Author Topic: Financially Challenged... What do I do?  (Read 7501 times)

sokkies

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Financially Challenged... What do I do?
« on: September 29, 2014, 01:41:31 PM »
Hi,
I need advice on our money situation:

So we have about 450 extra per month.

Our house needs work: the gutters and the back deck need replacing, along with the bathroom floor.
We have 30,000 in debt, no savings.

I feel overwhelmed and don't know if we should fix the house, or put everything we have into the debt, or start a savings account and pay into that at the same time as paying off the debt. I am trying to find another job that pays better, but in the meantime, what do I do?

Thanks!



greenmimama

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Re: Financially Challenged... What do I do?
« Reply #1 on: September 29, 2014, 01:46:48 PM »
I would read more of the articles on MMM and the forums and get ideas of where to cut your current costs, then maybe you could have a lot more than $450 extra each month.

I would save until I had at least a thousand $s in the bank as a mini emergency fund

Then pay off your debt as quickly as you can, by taking an extra job, selling toys, cutting lifestyle, or really all of them at once

After the debt is paid off, I would prioritize what you want to get done and save up money and pay for the materials and DIY.

But that's just me.


frugaliknowit

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Re: Financially Challenged... What do I do?
« Reply #2 on: September 29, 2014, 01:58:33 PM »
For now, only do work that is a safety issue.  The bathroom floor can wait.  Maybe the gutters can wait; perhaps you can "jerrry rig" them for now (extra straps) so they don't fall down and or cause water penetration or damage to the house.

More information would be helpful.  You need to build an emergency fund and start hammering away at the debt.  Choose a blend based on risk tolerance and job security.  If your job is very secure, just save $1,000, then hammer the debt with all of the surplus.   If your job is not secure, maybe save $1,000, then half of the surplus toward debt, the other half toward reserves until you reach a comfortable level, then hammer the debt with all of the surplus.

ender

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Re: Financially Challenged... What do I do?
« Reply #3 on: September 29, 2014, 02:04:23 PM »
What's your income?

What are your expenses?

Without this information it's impossible to really help. Help is different if you make $10k/month vs $2k month, etc.

Seņora Savings

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Re: Financially Challenged... What do I do?
« Reply #4 on: September 29, 2014, 02:16:09 PM »
Our house needs work: the gutters and the back deck need replacing, along with the bathroom floor.

You need to redefine need.  The way you've been defining it has landed you in deep shit (debt that will take over 5 years to pay off assuming 0% interest).

Before you buy anything ask yourself if you would talk out a loan at whatever your average interest rate is to buy it.  If the answer is no, don't buy it.

sokkies

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Re: Financially Challenged... What do I do?
« Reply #5 on: September 29, 2014, 02:19:40 PM »
Ok, here are more details:

Income: 5000
Expenses: 4550

Monthly expenses:
House and house taxes: 2000
Cars and car insurance: 600
gas: 250
groceries: 500
utilities/phones/tv: 400
kids activities: 200
misc: 200
debt payments: 400

leftover: 450
debt: 30,000

LalsConstant

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Re: Financially Challenged... What do I do?
« Reply #6 on: September 29, 2014, 02:24:44 PM »
Oh sokkies, I been there and done that.  Seems like every problem is a grain of sand and every day someone ships you a desert.  Thanks for giving some numbers!

Three things I want to tell you.

First of all, you have 450 extra a month?  That's great!  Just trust me, that's a big hammer to swing.  And looking at that budget, I bet you can trim it a little bit here and there, but I wouldn't focus on that just yet.

Second of all, the hardest part is getting started.  When I was in a mess like this, I thought it would take me like 8 or 9 years to climb out of it.  Took four.  As you go, you will find a way to make it work somehow.  There's an old cliche, "Where there's a will, there's a way."

Third and final, you're going to, at some point, hit an obstacle and want to give up.  It's unfair because the obstacles come most frequently at the start!

