case study - new here and want input.

[snacky]

All numbers rounded, obviously.
My income changed a lot in the last year – I went from an occasionally employed student to a full time worker. Still figuring out the money.

Life Situation: I’m a 33 year old single parent to two kids, 8 & 10. We live in a city on the Canadian prairies. One of my sons has a pervasive developmental disorder and needs special care at all times.

Gross Salary/Wages: $60k per year

Pre-tax deductions: 10% of my income is matched by my employer in a pension. Union dues, taxes, etc. reduce my biweekly paycheque to $1,450

Other Ordinary Income: $8400 child support and $6k in government transfers. These transfers will be reduced next year, I don’t yet know by how much

Adjusted Gross Income: $52k

Taxes: not sure what you need to know… they take the appropriate amount, so I get a small refund each year.

Current expenses:
Housing: mortgage + taxes + insurance + utilities = $1,000 per month
Food: $500 per month
Transportation: $450 car payment + bus pass + gas + maintenance = $600 - $700 per month (I drive the kids to daycare and take a bus from there, as the bus is cheaper + faster than parking downtown.)
Entertainment: $300/ month for family gym membership, outings & events, gifts, booze, meals out. I could cut this in half if needed. I cook at home 95% of the time, pack lunches for all of us, use the library, etc.
Phone & internet: $130/ month. No cable or Netflix or anything like that.
Daycare: $1,000 per month – this is non-negotiable; I pay a lot to have my kid in a daycare that can handle his needs.
Travel: my family lives in a distant province, annual visits with them cost me $2k or so.
Home repairs/ improvement: my house is 120 years old and needs a lot of work. I put ~$10k into it each year. In maybe 5 years the major issues will be handled and this cost will be reduced quite a lot.

Mortgage info: $450/ month, $16k remaining owing, up for renewal in april 2017, at which time I will pay it off in full. 4% interest.


Assets:
house is worth $130k, but needs major repairs.
Investment account (TFSA) of $10k
HELOC for $25k that I have not tapped into (this isn’t an asset, but is my emergency fund equivalent)

Liabilities:
Car payment (2013 honda fit) is $450/ month, 2% interest, $15k remaining in the loan and the car is worth $17k. when I bought it I couldn’t qualify for a bank loan (student, no job) so couldn’t buy a used car – this one is reliable, good on gas, and will need to be replaced in the next 5 years, as my boys’ legs are already getting too long to fit in the back seat and they are destined to be very tall people.

Provincial student loan: $6k @ 0% interest. This one can take its sweet time getting paid off.
Federal student loan: $30k @8.5%. I sometimes qualify for repayment assistance so haven’t really tackled this one. If they stop giving me free money for it I’ll start hitting it hard.

Specific Question(s):
I have a lot of conflicting obligations and goals.
1.   My parents are in terrible shape and no longer working, with no income. I need to be helping out. They are in their early 60’s so too young for most senior income support programs. I was thinking of buying them a small house or condo so they could sell theirs and live on the proceeds, but that isn’t a financial reality for me at this point. I need to find a way to pitch in.

2.   My pension will cover about half of my retirement income needs. I’m happy to work until I’m at least 55 – I like my job, and 55 is the minimum age to retire without taking a hit to my pension.

3.   I want to either travel or get a property outside the city and develop it into a place where I can live when the kids are grown and gone. Clearly I can’t do both of these, but one or the other would add a lot to my quality of life.

4.   I have no idea what I’m doing with my investment account and could use some starter points. I can give more detail on what I’ve been doing if that is helpful.

Thoughts?

[mozar]

How many more years do you anticipate your child being in daycare? Can you sell your house and move closer to the daycare? That way you will only have the bus expense for commuting. Putting 10k in your house a year is way too much and the problems could continue.
Your car is also too expensive for you. You should consider getting something cheaper and bigger.

[FrugalFan]

Welcome! Wow, you are in a tough situation but it sounds like things are improving with the new job. According to my quick calculations your expenses exceed your income though, and that is excluding debt repayment on your student loans, so something needs to change. Your house sounds like a money pit. Could you move to a similarly priced house without all the added expenses? I also agree that your car payments are too high. Could you move somewhere where you wouldn't need a car at all? Or can you change cars?

