The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: IsItSnowingInSpace on January 27, 2015, 07:30:08 PM
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(Apologizing in advance for this long post, and saying thanks in advance for reading it!)
I've only recently joined this community after doing a Google search for "problems with Dave Ramsey". A couple of years ago, I read The Total Money Makeover and got inspired. I'd already been doing things like automating my bills after signing up on mint.com and getting pissed off about alerts for, "You've been hit with a finance charge!" and "You've been hit with an overdraft charge!" I didn't total them up, but I know that it was bad enough that I practically had steam coming out of my ears, and had to repress the urge to throttle my darling wife.
Anyways, I got almost all my bills automated, including notifications for when there are account problems, and now that part of our life has been chugging along smoothly. During that time, I created a master document with accounts, due dates, usual amounts, etc. We created a rough budget based on this, as well as our usual discretionary spending and food bill, and then figured out how much was left over. We then started chunking money towards our credit accounts and got some cards paid off, but the total was still around $20K in unsecured debt.
So we were making good progress, but our housing was messed up: we lived in a mobile home -- the same mobile home we'd bought while we were students, and which we got financed on a 30-year mortgage through Washington Mutual...! (Yeah, you can't get those any more....) That was the only way we could afford it. Anyway, we were stuck there for 15 years while the economy kept hitting the skids repeatedly between 1999 and 2007. Finally, a couple of years ago, we were able to get into a house! All my hard work to get our finances in order paid off! My credit had risen to around 700, it was a buyer's housing market, and we qualified for a mortgage. We'd been trying to get into a house for years and years, so we finally took the opportunity and became (real) homeowners. (FYI: mobile homes depreciate, and you have to pay space rent. We were lucky and actually ended up walking away with a few thousand dollars after paying off our loan.)
Fast forward 2 years. The market improved. We refinanced and pulled out $13K for a sorely need HVAC refresh. We've been saving, and currently have about $9K in the bank, but that's all earmarked for sorely needed house upgrades (we continue to put in as much sweat equity as we can). We're still about $20K deep in unsecured debt, so we're basically treading water there. But my wife and I have about $100K in student loan debt (80 mine, 20 hers), and so now we have a bigger student loan payment. I earn about $75K/year, and my wife got a part time job to pull in an additional $10K/year. But we just don't seem to have enough money to make any progress, and I'm starting to feel a little hopeless. We've refined the budget, and stick to it. We both drive used cars (mine's paid off, hers we owe ~$5K), we almost never take vacations or go on trips, and when we do, we're SUPER budget conscious. Our only real luxury: $100/mo on satellite TV. That's our entertainment. We have a budget cell phone plan with Ting.com, $49/mo total. Comcast internet for ~$65 mo. We have a land line phone, $55/mo. Recently my wife started suggesting we migrate that number to another mobile line on the Ting account...so we can save there. We do eat some fast food, so we could cut back there, but actually we've cut way back on that already from where we were.
I feel like there's not a lot of room to go up in my career, income-wise, and so I'm left thinking that I don't have a lot of options. I only have about $15K in retirement savings, and I just turned 48. We're contributing enough to get 401K matching, and we contribute the max on our HSA to get a generous company match (but we haven't seen that grow, despite having pretty good insurance).
So...I know this might sound harsh, but...are we just screwed? Right now, we have enough savings to last for a couple of months. I know that's a lot more than most, but essentially we're living paycheck to paycheck. We're barely making a dent on paying down debt, let alone being able to think about retiring. My wife will not take a full time-job because we need her to run the household and care for the kids (youngest age 7). She did try working more a few years ago, and the kids were negatively impacted due to the lack of her presence (not going to go into it, but there were measurable factors that made us decide not to do this again until the older two kids were at least in high school).
I'm earning the most I've ever earned, and I'm doing the best I've ever done in my life...but we're not thriving, and I just don't see how I'm going to get there without figuring out how to switch careers to something with more income potential. But I've struggled just to get where I am now, so I'm not very optimistic about better future income prospects.
I'd appreciate thoughts and suggestions.
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Can you provide more details about exactly where the money is going? You have a lot of debt but 85k isn't an income to sneeze at.
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I agree with Picklemeister, we need a lot more details on your budget. How many people are you supporting? Where do you live (is it high cost of living)?
You have $120k debt, so you should be in hair is on fire mode. If you and your wife are willing to make changes, you are not screwed on $85k total income, but you need to act now!
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Based on your income and what I can infer from your situation (kids, house, student loan interest, retirement/child credits), you should get a hefty tax refund. Use that to pay off an entire account. That could be a credit card, another unsecured loan, or car note. Whichever has the highest interest rate but still within the refund amount.
If you replace the land line with another Ting phone, you might consider continuing the $55 payment, but directed to one of your remaining smaller debts.
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Have you looked into alternatives to your student loans? You may qualify for IBR (income based repayment) even though you make a healthy salary since your wife makes such a small salary. If you don't qualify, have you looked into a refinance? (See my sig). Rates are low now. I don't know when you got your loans but if they are like mine, the rates were higher then. By lowering your interest rate you would pay them off faster. You could also refinance to a longer term (not usually recommended) and use the savings to pay off the higher interest rate debt like credit card debt.
The sorely needed house upgrades. Are they sorely needed because they are eye sores or because they are functionally deficient? Your refrigerator isn't keeping food cold is a needed upgrade. Your counters are old and ugly aren't. (I'm guilty as charged here though because we redid our completely trashed countertops before my loans were paid off).
As to your wife, could she increase her part time hours to 20 hours? Kids are in school at least 9-3 right? That is 30 hours/week. Another alternative is her picking up more hours when you are home with the kids and you can share the running the household tasks. You wouldn't see as much of each other but sometimes we need trade offs. Again, just a thought without straying from your "no daycare" suggestion. :)
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One thing from the limited information here that I see is the 165 per month on satellite tv and internet. It may seem unthinkable, but really, it is a life improving suggestion that might help you save up to 120 per month and ALSO help you feel like you are thriving by giving you extra time and more opportunity for getting out and enjoying life...
I would recommend axing the satellite TV, getting a cord that can hook your computer to your tv (or a chromecast or the like), getting netflix or amazon prime or something like that to provide a little content for you, and then calling Comcast and telling them you will cancel if they don't drop your internet bill to 40 bucks a month. They will do it. They are NOT allowed to just let you cancel without doing whatever it takes to keep you as a customer and that includes cutting you a deal on your bill. That's what I pay and whenever the bill goes up, I call them and they figure something out to get it back to 40.
I cut the cable years ago and now when I am around TV it does't really interest me because it just feels like an unending commercial break. It is really nice to actively choose your entertainment and avoid commercials. As weird as this sounds, I prefer youtube content like Faircompanies over TV because I like shows that actually teach me something and aren't strictly designed to hold my attention with suspenseful music just long enough for the next commercial break. It just seems like you are not in luxury mode at the moment and 165 a month is luxury level spending for sure. Why worry about saving 10 extra dollars a month on phone bills when you've got the firehose open and blasting away on the home entertainment expenditures?
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Instead of ting you might consider Republic Wireless. You have internet so for $5 a month you could have a wireless home phone.
Also why do you need Satellite and internet? You can watch everything online the same day it airs. Your kids can probably set it up and walk you through it.
Also... you are paying too much for internet. Call Comcast and tell them you are thinking of dropping it, that your phone works as a wireless hotspot and you have unlimited data. Tell them you would consider keeping it, but need it to be closer to $20 a month to justify it. Then be quiet and see what they say. Whatever the number is tell them that works if they throw in basic cable too. Also... they are good at renting you a cable modem. You can buy one on Craigslist or EBay that will pay for itself in less than a year.
That frees up $50 a month on land line, $45 on internet, and $100 on Satellite. That is $2340 a year.
With a 700 something credit score you should be able to find a 0% credit card to move that credit card debt to, maybe even without a balance transfer fee (check credit unions, and regional banks). Don't have enough details to know what that saves you. You generally get this break for a 12 to 18 month period. That should be enough time to pay off that car and whittle away at the credit card debt. After that... Do the rest of the credit card debt. If necessary move it to another 0% card.
But if I can cut $2340 from your spending with the little bit of info you have given us then you should be able to do more than that. Just do it... And whenever possible make it automatic.
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Re: CC transfer, Chase Slate is running 15mo 0% and no fee on balance transfers. It may be worth considering: https://creditcards.chase.com/credit-cards/slate.aspx
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You are not screwed.
Umm... this is going to sound a little harsh but... what the fuck is going on at that house?
1) 9k earmakred for sorely needed "upgrades"?
2) 13k sunk in HVAC "upgrades" already? It sucks that you took equity out of the house for this too.
All of the advice on cutting the cable and shit is fine and dandy, but that's 21k dude! Nevermind property tax. I don't know what you paid for your house, but I think you're spending too much on it given your situation. Downsize and get a rental for less than your mortgage payment and bank everything, use whatever principle or equity you get from your house to pay off your debt, highest interest first.
You said the housing market improved, that house is nothing but a big sinkhole o' cash in my view. Sell it.
