Author Topic: New questions from a single mom  (Read 5186 times)

doingthisnow

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New questions from a single mom
« on: February 06, 2017, 05:25:00 AM »
Hi! This is my first time posting, and it's honestly been years since I posted anything on an Internet forum!

I discovered MMM through the So Money podcast. At first I thought, "Yeah, right. There's no way I could do that. I'm a 34-year-old single mom with a negative net worth. It's too late for me." But then I started reading...

Turns out, maybe I can do this! I'm all fired up and spent most of the weekend looking at how to cut bills I thought were static and starting to convince myself I may not die if I ride a bike around town. (This one will take awhile to believe.) I know I can get fired up about things and then they fade away, so I wanted to reach out to the community to ask about any pitfalls I need to plan for. Here's the situation:

I make $60,500 a year. (<--This alone makes me believe I can reach FI bc when I got divorced 2.5 years ago I made $18k and had no idea how to earn more.)

On top of that base salary, I make about $6000 from a freelance gig each year. This year, I also have the opportunity for some big commissions, but I can't plan for those yet. My thought is to plan without them, then throw them towards debt or savings when they come.

So, $66,500 of pre-tax income. I also have a $3500 emergency fund, and the ex and I split custody and expenses 50/50. Also, my kids are getting older. They're 11 and 9, so within ten years they'll be starting their own adult lives.

I have some things working for me!

The bad news is I also have about $6000 in debt from when I was unemployed, $18,000 in a car note, and no retirement savings at all.

Now that my emergency fund is established, I plan to throw all my money towards credit card debt. I am cutting expenses (like reducing my cell phone bill from $105/month to $23 thanks to Republic Wireless!) The landmines are, of course, those lovely people I share my house with. Kids create all kinds of unexpected expenses, and I'm trying to figure out how to keep enough money back each month to cover them, without reducing debt reduction/savings.

So, my big question is: What don't I know? If you've taken this path with kids before, what should I be watching out or saving for? What am I not thinking of? There might be a mister enter the picture soon, but for now, I want to plan as if I'll be on this particular path alone until the kids grow up.

All right, I'll stop there. Thanks for reading, and any wisdom from veterans of this process would be so welcome!

Le Poisson

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Re: New questions from a single mom
« Reply #1 on: February 06, 2017, 05:37:56 AM »
You CAN do it. You should talk to Snacky. She's a single Mom on a disability leave with an autistic kid. She'll have her house paid off this year and is shopping for income properties.

You will get a lot of folks here advising you to post a case study (Put up all your expenses and income and let the masses find you efficiencies) these are fun for us to do - but mean showing your soft underbelly and possibly getting a facepunch or two. You may have a few new ideas at teh end of it though.

At the very least, you should share where you are and what your goals are. Do you want to be FI next month, RE next year? Maybe not do-able. Are you just looking to get financially stable before going intense on the savings?? Are you targeting a 10 year plan?

Unexpected kid expenses are to be expected (listen to the Oh My Dollar podcast) You can stash for that.

Our family started down this path 2 years ago. We've killed off $40K in debt, built up an emergency fund, and bought a income property. We have 2 earners and 2 kids though - so not the same situation. Although being in a couple brings its own challenges (If I had it my way, we'd move onto a boat and rent out our monstrosity of a house)

Good lock on your journey!

Dee18

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Re: New questions from a single mom
« Reply #2 on: February 06, 2017, 09:47:26 AM »
The time with kids will fly by, as you well know.  Mine is now in college.  Here are some things I did that worked well: I gave small allowances--additional money could be earned by doing a big project like raking the fall leaves.  I did not get my daughter her first cell phone.  She got her first phone when she had the money to buy it and pay the monthly fee.  When she turned 16 I made her get a summer job; that became a very part time (10 hours/ week) job during school.  I introduced her to the joys of thrift shopping...and selling on our local version of Craigslist.  I gave her a bunch of stuff to sell for me and split the proceeds. I did not get her a car.  She was the only one of her friends who did not have one ( amazing, but true).  We shared the one family car. I did not buy her everything that came up from school and clubs....required sports uniforms, yes; tshirt to wear to homecoming football game, that was her choice and her money.  I had the money to buy her those things, but I work at a university and have seen way too many spoiled 18 year olds.  At home I made the rule: one of us cooks, the other cleans up, or we do both together.  Also she started doing all her own laundry at age 10.  In case this sounds grim, I must say we had a blast:  camped in Alaska, lived overseas a semester, rode bikes,ice skated and roller bladed together...once made a spread sheet of all the donut stores in town and tested a donut a day for two weeks one summer.....the best things in life are not expensive.  Just avoid keepingup with the Joneses...that can be tough.  Enjoy!
« Last Edit: February 06, 2017, 10:49:40 AM by Dee18 »

Kapiira

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Re: New questions from a single mom
« Reply #3 on: February 06, 2017, 10:00:49 AM »
It sounds like you've done a great job of building up your emergency cash and paying off the credit card is a next great step.  After that I would start putting money into a Roth IRA.  I like it because you can pull out the principal penalty-free if you find that you need to pay for something that your emergency fund won't cover.  You can also use the Roth IRA to pay for education expenses for yourself or children if you decide you want to do that.

