Author Topic: Drowning in Debt  (Read 13750 times)

tracy

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Drowning in Debt
« on: September 10, 2012, 08:09:29 AM »
I read many of the posts and reader case studues and cannot believe how crappy my husband and I are at handling our finances compared to most people. There are many reasons for this - 5 months of bedrest with twins, lost job, dogs with cancer, etc, but I know they are excuses and if we had been more in control of our finances in the first place we wouldn't be in this situation. I am fortunate to have found this blog through a mutual friend of MMM. My husband and I have made numerous mistakes, but over the last year I have learned a great deal,  paid off  a lot of debt and made some head way. We are still a financial mess, having previously bought into the consumerism/living above our means... and could really use some advise. I am not even sure where to start so please let me know if I forget anything.

Our income - husband 54k, me 45k  (we both work now , but I stayed home with twins until they were 3 1/2 years old. They are 8 now.)

Vehicles
- 96 Ranger - bought new in '96. husband needs a truck for landcaping related job and is paid off so we need to keep it
- 2006 Sienna - minivan is great for traveling  w/ 2 kids and 1 dog to visit family (the other dog recently passed away), but we both hate it. Bought used in 2008 and it will be paid off 12/13 - $335/month payment. (I know we shouldn't have financed a car.) Our other car, which was paid for had a cracked head gasket and it cost much more to repair than it was worth, but I know we should have saved enough to pay for a car w/out financing

Credit Card Debt
- 28,000

Student Loan
- 2,000

Mortgage
- 1,650 (It is a 10 year arm, which I also know now was a huge mistake.) We owe $289,000. On the bright side the house is in a great neighborhood that has retained it's value during the economic downtun. If we sold now we would probably break even. We have thought about selling, but once the market goes back up, we will be in a position to make a lot more money. There is also an HOA fee of $105/month.)

401k - we only contribute $250 /month, but we both work for the government and have pensions

Child care - We only pay for 1 day/week of after school care and summer camps while we're at work - $3500/year

Groceries - $700/month

Misc - sport fees for sons, gas for cars, utilities, insurance, dr. visits seem to take the rest. We are tracking our monthly spending and after paying bills, there is not much left.

We have gotten rid of cable, bring our lunches to work, we don't eat out. Is there anything else we should be doing. Our big question is whether to sell the house now or wait until the market picks up, but any other advise woudl be greatly appreciated.

palvar

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Re: Drowning in Debt
« Reply #1 on: September 10, 2012, 08:44:56 AM »
Breaking down all of your expenses on a monthly basis might be best. 

Are you adding to the credit card debt now?  Can you further breakdown your misc expenses?

James

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Re: Drowning in Debt
« Reply #2 on: September 10, 2012, 08:52:05 AM »
Congratulations on the changes you have made, and I'm sure there are lots of other recommendations we can/will make.  But before doing that, I think it's important to set out what you are hoping to accomplish.  What are your short and long term goals.  Are you hoping to just live less of a consumerist lifestyle?  Are you going for the full MMM makeover?

Obviously with that much credit card debt you should be in full emergency mode anyway, have you read this post?

tracy

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Re: Drowning in Debt
« Reply #3 on: September 10, 2012, 09:04:17 AM »
We have not added to the debt in almost a year and have cut up most of the cards. Here is a more detailed monthly breakdown.

Mortgage 1650
Car payment   335
Car insurance   85
Car Tax   25
student loan    50
Electric   150
Cable   0
Sewer   30
Water   30
Trash   25
after school care   160
summer camps June-August (while we're at work) -1000
HOA   105
Phone and Internet 80      
Groceries   700
Boys Lunch 120
School (PTA, supplies, field trips) $15
car fuel   150
Car. Main   150
Pet Med.   20
Pet Food   30
Vet bills   20
Rx Us   30
Vitams and other   20
Doctors visit   50
Beer, wine, etc   20
netflix   16
Clothes    25
   
Credit Cards   
SECU    100
Amex    100
lowes   130
Bank of AM 320
citi           200
chase     250

tracy

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Re: Drowning in Debt
« Reply #4 on: September 10, 2012, 09:16:48 AM »
Yes, I read the post, Your Debt is Your Emergency. That is why we're debating on selling the house. We don't have a lot of choices with that option because we need stay in the same elementary school district. We live in a small town, pop. 200,000, and there are only a few good schools.

The first short term goal is paying off all of the credit card and car debt. Using the debt snowball calcualotor, we can do that in 30 months.

I would like to hang onto the house for about 5 years then downsize. My sons will be in middle school by then and we'll have a larger area to look at for housing. When the debts are paid off, we'll be able to contribute the amount that was going toward them to our 401ks.