Also if you broke down your expenses in tabular form it would help:
Mortgage: $x
Heating: $y
food: $z
etc.
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More specifically, here's the guide for how to write a case study.
http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/
Puts things into a standard format that makes it easier for people to absorb quickly.
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No, you're not "screwed" but you do have a hair on fire debt emergency. Think back or go back to the Dave Ramsey mantra and PAY OFF THOSE DEBTS! Once you've paid off the cards and the car reevaluate where you are with your budget and savings goals. As a family that has to work hard at maintaining a decent savings rate because lifestyle creep is real and insidious especially with kids at home I know that your budget seems tight already but as many others have pointed out you DO have some room for improvement. But the number one thing holding you back from bigger savings rates is the debt. Without changing any aspect of your lifestyle (hobbies, habits, etc.) you could increase your savings by the amount you send to debt payments each month....wouldn't that be a joyous day? Get the debt GONE and you will find you can breath easier and save more with less effort that you can today.
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You are not screwed! Good income, low tax rate. You can do it, but more details are needed. Post your budget and let the mavens here do their thing.
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No, you're not "screwed" but you do have a hair on fire debt emergency. Think back or go back to the Dave Ramsey mantra and PAY OFF THOSE DEBTS! Once you've paid off the cards and the car reevaluate where you are with your budget and savings goals. As a family that has to work hard at maintaining a decent savings rate because lifestyle creep is real and insidious especially with kids at home I know that your budget seems tight already but as many others have pointed out you DO have some room for improvement. But the number one thing holding you back from bigger savings rates is the debt. Without changing any aspect of your lifestyle (hobbies, habits, etc.) you could increase your savings by the amount you send to debt payments each month....wouldn't that be a joyous day? Get the debt GONE and you will find you can breath easier and save more with less effort that you can today.
Agreed with Lakemom, Dave Ramsey may have failings, particularly in terms of investment horizon, but he like MMM advises to chase down your debts like Gazelle like intensity. Housing upgrades, housing renovations and car payments do not seem like a gazelle with your hair on fire. Another thing DR has a point on is that you can't rely on your kids to support you. As the kids get older, there is less and less they need from you in terms of hours of care, use this to increase earnings.
Finally, it sounds like you need to really drill down to the details of your budget and spending. You talk about getting mad with the notifications for fees and overdrafts but you don't talk about what you do to fix this and stop it. Don't be mad at the water for drowning you, SWIM BABY SWIM! You've got this.
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One quick fix may be consolidation of your TV internet and Landline.
you currently pay $80+$65+$55= 200 for all three
You can get all three through Comcast for 100-115 bucks per months (ask for Comcast triple play) depending on where you live with no loss in internet/TV/ or phone functionality.
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Are you a celebrity in an emergency?
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At age 47, why do you still have $80,000 in student loans? How long ago did you graduate?
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IsitSnowingInSpace,
As others have said, we really need details to help you.
We need to help you align your cashflow and optimize your wealth building. We can't do it on the information provided...
You might just own too much house, or God knows what, we can't tell, so please lay it out there so we can help.
Details, details. It CAN be fixed!
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If you keep doing what you have been doing you are going to keep getting what you have been getting. You need to make some serious changes. Luckily for you this community can be a major help at implementing said changes.
In the end it is up to you, will you listen to their advice...or tell yourself that their suggestions don't apply to you because x,y,z, and you aren't willing to give up certain things.
With that income and some changes you could be in a great spot in a few years. Good luck!
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As others have suggested, you aren't permanently screwed - we just need more details to really be helpful.
But with what you've given.... You have a reasonable-to-good income but a lot of debt. Earmarking $9k to spend on home projects is ridiculous unless they are absolutely necessary. I'd throw 100% of those savings at your high-interest credit-cards pronto.
Earning more income is the next thing that will help you. If your wife can go from 10hrs to 20hrs (or if you can get 5 hours of overtime/week), all that extra cash can go towards debt and you'll shave years off how long it takes to become debt-free.
Third step is to post and stick-to a budget. You're spending about $2500/yr on internet, satellite TV and a land line. And your hair is on fire with debt. Sorry, that's like saying you need to keep smoking while being treated for lung cancer. There also has to be other ways of freeing up cash for debt repayment. Post your actual expenses here - you'll get some facepunches but we will help.
You can get through this. Plenty of other people have come through here with situations as bad as yours... but it's down to you and your wife now.
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I think it would be helpful to see your entire budget. 85k in income is far from poverty, but you seem to repeatedly make poor decisions.
Why would you buy a house that needs 20k+ in maintenance/upgrades?
Why is your wife staying at home with kids when you have all this debt and barely any savings? Having a parent at home with kids is a noble use of time, but you clearly haven't planned for this financially.
More details on budget like others have mentioned would be helpful to give more advice than just "spend less, save more".
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I have a lot of sympathy for you because my bf makes about what you do, and even without kids, after student loans, it's not a piles-of-money-gushing-in-problems-solved-overnight situation. It's good, don't get me wrong. But I can see how it would be hard and slow with kids.
But. I like to remind myself that people have (and do), have good lives on less. 10 years ago my parents raised 3 kids (16, 11, 8) on 54k in a pricey, good schools part of the Chicago suburbs. That's 67k today.
So try a thought experiment. What if you came to work tomorrow and your pay was cut by 20%? What would you cut? Look at food spending, shopping, household, and "misc" for relatively painless places to optimize. That will show you HOW. Actually doing it, though? No one but you can make that happen. I v think you'll do fine, though. You did it to get the house! Good luck!
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I have a lot of sympathy for you because my bf makes about what you do, and even without kids, after student loans, it's not a piles-of-money-gushing-in-problems-solved-overnight situation. It's good, don't get me wrong. But I can see how it would be hard and slow with kids.
But. I like to remind myself that people have (and do), have good lives on less. 10 years ago my parents raised 3 kids (16, 11, 8) on 54k in a pricey, good schools part of the Chicago suburbs. That's 67k today.
So try a thought experiment. What if you came to work tomorrow and your pay was cut by 20%? What would you cut? Look at food spending, shopping, household, and "misc" for relatively painless places to optimize. That will show you HOW. Actually doing it, though? No one but you can make that happen. I v think you'll do fine, though. You did it to get the house! Good luck!
This thought experiment is the best starting out advice that I've read on this blog. From the outside, it's clear that this is a triage situation, but putting it in terms that requires a 20% cut really will make people think about their options. Cool idea!
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I have a lot of sympathy for you because my bf makes about what you do, and even without kids, after student loans, it's not a piles-of-money-gushing-in-problems-solved-overnight situation. It's good, don't get me wrong. But I can see how it would be hard and slow with kids.
But. I like to remind myself that people have (and do), have good lives on less. 10 years ago my parents raised 3 kids (16, 11, 8) on 54k in a pricey, good schools part of the Chicago suburbs. That's 67k today.
So try a thought experiment. What if you came to work tomorrow and your pay was cut by 20%? What would you cut? Look at food spending, shopping, household, and "misc" for relatively painless places to optimize. That will show you HOW. Actually doing it, though? No one but you can make that happen. I v think you'll do fine, though. You did it to get the house! Good luck!
This thought experiment is the best starting out advice that I've read on this blog. From the outside, it's clear that this is a triage situation, but putting it in terms that requires a 20% cut really will make people think about their options. Cool idea!
Thanks :)
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Answers to some of the questions above:
* The house was $174K, which was an awesome deal for this area. It was a short sale at the *rock bottom* of the market (and I'm not exaggerating on that, I looked at the pricing charts before and after). Why did we buy it? Uh, does 15 years in a mobile home not register? We're not passing on home ownership after having this as our top goal for over a decade. It's a little bigger than we need, so we may eventually sell, but probably not for at least a decade. Our mortgage is very manageable and reasonable, and we're very happy here. As far as why did we buy it, when it needed lots of work and upgrades? I think I already made that clear. The price was right, and we didn't see another opportunity like this coming soon. It was built in 1978 and beaten on pretty hard by a family of 11. Needless to say, besides the lack of a really old heating system and no A/C, it's not that bad. Mostly we're doing the work ourselves, but we're committed to improving it, on a budget. We may delay improvements depending on how our financial situation looks. Anyways, so far the upgrades have completely come out of the refi, which only increased our total owed, and actually lowered our payment slightly because it paid off (well, subsumed) our 2nd mortgage and the eliminated the mortgage insurance part of the payment.
* Why so much student debt? That's irrelevant. It's in the past. My main goal now is to A) stay current on the service payments for that, and B) help my kids get a good higher education as quickly and inexpensively as possible, and learn from our mistakes (and misfortune). Oh, and I'm already doing IBR.
* Wife's working 20 hours per week currently. Oh, and she just got a $0.33/hr raise! Woo hoo!!! :rolleyes:
* Ting's already cheaper than what we were on before (Virgin Mobile USA, which is pretty cheap, less than 30/mo), and for better service; plus, we paid cash for our (used) phones, so I think we're going to stick with this for a while. I doubt I'd save much on another carrier, and we're extremely happy with Ting.
