Author Topic: European Reader Case Study – Hair on Fire and husband got fired...any advice?  (Read 6748 times)

Chamar

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My first post, so first this...we are a family of four, sometimes six (husband and his two kids and myself with my two kids) and we live in Europe. I discovered MMM in January this year and from that moment on our life has changed for the better. We have a lot of debt, mostly because of divorce (both mine and his) and stupid decisions in our past (before our marriage). But we have made changes and are progressing: we started this year with a total amount of € 49.876,66 in debt and will end this year with € 37.370,03.

The reason why I’m posting our case is this: as of January 1st, 2015 my husband will lose his job which will change our financial situation significantly.  In our country if you lose your job you are entitled to unemployment-benefit depending on your work history. My husband will receive 70% of his income for the duration of 19 months. Of course husband’s first priority is to find a new job ASAP! However, where we live jobs are really hard to find right now and we think it will take some time before husband will find a job (but hope he will do so within these 19 months).

I will give an overview of our income and expenses as from January 1st as my question concerns our new financial situation.

Monthly income
My take home pay (net) € 2218,00
Husband’s income: € 1.150,00
Monthly tax return due to mortgage € 246,00
Total: € 3.614,00

Other income:
Annually in December, a 13th month: € 1.800,00
Annually in May: € 1.500

Our monthly expenses
Internet & TV: € 47,00
Mortgage: € 953,80
Taxes: € 65
Gas/electricity: € 200,00
Car insurance 1: € 35,00
Car insurance 2: 14,81
Car taxes 1: € 21
Car taxes 2: € 15,00
Gasoline for car: € 170,00
Groceries: € 485,00
House insurance: € 35,05
Water: € 28,00
Health insurance: € 259,14 (for husband, my kids and myself)
My cellphone: € 47,00 (unlimited texts, internet and calls)
Life insurance: € 6,04
Dog insurance: € 19,00
Sport daughter: € 15,00
Soccer son: € 15,50
Saving for annual expenses (Christmas, costs dentist/doctor, birthdays kids, car & house maintenance, taxes, etc): € 282,50
Savings:  € 50,00
Cellphone: husband € 35,00
Savings plan daughter husband: € 22,50
Contribution sports son husband: € 23,00
Life insurance: € 13,31
Debt 1: € 200,00 
Debt 2: € 300,00
Debt 3: € 100,00
TOTAL: € 3.511,82

Assets:
Emergency fund: € 2.000,00
One time only, severance pay husband: € 8.000,00 (net)

All Debts, current status:
My loan: € 8.839,58 (will be paid of end of January 2015)
His loans:
Debt 1: € 10.009,72 (sold a house under water, 0% interest, will be paid off end of August 2017)
Debt 2: € 12.520,40 (11,1% interest, will be paid off Oct 2026)
Debt 3: € 8.705,20 (0% interest payment plan for lawyer, will be paid off July 2020)

Important to know…
As you can see I have mentioned my debt, but haven’t included this in our expenses for our new situation. Since January this year I have been paying off this loan with € 300,00/month (minimum payments are € 187,50). Now I am paying it off with € 630,00/month. In December this debt will be
€ 7.713,96 and we will be able to pay this debt off in full at the end of January 2015 with my husband’s severance pay.
The reasons for this decision:
-   When this debt is paid off it won’t leave us with extra money as my husband’s income will decrease with exactly this amount (approx. € 600,00), but at least we will break even and won’t have the burden of having to pay off another loan.
-   I will be debt free and therefore will be able to put the mortgage in my (of our) name. That way we will be able to get a full tax return on the interest I have to pay for the mortgage. Now I can only get half back, as the house is also on my ex-husband name.
-   My husband sees this as a chance to make up for the fact that he hasn’t been able to contribute equally in our house-hold (he got paid less than I) and now due to the loss of his job he will contribute even less. So this is his way to ‘make things even’.

The debt to lawyer is accumulated due to ex-wife’s habit of starting fights involving lawyers. Officially this debt will be paid off in July 2020, but only if there won’t be any other costs added. So far we have paid off chunks of this debt only to see it increase again due to ex-wife’s tendencies. Besides that, we expect that the law firm will want to increase the monthly payments to at least € 200,00. They haven’t said this specifically, but we know that the administrator of this firm is not all too happy with the repayment plan my husband made with his lawyer. **Edit: today (Nov. 25th) we received an e-mail from the law firm stating that they would like husband to raise his monthly payment or pay € 5.000,00 February 1st, 2015. Exactly as I expected...**

The debt of 11,1% is a debt husband agreed to take upon him during the divorce settlement. However his ex-wife’s name is still on that debt so officially they both are still responsible for this debt. It would be best to pay off this loan as soon as possible as this is the highest interest loan husband has but….the plain truth is that as soon as his ex-wife thinks that husband has money, she will sue him for whatever reason again, even though she makes way more than he does, which will leave us with an even larger debt to lawyer.

