Author Topic: Tough money times...pay off CC's or keep it in savings?  (Read 1980 times)

d.rose

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Tough money times...pay off CC's or keep it in savings?
« on: May 23, 2019, 09:03:27 AM »
So, we've hit an unexpected snag in our already very tight budget. Our already single & low income has just gotten even lower. My husband's hours have been cut 8hrs/wk - all OT, so the difference is pretty large - about $500 less take home pay a month. I just redid our budget and we will have approx. $0.13 to save each month after bills, assuming I can actually stick to our food budget - $350 for a family of 4 - which has pretty much *never* happened (I *think* it can happen though, and this lowered paycheck is definitely an inspiration to make it happen!).

We have just over $5,000 in our savings, but we also have $1,300 in credit card debt and $3,000 personal loan from our bank (car). Altogether that's about $200/mo in debt payments. We had *no* debt the month prior, but essentially, I had some moron money moments, assumed things could only keep getting better...and yeah, life.

I'm not sure if we should at the very least pay off the credit cards, or just pay the minimum? As a low income family, I definitely like having the cushion in case of job loss, but I hate being in debt. Our interest rates aren't great - 26% on one, 21% on the other, although I will say we've been charged no interest this year, and I'm honestly not sure why, because although I *mostly* pay off our CC's each month, I know I've carried a balance - so I'm a bit confused.

Anyway, what would you do? Keep all the cushion or polish off the debt and have a fresh start?

Boofinator

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #1 on: May 23, 2019, 09:09:55 AM »
With those interest rates, absolutely pay off the credit cards in full every month. Otherwise, you'll be paying something like $25 per month for the privilege of earning $1 per month with the money in the savings account. Your cushion should be the credit cards, not the savings account.

therethere

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #2 on: May 23, 2019, 09:11:28 AM »
I would add the caveat that you need to make sure you have some buffer to pay bills that can't be put on a credit card.... rent/mortgage, utility bills, etc.

Boofinator

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #3 on: May 23, 2019, 09:45:46 AM »
To add, it wasn't clear what the interest rate for the $3k bank loan was (I assume the two interest rates mentioned were for two credit cards?). What's the interest rate on the bank loan?

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #4 on: May 23, 2019, 10:14:17 AM »
Thanks! I told my husband what you said about the interest rates and he's going to consider it, and we'll possibly pay off the credit cards today.

I don't have the paperwork in front of me, but I believe the loan is at 12%. We are planning to pay it off in full next spring (we get a big refund - not because our income/family size, not because we don't claim enough...).

I'm not sure why our CC interest rates our so crazy high. I've never really paid attention to it since we've always just paid it off, so I was pretty shocked. Our income is low, yeah, so maybe that's a factor, but our credit scores are pretty good (above 750 each) and we have never paid a single bill late in our lives (well, in our married lives. I can't vouch for DH prior to 11 years ago!).

GizmoTX

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #5 on: May 23, 2019, 10:43:16 AM »
Credit cards always have insane interest rates regardless of credit score, unless you open one with a zero or low teaser rate, but that goes away after a year or so. If you use one, always pay it off in full every month, and then the interest rate won't matter.

Cassie

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #6 on: May 23, 2019, 10:46:13 AM »
Yes pay off the CCís.

Villanelle

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #7 on: May 23, 2019, 11:16:37 AM »
Pay off the CCs.  But you need to understand why you've paid no interest because it might somewhat change that answer and because not understanding your bills just feeds back into this bad financial cycle you've created.

Also, you are in an emergency situation.  It's time to look for side gigs, for both of you.  Babysit, mow lawns, find a job waiting tables when the other spouse isn't working, walk dogs, help people move, whatever it takes.

Boofinator

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #8 on: May 23, 2019, 11:33:37 AM »
I would suggest minimizing all discretionary spending until you have all of the high-interest rate debt paid off (including the bank loan) and a comfortable emergency fund. By discretionary spending, I mean no restaurants, no fancy name-brand food from the grocery store, date nights are walks in the park rather than the movies, etc. Once those debts are paid off, you should be raking in about $50 more per month that you are currently paying in interest alone, which could be used to loosen up a little if desired (or could be used to build your stash).

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #9 on: May 23, 2019, 11:34:35 AM »
ETA: @Villanelle:
I agree we need to understand why we've been charged no interest. I assumed I had at least carried a small balance on my cards previously, but I'm guessing I have just successfully paid them off each month. That's what makes the most sense, since that's what I've always tried to do in the past, and clearly we would have been charged interest otherwise, right?

And I disagree with you on us being in an "emergency" situation. Our situation is less than stellar, yeah, but considering we actually ARE able to cover all of our expenses each month without going further into debt, I don't believe that constitutes as an emergency. Not being able save money right now sucks, but it isn't what most normal people would consider an emergency. Not being able to cover your bills, however, is another story entirely - and thankfully, we're not in that place! But considering I could pay off all our debt, still have more than $1k in an emergency fund plus cover all our living expenses...this isn't an "emergency".

