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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: canisius on December 15, 2012, 10:26:09 AM

Title: Two steps forward, four steps back due to medical debt.
Post by: canisius on December 15, 2012, 10:26:09 AM
My wife and I are looking for advice.  We made some mistakes when we first started to FI, a bit too much of Ormen and Ramsey and not enough effort towards MI.  However, due to medical accidents we had pretty much our entire medical savings wiped out over the past three years (as we had left debt).  I had a fractured skull due to an accident, daughter had an infection with her eye that left partial blindness and wife had a car crash.   Some of this was covered by high deductible plan, however as I'm a school teacher and our insurance plan begins each year in August, our insurance company rebegin the year Out of pocket expenses, thus having us start again.  We had no other way to pay for it, after savings was depleted, except for hospital loans.  In addition, both wife and I took higher paying jobs at a charter school to help.  We feel we'll be fine long-term financially, but if anyone can give us advice short term, it would help.  Daughter has surgery in January ($2000) and July ($1200), wife is pregnant and will give birth in March ($1400).  We hope to move closer to our new work (which was taken after we renewed our lease on current home).  This will save us about $500 a month in August, including car and rent and food (cheaper area), but also will be about $1100 for deposit (before we regain our current deposit on this house).  In addition, as we're Peruvian immigrants, renewal for permanent residency is in July which will run about ($3000) for all three of us.

Now, on income we earn $63,000 a year with 4% increases each September, and work from 7:30-5.  I also do some summer work and teaching which nets about another $3000.  After taxes and insurance, we net about $3800 a month, but from April to July it'll only be $2300 a month when wife stops working.  I do plan on biking to work when she is on maternity leave, and making it permanent when we move closer to work (although, she'll need to purchase a bike).  Furthermore, I've had "The Talk" with wife about unnecessary spending so many of the categories below are dropping.  The other hard part, is cutting phone bills and saving to visit Peru, as wife is home sick and we haven't been back for four years. 

Here's our situation:

We have in assets

2007 Kia Optima - KBB value - $5000, 90k miles
Savings - $2000
457 - $3000

Assets - $10,000

Debt -
Student Loans - $9500
Medical Loan - 12,400
Loan 2 - $9000

- Debt: - 30,900

Net Worth:  - 20,900

Monthly Contracts / Bills -
T-Mobile - $150 - two smart phones, contract expires in October 2013 (fee for cutting both lines would be $500)
Energy Costs - $90
Water -
Food - $550
Gas - $150
Dining / Activities - $100
Monthly pre-school cost (daughter is not eligible for public school until next year, this is also only 9 months of the year and we'll be suspending it when wife is not working) - $580
Clothing - $40
Rent - $800 (lease is until August 2013)
Internet - Home Phone and International Calling - $90
Student Loan Monthly - $180
Medical Loan Monthly - $560
Household - $100
Car and Rental Insurance - $80
Random Events (car maintenance, gifts, etc) - $50

Whether it's a punch in the face, simple advice, or tips, I'll take any.  Long term we'll be fine as we're cutting things left and right and getting out of shitty contracts and situations we had no business being in in the first place.  However, short term we're looking at a shit load of debt, and medical bills and immigration that we can't avoid and don't want to go further in debt.  Maybe, someone can see something here I don't or give a better mustachian ideas.  Also, we live in Dallas.
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: PJ on December 15, 2012, 01:37:39 PM
Welcome to the forum, canisius.  You have really had some rough stuff happen over the last few years - good for you for realizing that drastic times call for drastic measures.  A new place closer to work will be a big help, but I'm thinking that you can't afford to wait until August to do something big about your expenses.  Here's why ... 

Currently, with $3800 net coming in, you've got a budget that has you spending about $3520.  With only $280 left over, I'm guessing that's probably mostly getting eaten up by incidentals and minor emergencies, rather than being put toward paying down the debt faster.  (Please feel free to correct me if that's a wrong assumption, but either way, it's a really tight budget, and you're not going to get the debt paid down much before all your big upcoming expenses happen.) 

