Author Topic: Reader Case Study - No, no, this not a joke. We did all this stuff to ourselves.  (Read 23611 times)

jives5

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We are a family of 5 - two adults (age 33), 3 kids (age 10, 7, 4) and a small dog

Income: DH has a full time job (works as a bank manager)and take home is about $2,000 a month. I work PT from home (as an independent contractor) my income is different month to month but approximately $600-$800. Recently I've taken on higher paying work and more steady work, so I should see an increase from that starting next month. I stopped working full-time because we were paying full-time childcare. What I make part-time is more than what I'd make if I were working FT once child care and other expenses are paid. The good thing about this arrangement is I have the potential to make more money - I just have to find more hours to work. This is easier when the kids are in school.

TOTAL MONTHLY INCOME $2,600-$2,800

Current expenses:
Mortgage $1,300
phone bill $125
car payment $285 - have already discussed selling this car and getting a much cheaper one
electric bill $175
home/car insurance $100
internet $45 - best deal and definitely necessary since I work at home
credit cards (3) total - $125
Student loans (3) total - $415
Netflix - $8
gas for cars - $320
signature loan $200
life insurance $35
food - varies but about $300 monthly - already discussing ways to drop this to rice and beans diet

TOTAL ACTUAL BILLS and MONTHLY EXPENSES: $3,133

Other expenses - We owe my dad about $250 for a loan. We pay for our kids to do sports most seasons. Right now we are in football for the oldest and we still need to pay $150 for that. We also will have to pay $60 for cheerleading. We don't eat dinners out, but we do have a habit of picking up a quick pizza here and there and making too many trips to the grocery store that add up!

My husband has a 401(k) and I have no retirement right now. It does not have a lot in it (under $12,000).

We are just tired of drowning in debt. We are tired of missing out on life in general and always saying no because we "can't afford it." I knew the FB and cheer would be a target, as they should be. We do have a low-income option at our school that we can look into, but it points to a bigger problem I have and why I think Dave Ramsey failed me. When we're in a situation like this, where we're talking YEARS and not MONTHS, how do I deal with life passing me by while we dig out? My son is a fifth grader only once (I hope). I KNOW I should say no to sports, but it sucks. Time to suck it up, I know. I just want to be able to pay our bills and have money to do things, like a modest vacation. We don't have cable, we shop at the thirft store and dollar store, we don't take trips anywhere and we certainly don't do extras like movies. We've done the obvious like checking on lower deductibles, lower payments, deferments, etc. I feel like we're out of options! We have one car that is on its last leg and will need to be replaced very soon but it's been paid off for a few years now. I'd love to know where to start digging ourselves out of debt. I hate it when the phone rings because it seems like it's always someone calling about a payment that's late!

« Last Edit: August 08, 2014, 02:44:02 PM by jives5 »

dycker1978

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Well I am just a mustach in training, so take my words as they are, a little inexperianced.

The real problem here is the fact that your bills are exceeding your income, even before you get the kids sports involved.  I think I would sell the car as soon as humanly possible.  This would save 600 a month aproxamitly.

Is you DH able to walk/bike to work? 

Another option that you may have, is here there are programs to help lower end income familly with sports - is that something that you can apply for there?

Other then those the only thing I can think of is to increase income.  You need to make more to even sustain your payments.  Right now, you must be having to use your credit cards just to meet ends meet... that will only make things worse.

Good luck, my thoughts are with you.

gimp

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Alright, let's go down the line.

Phone bill. $125 is way too much. You can't afford it. Get Ting or Republic wireless or at worst, T-mobile. Even T-mobile's unlimited plan is $40 (500mb fast, slow after that). With RW or Ting you'd pay $20-50 for the two of you.

Car payment. Yeah, you're gonna need to sell it. It sucks, but the amount you paid is a sunk cost. You need something affordable.

Electric bill. Bit high, isn't it? Maybe turn the AC thermostat up one or two degrees. Maybe figure out what else is costing so much and use that less.

Credit cards. Gotta be paid. But, what's the balance? What's the minimum payment? Need more than just 125/month.

Student loans: Same thing as credit cards.

Netflix. Okay, for $8, just keep it, it's pretty much your only escape right now.

Gas. Figure out how to drive less. This might be in conjunction with your getting a cheaper car.

Signature loan. See: other loans. More details.

Food. Get rid of pizza. Get rid of any packaged, pre-sliced food. Go healthier and simpler. Rice and beans are a start. Add to that pasta, bread (flour and yeast - bake your own!), potatoes, eggs. Round out with vegetables, and some meat. Oatmeal if you like it is great. You can do better than 300 monthly. Go for the more nutritious, calorie-dense food.