[snacky]

he will be in daycare at least 4 more years, maybe longer, depending on his needs. my older boy finishes with daycare in 2 years, and that will save me $300/ month.

houses near daycare cost 2x or more what mine does; I have a junker house in a bad part of town, so there is no similarly priced place to move to. I figure it's like a car: you pay a premium for something that doesn't need work or you pay maintenance & upkeep for something with a low sticker price.
I should mention that my current neighbours give me free childcare when I need to get groceries or go to the gym, and moving away from them would hurt my quality of life/ support network.

about the car: I agree that it's too expensive. I could sell it and have a couple of grand in my pocket after paying it off, but I couldn't get something equally reliable for a couple of grand. how would I pay for the new car, if I sold this one? I have been puzzling over this.

eta: I know the numbers don't match up and I didn't include the debt repayment in my sums. I suck. ;) chalk it up to rounding errors? because I have a couple hundred dollars or nothing at the end of each month, never debt. so somehow it works.
(I know how it works, I have spreadsheets showing each dollar I spend, but the specific way it works varies from month to month, and the details are more than anyone, ever, needs to know)

[themagicman]

How many more years do you anticipate your child being in daycare? Can you sell your house and move closer to the daycare? That way you will only have the bus expense for commuting. Putting 10k in your house a year is way too much and the problems could continue.
Your car is also too expensive for you. You should consider getting something cheaper and bigger.

+1 I was going to make these same suggestions!

I think you could shave some off your spending too!

Current expenses:
Entertainment: $300/ month for family gym membership, Do you need a family gym membership for you and two kids 10 and under? I think you could save on this by just getting one for you! outings & events, gifts, booze, meals out. I could cut this in half if needed. I cook at home 95% of the time, pack lunches for all of us, use the library, etc.
Phone & internet: $130/ month. No cable or Netflix or anything like that. This is very high! I would shop around for your internet or get a lower speed. I do not know Canada's market but I would think you could get it at least for $40 a month. Also you should look into a prepaid phone plan costing about $40 a month as well
Daycare: $1,000 per month – this is non-negotiable; I pay a lot to have my kid in a daycare that can handle his needs.
Travel: my family lives in a distant province, annual visits with them cost me $2k or so. You can probably save some here as well. I assume that this is not a drivable distance to visit them but around $600 for round trip airfare each seems high. I would look into booking these at off peak times or on discount airlines. I would also look into using credit card rewards to get these free!
Home repairs/ improvement: my house is 120 years old and needs a lot of work. I put ~$10k into it each year. In maybe 5 years the major issues will be handled and this cost will be reduced quite a lot.

[snacky]

How many more years do you anticipate your child being in daycare? Can you sell your house and move closer to the daycare? That way you will only have the bus expense for commuting. Putting 10k in your house a year is way too much and the problems could continue.
Your car is also too expensive for you. You should consider getting something cheaper and bigger.

+1 I was going to make these same suggestions!

I think you could shave some off your spending too!

Current expenses:
Entertainment: $300/ month for family gym membership, Do you need a family gym membership for you and two kids 10 and under? I think you could save on this by just getting one for you!
the membership includes swim lessons & activity classes; we go there a few times a week. my older boy is smart and will go far, but I won't be paying for his university. I figure if he can get certified as a lifeguard in his teens he can start out with decent job prospects. so the membership is worth it, at my current income level.
outings & events, gifts, booze, meals out. I could cut this in half if needed. I cook at home 95% of the time, pack lunches for all of us, use the library, etc.
Phone & internet: $130/ month. No cable or Netflix or anything like that. This is very high! I would shop around for your internet or get a lower speed. I do not know Canada's market but I would think you could get it at least for $40 a month. Also you should look into a prepaid phone plan costing about $40 a month as well Canada is known for terrible net/ cell prices; I'm fairly confident that I have the best deal I can get for what I need. I pay less than most people I know...
Daycare: $1,000 per month – this is non-negotiable; I pay a lot to have my kid in a daycare that can handle his needs.
Travel: my family lives in a distant province, annual visits with them cost me $2k or so. This seems very high. I assume that this is not a drivable distance to visit them but around $600 for round trip airfare each seems high. I would look into booking these at off peak times or on discount airlines. I would also look into using credit card rewards to get these free!
these trips are so expensive! we drive, 3 days in the car each way and a week in a hotel when we're there. can't camp with the kid and no room at my parents' house for us. also while we're there I cover all my parents' food costs, etc. it's nuts. next time i'm planning a trip i'll post a thread to see if I can crowdsource a more affordable way of doing things.
Home repairs/ improvement: my house is 120 years old and needs a lot of work. I put ~$10k into it each year. In maybe 5 years the major issues will be handled and this cost will be reduced quite a lot.

[mturn]

1.   My parents are in terrible shape and no longer working, with no income. I need to be helping out. They are in their early 60’s so too young for most senior income support programs. I was thinking of buying them a small house or condo so they could sell theirs and live on the proceeds, but that isn’t a financial reality for me at this point. I need to find a way to pitch in.