Even more importantly, after the new baby comes, you project $2300 net income, but your budget minus preschool comes out at 2940.  You're $640 over budget, even without your daughter's 2 upcoming surgeries and delivery costs, which add up to $4600 even if everything goes exactly as planned (not always true when it comes to medical issues).  Sounds like your wife is only planning 4 months of maternity leave?  But even so, that's $2560.  Plus $3000 to renew your permanent residency.  $10,160 more debt added to the debt you already have would leave you in a very precarious position in terms of being able to service the debt.  And that's not even counting the deposit on a new place. 

So, what can you do moving forward?  It seems to me like you need to do anything and everything that you can, you can't afford to have anything be "off the table."  You might want to look into whether you can break your lease and move now.  Look into selling your car - which would cover all your upcoming medical procedures, and save money on gas and insurance.  Cutting your home phone and internet and seeing if you can switch to a cheaper cell contract (you can do that where I live, as long as you keep the length of contract the same).  Kids do need clothes, so you can't eliminate the clothing category entirely (but hand me downs and thrift stores are your friend!) but gifts, dining out and activities are out.  You'll have to eat at home, and find free stuff to do.  Groceries seem high for 2 adults and a pre-schooler, so that can probably come down.  You'll have to look at ways to increase income more, maybe by a weekend/evening job or maybe with some extra summer work. 

The biggest thing though is attitude.  I've been so inspired by reading old threads and active journals on this forum.  Read what others have done, and you can get inspired too.  People have sold their cars and started biking - including to the grocery store, and using a bike trailer to take their kids to school.  They've put their kids in daycare so that a stay at home parent can go back to work, or taken their kids out of daycare so that a stay at home parent can provide childcare and eliminate other expenses.  They've cut cable and cancelled planned vacations and reduced their utility bills and learned new ways of cooking for less.  They've saved $100 here and $8 there and so on and so on until they've squeezed $500 or $800 from their budget to repay debt or build savings.  You can do it too, it's an adventure, and it's worth it!
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: Erica/NWEdible on December 15, 2012, 02:49:38 PM
Is loan 2 a medical loan as well? Are these from the providers, like the hospital? This might not be a popular opinion, but I'd do everything possible to get your medical debt forgiven. Hospitals and providers write off a ton of expenses, which is one of the reason why medical costs are so stupid in this country. At a macro level I hate the this, but at a micro level if I were in your shoes I'd explore every option to get the medical debt reduced or forgiven. What is the possibility of that?
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: needmyfi on December 15, 2012, 03:50:34 PM
My condolences on your run of bad luck.  You have really had some challenges and I wish your young family the best  going forward. I hope you can put these temporary setbacks behind you soon and enjoy that new baby that is coming.

First we need to get you through July, take care of your daughters surgeries, have a baby and not get deported. Wow It has been a long time since I have had to pay installment payments on a hospital bill,is there interest on this debt? Is it through the hospital? If I am wrong please correct me, but I would guess that they would rather see you able to stay in the country and pay the bill eventually than not have the money  for the residency renewal.  While this only kicks the debt further down the road, it looks like you will be heading in a better direction by August.  By the way, is this all the same hospital?  Can these additional expenses be rolledinto the old and a new repayment planned for everything?

I am sure you can save on groceries.  Does Dallas  have Aldi stores?  They are great for produce and dairy.  I feedtwo people on about $300  to 350 a month and we eat well.  Obviously the cell plan goes when the contract is up.  PJ had  a great suggestion to modify the plan, if that doesn't work out you should still probably cancel, another 10 months at 150 a month minus the 500 cancellation fee is still a thousand dollars saved.  We have a Virgin mobile that is 20 bucks every three months minimum and we have tons of minutes built up.  I have no clue on how to save on preschool but it is obviously a huge part of the budget.  Look to other parents at your school and see if they can help.
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: A440 on December 16, 2012, 01:35:42 PM
Agree with cancelling or modifying phone contract.

Are you able to contribute to an HSA? 

Also I believe you can get money out of a 457, without paying a penalty, although you would owe income taxes on the money then.  I hate to see retirement savings depleted, but in your case, it might be appropriate. 

Can you get a better deal on your car/rental insurance? 