Retirement seems a distant dream at this point, but my husband and I are both fortunate to have flexible jobs where we're home with our sons by the time their home from school. We moved from Northern Virginia, knowing we were going to be making a lot less, but it is much less stress, housing is cheaper and our communte time went from an average of 90 minutes one way to about 15 minutes. I was also able to stay home with them for 3 years.

smalllife

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Re: Drowning in Debt
« Reply #5 on: September 10, 2012, 09:33:52 AM »
I don't think selling the house is the way to go.  You'll lose money by the time you pay all of the fees and find somewhere else to live.

Your grocery bills seem high (especially since it doesn't include school lunches!)  You could easily cut that in half.

I would consider selling the van and getting a smaller sedan for everyday use.  That would eliminate one debt payment which you could then put towards the credit cards. Work the numbers and see if you would come out ahead if you simply rent a van the couple of times a year you need one.

Perhaps you can look into biking to work if you want to get hardcore on some of the cards?

Richard3

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Re: Drowning in Debt
« Reply #6 on: September 10, 2012, 09:51:26 AM »
Unless you're getting really good matching or something ditch the 401k contributions. 18% on a credit card is way better than anything you'll get from investments.

Beer and netflix can go if you're in that much debt. Every dollar counts.

How often do you travel and how far is it that you need the van? It seems like selling it could be a win.

tracy

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Re: Drowning in Debt
« Reply #7 on: September 10, 2012, 10:06:18 AM »
I want to thank everyone for their help and suggestions.

You're right about the 401k so that can go.

Beer and netflix are my husbands expenses and that is a huge reduction from before. He is getting better at frugality though, so this is something I'll work on. He is also the cook and does most of the grocery shopping. Looking over our grocery bills though, I don't see anything that extravagant. We shop at Walmart and Costco, but could probably shave something of the bills.

We have tried to figure out what to do about the car situation. We both need vehicles because my husband is usually hauling plants, wood, etc with it and we need another car that fits 4 plus a dog. I can't bike because I have to rush from work at 2 pm and just barely make it to the pick up line to get my sons after school. I'm not sure what the resale value would be on the Seinna, but we still owe about $5k so I'm not sure we would net enough for something else.

James

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Re: Drowning in Debt
« Reply #8 on: September 10, 2012, 10:12:33 AM »
I agree with smalllife, groceries need to be cut quite a bit and van should be sold and something purchased that will get >30mpg and carry what you need to carry.  Lots of posts here about that, but feel free to ask if you need specific advice.  Getting that payment out of the way and lowering gas costs will save you a ton, and you will save some in insurance also. 

You definitely have a lot you can still cut, so I would keep making a sweep through that list of expenses every week and picking some new areas to attack.  Are things like electric as low as they can go?  Have you looked at your insurance rates and researched saving money there?  Boy's lunch is a pretty big expense, can that be lowered?  Cheaper pet food?  Online pet meds?  It's hard to know how much you have looked at these things and you can't focus on them all at once, but just make sure you review all these things frequently because your values will change as you get further away from the consumerist lifestyle you have left.  We have found things that we weren't ready to do when we first became frugal became obvious after a while.

I agree with Richard about only contributing up to the match for the 401k.  If no match, then no contribution.

I suggest paying off loans by highest interest rate rather than debt snowball (not sure if that is what you meant), but that is a personal decision.

I think retirement was going to be very painful at the direction you were headed.  You have pulled back from that future and have set yourself up to have a good retirement.  No, it might not be especially early, but you can be out of debt in a year and start building up savings after that.

jp

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Re: Drowning in Debt
« Reply #9 on: September 10, 2012, 10:29:12 AM »
By my calculations your total monthly expenses are about $5250, which is certainly high IMO.  But your total net income should be around $6500... if you paid everything extra toward your debt and kept your same lifestyle, you would be out of debt in a little less than 2 years.

To me, the obvious thing is your grocery bill.  Cut that in half and your payoff is down to 18 months.  Drop the Sienna and get a cheapo car and you are done in a year.  If you get any money out of the Sienna, you could be done in a matter of months.   

Flynlow

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Re: Drowning in Debt
« Reply #10 on: September 10, 2012, 11:27:27 AM »
I read many of the posts and reader case studues and cannot believe how crappy my husband and I are at handling our finances compared to most people. There are many reasons for this - 5 months of bedrest with twins, lost job, dogs with cancer, etc, but I know they are excuses and if we had been more in control of our finances in the first place we wouldn't be in this situation. I am fortunate to have found this blog through a mutual friend of MMM. My husband and I have made numerous mistakes, but over the last year I have learned a great deal,  paid off  a lot of debt and made some head way. We are still a financial mess, having previously bought into the consumerism/living above our means... and could really use some advise. I am not even sure where to start so please let me know if I forget anything.

From the tone of your post, it sounds like you are feeling overwhelmed, I'll try and tailor my reply appropriately.

