Author Topic: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!  (Read 9257 times)

mousebandit

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Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« on: September 02, 2015, 07:39:11 PM »
 Case Study


    Life Situation: IRS filing status - Married  filing Joint; : 4 minor children, ages 7, 5, 4, and 3.  Mom (that's me!) and kids live in SW Oregon, 37yo husband is the wage-earner working at other end of state, coming home on weekends; I'm 44yo and a homeschooling mom.  We're actually just moving this weekend, leave in 2 days!

   We are just transitioning to this living situation, so some of my expenses are just guesses right now.  I'll have better figures for utilities in a couple of months.  I am committed to making them as low as possible.  Starting while I was pregnant with our youngest child, I had about 3 years of health nightmare.  Adrenal system collapse, 2 strokes, atrial fibrillation heart condition, extreme anemia with a transfusion.  I was basically bedridden or at best, super slow, for most of that time.  I have been on the serious upswing starting 11 months ago, and really accelerating since last spring, off almost all the meds now.  But for all that time, we had to have pretty much round-the-clock care for me, and Jeff lost absurd amounts of work time with my hospitalizations and appointments and such.  To say the least, it sucked, and we accumulated a boatload of debt. 
 

    Gross Salary/Wages: About $100k this year.  Weekly take-home paycheck is usually $1370, unless he misses days or gets overtime.

    Pre-tax deductions:   Davis-Bacon Pension about $400/mo.  This is retirement fund that can't be accessed unless laid off from job, and then it's a big penalty.  AFLAC $160/mo.


    Adjusted Gross Income:   $72,500.

    Taxes:   Carpenter's Training Fund (not voluntary): $85/mo.  Federal WH $750/mo.  SS $500/mo.  Med $116.  Oregon WH $520.  AFter-tax AFLAC Disability $52 (not taxes, but deducted after tax before net).

AFTER TAX 401K:  Roth 401K about $160/mo.  THis is something he recently started.  He thinks we can borrow against it if needed.  Employer does some sort of profit-sharing/partial match thing on the 401K.

    Current expenses:

    Mortgage:  $480
    Property Taxes:  $150 (monthly, about $1800/yr)
    Rent for husband: $200
    Electric:  $50
    Propane:  $50
    Firewood:  $100 (wild guess, so far we've always cut it ourselves, which we will again if there's time before the rain comes)

Internet:  $40
Husband Cell $45
Wife Cell $15-60 (depending on if Republic Wireless can get cell towers in our backwoods-valley)

    Groceries:  $400 (we have a lot of food storage at home plus raise our own livestock for meat, garden, etc.  I may even get this lower.)
    Household Items:  $150
    Car Insurance:  $150
    Life Insurance:  $90
    Health Insurance Husband:  $320
    Health Insurance Wife:  $370
    Kids health insurance via state $0
    Mini Storage:  $80
    Jeff Expenses (gas, misc):  $400
    Jeff Allowance:  $120
    Tracey Allowance (includes livestock feed and home repairs): $240


TOTAL:  $3450


    THat is the "paper budget".  The past few years reality has been much uglier, including lots of drive-through eating, baby-sitters and "helpers" for me, discretionary spending for both the hubby and I, tons of medical costs and meds.  One of the results of kids and I going home will be a drastic reduction in all spending.  We come out better by us being home, even after his higher commuting costs.

We're shooting to sell a bunch of the stuff in the storage unit, and then will figure out what to do with the remainder.  It's his deceased-father's library of books and very large bookcases.  Our home isn't big enough to have them in there, although husband plans to add-on in the future.  He wants to build a shed on the property for the storage stuff, but we have agreed to hold off for now and slam on the debt.

 Each of us having a separate "allowance" account that is not tied to the bill account is something we are hoping will help us to curb our impulse spending.  With my health improved, I can handle things at our ranch back home, and drastically lower our food costs, and eliminate the high expense of renting in the Portland, OR area, too.  He got a little saturn car for $600 that is getting 38mpg, so that is really improving the gas expenses, and with me alone with 4 kids at home, my trips anywhere will be practically non-existent, LOL.  (I'm a homebody anyways.)  We'll be doing at most, once a month shopping in the town 30 miles away, but more likely it'll be once every 3 or 6 months.


    Expected ER expenses: not sure what this is?

    Assets: Amount & description - include current asset allocation plan if you have one

    Not sure that the vehicles are assets anymore.  96 Suburban, value $1500, maybe.  97 Suburban, value $800 very maybe, on it's last legs and soon to become parts for the 96, LOL.  1999 Saturn (or thereabouts) value $1200, but just paid $600 for it.
 
    Home:  6-1/2 acres, owe about $45k, private mortgage at 10% interest, $480/mo.  Not able to qualify for conventional financing on home.  Value about $80-$100k?  (We are figuring out what it will take to build a structure that will snag us a Certificate of Occupancy from the county, aka be considered a home, and then re-fi the property with conventional financing.  We both think it'll be a 400sf structure with a few requirements inside.  THat will help a lot on the long-term payoff of the mortgage.  It will be slapped together with the intention of being a shop later on.)