Another problem we have is that my husband doesn’t have any official qualifications (diploma’s whatever). He never went to college (which he regrets immensely now) nor has he attended any other courses that will enlarge his chances for a job. He always wanted to finish this degree in teaching (Elementary School) , but due to his working hours in his current job he couldn’t do the internships needed to get a degree. It would enhance his chances for a job tremendously if he could go back to school again. Where we live there’s a shortage in male teachers so that’s an advantage. The most sensible thing to do would be to pay off debt first, but husband is 37 years old. If everything goes according to plan our first debt will be paid off in August 2017. He will then be 40. Getting his degree will take 4 years, so he will be 44 when he finishes. He feels like that is a very long time to wait and would rather start his study immediately. He could start in January, cost for 1 year college incl. books will be € 2.500,00. The other 3 years we will see later how to pay as we assume husband will have a job by then.

Our questions:
-   Are our plans to pay off my debt with husband’s severance pay wise? Or is there something smarter we could do with his severance pay? We only get one amount of severance pay and I am very afraid to make the wrong choice with this.
-   What can we do to cut costs so we can pay off our debts?
-   Do you have ANY advice whatsoever incurring our financial situation?

Husband and I have made some really bad decisions in our past and this has left me with a fear of trusting my decisions concerning financial matters. I REALLY want to do ‘the right thing’ and I feel that this situation is above our level of financial knowledge, hence my request for help in this matter. I thank you for your trouble and am VERY grateful for every bit of insight you can provide!
« Last Edit: November 25, 2014, 11:50:04 AM by Chamar »

Malaysia41

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Wow.  0_o.

First off some formatting clean up:  Put all income together at the top with a bold total.  Then post expenses with a bolded total.  Seeing your income and then shared expenses then his income and his expenses is very confusing.  If you want us to get our heads around your situation group the #s as simply as possible.

Also, group assets separately from income.  For example, that holiday pay - that's income right?  Report it along with other income.

It should go income , expenses, assets, debts.  No interfangulations or you'll render us confused!

Break down that 'saving for annual expenses' into the categories.  When you lump Christmas gifts with taxes it's hard to call bullshit on specific line items.

That is a major bummer about the 11% debt - in other circumstances I'd say tackle that pronto.

Look into doing college on the cheap.  He could possibly do the first two years online?  Are there equivalency tests for the basic coursework for year one and two? 

Consider - seriously consider - selling one car.  We have one car.  Today that meant my son and I had to bike to his wushu lesson and back.  Meh - no biggie.  Our insurance is cheap because it covers just one car.  Our monthly gas expense is low because - you guessed it - we have just one car.   And we're physically fit because we bike a lot.

Dog Insurance? Really?

Pocket Money?  You can do better.  Use mint.com or another tracking software and figure that shit out.

Anywhere you can save put toward debt & education.


I'm sure my compatriots will have further ideas for saving.
« Last Edit: November 22, 2014, 08:04:56 AM by Malaysia41 »

Chamar

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Hi Malaysian41, tnks for your post!

I've edited my post following your suggestions. I hope it will be a bit easier to read now.
I guess I have gotten so used to our 'financial construction' that it never occurred to me that it would be confusing for other people :-)

I appreciate every input!

NewbieFrugalUK

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I second the going down to one car - unless the 'sometimes' 4 kids situation makes that impossible?  Do you ever have to all travel to the same place in 2 cars? If not, consider getting rid of one ' it really helps.
Groceries look high? May be space there - depending if you are feeding teenagers or littlies.  If getting rid of your debt in one go doubles your tax back from the govt, and means €600 less a month in your outgoings it seems worth it to me! Seems like a good return on an €8000 sum :)

totoro

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Re: European Reader Case Study – Hair on Fire and husband got
« Reply #4 on: November 22, 2014, 11:22:46 AM »
In your country would your husband be eligible for grants for education based on your family circumstances and the fact he is laid off?  Could he work co-op terms? Would his payments to ex-wife (if any) be lowered? How much higher than €1.150,00 would his salary be upon graduation? 

Raay

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Get rid of the cell phones and TV. If you really need to have a phone to be reachable, then get a crappy old one off eBay and a prepaid SIM card. TV is nothing except waste of electricity and time, an outdated invention to keep the masses docile. Moreover, if you have Internet, you really, really don't need TV because you can get all the entertainment for free.

