Cleaning up my mess

[amg1212]

I’m a little embarrassed to be writing this, but here goes. I am a part-time barber, 36, and my second husband is a tattoo artist, 30. I got out of a total mess when I met him about five years ago and escaped with nothing. He had nothing to begin with. We just found Dave Ramsey an this blog a few month ago. I have three kids, ages 8, 10, and 16. When we met, we were both apprenticing in our trades so we are both just this year really getting to where we both know money will come in. Now here’s an embarrassing tidbit: up until three months ago I really didn’t know how much we made or spent. My husband gets all cash from his commissions and gets a 1099, and at the end of the year gives his boss an arbitrary number because of his terrible record keeping (although this year he says he has all income and expenses tracked and categorized... we shall see when we file taxes!) Horrible, i know! I get regular paychecks with taxes taken out, that’s my commission and credit card tips, plus cash tips which i previously didn’t keep track of. I started using the every dollar app three months ago to keep better track and here’s what a month looks like on average:

Me: $2600
Cash tips: $300
Husband: $4300
Child support: $400

Total monthly average income: $7600

Which is crazy, before we started tracking in my head according to my earnings in previous years and just my best guess on hubby, i figured we made maybe $45000. So that’s good and bad news. Looks like without counting the child support that’s around $86,000.

So here’s another embarrassment: we have about $9,000 in credit card debt, mostly from some unexpected medical/dental things and some expenses incurred when we moved a year ago. I also have about 30k in student loans and 10 months left on a car lease. I tried to get out of it, but at this point i really cant. Never again, though. Hubby has a 09 Mazda 3, paid cash.

And still, ANOTHER embarrassment. We were previously renting a two bedroom flat with three kids, it wasn’t really working but we didn’t feel like we really had options. My family was really pushing us to buy a house in an expensive suburb of our city with a good school district. We knew that wasnt happening. I had a client/old friend offer their empty house to the first person who would pay what they owed on it, which was 72,000. It is in the city but its a beautiful Victorian on a tree lined boulevard. I got preapproved for a conventional loan with a high interest rate by a local bank that keeps mortgages in house. We had discussed us moving in in December but waiting until we got our tax return in February to buy it. When the time came, the bank denied us. Every bank denied us due to the commission based pay and uncertain nature of our income. I applied by myself but because of my student loans which are currently 0$ a month and my auto lease my dti ratio is too high. So here we are, just paying rent, hoping the owners will be patient with us while we try to figure out buying this house we’ve already put so much work in to.

This year we have paid off 12,000 in credit card debt. So there’s that. This is in a relatively short time and I’m quite proud of it. I have been biking to work all the days i can, but i have to drive a few days a month when i leave for an hour to get kids off the bus and situated at home before returning to work for the evening. And good news: the salon i work at is moving even closer in February! Ill only be 1/2 mile from work.

So that’s what”s running in the background. Here’s what the monthly expenses look like.

Rent: $825
Gas: $130 and probably going up for the next few months. Summer is $30 a month
Electric: $100 (two boys who are really into gaming)
Water/trash/sewage: $30

Auto lease: $250 (gone in October)
Insurance: $180 (will go down in October, includes renters insurance)
Gas: $120

Groceries: $800- not too bad for five vegans but trying to improve

Phone: $240, this includes my phone and phone and iPad hubs uses for work and mifi hotspot service the kids use for internet. He writes off most of this plus depreciation of devices as a business expense
Netflix: $12
Two Apple Music streaming services: $22
Family YMCA membership: $36
Pets: $45

Credit card minimum payments: $235
Extra debt payments we automatically transfer to a special savings: $600 (we also add all leftover money to this pool)

Life insurance: $30
Currently the kids are on chip and hubs and i have no insurance due to the clown in office messing up our access to the affordable care act. Maybe next year.

Usually some of that gas price and maybe 50$ or more a month in equipment/ entrance fees goes to traveling to nearby cities for our family pastime of skateboarding. Being in the Great Lakes region, we have to do it at indoor parks for half the year.

The only savings i have at the moment is a small Dave ramseian emergency fund of $1000 and $3400 from a whole life policy I’ll be cashing in to put towards my down payment.

