Author Topic: case study help me refine my budget!  (Read 3158 times)

partgypsy

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case study help me refine my budget!
« on: September 29, 2016, 03:02:05 PM »
I am in the process of separation.  I am hoping once it is settled, I will get $440 a month from him. He also agreed to 50% of kids extraordinary expenses (child's private school) but to tell the truth cannot count on it.
I know I am going to get a lot of face punches but kindness would be appreciated.
Income: I reduced my contribution to retirement so I will be getting 1800 biweekly. Also hopefully 440/mo =3637/mo after taxes

Below is what the average of this year has been so far. I will put in parentheses if think will be different going forward)
Total recurring (monthly bills, mortgage etc) is around 1550 (mortgage with interest and prop tax=929)
private schooling for child works out to 12K a year (but it is paid over a 9 month period) =986/mo prorated over the year
grocery 1030 (last month was 736)
restaurant 267 (this should go down too)
gas and car (projected) 412
medical 131
clothing 89
travel 135
miscellaneous 613 (last month was 217)
house 74
using the lower numbers, I get to 4597. 3637-4597=-960 a month.

I may need to do something drastic or out of the box to get these numbers down. One obvious thing, is if the school expenses go away, that would balance things. But I am committed to this year at the very least. 
I also have the crazy thought, of taking a withdrawal from my retirement fund to pay off mortgage. It would be an expensive way to pay it off as I would have to pay a 10% penalty and also pay additional taxes, but it would reduce my outgo by 600 a month, which with cost cutting measures might make my income viable? Between that and divorce settlement, would only leave around 10K in account. 
Another drastic thing would be to sell the house. there is equity there. However the neighborhood is incredibly convenient (to my work and kid's schools) also many various repairs and also a huge amount of stuff to get rid of with no place to go, I am not mentally prepared for selling at this time. In the future I may be willing to, if I could find a less expensive house in a similar area, and kids are out of the house.
« Last Edit: September 29, 2016, 03:04:51 PM by partgypsy »

4alpacas

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Re: case study help me refine my budget!
« Reply #1 on: September 29, 2016, 03:31:05 PM »
The easiest thing for you to change would be your grocery bill and restaurant spending.  With a little bit of effort, you could get both down to $300/month and cut about $700 off your budget. 

There is still another $260 to be cut, which could easily be done if you're motivated.  I would look into the monthly bills and car costs.

Shor

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Re: case study help me refine my budget!
« Reply #2 on: September 29, 2016, 03:44:54 PM »
As alpacas said, controlling the food expenses will cover most of the deficit there.

also, gas and car sounds high, how much driving is that totaling to?
Does that figure include car insurance (~$100 / mo averaged)?

What does travel category cover? Would that be easy to cut out?

Is there a plan B in regards to the kid's schooling? Especially if the 50% doesn't come through?

Also, sorry for the separation you are having to go through.

Cranky

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Re: case study help me refine my budget!
« Reply #3 on: September 29, 2016, 03:47:08 PM »
I think your housing costs are unsustainable. I don't think you should make drastic changes immediately, because this is a loss for both you and the kids in a lot of ways, and you need to let the dust settle.

In the short term, slash the grocery bill.

Over the next year, start thinking about changes in your housing. You'll be able to get a better feel as to whether the ex will really pay the the school tuition, and if he doesn't that will need to go.

Bee21

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Re: case study help me refine my budget!
« Reply #4 on: September 29, 2016, 04:07:39 PM »
You obviously can't afford this private school. If you insist on it, you will have to make some drastic cuts elsewhere.the crazy food expenses are the easiest to address.  Like the restaurants will have to be avoided, and you should also cut the groceries into half. 3 people should be able to eat on 5-600 easy. Why is it so high? Figure out what you are spending the bulk of the food budget on ( meat? Snacks?Prepared food? Perishables? ) and it will be easier to manage it.just write a list of the favourite meals the family is eating and cost them. If dinners are around 5-10 you will need to reassess how the rest of the food money is spent. (for me it was too much meat and too many perishables which we ended up not eating. Once I understood what was happening, it was easy to cut back and change my shopping habits)

