Author Topic: Optimistic but potentially screwed - Sage advice needed  (Read 2959 times)

secondchances

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Optimistic but potentially screwed - Sage advice needed
« on: July 02, 2018, 05:01:07 PM »
Husband and I both in 50s and have zero savings, nothing for retirement and no health insurance. He owes about $5000 in credit card debt and about another $4000 in medical bills. This his total debt and I owe about $60,000 in credit card debit. My debt plus house and cars and medical bills, all in my name totals about $250,000. We own or own business but were not making that much money and because we claimed we made like $7000 last year, we're being audited the IRS this month. I'm not super worried about the audit because I keep pretty good records.

We have an alcohol problem and spending problem and we're in counseling. I think we will whip it. I'm about 30 lbs. overweight. I wanted to add the weight issue because it overall highlights the real issue with me not using my brain cells. To sum it all up, we're morons, we know it and I should know better because I'm actually pretty smart except for this one area of my life. My husband is horrible with money. We manage to make all of our payments on time each month and no lates. My husband will add some medical bills to his credit soon but my credit would be excellent if it weren't for over utilization and dings for trying to get more credit.

I'm extremely inspired by Mr. Money Mustache and I'm ready to make a change and the hubs is too and we know there are hard decisions ahead. I just have need some sound advice to get a handle on this. I'm optimistic!

Here are the options as I see them:
File Bankruptcy and keep the house and cars. The thought of this makes me feel slimy.
Pay down the debt and try to do balance transfers on new cards if I can get them. Try to get a debt consolidation loan?

I don't have hard figures about our income; we have an accountant friend that files taxes and  we don't run financial reports like we should. We make enough to pay about 12,000 in bills each month but it's building and starting to cave in on us.

I look forward to the face punches and advise. :)

gpyros85

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #1 on: July 02, 2018, 05:44:59 PM »
Please explain more on the income side, 2017 IRS states $7,000. However, you claim you are able to pay $12,000 a month in bills...

Also, a itemized statement of your monthly cash flows would be helpful.

Frankies Girl

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #2 on: July 02, 2018, 06:24:09 PM »
Without actual numbers, there isn't much anyone can really help with. You're telling us a very sad, very wasteful background but no details. I do think you need serious counseling ASAP (so glad you're already there) as it sounds like you're a slow motion train wreck with the alcoholism, weight issues, a shopping addiction, and frankly a crippling amount of debt with nothing to show for it. This is a serious disconnect from reality.

Please review the how to case study topic sticky here: https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/


And if you have no idea of the numbers, then that's what you need to do right this minute. Locate all debts (amounts owe, interest charged), start tracking every penny spent and earned. You need a real budget like Mint or YNAB if you for some reason can't track things manually, and frankly I would not trust myself to track this way based off your past history - you are just not reliable to know how things are coming in and going out, so you need a third party like budgeting software to keep you honest.

I frequently have no idea what I'm talking about. Like now.

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secondchances

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #3 on: July 03, 2018, 04:14:52 AM »
Please explain more on the income side, 2017 IRS states $7,000. However, you claim you are able to pay $12,000 a month in bills...

Also, a itemized statement of your monthly cash flows would be helpful.

I use Quickbooks for personal and business and have spreadsheets that I work off to track credit card and other debt so that I can combine them together. I could use Quickbooks for everything but I like tracking on spreadsheets too. Here is a our business P&L for this year.

      BUSINESS               Jan - Dec 18
   Ordinary Income/Expense                  
         Income            
            Cash Rewards         49.83
            Sales Income         0.00
            Sales         137,821.55
            Non-Taxable Sales         7,096.00
            Freight and Shipping Income         675.00
            Interest Income         0.39
            Sales Tax - Vendor Comp         -1,087.08
         Total Income            144,555.69
         Cost of Goods Sold            
            Direct Job Costs         
               Building Materials      2,603.04
               Labor      
                  Vacation Pay   920.00
                  Hardware   -160.00
                  Shop Labor   36,261.75
                  Labor - Other   4,120.00
               Total Labor      41,141.75
            Total Direct Job Costs         43,744.79
            Other Cost of Goods Sold         
               Freight/Shipping      328.72
               Shop Supplies      975.75
               Other Cost of Goods Sold - Other      3,198.13
            Total Other Cost of Goods Sold         4,502.60
            Cost of Goods Sold         7.28
         Total COGS            48,254.67
      Gross Profit               96,301.02
         Expense            
            Late Fee         0.00
            Medical         2,003.67
            Fixed Expenses Allocated to Job         588.81
            Business Licenses & Taxes         -0.54
            NEEDS REVIEW         36,233.06
            Delivery Fee         -1,525.00
            Advertising and Promotion         
               Fuel Expense      2,214.46
               Advertising and Promotion - Other      199.15
            Total Advertising and Promotion         2,413.61
            Automobile Expense         946.11
            Bank Service Charges         38.78
            Computer and Internet Expenses         495.19
            Dues and Subscriptions         35.00
            Insurance Expense         2,323.54
            Interest Expense         544.48
            Meals and Entertainment         766.99
            Office Supplies         253.64
            PayPal Service Charge         2,101.01
            Postage and Delivery         21.10
            Professional Fees         4,311.00
            Rent Expense         6,900.00
            Repairs and Maintenance         221.76
            Taxes, Licenses & Fees         93.00
            Sales Tax         3.70
            Telephone Expense         1,260.77
            Tools and Equipment         418.91
            Utilities         893.79
            Waste Disposal         192.10
         Total Expense            61,534.48
   Net Ordinary Income                  34,766.54
Net Income                     34,766.54