 Davis Bacon Pension - about $5k
401K - about $1500



    Liabilities:

    Loan #1 - $14k, 22.48% interest, 5 year term, $570/mo.  Balance: $13,474.
    LOC - $3000, 10.75% interest, open, $50/mo, Balance:  $1543.
    CC#1 - $5000, unknown, $150/mo, Balance:  $5000
    CC#2 - $1308, 18.18% interest, $50/mo, Balance:  1308
    CC#3 - $1378, 12.90% interest, $35/mo.
    CC#4 - $1790, uknown interest, $50/mo.
    CC#5 - $768, 14.74% interest, $25/mo.
    CC#6 - $1746, 22.99% interest, $52/mo.
    CC#7 - $1754, unknown interest, $50/mo.
    CC#8 - $1187, 19.99% interest, $35/mo.


TOTAL:  $1037



    SUMMARY:  TAKE-HOME INCOME:  $5480

                       MORTGAGE & TAXES:  $480 & $150
                       RENT:  $200
                       UTILITIES:  $300
                       INSURANCES:  $940 ($690 of that is health insurance)
                       LIVING EXPENSES:  $1390
                       DEBT PAYMENTS:  $1037
 
                       AVAILABLE:  $983

So, our plan is to have all bills get paid automatically out of the direct deposit checking account.  Allowances, Jeff expenses, and food and household funds will transfer automatically to a separate debit card for him and a separate account/card for me.  That way we each have our own little spending account, and we don't have to track everything, plus less temptation for either of us to dip into the bill money.

We have been on this treadmill a lot of years.  I am really hopeful that these changes will produce some results.

Would love to get some feedback and ideas.  I have been brainstorming all day on ways to cut things, and reading back threads and through the blog posts.  I'm ready for this, and I think the husband is too.  Having to split the family up like this to get control of our finances is a HUGE face-punch for us both. 

MouseBandit
« Last Edit: May 13, 2016, 10:02:59 AM by mousebandit »

muckety_muck

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Re: Case Study: Deep in Debt, 4 kids
« Reply #1 on: September 02, 2015, 08:21:46 PM »
Sorry - not really following why your husband is several hours away from you and your 4 kids all week. Can you move closer to him? Your life and communication about savings/investing/paying off debt plans will be so much easier.

You need Dave Ramsey until you are out of debt. Then ditch him and save SAVE SAVE like your life depends on it. You have 4 little ones depending on you and your health and your husband's presence in their daily lives. It will affect them down the road if he's not around when they need him...

mousebandit

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Re: Case Study: Deep in Debt, 4 kids
« Reply #2 on: September 02, 2015, 09:23:10 PM »
Husband does civil construction jobs and his jobsite changes about once a year, although usually still in the PNW.  Up until now, we have always travelled as a family, even though it is outrageously expensive to pack up and move every year, renting wherever we go, having to find a place usually on less than 2 weeks notice, find places that don't require leases, new rounds of deposits for utilities and rentals, etc.  Just an expensive nightmare, especially as the babies started coming.  We own our place back home, and when I am healthy and can work the ranch, we can generate a great deal of our own food and cut our expenses a lot (which is why I can feed the entire family for somewhere between $200-$400/mo).  And of course the difference in lifestyle for us and the kids is huge and a big priority to us.

So, now that we're down in this hole, we finally ran the numbers and we would come out significantly ahead for the kids and I to go home, and for him to keep making the big bucks up in Portland, and just bunk up with a buddy.  If he tried to get a job back at home, he could bring home, if he was REALLY fortunate, half of what he brings home now, and he'd have to commute at least 30 miles each way per day to do that.  And there'd be no 401k matching, or davis-bacon fund, with a local job. 

We're familiar with Dave Ramsey - actually went through the first few steps many years ago, and got debt free, but after the health stuff started happening, we went back down the debt hole and just got depressed and hopeless and kind of gave up.  Now there's light at the end of the tunnel. 

N

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Re: Case Study: Deep in Debt, 4 kids
« Reply #3 on: September 02, 2015, 10:09:43 PM »
You may want to double check your withholding on your federal taxes.
http://apps.irs.gov/app/withholdingcalculator/

For the matching 401K, consider contributing the minimum amount needed to get the match, but not more than that, until debt free.

I use YNAB which is budget software. They have a free 34 day trial, plus if you take the online classes (free) I think they give away copies sometimes, plus, it is usually on sale for black friday (so lots of ways to get it discounted). It made budgeting SO MUCH easier for me. I think of it as virtual envelopes (instead of cash in actual envelopes). but its easy to adjust, and easy to manage. You may want to try it.

I think there are websites with debt payoff caluculators where you can input your debts and their interest rates, etc. to see different payoff scenarios. In your situation, Id start with some of the lowest balance debts and pay them off asap. Then roll the extra payments into the next debt, and so on and so on.

You may be able to find less expensive health insurance on the health exchange, and I think enrollments for the next year are coming up.

good luck! I hope things continue to improve for you.

N

MDM

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Re: Case Study: Deep in Debt, 4 kids
« Reply #4 on: September 02, 2015, 10:27:02 PM »
You may want to double check your withholding on your federal taxes.
http://apps.irs.gov/app/withholdingcalculator/

For the matching 401K, consider contributing the minimum amount needed to get the match, but not more than that, until debt free.