So with that said, I'd suggest three things:

1.  Tell a little more information about the house.  Is the house liveable otherwise?   Can you personally, physically, move to do some of the repair yourself?  You may not have the skills but you can learn.  I don't know if I'd tackle the bathroom floor myself, but a deck and gutters, that sounds manageable to me.  Is it paid off, are you still making payments, do you want to move, how big is it, how many people live in it, etc.  Have you done any estimates of what it will cost to repair the house?

2.  Tell a little more about you.  That's great you're job hunting, but you're right that's a long term thing, that's not something you can act on right now.  Is your job stable?  Do you have any other risk factors?  What's the interest rate on the thirty thousand you owe?  Are you the only one working in this scenario, is this a family or a single person or what's going on?  Are you otherwise safe, fed, etc.?

3.  You have a lot of competing priorities here.  The best I can tell you is, work on one thing at a time, try to solve it all at once and you'll go crazy.  Make a plan you can live with to solve one problem before you try to solve another.  In time you'll get better at it and will be able to do 2-3 at a time but not yet. 

If you don't know which one to work on first, flip a coin, I am dead serious.  People get so worked up about trying to be smart, they forget to act.  Doing anything at all always trumps nothing.  These are all problems but one must be worse than the others.

ender

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Re: Financially Challenged... What do I do?
« Reply #7 on: September 29, 2014, 02:30:55 PM »
Ok, so you are currently spending 65% of your income on your cars and house. This isn't sustainable at all.

What do you owe on the vehicles? If you have $600/month in payments there that's killing your financial situation too.


Ditch those cars for cheaper ones and then you have $1k/month additional for debt payment (or maybe knock a ton of your debt out too?).

sokkies

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Re: Financially Challenged... What do I do?
« Reply #8 on: September 29, 2014, 03:06:03 PM »
I'm married and have two elementary age kids. Hubs makes 4000, I make 1000.

Hubs has strong opinions on the cars. He's not going to trade them in for cheaper ones. We can leave the bathroom floor and the deck for now, but should probably do the gutters this year to prevent damage to the house.

If we could be out of debt in 5 years, I would be very happy!!!! My main plan is to find a way to make more money to pay it off faster. I'm just starting to read the articles on this site, so maybe I'll get some ideas...

MrsPete

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Re: Financially Challenged... What do I do?
« Reply #9 on: September 29, 2014, 03:41:45 PM »
Ok, so you are currently spending 65% of your income on your cars and house. This isn't sustainable at all.

What do you owe on the vehicles? If you have $600/month in payments there that's killing your financial situation too.


Ditch those cars for cheaper ones and then you have $1k/month additional for debt payment (or maybe knock a ton of your debt out too?).
Yes, this is exactly what I was going to say.  Over half your money is already spent each month -- and that's why you have no money left for anything else.  You're living in "too much house" and driving "too much car".  No matter how your husband feels about his cars, you have two options that will actually work long-term:

1.  Find cheaper housing and downsize your cars.  If you're earning 5000/month, you need to keep your "must haves" -- meaning housing, transportation, insurance, groceries, phones, clothing, day care -- under 2500/month.  And that's not being super-frugal.  That's just being comfortable and being able to save each month.

2.  Bring home more money so that you can afford the things you currently have. 

To tell the truth, no other solution's going to work.  You can't over-spend on your big-ticket items and expect things to work out.

On the positive side, you're earning 5000/month!  We paid off our first house, saved our kids' college educations, and started our retirement savings on LESS than that.  But, then, back when we had a house payment, it was 600/month, and back when we had a car payment it was 135/month. 

minimustache1985

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Re: Financially Challenged... What do I do?
« Reply #10 on: September 29, 2014, 03:57:34 PM »
I'm married and have two elementary age kids. Hubs makes 4000, I make 1000.

Hubs has strong opinions on the cars. He's not going to trade them in for cheaper ones. We can leave the bathroom floor and the deck for now, but should probably do the gutters this year to prevent damage to the house.

If we could be out of debt in 5 years, I would be very happy!!!! My main plan is to find a way to make more money to pay it off faster. I'm just starting to read the articles on this site, so maybe I'll get some ideas...