Also, not really sure where you are getting that we've created a bad financial cycle? In spite of our low income, we've been relatively debt free our entire life, always paid our bills on time, saved up more than 20% down to buy a home in our area right next to work with a mortgage hundreds of dollars cheaper than rent. We've always had money in our savings. The credit card debt isn't there because we had needs we couldn't afford (clearly, since we are able to pay it off...), but because we use our cards to get rewards. Not being able to pay it in full at present is due to surprise decrease in hours, that is hopefully temporary, not a "bad financial cycle".

I realize I sound a bit defensive, but I truly don't understand how you're coming to the conclusions you've come to based on any of my posts here.

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #10 on: May 23, 2019, 11:37:21 AM »
I would suggest minimizing all discretionary spending until you have all of the high-interest rate debt paid off (including the bank loan) and a comfortable emergency fund. By discretionary spending, I mean no restaurants, no fancy name-brand food from the grocery store, date nights are walks in the park rather than the movies, etc. Once those debts are paid off, you should be raking in about $50 more per month that you are currently paying in interest alone, which could be used to loosen up a little if desired (or could be used to build your stash).

Thanks! Yes, we are planning to do all this. The cook at home and eat all the food challenge - lol! Thankfully, my whole family loves beans, potatoes, and other cheap meals! We are already pretty cheap with very rare eating out and at home dates (we're hiking and board game people...), but we're officially nixing the wine and beer, which will easily cut $50/mo out of our budget. Sad, but necessary times, hah!

Cassie

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #11 on: May 23, 2019, 11:41:37 AM »
I think the problem is since you are living so tight the next emergency bill will give you CC debt that you may not be able to pay off. Thatís what people are concerned  about.

JLee

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #12 on: May 23, 2019, 11:46:17 AM »
ETA: @Villanelle:
I agree we need to understand why we've been charged no interest. I assumed I had at least carried a small balance on my cards previously, but I'm guessing I have just successfully paid them off each month. That's what makes the most sense, since that's what I've always tried to do in the past, and clearly we would have been charged interest otherwise, right?

And I disagree with you on us being in an "emergency" situation. Our situation is less than stellar, yeah, but considering we actually ARE able to cover all of our expenses each month without going further into debt, I don't believe that constitutes as an emergency. Not being able save money right now sucks, but it isn't what most normal people would consider an emergency. Not being able to cover your bills, however, is another story entirely - and thankfully, we're not in that place! But considering I could pay off all our debt, still have more than $1k in an emergency fund plus cover all our living expenses...this isn't an "emergency".

Also, not really sure where you are getting that we've created a bad financial cycle? In spite of our low income, we've been relatively debt free our entire life, always paid our bills on time, saved up more than 20% down to buy a home in our area right next to work with a mortgage hundreds of dollars cheaper than rent. We've always had money in our savings. The credit card debt isn't there because we had needs we couldn't afford (clearly, since we are able to pay it off...), but because we use our cards to get rewards. Not being able to pay it in full at present is due to surprise decrease in hours, that is hopefully temporary, not a "bad financial cycle".

I realize I sound a bit defensive, but I truly don't understand how you're coming to the conclusions you've come to based on any of my posts here.

Quote
I just redid our budget and we will have approx. $0.13 to save each month after bills

What if you have a home repair, plumbing emergency, furnace failure, broken refrigerator...and really, given the above quote, what happens if gas goes up 30 cents a gallon?

That's why it's emergency level. You're so close to the edge that ordinary life situations are going to mess it up for you.
« Last Edit: May 23, 2019, 12:44:25 PM by JLee »

Slow&Steady

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #13 on: May 23, 2019, 11:52:16 AM »
So you have:

2 CC debts that combined = $1300 (@ typical CC interest rates >20%)
1 Bank Loan = $3000 (@ 12% interest)
Savings account with $5000.

Going forward you can keep making the minimum monthly payments on these debts and have less than $1 at the end of the month but an emergency fund with $5000 in it

or

You could pay off all of these debts and have $200 at the end of the month but an emergency fund with $700 in it.  The $200 could then be put into saving to replenish the emergency fund.

or

Something in between those 2.



Personally I would pay it all off and save myself those >10% interest rate costs, then work to rebuild the emergency fund.  I would also try to find something that the 2nd adult in the house can do to bring in some money.  If going that low in the emergency fund makes you nervous, I would pay off whichever debt would get you the most wiggle room monthly, which might not be CC and therefore will cost you more in the long run.

cchrissyy

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #14 on: May 23, 2019, 12:15:32 PM »
Quote
Also, not really sure where you are getting that we've created a bad financial cycle? In spite of our low income, we've been relatively debt free our entire life, always paid our bills on time, saved up more than 20% down to buy a home in our area right next to work with a mortgage hundreds of dollars cheaper than rent. We've always had money in our savings. The credit card debt isn't there because we had needs we couldn't afford (clearly, since we are able to pay it off...), but because we use our cards to get rewards. Not being able to pay it in full at present is due to surprise decrease in hours, that is hopefully temporary, not a "bad financial cycle".

if the credit card balance is just your ordinary level of monthly spending then paying it off in full, then why are you even considering making minimum payments and having to pay interest on it?   the very last thing you need right now is a new expense. Pay it to zero like usual.