So it sounds like your house might not be worth all the repairs. Could you sell and move? Would you consider accomplishing two goals at once by finding either a duplex or a house with a "mother-in-law" suite? I don't know what real estate is like in your particular area, but I've been looking at a lot of houses (in Michigan) and am finding that duplexes are a great deal. Plus, once your parents are no longer able to live with you and need an actual nursing home, you can rent out the other half of the duplex, which would most likely cover your mortgage.
I also don't know how ill your parents are, or what the relationship with them is like. could your parents babysit one of the kids and then you could still take the one with special needs to daycare? I imagine that would lower the daycare cost.

[Dee18]

As a fellow single parent I think having helpful neighbors is worth a lot.  It's great that you have developed those relationships. But will you be able to get out the money you are investing in improvements when you sell?  Consider that carefully each year.  I also understand why the gym membership is so important.  For a future trip to visit family it might be worth getting a credit card with a big rewards bonus that could fund some hotel nights or even airfares. Since you know you will need additional money in retirement, you need to make that a priority.  You simply cannot afford to help your parents financially now. 

Mostly, congratulations on juggling so much!

[mandy_2002]

Daycare: $1,000 per month – this is non-negotiable; I pay a lot to have my kid in a daycare that can handle his needs.

Specific Question(s):
I have a lot of conflicting obligations and goals.
1.   My parents are in terrible shape and no longer working, with no income. I need to be helping out. They are in their early 60’s so too young for most senior income support programs. I was thinking of buying them a small house or condo so they could sell theirs and live on the proceeds, but that isn’t a financial reality for me at this point. I need to find a way to pitch in.

Daycare - This is obviously a necessity, especially with a special needs child.  Is this not a cost that could/should be split with the other parent?
Parents - I can only go off my parents here, but if my mom was in a similar situation, I would let her figure it out.  She's an adult, and her horrible relationship with money is not my responsibility to mitigate.  Are they able to work?  There are a lot of jobs out there with a small income that a 60 year old should be able to do.  (Hospital helper and Wal-Mart greeter come to mind, possibly retail cashier if speed isn't an issue.  Many of the volunteer jobs at a hospital can turn into paid positions for people who can do the work.  This is how my mom got her first paying job after completing her court mandated volunteer service for embezzlement charges.)

[snacky]

howdy! thanks for the responses.

the ex pays child support + 1/2 of daycare, which is all rolled into the amount in my first post.

my parents live far, far away, which we all prefer, so there will be no co-housing situation. it's really for the best.
they bailed me out a few times when I was really struggling, plus that whole housing and feeding me for 16 or so years thing, and I feel like I need to do something to give back. it's important to me, and I want to model generosity to my kids, so...
my dad still works a few hours a week, and will for as long as he can. my mum has no employable skills and they live in a high unemployment area - it doesn't seem realistic to expect her to get a job at this point.


this month I have $800 leftover, thanks to a 3 paycheque month. if you were me would you put it on debt, investment, or...?

[snacky]

update:

As I tend to do, I started out replying to suggestions with reasons they won't work. then I went away and thought about those suggestions, realized that I am stupid and you are all right.

new plan: buy a cheap car for cash, sell the current car. eliminate the monthly payment. I have a lead on a 2003 outback, which should do what I need it to do. (what I need it to do is be cheap and reliable)
that should pay for itself, in terms of no more car payments, in 8 months.

also, I bought my parents a (used) laptop so my dad can do some work. he's only had it a week, but has gotten several additional hours of work done thanks to it. I'm calling it their xmas present and considering my filial duties completed for 2015. I can revisit the ways I can support them in the new year.

new thing: there is a house near mine for sale. it's size is a better fit for my family, but it needs a lot of work. it's about where my current home was when I bought it. my current home, if I put a few grand and lots of hours into it, could be rented for $1k a month, with the tenant covering utilities, so I would have only insurance, tax, and mortgage to cover. that's $350 a month net profit, $800 a month of profit once it's paid off in April 2017. there are big-ticket repairs that need doing, but none are urgent.
the new house's mortgage would be $550, plus my HELOC would be tapped out for the down payment, so that would need to be repaid, too. it would be very tight for a little while.
would you go for it, or keep saving?

[mozar]

So you want to buy another money pit? Get your ish together, before you buy more real estate.

[galliver]

What are the prospects of bringing your parents out for a visit instead of going to visit them? Is there room for them to stay with you (can you give them your bed or your+older boys' bed and sleep on the floor/couch/airbed)? Even if you have to fly them out it might be cheaper than time off+wear and tear on car+gas+meals+hotel (though I would consider having them drive or putting them on bus or train first, depending on their health situation).

And/or maybe you can cut the visit to once in two years; there's actually no law that one must see parents/grandparents every year. The kids are pretty big (not like they're babies and change a ton in a year) and you can Skype.