With you taking home just 12k a year you should be able to find a better paying job.  At the very least maybe add in something part time, retail season is just picking up speed for the holidays (just don't get sucked into spending that newfound cash on a bunch of crap).

Your set expenses (house, cars) are definitely high for your household income and should be looked at, but I'd start with working the income side because it's easier and still a step in the right direction.  If you were single I'd be a bit more facepunchy, but it takes time to get a spouse on the same page.  Start with the things you can do: pick up a PT job, keep looking for a better paying FT job, meal plan to lower grocery costs, DIY necessary house repairs, etc.

sokkies

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Re: Financially Challenged... What do I do?
« Reply #11 on: September 29, 2014, 09:02:17 PM »
Wow, that is a bit scary. We can't get a cheaper house in our city unless we get a townhouse or mobile home. Our house is the cheapest house we could find. Renting was the same as our mortgage is now so it seemed like a good idea at the time. If living expenses are supposed to be half the income I'll have to make at least 3000 a month. I better get busy finding a good job... Its either that or move to a new town...

RockinLife

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Re: Financially Challenged... What do I do?
« Reply #12 on: September 30, 2014, 02:58:38 PM »
It can be scary when you're just starting out.  Don't let that discourage you!!  You can do this - first I would try to, gently, get your hubs onboard with badassity.  If you aren't working towards the same goal, if one of you is saving and the other is spending, you'll never get anywhere. 

Look to reduce the amount you spend on your cars.  If the cars themselves are off the table, try looking into a new insurance carrier to cut your costs or try grouping your car trips together to save on fuel... since I am guessing you're not ready to jump on the bike just yet.

Next look at your TV habit.  How much are you paying for TV service, if it's more than 14$, you don't need it!  Get rid of it.  Netflix and Hulu have basically everything these days.

Follow up with your cell phones.  Between switching to Republic and selling our old phones, we are saving huge amounts of money over AT&T, even with the added cost of the 'contract termination' fee. 

When we first started out, I made a list of our 'Top Ten' expenses for the previous month and posted it on the fridge.  It forces you to really look at exactly where your money is going and evaluate if it's really worth what you're paying.  When the climbing gym membership for the hubs showed up as number 7, it no longer seemed worth it and he canceled it.

Once you get started, the snowball effect takes over and you find yourself laughing at the way you used to live and the way the other 'consumer suckas' are still living.  It's liberating.  Good luck and keep reading. 

nereo

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Re: Financially Challenged... What do I do?
« Reply #13 on: September 30, 2014, 03:26:34 PM »
Wow, that is a bit scary. We can't get a cheaper house in our city unless we get a townhouse or mobile home. Our house is the cheapest house we could find. Renting was the same as our mortgage is now so it seemed like a good idea at the time. If living expenses are supposed to be half the income I'll have to make at least 3000 a month. I better get busy finding a good job... Its either that or move to a new town...
Sokkies - I'm going to respectfully disagree with a few posters here that claim your housing and car situation are 'unsustainable'.  You have $450/month in savings.  If that's true, by definition your situation IS sustainable... barring a debt emergency.  which happen.
In fairness I will say the amount you are spending on your cars and home are seriously impacting your journey towards FI, but some problems are better fixed later.

Ok - what kind of debt is that $30k?  What is the interest rate?
Also, what kind of repairs need to be done for the bathroom floor, deck and gutters?  How handy are you and your husband?  Can you do any of the work yourself?

Regarding the gutters, in many cases you can stretch the lifespan of gutters by another year or two by securing them anywhere they are sagging and using flashing tape anywhere water leaks - all of that may cost about $50 in materials and get you by for another year or two.

For now, that $450 month savings is $5400 a year.  In your case I'd urge you to build up an emergency 'stach of a grand or two before attacking your debt.  Then it's time to look at how you can trim your budget.  Just figuring out a way of cutting $50 out of your food budget and $25 out of 'misc' and another $25 or so somewhere else will make a huge difference.    Stick to it and you can pay off the debt in ~5 years. 
Can you find a way of making another $200/month (picking up an extra shift each paycheck, perhaps?)  BAM - you can pay off your debt in 4 years - or less.