Income. Good, you've taken on higher-paying work, that's pretty much a must-have. Especially when the youngest goes to school, you should make sure you work more. You can only do so much cutting (there's stuff to be cut, though) before you need more.

simonsez

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When you say credit cards $125, I assume these are payments being made on balances that are larger is $125.  That should be your first priority to wipe out, or the signature loan depending on the interest rate and terms.

You say you certainly don't do extra like movies but........yeah, you sorta do.  Netflix, football, cheerleading?  You can rationalize all you want about how those are necessary or are worth it but they are not essential to living and therefore to a household where expenses>income, they are extra.  I feel like children your age can still get all the competitive challenge they need with sport just by playing with the neighborhood kids for free or at the local park.  For the Netflix, drop it and use your local library for your media entertainment.  If you don't want to cut the formal activities, you need to earn more and/or cut back on your a/c and heating usage and how much gasoline your household burns through each month.

As for student loans, would need more information, but maybe you qualify for a financial hardship to defer them or at least forebear a bit or perhaps change the repayment plan in order to kill off higher interest debts first.

Good luck!

Oh, and don't have any more children or pets until your income goes up AND your expenses go down as once you get out of debt then you will need to start aggressively saving/investing.

« Last Edit: August 08, 2014, 02:13:26 PM by simonsez »

MillenialMustache

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Agree with Gimp. Also, can you consolidate your student loans into one, which may lower the monthly payment and/or interest?

There have got to be ways you can save on electricity. Fans cool people, not rooms, as my mom always used to say. Lights and fans should be off in every room you are not in. We also keep our air conditioning at 80 during the day and 78 at night. Raise yours up a few degrees a month and you will get used to it (there is even a MMM article about how we get used to temperatures, but I am not sure which one right now).

You could look into couponing for groceries - check out www.hip2save.com.

Good luck, the first step is realizing something is wrong :)

« Last Edit: August 08, 2014, 02:14:17 PM by Ashley57 »

myDogIsFI

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Here are my suggestions:

* Consider a career change for one or both of you.  You may have something going on that's convinced you that it's impossible, but the biggest issue in your case study is the total monthly income line.  Really think about it for a few days.

* If not a career change, maybe a side hustle. 

* Consider moving.  $1,300 for a mortgage is very high for your income.  If you have equity in the house, you could cash it out to apply to the credit cards and rent for awhile.  And with $320 on gas, you can't be close to work anyway.

* Definitely sell the car, as soon as you can.

* You can probably get your phone bill down; check the threads around here on Ting and Republic Wireless.

* If you are contributing beyond the match to the 401k, consider redirecting that money to the credit cards.

Good luck.  I imagine it might feel overwhelming putting it all out there like that, but if you found this site then you can find a way out of it.

Doomspark

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Could you put your student loans in deferment for six months or a year and just pay the accruing interest?  If so, you could take the difference and apply it to reducing either the credit cards or the signature loan.  Yes, this means you'd be paying longer on the loans, but you might be able to dig out from under.

Is there any way to reduce your gas bill?  Try planning a little better so you make fewer trips to the grocery store?

Is the phone bill for a landline or cell phone? If cell phone, have you looked into using prepaid phones instead?  Might be cheaper.

Best of luck - it sucks when you're dug in deep and getting deeper.

taekvideo

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Alright, let's go down the line.

Phone bill. $125 is way too much. You can't afford it. Get Ting or Republic wireless or at worst, T-mobile. Even T-mobile's unlimited plan is $40 (500mb fast, slow after that). With RW or Ting you'd pay $20-50 for the two of you.

Car payment. Yeah, you're gonna need to sell it. It sucks, but the amount you paid is a sunk cost. You need something affordable.

Electric bill. Bit high, isn't it? Maybe turn the AC thermostat up one or two degrees. Maybe figure out what else is costing so much and use that less.

Credit cards. Gotta be paid. But, what's the balance? What's the minimum payment? Need more than just 125/month.

Student loans: Same thing as credit cards.

Netflix. Okay, for $8, just keep it, it's pretty much your only escape right now.

Gas. Figure out how to drive less. This might be in conjunction with your getting a cheaper car.

Signature loan. See: other loans. More details.

Food. Get rid of pizza. Get rid of any packaged, pre-sliced food. Go healthier and simpler. Rice and beans are a start. Add to that pasta, bread (flour and yeast - bake your own!), potatoes, eggs. Round out with vegetables, and some meat. Oatmeal if you like it is great. You can do better than 300 monthly. Go for the more nutritious, calorie-dense food.

Income. Good, you've taken on higher-paying work, that's pretty much a must-have. Especially when the youngest goes to school, you should make sure you work more. You can only do so much cutting (there's stuff to be cut, though) before you need more.

I agree with most of this, but one very, very important thing is missing...