* Credit: we have four accounts with balances of ~$5K each: two Chase accounts, and two Discover accounts. We've already done 0% or low % rate balance transfers on both of them.
* We're definitely not going to get Comcast for anything MORE than internet. If anything, I'll dump Comcast if they don't agree to give me a better price. I only have them because they're the best internet option. The others are CenturyLink (DSL), or Digis (wireless, meh quality, close to CenturyLink). We've had both and they didn't really cut the mustard. I have Dish Network for satellite. In all, there maybe better options, but like I said, it's our entertainment. I'm probably not going to sacrifice here, but maybe we will, depending on what the overall analysis shows. The only places we go out to are the local cheap-o "dollar theater", or dinner at Applebee's when we get gift cards for Christmas.
* Eating out: this is an area we may be able to improve on...although we're a lot better than we use to be. Mostly we cook at home and have leftovers. But we still pick up fast food probably 1-2x a week. I'd prefer to cut that to 1-2x per month.
I do appreciate the responses. However, in some ways, these nickle and dime suggestions are just frustrating, since I don't see them making a big impact. I know that both a good offense AND a good defense are important, but we're already modest and frugal in most ways. No, we won't win the contest for biggest skinflint...but most people we know are more wasteful than we are. (Tons of people have 2 full incomes, though, too, so....)
My biggest thought is for me to figure out how to increase my income in my career, and I'm wondering why no one mentioned that. I work as a software support engineer, which is basically glorified technical support, but I've been very fortunate to get to the point where I earn a good salary. However, if I could figure out how to move into software development, that would move me into a whole new income class, at least in terms of potential income.
Anyways: thanks for all the replies! Lots of food for thought. I will eventually come back here with more details, but some of these questions I can't really answer off hand...but that in and of itself helps, because it's been a while since we've gone through everything. To those that have jumped to certain conclusions based on what I've shared, let me just say this: you have to realize that it's not just me. I need agreement and buy-in on everything with my wife. She's a great partner, but your financial plan is really only as sound as strong as your most committed team member.
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However, in some ways, these nickle and dime suggestions are just frustrating, since I don't see them making a big impact. I know that both a good offense AND a good defense are important, but we're already modest and frugal in most ways.
Wrong mindset. It's not about nickle and diming, it's about optimization. :)
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The nickel and diming is really a result of not having enough data (interest rates, balance, monthly budget and exact spending, etc). The advice we give is only as good as the information we get.
I would suggest going to iheartbudgets.net, look at a couple sample budgets and then make your own that matches that style (and post it back here). Not having a budget is a bit like running a business without knowing your inventory... It makes it nearly impossible to make educated decisions.
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IISIS,
I just don't see how I'm going to get there without figuring out how to switch careers to something with more income potential. But I've struggled just to get where I am now, so I'm not very optimistic about better future income prospects.
This is most likely why responders didn't discuss income. You give the impression that this is the top for you all. This is your biggest shovel, you can choose to dig out or continue to dig down.
Nickel and Diming are the key to getting out of the hole, one shovel full at a time. Its critical to accept that. Remember that just because something is cheaper doesn't mean its the cheapest. Continually looking for alternatives (other entertainment vs satelite, other phone companies, etc) is key to building the momentum.
You have a ton of debt, your hair should be on fire and do whatever it takes to get to 0. If you excuse yourself from this and that, instead of making a change, you've made your choice. It is possible to do if you choose. That has to be the same conversation with your wife. In the same manner.
Unfortunately you need to get your status in order before you worry about your kids' education. It will be much worse on them to rely on them for 30+ years of retirement because you're broke than making/helping them find a different way to pay for school instead of a gift.
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$200/mo is NOT insignificant! You have a land line, cell phone, mega-high speed internet, AND $100/mo television while carrying a high 5 figure student loan balance!!! I think this blog post is most appropriate.
http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/
You're a support technician, is that a 7 day a week job? If not, what are you doing on your other two days to earn extra money? You mention getting your kids a better life than yours, I would show them the value of hard work and discipline, not the luxuries of $1200/year television!
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However, in some ways, these nickle and dime suggestions are just frustrating, since I don't see them making a big impact. I know that both a good offense AND a good defense are important, but we're already modest and frugal in most ways.
Wrong mindset. It's not about nickle and diming, it's about optimization. :)
I should have precluded my comments with: "And don't tell me "wrong mindset"." ;-) Seriously, I realize this...and we've already done a LOT of that.
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The nickel and diming is really a result of not having enough data (interest rates, balance, monthly budget and exact spending, etc). The advice we give is only as good as the information we get.
I would suggest going to iheartbudgets.net, look at a couple sample budgets and then make your own that matches that style (and post it back here). Not having a budget is a bit like running a business without knowing your inventory... It makes it nearly impossible to make educated decisions.
Initially I did say this:
"We created a rough budget based on this..."
"Fast forward two years...we've refined the budget...."
"we're SUPER budget conscious..."
We use YNAB, which is a good mix of tech + manual.
I will concede to your point about not sharing enough data here. Like I said, I need to analyze the details and tabulate all of this again.
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IISIS,
I just don't see how I'm going to get there without figuring out how to switch careers to something with more income potential. But I've struggled just to get where I am now, so I'm not very optimistic about better future income prospects.
This is most likely why responders didn't discuss income. You give the impression that this is the top for you all. This is your biggest shovel, you can choose to dig out or continue to dig down.
Fair enough, but still....
Nickel and Diming are the key to getting out of the hole, one shovel full at a time. Its critical to accept that. Remember that just because something is cheaper doesn't mean its the cheapest. Continually looking for alternatives (other entertainment vs satelite, other phone companies, etc) is key to building the momentum.
You say this like I don't realize this, but what you don't realize is that I already do. This is my ONE luxury. I may yet sacrifice it (although I don't think we can right now b/c of a contract). I'm going to preface this by saying that I already know you're going to attack this point, and argue that I DON'T realize it, which just isn't true.
You have a ton of debt, your hair should be on fire and do whatever it takes to get to 0. If you excuse yourself from this and that, instead of making a change, you've made your choice. It is possible to do if you choose. That has to be the same conversation with your wife. In the same manner.
I have a student loan, a mortgage, and $20K in unsecured debt. As far as the mountain of student loan debt, right now, yes, I have made my choice. My attitude right now is that I'm going to service the student loan debt. I don't see it as "a ton of debt" when the interest is so low. Would I love to pay it off? Sure! But to me it makes more sense to worry about that last, if at all. I just accept the payment. Even if the lender eliminated the interest, and we paid $500/mo, it would take 17 years to pay it off. Neither of those things can or will happen. So I have a payment...hopefully one I can afford. That goes into the budget, pretty much until I die, or until it's forgiven. Including my mortgage, it's still less than $1500/mo.
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48, student loan debt, car debt, unsecured debt, mortgage, living pay to pay.
Still finding excuses and dismissing everyone's suggestions to help...yep, you're screwed.
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Would you care to specify details of your monthly expenses -- see the sticky/case study for the best way to format it?
The reason "nickel and dime" suggestions are made is because they have a two-fold impact. While this may be far off, the goal of financial independence means "having about 25 times your annual expenses."
Just to pay for your home phone, you need to build up $55 * 12 * 25 = $16,500 in savings! To pay for your satellite TV, you need twice that!
(A little note on that luxury... my girlfriend was hesitant to give up cable television... until she got her hands on a Roku 3 remote. She's addicted to the thing. One time $99 fee and then lots of free channels and optional $9/month Netflix or Hulu if you still feel starved for mindless entertainment.)
Then, the other half of those "nickels and dimes" - again with the home phone... paying off debt at an extra $660 / year can really speed things up. And of course the interest saved compounds. If you're paying 12.9% on $20k and managing to put $250 towards it each month, thanks to interest after 5 years, you'll have paid off $3k. An extra $55 each month increases that debt payoff in 5 years to $7500! (And saves you $1300 in interest!) It's not as small as it sounds. These numbers get much bigger when you start to swing things $100/month or more.
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48, student loan debt, car debt, unsecured debt, mortgage, living pay to pay.
Still finding excuses and dismissing everyone's suggestions to help...yep, you're screwed.
I'm not making excuses or dismissing suggestions. I said I have to go back and look at everything.
OK, presume I eliminate the 1200/year for satellite. On top of that, f**k it, for the sake of this discussion, I'll just completely turn off my phones and internet. That will save me another 170*12 = 2040/year, so that's 3240/year. I chunk that to the credit cards, and I pay off that debt in about 8 years. Now I'm 55. Now I save and invest that for the next 10 years, parlaying it through decent investing into...what? $70K if I'm lucky? About a year's income. Maybe I got lucky with my 401K and built up another $70K. So I can live until I'm 67. Working until I'm 70 will maybe allow me to save another year's income. Let's say I DOUBLE this performance. Still not a very good picture.
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IISIS,
It sounds like you have resigned yourself to this path and if so, that's your choice.
As of April 1st my wife and I will have paid of 150k worth of debt over 4 years. It can be done! At first we started with $300 of "snowball" per month. We kept at it, kept cutting and shrinking expenses little by little. Each time a debt was paid off, we used that minimum payment in the new snowball and kept the pace up. It works if you want it to. If you don't then acknowlege you don't.