The one thing I'd like you to focus on is that your situation is not hopeless.  You have debt, but you also have a monthly cash surplus.  In time, that surplus can eliminate that debt, and then grow into a happy-healthy-wonderful retirement stash.
If you respond with a few more numbers and details we can help you further
Best
N

Dicey

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Re: Financially Challenged... What do I do?
« Reply #14 on: September 30, 2014, 04:22:38 PM »
Kudos to lalsconstant and nereo for their kind, thoughtful SMART answers! I'd print them out and tape them on my mirror/refrigerator/whatever until I had them memorized.

As to the house and car, sokkies, I'd ignore the "sell it" crowd at the moment. I know you can reach FIRE with a high house payment because I did it. The cars are another matter, but I'd leave them aside for now.

I too, am curious about the origin of the debt. Please tell us more so we can offer specific suggestions for knocking it out.

Must_Stash

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Re: Financially Challenged... What do I do?
« Reply #15 on: September 30, 2014, 07:40:18 PM »
Hi,
I need advice on our money situation:

So we have about 450 extra per month.

Our house needs work: the gutters and the back deck need replacing, along with the bathroom floor.
We have 30,000 in debt, no savings.

I feel overwhelmed and don't know if we should fix the house, or put everything we have into the debt, or start a savings account and pay into that at the same time as paying off the debt. I am trying to find another job that pays better, but in the meantime, what do I do?

Thanks!

Nereo's advice is complete and sufficient IMO.  So I'm just going to respond emotionally.

I grew up in a house that was in worse shape than yours is now. My parents made a good home, but they didn't have a "decent" house for most of my childhood.  The tiles in the bathroom floor were loose and could be moved about to create new patterns (it was a sad day when Mom glued down every piece of our big puzzle).  Similarly, the shower stall was cracked along each grout-line.  By the time I was a teenager, those tiles began to fall, one by one.  My Dad fixed them back in place with mastic and mortar and life went on.  Did I mention the whole room was burnt umber, harvest gold, and burgundy?

My Mom cooked with the same stove 15 years (used when they got it).  For many years before its death, the door could only be secured shut with a long wood-clamp.  The wallpaper was plaid, and the kitchen floor was carpeted.

My Dad did all the maintenance and improvement himself.  It was very slow work and every five years, he re-did something that he had "learned on," like his early drywall mudding.  The house was so hopeless when purchased, nothing he did could fail to improve it, so he was completely free and even changed the layout.

Today that same home-owner is very, very wealthy, even after raising 4 successful, thrifty, eccentric children.  He owns a gorgeous house.  By the time we kids were old enough to respect nice things, my parents were financially secure and so began to build and buy the nice house they had earned.   

It would have been hard, especially for Mom.  Mom took on a LOT, working outside the house at first at night jobs, so she could care for us in the afternoon, evening, and early morning.  She slept during the day.  I don't think she commanded high wages for many years.   I'm sure she often thought she'd never have anything better than "make-do."  But the past and present don't have to make the future. 

I admire my parents.  I know they provided well.  Your kids could have great memories of the "crazy old house."  They could know what it is to create wealth, that it is not a glamorous process.  (Yes, we felt embarrassed sometimes.  We lived in a status-conscious suburb, in a time when the "good brands" first began to splash their logos in big print on shirts, jackets, shoes, and pants.  But we had a LOT of friends, so ultimately, those things must not have had much social value).

Never mind your bathroom floor, if it is not rotting out from under.  Fix the gutters if they're causing water issues in the basement or roof damage through ice damming.  Otherwise stretch your use of every part of the house as long as it works adequately well.  In essence, it is shelter and a frame surrounding your family.

lhamo

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Re: Financially Challenged... What do I do?
« Reply #16 on: September 30, 2014, 08:32:17 PM »
Some great feedback above.  Deep breaths -- you can do this.  In addition to what has been suggested above, I would look at:

1)  Gas:  What are your commutes like? Is there any way to reduce car usage  by carpooling, biking, walking and/or combining trips (doing errands on the way to or from work).