Mortgage $1,300

That's HALF of your take home pay... I bought a 4 bedroom house with only a 5% down payment and my mortgage is only $500/month.  Have you looked into finding a cheaper place to live?

sirdoug007

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Your house is killing you.  Period. 

All the other stuff can be worked on and optimized, but you simply cannot afford your house on your income.  A general rule is housing should be no more than 1/3 your income.  You are at 1/2 + considering the house is also running up a serious electric bill.

You need to seriously consider downsizing and moving closer to work.  All the other stuff will nibble at the edges but this is the main cause of your financial stress.

slugline

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That's a lot being spent on fueling up the cars. I shudder to think what might happen to your financial picture if the price of gas goes up moderately.

Just to be clear -- you really meant that you were looking at _raising_ your insurance deductibles, right? Because that's what lowers what you pay.

And is the mortgage just the principal and interest on the loan? Or are you rolling taxes and insurance in there too?
« Last Edit: August 08, 2014, 02:24:25 PM by slugline »

swick

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Good Job on taking the first step in writing a case study!

Gimp is right - as far as any payments you make that have interest rates - it would be best if you include the % and total outstanding amount. 

It sounds like you are doing a lot of things right and there is areas for improvement. The main thing I see though, is there are usually two sides to the coin - what you spend and what you bring in.  It seems like you really need to focus as a family on the income generation side of things. You mention that both you and your hubby are college educated - but my (rough) calculations show he is making 12-13 dollars an hour. Is there any way he can boost his income at work or find a better paying job?

With how much you are already underwater each month, you might have to make some very difficult decisions regarding kids sports activities and the like.  Is there any way your kids can take on some odd jobs to raise some of the money themselves? It would be a great life lesson for them. There are lots of help within sports organizations (as well as arts and culture) that offer assistance to those who can't afford to play. Alternately, is there a chance you could trade some sweat equity for a reduction in the fees? Depending on your skills it could be something as simple as offering to create a team/parents newsletter or email to be sent out once a month in exchange for letting your kids play for free.  In any organization there are lots of things that have to happen behind the scenes, they might be grateful for the help.

Another Reader

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How did you qualify for a mortgage with a $1,300 payment if the steady income is $2,000 a month take-home?  The house payment is unaffordable on your income.  Could you sell and rent something less expensive?  You likely won't qualify for a refi with all that debt, but what is the interest rate and term of the loan?  How is your credit?

You need to work on two things, reducing your spending and increasing your income.  It will certainly help if you up your income.  Can your husband find any side work nights or weekends?  It would not have to be permanent - just long enough to pay off a chunk of the debt and get some savings in place.  Or could he watch the kids while you work weekends?

One thing is for certain.  As long as your expenses exceed your income, you will continue to dig that hole you are in a little deeper every month.

Daley

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If you want to save on phone service, consider reading over the guide first, before wasting even more money and resources buying more crap just to try and get your service costs down. There's far cheaper than Republic or Ting... though at least Ting lets you bring your own device if you're switching from Sprint.

Meggslynn

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I agree with all the other suggestions but if I were you I would seriously consider be switching careers for at least one of you that will bring home more money. Is there free career counseling in your area?

Frankies Girl

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The kids don't need cheerleading and paid-participation sports - you are bleeding yourselves dry and still coming up short! Unless there is a low income option to fund these activities, you need to cut this out. You do not have the money for extras like this. You don't have the money at all.

Agree about the phone, car, and other items mentioned.

The big thing? You need a full time job or an additional job that works around the work-at-home job, and possibly your husband needs to get a part time job on the weekends. You are spending more than you bring in, drowning in debt. The best answer to this is bring in more money.

You need to stop everything that is non-essential, both you and your husband get more money coming in to hit those bills and dig out of the mess. Until you bring the income up over what you're spending, you're trapped. So time for some seriously hard thinking here. A year or two of working your asses off and living like monks would probably get you dug out and able to start saving and enjoying things going forward, but again, not sure since you didn't actually list the totals owed/interest rates.

And honestly, declaring bankruptcy might be a good idea, but I don't know myself. We'd definitely need a better breakdown on loans and money owed (interest rates and the actual totals) to tell.


sandandsun

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Cut every expense you can- not going to rehash what others have written, but kids activities need to stop NOW- those are totally optional and probably something they wont even miss (I say from experience).
You must earn more money until you get out of this debt- sure, look for higher regular income, but you can do quite nicely BABYSITTING and doing other odd job in the meantime... BABYSITTING is easy money and there are never enough of them around... did I mention babysitting?!?

Jack

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What's with all you folks being so nice and gentle? This family is operating at a $500 per month deficit! The issue is not that they "need to do a little better," the issue is that they're on the verge of total financial collapse!