I use YNAB which is budget software. They have a free 34 day trial, plus if you take the online classes (free) I think they give away copies sometimes, plus, it is usually on sale for black friday (so lots of ways to get it discounted). It made budgeting SO MUCH easier for me. I think of it as virtual envelopes (instead of cash in actual envelopes). but its easy to adjust, and easy to manage. You may want to try it.

I think there are websites with debt payoff caluculators where you can input your debts and their interest rates, etc. to see different payoff scenarios. In your situation, Id start with some of the lowest balance debts and pay them off asap. Then roll the extra payments into the next debt, and so on and so on.

You may be able to find less expensive health insurance on the health exchange, and I think enrollments for the next year are coming up.
+1

All good advice.  I'd pay the highest interest debts first, but that's a matter of taste.  See http://www.vertex42.com/Calculators/debt-reduction-calculator.html for one of the calculators mentioned.

You probably have other things to work on, but getting the 401k match and getting rid of the >10% interest debts should be the first two things.

Argyle

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Re: Case Study: Deep in Debt, 4 kids
« Reply #5 on: September 02, 2015, 10:49:24 PM »
I assume you are homeschooling for ideological reasons.  I do wonder, though, if four kids at home 24/7 and your husband away for considerable stretches, and your health only just climbing back to normal, is going to be a real strain.  If the older two could spend some time and school and halve your load for a bit...  You may consider this non-negotiable, but I thought I'd mention it.  I've known some mothers founder under the load of homeschooling a bevy of littlish kids.  In two years they could all be in school, which might also give you some time to bring in some income as well, even if only on a part-time basis.

Your husband is making good money, but in your circumstances, more income would also be helpful.  If you want to go the children-at-home route, any chance you'd be up for taking in some more kids?  Oregon required daycare ratios are quite strict, and I don't know if your three-year-old is considered a toddler or a preschooler.  Toddlers require a 1:4 ratio (caregiver:kids), but preschoolers 1:10.  (In a mixed group, the age of the youngest determines the ratio.)  Anyway, something to think about.

1967mama

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Re: Case Study: Deep in Debt, 4 kids
« Reply #6 on: September 02, 2015, 11:27:13 PM »
You've been through so much, and it must be great to feel your health returning. I have a large family also, and have just been through 2 surgeries in 8 months, so I know how hard that can be on the finances -- and my issues, though tough, weren't nearly as severe as yours.

We homeschool also, and for us, its a non-negotiable. I would be much more stressed without my kids around me :-)

Posting to follow your journey!

mousebandit

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Re: Case Study: Deep in Debt, 4 kids
« Reply #7 on: September 03, 2015, 12:07:20 AM »
Yep, homeschooling is a priority for us, although it's not too intense yet.  A second grader and kindergartener, and it doesn't take tons of time.  The littles can play while we do some of it, and they do lots of it with us. 

We are cautious that it'll all be a lot for me, on my own most of the time, but it is back home in the little town I was born in.  We both still have our moms local there, and and lots of brothers, and I have all my lifelong friends.  So good support network.  And, I know most folks here are urban, but for me, being home in the backwoods, milking goats and feeding chickens while my kids play in the treehouses and run amok is going to be a thousand times more therapeutic than being in a city.  :-).

I've thought about the daycare thing, but it's still just a thought.  I will hopefully get my chicken eggs route back, and start peddling more of my illicit, FDA-banned homegrown yummies and odd services.  Need your chickens plucked?  Rent my whiz bang plucker machine for $50!  ;-)

I probably will do an online course to get a certification for income tax prep and do that during the season.  My buddy from school owns the H&R Block in town and has been bugging me for years to do it, lol.  I don't intend to put much pressure on myself to generate cash until next spring. 

But I can do tons to save outgoing money.  I've already got a bunch of home grown, raised, canned food there and plenty of staples that will put our food budget very low.  I'll be practicing extreme water conservation which will reduce our well pump use and electric bill.  I want to live in Alaska, remote area, so I will be practicing, lol.  Wood stove cooking and water heating, compost toilet, chainsaw wielding mama, lol. :-)  I intend to drop our propane bill down to almost nothing and eventually eliminate the electricity. 

Yep, I'm nuts, but it's been a LONG and crappy 4 years, and I'm ready to be strong and healthy and back at it! 
MouseBandit

mousebandit

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Re: Case Study: Deep in Debt, 4 kids
« Reply #8 on: September 03, 2015, 12:11:14 AM »
Update:  got hubby's attention and showed him the numbers I came up with for the case study.  We added up the debt, and it's $30k.  I told him if we stick to the plan, we can knock that out in 15 months.  He said to take the money for the debt snowball plus the regular debt payments out first, automatically and slam it out!  That's a BIG deal to have him commit like that!!!  Woo HOO! 

N

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Re: Case Study: Deep in Debt, 4 kids
« Reply #9 on: September 03, 2015, 12:27:10 AM »
that is awesome that he is on board and excited about your plan!
maybe you will start a journal in the journal section-its been great for me to get support there and have found a virtual community.

