| Need Advice on how to get financially stable. |
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J S Machine
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Cash: $ 3.25
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Joined: 16 Feb 2009
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| Need Advice on how to get financially stable. |
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Hello everyone.
I found this forum doing a search for fiancial guidance forums. I have a couple of things that I need to address with my financial situation, and I am hoping to be able to talk about it and get some options here.
First off, let me say that I am 24 years old, and I was married last year. I had my first child Jan 30th of this year- A little girl. I now have everything that I could possibly dream of, but I have accumulated debt in the process and I wish there was some way that I could find my way out of it. I want to list some of my details so that I can get some help, but I don't know the procedure of doing this. I am kind of reluctant to post very detailed information, so some guidance on how to do this and permission to do so would be great.
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Mon Feb 16, 2009 6:05 pm |
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coaster
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Location: Wisconsin
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First of all, congratulations on your baby girl!! 
You don't need permission, and there's no procedure. People post what they're comfortable posting. You're anonymous as far as the wide world goes. So long as you don't post anything that can identify you or locate you. And there's no reason you need do that.
Getting yourself out of debt and coming up with a plan to do so right now is going to be a real challenge because you're in a totally new situation with no idea of how much spending is going to be required for your new family. I think the first step to become financially stable is to know exactly how much is coming in and how much is going out and where it's going. So a lot's going to depend on that child. And you can't predict that right now. Any plan is going to be just a broad outline and is going to need to be flexible.
~Tim~
Eye Candy : Why Whimsy
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Mon Feb 16, 2009 7:05 pm |
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J S Machine
Member
Cash: $ 3.25
Posts: 14
Joined: 16 Feb 2009
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Ok. Here are some basic things that need to be stated. This will be long but here we go.
My wife and i both work at the same company, and our jobs are fairly stable. I know mine will be, and I know hers has a good chance of it as well because of tenure. The problem that we have is that we have to depend on overtime to make our money. Fact is, I could not survive financially on regular time (40 hrs) if I had to. In a nutshell, we are living beyond our means. I know this, and I am not very proud of it, but I'm also not afraid to admit.
I regularly get between 55 and 60 hours a week. This lets me bring home anywhere from $700 to $900 a week. The problem with the overtime and our hours is that it changes so much that we can't accurately predict anything, like say if we were on a slary. I can tell you ballpark what I will make, but that's about it. The wife makes on average between $250 and $400 a week, depending on her hours.
I bought the house that we live in in November of '06. I had just turned 22 when I bought it, and it is very nice. In my town, it was one of the nicest houses, and it is in a very nice neighborhood. I made this decision hoping that the value would surely go up over time, and it has, but not significantly. I hope to someday sell it and move to a place that has a little land. My house just has no room as it is sitting on .5 acres. I paid $132K for it on a 100% fiananced loan. I have a 6.5% fixed interest rate there. I pay right around $1K a month payment on it.
We have two cars. Mine is a '99 model which I paid $20K for at purchase, and it is financed through a local credit union. I bought it in March of last year. Unfortunately, the value has dropped to the point where if I had to sell it, I could not get anywhere near what i owe. It is worth about $15K at the most right now. The payments are $400 a month on it. I do not have any intentions of getting rid of it, I just don't know what might happen in the future. I plan to pay it off. Hopefully sooner than the full term of the loan. My Wife has a 2006 Model Car that we bought in September of last year, and we paid 15K for it. She pays around $300 a month for it. I know I could probably get what it is worth if I ever had to sell it, but most likely mine would be sold first in the wake of an emergency.
I have a credit card that I have had since I was 19, and to tell the truth, I wouldn't even have had credit to buy the first thing that I own if it would not have been for the credit card to build my credit. It has a limit of $3500, and it is currently sitting at about a $3300 balance. I pay the minimum amount every month, because it is all I can afford to do. My wife and I were married in September of '08, and shortly after I got her a CC so that she could start building her credit. It started out with a $300 limit, and now it is up to a $1K limit. She does very good with it though, and she has never gotten over a $200 balance.
I also have a signature loan through my employer's credit union, and I still owe around $900 on that. It will pay of in Decmeber at the end of this year. The problem with that is that if I ever lose my job, I will have to pay that loan balance immediately, since it is drawn from my check each week.
I have no savings at all hardly. I used to be able to save a good bit before I bought my house, but now the majority of my income each month goes to a mortgage payment.
I plan to pay off a good bit of my CC at the end of this month with money from my tax refund. I know that this is the best use of this money. If I do not use it here it will get spent somewher else most likely.
I have never been late on any payment, and I do well to get the bills paid. My problem is that I do not have any money put back for an emergency.
When we did our taxes this year, I made right at $60,500. My wife made $31K. Together our combined income was over $90K.