With clothes I find that the best way to keep expenses reasonable is to write a list of the types of clothes we need: ie school clothes for the kids (4-5 sets), home clothes( 4-5), cute going out ( 2-3), formal going out. (1). Etc. I organise wardrobes frequently, so I know exactly what we have ( too many clothes) so I am not tempted to buy more. I also buy kids clothes at the end of the season from the clearance racks (the next size). I find that kids don't need a large variety, they have their favourites they want to wear all the time. For work I recommend a 'uniform'. My boss calls me the queen of frocks, but the reality is I have only 6 very nice dresses ( from the clearance racks of course). I find dresses easier, I don't have to worry about ironing or matching parts or whatever, it takes me 5 minutes to get ready and there is less laundry to do.

And what is the miscellaneous category? If it is entertainment, presents, toys, vacations, those can be budgeted for.

If it is just you and the kids, you should be able to control it, there are a lot of obvious places you can cut expenses, it is now your decision how you spend your money.

You mentioned there is a lot of stuff around. Is there anything you can sell to start an emergency fund with the money?

I wouldn't touch the retirement funds. Could you pay interest only on the mortgage until you get back to your feet?  Refinance to get a better interest rate? I personally would attack the expenses you have control over (food, clothes, misc) and renegotiate the fixed expenses to see if you can get a better deal on them.

Cassie

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Re: case study help me refine my budget!
« Reply #5 on: September 29, 2016, 04:27:15 PM »
You will be sorry in years to come if you touch the retirement $.  We only spend 300 for 2 adults so you should be able to get the grocery bill down. either the house or school will need to go.  If you make cuts other places you can struggle through a year to decide what big thing you will cut.   Hugs:))

partgypsy

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Re: case study help me refine my budget!
« Reply #6 on: September 29, 2016, 07:16:18 PM »
I'm pretty sure I will be able to reduce both the grocery and restaurant. I guess I need to accept the fact that maybe after this year, private school will be a no-go. The car costs are estimated, 272 for car payment (necessary), $100 to ex for gas, rest gas for me (does not include insurance, that is in recurring). Also stressing about things like unexpected expenses as there is absolutely no wiggle room in budget.
Yes, touching the retirement fund is a last resort. As it is it will take a big hit due to separation. No early retirement here!
« Last Edit: September 29, 2016, 07:19:32 PM by partgypsy »

GoConfidently

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Re: case study help me refine my budget!
« Reply #7 on: September 29, 2016, 07:29:37 PM »
Why do you say no early retirement? Because of your age? Honestly, change is hard and you're going through a lot of changes right now. But as you adjust, you'll find room to make other changes. Start with the easy ones (groceries and gas) and build to the harder ones. What seems impossible today may be easier in three or six or twelve months. Don't take something off the table now just because you can't predict the future.

partgypsy

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Re: case study help me refine my budget!
« Reply #8 on: September 30, 2016, 07:10:59 AM »
Right now I don't see it happening right now. I just need to focus on the cash flow problem; retirement now is a secondary consideration.

Ebrat

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Re: case study help me refine my budget!
« Reply #9 on: September 30, 2016, 07:49:57 AM »
What are your recurring expenses? There's over $600 there after accounting for the mortgage. Is there anything in that category than can be cut or downgraded?

I prefer to keep recurring expenses as low as possible. You're committed to these, so there's less wiggle room if you need to cut. For example, if I lose my job, I can buy cheaper groceries, but lower a mortgage or car payment would involve a lot more work and potentially cost (e.g., transaction costs of selling the house). The lower your committed expenses, the more flexible your cash flow.

