high!  Can that be changed?  Move or downsize?

JLee

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Re: What would you do???
« Reply #32 on: January 11, 2017, 08:17:29 PM »
Your net take-home pay is over twice the median GROSS FAMILY HOUSEHOLD INCOME in the United States.

Let that sink in.

Fortunately, you do not have an income problem and if you're willing to, you can easily get out of this mess.

I would start by doing a case study.  Other than that, I would open a Chase Slate card and transfer as much credit card debt as you can to that (no fee and 0% for 15 months), then cut up your credit cards and delete them from every shopping website in which they're saved. Figure out how to put $2600/mo towards those cards so you can get them paid off in 15 months. If you keep both of your vehicles, refinance them for a lower rate (PenFed typically has 1.99%).

Cut your grocery spending in half, at least.  Does your spouse work as well?
« Last Edit: January 11, 2017, 08:21:11 PM by JLee »

Rezdent

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Re: What would you do???
« Reply #33 on: January 12, 2017, 08:57:24 AM »
You can't make great decisions without knowing where the money is going now and how it relates to your family's happiness.

Someone may advocate selling a car, but you might discover that you are spending twice that on a child's sport that doesn't even matter to them anymore - and the second car is really important to your family.  Or maybe you discover that selling the car might allow one spouse to stay home for the kids.

The case study will help with those decisions.

I don't do well with budgets either.  But I do track my spending - all of it.  I know where it is going and why.

I read a classic book called "Your Money or Your Life" that forever changed my relationship with money.  The change allowed us to pay off enormous debt and save for ER without feeling any sacrifice at all.  No "budget" was needed.

Mike58

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Re: What would you do???
« Reply #34 on: January 12, 2017, 10:28:11 AM »
Thank you everyone for the responses. I'm in the process of filling out the Case Study - I'm trying to be as accurate as possible. I love these responses - many of them make me feel like an idiot - others give me hope. My wife and I spoke last night about going to an all cash budget for both of our weekly spending money. 

A few answers to some of the questions that I am seeing:

- My wife doesn't not work. She stays at home with our 3 year old.
- I don't have a cell phone bill or internet bill (covered by the company I work for)

As far as being "nickel and dimed" every month - I'll list some recent examples of things in the past 30 days.

- 3 school  yearbooks - $105
- Root canal for me - $1,200
- Crown for root canal - $857 -
- Tires needed for wife's van - haven't purchased yet but guessing $450
- Spring Baseball Registration for the 2 boys - $700ish - I still need to buy a bat and glove for one of the boys.
- A random DR bill that I got in the mail for $200

My comment about wanting my kids and wife to have a good life - that comment has seemed to generate some discussion. I meant that I grew up always being one of the poor kids in our school. Not dirt poor - its just that we struggled. I watched my Mother stress (kind of like my stress now, I just have more needless crap). I was never dressed the coolest - my Mother did the best she could all by herself but we never really had any money - it was always an issue. I remember thinking that one day my kids wont have this childhood. Perhaps this is what has gotten me in this mess.

Mike58

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Re: What would you do???
« Reply #35 on: January 12, 2017, 10:35:44 AM »
Also, I found it interesting that one person advised that I take the tax return (roughly $8k) and pay off the car loan instead of throwing it at high interest credit card debt. I get the mathematical reasons not to do this - but perhaps I am overlooking the psychological reasons.

Does anyone else think that I should pay off my $9k car loan ($320) a month vs throwing it at my credit card debt?

kms

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Re: What would you do???
« Reply #36 on: January 12, 2017, 10:44:10 AM »
Does anyone else think that I should pay off my $9k car loan ($320) a month vs throwing it at my credit card debt?
I like the idea. Don't underestimate the psychological effect of having paid off that one loan. It will also free up an additional $320 each month to throw at your credit cards.

That is of course if you keep using the car instead of doing what most Americans do: get a new car loan as soon as the old one is paid off.

MrsDinero

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Re: What would you do???
« Reply #37 on: January 12, 2017, 10:47:07 AM »
My comment about wanting my kids and wife to have a good life - that comment has seemed to generate some discussion. I meant that I grew up always being one of the poor kids in our school. Not dirt poor - its just that we struggled. I watched my Mother stress (kind of like my stress now, I just have more needless crap). I was never dressed the coolest - my Mother did the best she could all by herself but we never really had any money - it was always an issue. I remember thinking that one day my kids wont have this childhood. Perhaps this is what has gotten me in this mess.

I think it is great that you want your family to have a better life than you did as a kid, however you have to define what better really means to you and your family.