Sometimes this board may seem negative but their advice truly does help if you allow it to. My (can't speak for everyone) biggest frustration is when people ask for help but then explain/excuse away why it won't work. Just take a test run and cut 500 for next month and put it towards credit cards. If it was too tough then stop, but you'll see how easy it was.
Also if your budget is 2 years old and you haven't paid any debt down, it's not a budget, its a dream/nightmare. If you don't hold to a budget all it does is remind you of failing. If you make it with the understanding that without it you will lose your car, house and childrens education then hopefully it will give you that urgency. It needs that urgency because that is exactly what will happen if you do nothing. Not only will you not be able to retire but you will be worse that where you are today.
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First, you're only looking at one part of the picture - those three expenses. Two, you're assuming no changes in pay - I'm OK with that because I like to be cautious. But three, you're doing Simple Math - but debt and investments compound, and that's where everything big happens.
I strongly recommend you break out all of your monthly expenses, line by line, as well as where you put your money (i.e. tax advantaged, etc.) It's not going to be easy or a "pretty picture" but if you can work on being more optimistic, and go through each line item with an open mind, we can probably find a much better picture for you. We only have "ideas" - the hard work part is still firmly on your shoulders.
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You have a debt emergency and you state that your house is more than what you need. The first step isn't rocket surgery, here.
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Since your wife's plan is to work more once the kids get to high school, is there a community college she can attend to get a degree in something that will pay her well when that time comes?
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We have Netflix, Hulu, Amazon Prime, and a TIVO (to record over the air shows), and we still only pay around $40 a month for these devices. And this gives me way more television than I could ever watch.
What are you watching that requires such an expensive satellite package? Is it sports? I can perhaps understand that, but if it's just HGTV or other networks, is it truly worth it for $100 a month?
Check out the new Sling TV and see if this can satisfy your needs.
People here have made excellent suggestions for how to reduce your budget. Without someone directly in your field reading this, it's much more difficult for strangers on the internet to weigh in on how you can advance in your field.
Can you provide the details of your IBR? Is there any chance that this could leave you even more screwed in the future? There was a recent discussion on this in another thread, and it was kinda worrisome how these programs can backfire on you.
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Nickel and Diming are the key to getting out of the hole, one shovel full at a time. Its critical to accept that. Remember that just because something is cheaper doesn't mean its the cheapest. Continually looking for alternatives (other entertainment vs satelite, other phone companies, etc) is key to building the momentum.
This.
You have to realize that you are on a mustachian forum. You are going to get mustachian answers. Your hair is on fire. You should be going out to eat NEVER, for example (or like once or twice a year) until you have pulled out of the hole. You shouldn't have a car payment at all. You should have no land line, no cable, etc. Dollars are made of nickels and dimes.
Also, agree with others -- less money sinkhole of a house, if at all possible. I get that the mortgage is reasonable, but that's not the only expense of this house. Downsize.
And finally... Look, man, the defensive tone and dismissiveness are a bit unbecoming, especially given that you came here and told us that A) you are a newbie; and B) you were asking for advice. Then, as soon as people start giving you advice: A) You say you are not a newbie, so stop giving you newbie advice; and B) You shoot down pretty much every suggestion as insignificant, impossible, or out of line.
"Screwed" is a relative term. Financially screwed? Probably not. "Mentality" screwed? Starting to look like it.
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I have a lot of sympathy for you because my bf makes about what you do, and even without kids, after student loans, it's not a piles-of-money-gushing-in-problems-solved-overnight situation. It's good, don't get me wrong. But I can see how it would be hard and slow with kids.
But. I like to remind myself that people have (and do), have good lives on less. 10 years ago my parents raised 3 kids (16, 11, 8) on 54k in a pricey, good schools part of the Chicago suburbs. That's 67k today.
So try a thought experiment. What if you came to work tomorrow and your pay was cut by 20%? What would you cut? Look at food spending, shopping, household, and "misc" for relatively painless places to optimize. That will show you HOW. Actually doing it, though? No one but you can make that happen. I v think you'll do fine, though. You did it to get the house! Good luck!
This thought experiment is the best starting out advice that I've read on this blog. From the outside, it's clear that this is a triage situation, but putting it in terms that requires a 20% cut really will make people think about their options. Cool idea!
+1
I think this is a great idea and am going to do it with my own budget!
One of the articles I really like on the MMM site is called A millionaire is made 10$ at a time (I think). It really hit home for me that I need to start respecting every 5 and 10 dollars that comes into my possession because they DO add up over time. And while putting an extra 10 towards debt doesn't seem like much you do that 10 times and is 100$...and you do it 100 times and it is a 1000. For me, my brain had been programed as ' it is only 10$' and I have am working on reprogramming it to be WOW! I just saved 10$! It is hard to change the way we think about our money after a lifetime (in my case) of programming. But it can be done! I started a money savings jar at home where I have been putting all my extra money that I earn selling stuff on kijiji and it has about 500$ of 10 and 5 dollar bills in it now after about 6 months. I love it because it shows me that every 5 dollars I don't spend is adding up to be a meaningful sum. When it gets to 1000$ I will put it in the bank and start all over again! So maybe look at the article and it might help you shift your mindset from it is only 'x' amount to WOW, it is 'X' amount...which is more than you would have had if you made no changes. Good luck!!!
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I have a lot of sympathy for you because my bf makes about what you do, and even without kids, after student loans, it's not a piles-of-money-gushing-in-problems-solved-overnight situation. It's good, don't get me wrong. But I can see how it would be hard and slow with kids.
But. I like to remind myself that people have (and do), have good lives on less. 10 years ago my parents raised 3 kids (16, 11, 8) on 54k in a pricey, good schools part of the Chicago suburbs. That's 67k today.
So try a thought experiment. What if you came to work tomorrow and your pay was cut by 20%? What would you cut? Look at food spending, shopping, household, and "misc" for relatively painless places to optimize. That will show you HOW. Actually doing it, though? No one but you can make that happen. I v think you'll do fine, though. You did it to get the house! Good luck!
This thought experiment is the best starting out advice that I've read on this blog. From the outside, it's clear that this is a triage situation, but putting it in terms that requires a 20% cut really will make people think about their options. Cool idea!
+1
I think this is a great idea and am going to do it with my own budget!
One of the articles I really like on the MMM site is called A millionaire is made 10$ at a time (I think). It really hit home for me that I need to start respecting every 5 and 10 dollars that comes into my possession because they DO add up over time. And while putting an extra 10 towards debt doesn't seem like much you do that 10 times and is 100$...and you do it 100 times and it is a 1000. For me, my brain had been programed as ' it is only 10$' and I have am working on reprogramming it to be WOW! I just saved 10$! It is hard to change the way we think about our money after a lifetime (in my case) of programming. But it can be done! I started a money savings jar at home where I have been putting all my extra money that I earn selling stuff on kijiji and it has about 500$ of 10 and 5 dollar bills in it now after about 6 months. I love it because it shows me that every 5 dollars I don't spend is adding up to be a meaningful sum. When it gets to 1000$ I will put it in the bank and start all over again! So maybe look at the article and it might help you shift your mindset from it is only 'x' amount to WOW, it is 'X' amount...which is more than you would have had if you made no changes. Good luck!!!
I loved that MMM post, as well. It changed my mindset, too, and led me to start doing the following things:
1) I actually have a journal in which I record little mustachian daily decisions I make (they are mostly $5 and $10 things). It makes me happy to add another "I just cut out a monthly expense that I wasn't really using/had lost interest in". And following from this:
2) I have a reminder in my phone at the end of every week that says "Can you put a little extra in savings today?" And every week, it turns out that of course, I can. So I'll log on to my bank and move, say, $25, to my primary savings account. Some weeks it's more, etc. But the point is, as a result of this, I am consistently saving hundreds of dollars more per month *more* than I would have if I was just passively buying lattes and not thinking about it, because I know there's plenty of "extra" money in my checking account.
If I had a hair-on-fire emergency, I would be doing these things but for #2 it would be a fund set aside for paying down debt.
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I have a lot of sympathy for you because my bf makes about what you do, and even without kids, after student loans, it's not a piles-of-money-gushing-in-problems-solved-overnight situation. It's good, don't get me wrong. But I can see how it would be hard and slow with kids.
But. I like to remind myself that people have (and do), have good lives on less. 10 years ago my parents raised 3 kids (16, 11, 8) on 54k in a pricey, good schools part of the Chicago suburbs. That's 67k today.
So try a thought experiment. What if you came to work tomorrow and your pay was cut by 20%? What would you cut? Look at food spending, shopping, household, and "misc" for relatively painless places to optimize. That will show you HOW. Actually doing it, though? No one but you can make that happen. I v think you'll do fine, though. You did it to get the house! Good luck!
This thought experiment is the best starting out advice that I've read on this blog. From the outside, it's clear that this is a triage situation, but putting it in terms that requires a 20% cut really will make people think about their options. Cool idea!