The NEEDS REVIEW are mainly COGS that have not been allocated yet. I send all receipts to my accountant and he enters them and scans them however I'm way behind getting them to him. There may be some meals and entertainment expenses in there. The Net Income basically is what we've paid ourselves through draws. We have many, many leaks in our business that we need to fix and we're working on them. One of our guys just quit and that will save about $3000 per month. My husband is taking over his job and working longer hours which going to make a huge difference. I'd rather not talk about what we actually do for a living because I'm afraid someone will recognize us lol! I am know, I'm weirdo.

Personal P&L                   Jan 1 - Jul 3, 18
   Ordinary Income/Expense               
         Income         
            Household Sales      1,049.72
            Interest Income      0.04
            Business          20,238.03
         Total Income         21,289.74
      Gross Profit            21,289.74
         Expense         
            Auto Expense      -1.65
            Bank Charge      33.00
            Beauty      132.11
            Clothing      751.97
            Coffee      66.29
            Dining      1,402.48
            Litigation Expenses      71.95
            Energy Drinks      102.98
            Entertainment      
               Alcohol   2,001.51
               Movies on Demand   47.87
               Entertainment - Other   251.86
            Total Entertainment      2,301.24
            Fast Food      903.74
            Garden Boxes      5.27
            Gifts      
               Birthday   132.69
               Gifts - Other   75.62
            Total Gifts      208.31
            Groceries      1,854.59
            Health Insurance      
               Kids Health Ins.   300.00
            Total Health Insurance      300.00
            Home Improvement      344.68
            Household      988.19
            Interest Expense      1,374.38
            Late Fee      64.00
            Life Insurance      163.32
            Etsy      4.94
            Medical Expense      
               OTC Meds   33.79
               Medical Expense - Other   45.00
            Total Medical Expense      78.79
            Needs Review      7,151.70
            Personal Care      39.13
            Pet      235.09
            Sales Tax      15.11
            Snacks      160.84
            Subscriptions      90.15
            Toiletries      23.23
            Utilities      
               Water & Sewer   101.02
               Utilities - Other   1,089.14
            Total Utilities      1,190.16
            Vitamins      
               Curcumin   14.41
               Vitamins - Other   6.44
            Total Vitamins      20.85
            Biz Expense       1,835.94
         Total Expense         21,912.78
   Net Ordinary Income               -623.04
   Other Income/Expense               
      Other Income            
         Rewards         779.04
      Total Other Income            779.04
   Net Other Income               779.04
Net Income                  156.00

Again, the NEEDS REVIEW category needs to be allocated but I can tell you for the most part it consists of groceries, dining, alcohol, and other misc. BS that we don't need. I have been slammed with my regular job and trying to make sure that we have everything in order for our audit which means locating and printing every single receipt for 2016.

Personal Monthly Expenses
01st - Cap One - Platinum   $36.00
01st - Wayfair   $26.00
01st - PAYPAL CREDIT - HUBS   $40.00
02nd - Paypal Mastercard    $200.00
04th - Overstock   $30.00
07th - AMEX   $35.00
07th - CheapOair   $80.00
07th - Paypal Credit - Me   $0.00
08th - Chase Freedom   $26.00
08th - Nelnet   $20.00
08th - Electric   $128.00
09th - Cap One - Hubs   $35.00
11th - Belk   $90.00
11th - Kohls   $75.00
12th - Haverty's - Promo ends 8/20/18   $60.00
16th - Cap One - Me   $25.00
16th - Mortgage   $996.00
16th - Water Bill   $20.00
21st - Walmart   $140.00
23th - Gas Bill   $56.00
25th - Amazon Prime   $50.00
27th - Chase Amazon   $28.00
28th - Discover   $92.00
28th - Life Ins.   $27.77
30th - Dad   $50.00
30th - Gainesville Emerg.   $5.00
30th - Hospital   $10.00
30th - KHELSC   $10.00
TOTAL   $2,865.77