First off, congratulations!!!!  Rather than CONTINUINING to drown in debt, you are trying to do something about it!  It sounds like you already recognize a number of mistakes and are trying to learn from them (cut up CC's, want to pay cash for the next car, etc.).  You say you are crappy at handling finances compared to most people, I disagree...I would say you are average at finances compared to most people (general population), and crappy at handling finances compared to the average member of the MMM forums.  Again, this is a lucky thing, not a reason to be ashamed.  Look at it this way, would you rather be the smartest person in a room full of stupid people who can't teach you anything, or the dumbest person in a room full of geniuses eager to share their knowledge with you?  While the first is undoubtably better for your ego, the second option will probably help you grow much more!

Reassurement and cheerleading aside, I came up with ~$6200 in expenses, rather than $5250 like jp (possible the -$1000 for summer camp was misinterpreted?).  Either way, there are definitely gains to be made.  First question:  how on board is everyone in your family, and how commited are all of you to sacrificing in the short term for excellent long term results?  It can very tough to get everyone on board, sounds like you are making progress though.  If $20 in beer and $16 in netflix is necessary to maintain family harmony, $36/month is probably money well spent.  If there's room to wiggle, maybe you can cut it in half, to online-only netflix for $8, and say a case of good beer for $10-15. If you're all stars, cut it entirely and add it back in when you're out of debt (if you still want to at that point).  The food budget should be able to be cut down by at least $100-200, minimum.  Try to challenge you food-oriented spouse to make their creations for less than $5/person/meal the first month, then ramp it up to $3/, then $1/ if you're feeling ambitious!!!  Their challenge is to make it cheap, quality, and delicious.  Doing it in steps can help avoid too much shock at once.  See if your kids would be happy bringing their lunch from home.  I actually liked PB&J, goldfish crackers, and some grapes from home much better than what the school gave me. 

On the car side, I actually don't think selling the van is the first step to saving money here.  Presumably it's reliable, and as you said, it's your cargo hauler.  MMM has one for much the same purpose.  $335/month for 16 more months is just over $5K, and the car is probably still worth that.  And presumably the loan is <5% APR, so it's worth tackling the CC debt first.  If it's in good shape and not giving you any trouble, I'd leave it alone (for now).  If you have spare time and want to tackle everything at once, then absolutely shop around, both for what you could sell it for, and what you'd want to replace it with.  Why do you say you hate it?  Is it uncomfortable or some other quantifiable problem, or is it an intangible feeling, anything from it feels cheap inside to simply not wanting to be a soccer mom in a minivan.  All are valid, but the important thing is to be honest in your response.  A great long term replacement, in my engineer opinion, is a station wagon.  I love them, but then engineers have no sense of style to speak of.  I love wagons for their car like dynamics and fuel efficiency, and their truck-like cargo capacity.  I believe Honda and Toyota made Accord station wagons until very recently.  Sadly, most of the US is style conscious and currently infatuated with CUVs....which were the replacement for the previously stylish SUVs.....which replaced minivans......which replaced....station wagons.  Anyway, an Accord wagon in good shape with a 4cyl is the 2nd most perfect family vehicle in my mind (1st is an 80's Volvo boxy wagon with a Mustang GT drivetrain swapped in, but I digress). 

That leaves the Ranger...and I'm not sure why that is not up for consideration.  You say you need it for a yard business side hustle, all well and good...could you clarify?  Does your husband haul a trailer with it?  Does he put mowers in the bed?  Something else?  If this is a weekend-only thing, could you put a trailer hitch on the minivan?  If its the truck bed issue, could you put a hitch on the minivan and buy a small utility trailer from harbor freight (or used off CL), assuming you have room to store it?  If so, and you could consider selling it after all, possibly replace it with a small, fun hatchback to ease the loss of "his car", or since it was a 2-seater and completely impracticle anyway, get a Miata or MR2 for <$5K and have a sporty runabout that's fun to drive and will net 30+mpg on your commute.  Practical and you get to be the cool wife. 

For commuting, do you guys work close together?  Could you carpool in, and since you have to leave early, have your husband catch a ride home from someone else?  If you work far apart, but have coworkers nearby, can you carpool with them? 

Lastly, and this is the killer....the CC debt.  Pay it down fast.  The 401K money towards it was a good suggestion, just remember to "pay yourself back" when you're out of debt.  Put a big chunk in the 401K or seperate savings account to make up for the time when you weren't saving.  All else being equal, I'd pick the card with the highest interest rate, and pay everything I could towards that, with the minimum towards the others.  When that was done, close the card and move on to the next.  Is there anything you guys don't use anymore (furniture, kids bikes that have been outgrown, other stuff around the house) that you could sell to help pay off the debt?  Certainly if you sold a vehicle and netted $$ trading to a different car that could go towards it, or the fuel savings could as well.  But knocking the credit card debt off nets you an $1100 improvement in your monthly budget, so I would think that is absolutely the top priority. 