PJ

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Re: New questions from a single mom
« Reply #4 on: February 06, 2017, 10:22:32 AM »
...snip

You will get a lot of folks here advising you to post a case study (Put up all your expenses and income and let the masses find you efficiencies) these are fun for us to do - but mean showing your soft underbelly and possibly getting a facepunch or two. You may have a few new ideas at teh end of it though.

...snip

Good lock on your journey!

Hi doingthisnow!  Welcome to the forums.

First, full disclosure. 

I've never posted a case study to the forums, 'cause I don't want to show my soft underbelly and get a facepunch or two! 

But Prospector has a good point, because by posting all your numbers, you'll get advice about so many different categories of spending.  You gave the example of your cell phone - you would absolutely have gotten a facepunch for posting a $105 bill for one person!  And someone might even have suggested Republic Wireless to you.  Now think of getting that kind of advice for your cable/internet/electric bill/gas bill/grocery budget/household supplies costs/medical-dental/clothing budget/car insurance/rent or mortgage/investment accounts and more!

But, if you prefer not to (like me!) you'll want to scout around, peek into different threads on the forums about those topics.  What you're looking for is to find out a) what other people are paying for the same or similar things and b) suggestions on how to lower your costs, tips and strategies.  And if you find that there's an area or two that you could really improve, then join or start a thread in the "Throw Down the Gauntlet' section of the forums, where you can get support as you target one particular area.  On the subject of kids, you'll definitely want to check out the forum sub-section on "mini-mustaches!"

Again, welcome to the forums!

snacky

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Re: New questions from a single mom
« Reply #5 on: February 06, 2017, 11:15:26 AM »
Prospector's post made my ears burn. I don't know enough about your situation to make any suggestions, but you can do this! Ask me anything, either here or by PM - my kids are the same age as yours, btw.

doingthisnow

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Re: New questions from a single mom
« Reply #6 on: February 06, 2017, 02:04:28 PM »
Ha! PJ, that's exactly why I'm not posting a case study quite yet! I'm already making active changes to things that I just assumed worked in expensive ways. I figure once I reach the end of what I can do myself, I'll post a case study to see if there's more I'm missing.

Novik

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Re: New questions from a single mom
« Reply #7 on: February 06, 2017, 02:14:34 PM »
Ha! PJ, that's exactly why I'm not posting a case study quite yet! I'm already making active changes to things that I just assumed worked in expensive ways. I figure once I reach the end of what I can do myself, I'll post a case study to see if there's more I'm missing.

Great idea - if you had posted a case study with a bunch of low hanging fruit, you'd get that advice a million times. But since you know you have those easy items to improve on, by waiting until you've done them, you'll hopefully get better/more targeted advice.

Cassie

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Re: New questions from a single mom
« Reply #8 on: February 06, 2017, 02:21:04 PM »
I usually check home and car insurance yearly to see if I can get a better deal.

Hargrove

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Re: New questions from a single mom
« Reply #9 on: February 06, 2017, 06:33:25 PM »
Unfortunately, a lot of parenting literature explains that you're hopelessly incapable of controlling your life because children cost Infinite Money™, and there's nothing you can do but desperately shove cash at their problems until Ben Franklin waves his magic wand and they disappear.

The problems, not the kids.

Luckily, you're on the MMM forum, where almost nobody believes that.

The expenses that are, in fact, nonetheless more difficult to nail down, like with your kids, will be the trickier ones to address. We don't know what they are, but as an example, involving your kids in the process could help both of you - establishing an allowance for them could eliminate several "Misc" categories in your budget and make them responsible for making some spending choices instead of leaving it on you to "no" them. It could also help if you had difficulty saying no to pizza AND sleepover parties AND... you get the idea. Meanwhile, they will learn saving, too. Start with making a lot of your budget knowable to you, at least!

Once it's knowable, work backwards from the biggest items like you're writing a mystery novel. Take each number and say to yourself "I KNOW this could be significantly lower. How does the story end with this number cut in half?" 18k on a car is definitely possible to cut. If you're very worried about needing a car 100% of the time, you could pay 10 bucks on many auto policies for rental car replacements (for if your car ever was in the shop). Then, replace the 18k with a 6-9k. If you can do that, you could erase your car debt and your unemployment debt in one action.