My parents immigrated to the US when I was 6 and my sister was 1 and then had another girl 2 years later. My paternal grandparents flew out every so often, we probably saw them every year or two. My maternal grandparents weren't healthy enough for a transatlantic flight so we only saw them ~every 3 years when we visited. It wasn't ideal, but everyone managed, and we had a decent relationship with grandparents (and we didn't even have Skype until the last couple years!).  Not as close as if they lived down the street or a few hours away (ok for weekend trips), but it doesn't sound like you really want that anyway. Which is valid; everyone's family is different.

[snacky]

@mozar: you're right, it's stupid. I just loved the idea of a little more living space and some privacy.

ok, help me prioritize. these are my options for where to put money that's leftover at the end of each month:

federal student loan, ~$30k owing, 6%, the government pays about $100 towards this each month as repayment assistance, I pay the rest.
hydro loan, $7k owing, won't be payable until the new year but will be at 8%
investment account, currently has $11,000

I have $2,300 in savings that can be put towards one of these, and it looks like i'll have another $1k at the end of this month. (thanks, no-spend November!)

My other option is to use my currently untapped HELOC. It's my emergency fund, basically. If I want to use it I can take up to $25k for prime + 1%. My current plan is that I'll use it to pay the hydro loan, then pay it off as quickly as I can. A better interest rate, and most of the available credit will still be there if I need it.

Thoughts?

[SunshineGirl]

Hi, snacky!

You seem like you've got a good head on your shoulders, so I have faith everything will work out just fine for you. What jumps out at me is your impressive close-to-paid-off home that needs major work and is in a bad neighborhood, but it is working for you now. Also that your kids will need daycare for four years minimum, which is right about when your house will be paid off.

Bad neighborhoods seldom turn into good ones (this is a generality, of course - you might get lucky), so if I were in your shoes, I would not put much money into your house. Instead, I would detail an option/plan for moving in 4-5 years. You could do option a, in which you keep the house and rent it out, and an option b., in which you sell the house. (I would opt for selling, just due to the neighborhood and the condition of the house.) Try to envision where you want your family to be in 5 years - really paint a picture - and then see how to make it happen. Maybe banking all the house proceeds and renting in a great neighborhood is the way to go? You'd have a nice buffer in the bank that way, which buys a lot of easy breathing.

I'm happy to hear you've got a good union job with a pension. That's something you'll want to hold onto, for sure, especially since you like it.

I feel like I'm rambling. I guess my point is think in five-year increments. For this current five years, this is how I want my life to look. For the next ten years, this is how I want my life to work. And here's how I want it to look once the kids are older.

I would NOT use your equity line of credit except in dire circumstances. 

[Gerard]

As a fellow Canadian I assumed when you said "bad part of town" you meant "bad reputation and thus low cost", not "terrible awful things happen every day," so you might not be as eager to move as posters assume. And if you understand your money pit well enough to know when it'll stop being one, that's awesome. Renting it out and buying a new house doesn't sound like a good idea.

I would agree with other posters that you might cover a trip out east (I assume it's east? To Atlantic Canada?) from flyer points through credit card sign-up bonuses and the like. The three day car journey sounds like it's probably rough for all of you (my PDD son would not enjoy it!), and ideally you want that car to last a while (even tall kids can fit in a fairly small car once one of them can go in the front and one in the back).

I would definitely put new money toward paying off that hydro loan. Not many investments are guaranteed to give you an 8% return, post-tax!

[tomita]

answer about the car: my son is leasing the same car as you have/ same model/year and pays 150/mo for 2 years.
I think that's cheaper than what you pay now
may be worth looking into

[snacky]

thanks for the feedback, folks!

as soon as my Fit has some bodywork done (paid for by insurance; I was not at fault) I will sell it for what I owe, or maybe more. if I get $1,000 more than I owe it will be like Christmas. either way, the "new" car cost $3,000 and is $500 cheaper to insure each year, so it will pay for itself fairly quickly. that's barring any major mechanical problems, but it's been well cared for, so i'm hopeful.

Sunshinegirl & Gerard: the neighbourhood is rough, but it's close to everything and good for transit, plus I have a gigantic dog. And all of the more serious stabbings happen a few blocks away. ;) Once a few more big things are done it should be good for the years that remain before my kids are grown. I daydream/ waste time online looking at houses with more space and nicer amenities, but what I have is affordable and meets our basic needs. so I will stay where I am for the next decade or so, then re-evaluate and see where I want to be.

My CC rewards give me substantially reduced food costs - I have a superstore card, and get $20-$30 in free groceries each month. Before I had an air miles card, but it took forever to earn anything, and their "free" flights had enough fees that travel still cost a lot. do any Canadians know of a better deal than my current, for rewards cards?

I will put aside money each month for the Hydro loan, until it becomes payable. After that do I start putting money in my investment account, or pay off the student loans? the free money I get to help with repayment makes it a less straightforward decision.