+1
I think this is a great idea and am going to do it with my own budget!
One of the articles I really like on the MMM site is called A millionaire is made 10$ at a time (I think). It really hit home for me that I need to start respecting every 5 and 10 dollars that comes into my possession because they DO add up over time. And while putting an extra 10 towards debt doesn't seem like much you do that 10 times and is 100$...and you do it 100 times and it is a 1000. For me, my brain had been programed as ' it is only 10$' and I have am working on reprogramming it to be WOW! I just saved 10$! It is hard to change the way we think about our money after a lifetime (in my case) of programming. But it can be done! I started a money savings jar at home where I have been putting all my extra money that I earn selling stuff on kijiji and it has about 500$ of 10 and 5 dollar bills in it now after about 6 months. I love it because it shows me that every 5 dollars I don't spend is adding up to be a meaningful sum. When it gets to 1000$ I will put it in the bank and start all over again! So maybe look at the article and it might help you shift your mindset from it is only 'x' amount to WOW, it is 'X' amount...which is more than you would have had if you made no changes. Good luck!!!
I am trying to do that with raises now. I recently max'd my employee stock plan for maximum match (pulled $700+/mo out of my paycheck) and when I get my next raise, I'm planning on increasing my 401k contribution so I still see the same net income. It should help avoid that 'lifestyle creep' that tends to happen when pay goes up.
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OP, I think you've been given some good advice here, based on the information you provided, but I thought I'd come at this from a slightly different direction. It sounds like you might have come on to this forum without a clear picture of it's general approach to things. You may want to read some of MMM's early blog posts, and read through some other forum threads to get a sense of where people here are coming from.
I also wanted to offer you some congratulations! And some appreciation! You and your family have obviously not had an easy time of things over the last number of years. You have worked incredibly hard and been extremely patient, likely going against the grain of the materialist culture of family and friends. You have something truly valuable to show for this hard work: low debts (except for the student loan), a lifestyle that feels frugal compared to those around you, and most important to you, a real home of your very own. Your family has gone through some major changes and you and your wife may need to take some time and really be proud of what you've accomplished. I think it's really important to FEEL the reward for years of sacrifice, otherwise it just feels like poverty and drudgery.
So now, things have changed. You are taking the time to re-calibrate. And you feel like, for all of the hard work and sacrifice you've been doing, why aren't you farther ahead? So demoralizing! But the truth is, it's just time to take a deep breath, let go of what "should" be; look around, figure out new goals, look at your budget with fresh eyes, and then, with your whole family, start prioritizing once again.
A few things that have been important realizations to me: my gross pay is not my take home pay. I get cranky because, in theory, my DH and I make a really good income: more than $120k a year. This is more than we would have dreamed of years ago! Where does it all go?! Well, lots of it goes to taxes, EI premiums, health care deductions, etc. The ACTUAL money that we work with on a monthly basis is much lower than that. I don't mean to sound patronizing; we all KNOW that this is true, but I had this fuzzy sense of wealth that didn't match our actual reality. I need to think of us as a household that makes less than $100k. It's still a very respectable amount, of course, but it does limit our options. And we live in a high cost of living area, where most people are funding good-looking lifestyles with a TON of leveraging. It's tough, sometimes, to get an accurate picture of what lifestyle our incomes buy in this area.
Another thing that's helped is really finding peace about my choices. Budgets and money are all about choices. It is completely your choice to keep your satellite tv. We have a ridiculously unmustachian sailboat that I can justify as old, used, a diy project, etc...so it *shouldn't* really cost that much, right? Well, it costs us $500/month. That's the reality. This is totally ridiculous. However, DH and I have decided that it IS in fact worth the extra years of working and spending to have this boat in our lives. We don't have hair-on-fire-debt. It is a luxury that we don't insure; if it sank tomorrow, we would cry and say, oh well, it was worth it while we had it. So if this STV is the thing that makes you feel ok about your life, then do the same thing: recognize that you LOVE having STV, it is completely worth $100/mo to your family, and you absolutely recognize the trade-offs of the lost opportunity cost of that money, which include greater financial insecurity. The responses you are getting here are from people who have been down that road, decided it *wasn't* worth those trade-offs for them, and have found much cheaper ways of meeting the entertainment need so that they feel their quality of life has been *improved* AND they are saving $$.
Lastly, remember that this is a *process*, as you've experienced already. On this forum, we love a great "180" story, where someone gets the bug, sells everything, starts biking everywhere, stops eating out and starts working out, and is thrilled and empowered. But it doesn't work that way for all of us, especially those with families. Sometimes the nickel and diming is all we have to work with for a while, because bigger changes (like finding new work) don't happen as quickly. Sometimes those nickel-and-diming actions add up over time and get us where we need to go; sometimes they help us to realize that bigger, more dramatic changes (like moving) are necessary to meet our goals.
Anyway, sorry that was long, hope it helps put things in perspective a little. Remember that this is a place famous for "face-punching" sense into people, but that we are a group that finds a lot of joy in a stripped-down life, and we're just trying to encourage you to find the same. Good luck to you and your family.
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You know, I think you should consider the house as a long-term expense. I just had friends buy a house and discover it's much more expensive to live in the house and fix the problems houses have than it was to rent. I get why this is a surprise to them. They're totally bummed about it.
But I told them that it might be more expensive to live in the house NOW, but in 10 years, that probably won't be the case. Rent will go up with inflation, but their mortgage payment will stay the same. My parents bought a really nice house in an upscale part of Pittsburgh in 1971. They paid off the mortgage a couple of years early in 1994, and I asked what the payment was: around $400 a month. For a huge, fancypants house in an amazing place. That $400 per month was probably a lot in 1971, in 1994 it was a paltry amount. So think about what the house will cost you in 15 years -- at that point, you're going to be way ahead.
So no, you're not screwed. You're just working your way towards success.
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OP you have received a lot of responses, some were understanding and some were just getting real with you. Just reading some of these forums should have given you an idea of the type of response you would receive.
1. You're asking for advice but not open to the answers. You will get many answers including a lot you don't like.
2. You're asking for advice but not giving the details. You are being evasive about facts and figures. Facts and figures are the bottom line. Along with your income, knowledge and a plan are the solution to your problems.
My best advice based on what I read. You and your wife should be a team with a plan. If your wife is home while kids are in school there should be absolutely no take out happening at your house. She has her days to plan and prep meals.
I get that being a two income family with kids is a challenge but if you won't decrease your expenses you had better increase your income. It's simply one or the other.
The little stuff does add up, don't discount saving a few dollars here and there. We recently paid off our mortgage but you will still find me on the grocery shopping challenge trying to get my food budget down. Every penny counts and they can add up quickly. I intend to make them add up in my savings accounts.
Last thought, I read between the lines and it seems to me that you bought a house with no air conditioning and than saved to put it in? You should be saving to pay off your credit card debts, I'm sorry but if you really want rid of your debts you need to get your priorities in order.
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backyardfeast, I just wanted to say I love your style :) [I also didn't want to re-post your whole post and clutter the thread which is why I replaced it with an ellipsis...I might be weird.]
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My best advice based on what I read. You and your wife should be a team with a plan. If your wife is home while kids are in school there should be absolutely no take out happening at your house. She has her days to plan and prep meals.
The wife works part-time, but even if she didn't, your hard line approach here is pretty harsh. Just because a person stays home while kids are in school doesn't mean that shit doesn't happen sometimes to derail things. Kids sick, mom sick, etc. etc. I would say take out rarely, but come on, we all have our bad days. Or (gasp!) maybe the stay at home spouse might want a break once in a while. It would be better just to budget in two or three take out meals per month and set a price limit. Or conversely, they could have frozen pizza or lasagna in the fridge for when those days happen. But I don't see a problem with occasional take out, but then again, I don't have 100K in student loan debt. I prefer to actually go somewhere, because that gets us all out of the house and seems more like an event. Plus the kitchen stays entirely clean that way.
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backyardfeast, I just wanted to say I love your style :) [I also didn't want to re-post your whole post and clutter the thread which is why I replaced it with an ellipsis...I might be weird.]
+1
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Thanks for all the replies, especially to backyardfeast.
Some of you guys would make great politicians, cherry-picking what I've said and taking it out of context. Yes, if you laser-focus on some of my comments, then I have an attitude problem...but that's an unfair assessment. Honestly, with my tone, as Kris and a couple of others pointed out, I expected some facepunches...and that's fine. I've punched back pretty hard at times, too.
I did jump in here without reading through lots of the site. I guess I will apologize for that. I'm just a very slow reader. I appreciate the articles that were pointed out, and I'll appreciate any other suggested articles/posts. I will continue to follow any other posts in this thread, and read some stuff here.
My attitude truly is actually better than I'm coming off here, but I'm just stripping away any BS and being completely honest. I knew I'd get some foaming at the mouth over the A/C upgrade and the satellite TV. I didn't want to spend that much on the A/C...until we went two summers where the upstairs (where we spend 95% of our time) was pretty much a steady 93 degrees for 4 1/2 months, and a window A/C unit barely even made the one room we all huddled into comfortable. The house is a dream now. I'm completely at peace with the decision, and would do it again in a heartbeat. Our energy bill went down a LOT, too. Yeah, SatTV is a luxury. I don't splurge on much else, but it is definitely a luxury. But it's a biggie for us, and probably the one thing we won't cut (although I did look at the package today to see if we could go with a cheaper one and save 20/mo or so).