If you mean you want them to always have the latest and greatest of everything because you never had it, then you are on the wrong forum.

If you mean you want them to have financial stability then this is the place for you.

What would happen, financially, if you were to be in an accident and die?  Or worse what would happen financially if you were in an accident that disabled you to the point you could not work and needed round-the-clock care?

How would your family handle that $70k of debt AND continue to pay the monthly bills?

Chances are neither of those would happen, but you have to really think about what it means to provide "a good life" for your wife and family. 

I would much rather have the life of living frugally, however knowing that if they paychecks stop my lifestyle would continue uninterrupted rather than knowing if the paychecks stopped my entire lifestyle would be turned on its head and I would be forced to either "sink or swim".

RetiredAt63

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Re: What would you do???
« Reply #38 on: January 12, 2017, 10:59:20 AM »
Spring Baseball - $700.  Wow, so glad my DD played soccer.  Is there then a summer baseball season that will suck more money from you?  And fall and winter?  How much do you spend on baseball in a year - registration, equipment, transportation, after-game snacks, the whole bit.  Do the boys love baseball that much?  Youngest is 3 so presumably there is an older daughter (or 2) as well?  What expensive activities is she in?  All part of the budget analysis.

Trifele

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Re: What would you do???
« Reply #39 on: January 12, 2017, 11:00:35 AM »
Posting to follow

Trifele

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Re: What would you do???
« Reply #40 on: January 12, 2017, 11:02:35 AM »
I hear you about the baseball costs, BTW.  Our son plays too.  Check out Play it Again Sports if you have one in your area.  You can get good used equipment fairly cheap. Won't help with the registration fees, but every bit helps. 

Mike58

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Re: What would you do???
« Reply #41 on: January 12, 2017, 11:03:55 AM »
Baseball Registration for Spring is roughly $700 - that's only once a year
Tennis for the youngest girl is $120 a month - but only 6 months out of the year
Football registration for the oldest boy is $300 plus snacks and other items. 
The youngest is in swimming lessons for $100 a month - he goes once a week.


Mike58

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Re: What would you do???
« Reply #42 on: January 12, 2017, 11:04:58 AM »
Mrs Dinero - I wholeheartedly agree. Buying the latest and greatest was my priority for a long time. Now it disgusts me. I look at my past as wasted time. I could have saved so much more - spent so much less. And now I'm in this mess. Its my fault and only mine. Hence the reason I'm on this forum. I don't want to be one of those idiots with a decent income who live paycheck to paycheck - but I am. I would go under in a month if something were to happen to my job. Talk about stress!

But, that's why I'm here. I'm here to fix this so that it never happens again. Ever. I'm tired of getting paid and writing all of these checks to banks for crap that I don't even own. And I appreciate all of the feedback from all of you who have done it or who are in the middle of your journey!

kristof

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Re: What would you do???
« Reply #43 on: January 12, 2017, 11:10:16 AM »
Another reason to pay off the entire car loan first would be that it might simplify the logistics of selling it, especially to a private party. If you replace it with something significantly cheaper (say something 5-10 years older) you could bank an instant $5-$10k cash to put towards the other debt.

Malum Prohibitum

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Re: What would you do???
« Reply #44 on: January 12, 2017, 11:13:17 AM »
Not much detail to go on.  But I will offer the solicited advice on what you have provided.

I have in the past made the same $$$ as you.  I spent it all, just like you are dong.
I am 35 years old, married, 4 kids.
  I am older than you, but I am married with 4 kids, too!

Quote
my total take home pay every month is about $8,500 - after taxes and health insurance.
  Cool!  Killing it!
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I am not saving for retirement whatsoever. I have no savings. I want to - and I realize the importance of doing so, however, I am trying to dig my way out of debt.
All good goals, and you have plenty of money with which to do it.

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I currently owe about $38k on credit cards.
  Ouch!  What are the interest rates?
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I have 2 car loans - one I owe $23k and on the other one I owe $9k.
Are you aware that overspending on cars and homes is pretty much what makes middle class and upper middle class Americans feel like they cannot get ahead?  It affects their happiness.  They think they will be happy with the expensive cars and homes, but they are unhappy.

Quote
  My mortgage is $2,100 a month.
Are you aware that overspending on cars and homes is pretty much what makes middle class and upper middle class Americans feel like they cannot get ahead?  It affects their happiness.  They think they will be happy with the expensive cars and homes, but they are unhappy.