OP: You are in a full-on, hair-on-fire emergency, and now is the time for drastic action.
  • You can't afford your house no matter what else you cut. Unless you have some reason to expect a large increase in income in the short term (e.g., if your husband makes $2k per month only because he's a grad student on a stipend and about to get a real job), move ASAP.
  • Your phone bill is entirely insane. Buy an ATA and sign up for a VoIP service for ~$30/year. (If you have a smartphone already, you can use a VoIP app when you're on Wi-Fi; otherwise, you should do without cellular service.)
  • You can't afford your car payment. Sell it and don't replace it (since you have more than one car).  You work from home; learn to deal with not having a car during the day.
  • Is the $175 for electricity your July bill, or your yearly average? If the former, cut the AC. If the latter, you have serious issues and need to tell us about your appliances.
  • Your insurance seems halfway reasonable, given that you are totally and completely unable to absorb any kind of loss event.
  • $45 per month for Internet is unfortunate, but if it's really the best deal and you need it for work, it's acceptable.
  • Your credit cards are not costing you "$125 per month." Your credit cards are costing you many thousands of dollars multiplied by some huge, insane interest rate!!!
  • If your student loans can be deferred, defer them and throw the money at your credit card balance. Later, once you have positive cash flow, throw all excess money at the highest-interest-rate loan of the three.
  • You can't even afford Netflix right now. Sorry.
  • When you move, move much closer to work and walk or bike.
  • Signature loan?! Sigh... If it's higher-interest than the credit cards, pay it first; otherwise, pay it second.
  • The life insurance is probably fine. In fact, you might need more than you have since you have such a huge pile of debt that would need to be paid off. (This falls into the "being poor is expensive" category: if you were financially-independent, you would no longer need life insurance and could save that $35 per month.)
  • $300 per month for food for 5 people is actually pretty good. Cut here if you can, but you really, really need to focus on the other stuff first. You will not dig yourself out only by eating rice and beans.
  • Finally, you need to ask yourself this: are your kids' sports worth bankruptcy and destitution? Because that's the choice you're making.


jives5

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I am amazed at how quick these responses came in. Thank you all for taking a look. I said in a different post that after doing our finances myself for years, I have not paid close attention these last couple while my husband has taken over. I will get a better idea on true balances for things like the credit cards and student loans and update the OP.

I was also surprised at the difference in our income vs. outgo. I'm going off a list we made up when we had a heart-to-heart a few weeks ago. Maybe I'm underestimating something somewhere because I have no idea how we're doing this.

About the house....we just moved in here Memorial Day weekend. I know. And it does include all taxes and insurance. We knew it was more than we wanted or should be paying, but we were so crammed in our old place that when the chance to get this one came along we took it. It was a steal.....which doesn't matter if it's too much for your budget.

Thank you for the ideas, please keep them coming. Really, this whole situation is a result of 11 years of just bad decisions. It's gonna take a miracle to dig us out.

unseenstache

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I am definitely not a pro at any of this yet, but, if the house was a good deal.  You may be able to sell it easily and downsize?  Especially if you look into putting some sweat equity in.   

Another Reader

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HOW did you get a mortgage?  Did the owner finance at a high interest rate?  Are you on a lease option or land contract?  What was the down payment or option cost?  What's the market value of the house?  You need to understand exactly what you did and what's at risk if you have to walk away from the house.

jives5

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HOW did you get a mortgage?  Did the owner finance at a high interest rate?  Are you on a lease option or land contract?  What was the down payment or option cost?  What's the market value of the house?  You need to understand exactly what you did and what's at risk if you have to walk away from the house.

I think this is what happened. We sold our old house to my in laws. We used the proceeds to pay for this new house. I don't know what our rate is (DH handled the details). It is a straight out mortgage, not a land contract. What do you guys think about renting? I know some people shun rentals in most cases, but what would be the best for us to do?

NoraLenderbee

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The good news is--you're now taking the first steps to deal with a big problem.

The bad news is--well, others have already told you. You're in for some short-term pain in order to get out of this emergency. It seems like you and husband have both been in denial about your true cost of living vs. income.

Keep the information coming. We (and you) need the full picture.

slugline

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What do you guys think about renting? I know some people shun rentals in most cases, but what would be the best for us to do?

There are a lot of scenarios where renting makes more sense than owning. This is one issue where knowing where you live can make a difference, because some markets favor renting and others favor buying.

In any case, do what you must to fix the bleeding cash flow problem. There's a lot of MMM talk about cutting expenses, but I can't help but think that there's potential to boost family income too. Can you?

dandarc

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Do you usually get a tax refund?  Don't know what your husband's gross is, but 2,000 / month seems low for a bank manager - that's only $12.50 an hour if he works full time.  There shouldn't be much being withheld for a family of 5 at this income level - FICA + maybe 500-1000 per year for income taxes.  Might be that you can solve some of the income issue by adjusting withholding.