As far as living in the home itself: I was actually very uncomfortable and hesitant with making a commitment to buy a home while we still have unsecured debt, because I knew that would kill the great progress we were making on our debt snowball, but in a lot of ways I feel like it's been one of the best decisions we've ever made. The place needs work, it's what we could afford, it's needed some attention, but all in all it's solid, and not a money pit. Our f***ing mobile home was more of a money pit than this place. Ugh. So we're not moving, period. that's entirely out of the question. She's SO MUCH happier, and of course that means I am, too. Life is good.
I've been uncomfortable for a while now with the home upgrade plans she wants to make, so I'm slowly massaging that, appealing to her frugality, etc. I was actually astonished when she caught some of the Dave Ramsey fever a few years ago and was on board with reading TTMMO. She hasn't completely committed to the frugality lifestyle, though (nor have I); she wants to take a more measured approach, even if it takes longer to get out of debt. So it's a negotiation process. But, we've stalled out on paying off the debt. We're actually meeting about that tomorrow. My foray here is to begin exploring this again, and find ways to get her to agree to scale back further so that really have complete control of our finances, macro and micro. Nickle and dime is an obvious thing. Scaling back on plans so that those plans take our unsecured debt into account is another obvious one. Figuring out how to increase our income (which we've almost doubled from about 5 years ago...man did it suck back then) is another.
Thanks again for all the feedback.
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You know, when I hear a new idea/suggestion, my first reaction is often "no I can't do that!" and probably excuses. But then I walk around with it for a few days/weeks and marinate and eventually decide it's a good idea. It's most obvious for me with working out strategies, not money. Anyway, can't pick on your attitude too much. ;)
Here's my beef with this thread. You've said your mortgage+student loans are under $1.5k. The phone/tv/internet thing, that's under $200. That's $1.7k. You (together) make $85k; obviously not all of this comes home, but your take home can't be less than $4-5k or so, can it (I'm really not sure here), even after taxes and health insurance contributions, and maybe 401k, if any? So there's 2.3-3.3k going...somewhere. You need transportation, you need food, you probably need occasional clothes, school supplies etc. But those things don't have to cost $2-3k/mo. It really sounds like there are big leaks somewhere in the nickels and dimes, and I think everyone wants to figure out what those are. I do. Maybe you need to go back and do your own re-analysis, but just letting you know we'd love to hear what you find, or what plan(s) you make so we can give you a big thumbs up. :)
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My best advice based on what I read. You and your wife should be a team with a plan. If your wife is home while kids are in school there should be absolutely no take out happening at your house. She has her days to plan and prep meals.
The wife works part-time, but even if she didn't, your hard line approach here is pretty harsh. Just because a person stays home while kids are in school doesn't mean that shit doesn't happen sometimes to derail things. Kids sick, mom sick, etc. etc. I would say take out rarely, but come on, we all have our bad days. Or (gasp!) maybe the stay at home spouse might want a break once in a while. It would be better just to budget in two or three take out meals per month and set a price limit. Or conversely, they could have frozen pizza or lasagna in the fridge for when those days happen. But I don't see a problem with occasional take out, but then again, I don't have 100K in student loan debt. I prefer to actually go somewhere, because that gets us all out of the house and seems more like an event. Plus the kitchen stays entirely clean that
I'll explain my point of view better. I am a wife, I have been a stay at home mom with two kids, I've been a working mom and a work at home mom. Trust me, I know all about what it's like to be home with kids and having your day ruined by the flu, a snow day or just too much damn laundry. (I swear it multiplies). I'm not just preaching what I haven't practiced.
What you said is exactly right, for easy days have a frozen pizza ready to go or scramble some eggs and toss some veggies in it.
IMHO if I were in the OPs position there would be zero takeout along with some serious belt tightening and cutbacks.
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IISIS (interesting online name btw);
I had a lengthy reply written but then my browser crashed. I'll try again tonight/tomorrow.
One thing that hasn't been brought up here is the $20k in credit card debt sitting along side "several months worth in savings". You mentioned leveraging 0% balance transfers, but that's just a short-term fix. I'll just say that it make no financial sense to keep money in savings when you are (or will very soon be) paying high interest rates on four different credit cards.
I realize that there's a drum-beat chorus out there stressing "have and emergency fund! 3 to 6 months expenses!" However this does NOT apply when you are carrying cc debt. Use that money and kill that balance pronto. It instantly loosen your cash-flow, and save you thousands in interest every single year. Then you can rebuild your emergency fund/savings fund over the next few months. If you do have an emergency in that time period, you'll still have the option of your cc to handle it if there is no other option.
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I don't think many here would see $20K in credit card debt and $15K in retirement "savings". Most of our minds are wired backward from the mainstream and we'd see -$5K in retirement savings.
Do you smoke? What sort of grocery stores to you frequent? The fancy ones are easily twice as much over the long haul for the same damn radishes. Alcohol expenses? That shit can add up quickly.
I'll put in my two cents about the sat TV/cable: My local library has more DVD movies and TV shows than I will ever be able possibly to watch in this lifetime. (For free!) My only qualm when I cut the cable was that (despite MM's preachings) I'm a news junkie. Can't rent that at the library or through Netflix. ...But I decided watching an hour-and-half news a night wasn't worth 30 channels and $50/month. A pair of $10 rabbit ears gets me three channels (one in HD!) and it's enough for me to get my evening news fix of what's going on. The unexpected bonus was that my mind is way more peaceful now without all that enraging, loud cable TV advertising.
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You know, when I hear a new idea/suggestion, my first reaction is often "no I can't do that!" and probably excuses. But then I walk around with it for a few days/weeks and marinate and eventually decide it's a good idea. It's most obvious for me with working out strategies, not money. Anyway, can't pick on your attitude too much. ;)
Here's my beef with this thread. You've said your mortgage+student loans are under $1.5k. The phone/tv/internet thing, that's under $200. That's $1.7k. You (together) make $85k; obviously not all of this comes home, but your take home can't be less than $4-5k or so, can it (I'm really not sure here), even after taxes and health insurance contributions, and maybe 401k, if any? So there's 2.3-3.3k going...somewhere. You need transportation, you need food, you probably need occasional clothes, school supplies etc. But those things don't have to cost $2-3k/mo. It really sounds like there are big leaks somewhere in the nickels and dimes, and I think everyone wants to figure out what those are. I do. Maybe you need to go back and do your own re-analysis, but just letting you know we'd love to hear what you find, or what plan(s) you make so we can give you a big thumbs up. :)
Fair enough. Great observations. :-)
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After reading this thread, I'd still be very interested to see your actual budget, done up case-study style. That's what most of the early responders were suggesting. It is a VERY powerful tool and analyzing a budget is what the true Mustachians on this forum are best at. You seem hesitant to do it, and it will probably be painful, but I'm telling you - you will not believe with the money these folks can find in a budget. It's not always just nickels and dimes, either!
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I don't think many here would see $20K in credit card debt and $15K in retirement "savings". Most of our minds are wired backward from the mainstream and we'd see -$5K in retirement savings.
Do you smoke? What sort of grocery stores to you frequent? The fancy ones are easily twice as much over the long haul for the same damn radishes. Alcohol expenses? That shit can add up quickly.
I'll put in my two cents about the sat TV/cable: My local library has more DVD movies and TV shows than I will ever be able possibly to watch in this lifetime. (For free!) My only qualm when I cut the cable was that (despite MM's preachings) I'm a news junkie. Can't rent that at the library or through Netflix. ...But I decided watching an hour-and-half news a night wasn't worth 30 channels and $50/month. A pair of $10 rabbit ears gets me three channels (one in HD!) and it's enough for me to get my evening news fix of what's going on. The unexpected bonus was that my mind is way more peaceful now without all that enraging, loud cable TV advertising.
Sport junky here, especially football (NFL, and US Soccer). We've actually gone periods where we went without. I was very sad. I went through my political news phase until my wife started hating me for it. No smoking, no drinking, although I'm intermittently addicted to Rockstar energy drink when they offer it for $1.50/can at the c-store where I often get gas...about 1-2 months per year. Big mea cupla on that one. Very wasteful...but that stuff is crack in a can to me. I love diet pop, but work has free soda most of the time. We shop at Costco or Winco almost exclusively, so we're getting the best prices there. We store food in the freezer when there are good deals.
As far as the general public goes, I'm probably like a B/B+ with my money...but that's only b/c most people in this country are dummies when it comes to finances. Here, I'm probably a D-.
After reading this thread, I'd still be very interested to see your actual budget, done up case-study style. That's what most of the early responders were suggesting. It is a VERY powerful tool and analyzing a budget is what the true Mustachians on this forum are best at. You seem hesitant to do it, and it will probably be painful, but I'm telling you - you will not believe with the money these folks can find in a budget. It's not always just nickels and dimes, either!
