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Case study - Time to be analyzed by the experts!
Old Ball Coach:
OK everyone! I have been around the site for about 6 months and trying to work our way to financial independence. I've been very hesitant to post our numbers on here because I know that there are things that I need to and am trying trying to fix. Please look over what we have here and let me know what I can try and fix.
Background:
Me- 44
Wife - 39
2 kids – 15, 13
Income (monthly):
Me - $3,200 take-home paycheck (after $150 to 403B and $380 to State Teacher Pension. SEE BELOW)
Wife - $2,300 take-home (after $260 to 401k -7% of her salary this increases .5% each year, and $480 to health insurance)
Total $5,500 take-home
Expenses (monthly):
$600 mortgage P&I
$55 home insurance
$65 property tax
$600 groceries/household
$266 cell phone - This is a tough one living in a rural area. Verizon is our only reliable option.
$181 auto insurance - I am currently shopping around on this. Our cars are old so I feel this is way too high.
$75 gas
$180 electric
$87 cable
$96 landline/internet
$500 transportation (gasoline)
$40 pets (food, vet, annual cat shaving for summer)
$100 dining out
$150 medical
$100 clothes/shoes
$12 netflix
$1,200 credit cards (see below)
$75 golf - This expense happens mainly in the summer, but it averages about $75 month for the year.
$50 Wife misc
$50 Me misc
$100 kids misc
$89 student loan
$150 school lunch account - kids during the school year
$110 golf cart payment - Only 4 months left. This was the last big dumb decision before I found MMM.
$56 life insurance - 25 year term policy
Saving for car repairs $50
Saving for house repairs $200
Total $5,137
Assets:
Primary residence (3b/2ba, 2100 sqft) $156,000
2008 Toyota Corolla $2,500
2010 Dodge Avenger $2,800
403b (mine) $58,208
410k (hers) $109,771
HCSP (mine) $16,513
TD Ameritrade taxable $1,807
Emergency Fund $800 Very low
Cash (personal) $3,000
Total (excluding vehicles AND Home value) $190,099
Liabilities:
Primary mortgage $110,881 at 4.375%
Wells Fargo Credit Card $2,308 at 25% This was a "surprise" card the wife had maxxed at $3,000 two months ago. Hammering this one.
United Educators Mastercard $6,250 at 11.99%
Chase Visa $3,282 at 0% Did a balance transfer that is 0% for 15 more months.
Student Loan - 6,888 at 4.25%
Total $129,609
Net worth $60,291
As a note, the wife's employer kicks in 9% of her salary each year to her 401k as an end of year bonus. (They have never missed it. healthcare facility). My state teacher pension is a defined benefit plan. At current, I will receive a full pension at age 66 of approximately $4,800-5,200/month with 1.5% COLA. If I retire at 62, it would be $1,800-$2,100/month.
There are some big mistakes that have been made over the years before I found MMM. The wife and I both were always "minimum" payment people. Then I read Rich Dad, Poor Dad, and it completely changed my thinking and my life. I am working hard to pay off those credit cards as quickly as we can so that we can contribute more to our pre-tax investments. Wife is slowly coming around to this idea of not carrying a credit card and investing money beyond the bare minimum in our retirement accounts.
We are both picking up some bartending shifts at our small town golf course (where I'm also the president) to pick up a little extra money to pay our credit cards off more quickly. The reason I am so nervous is because we will need another vehicle next May for our oldest who will get her license. The biggest positive of all of this is that I have now opened a Roth for her since she just started her first job. I'm not going to let her fall into the same pattern that her mom and me and our parents have been in.
Sorry for the long post. I hope this explains everything clearly.
Morning Glory:
Hi, the first thing you can do is read the MMM article about why your debt is a hair on fire emergency. Next sign up for Frugalwoods Uber frugal month challenge; it will help with motivation on your next steps. That's it for tonight.
Tomorrow morning, immediately get on the phone and cancel your cable and landline. Suspend your Netflix account, you can sign back up after the debt is gone if you really miss it. Then call your car insurance company and drop everything except liability coverage.