N

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Re: Case Study: Deep in Debt, 4 kids
« Reply #10 on: September 03, 2015, 12:57:40 AM »
Good luck! You can do it! The first thing that leaves the account once we get paid are the student loan payments. Budgeting is key!

marty998

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Re: Case Study: Deep in Debt, 4 kids
« Reply #11 on: September 03, 2015, 03:56:43 AM »
Oh dear lord so many credit cards!!!!!

Each month pick one with a very high interest rate and throw the $983 monthly surplus at it.

Then cut up the card. Actually, cut up the cards now so you can't go back to this....

Then that $983 will grow and pretty soon you'll be throwing $1500 a month at that bigger loan and LOC

You're on the proverbial treadmill because you're only paying minimum balances on them... put your mind to it and smash them!
« Last Edit: September 03, 2015, 03:58:27 AM by marty998 »

Villanelle

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Re: Case Study: Deep in Debt, 4 kids
« Reply #12 on: September 03, 2015, 04:49:26 AM »
I would cut his visits home to every other week (are at least skipping every third week).  It will suck, but that will cut that gas bill significantly.  Your hair is on fire.  Also, I hope he's driving the Saturn, not the Suburban.  (I assume that since you have the kids, he is, but thought I'd mention it just in case.)  You might also look in to selling both Suburbans and finding something large enough for your family but with better gas mileage.  Even if you have to pay slightly more than you get for selling your two, the money you save in gas will add up quickly assuming you drive much at all.

For the debt, drop everything to the minimum except the highest card.  Paying the lowest balance first costs more money, than thus wastes money.  Find out the rate on those unknowns, and then pay off the highest one first, snowballing to the next highest, etc. 

There are tons of small things you can do at home to earn some money.  You've listed a few ideas already, but add a few more.  There are threads here.  Places like tutor.com hire online tutors.  Things like that add up if you stack a few of them.  Even coming up with $100 more a month will be huge for you. I know you said you were going to wait to do much about this, but that wait is costing you a lot of money.  To the extent that your health allows it at all, I think you need to push yourself a bit.  When the debt is gone, you can back off a bit, but for now, it is an emergency.  Things like online jury surveys (which I haven't done yet but learned about on MMM)  allow you to be flexible and not make a regular commitment, but to work when you have time and feel up to it.  Find something like that so you can flex it as your time and health allowed, but commit to doing X amount per month so you don't just put it off.  You really need every penny you can scratch up right now.

I agree with only doing the 401k up to the match right now.  You are paying 20%+ interest on debt.  You aren't getting that kind of return in the market, so no extra money there until the debt is gone.

Also, see if you can find some 0% cards, even as a 12 or 18 month introductory offer (but with no annual fee, or at least no fee for a year).  With that kind of debt at those kinds of interest rates, your return on the time spent researching and applying for these cards, than transferring your highest interest debt (and making sure you pay it off before the 0% goes away!) will be huge.

midweststache

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Re: Case Study: Deep in Debt, 4 kids
« Reply #13 on: September 03, 2015, 07:21:36 AM »
I know someone mentioned the debt avalanche approach (highest interest first) but I think with so many accounts at mostly low amounts, a snowball could be more emotionally encouraging. With your surplus, you could knock out CC#5 this month and CC#8 next month. Every other account (except Loan #1) could be knocked out in 2-3 months after that, especially if you snowball your payments to the other loans. Achieving a goal like that every 2-3 months can do WONDERS for keeping your debt-payoff-energies up. Once you've achieved that goal, come back with new ones! Right now, your priority is debt payoff (particularly since your interest rates are all 10%+!)

Is this mathematically the fastest plan? No. But it may be the more emotionally-sound. YMMV.

I'm glad your health is on an up-swing, and it sounds like being more grounded at home will be good for you. I will second the notion that some sort of free daily activity (school, library time, mandatory outside time while you nap/meditate/yoga/etc.) could be good for giving you breathing room from the kids.

Welcome to the forum. It might be worth it to start a journal to chronicle your debt payoff progress, your health, and your long-distance relationship with your husband. Forum members are really supportive. Best of luck!

mousebandit

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Re: Case Study: Deep in Debt, 4 kids
« Reply #14 on: September 03, 2015, 10:44:13 AM »
Thank you all for the awesome replies!  I need LIKE buttons for all these!  Great ideas, too!  I will definitely be continuing to guard and build my health and strength, but looking for ways to earn a little extra here and there.  And you're right - even an extra $100/mo will make a big difference!  I'll make it happen!  I will also check out the journals section.  I'm going to try and stay off here today, since tomorrow is moving day, and I still need to finish packing the odds and ends and make sure we're ready to roll.  :-)

I'll be back around after the weekend, posting from our beautiful Southern Oregon compound, haha!

MouseBandit

Axecleaver

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Re: Case Study: Deep in Debt, 4 kids
« Reply #15 on: September 03, 2015, 11:20:55 AM »
The biggest potential change you could make is around the health insurance. The FPL for a family of six is $32,570. Your children are eligible for Medicaid under the CHIP program (Oregon covers children up to 300% of FPL). This is completely free and will take care of really important preventive care under the EPSDT program. Apply for this today.