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #15 on: May 23, 2019, 12:32:44 PM »
Thank you all!

We decided to pay off the credit cards in full and and stop using them altogether until the hours go back to the usual! So...I'm off to do that right now :)


Catbert

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #16 on: May 23, 2019, 12:51:08 PM »
I'll also suggest that your husband should adjust his tax withholding so you get money in your pocket now rather than next Spring.

Dave1442397

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #17 on: May 23, 2019, 12:52:11 PM »
Here's a script I read to try getting lower interest rates on your credit cards:

3. Negotiate down the APR. Iím a huge fan of taking fifty-fifty odds if the upside is big and it takes only five minutes of my time. Accordingly, try negotiating down your APR. It works surprisingly often, and if it doesnít, so what? Just call your card companies and follow this script:

YOU: Hi. Iím going to be paying off my credit card debt more aggressively beginning next week, and Iíd like a lower APR.

CREDIT CARD REP: Uh, why?

YOU: Iíve decided to be more aggressive about paying off my debt, and thatís why Iíd like a lower APR. Other cards are offering me rates at half of what youíre offering. Can you lower my rate by 50 percent, or only 40 percent?

CREDIT CARD REP: Hmm . . . After reviewing your account, Iím afraid we canít offer you a lower APR. We can offer you a credit limit increase, however.

YOU: No, that wonít work for me. Like I mentioned, other credit cards are offering me zero percent introductory rates for twelve months, as well as APRs of half what youíre offering. Iíve been a customer for X years, and Iíd prefer not to switch my balance over to a low-interest card. Can you match the other credit card rates, or can you go lower?

CREDIT CARD REP: I see . . . Hmm, let me pull something up here. Fortunately, the system is suddenly letting me offer you a reduced APR. That is effective immediately.

It doesnít work every time, but when it does, you can save a significant amount of money with a five-minute conversation.

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #18 on: May 23, 2019, 01:20:27 PM »
Okay, a little better now!
Just paid off the CC's & Dh got a bit of a bump to his hourly pay, so now we're at $84.13 savings a month...a little further from the edge! Hope to get that number up even higher with mad frugal skillz :-)

secondcor521

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #19 on: May 23, 2019, 01:33:46 PM »
Okay, a little better now!
Just paid off the CC's & Dh got a bit of a bump to his hourly pay, so now we're at $84.13 savings a month...a little further from the edge! Hope to get that number up even higher with mad frugal skillz :-)

When do you want to stop working?

Here's a suggested exercise:

1.  Multiply that $84.13 by 12 to get to your annual savings.  It's basically a bit over $1,000.

2.  Figure out what your income is per year.  I'll guess $30,000, but it could be higher or lower.

3.  Divide the answer in 1 by the answer in 2 to get your savings rate as a percent.  Using my numbers, it's $1,000 / $30,000 * 100 = 3.33%

4.  Go to the following article and scroll down to the table:

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

In this case, 3.33% is less than 5%, so you'd have to work for another more than 66 years to retire.  If you're in your 20's now, that would mean retiring in your mid to late 80's.

(This assumes a current net worth of zero, but I am guessing that's not far from accurate.)

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #20 on: May 23, 2019, 02:14:13 PM »
Okay, a little better now!
Just paid off the CC's & Dh got a bit of a bump to his hourly pay, so now we're at $84.13 savings a month...a little further from the edge! Hope to get that number up even higher with mad frugal skillz :-)

When do you want to stop working?

Here's a suggested exercise:

1.  Multiply that $84.13 by 12 to get to your annual savings.  It's basically a bit over $1,000.

2.  Figure out what your income is per year.  I'll guess $30,000, but it could be higher or lower.

3.  Divide the answer in 1 by the answer in 2 to get your savings rate as a percent.  Using my numbers, it's $1,000 / $30,000 * 100 = 3.33%

4.  Go to the following article and scroll down to the table:

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

In this case, 3.33% is less than 5%, so you'd have to work for another more than 66 years to retire.  If you're in your 20's now, that would mean retiring in your mid to late 80's.

(This assumes a current net worth of zero, but I am guessing that's not far from accurate.)

We don't presently have a set goal about when to retire, and we're actually in our mid-late 30's. But this isn't our only savings. We save 10% of our income in a matched 401k that also gets profit sharing. We don't have tons in our 401k, but more thank $60k (had some years of no work or no 401k option, otherwise it would be a bit higher). That doesn't mean we're retiring early, but we shouldn't be working until we're in our 80's. But yeah, no retiring at 40 going on in this house!