Do you do your own taxes?  If you are getting a refund this year, see if you can adjust your withholding for the coming year.   Make sure you are getting all the deductions/credits you can--child care, medical expenses, etc.

Could you get certified as a medical translator?  That seems to be something people can do by phone and at odd hours.
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: canisius on December 16, 2012, 02:23:12 PM
Well to answer some questions, we modified our cell contract so we will be able to cut about $70 a month on that.  It's still more than I like, but better than it was.  We're calling out internet/landline provider tomorrow along with the hospital loans.  Likewise on student loans we are seeking to reduce payments (not eliminate) for a year.  This wouldn't add more times, but give us about $100 more on cash flow for the year, and then we can go back to eliminate other bad debt.

In addition, we have looked at entertainment, restaurants, and looked over our receipts closely.  With restaurants and entertainments we think we can easily cut $150, and realising our own latte factor at the grocery store (e.g. cokes for me, Hawaiian bred for wife, etc) we can cut $100 without it hurting, and probably another $100 with a bit of pain.  We stopped at Costco and Sam's Club, but we live in such a small house, I don't know whether or it would be practical with the bulk sizes and it may be better to stick with Aldis. 

We are able to contribute to an HSA.  We have considered using the 457 to pay for it, but we want to make that as a last case situation (at lease before taking on more debt). 

Rental Insurance:  It is going down about ten dollars each month.  We use Geico and before paid about $50 for both rental and car, however, when wife got her license last May, it shot up about twenty dollars.

I haven't thought of medical translator, that could be a possibility.  In addition, I'm looking for tutoring opportunities on Saturdays and what not.  That could possibly add $160 to $400 extra each month.

To the question on the hospitals they're actually three different hospitals, but two are in the same company.

I appreciate the help and advice and it's giving us new ideas and we appreciate the feedback and any other advice anyone can add.

Conservative, with just the advice this should already cut $520.  Taking work on Saturdays along with other things could possibly bring it up to $800 each month.
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: PJ on December 16, 2012, 09:02:50 PM
canisius, it surely sucks to think of having to take on Saturday work just when you're about to have a new baby you want to spend time with, but I congratulate you for being prepared to just do what's necessary to take care of your family's financial future.  I can tell you've taken the time to go systematically through your budget and figure out those first few steps you can take right away to improve your financial situation. I'm thinking that if you do all those things right away, and put aside the extra $$$ while your wife is still working, you should come close to being able to cover all the upcoming medical expenses without adding to your debt.  Do keep us posted so we can cheer you on!
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: Tami1982 on December 29, 2012, 08:36:33 PM
Wow.  You are making a huge number of changes in a short period of time.  It is going to be hard, but be SO proud of yourselves and your family.  We are here with suggestions and support and I can't wait to hear how things continue to go.  Congrats on the upcoming bundle of joy and I hope you can figure out the lease situation to your satisfaction. 
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: kkbmustang on December 29, 2012, 09:11:55 PM

Congrats on taking the first steps to get your financial house in order. A few things (I'm in Dallas, too):

1. Shop at Aldi. We feed our family of 4 (2 adults, 10 year old more that eats more than I do, and an 8 year old) on $450/month and we eat very, very well with a few items purchased at Whole Foods. (Aldi doesn't carry kale, ginger root and bulk spices.) We don't eat out, except for the occasional hot lunch at school for our kids and dinner once a month for the family. For 2 adults and a toddler, you should be able to get that down to $350 without breaking a sweat, $300 if you hustle.

2. What do you teach? I have a vast network of people who might be able to use your services. I'm happy to send a message to my network if you tell me what you teach, your rate per hour and when you are available.

3. What does your wife do? Can she pick up side work on Sundays? It would be hard on your family in the interim, but if she can babysit or do some other side work a few hours each week, that would help the bottom line, too.

4. Are you using an immigration attorney? I'm an attorney (not immigration, but I know a lot of local attorneys) so may have some contacts for you in this regard. If you are okay on that front, no sweat, but if I can help, please let me know.

5. Call the hospitals and renegotiate the debt. Like now.

6. Aside from the car which has already been mentioned, do you have anything around the house you can sell on CraigsList? Furniture you don't use, decorative items, appliances you don't need, etc.?