Since you're under 400% of the FPL, you and your husband qualify for subsidy through the health insurance exchange. With an AGI of 72k, you're between 200 and 250% of FPL, which is too high for Medicaid, but still provides a pretty hefty subsidy. There are some good articles here on the forums about ACA coverage. You will also very likely get better coverage with lower copays and premiums. You're paying way too much for your insurance today.

Check it out here: www.coveroregon.com

You may be able to get your AGI and MAGI even lower with deductions for unreimbursed business expenses. The mileage and rent while working out of town are significant and should be deducted on Schedule C. Lowering your AGI will help you qualify for better insurance subsidies. Silver plans will also qualify you for cost sharing, which can be huge, especially with significant health expenses.

Agree with other posters on contributing enough to claim the 401k match, but no more than that until your CC's are paid off. Good luck!

Josiecat

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Re: Case Study: Deep in Debt, 4 kids
« Reply #16 on: September 03, 2015, 11:49:08 AM »
You have a great attitude and you're open to suggestions.  I have the feeling you will win this money battle.  Good luck!

hunniebun

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Re: Case Study: Deep in Debt, 4 kids
« Reply #17 on: September 03, 2015, 12:11:22 PM »
I am so happy that things are on the upswing for you and it sounds like after having to be reactive the last few years, that you are moving to a place of being proactive, which is very empowering! I also know that with young kids life can feel like a whirl wind and it is easy to get overwhelmed trying to do to much at once.  I love the idea of sell sell selling things you don't need and using that money to either build up an emergency fund (so you never have to resort to those credit cards again) or paying off the debt.   Would it be possible to get consolidate all those cc's to a single low interest line of credit or something?  I think simplifying could be useful and make it easier to manage.  Good luck and I'll be following! 

TrMama

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Re: Case Study: Deep in Debt, 4 kids
« Reply #18 on: September 03, 2015, 12:31:59 PM »
Wow, what an amazing recovery story. Good for you!

I'd look into consolidating all those high interest debts into something with a lower rate and then paying it off as fast as possible. Look through MMMs list of credit cards to see if you can apply for some that offer a sign up bonus and better rate.

Kaspian

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Re: Case Study: Deep in Debt, 4 kids
« Reply #19 on: September 03, 2015, 12:41:09 PM »
Then cut up the card. Actually, cut up the cards now so you can't go back to this....

^^ This!!  Cut those up and forget about all point systems/incentives/balance transfers/other nonsense they throw at you between now and then.  If you online bank, having a card cut up first doesn't mean you can't pay it off anyway.

ltt

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Re: Case Study: Deep in Debt, 4 kids
« Reply #20 on: September 04, 2015, 05:10:21 AM »
Case Study

    Liabilities:

    Loan #1 - $14k, 22.48% interest, 5 year term, $570/mo.  Balance: $13,474.
    LOC - $3000, 10.75% interest, open, $50/mo, Balance:  $1543.
    CC#1 - $5000, unknown, $150/mo, Balance:  $5000
    CC#2 - $1308, 18.18% interest, $50/mo, Balance:  1308
    CC#3 - $1378, 12.90% interest, $35/mo.
    CC#4 - $1790, uknown interest, $50/mo.
    CC#5 - $768, 14.74% interest, $25/mo.
    CC#6 - $1746, 22.99% interest, $52/mo.
    CC#7 - $1754, unknown interest, $50/mo.
    CC#8 - $1187, 19.99% interest, $35/mo.

TOTAL:  $1037


Go after credit card #5 first--you can have that knocked out in 1 or 2 months.  Then credit card #8 second.  Again, that will take you another 1 or 2 months.  Then credit card #2.  Get all those credit cards gone first.  That will free up $400+ in cash that you will probably be able to then knock down the LOC relatively quickly.  Then go after that loan.  I think for you that you really need to start seeing these smaller credit cards getting paid off to see that you are making headway.  Once you start making headway with these cards, that will free up your cash so that you will have that additional $100 a month that you are wanting without taking on additional work.  Coming from another mother of four, I know how busy it is.  Please let us know how things are going.

justajane

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Re: Case Study: Deep in Debt, 4 kids
« Reply #21 on: September 04, 2015, 06:41:26 AM »
You're frugal and resourceful and find yourself in this situation not due to frivolous spending but a true health emergency. I agree with others that you are going to kick this debt's ass!

mousebandit

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Re: Case Study: Deep in Debt, 4 kids
« Reply #22 on: September 16, 2015, 03:04:14 PM »
Update.   The move has thus far been a money pit, and we're not in the house yet.  Renters giving us trouble, but say they'll be out by the 21st.  Kids and I in the tent trailer on the property, oh boy!  Internet is sketchy, and cell service blows, lol.  However, the compost potty works great and you can bet I'll never pay for a septic system again, haha!  Got a visit from an old friend today who is going to relocate her homestead to Kentucky, but needs to board her animals for a year or so while she gets things figured out.  Wants us to do it.  We would split revenue from puppies (livestock guardian dogs x3 mommas, purebred, $600 per puppy) and I could have all revenue from goats, kids, and milk.  That's a huge opportunity.  It'll be a few months before she's ready, but it will definitely be a financial blessing that we can do right here on the ranch, with the kids, with no initial cash outlay.  :-).  Seeing so much stuff around here I can sell.  Tons more that I can use to make projects to make or save cash.  Very excited!  Oh and I went through and mapped our orchard, and we still have 57 fruit trees alive and well, including a fig tree and an English walnut!  Woo hoo!  I will post updates as I can, but more regularly after we are in the house. 