If your credit is good and there's still debt, put your unemployment debt on a 0% credit card offer and pay exactly what you need to so it's gone by the time the offer is up. Leave yourself the wiggle room only if you need to - if you get commissions etc., kill the unemployment debt and then hit the car debt.

Don't necessarily expect to pay your kids' tuition. If twenty years ago, we told parents they owed their children houses bought-and-paid-for, they would laugh at us, but today somehow we think we owe kids their entire tuition bills. By all means, save and expect to offer a gift at graduation if you like, but make it clear to them that college isn't a very expensive continuation of high school that mommy will cover while they're having fun.

The Money Monk

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Re: New questions from a single mom
« Reply #10 on: February 07, 2017, 12:58:59 AM »


- I would seriously think about expanding your freelancing if it's at all possible. Sounds like it is pretty lucrative.

 - Obvious way to free up some money is sell the car and buy a cheap used one. Most areas you can find great cars for less than $8k. That alone should free up more than enough to knock out the credit card bill. It will also eliminate a size-able monthly payment, and should lower your car insurance slightly as well.


MDM

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Re: New questions from a single mom
« Reply #11 on: February 07, 2017, 01:10:04 AM »
Now that my emergency fund is established, I plan to throw all my money towards credit card debt.
If your workplace has a 401k and matches some amount of your contribution, that can be even better than paying credit card debt.  Depends on the match rate and the debt interest.  If you don't have a 401k match, likely nothing beats paying the CC debt so have at it!

Prodigal Daughter

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Re: New questions from a single mom
« Reply #12 on: February 07, 2017, 09:07:10 AM »
Posting to follow as a single parent myself. I've made all the low-hanging fruit changes, now I'm getting far more serious about attacking the expenses that are a bit harder to move the needle while keeping my eye open for income opportunities.

I have a credit card balance that I'm dying to pay off faster. I've started selling a few things on eBay and transferring that income to my CC which has me motivated to clear out the clutter in my life, sell what I can, and simplify!

Welcome! :)

Chas

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Re: New questions from a single mom
« Reply #13 on: February 07, 2017, 11:23:07 AM »
Doingthisnow, you're starting a lot earlier than I did. It's great to sense your excitement. One thing I personally noticed when heading down a frugal path over ten years ago, was that once I embraced the philosophy and it was in the front of my mind, many daily things I never thought about became a challenge to extract the most for the least cost.

It's a ton of fun and my wife and I challenge each other constantly.

You'll get there sooner than you think once debt is dispatched and you reap the benefit of compounding of investments.

Best of luck in the new adventure!

WGH

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Re: New questions from a single mom
« Reply #14 on: February 08, 2017, 01:12:06 PM »
Now that my emergency fund is established, I plan to throw all my money towards credit card debt.
If your workplace has a 401k and matches some amount of your contribution, that can be even better than paying credit card debt.  Depends on the match rate and the debt interest.  If you don't have a 401k match, likely nothing beats paying the CC debt so have at it!

Want to reiterate this make sure and get whatever match is available to you first and foremost.


doingthisnow

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Re: New questions from a single mom
« Reply #15 on: February 09, 2017, 06:23:01 AM »
Thanks for all the encouragement, everyone! It's very exciting to feel on the road to recovery. :)

My workplace does not match 401(k), unfortunately. I'm checking today, but I don't think our HSA invests either. I know why we don't do the first, but I might look into pushing for the other one the next time we renew our benefits packages! (It's a wonderfully small company, and we all have input into how this stuff happens.)

As I've looked at my budget, it's obvious that my car is a HUGE drain. I'm not sure how to change that. I'm a good $9000 under water on it. It's a good little car and felt like a very frugal purchase at the time. But now I'm seeing how expensive it will be over time.

Anyway, I'm glad I came across MMM. Freedom and frugality speak to me!

Le Poisson

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Re: New questions from a single mom
« Reply #16 on: February 09, 2017, 06:28:45 AM »
WRT your car - is maintenance an issue, or just payments? Is it a brand that takes $500 oil changes?

You may be trapped in a sunk-cost fallacy here. It may be better to sell it for what ever you can get and replace it with an antique that costs little to run until you clear the debt and save up enough for something to replace it. Then shop with steely nerves for a small, dependable vehicle. Around here, newish hatchbacks are the preference. Having said that, I noticed the other day that Jetta wagons are back on the lots (with a sticker price of $35K) - if you turn things around now, you may be able to pick up one of those for $10K or less in 2 years. I know nothing about the Jettas except that the extra interior volume would be nice to have.

doingthisnow

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Re: New questions from a single mom
« Reply #17 on: February 09, 2017, 07:53:18 AM »
When I typed this question, I would've said it was payments that were most expensive. Then the fan started making a clicking noise on the way to work...