I do make good money, but my main problem is frivilous spending. It is amazing to me how much money it costs to simply live. I can remember when I was in high school and $100 a week at a part time job was good money. Now, I make around $800 a week and still struggle sometimes...lol
So here is a breakdown of my bills:
Average $4400 a month monthly income between my wife and I.
House: $1K
Cable TV: $75
Car 1: $300
Car 2: $400
Insurance for Cars: $250
Power: $150
Water: $70
Phones combined (Hers and mine): $150
CC1: $100
CC2: $50
Storage unit: $35
Maybe this will give us a good start. Let me know if you all need anything else.
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Mon Feb 16, 2009 7:59 pm |
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littleroc02us
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Welcome to this forum and congrats on the new child. My wife and I will hopefully start a family soon too.
As for instructions and confidentiality on this forum you just need to provide information that you are comfortable with that help the rest of us help you and as for personal info. you don't need to tell us where you live or what your name is.
If you want to achieve financial stability you need to reduce your risk. I believe strongly that paying off all your debt except your mortgage until a later time will allow you to succeed greatly. To give you a start here is what I would suggest:
1. Get on a written budget.
2. Save $1000 for an emergency fund. (You never know what can happen)
3. List your debts from smallest to largest. Pay minimum payments on all of your debts except your smallest. Pay everything you can budget on the smallest debt until you have won that battle. Than apply that amount and your minimum payment on the next largest debt and so until you are finished with all of your debt.
*If you are having trouble finding extra cash to pay down your debts you may have to get a part time job for a short period to help this process. Another idea is to sell everything you can in order to generate cash to pay off your debt. I know this sounds extreme but you need to sacrifice to win. Live like no one else, so later on you can live like no one else.
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Mon Feb 16, 2009 8:20 pm |
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littleroc02us
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Good information you have documented. I did the math and basically your mortgage is 23% of our net income which is a reasonable payment.
After calculating all your bills you have posted not including daily expenses (restuarants, entertainment, etc..) you have $1520 left for disposable income.
I hate to say it but your two vehicles are eating up 16% of your income. I know you don't want to get rid of your vehicle but if you look at the math, why continue to pay what you owe on the vehicle (which you said is more than $15,000), when you could sell the car for $15,000 and take a loan out for the remainder at much lower payments on say $3000 or whatever it is. You could buy a very inexpensive Toyota Camry that could get you from point A to point B. As for your wifes vehicle I would suggest the same principle. Your car poor to put it simply. At this point you have freed up hundreds of dollars.
Lastly, these small loans could then be put into the debt snowball idea I was talking about in the last post.
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Mon Feb 16, 2009 8:43 pm |
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coaster
Senior Advisor
Cash: $ 1357.80
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Joined: 11 Oct 2005
Location: Wisconsin
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I've got an observation and a couple different viewpoints than the previous poster.
1) Observation: if you're getting a tax refund that's enough to pay off that credit card then you're having way too much withheld. $3300 refund before the new kid comes out to $275 per month too much withheld, and now you'll have another exemption. So run an estimate on your 2009 taxes and adjust your withholding so you come out to zero owed and zero due when you file next year. It's your money and you need it now, not next year.
2) Different viewpoints: $1000 emergency fund is way too small. For a two-income family I used to recommend three months' expenses when I was a financial advisor. You could put $1000 aside now from your refund and then start building your emergency fund when your debt is paid off.
Starting now with a written budget is only a broad-stroke guideline as I mentioned above. With the new kid you're going to run into expenses you never knew existed. Better is to track your expenses down to the penny for the next three months, so you know where it's all going, THEN do your budget, so you know where you can cut back on.
Don't get a part-time job. You already have an income you can live on. Working 55 - 60 hours a week is already too much for starting a new family. You'll burn yourself out, work yourself to a nubbin, and miss out on your daughter's life.
Drive your vehicles until they're rust buckets. It's cheaper to fix a car than it is to buy one.
~Tim~
Eye Candy : Why Whimsy
Last edited by coaster on Mon Feb 16, 2009 8:53 pm; edited 1 time in total |
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Mon Feb 16, 2009 8:52 pm |
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J S Machine
Member
Cash: $ 3.25
Posts: 14
Joined: 16 Feb 2009
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One thing I have never been able to do is buy something and it hold its value. I swear that cars are the worst, and they jsut simply amaze me how bad they deprciate. I bought my truck that I also own, in '04. I paid $9200 for it then. Now, I know I couldn't get $3K for it. I don't plan on selling it though, because I need a truck around the house. I paid cash for it when i bought it. I can't afford to drive it though, because 1) it has 210K miles on it, and 2) it gets about 12 miles to the gallon. I figure I can't get anything for it if i sell it, and I can still use it, so why not keep it?