You might also look into scholarship or need-based funding for the private school if you haven't already.

partgypsy

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Re: case study help me refine my budget!
« Reply #10 on: September 30, 2016, 09:30:51 AM »
This is an example of monthly recurring
949 mortgage (includes property tax escrow) 18.55 (the gas is higher in the winter to 200-300 highest)  gas 63  electricity (electricity highest in summer highest 150) 50 water 46.42  internet and email  21.48  netflix  41.90 phone for daughter and I  33.36 ex's phone (he will be taking over)   4.83 home phone (this allows us to keep cell phone charges down) 55.46 life insurance (we have kids) 65.00 (school supplies) 12.36 interest charge  12.50  overdraft charge =1881  Also 1294.75 private school 478 semi annual auto, and 1K attorney bill.
1250.64 minimum monthly not including additional expenses and private school. The extra bank charges was still having a joint account, which we were both charging out of. I will no longer be putting money into that account and paying everything from a single account, which should simplify (and reduce) some expenses.

looks like miscellaneous are any kind of purchases including for pple's birthdays also haircuts etc. Most of those purchases are from amazon and from home. If pets need care it goes into medical pile.
« Last Edit: September 30, 2016, 09:42:23 AM by partgypsy »

Ebrat

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Re: case study help me refine my budget!
« Reply #11 on: October 01, 2016, 09:22:18 AM »
Most of those seem pretty reasonable to me. You could cut out Netflix and try to get the other categories down, but those will be small amounts in the grand scheme of things.

You have a lot going on in your life right now. My advice would be to keep a detailed log of all of your expenses and start identifying places to reduce, one by one. Selling extra stuff around the house like someone mentioned is a good idea. If you have equity in the house, refinancing might help lower your payment, depending on what your current interest rate is and how far into the loan you are. Rates are very low right now, and you could find a place that will do a no-cost refinance or roll the closing costs into the loan.

SeaEhm

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Re: case study help me refine my budget!
« Reply #12 on: October 01, 2016, 09:39:15 AM »
http://www.budgetbytes.com

Seems like you are spending a lot of money on food relative to income.

Are private schools a must in your area?  Age of child(ren)?  Would taking them out of a private school for a year to see how things work out financially be a possibility?

Don't know your area so I am unable to gauge just how bad a public school would be for a year to see where you land after a year of adjusting to the separation.

Does your child do well with change as he will be going to a one parent household so maybe school change would be too much or would he/she see this as a fun opportunity.


Lizzaroo

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Re: case study help me refine my budget!
« Reply #13 on: October 01, 2016, 09:45:03 AM »

Income: I reduced my contribution to retirement so I will be getting 1800 biweekly. Also hopefully 440/mo =3637/mo after taxes

Below is what the average of this year has been so far. I will put in parentheses if think will be different going forward)
Total recurring (monthly bills, mortgage etc) is around 1550 (mortgage with interest and prop tax=929)
private schooling for child works out to 12K a year (but it is paid over a 9 month period) =986/mo prorated over the year
grocery 1030 (last month was 736)
restaurant 267 (this should go down too)
gas and car (projected) 412
medical 131
clothing 89
travel 135
miscellaneous 613 (last month was 217)
house 74
using the lower numbers, I get to 4597. 3637-4597=-960 a month.

Until things stabilize and you get an idea of what expenses are (car and spouse contrib seem to be up in the air) I would focus on minimizing grocery spending, and cut out restaurant and travel expenses.
I second not touching retirement funds for mortgage payoff. This should be a last resort to keep you off the street. There are other choices / cuts to make before so big of a sacrifice.
Best of luck in your new phase of life! Remember, with the new skills you are about to hone, you will be an unstoppable force in your financial life!

Paul der Krake

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Re: case study help me refine my budget!
« Reply #14 on: October 01, 2016, 10:09:14 AM »
Income: I reduced my contribution to retirement so I will be getting 1800 biweekly. Also hopefully 440/mo =3637/mo after taxes
How did you arrive to this number? I have a feeling you may be currently over-withholding.

Good news #1 is that child support isn't taxable income (if you can get it).
Good news #2 is that as head of household with kids, your income tax liability is going to be laughably low. You may even qualify for goodies like the saver's credit.

If I were you, I would figure out how much you really need each month, then add a $100-200 for wiggle room, and keep your retirement contributions to the highest possible level to keep that AGI right at that amount.