I'm not as worried about what I've put into the car so far. I'm more thinking I don't have the money I need to pass the title on to another buyer--I couldn't pay the loan in full, even if I sold the car for full value. I wouldn't mind doing exactly what you suggested, but if I understand how this works correctly, that's not really an option. What am I missing?

Thanks for your help!

Heroes821

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Re: New questions from a single mom
« Reply #18 on: February 09, 2017, 08:37:17 AM »
You got this!  Congrats on finding MMM and taking it seriously.  As far as advice to keep up with being FIREd up I would check out the journal section, start one, and keep up with it.

Also what car are you driving? You might not need an 18k car and selling it might be a good option.

Le Poisson

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Re: New questions from a single mom
« Reply #19 on: February 09, 2017, 09:37:04 AM »
When I typed this question, I would've said it was payments that were most expensive. Then the fan started making a clicking noise on the way to work...

I'm not as worried about what I've put into the car so far. I'm more thinking I don't have the money I need to pass the title on to another buyer--I couldn't pay the loan in full, even if I sold the car for full value. I wouldn't mind doing exactly what you suggested, but if I understand how this works correctly, that's not really an option. What am I missing?

Thanks for your help!

Well I'll walk you through our path out of a spendy car, and you can see if you can do something similar... your call. This was a years-long process.

Spendy Car - 1999 Volvo Convertible Bought in 2008 or so. The Volvo looked good when parked. And when it ran right, it was a great car. It did this rarely.
- 5 years into ownership, still owed on car (forget how much) had regular issues with the Turbo blowing up
- Spending about $1100/month on turbo rebuilds, plus insurance on convertible, plus premium fuel, plus expensive oil changes.
- Couldn't sell it due to ongoing issues (basically couldn't keep it running long enough to sell) between turbo and electric.
- Concurrently, wife was driving an older Montanna minivan, which was rotting out, but running well. The windshield wipers were unrepairable and made the van unsafe to drive.

- Traded Volvo in at dealership in Ottawa (online deal) against a Buick Allure (LaCrosse in the USA) base model ($7,500)
- Allure ran perfectly and we had no issues with it over the life of the car, but it was intensely boring.
- Sold van ($800) and replaced with Cheap 1995 GMC Suburban ($1500), and thought I could suck up the cost of gas. I was wrong.
- Sold Suburban for what I bought it for ($1500) and bought a 1981 (ancient, but awesome) Mercedes Diesel ($2000) - used the Mercedes to deliver pizzas on evenings and weekends and paid off debt, built up savings.
- Sold Mercedes ($1500) and bought 2012 Chev Sonic in 2015. ($8500)
- Traded Buick against 2009 (??) Toyota Previa also in 2015. ($10,000)

So we've gone from a fancy car and a beater van to a not fancy car and a good van.

Things I should have done different:
- Skip the suburban. I thought the gas couldn't really be THAT bad - it was. And I never needed the vehicle that big.
- Keep the Buick. The car ran flawlessly the entire time we had it. I should have sucked it up and kept driving it.

doingthisnow

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Re: New questions from a single mom
« Reply #20 on: February 09, 2017, 10:40:07 AM »
Ah! Perfect! Thanks for the details Prospector and Chippewa. I've done the math and come to the same conclusion that I'm better off keeping the car and paying it as quickly as I can. It's a good car, with great gas mileage, and in the meantime I can offset a little by working from home more often and making sure I'm getting the best insurance rates.

Chippewa, I looked at the post you linked to, and we have very similar stories along the car lines!

SisterX

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Re: New questions from a single mom
« Reply #21 on: February 09, 2017, 11:39:59 AM »
If you're serious about getting into biking, I can give you info on how to get started. Like, resources to look into and what are the most dangerous spots, the gear that's most important, how to find a good bike, etc. The one thing I'd recommend if you're even considering biking is the book Urban Cycling by Madi Carlson. Full disclosure: she's a friend of mine. However, she's a single mom with two kids about the ages of yours and no car, so her situation is applicable to yours. Also, the book is fun and contains tons of useful information.

Go you! Welcome to the forums and to this community. So glad you feel like you're getting a handle on your finances. It's one of the best feelings in the world.

BabyShark

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Re: New questions from a single mom
« Reply #22 on: February 09, 2017, 03:03:32 PM »
Posting to follow and give encouragement! You can do it!