My car gets 27 miles to the gallon, and only costs $80 a month to insure. That $80 comes out of the insurance premium I listed.
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Mon Feb 16, 2009 8:53 pm |
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littleroc02us
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Cash: $ 204.95
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I would like to post the last 5 steps of my plan but wasn't ready to present them yet because you are in the beginning stages.
After you have saved up $1000 emergency fund and paid off all over your debt except the house here is what I recommend.
3. 3-6 months emergency fund.
4. Invest 15% into Roth IRA's/ pretax retirement
5. College funding for kids
6. Pay off mortgage
7. Build wealth and give
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Mon Feb 16, 2009 9:08 pm |
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J S Machine
Member
Cash: $ 3.25
Posts: 14
Joined: 16 Feb 2009
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1) Observation: if you're getting a tax refund that's enough to pay off that credit card then you're having way too much withheld.
-I know that alot of people will have this opinion, but I actually look forward to having that money returned to me every year. It is nice, because I don't get any sort of bonus or anything like that. I am not able to save the money during the year, so i kind of use it like an automatic savings account.
2) Different viewpoints: $1000 emergency fund is way too small.
-I would love to start saving for some sort of emergency fund, but I just can't save money at the moment.
Starting now with a written budget is only a broad-stroke guideline as I mentioned above.
-I have no idea how to do a budget, and I don't even know what is involved with it.
Working 55 - 60 hours a week is already too much for starting a new family. You'll burn yourself out, work yourself to a nubbin, and miss out on your daughter's life.
-Trust me, it is rough. But in this economy, I am simply happy to still have a job. I wish that there was a way that I could get something with alot less hours, but unfortunately in my line of work it is all based on hours. I am a tool maker by trade. I build metal forming dies and molds. Many people depend on what I do to keep production running. If I don't do my job, they can't do theirs. That sometimes equates into alot of hours, and I don't neccesarily like it, but I have no choice.
I hope to one day own my own shop with my own CNC machine. But for now, I could never afford it. I know that I could take the opportunity and run with it, but getting there cost so much that I just don't know how I will ever do it. I'm probably looking at $100K start up costs easy.
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Mon Feb 16, 2009 9:15 pm |
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littleroc02us
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Cash: $ 204.95
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I forgot to mention one thing, when you drive used cars your car insurance goes down. My wife and I drive 10 year old camry's with over 160,000 miles on them and they both get 28 mpg and are very reliable cars for around $3000.00 each and our insurance is only $75.00 a month with Amercian Family Insurance.
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Mon Feb 16, 2009 9:15 pm |
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littleroc02us
Moderator
Cash: $ 204.95
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Joined: 09 Feb 2009
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Part of succeeding is in making sacrifices.
Emergency fund: What we did to achieve the $1000 was to have a garage sale and to sell things on eBay.
As for budgeting, one method you can try is to list all of your monthly expenses not bills and figure out how much you can survive on estimated. Then take cash at the beginning of the month and stuff them into envelopes that are labeled for their use like; groceries, entertainment, haircut, gas, etc...) and then you need to ration each month until the money is spent. This helps you to control your spending and is a budget method.
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Mon Feb 16, 2009 9:32 pm |
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coaster
Senior Advisor
Cash: $ 1357.80
Posts: 6686
Joined: 11 Oct 2005
Location: Wisconsin
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quote:
Originally posted by J S Machine
1) Observation: if you're getting a tax refund that's enough to pay off that credit card then you're having way too much withheld.
-I know that alot of people will have this opinion, but I actually look forward to having that money returned to me every year. It is nice, because I don't get any sort of bonus or anything like that. I am not able to save the money during the year, so i kind of use it like an automatic savings account.
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JS, I know a lot of people use this as their reason for not increasing withholding and it's always an excuse: "I can't save, so it's like a savings account." I've heard that over and over. It's an excuse and just an excuse. Part of what you're doing here is learning to exercise control over your income and your spending. To do that, you need to control as much of your income as you can. Allowing the government to take more of it away than they're entitled to, so they can use it free of charge without paying you interest, then give it back to you next year ..... why that's just plain silly. The least you can do is to increase your withholding and deposit the difference in your own savings account, where you can at least earn a little bit of interest. Talk to your employer. Many employers have an automatic deduction plan whereby some of your paycheck can be automatically taken out and deposited in your savings.
IF YOU CAN'T DO THIS THEN YOU WILL FAIL AT THE REST OF YOUR PLAN
It all takes discipline and planning and if you can't plan and don't have the discipline to stick to the plan then all of this is a meaningless exercise.
Best wishes, good luck, and don't make any more excuses. Take charge!!