Another Reader

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You have to start by looking at rentals to see how much they cost.  If you can rent something for $800 and can sell the house and at least break even, then in your shoes I would sell.  If it would cost you $1,300 to rent and you would lose money on a sale, then other options have to be considered.

How much did this house cost?  If your name is on the loan and on the deed, you must have seen the information.  It makes no sense that you could qualify for a mortgage in your situation.  You have too little income and too much debt.

If this is what your husband does when he manages the family finances without consulting you, it might be a good idea to discuss making a change.  Most people are better off if the responsibility and knowledge are shared.

Gone Fishing

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-Looks like dandarc beat me to it

If your husband is in banking does he have the background and ability to move into commercial banking as it tends to pay better?  Or moved to a larger bank with better pay?   Around here branch managers make around $50k. Not to mention a move in banking usually yields a signing bonus that could be used to pay down debt. 

With 3 kids and a big slug of mortgage interest, you should be paying very little in the way of federal income taxes.  Did you get a big refund check last year?  If so you might be able to reduce your withholdings and get more current cash flow-be careful though, you don't want to end up with a tax bill come April.

jives5

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Slug, YES definitely! I mentioned I can make more money. The last couple of weeks I've had a mother's helper come a few hours a week so I can work more hours. I pay her $21 for 3 hours and I can make about $60 in that amount of time. (The problem is just having the money to pay her while I started doing this). So as I said, my shovel is starting to get bigger. My youngest starts preschool next month. 4 mornings a week. I should be able to really start making up the money and that will help.

theonethatgotaway

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How much will your kids preschool be?

What was your house payment pre-move??


jives5

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I am going to have to ask DH about this income thing again. He does make nearly $50k. I know we pay health insurance from that but I don't know what else he's subtracting when he considers "take home". He just sent a quick text saying it's about $1,000 per paycheck when I asked how much his take home pay was.

As I said, we're on the path to getting in this together, after taking turns ignoring the family finances. And no, I am not on the mortgage because even though I've been self-employed for 7 years, my income fluctuates too much and it was easier to do without me.

Beric01

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What do you guys think about renting? I know some people shun rentals in most cases, but what would be the best for us to do?

There's a certain crowd on the MMM forums that not only rents, but finds themselves in a situation where renting is substantially cheaper than owning. I'm definitely in that situation myself.

I would price out 2 and 3-bedroom apartments in your city. Remember, housing doesn't just cost your mortgage payment, it's also maintenance, utilities, property taxes, insurance, etc. I'm going to bet your house comes out to almost $2K/month in total costs, or 2/3 of your income!

If you could sell, and invest the proceeds in paying down all your debt (particularly those high-interest credit cards!), you would find yourself in a substantially better situation. After paying down all of your debt, if you still had some cash over, you could look at some investment for the longer term, whether that's into the stock market or a home.

But let's be honest: you need to downsize with your current financial straits. Housing expenses should never be more than 1/3 of your income, and ideally less than 1/4.

jives5

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How much will your kids preschool be?

What was your house payment pre-move??

Pre-move is was way lower - just under $800. We were packed in a tiny 2 bed house, so when in laws offered to buy ours so we could move, we jumped....into a $150k house

Preschool will only be $130/month, which I will make up in about 2 mornings each month.

Must_Stash

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What would your house rent for?  Is that an option, and you live elsewhere?

TheSimpleLife

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Do you usually get a tax refund?  Don't know what your husband's gross is, but 2,000 / month seems low for a bank manager - that's only $12.50 an hour if he works full time.  There shouldn't be much being withheld for a family of 5 at this income level - FICA + maybe 500-1000 per year for income taxes.  Might be that you can solve some of the income issue by adjusting withholding.

Should be $0 for federal income taxes plus they will receive a huge amount back from the Earned Income Credit if everything she posted is correct.  Don't know what state she lives in, but shouldn't be much of anything for state income taxes either.  The paychecks should just be gross pay less 7.65% for FICA = net paycheck.  Anything else is just giving the govt an interest free loan! 

Your husband should adjust his federal income tax withholding to $0 IMMEDIATELY!  He needs to request a new W-4 form from HR or whoever handles payroll processing at the bank, and claim a ton of dependents so nothing is withheld (try '12' for good measure).

This should be first priority if anything is being withheld as it improves cash flow immediately with no tweaks to spending.

Another Reader

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My bet is most of those deductions are for health insurance.  Does his employer offer health insurance? Are you buying insurance on the exchange?  For a family of 5, that could easily be $1,200-$1,500 a month or more.  I would definitely have a close look at that.