Villanelle

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #21 on: May 23, 2019, 03:11:38 PM »
ETA: @Villanelle:
I agree we need to understand why we've been charged no interest. I assumed I had at least carried a small balance on my cards previously, but I'm guessing I have just successfully paid them off each month. That's what makes the most sense, since that's what I've always tried to do in the past, and clearly we would have been charged interest otherwise, right?

And I disagree with you on us being in an "emergency" situation. Our situation is less than stellar, yeah, but considering we actually ARE able to cover all of our expenses each month without going further into debt, I don't believe that constitutes as an emergency. Not being able save money right now sucks, but it isn't what most normal people would consider an emergency. Not being able to cover your bills, however, is another story entirely - and thankfully, we're not in that place! But considering I could pay off all our debt, still have more than $1k in an emergency fund plus cover all our living expenses...this isn't an "emergency".

Also, not really sure where you are getting that we've created a bad financial cycle? In spite of our low income, we've been relatively debt free our entire life, always paid our bills on time, saved up more than 20% down to buy a home in our area right next to work with a mortgage hundreds of dollars cheaper than rent. We've always had money in our savings. The credit card debt isn't there because we had needs we couldn't afford (clearly, since we are able to pay it off...), but because we use our cards to get rewards. Not being able to pay it in full at present is due to surprise decrease in hours, that is hopefully temporary, not a "bad financial cycle".

I realize I sound a bit defensive, but I truly don't understand how you're coming to the conclusions you've come to based on any of my posts here.

You have debt.  You have almost no savings.  Your monthly spend is $.13 away (now $83) from being in the red, and that's if you can lower it more than you've ever lowered it before.  How is that not an emergency?  What happens if your car gets even something as minor as a flat tire?  Or the price of groceries goes up 2%? Or a pair of shoes falls apart and need to be replaced?  Or your windshield gets hit by a rock? Or one of your kids gets sick or breaks a leg or gets a cavity?  Or... 

Your situation is terrible.  You are struggling to simply afford life, much less to actually save for the future.  How is that not an emergency? You are a very minor incident away from debt, and that means the following month your expenses go up even more, which means you are short even more, and so it goes.  How is that not a bad financial cycle?

It sounds like you racked up $4300 in debt in a month (since you said before last month you had no debt).  You've spent nearly every penny you've made up until now.  (You did have $5k in savings, but that's not especially much, and you clearly felt free to spend almost all of that on what you admit were not wise decisions.  That's a bad financial cycel. 

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #22 on: May 23, 2019, 04:06:12 PM »
ETA: @Villanelle:
I agree we need to understand why we've been charged no interest. I assumed I had at least carried a small balance on my cards previously, but I'm guessing I have just successfully paid them off each month. That's what makes the most sense, since that's what I've always tried to do in the past, and clearly we would have been charged interest otherwise, right?

And I disagree with you on us being in an "emergency" situation. Our situation is less than stellar, yeah, but considering we actually ARE able to cover all of our expenses each month without going further into debt, I don't believe that constitutes as an emergency. Not being able save money right now sucks, but it isn't what most normal people would consider an emergency. Not being able to cover your bills, however, is another story entirely - and thankfully, we're not in that place! But considering I could pay off all our debt, still have more than $1k in an emergency fund plus cover all our living expenses...this isn't an "emergency".

Also, not really sure where you are getting that we've created a bad financial cycle? In spite of our low income, we've been relatively debt free our entire life, always paid our bills on time, saved up more than 20% down to buy a home in our area right next to work with a mortgage hundreds of dollars cheaper than rent. We've always had money in our savings. The credit card debt isn't there because we had needs we couldn't afford (clearly, since we are able to pay it off...), but because we use our cards to get rewards. Not being able to pay it in full at present is due to surprise decrease in hours, that is hopefully temporary, not a "bad financial cycle".

I realize I sound a bit defensive, but I truly don't understand how you're coming to the conclusions you've come to based on any of my posts here.

You have debt.  You have almost no savings.  Your monthly spend is $.13 away (now $83) from being in the red, and that's if you can lower it more than you've ever lowered it before.  How is that not an emergency?  What happens if your car gets even something as minor as a flat tire?  Or the price of groceries goes up 2%? Or a pair of shoes falls apart and need to be replaced?  Or your windshield gets hit by a rock? Or one of your kids gets sick or breaks a leg or gets a cavity?  Or... 

Your situation is terrible.  You are struggling to simply afford life, much less to actually save for the future.  How is that not an emergency? You are a very minor incident away from debt, and that means the following month your expenses go up even more, which means you are short even more, and so it goes.  How is that not a bad financial cycle?

It sounds like you racked up $4300 in debt in a month (since you said before last month you had no debt).  You've spent nearly every penny you've made up until now.  (You did have $5k in savings, but that's not especially much, and you clearly felt free to spend almost all of that on what you admit were not wise decisions.  That's a bad financial cycel.