Easye418

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Re: Case Study: Deep in Debt, 4 kids
« Reply #23 on: September 16, 2015, 03:43:52 PM »
Case Study


    Life Situation: IRS filing status - Married  filing Joint; : 4 minor children, ages 7, 5, 4, and 3.  Mom (that's me!) and kids live in SW Oregon, 37yo husband is the wage-earner working at other end of state, coming home on weekends; I'm 44yo and a homeschooling mom.  We're actually just moving this weekend, leave in 2 days!

   We are just transitioning to this living situation, so some of my expenses are just guesses right now.  I'll have better figures for utilities in a couple of months.  I am committed to making them as low as possible.  Starting while I was pregnant with our youngest child, I had about 3 years of health nightmare.  Adrenal system collapse, 2 strokes, atrial fibrillation heart condition, extreme anemia with a transfusion.  I was basically bedridden or at best, super slow, for most of that time.  I have been on the serious upswing starting 11 months ago, and really accelerating since last spring, off almost all the meds now.  But for all that time, we had to have pretty much round-the-clock care for me, and Jeff lost absurd amounts of work time with my hospitalizations and appointments and such.  To say the least, it sucked, and we accumulated a boatload of debt. 
 

    Gross Salary/Wages: About $100k this year.  Weekly take-home paycheck is usually $1370, unless he misses days or gets overtime.

    Pre-tax deductions:   Davis-Bacon Pension about $400/mo.  This is retirement fund that can't be accessed unless laid off from job, and then it's a big penalty.  AFLAC $160/mo.


    Adjusted Gross Income:   $72,500.

    Taxes:   Carpenter's Training Fund (not voluntary): $85/mo.  Federal WH $750/mo.  SS $500/mo.  Med $116.  Oregon WH $520.  AFter-tax AFLAC Disability $52 (not taxes, but deducted after tax before net).

AFTER TAX 401K:  Roth 401K about $160/mo.  THis is something he recently started.  He thinks we can borrow against it if needed.  Employer does some sort of profit-sharing/partial match thing on the 401K.

    Current expenses:

    Mortgage:  $480
    Property Taxes:  $150 (monthly, about $1800/yr)
    Rent for husband: $200
    Electric:  $50
    Propane:  $50
    Firewood:  $100 (wild guess, so far we've always cut it ourselves, which we will again if there's time before the rain comes)

Internet:  $40
Husband Cell $45
Wife Cell $15-60 (depending on if Republic Wireless can get cell towers in our backwoods-valley)

    Groceries:  $400 (we have a lot of food storage at home plus raise our own livestock for meat, garden, etc.  I may even get this lower.)
    Household Items:  $150
    Car Insurance:  $150
    Life Insurance:  $90
    Health Insurance Husband:  $320
    Health Insurance Wife:  $370
    Kids health insurance via state $0
    Mini Storage:  $80
    Jeff Expenses (gas, misc):  $400
    Jeff Allowance:  $120
    Tracey Allowance (includes livestock feed and home repairs): $240


TOTAL:  $3450


    THat is the "paper budget".  The past few years reality has been much uglier, including lots of drive-through eating, baby-sitters and "helpers" for me, discretionary spending for both the hubby and I, tons of medical costs and meds.  One of the results of kids and I going home will be a drastic reduction in all spending.  We come out better by us being home, even after his higher commuting costs.

We're shooting to sell a bunch of the stuff in the storage unit, and then will figure out what to do with the remainder.  It's his deceased-father's library of books and very large bookcases.  Our home isn't big enough to have them in there, although husband plans to add-on in the future.  He wants to build a shed on the property for the storage stuff, but we have agreed to hold off for now and slam on the debt.

 Each of us having a separate "allowance" account that is not tied to the bill account is something we are hoping will help us to curb our impulse spending.  With my health improved, I can handle things at our ranch back home, and drastically lower our food costs, and eliminate the high expense of renting in the Portland, OR area, too.  He got a little saturn car for $600 that is getting 38mpg, so that is really improving the gas expenses, and with me alone with 4 kids at home, my trips anywhere will be practically non-existent, LOL.  (I'm a homebody anyways.)  We'll be doing at most, once a month shopping in the town 30 miles away, but more likely it'll be once every 3 or 6 months.


    Expected ER expenses: not sure what this is?

    Assets: Amount & description - include current asset allocation plan if you have one

    Not sure that the vehicles are assets anymore.  96 Suburban, value $1500, maybe.  97 Suburban, value $800 very maybe, on it's last legs and soon to become parts for the 96, LOL.  1999 Saturn (or thereabouts) value $1200, but just paid $600 for it.
 