Do that, get the cars paid off and sorted out, and trim a few other monthly expenses, and you'll be there before you know it.  A year from now, you'll be one of the geniuses educating the next person entering the room :).

jpo

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Re: Drowning in Debt
« Reply #11 on: September 10, 2012, 12:04:34 PM »
Your kids should be bringing their lunches. Not only will it be more healthy and start a frugal habit, but it also is much more cost-effective: Cost of Sandwiches

$120/2 kids/20 school days per month = $3 per lunch

You could feed them each 6 PB&J's a day for that cost.

Jamesqf

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Re: Drowning in Debt
« Reply #12 on: September 10, 2012, 12:42:41 PM »
I want to thank everyone for their help and suggestions. can't bike because I have to rush from work at 2 pm and just barely make it to the pick up line to get my sons after school.

Humm...  Could you explain why your kids have to be picked up, instead of riding the school bus/walking/biking?

If hubby really likes beer, you might consider getting him into brewing his own.  Don't do it myself, but I understand from a neighbor that it's less expensive over time, and he does produce stuff that's much better than mass-market commercial.

PS: A city of 200,000 is NOT a small town!

James

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Re: Drowning in Debt
« Reply #13 on: September 10, 2012, 06:37:34 PM »
PS: A city of 200,000 is NOT a small town!


I chuckled at that also, I'm from a town of 8,000, and we are the largest town for 60 miles in any direction.  :)


Just different perspectives.

Paul der Krake

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Re: Drowning in Debt
« Reply #14 on: September 10, 2012, 07:44:37 PM »
Ex-Londoner here. 200,000 is a borough. *ducks*

Anyway, over the years I have gone extreme ways to save on food. $700 a month? Like other people said, you can easily cut that in half. Now like some people have suggested, sandwiches are a cheap option. The hungry rowdy youth that I am spends less than $90 a week on food, and I eat way more than what the average adult should.

Cost of sandwiches is:

- sliced wheat bread from Kroger (1lb): 88 cents
- sliced Virginia smoked ham from Sam's club (2lbs): $6.75
- sliced cheddar from Sam's club (2lbs): $8
- mustard from Kroger (8oz): $1.09

That's a LOT of sandwiches. Buy your sandwich meat in bulk. If your husband does most of the shopping, make sure he knows about those MVP cards. They do save a ton in the long haul.

Find out what your family consumes most, and figure out which store sells it for cheapest. For example, I drink a ridiculous amount of milk and buys it from Sam's club because it's $2.79 instead of $3.50+ elsewhere. I buy my vegetables from Kroger because the ones I eat most are consistently cheaper there. Write your groceries down and plan your purchases in advance to save on trips to the stores.

Best of luck to you!

tomsang

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Re: Drowning in Debt
« Reply #15 on: September 10, 2012, 09:21:09 PM »
Balance sheet approach would be to list out all your assets, liabilities and the corresponding interest rates. If your credit cards are high interest. I would take a 401k loan out at 4.25%, rebalance portfolio to ensure money is coming out of low risk investments as you are guaranteeing payment. Pay yourself vs. VISA. then your networth is growing at your highest interest rate cc vs 401k bond fund. This only works if you are mustachian and don't go out and spend money because visa is paid off. I would continue paying into 401k during this process to save taxes and stay poor cash poor.

Jamesqf

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Re: Drowning in Debt
« Reply #16 on: September 10, 2012, 10:42:07 PM »
PS: A city of 200,000 is NOT a small town!

I chuckled at that also, I'm from a town of 8,000, and we are the largest town for 60 miles in any direction.  :)

Just different perspectives.


I wouldn't even call it perspective.  There's a really simple definition of a small town: if you've lived there more than a couple of years, you know everyone.  And you know all their dogs by name, too.

(Though if you're me, you know all the dogs, but still get a bit confused on some of the humans :-))

simonsez

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Re: Drowning in Debt
« Reply #17 on: September 11, 2012, 12:36:36 PM »
Federal government worker?  CSRS or FERS?  If CSRS, definitely stop the 401k contribution.  If FERS, keep it at 5%, hard to be a 100% return in the form of the employer match.

twinge

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Re: Drowning in Debt
« Reply #18 on: September 12, 2012, 03:54:05 AM »
Quote
Looking over our grocery bills though, I don't see anything that extravagant. We shop at Walmart and Costco, but could probably shave something of the bills.

This is what stood out to me where your thinking might need help.  It's not going to appear "extravagant" because in contemporary culture extravagance seems normal.  But many people on this board consistently spend about $400 month for a family of four (some do even better) and that often includes lunches/beer/wine etc. and isn't supplemented by restaurant food. Ours is a family of four (including a voracious pre-adolescent boy) in one of the highest cost of living areas, with both parents working so not a lot of extra time, and with the attention we keep it at 400 month. BUT any time we haven't paid attention it drifts up to 700 (all inclusive) and it still doesn't *seem* like anything extravagant even though we are spending near twice as much! So I've found it takes focused attention to see the patterns of differences. 