7. For baby items second hand, there's a huge consignment sale for baby stuff called Just Between Friends. The next one in Dallas is in March. Think about getting any necessities here instead of Target or Walmart. Might be less expensive. You can sell stuff there on consignment and shop there.


In the US, we don't get maternity leave like in Canada. If certain criteria are met (employer is more than 50 employees and you've worked there for a year), you get 12 weeks protected, albeit perhaps unpaid leave depending on whether you or your employer has short term disability insurance for you, leave meaning you won't lose your job and up to 26 weeks of unprotected leave meaning you won't lose a job, but you aren't guaranteed the job you had before the leave. You can be fired after 26 weeks of leave.
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: Working Mama on December 30, 2012, 10:59:26 AM
Dear canisius,

Wow you've had a lot on your plate.  I am sorry there's so much bad luck to deal with!

But ti also looks like the fates are smiling again - a baby on the way is a joyful thing.

Hospitals often have charity programs.  Consider calling and asking about charity care.  I know many people that were eligible including myself at one point in my life when I needed and asked for that help.

Much love, Mama
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: canisius on May 16, 2013, 08:44:02 PM
Well, nearly six months later, I wanted to give you all an update and a thanks.  I took many of your suggestions.
By stretching food, being creative, and encouraging left overs, we cut our food budget down to 450. 
I've been biking to work, and when our lease is up in July wife insists we don't live two miles from work.  We'll have to pay two hundred more or less in rent, but we'll not only save that in gas and mechanics, but also extra time at work.
We renegotiated much of our medical debt down to 0% and consolidated the rest to 5%.  That will be good since our FSA plan begins in September where wife and I will max out our plan to pay off the rest of the debt at a 0% interest withdrawl from our paychecks and pre-taxed.
We don't EVER go out to eat, but wife and I have drawn closer from our romantic suppers together.  We actually did go out last Friday when a family member invited us.  It was terrible.  We could make the same thing at home, cheaper, without the noise, and better.

Finally, and most importantly, I didn't take a second job, but did take over time with tutoring, writing tests for the district, and creating curriculum.  I was and am putting in about sixty hours a week.  However, was just called in yesterday for a meeting with the superintendent.  Because of all the work, beginning in July, I'll be the new head over curriculum with the department, a 20,000 pay raise, and a paid for masters degree, which will then net another 10,000.  We'll pay off all our debt and have enough for a 20% down payment in 18 months, while being FI in nine years.  The reason given?  They were impressed by the drive and extra work shown.  Well, when your family is put in a situation like that, it's amazing what you can do to see them secure.  So thanks again for all of you all's help!
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: N on May 16, 2013, 08:55:28 PM
that is really, really awesome to hear. congrats. very impressive!!!
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: FlorenceMcGillicutty on May 16, 2013, 09:04:06 PM
Can you settle the hospital debt? Most hospitals will do that and negotiate with you on the price, not just the interest. It can't hurt to try. I would start very low and let them know how strapped you are and that you have a baby on the way. I would think you could cut the debt in half at least.

I think you're doing amazing, btw. It probably feels like two steps forward, four steps back right now, but you're on a steady uptick. You're also young, bright, and willing to do what it takes. Hang in there and you will come out the other end of this with guns blazing.
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: Johnny Aloha on May 17, 2013, 06:49:47 PM
Great job and nice follow up.  I like how optimistic your last post was! 
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: KingMe on May 17, 2013, 07:29:27 PM
Wow. Things really turned around. Congratulations!

A cautionary note about the FSA. It sounds like you want to treat your past medical expenses as eligible expenses for the FSA in this upcoming year. If that is the case, it may not work. You really don't want to max out an FSA account if you won't have enough eligible expenses. Before making the election, you or your wife should call your plan administrator to make sure it will cover these medical debts that were incurred well on the past.
Title: Re: Two steps forward, four steps back due to medical debt.
Post by: savingtofreedom on May 18, 2013, 12:29:16 AM
Wow canisius you and your family are amazing.  Thanks for keeping us updated!!