I'm not unwilling, I just don't have the data and won't have time to have that compiled for a number of days, maybe even a couple of weeks. It's on my to-do list, though.
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I didn't see it anywhere in the thread, but could have missed it - what are the 9K critical house upgrades?
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I didn't see it anywhere in the thread, but could have missed it - what are the 9K critical house upgrades?
Heh...who said critical? Part of he fence is falling down (literally) and it's falling apart. A little embarrassing, but definitely not critical. The sprinkler system PVC lines keeps cracking. We actually already shut down part of it and just watered with a sprinkler last summer. It's corner lot, and the yard is pretty big. We're talking about doing a lot of this work ourselves, like renting a ditch witch or mini backhoe from Home Depot and just doing it piecemeal. But my back isn't what it was 10 years ago.... Anyways, fence materials aren't cheap, and we have to coordinate with the neighbors and agree on something. So at this point we're just holding on to that money until we can see what they want and can afford, too, and then we can talk. Doing most of the labor will save a lot, and we may be able to skip on the longest section, depending on what one neighbor wants and/or can manage (very elderly retired couple).
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Hey there! I just wanted to say that at 48, you could have another 20 years in your current career. I know that may not be ideal, but it does give you a long time to put your financial house in order. Over 20 years, small, regular additions to your savings can have a big impact! Good luck.
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OK, presume I eliminate the 1200/year for satellite. On top of that, f**k it, for the sake of this discussion, I'll just completely turn off my phones and internet. That will save me another 170*12 = 2040/year, so that's 3240/year. I chunk that to the credit cards, and I pay off that debt in about 8 years. Now I'm 55. Now I save and invest that for the next 10 years, parlaying it through decent investing into...what? $70K if I'm lucky? About a year's income. Maybe I got lucky with my 401K and built up another $70K. So I can live until I'm 67. Working until I'm 70 will maybe allow me to save another year's income. Let's say I DOUBLE this performance. Still not a very good picture.
Ok - so that's the pessimistic view. let's take the optimistic view, shall we? (Based on you retiring 17 years from now at age 65).
You save the above-mentioned $3k a year and pay off the credit cards in 8 years.
Wife finds other part-time work which will pay her better. (Thoughts - in-home daycare of, say, 3 extra kids at $133/wk each allows her to be there for your kids and earns her $400/wk or about $19,000 a year if she takes 4 weeks off/yr. That doubles her income right there, AND still allows her to be at home to prep meals etc. Not for everybody, I know, but this is how my sister has afforded to be home for her daughters.) (Or - a job as a secretary at an elementary school, would coincide with the kids' school schedules and would surely pay more than $10k per year in most places?) (Or - wife starts a side business she can run from home?) Whatever the choice, let's conservatively say wife could make an additional $6k/yr takehome while still being available for kids. Since your youngest is 7, let's say that's $6k/yr for the next 7 years = $42k. Then when youngest is 14, let's say wife gets a job that pays $30k/yr, and let's estimate that this increases her additional takehome pay by another $8k/yr. Now you have $14k/yr you can save for the remaining 10 years to retirement = 140k. 140k + 42k +maybe $50k in investment returns on that money = $232k.
Also - you have a large house, right? So let's say you rent one bedroom to a college student for $500 a month. That's another $6k/yr. $6k x 17 years = $102k, plus investment interest, say maybe (conservatively) $130k.
Now, let's say your pay gradually rises more than inflation, resulting in a real after-tax increase of $500 per year. (That's 500 dollars the first year, 1,000 dollars the next year, 1500 dollars the third year etc - real after-tax increase above inflation - which should be easy since some of your costs - the house for instance - will not be inflating). By the 17th year, your take-home pay after-tax in today's dollars is (17 x $500 = $8500/yr) higher, and your total increase over that 17 years is, say,(somebody else can do the math here, I'm just WAG-ing it) $60k more income over that time.
So far - I've got $232k + 130k + $60k = $422k in savings by the time you're 65. Add in social security for you and wife, maybe some home equity by liquidating the large house and downsizing in retirement - you guys should be fine. But this involves watching those nickels and dimes, figuring out how to raise wife's income by a relatively small amount, and controlling those spending impulses.
If you wanted to retire earlier, I'm sure you could, but it would require more radical changes in expenses and/or earnings. Starting a profitable side gig, or retiring to a low-cost third world country, are approaches that come to mind.
As to the house remodeling - take your time and learn to be handy. If you learn to paint, lay laminate flooring, and do tile work, you can probably do most of the cosmetic stuff quite inexpensively, especially if you look for sales and bargains. You can build sweat equity in your property in the process. In the garden, get free cuttings from friends and neighbors.
And bear in mind, most of my estimates above are EXTREMELY conservative. You might easily find you can do twice as well, with just a few tweaks. But it definitely won't be the bleak picture you painted, if you focus with intensity right now.
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For every case study, someone mentions the room rental suggestion. But how many people with kids actually do this? I personally would move into a small, cheap apartment with my husband and three kids before I would rent out a room to a random college student. Perhaps this is regional, but I just can't imagine that many people who would want to live with a family either.
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I think it really depends on the person and the setup. Many large homes would have a room that could have an outside entrance, or that is a bit removed from the rest of the house. Some could have a granny flat. I had room mates in college and when I was first married. It always surprises me when people overlook such an easy source of extra money.
And why is renting a room to a "random college student" so different from, say, taking in an exchange student?
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If you aren't willing to do without satellite forever, I'd recommend trying to cancel anyway. Hear me out. We recently cut the cord on our $90 DirecTV bill. Going through the cancellation process, they offered it for $50/month with no contract. Once we had turned in the equipment, they sent another letter offering it for $25/month with upgraded equipment--I forget if it was with a 2-year agreement. So, if you want to keep satellite but are willing to go without for a few weeks--or even just threaten to close your account--you could save almost half on your bill right there.
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And why is renting a room to a "random college student" so different from, say, taking in an exchange student?
It isn't. I probably wouldn't do that either, although presumably if you take in an exchange student your own children are a comparable age and likely all teenagers. I have young children, so I couldn't imagine having a perfect stranger in our home and sharing our space. But, yes, point taken that some houses are laid out differently.
It just comes up in every. single. case study, and I wonder if someone with children has ever actually done it.
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And why is renting a room to a "random college student" so different from, say, taking in an exchange student?
It isn't. I probably wouldn't do that either, although presumably if you take in an exchange student your own children are a comparable age and likely all teenagers. I have young children, so I couldn't imagine having a perfect stranger in our home and sharing our space. But, yes, point taken that some houses are laid out differently.
It just comes up in every. single. case study, and I wonder if someone with children has ever actually done it.
Or has anyone been a college student and wanted to rent a room out from a random family with several young children? I can think of exactly zero of my peers who would be interested in that situation. I suppose a non-traditional student who was going back to school might be but still...
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And why is renting a room to a "random college student" so different from, say, taking in an exchange student?
It isn't. I probably wouldn't do that either, although presumably if you take in an exchange student your own children are a comparable age and likely all teenagers. I have young children, so I couldn't imagine having a perfect stranger in our home and sharing our space. But, yes, point taken that some houses are laid out differently.
It just comes up in every. single. case study, and I wonder if someone with children has ever actually done it.
Or has anyone been a college student and wanted to rent a room out from a random family with several young children? I can think of exactly zero of my peers who would be interested in that situation. I suppose a non-traditional student who was going back to school might be but still...
If my aunt and uncle lived 20 miles closer to school, I would have been glad to live with them and my young cousins. But I was already in very inexpensive apartments with people my age, so I'm not sure I'd do that with strangers.
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And why is renting a room to a "random college student" so different from, say, taking in an exchange student?
It isn't. I probably wouldn't do that either, although presumably if you take in an exchange student your own children are a comparable age and likely all teenagers. I have young children, so I couldn't imagine having a perfect stranger in our home and sharing our space. But, yes, point taken that some houses are laid out differently.
It just comes up in every. single. case study, and I wonder if someone with children has ever actually done it.
Or has anyone been a college student and wanted to rent a room out from a random family with several young children? I can think of exactly zero of my peers who would be interested in that situation. I suppose a non-traditional student who was going back to school might be but still...
If my aunt and uncle lived 20 miles closer to school, I would have been glad to live with them and my young cousins. But I was already in very inexpensive apartments with people my age, so I'm not sure I'd do that with strangers.
Hopefully you don't think of your aunt and uncle as random people ;)
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I've worked with a couple of people who had arrangements with local college students to get a room for free or VERY cheap in exchange for childcare (not full time, just picking kids up from school when shift work made it impossible for the parent to). It worked out well for both parties - the parent got childcare and could work full time, the student got a free place to live in exchange for minimal work. Collective living is becoming pretty popular in Vancouver as well where a bunch of people rent or own a large house, share meals, split costs, etc, and there are a lot of families that go into those (often more to keep costs down, but the "building a community" aspect is nice too).
Just a couple of examples I've seen of people with both young kids and roommates.
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And why is renting a room to a "random college student" so different from, say, taking in an exchange student?