Generally, anything that is a recurring fixed monthly expense, as opposed to a pay-per-use expense, should be eliminated from your budget as much as possible. Even the "sports" expenses probably fall in that category - there's plenty of sports that don't require you or your kids to spend money.

The basic idea is to spend money after you have it, not before you have it. So "you're doing it wrong", sorry.

Exflyboy

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Yeah sorry but a lot of these expenses are completly trivial.

Your going to lose 30% of your Hubby's income.. I'm afraid spending anything for sports or saving for Christmas/vacations etc.. It all has to go.

The faster you get control of this before the bug cut happens the better off your'll be.

This will sound harsh I know but there is a huge amount you can cut here. I'd even argue that you may even want to consider re-homing your dog. Sorry but anything that threatens the roof over your head or food in your belly is a luxury.

Frank

Cassie

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Frank, pets are like children: a forever commitment.   People that do not believe this should not get any.

Exflyboy

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Frank, pets are like children: a forever commitment.   People that do not believe this should not get any.

To a point I agree it is a serious responsibility and in some cases an ill advised one to take on in the first place... But If your starving you will eat your pet if you have to.

Frank

mozar

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Is there a way your husband can accelerate his degree? I did a 2 year program in 1.5 years by working full time in the summer and taking classes at night. Just because there is a shortage of male teachers doesn't mean he will get hired. Would he major in a subject that is in high demand like math? In the country you are in do elementary teachers specialize in a subject? Are there specific schools hiring from specific programs? Are school budgets declining in your area? They might not be hiring anyone.

EricL

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Ditto selling on the car. And possibly the other car as well. I don't know exactly where you live but most urban areas there have a good public transportation system and some are very bike friendly.  That kills a lot of expenses on your list in on shot. The proceeds can go along way towards paying off the debts too. 

Ditching the smart phones is a good idea too. I know it hurts. But I know you can get an el cheapo cell with a SIM card new as well as from pawn shops and eBay. 

The bad thing about much of Europe is there are laws dictating everything. That probably explains the Dog insurance.  But that's also the good thing about Europe. Are there any laws against frivolous law suits where you live? 

Your utilities bill seems a little high. When I lived in Germany mine was much lower and I was heating a four bedroom town house.  But regions still make a big difference. If you lived in the Czech Republic your food bill would be almost half as big. 

Soccer is the great game there.  But If you're in a northern region it may not make sense shelling out €15 every month for a game that can only be played half the year.

Chamar

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First of all, thanks for your replies! We’ve gotten some really useful insights.

Before I posted our case study, we were already seriously considering selling one car. We used to travel with two cars in weekends that all our kids would be at home, but husband's son doesn’t visit so often as he used to (teenager….) so we don’t use the car that often anymore. Now I see that most of you are of the same opinion that car 2 should go, we will consider it even more.

The only thing holding us back is that we don’t know where husband will end up working. If he might need a car it is easier to already have one than to have to purchase a ‘new’ one again. We live in Holland and though public transportation is organized fairly well, where we live buses and/or trains don’t ride during the night or very early in the morning and if husband will land a job where he has to work in shifts, a car might come in handy.

@totoro: thanks for your suggestion! Husband immediately did some research if he would be eligible for grants, but unfortunately it is based on both our incomes and I make too much to be eligible for anything. His payments to ex-wife are already on a minimum and I think he would be making € 1.700- € 2.000,00 after graduation.

@mozar: your comments really made us think, thank you! As it has been a VERY long time since husband started the program he will have to do the entire program all over again. The school is only if you want to be a teacher at Elementary school, if he would like to teach Math (or any other specific subject) he would have to do another educational program for approx. 3 years. School budgets are declining but there is always demand for teachers in Elementary school. But yeah...no guarantee...

@EricL: no laws against frivolous law suits unfortunately :-(. My son plays soccer  and he gets to play it for the whole school year (Sept-July). It is what he lives for and he is the top player in his team. So this would be one of the last things that we would erase out of our budget. Same goes for daughter in Gymnastics, she is only 7 but already very good at it and enjoys it tremendously.

I see that while editing I accidentally erased some extra income!!!
Annually in December, a 13th month: € 1.800,00
Annually in May, holiday pay: € 1.500
So I will add that to our income in my first post.

Thanks again for all your insights, please keep 'em coming!

Blackadder

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For the Netherlands, health insurance seems high to me, even for 2 adults, 2 kids. It is currently the time of year to shop around. So take a look, e.g. at zorgkiezer.nl and look around for applicable rebates (collectieve verzekering). Also, depending on your assets, you might want to increase "personal risk" (but only if you have enough extra set aside).

john c

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My take
« Reply #13 on: November 23, 2014, 06:20:33 PM »
A couple of points in no particular order:

I actually don't think you have a huge amount of debt.  Obviously, even 1 euro is too much, but the totals you have here seem reasonable enough to deal with.