Hm, well I just don't see it the same way you do. We actually have quite a bit of resources and help should we ever need it (like an abundance of people in our lives who know pretty much every trade possible and are willing and more than happy to give their time), and even $3,500 is enough to cover the expenses that most often arise unexpectedly. Should, God forbid, we have a medical emergency, we are double insured and our coverage is excellent. Every single thing you listed would cost us a less than our piddly savings each month, if anything at all. (And thankfully, my kids are cavity free, as we just had check-ups last week). We also have awesome home owners and car insurance with really low deductibles - not to mention 4 new tires in our garage as backups to our presently 2 month old tires. Also, DH works about 1.5 miles away. Driving is unnecessary most of the time, and I don't drive at all (really. I don't have a license)...so we really don't spend that much there. So we'll have to agree to disagree. We are quite blessed to be around a bunch of amazing & talented friends and family, have great insurance and live close to work - so I think God more than has us covered. I get that perspectives are different though.

I'm not saying our situation is amazing. We definitely should have waited to purchase the car, and had we foreseen the cut hours, would have - but our situation isn't *nearly* as bad as what you're describing. Perhaps the fact that we've been low income forever - and I'm guessing you probably earn quite a bit of money/have quite a bit of savings, gives me a little more knowledge about what's "doable" in our situation, and what isn't. I can imagine if you're coming from a more cushy background our situation would be scary. And I do actually appreciate the fact that you care about a stranger's situation enough to give me advice, so I do thank you for that.

Again, thankful for the advice to pay off the CC's.

ETA:
Also, our situation isn't really as bad as it seemed initially either. I wasn't coming on here to post my budget, just to see if I should pay off my CC's now or not, so I didn't really think about this - but even when we only had $0.13 to save, that was excluding $84 we already put in our "sinking" fund every month (for misc. things like oil changes, etc). I know that's technically savings, but since it's fluid, I don't think of it as "savings" but just another budget category. I also left off the $100/mo my ex gives me for my daughter (yes, a very small child support, and he should pay more, but she's 15 and I don't want to fight) since it's not from our income. So really, we actually have a buffer of $268.13/mo...which is probably why I wasn't feeling like the situation was as dire as you were! Sorry to leave that off. I truly just forgot since I wasn't really thinking of the nitty gritty budget details in the OP.

Okay - I'm gonna go plant my kiwi berries now - a future fruit savings :-D
« Last Edit: May 23, 2019, 04:33:06 PM by d.rose »

Laserjet3051

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #23 on: May 23, 2019, 04:28:04 PM »
ETA: @Villanelle:
I agree we need to understand why we've been charged no interest. I assumed I had at least carried a small balance on my cards previously, but I'm guessing I have just successfully paid them off each month. That's what makes the most sense, since that's what I've always tried to do in the past, and clearly we would have been charged interest otherwise, right?

And I disagree with you on us being in an "emergency" situation. Our situation is less than stellar, yeah, but considering we actually ARE able to cover all of our expenses each month without going further into debt, I don't believe that constitutes as an emergency. Not being able save money right now sucks, but it isn't what most normal people would consider an emergency. Not being able to cover your bills, however, is another story entirely - and thankfully, we're not in that place! But considering I could pay off all our debt, still have more than $1k in an emergency fund plus cover all our living expenses...this isn't an "emergency".

Also, not really sure where you are getting that we've created a bad financial cycle? In spite of our low income, we've been relatively debt free our entire life, always paid our bills on time, saved up more than 20% down to buy a home in our area right next to work with a mortgage hundreds of dollars cheaper than rent. We've always had money in our savings. The credit card debt isn't there because we had needs we couldn't afford (clearly, since we are able to pay it off...), but because we use our cards to get rewards. Not being able to pay it in full at present is due to surprise decrease in hours, that is hopefully temporary, not a "bad financial cycle".

I realize I sound a bit defensive, but I truly don't understand how you're coming to the conclusions you've come to based on any of my posts here.

You have debt.  You have almost no savings.  Your monthly spend is $.13 away (now $83) from being in the red, and that's if you can lower it more than you've ever lowered it before.  How is that not an emergency?  What happens if your car gets even something as minor as a flat tire?  Or the price of groceries goes up 2%? Or a pair of shoes falls apart and need to be replaced?  Or your windshield gets hit by a rock? Or one of your kids gets sick or breaks a leg or gets a cavity?  Or... 

Your situation is terrible.  You are struggling to simply afford life, much less to actually save for the future.  How is that not an emergency? You are a very minor incident away from debt, and that means the following month your expenses go up even more, which means you are short even more, and so it goes.  How is that not a bad financial cycle?

It sounds like you racked up $4300 in debt in a month (since you said before last month you had no debt).  You've spent nearly every penny you've made up until now.  (You did have $5k in savings, but that's not especially much, and you clearly felt free to spend almost all of that on what you admit were not wise decisions.  That's a bad financial cycel.