It isn't. I probably wouldn't do that either, although presumably if you take in an exchange student your own children are a comparable age and likely all teenagers. I have young children, so I couldn't imagine having a perfect stranger in our home and sharing our space. But, yes, point taken that some houses are laid out differently.
It just comes up in every. single. case study, and I wonder if someone with children has ever actually done it.
Or has anyone been a college student and wanted to rent a room out from a random family with several young children? I can think of exactly zero of my peers who would be interested in that situation. I suppose a non-traditional student who was going back to school might be but still...
If my aunt and uncle lived 20 miles closer to school, I would have been glad to live with them and my young cousins. But I was already in very inexpensive apartments with people my age, so I'm not sure I'd do that with strangers.
Hopefully you don't think of your aunt and uncle as random people ;)
Well they are random (interesting at least), but they aren't strangers :)
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Nickle and dime is an obvious thing.
Sorry, I just gotta be the one to say this...
It's N-I-C-K-E-L
First you learn to spell it, then you learn to save it, eventually you retire and live happily ever after. With sufficient motivation you can and you will.
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If you use YNAB, then why isn't your data very handy?
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I am also a sports nut. And I love TV - I really do. When I first came here, we paid around $100 a month and got every single cent out of what we put in.
Then one day, someone said something along the lines of "try it, and if you literally can't do it, at least you know you tried and you can focus somewhere else". So when our contract was up we went the Prime, Netflix, Hulu Plus route. When setting up our internet package Comcast agreed to give us the "regular channels" free.
Fast forward 8 months. I still love sports and I still love TV - I just don't watch all of the filler I used to. We save $80 a month and are actually HAPPIER with our TV situation than before.
Someone mentioned it here - but make sure you look into Sling TV. ESPN and the other ABC/Disney channels for $20. That plus CBS, FOX and NBC should address your sports hankering. Try it, and if it doesn't work DISH will welcome you back with open arms and an account credit :)
Keep working hard and and focus on the "what would happen if" instead of the "this would never happen"
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I don't know if someone else suggested it yet, but YNAB (You Need A Budget) is one of the single BEST tools out there for gaining control over personal finances.
It will empower you to feel great about life again.
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I'm glad you're here, looking for solutions to your problems. This is the best first step you can make. The nice thing about money (not the people spending the money) is that it isn't a loose, fluid, undefined entity. If you have 100,000 dollars in debt at a certain interest rate, you have to pay that exact amount plus the interest. Every time you find a way to cut out some expense, the amount you owe will get smaller. Every time you find a way to make a couple extra bucks, the amount will get smaller. Every good decision you make, the amount you owe will get smaller, whether it saves one or one thousand dollars.
We paid off quite a bit more debt than you have, on a slightly higher salary, before we had kids. We used Dave Ramsey as a motivator as MMM wasn't around yet. It's doable and once it's done you will kick yourself for thinking satellite TV was more important than getting your financial house in order. I think most of the posters on this board have either been where you are and can look back with 20/20 vision or will be with you for the journey. :-)
When you can, post your budget. Prepare yourself for some face punches and take the good ideas back to your family. Then, start a journal to help keep you accountable. Good luck!
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I don't know if someone else suggested it yet, but YNAB (You Need A Budget) is one of the single BEST tools out there for gaining control over personal finances.
It will empower you to feel great about life again.
Yes, I said above I'm already using it.
If you use YNAB, then why isn't your data very handy?
I went through it, and my wife just hasn't used enough categories. So this is gonna take a while. :-/
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Just going to add to the side track and say I'm a student who has lived with random families- usually older women/couples who have a bigger house than they need once the kids have moved out admittedly (and done bits of dog care as a bonus), but I'd be open to a home with kids past the frequent crying/tantrum stage given the rent was right. The arrangement minimizes any homesickness I get as I'm living with an "adopted family" in a sense if I live there multiple terms, and I'm a mild introvert who likes having people around but not having to interact with them that much.
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Just going to add to the side track and say I'm a student who has lived with random families- [...]
+1. In college I lived with two different families, and when I first met me SO she was living with a single mother and her daughter. I'd estimate that about half of my friends from college lived with another family at least once during their four years. Sometimes it was in a 'granny-unit' with a separate entrance, and sometimes it was with more co-mingling. While growing up, my parents housed three different exchange students and two 'children-of-old-friends' for a couple months each. Now I periodically take in renters (normally friends of friends) to 'supercharge' paying off the mortgage. In our case all common spaces are shared.
I think it comes down to a change in mindset. Many people view their home as a personal space where no one else besides family can be. But if you start viewing it as an asset that can be leveraged to bring in income, then it's an incredibly powerful way of getting to FI. Despite my aprehension at taking in a new renter, in most cases everyone just adapts to one another very quickly.
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Just going to add to the side track and say I'm a student who has lived with random families- [...]
+1. In college I lived with two different families, and when I first met me SO she was living with a single mother and her daughter. I'd estimate that about half of my friends from college lived with another family at least once during their four years. Sometimes it was in a 'granny-unit' with a separate entrance, and sometimes it was with more co-mingling. While growing up, my parents housed three different exchange students and two 'children-of-old-friends' for a couple months each. Now I periodically take in renters (normally friends of friends) to 'supercharge' paying off the mortgage. In our case all common spaces are shared.
I think it comes down to a change in mindset. Many people view their home as a personal space where no one else besides family can be. But if you start viewing it as an asset that can be leveraged to bring in income, then it's an incredibly powerful way of getting to FI. Despite my aprehension at taking in a new renter, in most cases everyone just adapts to one another very quickly.
My roommates are absolutely amazing. We get along well enough that I would be sad if they left, and not just because of the rent checks.
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I lived with familes with young children while in college, and I had a few friends who did the same. I'm not easily annoyed, and would be much more tolerant of being woken up by a screaming toddler than by a screaming drunk. I'm also not a homebody so concerns about sharing common space with strangers was almost irrelevant.
What about hosting a foreign exchange student? Many want to live with a family with young children, and may be more studious than the average local.
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I rented a room from a single mother with two kids age 3 and 5 when I was in grad school. It worked.
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I've been uncomfortable for a while now with the home upgrade plans she wants to make, so I'm slowly massaging that, appealing to her frugality, etc. I was actually astonished when she caught some of the Dave Ramsey fever a few years ago and was on board with reading TTMMO. She hasn't completely committed to the frugality lifestyle, though (nor have I); she wants to take a more measured approach, even if it takes longer to get out of debt. So it's a negotiation process. But, we've stalled out on paying off the debt. We're actually meeting about that tomorrow. My foray here is to begin exploring this again, and find ways to get her to agree to scale back further so that really have complete control of our finances, macro and micro. Nickle and dime is an obvious thing. Scaling back on plans so that those plans take our unsecured debt into account is another obvious one. Figuring out how to increase our income (which we've almost doubled from about 5 years ago...man did it suck back then) is another.
Many of us here deal with the "reluctant spouse" problem, and I'm concerned by your choice of words: "find ways to get her to agree to scale back..." Remember that it's a team effort, so please don't take an accusatory tone. Most divorces are caused by disagreements over money... What I recommend is that instead of asking her to cut out X, maybe approach it in a "Can you help me figure this out?" kind of way. I'd also come in with something that you're willing to give up yourself as a way to open the negotiation, and ask what ideas she might have.
My apologies for beating a dead horse, but is the resistence to cutting cable your issue, hers, or both? I understand the issue with cancelling a contract which would make it hard to undo; how about buying a Roku, Chromecast, or other internet TV device from Amazon or somewhere with a really good return policy, and give it a trial run?
If you don't like it you can return it and no harm done. If it works for you then you have spent $100 one time to save $1200/year.
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2) I have a reminder in my phone at the end of every week that says "Can you put a little extra in savings today?" And every week, it turns out that of course, I can. So I'll log on to my bank and move, say, $25, to my primary savings account. Some weeks it's more, etc. But the point is, as a result of this, I am consistently saving hundreds of dollars more per month *more* than I would have if I was just passively buying lattes and not thinking about it, because I know there's plenty of "extra" money in my checking account.
WOW! I love this idea! Thanks so much for sharing; I'm going to put a reminder in my phone right now.
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2) I have a reminder in my phone at the end of every week that says "Can you put a little extra in savings today?" And every week, it turns out that of course, I can. So I'll log on to my bank and move, say, $25, to my primary savings account. Some weeks it's more, etc. But the point is, as a result of this, I am consistently saving hundreds of dollars more per month *more* than I would have if I was just passively buying lattes and not thinking about it, because I know there's plenty of "extra" money in my checking account.
WOW! I love this idea! Thanks so much for sharing; I'm going to put a reminder in my phone right now.
Glad you like it! I would estimate that since I've started doing this, I have saved anywhere from $200 to $500 extra every month. And of course, it's also helped to cut down on mindless spending, since whenever I feel like buying some small, dumb impulse buy, it's always in the back of my mind that if I don't buy it, that money can go into savings at the end of the week. It's actually become a fun little game, and it's always very pleasurable to move the money into savings every weekend.