The key factors I've found when we pay attention vs not:

1. When we pay attention we don't buy any prepared foods- (and by this I mean things that many people have forgotten are prepared foods like bread and boxes of cereal, not just prepared meals).  It saves us a lot of money when we get our primary grains from brown rice, quinoa, oats etc. and make our own bread as needed for kids' lunches and whatnot.  It also prevents our kids from eating too much bread and cereal at the exclusion of other healthy foods.  At Costco you can get a bag of quinoa and be set for a long time!

2. desserts/snacks--when we pay attention we eat fruit, pop popcorn or make treats from scratch as a family.  When we don't we end up buying some snacks like goldfish crackers or treats or ice cream or something like that.  (it's really the same point as no prepared food--but  treats exist in a different portion of my mind than regular food since we don't eat them every day).

3. When we pay attention we  make healthy inexpensive foods (e.g., beans, greens, eggs, tofu, rice and whatever vegetables/fruits are abundant and cheap ) a  larger portion of our diet and other things like fish, meat, olives, cheese, special fruits more supplementary and occasional.

It seems like when we really pay attention to our food bills we also are paying attention to our health.  When we don't, there's an unconscious drift towards both greater spending and less healthy foods.

Just our experience.  We don't use coupons other than the occasional Costco coupon that comes in the mail for something we would buy anyway (not too often!).

tracy

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Re: Drowning in Debt
« Reply #19 on: September 12, 2012, 06:11:16 AM »
Thanks so much for all of the great advice. Knowing that other families can make it on $400 has motivated us to go through the groceries we have on hand to see what we're doing wrong. One thing we noticed right away is that our pantry and freezer are pretty stocked. I think we tend to over buy on staple items that we may not eat for several weeks/months. We're going to go through everything we have, before buying more. We tend to eat fairly healthy, but part of our food budget is organic produce and yogurt from the local co op and nitrate free luch meat. I have a hard time justifying giving my children hormone/pesticide laden food, even if it is less expensive. That said, they love school lunch and we have been lazy about letting them eat that garbage. They took a packed lunch today and we're going to make that a more frequent occurance.

My sons can't walk or bike home because school is about 2 miles from our house down a busy six lane road. The bus gets to our house before I do so they can't take the bus.

Our take home pay after taxes, insurance and pension is 5900. My husband got a new job last year with a 30% salary increase so that has helped immensly and we can now at least make our bills without having to use credit and have been slowly paying them down. A mandatory 6% is taken out of both of our paychecks to go to the Local Government Retirement System (LGERS).

Amazingly we still have good credit and have transfered all of our cards except 1 to 0% interest cards. We'll have that rate for 15-18 months depending on the card and hope to have everyting paid off in that time. The one card with interest is at 9.9 %.

The small town is a matter of perspective -  I'm from the DC area so 200,000 is small when you're used to several million.

My husband and I work on opposite sides of town and part of the deal I made with my boss to leave at 2pm 3 days a week requires that I get to work at 6:30 am. My husband takes the kids to the bus at 7 am so we can't commute together at this time.

My husband is a horticulture/gardening instructor and uses the truck almost daily for his work.

Thanks again for the great input and the motivation help. Just reading through everyone's suggestions and other posts has been a huge motivation for me.

Gerard

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Re: Drowning in Debt
« Reply #20 on: September 12, 2012, 10:00:42 AM »
Congratulations on your decision to "eat the freezer"... I have to do this every now and then or else I'll squirrel away tons of useless stuff. And it's fun to try to make something good from limited choices.
I'm assuming if your husband's a gardener, you're growing a lot of your own produce. Could you possibly grow more, or preserve more of what you do grow? For me, one of the huge advantages of homegrown produce is that the veg/fruit part of your meal is so damn good that I'm satisfied with smaller amounts of the other expensive stuff on my plate.

twinge

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Re: Drowning in Debt
« Reply #21 on: September 12, 2012, 10:38:44 AM »
I'm with Gerard on the garden.  Ours has been such a boon and the freezer's steadily filling with enough tomatoes for sauce for the year.  I want to up the ante on preserving.

For what it's worth, our $400 mo grocery includes hormone free/organic choices--though we eat very little meat.  But we do get organic eggs, yogurt, milk for the kids etc.  For produce that isn't from our own organic garden we go by the dirty dozen/clean dozen list--we buy organic for produce that has the worst levels of pesticides and not for those that have the least.  The in the middle stuff we just make judgment calls.  For these things, it's worth it to research all possible sources because there can be wide variety.  By us, Costco has organic versions of many of the basics.

mechanic baird

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Re: Drowning in Debt
« Reply #22 on: September 12, 2012, 12:25:43 PM »
Don't get discouraged by the food bills just yet.. I know folks here are screaming "cut it in half". The reality is, to take the bill down by half will take some time to accomplish.. It's one single most difficult habit to break. But as long as you are making progress each month, that's something you should be proud of.