    Home:  6-1/2 acres, owe about $45k, private mortgage at 10% interest, $480/mo.  Not able to qualify for conventional financing on home.  Value about $80-$100k?  (We are figuring out what it will take to build a structure that will snag us a Certificate of Occupancy from the county, aka be considered a home, and then re-fi the property with conventional financing.  We both think it'll be a 400sf structure with a few requirements inside.  THat will help a lot on the long-term payoff of the mortgage.  It will be slapped together with the intention of being a shop later on.)


 Davis Bacon Pension - about $5k
401K - about $1500



    Liabilities:

    Loan #1 - $14k, 22.48% interest, 5 year term, $570/mo.  Balance: $13,474.
    LOC - $3000, 10.75% interest, open, $50/mo, Balance:  $1543.
    CC#1 - $5000, unknown, $150/mo, Balance:  $5000
    CC#2 - $1308, 18.18% interest, $50/mo, Balance:  1308
    CC#3 - $1378, 12.90% interest, $35/mo.
    CC#4 - $1790, uknown interest, $50/mo.
    CC#5 - $768, 14.74% interest, $25/mo.
    CC#6 - $1746, 22.99% interest, $52/mo.
    CC#7 - $1754, unknown interest, $50/mo.
    CC#8 - $1187, 19.99% interest, $35/mo.


TOTAL:  $1037



    SUMMARY:  TAKE-HOME INCOME:  $5480

                       MORTGAGE & TAXES:  $480 & $150
                       RENT:  $200
                       UTILITIES:  $300
                       INSURANCES:  $940 ($690 of that is health insurance)
                       LIVING EXPENSES:  $1390
                       DEBT PAYMENTS:  $1037
 
                       AVAILABLE:  $983

So, our plan is to have all bills get paid automatically out of the direct deposit checking account.  Allowances, Jeff expenses, and food and household funds will transfer automatically to a separate debit card for him and a separate account/card for me.  That way we each have our own little spending account, and we don't have to track everything, plus less temptation for either of us to dip into the bill money.

We have been on this treadmill a lot of years.  I am really hopeful that these changes will produce some results.

Would love to get some feedback and ideas.  I have been brainstorming all day on ways to cut things, and reading back threads and through the blog posts.  I'm ready for this, and I think the husband is too.  Having to split the family up like this to get control of our finances is a HUGE face-punch for us both. 

MouseBandit

+1 Dave Ramsey is calling.  Pick up the phone. 

Snowball the shit out of those debts. 

Rosy

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Re: Case Study: Deep in Debt, 4 kids
« Reply #24 on: September 16, 2015, 05:44:41 PM »
I can't even imagine - 4 kids, a ranch, sidehustles of selling things and homeschooling? Oh and btw you are still recovering from a serious illness!
You, my lady, are one tough cookie! Did your people arrive in Oregon on the wagon trail:) JK

1. Run each card balance and its respective interest through a calculator and decide which to pay off first. The highest interest rate will save you money, but if there is minimal difference if you pay off the two lowest balance ones off first - you might want to consider that, just so you see a little psychological bang for the buck.
2. I hope hubby understands and appreciates all you do:)
3. Match the 401K up to the employer match for now - as soon as debt is gone increase it to the max that you can.
4. That 10% personal loan is a biggie -I see where you are going with this, but don't let it bubble on the back burner too long.

Don't overdo it now - summon up some strength and like you said, for now pay the bills down and see where you are in the spring. Taking care of the critters is a nice boost in income too and you have so many extra ways to have income from eggs and other things, it will all end well - maybe sooner than you think:)

Wishing you strength and health and good luck - hope the tenants will move out soon.

Catbert

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Re: Case Study: Deep in Debt, 4 kids
« Reply #25 on: September 16, 2015, 06:02:29 PM »
I would figure out which CCs have interest rates of 18% or higher.  Then I would start working on which ever one has the lowest interest rate.  That's a hybred between snowball and avalanche methods.

I agree that you should set up automatic payments on all your CCs.  It's tough to keep track multiple cards.  If you or your husband get offers to transfer balances at 0% for  X months use those.  But only if you do the math and don't transfer more than you can pay off in the 0% period.

Barnaby

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Re: Case Study: Deep in Debt, 4 kids
« Reply #26 on: September 16, 2015, 06:39:34 PM »
You can probably lower your car insurance quite a bit. 150/month is a lot. It sounds like you don't drive much and his car is old, so you may decide to just do liability and property damage or something close to whatever your state minimums requirements are.

mousebandit

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Re: Case Study: Deep in Debt, 4 kids - UPDATED!!
« Reply #27 on: May 13, 2016, 10:01:17 AM »
Hey everyone!  I just wanted to post and THANK YOU ALL and give an update! 

Tenants got out, we got in, and kids and I made it through the winter on our own, with hubby on the weekends (although he was working a lot of overtime, so there were lots of weekends it was just us).  Everything was going great, except the debt wasn't getting paid down any better, even with all the overtime.  Just before New Years, the husband agreed to throw out a test post on craigslist to sell the place, and ask a ridiculous price, that no one would pay, LOL. 

Fast forward - property sold, on wrap-around mortgage, and we are installed in a new homestead, much smaller (just 1 acre) but surrounded by 80 acres of forest, half of which is untouched old-growth, that is ours for the usage!  Found a used manufactured home for a song and a dance that is HUGE (very helpful when you have all these kids!), and gorgeous.  With the new budget and the payments from the old property, we are slamming out credit cards every week or two, and will have them all paid off by end of summer, and everything, including the property, will be paid off by next Jan/Feb!!!  The husband will be coming home from the travel job in September! 