Business Monthly Expenses
01st - Internet   $79.49
01st - Rent   $1,150.00
02th - Payroll                   $920.00
06th - Geico   $280.83
07th - Paypal Credit - Me   $50.00
09th - Care Credit -Hubs   $30.00
09th - Home Depot   $149.00
09th - Payroll   $920.00
12th - Farm Bureau Card   $25.00
12th - Paypal MC - Biz   $293.17
12th- Liability Ins.   $86.44
13th - ATT    $164.40
16th - Payroll   $920.00
19th - Chevron   $325.24
19th - Truck   $170.00
20th - Sales Tax   $1,200.00
22nd - Office Depot   $30.00
23rd - BOA    $100.00
23rd - Payroll   $920.00
24th - Synchrony   $175.00
24th - Kauffman Tire    $0.00
25th - Electric   $172.52
27th - Lowes   $245.00
30th - CPA    $400.00
30th - Honda   $300.00
TOTAL   $10,901.09




secondchances

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #4 on: July 03, 2018, 04:42:57 AM »
Without actual numbers, there isn't much anyone can really help with. You're telling us a very sad, very wasteful background but no details. I do think you need serious counseling ASAP (so glad you're already there) as it sounds like you're a slow motion train wreck with the alcoholism, weight issues, a shopping addiction, and frankly a crippling amount of debt with nothing to show for it. This is a serious disconnect from reality.

Please review the how to case study topic sticky here: https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/

Yes I realize that I'm a train wreck, both us are actually and I've been sticking my head in the sand. Dining and alcohol are the two biggest things for us. I'm not one of those women that spends a lot on clothing, makeup and other such things and can be very conservative and frugal. I'm strong willed and determined and I know I can make the changes that I need to make. Counseling will help us be accountable.

I know that the numbers I supplied are not in the right format for case studies but they were already mostly done so hopefully it will be helpful. Anyway, I would not be proud to do it, but should I even consider bankruptcy at all? I'm able to make the payments for now but the stress of it is started to wear me down mentally. I could possibly consolidate some of this debt but my scores are low and so is income. I did just pay off a high interest card with a new card with a zero balance for 18 months however getting new cards will be difficult with the scores.

If I decide to pay down the debt, should I follow Dave Ramsey's baby steps and save the $1000 first and snowball? I like the attitudes of the people on this forum better than the Ramsey forum. Besides cutting spending, which I can do if I set my mind to it, I need a solid plan to get rid of the debt, even if that does include bankruptcy.


Megs193

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #5 on: July 03, 2018, 05:10:58 AM »
There are obviously a ton of things in your budget that need to be cut but the number that struck me the most was the $2,000 on alcohol.  Have you sought any treatment for your issues with alcohol?  I know it isn’t easy but I think once you get that under control you will have a clear enough mind to tackle the rest. In the meantime, do you have a trader joe’s nearby?  If so, go and buy a bunch of premade food and cut back on eating out. Their premade refrigerated chicken and frozen brown rice make a 5 minutes meal for less than $7.  My husband and I use that as our too tired to cook meal.

secondchances

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #6 on: July 03, 2018, 05:20:18 AM »
There are obviously a ton of things in your budget that need to be cut but the number that struck me the most was the $2,000 on alcohol.  Have you sought any treatment for your issues with alcohol?  I know it isn’t easy but I think once you get that under control you will have a clear enough mind to tackle the rest. In the meantime, do you have a trader joe’s nearby?  If so, go and buy a bunch of premade food and cut back on eating out. Their premade refrigerated chicken and frozen brown rice make a 5 minutes meal for less than $7.  My husband and I use that as our too tired to cook meal.

Yes we are in counseling for the alcohol and spending issues and my mind is clear about the lifestyle changes that we've committed to make. We're in agreement that we will not drink or eat out, even fast food, for the next 30 days. That's the start and we can extend it when the 30 days are up and we have gained momentum. :)

Hirondelle

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #7 on: July 03, 2018, 05:33:58 AM »
There are obviously a ton of things in your budget that need to be cut but the number that struck me the most was the $2,000 on alcohol.  Have you sought any treatment for your issues with alcohol?  I know it isn’t easy but I think once you get that under control you will have a clear enough mind to tackle the rest. In the meantime, do you have a trader joe’s nearby?  If so, go and buy a bunch of premade food and cut back on eating out. Their premade refrigerated chicken and frozen brown rice make a 5 minutes meal for less than $7.  My husband and I use that as our too tired to cook meal.

Yes we are in counseling for the alcohol and spending issues and my mind is clear about the lifestyle changes that we've committed to make. We're in agreement that we will not drink or eat out, even fast food, for the next 30 days. That's the start and we can extend it when the 30 days are up and we have gained momentum. :)

Just wanted to say that that sounds like an excellent start. Your budget for alcohol and dining is indeed completely out of control, so by cutting this even for a month you'll probably already be able to pay of the first bunch of dept. Hope you can keep it up the full month and much longer after that. Good luck!

secondchances

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #8 on: July 03, 2018, 06:09:00 AM »
Just wanted to say that that sounds like an excellent start. Your budget for alcohol and dining is indeed completely out of control, so by cutting this even for a month you'll probably already be able to pay of the first bunch of dept. Hope you can keep it up the full month and much longer after that. Good luck!