We went through this exercise earlier this year and it took us 4 months+ to cut down half. Not easy.

The most important thing we did was to always make a meal plan and try to empty the existing stock of the available food in pantry and freezer. Then, we try to buy only what we eat for that week. So imagine by the end of the week, both pantry and freezer and fridge shall be pretty empty. We eat mostly organic and very little meat. I think cutting out a lot of of animal based products have helped the bottom line.


alandjackson

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Re: Drowning in Debt
« Reply #23 on: September 12, 2012, 02:34:10 PM »
Sounds like an almost exact mirror of our situation 2 years ago (5 year 350/mo car loan, large credit card debits, barely cover all the bills, multiple kids).  Unfortunately, getting on track is really slow unless you figure out a way to earn more money or cut expenses significantly.  When I was in your place, getting the monthly cash flow in check had to come first.

My recommendation based on our experience:
  • 401k: This is going to be controversial, but I'd use the 401k contributions for a year or two to get debts squared away.  The freedom and stress relief was worth it for us. $500/mo reallocated to debt.
  • Car: You know this, but that $335 for the Sienna is killing you.  Almost 1.5 years left on the loan means you should ditch it pronto.  With only 2 kids (and a dog) a hatchback should be plenty but if I can't talk you into that, at least swap to a 10 year old Honda/Toyota mini van for cash.  $335/mo saved
  • House: It's tempting to stay in the house until prices recover, but that is way too much for you on your salaries.  You didn't mention the specific area, but can you find something more in the range of $150-$200k?  Most families now adays (myself included) have/had a much inflated view of how much house we need.  If not, I've often found that rental houses from individuals are a great deal and can keep you in certain school areas.  Also, not paying for all the extras like home repair, upgrades, taxes, etc can really help your misc category.  You have probably $500-600 that might be saved here.
  • Groceries: Many other comments suggested cutting back here.  You can probably target $400/mo or $100/mo/person for this.  The key is to figure out how much each meal is costing and make sure you aren't buying a ton of non meal (snack) stuff.  They add up really fast! $300/mo saved
  • Misc: Other things you might consider:  Make sure you're insurance policies have been shopped around recently.  Expensive sports should be skipped until finances are in order.  Biking some of the time and watching utility usage can lower those bills if you are careful and creative.

Those changes should give you on the order of $1500-$2000 / mo to pay down the student loan and credit card debt, which should be possible to pay off by early 2014.  Then you'll have those payments to add to savings.  They key is to go into emergency frugal mode with the cars/house/activities for the next 16 months or so to get on top of everything.

c

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Re: Drowning in Debt
« Reply #24 on: September 12, 2012, 07:25:49 PM »
I am always surprised at the cost of summer child care. When my niece was younger, my sister used to get together with a couple of mums from the school. Each of them would take a week off work and look after all the kids. It really helped her out as there was no way she could afford childcare otherwise. They would all put in a couple of GBPs for snacks, outings etc. It worked well for them.

Our grocery bill was really high too. It took us a long time to get it down, especially since my husband is the cook, does the shopping and wasn't (isn't) on board with the saving money thing. I slowly introduced meant free meals and whole, rather than processed, ingredients. Even changing up one meal a week had an impact on the budget. I would buy ingredients for, and cook, a meal that I wanted to eat. When he saw that it was something I enjoyed and so did he, he was much more open to it and started buying and making similar meals.

Cable, home phone, Netflix etc were also my husband's "domain". Getting rid of cable was a major deal for him and you guys are already there. We also used to have the more expensive Netflix, now we do streaming only and get Red Box if we want to watch something on a disc, which we do maybe once a month now.

All these changes are big changes and so hard to make, but once you do it's hard to imagine you lived any other way.

ShanghaiStashing

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Re: Drowning in Debt
« Reply #25 on: September 12, 2012, 11:16:21 PM »
A couple of notes, first the title of your post is actually incorrect! Congratulations! You're not yet drowning in debt.

In fact, you are saving in your pension, and have ~$750 to spare every month to pay off your debt in the current budget. At current rates you will pay off your debt in 3 years. I'm pretty sure this can be accelerated. As others have said I think you can, and likely will continue to do better and in this case the changes don't need to be dramatic (e.g., sell the house).

First, remain calm. While you are in debt you are making progress and you should feel good about this. Don't panic and think about your debt every minute of the day (having been in this situation I used to do this all the time!). You've already made most of the biggest moves (e.g., the 1% card) and now I personally think it is about fine tuning. The good news is the fine tuning you do now, sets you up fantastically well for financial independence once the debt is gone.

Second, others have detailed the grocery items, boys lunches, and other food related costs as ways to get rid of cost. I suspect if you can make some progress against all of these you'll save at least another $200-$300 per month which will allow you to shave several months off of your debt repayment schedule.