I think you should use the 8,000 severance to pay down the debt at 11.1%, as soon as possible.  I would consider using the emergency fund, as well.  A debt at 11.1% interest IS an emergency.

I'm not in Europe, so I don't know how this would work culturally, but call up the debt holders for debts #1 and #3 and tell them that your husband lost his job, and see if you can work out more favorable payments.  If you could reduce the payments, it would free up the cash flow.  My guess is that the lawyer would prefer to have a debtor that pays a little bit to one that doesn't pay at all.

How old are your kids?  Do they really need cell phones?  Perhaps they could do some cash jobs, like babysitting or yard work, to pay for them?  Again, that is typical teenager work where I am, but I don't know about Holland.

If you sell a car, and your husband gets some shift work, couldn't you drive him to work or pick him up, and have him take public transportation for the other half of the trip?  This might be inconvenient, but you can get another car when your debts are paid off.

Your husband should take this time to work on his skills.  From the news, it appears that Europe is back in recession.  He might be out of work for a while.  Don't let a year of fruitless search go by before he starts school or training.  If he starts school now, and a good job pops up, he can postpone school again for the new job.

Good luck!

Kronkl

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+1 on selling a car. You and i live in Holland, the flattest country in the world! Your husband can bike to his new job.

Get rid of the 11.1% loan first and then start the snowball on the other loans. Don't take the ex into account. She will sue your husband anyway if she wants to.

Honestly, i think you are doing very well. You are already anticipating the lower income when the contract ends and still paying of the debts. Some remarks in bold below.

Our monthly expenses
Internet & TV: € 47,00
Mortgage: € 953,80  How long does your mortgage-period lasts? Current intrest rates are historically low so you might consider paying a fine and go for a lower intrest-rate and ditto monthly cost.
Taxes: € 65
Gas/electricity: € 200,00 This seems high to me, i spent half
Car insurance 1: € 35,00 Sell it!
Car insurance 2: 14,81
Car taxes 1: € 21 Will disappear when you sell it
Car taxes 2: € 15,00
Gasoline for car: € 170,00 Won't this be lower when your husband is out of job and at home?
Groceries: € 485,00 Nice, try to target for the € 400 range
House insurance: € 35,05 Shop for cheaper insurance, i pay € 27 euro for this
Water: € 28,00 High as well, i pay € 13 per month for family of 4
Health insurance: € 259,14 (for husband, my kids and myself) You can lower this by shopping for new insurance, be frugal in selecting additional health-insurance
My cellphone: € 47,00 (unlimited texts, internet and calls) - Wow, why unlimited texts? Everyone uses whatsapp? Go shop for sim-only. I pay € 13 per month for 100 mins/text plus 1GB of data
Life insurance: € 6,04
Dog insurance: € 19,00 Haha, cut!
Sport daughter: € 15,00
Soccer son: € 15,50
Saving for annual expenses (Christmas, costs dentist/doctor, birthdays kids, car & house maintenance, taxes, etc): € 282,50
Savings:  € 50,00 Lower this and specifying each post in your budget
Cellphone: husband € 35,00 Go to sim-only
Savings plan daughter husband: € 22,50 Kill your debt first, and why save for the daughter but not for the son?
Contribution sports son husband: € 23,00
Life insurance: € 13,31 Why 2 life insurances? Check to see if it still fits your needs

Chamar

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Thanks again for all your advice!

@Kronkl: ha a fellow Dutch person :-). Thanks to some of your pointers I called our provider (Vodafone). Unfortunately I can't switch to Sim-only just yet, but in August 2015 I could switch to sim-only. My husband however could go to sim-only per January 1st. What provider do you have? I will call the house and car insurance company tomorrow, perhaps we could get a cheaper fee.

About the dog-insurance thing:  we had to pay for a lot of surgery/medicine etc for our previous dog. If we would have had insurance it would have cost us way less to almost nothing. So with this (new) dog I kinda went into 'better safe than sorry'-mode...but we will cancel it....I guess it makes sense because this dog is much younger than the previous one. The savings for husband's daughter was agreed in the divorce settlement (husband's ex-wife pays for son) so no room for change here. The life insurance tip is a good one! Will call insurance firm tomorrow as well!

As for the readers who advised us to sell the car: we decided to do so indeed and have already put an ad on the Dutch Craigslist (Marktplaats). Thanks!