Thank you! So I guess at least one of you is thinking no to the bankruptcy option? I've accepted the fact that I will not be ale to retire early but I feel like I need to be saving now. Makes no sense to save until the debt is paid off however.

Going to read some positive quotes now to keep myself motivated.

Hirondelle

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #9 on: July 03, 2018, 06:17:27 AM »
Just wanted to say that that sounds like an excellent start. Your budget for alcohol and dining is indeed completely out of control, so by cutting this even for a month you'll probably already be able to pay of the first bunch of dept. Hope you can keep it up the full month and much longer after that. Good luck!

Thank you! So I guess at least one of you is thinking no to the bankruptcy option? I've accepted the fact that I will not be ale to retire early but I feel like I need to be saving now. Makes no sense to save until the debt is paid off however.

Going to read some positive quotes now to keep myself motivated.

I'm not from the US so I don't know about whether bankruptcy or not would be the better idea as I'm not familiar with the system. But I do think that regardless of what option turns out the best, you have a lot of positive life changes to make and I think that'll improve your life either way!

reeshau

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #10 on: July 03, 2018, 07:50:32 AM »
Just wanted to say that that sounds like an excellent start. Your budget for alcohol and dining is indeed completely out of control, so by cutting this even for a month you'll probably already be able to pay of the first bunch of dept. Hope you can keep it up the full month and much longer after that. Good luck!

Thank you! So I guess at least one of you is thinking no to the bankruptcy option? I've accepted the fact that I will not be ale to retire early but I feel like I need to be saving now. Makes no sense to save until the debt is paid off however.

Going to read some positive quotes now to keep myself motivated.

There is a philosophical and a practical answer to your bankruptcy question.  Only you know the first.  But if you are committed to change, then I don't see your debts as insurmountable.  As you say, you aren't on track for an early retirement, but if you take your "wants" out of the picture and live with focus on the future, it's definitely doable.

If you were going to go Dave Ramsey on this, you would be done with your debts (less the house) in less than a year.  You said it yourself:  nothing is Needs Review is necessary, and that's more than $7k per month.  Plus alcohol, $9k.  Kill your debts in a year, be a millionaire in a decade.  And you have a business that you could focus on to scale that higher.

secondchances

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #11 on: July 03, 2018, 08:46:36 AM »
There is a philosophical and a practical answer to your bankruptcy question.  Only you know the first.  But if you are committed to change, then I don't see your debts as insurmountable.  As you say, you aren't on track for an early retirement, but if you take your "wants" out of the picture and live with focus on the future, it's definitely doable.

If you were going to go Dave Ramsey on this, you would be done with your debts (less the house) in less than a year.  You said it yourself:  nothing is Needs Review is necessary, and that's more than $7k per month.  Plus alcohol, $9k.  Kill your debts in a year, be a millionaire in a decade.  And you have a business that you could focus on to scale that higher.

Do you really think that I could be a millionaire in a decade? That gave me goosebumps to read! One question regarding Ramsey, I'm not sure if I feel that saving the $1000 first is the best idea in our situation. I could probably just transfer it now to savings and get that done if it is so important and pay the min. on the cards for a couple of months with the exception of the one we select to pay off first. Right now, I'm paying over the min. on all over them. And should I snowball or tackle highest debt first?  I'm probably actually in the wrong forum for these questions because you guys help people more that already have it together and not total failures like myself but I just want to make sure that Ramsey's is the right approach.

Thank you!

reeshau

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #12 on: July 03, 2018, 09:49:42 AM »
There is a philosophical and a practical answer to your bankruptcy question.  Only you know the first.  But if you are committed to change, then I don't see your debts as insurmountable.  As you say, you aren't on track for an early retirement, but if you take your "wants" out of the picture and live with focus on the future, it's definitely doable.

If you were going to go Dave Ramsey on this, you would be done with your debts (less the house) in less than a year.  You said it yourself:  nothing is Needs Review is necessary, and that's more than $7k per month.  Plus alcohol, $9k.  Kill your debts in a year, be a millionaire in a decade.  And you have a business that you could focus on to scale that higher.

Do you really think that I could be a millionaire in a decade? That gave me goosebumps to read! One question regarding Ramsey, I'm not sure if I feel that saving the $1000 first is the best idea in our situation. I could probably just transfer it now to savings and get that done if it is so important and pay the min. on the cards for a couple of months with the exception of the one we select to pay off first. Right now, I'm paying over the min. on all over them. And should I snowball or tackle highest debt first?  I'm probably actually in the wrong forum for these questions because you guys help people more that already have it together and not total failures like myself but I just want to make sure that Ramsey's is the right approach.

Thank you!
The details aren't the most important thing, although if you declare that you are following Ramsey's method, you should stick to those specifics.  The key to me of his method is the intensity:  if you get serious about things, then you make quick work of the mess you are in.  If you are on a path to get out of debt in just months, then jiggering the interest paid is less important than the psychological feedback of achieving interim goals.