Third, the car is exceptionally expensive both in terms of operating costs and regular payments. You are a family of four and frankly you don't need a minivan unless you're a family of 7. You are currently have one expensive vehicle that you need for work and I'd recommend adding a more practical, fuel efficient vehicle. Ditch the minivan and trade it for something of equivalent value that gets better mileage and is paid for. This alone frees up ~$500 per month and will shave another several months off of your debt repayment.

If you make only the two changes above (neither of which will dramatically affect your life) you'll be able to pay off another $700 per month of debt and take your repayment schedule from 4 years to 2.

Sacadoh

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Re: Drowning in Debt
« Reply #26 on: September 13, 2012, 02:45:28 AM »
I wonder if you have acquired any other goods during your leverage phase you might be able to dispose of during your deleveraging phase.

Might it be worthwhile considering some of the "stuff" you have bought that you probably didn't need that you might be able to get rid of.

I second the other responders in congratulating you in your progress thus far.

Captain and Mrs Slow

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Re: Drowning in Debt
« Reply #27 on: November 15, 2012, 02:55:31 PM »
Quote

1. When we pay attention we don't buy any prepared foods- (and by this I mean things that many people have forgotten are prepared foods like bread and boxes of cereal, not just prepared meals).  It saves us a lot of money when we get our primary grains from brown rice, quinoa, oats etc. and make our own bread as needed for kids' lunches and whatnot.  It also prevents our kids from eating too much bread and cereal at the exclusion of other healthy foods.  At Costco you can get a bag of quinoa and be set for a long time!

@ Twinge if you don't buy cereal what do the kids eat for breakfast?

Also do you use a bread maker?



twinge

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Re: Drowning in Debt
« Reply #28 on: November 15, 2012, 03:30:48 PM »
Quote
1. When we pay attention we don't buy any prepared foods- (and by this I mean things that many people have forgotten are prepared foods like bread and boxes of cereal, not just prepared meals).  It saves us a lot of money when we get our primary grains from brown rice, quinoa, oats etc. and make our own bread as needed for kids' lunches and whatnot.  It also prevents our kids from eating too much bread and cereal at the exclusion of other healthy foods.  At Costco you can get a bag of quinoa and be set for a long time!

@ Twinge if you don't buy cereal what do the kids eat for breakfast?

Also do you use a bread maker?

We switched to hot oatmeal  for breakfast which is what I meant instead of boxes of prepared cereal.  My daughter eats oatmeal with  fruit and yogurt every day. My son now chooses 1 day a week that he eats cereal from a box-- and has oatmeal or dinner leftovers most other days.  Sometimes I make a big pot of steel cut oats, sometimes we use rolled.   My daughter adores it, my son accepts it.  We periodically drift away from it but I found if I just buy a lot less boxes of cereal my son has to make do with what's around. Oatmeal seems to fill him up better too.  The main thing is that we're not having to go out to the store constantly for milk--the yogurt seems to last longer and they need less. 

We use a bread machine for mixing/kneading/rising dough and then bake it in a cast-iron loaf pan in our mini-convection oven.  Sounds complicated but we had too many dough-run overs with the bread machine that were a pain to wash out (our son makes the bread and he likes to experiment :). We found when we use it to make dough we stick to our routine a lot better because it washes out easy and the cast iron pain is a breeze too--plus we don't cook in non-stick coatings then too.

capital

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Re: Drowning in Debt
« Reply #29 on: November 16, 2012, 11:46:27 AM »
My sons can't walk or bike home because school is about 2 miles from our house down a busy six lane road. The bus gets to our house before I do so they can't take the bus.
Are you in one of those badly-designed culs-de-sac-everywhere new towns where a big high-speed arterial road is the actually the only route to school, or is there side streets or a bike trail they could take? Does your town do Safe Routes To School? In my hometown, most kids walked to school, but the elementary schools were about a mile apart.

My parents also had me start staying at home alone until they got home at around age 8, and I never burned the house down or anything. They also had me start making my own lunch around first or second grade, so your kids are old enough for that if you're too busy to make lunches yourself in the morning.

Unless your market housing market is uncommon (i.e. a rapidly-gentrifying inner city neighborhood), planning on making money on housing "once the market goes back up" isn't a particularly good bet. You should treat your house as a place to live, rather than a high-return investment; a lot of young folks are having a hard time starting out or getting mortgages these days. As they're likely the ones who'd be buying your house from you, and they are unlikely to come up with a big pile of money for a house, housing prices are unlikely to spike up like they did pre-2007 any time soon. In the medium-term, the rates on that ARM are some of the lowest you'll ever see. The Fed says they will keep interest rates low until 2015, but there are no guarantees after that, so look at refinancing within the next couple years. Investigate your local market for what it costs to buy vs. rent in your neighborhood (it varies a lot throughout the country), and what smaller houses in your school area go for, too.