We plan to pay the cc debt off within 6 months. Does anyone have any idea what we can do about the lease, or should we just ride it out? Also with my current student loan payments at zero should i start saving for retirement once my cards are paid or pay the loans first? Is it possible for people like us to retire early? Ive only been barbering for a few years and already I’ve got a bad back and hands and feet riddled with tendinitis and arthritis, i need an exit strategy!

What do we do about this house situation? Any insight would be appreciated!

[Laserjet3051]

I'm most concerned that you nor the kids have any medical insurance. This seems to be the most important financial aspect of your post. Why do you think you cannot buy insurance today? Even for the ACA, the deadline is Jan 15, 2019 for coverage to begin in Feb. The second item is your student loan, where you have a $0 payment per month. This could be a ticking time  bomb if not handled optimally. Can you please explain the loan/repayment terms and your plan to handle this debt?

[amg1212]

The kids do have insurance, they qualify for Chip. We previously had subsidized insurance under the aca, then were kicked off and told we qualify for Medicaid, then eventually we were kicked off that for making too much. By then it was too late to re-enroll. This year we opted not to participate in the shit show for fear of the same thing happening.  My kids are also bounced back and forth between chip and Medicaid, we have always been right around the line for the cutoff for income for a household of our size. I’d like to look into other options once our debt is gone.

My student loan is currently on an income based repayment plan, it only goes off my income and not my husbands and takes family size into account so will likely stay at zero. It is accruing interest at a rate of i think 3.75? Ive never paid on it but it is current. I’ve never even thought about paying it until i started to actually think about my finances this year.

[cchrissyy]

your grocery figure is 2-3x what mine is with 3 teenagers. I think you have lots of space to improve it! there are some big ongoing threads here where you can discuss exactly that and hopefully find some quick success.

[cchrissyy]

As far as the mortgage, you're going to need 2 years of tax returns to prove your income. the fact that some of it is variable or commission based is ok, and different banks may have different rules on how they count that part, but everybody is going to need 2 years of taxes.

Try not to be bothered by renting a bit longer! You have a good price and it's close to work. Renting is freedom to move when your needs change or when a better opportunity opens. If you want to buy later, cool, you'll be ready then.

[amg1212]

As for my grocery bill, I don’t know what to do about it! I already feel like i am very intentional about my groceries. I shop every Tuesday, and Monday night i write out a detailed meal plan and shopping list and i stick to it. My kids also pack lunches which means more convenience and packaged foods. We go to Aldi for most of our stuff. Most of our diet is fresh fruits and vegetables with some nuts, grains, and beans. We’ve even been scaling back quality and eating cheap stuff like white pasta and more processed treats for lunches and less organic. I’ll look into the threads and see what ideas other people have! Thanks!

For the house: my husband will have two years of claimed self employment this tax season so fingers crossed.

[Gronnie]

Apple Music family plan is 14.99 so definitely switch to that and save 33% (as well as gain access for the whole family).

[calimom]

You are making amazing progress with knocking down your debt! Well done. WRT the house, this may not be the time. A vintage Victorian may need major repairs and upgrades. Continue working on your CC debt and get squared away with retirement savings and a solid EF. 5 people in a 2 BR is tough but doable. There does appear to room to cut in your expenses, as others have mentioned. When your car lease is up, you're not planning on replacing it correct? With the closer proximity to your workplace and the ability to bike?

[Basenji]

As for my grocery bill, I don’t know what to do about it! I’ll look into the threads and see what ideas other people have! Thanks!

Check out these:
https://forum.mrmoneymustache.com/off-topic/the-ultimate-mustachian-food-guide/

https://forum.mrmoneymustache.com/share-your-badassity/have-a-sub-$200month-grocery-budget/

[reeshau]

Regarding the car lease, have you researched its current value?  Right now, the car costs you (lease payment) + (insurance) per month.  So, $250 + $80 (my estimate) = $330 per month.  (plus gas)  Through October, that's $3,300.  If you could sell it at a loss of less than $3,300, then you would be money ahead to get rid of it now and get on with your life.  You have the cash to do it, when you cash in your whole life policy.