If you have specific questions about the method, though, then I'd suggest you sign up for an FPU class.  Not because I get a referral kickback, but so that you can study your progress and get feedback from others in a similar boat.  If you are in counseling for your other issues, then you understand the importance of this.  The cheaper route is to read the Total Money Makeover.

But, to get you started:  the $1,000 starter emergency fund can come from any source--it's not saving $1k more.  It is having $1k in the bank.  For most people, that shows how big a hole they are in--that it is a savings goal.  For those who have more than this, then the idea is that you need to take all but $1k and pay down your debt--it isn't your money, it's borrowed.  Smallest to largest, so that you get some "wins" and the endorphins that can motivate you to the next win.  And so on.

Having the hope of something better can be motivating.  But this will be tough for you--it is a big change to your life.  It is on the order of having children, or a death in the family, or graduating college.  You will have to find new ways to address the stresses in your life.  The money, then, is the easy part.

SavinMaven

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #13 on: July 04, 2018, 07:38:57 AM »
A rule of thumb I've heard is that if your debt load - NOT counting a mortgage - is greater than your annual gross income, you are "bankrupt". So exploring your question of whether bankruptcy is indicated:

Quote
Personal P&L                   Jan 1 - Jul 3, 18
   Ordinary Income/Expense               
         Income         
            Household Sales      1,049.72
            Interest Income      0.04
            Business          20,238.03
         Total Income         21,289.74

Is 21k your income for the time frame from 1/1 to 7/3? Or 21k each month? Seems like it would have to be the latter, if you are servicing 12k in debt payments each month.

Quote
He owes about $5000 in credit card debt and about another $4000 in medical bills. This his total debt and I owe about $60,000 in credit card debit. My debt plus house and cars and medical bills, all in my name totals about $250,000.

Spouse has 9k in debt. You have to subtract your mortgage debt from your 250k and just consider your credit card debt, medical debt and car debt. Add those up, toss in hubby's 9k, and compare to your annual gross - the real annual gross, not the 7k figure! Unless your mortgage is tiny, I think you're in the clear and should work to pay back these debts instead of declaring bankruptcy. For three reasons: 1) it's the right thing to do. 2) your credit score is probably pretty good if you truly make all payments on time as stated in your first post and 3) the PROCESS is what matters.

What do I mean by "the process is what matters?" Imagine someone who is quite overweight, becoming thin overnight. When they wake up, they are thin, but they have no idea how to get thin, so they have no idea how to stay thin. They keep their old habits, and the weight comes right back. In the money world, you have not yet learned how to handle money. Waving the wand to make the debt go away will leave you with the same money skills and same money habits you have now. You have to do the hard work of digging out of the hole to know how to never be in that hole again. Good luck.

secondchances

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #14 on: July 04, 2018, 10:03:39 AM »
A rule of thumb I've heard is that if your debt load - NOT counting a mortgage - is greater than your annual gross income, you are "bankrupt". So exploring your question of whether bankruptcy is indicated:

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Personal P&L                   Jan 1 - Jul 3, 18
   Ordinary Income/Expense               
         Income         
            Household Sales      1,049.72
            Interest Income      0.04
            Business          20,238.03
         Total Income         21,289.74

Is 21k your income for the time frame from 1/1 to 7/3? Or 21k each month? Seems like it would have to be the latter, if you are servicing 12k in debt payments each month.

This is our total personal income to year to date. We pay around $2900 give or take for all of our personal expenses; credit cards used for personal, mortgage, utilities, and other stuff that we don't need. Everything else is paid through the business including credit cards that we use for the business, both autos, gasoline, COGs, etc. We actually owe some vendors that was not included on the P&L. I guess I need a balance sheet for the whole thing on top of actually learning how to read the financials correctly. Right now I'm so freaking slammed with trying to get everything together for the IRS audit, preparing for a house full of people on Saturday and doing my regular everyday crap that I'm overwhelmed. Outside of credit cards and loans, which I have those balances correctly, I will have everything updated hopefully by the end the month. I do know that excluding vendors, which I guessimate at around $8000, we owe exactly $201,687.65. I updated this figure yesterday and input all the balances on a spreadsheet.

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He owes about $5000 in credit card debt and about another $4000 in medical bills. This his total debt and I owe about $60,000 in credit card debit. My debt plus house and cars and medical bills, all in my name totals about $250,000.

I was just a little bit off!

Spouse has 9k in debt. You have to subtract your mortgage debt from your 250k and just consider your credit card debt, medical debt and car debt. Add those up, toss in hubby's 9k, and compare to your annual gross - the real annual gross, not the 7k figure! Unless your mortgage is tiny, I think you're in the clear and should work to pay back these debts instead of declaring bankruptcy. For three reasons: 1) it's the right thing to do. 2) your credit score is probably pretty good if you truly make all payments on time as stated in your first post and 3) the PROCESS is what matters.