If you were in over your head at an $800 a month payment, $1,300 makes no sense at all.  You are not benefitting much from the interest deduction if at all.  I would start looking at rentals now.  You may have a hard time getting into one because your credit is probably shot now if you are getting calls about late payments.

slugline

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$1300 PITI monthly on a $150K house? Could this loan be upside-down already?

sheepstache

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What's with all you folks being so nice and gentle? This family is operating at a $500 per month deficit! The issue is not that they "need to do a little better," the issue is that they're on the verge of total financial collapse!

OP: You are in a full-on, hair-on-fire emergency, and now is the time for drastic action.


Holy crap.  Yes.  I think what looks like being nice and gentle might just be complete and utter stunned shock at how bad this is.  OP, I was expecting from your thread title that you had hair-on-fire debt, but you are also actively dousing yourself in kerosene.

This is not the result of 11 years of poor decisions, this is also the result of decisions you are making this very month.  You are spending money you don't have.  I just...I can't even...

Kill your cell phones.  Turn off the AC.  For that matter, turn off all the lights in the house.  Before the utility company shuts them off for you.  While you're looking into selling your house, rent out a bedroom or the basement.  Or both.  Put multiple kids in a bedroom if needed if they aren't already.  Your husband needs to find a buddy to carpool with.  You need to ask dad if he'll lend you more money so you're not putting anything more on the credit cards.

You are not going to "start digging your way out of debt."  You are going to immediately stop teaching your children that it's okay to spend money you don't have. 

TheSimpleLife

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Something doesn't add up if your husband grosses $50K a year and only brings home $24K.  Even at $50K for him, you should owe no federal income taxes:

$55,000 Gross Income
(12,400) - Standard Deduction
(19,750) - Exemptions
$22,850  AGI

That should equal about $3K in tax, and then you have the child tax credit wipe all that away to zero.  I'm guessing you have some Student Loan interest and possible other deductions, but if everything posted is correct, you shouldn't be having much withheld for income taxes.

I highly doubt health insurance is taking up $2K a month, but who knows.


On to the income and expenses...  Many others will do a fine job explaining how your expenses are too high.  I agree with that and am guessing your actual monthly spending is around $3,800 - $4,000 /month.  I will only offer a few suggestions to trim expenses:

1.  You can't afford that house.  If it is some type of owner financing junk, consider leaving if you haven't put much money down.
2.  You can't afford pets, sports, or any other form of entertainment.  You just can't.


I would focus most of my energy on making more income.  No offense, but your husband needs to find a way to increase his income.  If you guys decide for you to work more, you've got to find ways to make much more than you do now.  Your kids won't hate you for making a better situation for the entire family.  They may not understand at first, but will appreciate it later in life as they figure out you guys would've been a financial burden on them had you not changed your course.  You gotta learn to love the hustle. If you can't get motivated to make more money, I really don't think you'll be able to change your financial situation in any meaningful way until your youngest is out of the house.

Another Reader

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My guess is the loan is at a high interest rate and there is PMI.  If there were proceeds from the sale of the other house, they may not have gotten rolled in to the new house.  I just don't see how he could have qualified for conventional financing unless all the other debt is in her name.

dodojojo

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Piling on the housing situation, I had to do a double-triple take when I saw the housing cost versus your post-tax income.  I also pay 1,300 monthly for housing (rent) but my take-home pay is about 4,900 and that's after maxing out my 401K too. 

With so little leeway, any unexpected expense or emergency could really sink you.  I agree with the suggestions so far--you have to cut everywhere.  I grew up dirt poor--my single mom didn't pay for me to participate in sports and I turned out only half-weird...just kidding.  But your kids' sports participation at this point is a luxury you can't afford. 

And since you just moved into your house, I'm guessing you're not keen on moving out any time soon.  If that's the case, you're going to have increase your income by quite a bit.  Can your husband get a higher paying job?  In any case, increase income or get cheaper housing.

In any case, kudos to you for addressing this situation.  I'm sure many in your shoes just carry on as if nothing's wrong.  Or they know it's wrong but aren't proactive about changing the situation.

mm1970

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Ouch

How big is your house?

Can you rent out rooms?

Otherwise, you have to ditch it.  Go back to a smaller place and get rid of stuff. 

beltim

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Something doesn't add up if your husband grosses $50K a year and only brings home $24K.  Even at $50K for him, you should owe no federal income taxes:

$55,000 Gross Income
(12,400) - Standard Deduction
(19,750) - Exemptions
$22,850  AGI

That should equal about $3K in tax, and then you have the child tax credit wipe all that away to zero.  I'm guessing you have some Student Loan interest and possible other deductions, but if everything posted is correct, you shouldn't be having much withheld for income taxes.