PS - a budget is just a fancy word for writing down what you plan to spend. What you wrote down above is half a budget in hindsight, sort of. 
~Tim~
Eye Candy : Why Whimsy
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Mon Feb 16, 2009 10:24 pm |
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J S Machine
Member
Cash: $ 3.25
Posts: 14
Joined: 16 Feb 2009
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quote:
Originally posted by coaster
JS, I know a lot of people use this as their reason for not increasing withholding and it's always an excuse: "I can't save, so it's like a savings account." I've heard that over and over. It's an excuse and just an excuse. Part of what you're doing here is learning to exercise control over your income and your spending. To do that, you need to control as much of your income as you can. Allowing the government to take more of it away than they're entitled to, so they can use it free of charge without paying you interest, then give it back to you next year ..... why that's just plain silly.
IF YOU CAN'T DO THIS THEN YOU WILL FAIL AT THE REST OF YOUR PLAN
Again, I don't really see the point you are trying to make. If I choose to have more witheld throught the year so that I get a refund back, I don't see how that makes me more "unable to get my finances straight".
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Tue Feb 17, 2009 3:08 am |
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coaster
Senior Advisor
Cash: $ 1357.80
Posts: 6686
Joined: 11 Oct 2005
Location: Wisconsin
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If you CHOOSE to do it that way because you want to get a big REFUND that's fine, but don't do it as an enforced savings plan. The whole principle of building wealth is to make your money WORK for you. If the government takes it out of your paycheck and keeps it until next year, it's not working for you, it's working for the government, and I'm 100% sure that you can do a whole lot better with your own money than the government can do with it.
Interest rates are pretty low right now because of the bad economy, but a good average interest rate is around three percent. Figure inflation about three percent. Then $3000 loses $90 value due to inflation when you let the government have it for a year, but it could earn you $90 if it was in your hands in the bank. In other words, the way you want to do it, you lose $180 a year net. It may not sound like much, but you'd be surprised at how it builds up year after year after year. (I've left out taxes and the future value of current dollars to make it simple)
What I said about failing was that if you don't have the discipline to put your own money away in savings, i.e. you need to have it sent to the government to keep it out of your hands until next year, then you don't have the discipline to make any kind of a financial plan succeed.
I know you can do it.....it's not that hard....you're here looking for advice. You're concerned about the financial future of you and your family. If you didn't care; if you weren't a responsible person; you wouldn't be online looking for advice and information. You'd be out there getting further and further into the hole.
~Tim~
Eye Candy : Why Whimsy
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Tue Feb 17, 2009 4:49 am |
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J S Machine
Member
Cash: $ 3.25
Posts: 14
Joined: 16 Feb 2009
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This is a quote of myself from a post above concerning my house.
"I bought the house that we live in in November of '06. I had just turned 22 when I bought it, and it is very nice. In my town, it was one of the nicest houses, and it is in a very nice neighborhood. I made this decision hoping that the value would surely go up over time, and it has, but not significantly. I hope to someday sell it and move to a place that has a little land. My house just has no room as it is sitting on .5 acres. I paid $132K for it on a 100% fiananced loan. I have a 6.5% fixed interest rate there. I pay right around $1K a month payment on it."
I would like to know what the best thing to do about my house is. Everybody I know is refinancing their house right now, and they are doing it mostly because they have adjustable rates. Mine is fixed, but higher than average. I was hoping to maybe refinance and get a lower interest rate, but I don't know what this involves. Seems like I talked to some banks and some mortgage companies a while back, and they told me that I just really haven't owned the house long enough. It would be great if I could refinance and get a lower rate. I still don't know the best way to go with the savings though. I could get the lower rate which would lower my payments and 1) keep my payments the same but shorten the term of the loan, or 2) lower the payments and keep the same term. The lower payments would free up some cash to work with in other places, for example paying off debt.
What I would really like to do is eventually sell my house and move, to get to a place where I have a houseas well as 2 or 3 acres of land. Land seems to be a very good investment. I would love to have some land, but it is so expensive right now that I can't afford to buy any of it. I could buy a plot of land and put a mobile home on it or something, that way my house payment would be nothing comapared to what it was. Problem is, the housing market is so screwed up right now that even if I wanted to sell my house I would probably take a loss. I have heard of people taking huge financial hits trying to sell their homes right now.
One idea I had was to refinance my house for more than what it is worth, and pay off my cars with the difference in money that I get back. To do this I would need close to $35K, and I just don't see a Mortgage company refinancing my home for that much over what it is worth. And even if they do, and I end up having to sell the house, I will end up owing the difference for what the house doesn't sell for won't I?
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Tue Feb 17, 2009 11:43 am |
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