It's hard to determine exactly how many money we make because so many things pass through the business and get paid that way. Our CPA is a retired friend who does our taxes and enters and allocates some receipts each month. I guess I need to reach out to him and figure how much money we actually make lol. The IRS wants us to print every single receipt, statement, etc. for 2016. That appointment is in a couple of weeks. Once that is done, again, I will have a much better idea of what is going on and be able to supple more figures.

We have 32 active credit cards with balances. We have taken all of them out of commission but 4 that earn rewards. My plan is to use those for gas and groceries which we will budget for each week, use the cards and immediately pay them off as if we're using cash. That will help pay down those balances faster.

What do I mean by "the process is what matters?" Imagine someone who is quite overweight, becoming thin overnight. When they wake up, they are thin, but they have no idea how to get thin, so they have no idea how to stay thin. They keep their old habits, and the weight comes right back. In the money world, you have not yet learned how to handle money. Waving the wand to make the debt go away will leave you with the same money skills and same money habits you have now. You have to do the hard work of digging out of the hole to know how to never be in that hole again. Good luck.

I actually know better than to live as I have lived. My husband should too but for reasons for the most part surrounding our love of alcohol, we simply stuck our heads in the sand. It's like we knew we were on a run away train and had a chance to get off but chose to stay on. It's utterly stupid I know. And I know bankruptcy is not the right thing to do at all and  I'm trying to avoid it and keep some credit. My scores are in the mid 600s from over utilization. Most of my cards are maxed and high interest at that.

SavinMaven

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #15 on: July 05, 2018, 06:30:10 AM »
I know you're even newer here than me, but around here there's a tradition of administering facepunches when people need to wake up. We all need them at some point. Today, it's your turn.
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It's hard to determine exactly how many money we make because so many things pass through the business and get paid that way.

It's not hard to separate personal from business finances when done at the time the expenses are occurred. It IS hard when that task has been neglected for a long period of time to go back and sort them in retrospect.
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I guess I need to reach out to him and figure how much money we actually make lol.

No room for lol on this one - this is a four-alarm, pants-on-fire financial emergency. You can't make any decisions about next steps until you have numbers so firm you can lay the foundation of your life on them, because you have to. Period. People told you that back on July 2nd. If you had put the needed effort then, you would have the numbers by now. You don't seem to be taking this seriously. There is not one more hour to waste.
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I actually know better than to live as I have lived.

This is where I think the facepunch needs to be hardest. You are no doubt highly intelligent, and have kept your business afloat (probably? no hard numbers). But you seem to think there's some sort of free pass for knowing something but not acting on it, and that that is somehow 'better' than blissful ignorance. There's not, and it isn't. Believing you could have avoided this situation, even though you didn't, seems to be softening your perception of how serious this really is.

Bicycle_B

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #16 on: July 06, 2018, 07:20:14 PM »
Congrats on putting down the bottle for a moment and posting on the forum. It's a big step emotionally. Keep going and one day, the pain will be in a river behind you, with a fairly bright future ahead.

You're not there yet. Like the other posters, put down the bottle ASAP. 20 years sober here...not easy, but I am rooting for you. In any case,  learn to distinguish between personal and business spending. The IRS will distinguish. You need to also. You must become clear on what you really earn, which is business revenue less business expenses.  You must be clear on what the correct taxes are on that amount, so that you know what you earn after tax. You must then become clear on what you and hubs actually spend on your personal life. I did not see your housing expenses in the list of your personal expenses; if they exist, you must include them in your accounting. Sorry if I missed them.  Finally, learn to distinguish the cost of servicing consumer debt (for this post, I mean all non-business debt except your home mortgage) vs the cost of actual living expenses (food, gas, mortgage, etc).

Once you know after tax income, the underlying living expense, and the cost of servicing the debt, you can get realistic about options such as what debt to pay, how or whether to avoid bankruptcy, and so on.

My guess, like other posters', is that if you can stick to your plan of eliminating personal expenses that you already identified as unneeded, you have a shot at running the table - paying off the debts, recovering fiscal as well as chemical sobriety, building some tolerable future retirement. Perhaps you'll need major changes like doing an employee's work to secure the needed income. Perhaps you'll end up downsizing a residence or something, perhaps along a purge of some of the goods purchased with all those cards. But those steps will only become clear after your expenses become clear.

So start where you are: less drinking, more financial understanding, and then further concrete steps. It doesn't matter so much which account you fix first, more that you pick one and pay it off. I lean towards highest interest rate first but that's your choice.  First you must make sure you spend less than you earn, otherwise you can't catch up. Once you do that, then you can succeed in reducing the past debts.

Results will follow. You'll also discover your stress level dropping as you regain your integrity.  Keep going on this journey, and good luck.

« Last Edit: July 09, 2018, 04:51:02 PM by Bicycle_B »

zoe2dot

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #17 on: July 09, 2018, 01:18:51 PM »
There's a lot going on here. 
Start a numbered to-do list and keep track of what you've done.

Just to have a starting point:


Bank Charge      33.00 = what are these fees?