You're calculating their total tax burden, not what the employer would deduct.  Here's a sample of what might be happening to the paycheck:
Annual gross income: $45k (the OP said it was close to 50)
Health insurance: $700 / month for a family plan (costs vary, as seen here: http://forum.mrmoneymustache.com/ask-a-mustachian/how-much-do-you-pay-for-health-insurance/)
That leaves $36,600.  Subtract from that:
6% for a 401k (perhaps to get matching) = 2700
Social Security, Medicare, Unemployment Insurance: 3130
Federal withholding, if held over from when the wife had a job, could easily still be $4500.
State withholding, in the same case, could be $2000.
That leaves 24,270, or just about $2k per month.

Now, in this case the OP and husband would get a large federal tax rebate.  But it's quite possible to see how the final paycheck could come to that point, especially since the OP used to have a full-time job and the withholdings probably reflect that.

dandarc

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Something doesn't add up if your husband grosses $50K a year and only brings home $24K.  Even at $50K for him, you should owe no federal income taxes:

$55,000 Gross Income
(12,400) - Standard Deduction
(19,750) - Exemptions
$22,850  AGI

That should equal about $3K in tax, and then you have the child tax credit wipe all that away to zero.  I'm guessing you have some Student Loan interest and possible other deductions, but if everything posted is correct, you shouldn't be having much withheld for income taxes.

You're calculating their total tax burden, not what the employer would deduct.  Here's a sample of what might be happening to the paycheck:
Annual gross income: $45k (the OP said it was close to 50)
Health insurance: $700 / month for a family plan (costs vary, as seen here: http://forum.mrmoneymustache.com/ask-a-mustachian/how-much-do-you-pay-for-health-insurance/)
That leaves $36,600.  Subtract from that:
6% for a 401k (perhaps to get matching) = 2700
Social Security, Medicare, Unemployment Insurance: 3130
Federal withholding, if held over from when the wife had a job, could easily still be $4500.
State withholding, in the same case, could be $2000.
That leaves 24,270, or just about $2k per month.

Now, in this case the OP and husband would get a large federal tax rebate.  But it's quite possible to see how the final paycheck could come to that point, especially since the OP used to have a full-time job and the withholdings probably reflect that.
This definitely could be the case, but then adjusting withholding provides like $400 a month more - that makes a big difference for OP!

dandarc

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jive - I think step 1 for y'all needs to be a long discussion with your husband so both of you can nail down the particulars on both the income and spending sides of the equation.  You're close enough to the edge that a few hundred per month one way or the other is the difference between actually making a little progress and digging further into the abyss.  "About 1,000 per check" is not going to be close enough to really get a handle on your situation.

theonethatgotaway

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Ok after rereading your posts. You are spending too much and don't want to stop. You don't want to say no to your kids and you are waiting for the little one to be in preschool.

Which city are you in?

I suggested this to a single mom on here the other day but since you have a pricey car your husband needs to sign up for Uber and be a driver (maybe nights 11pm-2am) near club/bar areas. I've spoken with drivers and that's the best time in smaller towns apparently for good quick income. He can start driving asap. I've been using it as a passenger and bankers/lawyers/college kids have been driving me around.

beltim

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Something doesn't add up if your husband grosses $50K a year and only brings home $24K.  Even at $50K for him, you should owe no federal income taxes:

$55,000 Gross Income
(12,400) - Standard Deduction
(19,750) - Exemptions
$22,850  AGI

That should equal about $3K in tax, and then you have the child tax credit wipe all that away to zero.  I'm guessing you have some Student Loan interest and possible other deductions, but if everything posted is correct, you shouldn't be having much withheld for income taxes.

You're calculating their total tax burden, not what the employer would deduct.  Here's a sample of what might be happening to the paycheck:
Annual gross income: $45k (the OP said it was close to 50)
Health insurance: $700 / month for a family plan (costs vary, as seen here: http://forum.mrmoneymustache.com/ask-a-mustachian/how-much-do-you-pay-for-health-insurance/)
That leaves $36,600.  Subtract from that:
6% for a 401k (perhaps to get matching) = 2700
Social Security, Medicare, Unemployment Insurance: 3130
Federal withholding, if held over from when the wife had a job, could easily still be $4500.
State withholding, in the same case, could be $2000.
That leaves 24,270, or just about $2k per month.

Now, in this case the OP and husband would get a large federal tax rebate.  But it's quite possible to see how the final paycheck could come to that point, especially since the OP used to have a full-time job and the withholdings probably reflect that.
This definitely could be the case, but then adjusting withholding provides like $400 a month more - that makes a big difference for OP!