After that, start researching cell phone options. I live in a rural area too, and in fact can't get a signal in the house without Verizon. We have Republic wireless for $15 per month each, no data. WiFi calling is your friend. We have a WiFi signal repeater out in the shed so we can get WiFi outside too. If you have to have a signal somewhere other than school/work/home, look int Straight Talk, they use the Verizon network. I think Sprint also let's you roam on Verizon's towers.
There, now you just freed up at least$300 per month to put towards debt, and then savings once the debt is gone. I also recommend putting a temporary hold on dining out, new clothes, golf, and misc. until the cc debt is gone. Remember that right now you are essentially paying an extra 25% on anything you purchase.
Once you have gotten the fire put out, look at your commute. $500 on gas every month is a lot, you must live very far from work. Can you move closer, carpool, or save up cash for a more efficient car? Are there commuter buses in your area?
One more thing, don't buy your daughter a car. She will learn more about money if she saved up income from her job
gpyros85:
--- Quote from: bpolson2 on July 05, 2018, 05:21:55 PM ---
Total $5,500 take-home
Expenses (monthly):
$600 mortgage P&I This is okay no issue.
$55 home insurance This is okay no issue.
$65 property tax This is okay no issue.
$600 groceries/household This is okay no issue.
$266 cell phone - This is a tough one living in a rural area. Verizon is our only reliable option. This is out of control!! Try Verizon Prepaid!!
$181 auto insurance - I am currently shopping around on this. Our cars are old so I feel this is way too high. This is also out of control should be paying $80-100, libality only your cars aren't worth much
$75 gas This is a lot for gas, where do you live?
$180 electric Is this every month? This is high, but its what you pay for having 2,100 sqf home also.
$87 cable How much do you really use this?
$96 landline/internet This is out of control! Is this due to being rural? What about a bundle TV/PHONE/Internet?
$500 transportation (gasoline) Completely out of control, thought you were driving F-350 Trucks then seen Corolla!!
$40 pets (food, vet, annual cat shaving for summer)
$100 dining out Reasonable but debt payoff should come first.
$150 medical Is this pretax?
$100 clothes/shoes
$12 netflix Your $87 Cable isn't good enough?
$1,200 credit cards (see below) We need to pay this off, I would exclude this from your monthly budget and consider this savings, because the mindset is when cards are paid off this is investment savings.
$75 golf - This expense happens mainly in the summer, but it averages about $75 month for the year. Debt First!
$50 Wife misc Debt First!
$50 Me misc Debt First!
$100 kids misc Debt First!
$89 student loan
$150 school lunch account - kids during the school year
$110 golf cart payment - Only 4 months left. This was the last big dumb decision before I found MMM. Don't get me started... How much is this asset worth? Possible sell and send to debt
$56 life insurance - 25 year term policy The Social Security has pretty good life insurance already in place.
Saving for car repairs $50
Saving for house repairs $200
Total $5,137
--- End quote ---
You net roughly the same as me $5412/month but I am able to save $1,800/month from that $5,412 and I have a stay home wife and 3 kids.
Old Ball Coach:
@MrsWolfeRN and @gpyros85
Thank you both for commenting on my post. I knew we had some big issues. I can expand on a few of these.
Auto Insurance - I am currently shopping around. I do believe that I will get a much better rate from another agent.
Auto Gas - My wife did just get a job much closer which will cut her commute in half. As I dug a little closer into our bill, we use a Kwik Trip card and I pay it off each month. It's probably more like $300 in gas and then a couple hundred on food and items in the store. I will definitely be cutting that down! I should have looked more closely at my monthly statements!
Cell Phone - I am working on shopping around for this as well!
Electric - That is what I pay each month. I'm not sure why it is so much. Would an energy audit help?
Golf Cart - Yeah, this is my one big non-Mustachian thing.
Medical - Yes, I do have a flex spending account, but we have exhausted that for the year. I have low back arthritis, yeah at 44 it sucks, but each year I have an RFA done on my low back to kill the pain for a year. It is wonderful, but expensive and not something I would ever go without.
I did sign up for the Frugalwoods Uber Frugal monthly challenge. I read their posts and am looking forward to trying to more to pay off my "hair on fire" credit cards. I'm also reading Rich Dad Poor Dad again. That was the book that got me started down this path.
My wife and I have to stop thinking like the "old us" and think like the "new us".
brooklynmoney:
Can you roll all of the balances into a zero interest card?
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