Hm, well I just don't see it the same way you do. We actually have quite a bit of resources and help should we ever need it (like an abundance of people in our lives who know pretty much every trade possible and are willing and more than happy to give their time), and even $3,500 is enough to cover the expenses that most often arise unexpectedly. Should, God forbid, we have a medical emergency, we are double insured and our coverage is excellent. Every single thing you listed would cost us a less than our piddly savings each month, if anything at all. (And thankfully, my kids are cavity free, as we just had check-ups last week). We also have awesome home owners and car insurance with really low deductibles - not to mention 4 new tires in our garage as backups to our presently 2 month old tires. Also, DH works about 1.5 miles away. Driving is unnecessary most of the time, and I don't drive at all (really. I don't have a license)...so we really don't spend that much there. So we'll have to agree to disagree. We are quite blessed to be around a bunch of amazing & talented friends and family, have great insurance and live close to work - so I think God more than has us covered. I get that perspectives are different though.

I'm not saying our situation is amazing. We definitely should have waited to purchase the car, and had we foreseen the cut hours, would have - but our situation isn't *nearly* as bad as what you're describing. Perhaps the fact that we've been low income forever - and I'm guessing you probably earn quite a bit of money/have quite a bit of savings, gives me a little more knowledge about what's "doable" in our situation, and what isn't. I can imagine if you're coming from a more cushy background our situation would be scary. And I do actually appreciate the fact that you care about a stranger's situation enough to give me advice, so I do thank you for that.

Again, thankful for the advice to pay off the CC's.

We had a water leak in our 2nd floor bathroom this January inside the wall. By the time we saw any sign of water (under the flooring), it was too late. We are now 4 full months into a mass demolition and reconstruction project (including repiping the whole home) where the bill will be / has been at least $35,000. The home warranty company has refused to cover it as well as the original pipe installer. Every cent is coming out of my pocket. Water leaks do happen as can many other problems that may cost a small fortune.

I would also add that your EF may be dangerously low. Did you state is was only $1000? Mine is currently $25,000 and I'm not bragging here but telling you that I am absolutely TERRIFIED of how small it is given the cost of living in this part of the US. $1000 EF would have me shaking in my boots in a cold sweat. YMMV.
« Last Edit: May 23, 2019, 04:30:34 PM by Laserjet3051 »

snacky

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #24 on: May 23, 2019, 04:42:42 PM »
Hello d.rose!
It sounds like you're living happy, healthy lives on a modest income. Well done! There a bunch of us lower income folks around here who don't have a $25k emergency fund sitting around, but seem to be surviving just fine.

Sometimes stuff happens and things get tighter than we'd like, but it sounds like you figured it out.

You haven't responded to any of the suggestions that you bring in a second income. Of course it's up to you, but one day you might want to look into a side gig to make things a little easier. Some stay at home parents tutor online or babysit. I personally have a foster kid staying with me every weekend and I manage an airbnb. There are lots of good options if/ when you're ready.

Well done!

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #25 on: May 23, 2019, 05:16:02 PM »
Hello d.rose!
It sounds like you're living happy, healthy lives on a modest income. Well done! There a bunch of us lower income folks around here who don't have a $25k emergency fund sitting around, but seem to be surviving just fine.

Sometimes stuff happens and things get tighter than we'd like, but it sounds like you figured it out.

You haven't responded to any of the suggestions that you bring in a second income. Of course it's up to you, but one day you might want to look into a side gig to make things a little easier. Some stay at home parents tutor online or babysit. I personally have a foster kid staying with me every weekend and I manage an airbnb. There are lots of good options if/ when you're ready.

Well done!

Thank you! And yes, I admit it - I was ignoring those, hah! Between homeschooling both of my kids (9 & 15) - (the 9yo boy is a smart little man but quite distracted and requires a LOT of my attention to keep him focused) - and all the cooking from scratch, cleaning, gardening, etc I do, I don't have much time. I recently learned I have moderate degenerative arthritis in my back and neck that's making it pretty hard for me to be as active as I used to, and now all my daily stuff takes much longer and I frequently have to lay down for periods of time (making it harder to keep the boy on his toes!) (I had an injury last year that caused this, and had stupidly been pushing through the pain thinking I would get better, only to discover last month NOPE), leaving even less time.

It's a huge bummer, because I had always planned on getting a part time job once the kids were done with school at a local hotel or farm, or something else semi-manual. I don't have a degree and haven't worked except for 2 years when I was 19-20 (I'm 36), so I'm not sure what I can do with my pain and lack of skills. I still want to figure something out though, for the future. We do have a community college with online courses and such, so maybe, once the kids are done doing their thing, I can do mine. I've heard of *awesome* online tutoring jobs, but you need a bachelors. Maybe one day I will be able to find something like that!

Cassie

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #26 on: May 23, 2019, 05:45:54 PM »
You could take some training and work in a office. That should be compatible with your physical issues.

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #27 on: May 23, 2019, 08:10:06 PM »
You could take some training and work in a office. That should be compatible with your physical issues.