Agreed.  This needs to be figured out right away.

former player

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I don't get how you could sell one house and buy another without knowing exactly what your finances are.  I also don't get how you can say that you are tired of "always saying no because you can't afford it" when you obviously haven't been saying no, and apparently have no idea what you can and can't afford.

OK, here's my view.  First, don't have any more kids.  You cannot afford to get pregnant again, so make sure you won't, however you have to.  Make sure the dog doesn't procreate, either (if she's a bitch that hasn't been fixed, give her away or try to get a charity to pay for her to be spayed).

Next, find out exactly what your financial position is.  How many bank accounts and credit cards do you have, and what are the current statements on all of them?   All your finances need to be on the table, including your husband's pay slips.  What are you paying in taxes?  Are you eligible for any federal or state assistance (food stamps)?  What health care are you buying?

Your expenditure for August needs to be less than your income.  Sell the car that has the loan and don't replace it, stop the phone contracts, turn off everything electric and think three times before turning it back on, stop driving the other car except in emergencies, sell off anything you own that is not essential (including the television), stop Netflix and start going to the public library, stop shopping (even at thrift stores and dollar stores).  Stop the football and cheerleading: tell the kids they can do them next year if things are better, but this year you bought the house so there is no money to spare).

Can the work you do from home be done in the evenings or at weekends?  If so, your husband should be providing free babysitting while you are working and earning.

Once you are spending less than is coming in, start paying the highest interest debts first.

I'm not at all sure about moving - it will cost you money you don't have (deposit on the rental, moving expenses, cost of selling/renting out the current house).  You need to stabilise your expenditure at rock bottom first - if you don't do that, moving out won't help at all - and then see whether you have enough spare to cover your loan costs plus a bit more.

cdub

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We were packed in a tiny 2 bed house, so when in laws offered to buy ours so we could move, we jumped....into a $150k house



Wahhh wah? Huh? My mortgage payment is $1,371 and I have a 290k loan!!! How in the hell is your mortgage payment so high? Granted this is just the mortgage - no taxes taken.

$1300 is OVER HALF YOUR INCOME. Sell the house. Or rent a room. I don't know but oh my. That's insane. Who in the hell approved you for that loan? Did you have to fudge numbers to get approved or has the financial industry gone to hell again?


theonethatgotaway

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We were packed in a tiny 2 bed house, so when in laws offered to buy ours so we could move, we jumped....into a $150k house

Could be a 15 year at high interest (due to credit score)
OP won't provide this info. What's the deal how do you buy a house and not know the Financials?






Wahhh wah? Huh? My mortgage payment is $1,371 and I have a 290k loan!!! How in the hell is your mortgage payment so high? Granted this is just the mortgage - no taxes taken.

$1300 is OVER HALF YOUR INCOME. Sell the house. Or rent a room. I don't know but oh my. That's insane. Who in the hell approved you for that loan? Did you have to fudge numbers to get approved or has the financial industry gone to hell again?



okashira

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OP, we don't have any magic pills for you.

You have to cut your obscene spending. Your problems will solve themselves if you can do that.

There are no miracles, and you do not need a miracle to solve your problem. You just have to take one problem at a time, come up with a solution and implement it. Them move on to the next problem.

Change your cell phone plans to $10/month plans.

Next, look at your Clown SUV/Truck and sell the biggest gas guzzler. And get a cheap car with liability only insurance. ($320/mo on gas is ridiculous, you are just donating this money for NO gain)

Find out why your electric bill is so high. Seal windows, fix weather stripping, up AC by 2 degrees. Hang Dry.

Next, start selling stuff. I'll bet you were "crammed," in the old house because you have too much crap. Selling stuff will make it easier to move if necessary to deal with that $1200/mo mortgage problem.
« Last Edit: August 08, 2014, 04:57:06 PM by okashira »

Another Reader

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No one has mentioned it yet, but these folks need to understand what they are doing before they can fix their problems.  The first step is to figure out where the money is going - track all the spending in Mint.com or something like that.  From what I see, neither spouse is knowledgeable about all the spending.  Both spouses need to enter their transactions and both need to look at where the money is going.  Every dollar spent needs to show up here.  The second step is to look at the income and the spending and make a budget.  That includes making adjustments to withholding if in fact a big tax refund is due.  Not enough money for all the budget items??  Out go all the optional items.  Third step is looking at the housing.  Should the house go?  Is a rental the best choice?  Do they have any options with their credit?  Fourth, the income must go up.  Does she go full time or pick up more contract work?  Can he find a side job?

These folks are already getting late payment calls.  One unexpected emergency and they are going to have to file bankruptcy.  Since he is a bank manager, a bankruptcy filing may cost him his job - people that demonstrate they can't manage their own money are too risky to employ watching over other folks' money.  He won't be able to find another banking job with that on his record.   They need to get on top of the situation right now.