2)  Utilities, phone, TV:  Ways to cut back on phone and TV have been suggested.  Use your library for DVDs (not Netflix or cable).  See if your local utility offers an energy audit/rebates for improving insulation.

3)  Groceries:  Lots of useful feedback and links to sites here on how to eat well on a budget.  Browse around a bit.  Look for links to the SNAP cookbook and BudgetBytes in particular.  great resources.

4)  Kids activities:  What are these?  How necessary are they?  Can you cut back?

5)  MIsc:  Nail this down.  YOu can probably find places to cut.

Also agree that looking at ways to increase your income is probably smart. 

Hang in there and keep coming back.  We can help you kick that debt and get to a better place.


sokkies

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Re: Financially Challenged... What do I do?
« Reply #17 on: October 01, 2014, 05:51:24 PM »
Thanks for all the advice. I really appreciate it. You guys reminded me that cutting back a little can add up and make a difference. While I try to find a reliable source of 3000 a month, I think I can find ways to bring in a couple extra 100 per month, and also tighten up the spending a bit for gas, food, misc, etc. I do have a bike, hey maybe using it would get me into shape. Hubs bikes to work twice a week. The debt is credit card debt, mostly from roof repair and perimeter drains, a trip to see my mom when she was dying of cancer. It's not from extravagant spending habits. I think we are OK for spending, other than the house and cars.

I am feeling more hope about getting rid of the debt now, it just seems like sooo much, I just have to look at other people who did it and be disciplined.


lhamo

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Re: Financially Challenged... What do I do?
« Reply #18 on: October 01, 2014, 09:11:28 PM »
OK, I'm going to push back a bit -- because resistance helps build muscles :)

If your DH already bikes to work 2x/week, why can't he bike 3x/week, or 4x, or 5x? 

And yes, you should also get on your bike -- you kill the workout along with your commute, do something good for the environment, save money, and improve your health.  5 birds with two wheels!  Get a basket or a carrier rack, or even a used trailer, so that you can also run errands on the bike and try to knock that spending on gas as low as you can go. 

Check out the Good and Cheap cookbook recently posted about for some great low cost meal ideas.  Highly recommend the Cheddar Jalapeno scones.

BTW, just got off my new used bike that I picked up this morning and rode home 11.5 km.  And about to head out for a ride with DS to get sushi for lunch (special treat).  Biking is awesome!

sokkies

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Re: Financially Challenged... What do I do?
« Reply #19 on: October 01, 2014, 10:51:42 PM »
My husband is very sporty, and he bikes to work 2 or 3 times a week just for fun (30K each way). He takes the car to work once a week so he can go swimming at a lake near his work. He takes the bus the remaining days, because his company pays for it, so he can go for a quick 6-10K during lunch, or to the gym at work. So he's not using much gas. I'm the one that uses all the gas, driving the kids around and going to work and running errands, although my commute is much shorter. I wonder how much of a dent in the gas I could make with biking... And really, most of my errands are a short 5 min bike ride away...


Ok I'll try it out... You people have convinced me. And, I've managed to get more work for $150 extra per month! Yay!

sokkies

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Re: Financially Challenged... What do I do?
« Reply #20 on: October 04, 2014, 07:08:00 PM »
Update... OK so inspired by all of you, I have made a bit of progress!!! If everything goes as planned, I'll have 900 to put towards the debt this month. So that feels good. I'm starting a couple projects to bring in a bit more cash in the meantime, until I can find a better job.

We also have an additional 1000 dollars that is supposed to come in the next couple months so we will probably get the gutters/barge boards replaced-- I'm too worried about the roof.

Other than that, we are tightening our belts. I am going to get my hair cut for free at a teaching salon, and we are going to buy rollerblades-- a one time purchase--instead of karate lessons at 90 bucks a month. Getting there... Thanks for giving me ideas and hope!

plank

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Re: Financially Challenged... What do I do?
« Reply #21 on: October 04, 2014, 10:58:58 PM »
Buy wrist guards.