A decent-sized hatch/wagon is plenty big for 4 people and a dog. It's worth keeping your eye out for a well-maintained Pontiac Vibe/Toyota Matrix (the same car with different badges, basically a Corolla wagon) or Hyundai Elantra Touring. Even a Honda Fit or Scion xB might do the job, depending on how big your dog is. Here's a marketing image for how big the Vibe is:

Not quite a minivan, but sizable. Unless your dog is the size of a horse, it'd do the job. To figure out what you can afford to do car-wise, check what similar Siennas are going for on Craigslist; it looks like they go for $10k here even with a ton of miles, and more in better condition, which would leave you with $5000 or more in cash to buy something smaller with. I paid $5000 (plus new tires) when I bought a 2003 Vibe from a co-worker two years ago, after shopping around for a few months.

A few other line items to look at, at least until you get out of debt:
-Do you need new clothes for a couple years?  Can you get clothes for the kids at thrift stores? (Plenty of other folks have kids growing out of very nice clothes all the time, and they'll donate them).
-If you eat a balanced diet and are younger, there's not very much definitive evidence that vitamin supplements do much for your health: http://en.wikipedia.org/wiki/Multivitamin#Health_effects
-Likewise, the evidence shows that organic food isn't more nutritious than non-organic (http://www.nytimes.com/2012/09/04/science/earth/study-questions-advantages-of-organic-meat-and-produce.html?_r=0), and if pesticides are a concern, specifically target the foods that have the most pesticides on them to buy organic. Also, investigate what a local CSA share would cost for a similar amount of fruit/veggies.
-Do you do everything you can to keep your electricity use down? Turn out every light when you're not in the room, be very conservative with A/C use, only use one bulb in multi-bulb fixtures, etc.
-For car maintenance, do you go to the dealer? They're often more expensive, so ask around for a trustworthy local mechanic if you don't have one. See what stuff you can do on your own, like oil changes or basic stuff like air filter changes.
-Can you combine trips on errands so you use less fuel?

That debt is a big expense. Once you get it knocked out, you'll be in really good shape to save a ton of money.
« Last Edit: November 16, 2012, 11:57:06 AM by ehgee »

mm1970

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Re: Drowning in Debt
« Reply #30 on: November 16, 2012, 10:09:09 PM »
Well, I don't have any experience in this but...

I'd expect a well maintained Sienna to sell for around $10k from that era.  Just depends.

And you could buy an older ('03) Matrix hatchback for about half that.

On the food thing...you can bring that down, but it will take time.  Do it slowly.  Lots of good advice on here already.  We have a family of 3 at about 2/3 of what you are spending.  We eat organics also.

grantmeaname

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Re: Drowning in Debt
« Reply #31 on: November 17, 2012, 07:32:20 AM »
I'd expect a well maintained Sienna to sell for around $10k from that era.  Just depends.

And you could buy an older ('03) Matrix hatchback for about half that.
Of course, if you're willing to buy one 2003 toyota you should be willing to by another. An 03 Sienna here in my neck of the woods is around $5000, while an equivalent Nissan Quest or Chrysler Town and Country is like $8000. And even given all that, there's KBB's generosity to take into account. But after it's all said and done, I'm seeing a typical 03 Matrix for a couple hundred more than an equivalent 03 Sienna.

kisserofsinners

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Re: Drowning in Debt
« Reply #32 on: November 20, 2012, 12:33:36 PM »
Another note to help you with food costs:

Don't underestimate the power of portion control. I keep scoops inside my containers for many things. I also use the same plastic containers to bring in lunches for work so it's easy to eyeball it, but i started by weighing them.

Ask any kitchen manager, the only way to control costs is to use measuring scoops. Plate up your meals VS leaving a spread on a table. I might find that you really don't need to eat as much as you would without limits. There are also things you can do to increase volume and reduce weight by doing things like shredding meat or cheese. Remember that pre-shredded cheese always costs more per pound and usually dries out faster, increasing waste. It saves to do the work, but i understand you might be short on time. You will have to decide for your situation what is best.

Be creative about how you include cheese and meat. It's easy to pile it on or make it the focus of a dish. By reducing portions of just these items you'll likely see and improvement in cost. You can also reduce costs by making more calculated choices. I'm not saying buy "cheap meat", but there are cheaper cuts from the same animals you would have bought anyway. For example ground turkey breast is $2/lbs less than regular ground turkey, same farm, same animal treatment, just a slightly less attractive cut of meat.

When my family was really poor my mom pre-poured our cereal and left the covered plastic bowls out for us to eat in the morning to prevent us from eating a whole box in one sitting. Might be worth a try, too. :)

Good Luck!

swick

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Re: Drowning in Debt
« Reply #33 on: November 21, 2012, 09:28:26 AM »
Hi Tracy, we have a pretty good thread about shopping for food less/eating from your pantry over here:

http://www.mrmoneymustache.com/forum/throw-down-the-gauntlet/fire-drill!-skip-this-week's-grocery-shop/100/

Hope you'll join us:)