Literally, this would have never happened without MMM.  We have been Dave Ramsey people for years, and used his method to get out of debt completely once before, but this time we were just in too deep, and really needed the stiff kick in the hiney to get WAY more drastic than just a snowball.  The examples from you guys, especially things like ditching your car (to me, that is the most radical thing ever, LOL), made me realize that you have to put EVERYTHING on the table when you're in that deep!  THANK YOU ALL!   Even the health continues to get better and better.  I'm off all the meds, including the heart meds and blood thinners now, just down to aspirin!  A winter of hauling firewood and doing all the chores has really improved my endurance and strength!  Hubby is now even open to considering my dream of homesteading in Alaska!! 

THANK YOU MMM COMMUNITY!! 

MouseBandit

little_brown_dog

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Re: Case Study: Deep in Debt, 4 kids - UPDATED!!
« Reply #28 on: May 13, 2016, 10:04:52 AM »
Hey everyone!  I just wanted to post and THANK YOU ALL and give an update! 

Tenants got out, we got in, and kids and I made it through the winter on our own, with hubby on the weekends (although he was working a lot of overtime, so there were lots of weekends it was just us).  Everything was going great, except the debt wasn't getting paid down any better, even with all the overtime.  Just before New Years, the husband agreed to throw out a test post on craigslist to sell the place, and ask a ridiculous price, that no one would pay, LOL. 

Fast forward - property sold, on wrap-around mortgage, and we are installed in a new homestead, much smaller (just 1 acre) but surrounded by 80 acres of forest, half of which is untouched old-growth, that is ours for the usage!  Found a used manufactured home for a song and a dance that is HUGE (very helpful when you have all these kids!), and gorgeous.  With the new budget and the payments from the old property, we are slamming out credit cards every week or two, and will have them all paid off by end of summer, and everything, including the property, will be paid off by next Jan/Feb!!!  The husband will be coming home from the travel job in September! 

Literally, this would have never happened without MMM.  We have been Dave Ramsey people for years, and used his method to get out of debt completely once before, but this time we were just in too deep, and really needed the stiff kick in the hiney to get WAY more drastic than just a snowball.  The examples from you guys, especially things like ditching your car (to me, that is the most radical thing ever, LOL), made me realize that you have to put EVERYTHING on the table when you're in that deep!  THANK YOU ALL!   Even the health continues to get better and better.  I'm off all the meds, including the heart meds and blood thinners now, just down to aspirin!  A winter of hauling firewood and doing all the chores has really improved my endurance and strength!  Hubby is now even open to considering my dream of homesteading in Alaska!! 

THANK YOU MMM COMMUNITY!! 

MouseBandit

That is amazing fabulous job!

apricity

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #29 on: May 13, 2016, 10:06:34 AM »
Wow, this is an amazing update! Congratulations on all the hard work.

Warlord1986

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #30 on: May 13, 2016, 10:08:28 AM »
I think this might be my favorite post of all time.

KisKis

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #31 on: May 13, 2016, 10:33:15 AM »
Congratulations, Mouse.  So happy for you.  Your thread was wonderful to read.  Best wishes for continued health improvements and financial success.

Random Hangers

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #32 on: May 13, 2016, 10:35:21 AM »
That's such great news. It's so thrilling to read about someone asking for advice who you know, takes it AND does such an awesome job kicking debt's ass. Just goes to show how life changing a little thing like a blog can be!

elaine amj

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #33 on: May 13, 2016, 11:29:38 AM »
I absolutely love your update. CONGRATULATIONS!!!

N

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #34 on: May 13, 2016, 08:06:12 PM »
awesome!!

meandmyfamily

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #35 on: May 13, 2016, 08:57:24 PM »
Wonderful news!

Tuskalusa

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #36 on: May 14, 2016, 12:34:48 AM »
Wow!  Way to take a fresh look at the situation and find a creative and smart way out! 

dreams_and_discoveries

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #37 on: May 14, 2016, 05:35:57 AM »
A fabulous updated; you've really turned things round - so impressed with your energy and how much you can do as well as home schooling 4 kids. Have homestead envy..

Dmy0013

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #38 on: May 14, 2016, 09:48:28 AM »
Super motivating read, and I think we could learn a lot from you with how positive you were throughout!

So thank you!

Eurotexan

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #39 on: May 14, 2016, 10:28:49 AM »
Absolutely amazing! Well done! You have given your family the best gift, a happy and worry free
Mom!

LAL

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #40 on: May 14, 2016, 12:57:44 PM »
Wow.  Amazing. I am posting because you did something so radical to get out of debt more than Dave Ramsey.  You should call and tell him.

Bergal

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Re: Case Study: Deep in Debt, 4 kids - UPDATED in Reply#27!!!
« Reply #41 on: May 14, 2016, 02:03:14 PM »
Thank you so much for this update and kudos to you and your husband for your amazing attitude and putting everything on the table.  I'm also happy to hear that your health has improved so much.  Well done!