Actually sitting is worse for me than standing. I honestly think I would do better on my feet, moving around (my injury is my L5S1, so maybe that is why). I can't even sit for our whole church time, for example. I can usually make it about 45 min, but then I need to stand and move. But who knows where I will be in 8 years ( when I will have time to work). I am just starting to work with a chiropractor, and next month I start physical therapy, so I am trying to stay hopeful that I will get stronger, learn to move properly, and be able to cope!

And I actually do have some office training..,from Job Corps, when I was 16....hah! Pretty sure I will need a refresher due to, well, technology! I am also 1 science class away from my 2 year degree, but it has been 12 years since I was in college, so I doubt that would count...or that I would remember anything.

Villanelle

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #28 on: May 23, 2019, 08:19:30 PM »
Hello d.rose!
It sounds like you're living happy, healthy lives on a modest income. Well done! There a bunch of us lower income folks around here who don't have a $25k emergency fund sitting around, but seem to be surviving just fine.

Sometimes stuff happens and things get tighter than we'd like, but it sounds like you figured it out.

You haven't responded to any of the suggestions that you bring in a second income. Of course it's up to you, but one day you might want to look into a side gig to make things a little easier. Some stay at home parents tutor online or babysit. I personally have a foster kid staying with me every weekend and I manage an airbnb. There are lots of good options if/ when you're ready.

Well done!

Thank you! And yes, I admit it - I was ignoring those, hah! Between homeschooling both of my kids (9 & 15) - (the 9yo boy is a smart little man but quite distracted and requires a LOT of my attention to keep him focused) - and all the cooking from scratch, cleaning, gardening, etc I do, I don't have much time. I recently learned I have moderate degenerative arthritis in my back and neck that's making it pretty hard for me to be as active as I used to, and now all my daily stuff takes much longer and I frequently have to lay down for periods of time (making it harder to keep the boy on his toes!) (I had an injury last year that caused this, and had stupidly been pushing through the pain thinking I would get better, only to discover last month NOPE), leaving even less time.

It's a huge bummer, because I had always planned on getting a part time job once the kids were done with school at a local hotel or farm, or something else semi-manual. I don't have a degree and haven't worked except for 2 years when I was 19-20 (I'm 36), so I'm not sure what I can do with my pain and lack of skills. I still want to figure something out though, for the future. We do have a community college with online courses and such, so maybe, once the kids are done doing their thing, I can do mine. I've heard of *awesome* online tutoring jobs, but you need a bachelors. Maybe one day I will be able to find something like that!

You might see if there is a market near you for food prep.  Perhaps an older person who isn't up for cooking for hem/herself, or a busy dual-working family?  Generally making 25% or 50% more food takes almost no time.  And people pay $10 each for meal delivery that they still have to prep themselves, so I suspect they'd pay about that for something that only need to be re-heated.  I had a friend who started a soup business.  She had about 8 kinds, and would make 2-3 each week and sell them in quart mason jars, and she had more business than she could handle.  Literally, within minutes of posting "This week I have loaded baked potato and chicken wild rice)", she'd be sold out for the week.  IIRC, she got $10 per mason jar.  And her family ate the soup she made, so she wasn't doing extra cooking, just larger batches. 

You could also see about watching a couple kids after school or over the summer.  Those times can be tough on dual-income families.  Reliable child care is something people will pay a lot for!

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #29 on: May 23, 2019, 09:09:36 PM »
Hello d.rose!
It sounds like you're living happy, healthy lives on a modest income. Well done! There a bunch of us lower income folks around here who don't have a $25k emergency fund sitting around, but seem to be surviving just fine.

Sometimes stuff happens and things get tighter than we'd like, but it sounds like you figured it out.

You haven't responded to any of the suggestions that you bring in a second income. Of course it's up to you, but one day you might want to look into a side gig to make things a little easier. Some stay at home parents tutor online or babysit. I personally have a foster kid staying with me every weekend and I manage an airbnb. There are lots of good options if/ when you're ready.

Well done!

Thank you! And yes, I admit it - I was ignoring those, hah! Between homeschooling both of my kids (9 & 15) - (the 9yo boy is a smart little man but quite distracted and requires a LOT of my attention to keep him focused) - and all the cooking from scratch, cleaning, gardening, etc I do, I don't have much time. I recently learned I have moderate degenerative arthritis in my back and neck that's making it pretty hard for me to be as active as I used to, and now all my daily stuff takes much longer and I frequently have to lay down for periods of time (making it harder to keep the boy on his toes!) (I had an injury last year that caused this, and had stupidly been pushing through the pain thinking I would get better, only to discover last month NOPE), leaving even less time.