Silvie

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Vodafone is the most expensive provider. Telfort and Hi are way cheaper. I have Telfort sin only for 17 euros per month.

goodlife

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So, I was just thinking of something a bit radical...not sure if that works in your situation...but I do know people who did this sucessfully in Europe. I see most of the debt is your husband's debt and your husband doesn't seem to have any other assets. Your debt is gone in Jan. The house will then be put into your name. Who owns the cars? Let's assume you own them. So assume you own all assets and your husband nothing. Then....he could declare bankruptcy and all the debt goes away (he is even unemployed by then, so all the more credible). Unethical? Not really, especially given that over half that debt is from frivolous law-suits from an ex-wife. Of course if he does that, he will be a bankrupt and can't borrow money for 7 years or so (no idea what the law on this is in the Netherlands). But this doesn't really matter from what I can see. The only thing you have to be careful about would be the timing of the transfer of this house...in some countries there are laws that prevent that when the other party declares bankruptcy shortly after.

Mr FrugalNL

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For the Netherlands, health insurance seems high to me, even for 2 adults, 2 kids. It is currently the time of year to shop around. So take a look, e.g. at zorgkiezer.nl and look around for applicable rebates (collectieve verzekering). Also, depending on your assets, you might want to increase "personal risk" (but only if you have enough extra set aside).

Better yet, read this article (in Dutch) and try ALL of those comparison websites. You can't afford to get anything other than the very best deal. The option I personally selected was only in the comparison on ONE of those websites. I might have missed it if I hadn't tried them all.

My first post, so first this...we are a family of four, sometimes six (husband and his two kids and myself with my two kids) and we live in Europe. I discovered MMM in January this year and from that moment on our life has changed for the better. We have a lot of debt, mostly because of divorce (both mine and his) and stupid decisions in our past (before our marriage). But we have made changes and are progressing: we started this year with a total amount of € 49.876,66 in debt and will end this year with € 37.370,03.

I recently read that the average debt of people who apply for 'schuldhulpverlening' in the Netherlands is €37,000. So be proud of yourself for climbing out of the hole as far as you have without any help from the government or the courts. You're still not in great financial shape but your situation's far from hopeless.

The debt to lawyer is accumulated due to ex-wife’s habit of starting fights involving lawyers. Officially this debt will be paid off in July 2020, but only if there won’t be any other costs added. So far we have paid off chunks of this debt only to see it increase again due to ex-wife’s tendencies. Besides that, we expect that the law firm will want to increase the monthly payments to at least € 200,00. They haven’t said this specifically, but we know that the administrator of this firm is not all too happy with the repayment plan my husband made with his lawyer. **Edit: today (Nov. 25th) we received an e-mail from the law firm stating that they would like husband to raise his monthly payment or pay € 5.000,00 February 1st, 2015. Exactly as I expected...**

Can they do this? I happen to know a thing or two about Dutch law, and I think that in principle your repayment agreement with your lawyer constitutes a binding legal contract. I hope you have the agreement in writing? I guess that their asking for more in writing implies that there is a prior agreement they're coming back on, but if you have a written agreement with your lawyer then that would help to make your case. You might wish to visit a rechtswinkel to examine your options. Alternatively, you may simply prefer to give in because you've had enough legal drama already to last you a lifetime.

markbrynn

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Re: European Reader Case Study – Hair on Fire and husband got fired..
« Reply #19 on: November 26, 2014, 02:07:26 AM »
Also live in the NL. Good idea to sell 1 car, but why not both? Living without a car is an inconvenience, but so is having so much debt. In most parts of the NL you can get around very well via bike and public transport. OP's commute may be lengthened by not having a car, but it just depends how quickly you want to get out of debt. And I wouldn't worry about a potential-future-maybe-middle-of-the-night-shift-work-job that your husband might get. Most likely he finds a daytime job that doesn't need a car.

Years ago, I went carless for a while and had to commute about 1.5 hours each way by bike, train, ferry, bus. After a while I managed to set up a partial carpool (I rode in someone else's car part of the way) and eventually carpool the whole route. It helped me to get my financial act together and eventually I bought a car (then I got a job closer to home and got rid of the car again).

Living without a car is an adventure. In NL it isn't even that difficult. Most people won't look at you funny for being carless. Everybody rides bikes, trams, buses and trains. If 80 year olds can do it, I'm sure OP's family can manage.


Kronkl

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@Chamar I have a Ben subscription, currently 1-month contract goes for € 14. If you decide for a sim-only contract for 2 years (i think that's way to long) you pay 12,50 for 100min/sms and 1gb data.

alsoknownasDean

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How much is the place worth, and how much do you owe on it?

Are there any side jobs that you or your husband can do to increase your income?