Clothing      751.97 = guessing this could be lower  (read about clothing swaps, thrift stores, capsule wardrobes)

Dining      1,402.48 = this actually doesn't seem that bad to me for two people in six months...esp if there are kids

Litigation Expenses      71.95 = what is this?

Energy Drinks      102.98 = cut/reduce this

Alcohol   2,001.51 = lots of room for improvement here

Movies on Demand   47.87 = delete/cancel/don't use this service; get DVDs at library

Fast Food      903.74 = ah, here is more dining out - reduce!  though, again, this actually doesn't seem that bad to me for two people in six months...esp if there are kids

Garden Boxes      5.27 = what is this?

Groceries      1,854.59 = again, this doesn't seem that bad to me for six months...need input from more ppl

Interest Expense      1,374.38 = what is this?

Late Fee      64.00 = on top of the $33 bank fees earlier?  what is this?

Etsy      4.94 = cut this out

Needs Review      7,151.70 = DEFINITELY needs to be broken out down to the penny (use www.mint.com)

Subscriptions      90.15 = reduce/cancel

Total Utilities      1,190.16 = break these out for input


secondchances

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #18 on: July 13, 2018, 08:54:38 AM »
Congrats on putting down the bottle for a moment and posting on the forum. It's a big step emotionally. Keep going and one day, the pain will be in a river behind you, with a fairly bright future ahead.

You're not there yet. Like the other posters, put down the bottle ASAP. 20 years sober here...not easy, but I am rooting for you. In any case,  learn to distinguish between personal and business spending. The IRS will distinguish. You need to also. You must become clear on what you really earn, which is business revenue less business expenses.  You must be clear on what the correct taxes are on that amount, so that you know what you earn after tax. You must then become clear on what you and hubs actually spend on your personal life. I did not see your housing expenses in the list of your personal expenses; if they exist, you must include them in your accounting. Sorry if I missed them.  Finally, learn to distinguish the cost of servicing consumer debt (for this post, I mean all non-business debt except your home mortgage) vs the cost of actual living expenses (food, gas, mortgage, etc).

Once you know after tax income, the underlying living expense, and the cost of servicing the debt, you can get realistic about options such as what debt to pay, how or whether to avoid bankruptcy, and so on.

My guess, like other posters', is that if you can stick to your plan of eliminating personal expenses that you already identified as unneeded, you have a shot at running the table - paying off the debts, recovering fiscal as well as chemical sobriety, building some tolerable future retirement. Perhaps you'll need major changes like doing an employee's work to secure the needed income. Perhaps you'll end up downsizing a residence or something, perhaps along a purge of some of the goods purchased with all those cards. But those steps will only become clear after your expenses become clear.

So start where you are: less drinking, more financial understanding, and then further concrete steps. It doesn't matter so much which account you fix first, more that you pick one and pay it off. I lean towards highest interest rate first but that's your choice.  First you must make sure you spend less than you earn, otherwise you can't catch up. Once you do that, then you can succeed in reducing the past debts.

Results will follow. You'll also discover your stress level dropping as you regain your integrity.  Keep going on this journey, and good luck.

Congrats on your 20 years of sobriety! And I really appreciate the sage advice. We let go of our part-time book keeper and  that will save us $400 per month. It was a very part-time position. We've been pretty good on our spending other than hosting a large family gathering that was planned before the get out of debt plan but are back on track. I just entered 40 invoices from vendors this am and working on getting every single receipt entered myself. Our IRS agent told us not to file our taxes for 2017 so I don't know the tax info yet because I doubt my accountant has been working on it. Found a bug in Quickbooks inventory that's really bugging me because it could have really messed up our COGS for prior years but other than that, I'm focused on real change and we're doing ok. We're not buying groceries until everything in pantry is eaten. :)

secondchances

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #19 on: July 13, 2018, 09:05:05 AM »
There's a lot going on here. 
Start a numbered to-do list and keep track of what you've done.

Just to have a starting point:


Bank Charge      33.00 = what are these fees?

Clothing      751.97 = guessing this could be lower  (read about clothing swaps, thrift stores, capsule wardrobes)

Dining      1,402.48 = this actually doesn't seem that bad to me for two people in six months...esp if there are kids

Litigation Expenses      71.95 = what is this?

Energy Drinks      102.98 = cut/reduce this

Alcohol   2,001.51 = lots of room for improvement here

Movies on Demand   47.87 = delete/cancel/don't use this service; get DVDs at library

Fast Food      903.74 = ah, here is more dining out - reduce!  though, again, this actually doesn't seem that bad to me for two people in six months...esp if there are kids

Garden Boxes      5.27 = what is this?

Groceries      1,854.59 = again, this doesn't seem that bad to me for six months...need input from more ppl

Interest Expense      1,374.38 = what is this?

Late Fee      64.00 = on top of the $33 bank fees earlier?  what is this?