Quote
Groceries are $1,400 a month.
Ouch.  My family is the same size as yours.  We spent $520 in November on groceries, and we hosted more than a dozen people for Thanksgiving at two different feasting days.  I can also pretty much guarantee that I eat way more than you.

Quote
Plus all the other common bills such as utilities and car insurance etc. I do get tax returns every year of about $8k - so that helps.
  Why does that help?  Adjust your withholding to take that $8k spread out in your paychecks over the year and apply it to your debt as it comes in.

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Here is the thing - I don't feel I'm living way above my means (ok, I guess I was for awhile hence the CC debt).
What do your feelings matter when you have a brain that can do math?

Quote
I'm doing everything I can to get out of that debt but with the kids and their sports and wife and 2 dogs - geez - everything is just so freaking expensive. I want my wife and kids to have a good life - but this is affecting my happiness. I feel that I get nickel and dimed every month and they really add up. Its like I'm a walking checkbook. We have tried budgets - but it seems something is always coming up that isn't budgeted for. Its like I don't make nearly enough money - but yet I know the average family gets by on less. I love the MMM philosophy but need to get my family on board. Easier said than done. I have tried cash budgets, debit cards, etc and nothing seems to work effectively for us. I feel that I'm not a dumb person but as I reread my financial situation, I wonder, lol.

SO - a couple of questions for all of you. Am I totally financially screwed?  Also, if you were in my situation - where would you start? I know that sounds like a very vague question - but I'm just looking for some general advice from some very smart people that can provide a different perspective. Thanks.
  Wow.  I feel for you, dude, because I WAS you.

As for the family being on board, well, the only family that needs to come on board is your wife.  I assume the kids do not have your credit or debit cards or ATM cards, right?

Have a deep discussion with your wife on where you want to be, financially, in 10 years.  Only after you have a goal can you two start putting together methods for getting there.

Malum Prohibitum

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Re: What would you do???
« Reply #45 on: January 12, 2017, 11:13:34 AM »

Step 1: fill this out (you can edit this post with the information)

http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/

The form was create to supply the other posters with the specific information needed to assist you with your questions. I'm sure there will be a lot of suggestions, advice & comments supplied with the full picture.

Definitely do this!

Malum Prohibitum

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Re: What would you do???
« Reply #46 on: January 12, 2017, 11:19:00 AM »
Do the case study questionnaire that people keep linking to. No one can help if we don't know where your money is going.

How much are you spending on gas? Kids' activities? Childcare? Cell phones? Cable TV? Restaurants? Alcohol? Hobbies? Etc Etc. These are the places you can cut to pay off your debt faster.

I live in Manhattan, my rent is identical to your mortgage, I take home slightly more than half your take-home pay, and I'm saving close to 25% of my income. And I'm *barely* mustachian (I eat lunches out, I take taxis, I go out to concerts all the time, etc.). What are you spending all that money on??
  Do you have a wife and four kids at that Manhattan apartment?

SimpleCycle

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Re: What would you do???
« Reply #47 on: January 12, 2017, 11:20:18 AM »
Baseball Registration for Spring is roughly $700 - that's only once a year
Tennis for the youngest girl is $120 a month - but only 6 months out of the year
Football registration for the oldest boy is $300 plus snacks and other items. 
The youngest is in swimming lessons for $100 a month - he goes once a week.

$700/year for baseball
$720/year for tennis
$300/year for football
$1200/year for swimming
$2920/year in just sports registration fees

I wouldn't advocate cutting the kids' activities as a first step, but is there any way to economize?  Our parks department tot swimming lessons are $34 for a 10 week session.  Parks department tennis lessons are $53 for 8 weeks.

The thing in your post that stands out to me is "but it's only once a year".  A lot of expenses are "only" once a year, or "only" $25/month, but add them up and your whole paycheck is gone.

I sense you are not tracking expenses and budgeting, because otherwise you'd know exactly how much per year you spend on activities and whether you can afford that.

SimpleCycle

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Re: What would you do???
« Reply #48 on: January 12, 2017, 11:23:27 AM »
You are currently spending about $8000 a year on credit card interest!  Over time that will definitely impact your family's happiness if you don't turn this around.

Mike58

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Re: What would you do???
« Reply #49 on: January 12, 2017, 11:25:41 AM »
I do not track my expenses. I get paid and watch my balance dwindle down until I have less that $100 in my account. Isn't that ridiculous? A man who makes six figures but can't come up with $100 cash a lot of the time. Well, that's why I am here. I've always been intrigued by the minimalist lifestyle. I think its a learned skill.