That means you won't move forward on the house right away, but the deal shows all kind of red flags to me.  As @calimom mentions, an older house will also have more upkeep--it's a bargain for a reason!  Compare their price to others in the neighborhood, and make sure it's inspected before you buy.  You might think this is looking a gift horse in the mouth, but unless the sellers are in a hurry to claim their Powerball prize in another state, I can't think of why they would be so "giving" about it.  If it sounds too good to be true, it probably is.

I'm also concerned that you have medical conditions, and no insurance.  While there is certainly risk in playing the ACA game, now more than ever, you do have pre-existing conditions, and that is currently the clause in play in court.  I would advise you to make sure you have something in place, in case the music stops and exclusions for pre-existing conditions come back into general practice.

You also talk about uncertainty regarding which program you are eligible or ineligible for.  But, these are controlled by your income, and you are part time, while you husband is commission--I think you control this variable.  You haven't said which program you prefer, but I would say you should be able to intentionally target / control your income to fall within the limits of your preferred program.  People usually focus on expenses when talking about budgeting, but many early retirees talk about managing income, too, for exactly this reason.  (Our Next Life talks a lot about this)

[Tuskalusa]

I think you should check into ACA enrollment now. It’s open enrollment now,so the best time to start the process again. I’m sorry you’re getting the runaround because of all the attacks on the ACA...it’s shameful with the clowns in office. However, you need something.

Are there any employers that offer health insurance in your field?

You’re doing a good job. I think the post about controlling your income to gets the best insurance plan for you and your family is a great thing to explore further.

[Peachtea]

You don’t need to do processed foods for lunch for it to be cheap. Ours is pretty cheap and almost vegan (although we are no where close to the low grocery budgets some people on here have). Every week for work lunches we have a peanut butter & jelly sandwich, carrot sticks, 2 fruits (usually an apple and banana, but watermelon or etc when it’s on sale), 1/4 cup almonds, and a hard boiled egg. The egg is probably the most expensive anyways and you could sub with another grain or veggie. We buy the almonds in bulk 10 lbs at a time. PB is non-organic whole foods 365, but “natural”, sugar free with just peanuts and some salt. It’s actually the cheapest real PB we can find around us, and we go there just to stock up on it. DH cuts up all the carrots into sticks on the weekend. He keeps them in a container with water, so they don’t dry out midweek. This lunch also doesn’t take long to pack in the mornings.

My understanding is that being vegan can be very cheap as long as you don’t start trying to substitute things or buy organic/vegan processed foods, like vegan ice cream, (premade) burgers, etc. Have you looked at the dirty dozen/clean 15 lists? That could help you decide which things are important for you to buy organic vs which ones you can save some money buying conventional.
https://www.ewg.org/foodnews/clean-fifteen.php

I’d also look at reducing your phone bill, check out MNVOs for your network and buy cheaper phones next time, even if it is a business expense. Doesn’t matter if you get a $1000 deduction if your spending $2,000 more than what you need to.

Have you read through all the blog posts? Lots of ideas for cutting electricity and energy bills. Don’t assume the kids playing video games is where all the waste comes from. (Sure it doesn’t help, but probably other ways to reduce.)

Don’t worry about being renters and don’t let people tell you, your wasting money. Paying for housing is not wasting money, and renting can be cheaper. If you can’t get a mortgage would renting a 3 bedroom apartment be cheaper than the house? In terms of rent + utilities? You’re paying a lot for gas and electric.

[Gronnie]

I’ll stress the not feeling bad about renting as well.

When we were MN and rent on a 200k house would be almost 2 grand owning was a better deal.

Here in SoCal where rent on a 1.2 million house is 3500 renting is better.

In MN we owned and in CA we are renting. It’s just a math problem.

[CrustyBadger]

I hate to bring up something that will only cost you more money. But I think you need disability insurance. You have a job that requires standing and use of both your hands. There are many disabilities that could affect your ability to earn an income.

[OtherJen]

Speaking as a freelancer, your husband is regularly setting aside money for quarterly tax payments to the IRS and state, right? It sounds like he would be on the hook for both halves of FICA plus income taxes.