Etsy      4.94 = cut this out

Needs Review      7,151.70 = DEFINITELY needs to be broken out down to the penny (use www.mint.com)

Subscriptions      90.15 = reduce/cancel

Total Utilities      1,190.16 = break these out for input

Thank you for taking the time to post. We use Quickbook for both personal and business. Bank fees and other fees are NSF/lates, interest expense is all the interest we pay on the mounds credit card debt. We're setting a budget for groceries  and clothing and such but I seriously have boxes of receipts to go through. And we've already cancelled several subscriptions and such so we're on the right track or at least I am. My husband says he is on board but is not as interested as I am. For instance I downloaded the MMM app and but he's not really interested like I am which kinda sucks. We are so vastly different when it comes to managing this. He'd rather stick his head in the sand so he doesn't have to look. To me, knowing these details is power but he could really care less. Not happy with him right now. :(

Hirondelle

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #20 on: July 13, 2018, 10:10:34 AM »
You can't have it all! At least your husband doesn't sound averse to making changes so that's a good thing. There's lots of case studies or even long time posters here to be found with very anti-mustachian (That's a next level from unmustachian which comes after uninterested) that are heavily resisting any change. Basically I'm trying to say that your husband being in the uninterested category seems rather like a blessing, but it does depend on how many of the spending decisions he makes (if ithat's you, you're all good!).

secondchances

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #21 on: July 13, 2018, 02:49:28 PM »
You can't have it all! At least your husband doesn't sound averse to making changes so that's a good thing. There's lots of case studies or even long time posters here to be found with very anti-mustachian (That's a next level from unmustachian which comes after uninterested) that are heavily resisting any change. Basically I'm trying to say that your husband being in the uninterested category seems rather like a blessing, but it does depend on how many of the spending decisions he makes (if ithat's you, you're all good!).

I'm kinda the boss of the money so I'm good there until he decides to go rogue which is about once or twice a year. But you're right, I should count my blessings. I was mad at him today for many reasons. Thanks for reminding me that things could be worse! :)

On another note, what a freaking fabulous bunch of people that hang here!

fuzzy math

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #22 on: July 14, 2018, 09:11:47 AM »
You say you're not big on clothing makeup etc but you have Belk and Kohls cards with significantly high enough balances that you are paying $90 a month on them. This does indicate you or someone in your home is buying a lot of clothing or makeup. The emergency room bill that you're paying at $5 a month indicates to me that these are all minimum payments you're making.

You have tons of housewares bills too. Haverty (had to google that), overstock, way fair, Home Depot. You need to stop buying cutesy items for your home.

do you have any transferable skills outside of running your business? degrees, other work experience etc? I would go as extreme as saying if you can't tell your business is profitable (and I suspect your accountant and you have been scamming the IRS if you're reporting income of only $7k) and you can't separate your expenses, that you should close your business and just be employees somewhere else. It's too tempting. If your numbers prove otherwise, great. But you need a period of spending sobriety (in the same way as the alcohol sobriety) and the difficulty is that you can justify so many things as business expenses, when in reality it's just feeding your addiction. I don't even know how you would begin to separate business vs personal as it appears that you might not even be able to pay your rent if it weren't coming out as a business expense.

I wish you luck and
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TassieFI

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #23 on: July 16, 2018, 04:57:52 AM »
PTF

calimom

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Re: Optimistic but potentially screwed - Sage advice needed
« Reply #24 on: July 16, 2018, 08:16:03 PM »
You say you're not big on clothing makeup etc but you have Belk and Kohls cards with significantly high enough balances that you are paying $90 a month on them. This does indicate you or someone in your home is buying a lot of clothing or makeup. The emergency room bill that you're paying at $5 a month indicates to me that these are all minimum payments you're making.

You have tons of housewares bills too. Haverty (had to google that), overstock, way fair, Home Depot. You need to stop buying cutesy items for your home.

do you have any transferable skills outside of running your business? degrees, other work experience etc? I would go as extreme as saying if you can't tell your business is profitable (and I suspect your accountant and you have been scamming the IRS if you're reporting income of only $7k) and you can't separate your expenses, that you should close your business and just be employees somewhere else. It's too tempting. If your numbers prove otherwise, great. But you need a period of spending sobriety (in the same way as the alcohol sobriety) and the difficulty is that you can justify so many things as business expenses, when in reality it's just feeding your addiction. I don't even know how you would begin to separate business vs personal as it appears that you might not even be able to pay your rent if it weren't coming out as a business expense.

I wish you luck and

@fuzzy math brings some hard truths to the discussion. OP, it sounds like you're trying and open to change, but you've been treating your business like an ATM and you really need to have a come-to-Jesus moment with that. Business expenses are business expenses, period, the end. There is no way department store charges, restaurants (entertaining? when it's just you and DH eating and drinking?) count as qualifiable deductions. A scenario is that one of you operate your business honestly and truly and the other takes a job with benefits. It will take time, but you can dig yourselves out of the hole you've dug for yourselves. Being a responsible adult is hard sometimes, but lots and lots of people do it. Keep reading and posting. Wishing you the best.