It's a huge bummer, because I had always planned on getting a part time job once the kids were done with school at a local hotel or farm, or something else semi-manual. I don't have a degree and haven't worked except for 2 years when I was 19-20 (I'm 36), so I'm not sure what I can do with my pain and lack of skills. I still want to figure something out though, for the future. We do have a community college with online courses and such, so maybe, once the kids are done doing their thing, I can do mine. I've heard of *awesome* online tutoring jobs, but you need a bachelors. Maybe one day I will be able to find something like that!

You might see if there is a market near you for food prep.  Perhaps an older person who isn't up for cooking for hem/herself, or a busy dual-working family?  Generally making 25% or 50% more food takes almost no time.  And people pay $10 each for meal delivery that they still have to prep themselves, so I suspect they'd pay about that for something that only need to be re-heated.  I had a friend who started a soup business.  She had about 8 kinds, and would make 2-3 each week and sell them in quart mason jars, and she had more business than she could handle.  Literally, within minutes of posting "This week I have loaded baked potato and chicken wild rice)", she'd be sold out for the week.  IIRC, she got $10 per mason jar.  And her family ate the soup she made, so she wasn't doing extra cooking, just larger batches. 

You could also see about watching a couple kids after school or over the summer.  Those times can be tough on dual-income families.  Reliable child care is something people will pay a lot for!

Oooh...maybe the food prep thing. Both my parents work full time and struggle with healthy eating. We eat a (mostly) wfpb diet, and my dad did mention something about paying me for lunch the other day. Not sure if he was joking or what...I'll have to check!

former player

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #30 on: May 24, 2019, 02:16:27 AM »
I recently learned I have moderate degenerative arthritis in my back and neck that's making it pretty hard for me to be as active as I used to, and now all my daily stuff takes much longer and I frequently have to lay down for periods of time (making it harder to keep the boy on his toes!) (I had an injury last year that caused this, and had stupidly been pushing through the pain thinking I would get better, only to discover last month NOPE),

Is there any chance of a legal claim against anyone else, or a claim on insurance for this injury?  If you have just found out about the resulting health issues then that would be a good reason for starting the claim now rather than at the time.  If a legal claim, you need a lawyer who will take it on "no win no fee" with no costs coming to you win or lose, other than a percentage of any reward.

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #31 on: May 24, 2019, 09:48:00 AM »
I was laying on a round hammock swing attached to one of our trees, the strap broke, and I fell flat on my back on hard, compacted dirt. The swing was only 3 months old, and we did attach it properly. I bought it through Amazon, and after this happened I went back on the listing and saw it said to replace the strap every 3 months. Also, I waited over 6 months to see a doc and get xrayed, because I was able to walk, and stupidly figured I would get better (and I had a friend who recently injured her back, and I wasn't as bad as her, so I assumed the best).  So, I am not sure I have much of a case, sadly. I wish, because I can't afford the closest chiro/physical therapist, and have to therefore go to two seperate places, 15-20 miles away...but at least insurance is paying in full!

Just glad it happened to me and not one of my kids, or neighbor's kids!

Cassie

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #32 on: May 24, 2019, 11:15:54 AM »
Not worth pursuing. My uncle had a swing fall off at sears while he was walking under it. It fell off and gave him life time brutal debilitating headaches. He sued sears and lost.

d.rose

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #33 on: May 24, 2019, 01:23:55 PM »
Not worth pursuing. My uncle had a swing fall off at sears while he was walking under it. It fell off and gave him life time brutal debilitating headaches. He sued sears and lost.

Oh my gosh! That's ridiculous that he lost!

Buffalo Chip

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #34 on: May 24, 2019, 05:23:00 PM »
With respect if youíre not in an emergency, youíre darn close. If Mr. Murphy pays a visit, youíre pretty much screwed.  Glad to see you have paid the CCs off.

While Dave Ramsey isnít so popular around these parts, his plan is rock solid for baby steps 1-3. Iíd be working on BS 3 with gusto right now if I were you. Side gigs, extreme frugality, whatever it takes.

Cassie

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #35 on: May 25, 2019, 12:08:20 AM »
Personally I would get s job and send my kids to school. 

FallenTimber

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Re: Tough money times...pay off CC's or keep it in savings?
« Reply #36 on: May 25, 2019, 05:37:46 AM »
Your income, your savings level, and your emergency fund are terrifyingly low for many on this forum. But itís all relative. Most of our income, savings level, and emergency funds around here would be terrifyingly low on the Bogleheads forum.

Point being, youíre doing much better than a lot of families. You have minimal debt, and you have some money going into savings. Thatís more impressive than many people I know.

Donít get discouraged by the fear that many of us have when looking at your numbers. The fact that youíre on this forum is a great sign that youíre focused on your finances and not ignoring them while you rack up debt. And you have a very optimistic attitude. Thatís much healthier, in my opinion, than the folks who have over a million in investments and insist on continuing to work stressful jobs because they want to reach 35x as opposed to 25x expenses because theyíre so negative about things going wrong.

I do think you shouldnít resign yourself to not working for the next 8 years. The gig economy has grown so much that thereís something for EVERYONE these days.

Best of luck to you and your family!