seeking budget help

[GirlGreen]

Can you hold off on paying for the sculpture for a while, or even get a refund for what you've paid so far?

I know you really want it but it sounds like you don't even have room for your furniture right now.

[Rocky Mtn Saver]

Jan 5, 2012 15:30:41 GMT -5 GirlGreen said:

Can you hold off on paying for the sculpture for a while, or even get a refund for what you've paid so far?

I know you really want it but it sounds like you don't even have room for your furniture right now.

I had the same idea to see about a refund and getting rid of the art purchase. I know sealy said she is making payments on the sculpture to the artist, so my question would be whether the art is in her possession or in the artist's possession? If it's in his possession, I would suggest she try to negotiate to get most or all of her money back and let him sell it to someone else. If it's in her possession, it would be trickier, of course.

Getting rid of the sculpture payment and paying off the Summit Bible College expense from savings would pretty much close the budget gap she is currently experiencing based on the numbers above. And she could still save aggressively for her house and upgrades! To me, that'd be pretty close to a win-win.

[sheilaincali]

Many years ago (probably like 13) we were due to get a refund but DH owed money on a college type loan they hijacked the refund to pay the loan. It's my understanding that if you already owe the IRS money you won't be seeing a refund until what you owe is paid off.

I don't recall you addressing the storage issue that many have commented on (If I missed it I am sorry) what's the story there? Is it long term? Are they things that can be sold? Why are they in storage in the first place? Seems to me like that would be an easy bill to be rid of.

[ses]

I am going to take a very big picture of your budget and be very blunt. It is costing you 13 cents to save a dollar when you consider the difference in the costs of debt vs the income of savings.

I know you want to save for your house, but your tax situation is more critical right now. The plan I have for you will only delay your goals by a little over a year.

If you take your current debt to VISA ($5920), DISCOVER($4249), SUMMIT ($1550)and your SCULPTURE ($3500)-- a total of $15,160 and the $5000 you need to cover your tax issues you would take about $20,000 which would leave you about $7000 in savings. Then use the $400 from credit payments plus the $1000 you planned to direct to savings to replace your savings and in about 15 months you will be right back where you were, but have no debt other than a car payment. I would suggest an automatic savings deduction from your paycheck so you never see the savings and are not tempted to use the money as we all are when we have to do the transactions ourselves

$4055-1400 savings=2655-1020=1635 for monthly expenses. This is about where you are now. You can still tithe and keep your storage. I would try some negotiating on your insurance and phone bills, though. This will only work if you don't use any credit cards. You can do this.

The reason I am suggesting this path is that your credit score will be improved greatly which will give you a better chance at a good mortgage rate. In your current financial situation I don't think you would be approved for a good mortgage rate if at all.

I would suggest you make an appointment to be pre-approved for a mortgage. To have the actual numbers in front of you rather than what you "think" you will need for a big dream helps make it become reality.

[Peace77]

I disagree with SES's plan because the sculpture is on a layway plan. There is no need to take funds out of savings to pay it off.

Otherwise, it is a good plan to get rid of most of the debt.

I would add to look into First time homebuyer programs to help you get into a house.

[sealy]

Thank you ses and peace I will be stopping my savings and working on my debt.
I am hoping to get something back from IRS this year which will go towards paying off the
$ I owe them.

I signed up for faster internet which will save me $10 per month. I am contemplating my landline.
maybe there's a deal i can sign up for.

I also decided to go for a smaller house which will be about 256,000 instead of the 303,000. I will use all my down payment on it and not
get too many upgrades (maybe just a double oven). That will save me $47,000 right off the top.

[Rocky Mtn Saver]

Jan 10, 2012 0:10:06 GMT -5 sealy said:

Thank you ses and peace I will be stopping my savings and working on my debt.
I am hoping to get something back from IRS this year which will go towards paying off the $ I owe them.

Sealy, remember that it doesn't have to be an all-or-nothing approach regards debt or savings. Do you still have $0 in emergency fund? If so, you should probably still put that away for emergencies. This will likely help you keep your goal of not using the cards. It's great to work on your debt, I think that's really smart. But be careful not to yo-yo too far the other direction and wind up making choices with your long-term goals that you won't be happy with. There's a happy medium to be found if you look.

[ses]

Don't count on getting anything back on your taxes. If you already owe they will keep any refund and it will flag you as a problem to be dealt with.

The reason I suggested using savings here is to avoid popping onto their computer's horizon. Once you become an "issue" for the IRS it takes forever to get back under their radar. Paying everything off BEFORE they notice you, could prevent a lot of problems getting a mortgage. Bankers are so picky now that any hiccup in your history is a reason to deny. And IRS issues are a major hiccup. All I am thinking about is polishing your halo for a mortgage application.

The plan I suggest does not stop your savings at all, in fact it will boost your savings. It just changes the time frame and emphasis of using your money and making it work FOR you and not AGAINST you. The biggest issue is NO credit cards!

[midjd]

I am hoping to get something back from IRS this year which will go towards paying off the $ I owe them.

You won't - they'll seize everything you owe them and then some. Agree with SES on using savings to pay this off - it wouldn't wipe you out, and you really don't want to mess with the IRS.

[Peace77]

MidJD is correct. You won't get a refund. The IRS will make sure that you pay them one way or another. They will take your refund and if you don't pay them quickly enough, they will take the rest of the money right out of your bank account. Your best best is to pay them NOW.

Then, Pay off the other debts that are charging you interest.

Did I understand correctly that your take home pay is $36k and you want to buy a home for $256,000?

That is just not realistic. You won't have enough to pay for the downpayment (5% =$12,800, pay for closing costs, move-in costs and still have an Emergency fund of at least 6 months worth of expenses.

Do Not plan to spend ALL your money on getting into a dream house. The first time the smallest thing goes wrong, your dream becomes a nightmare when you can't afford to pay the mortgage.

There are many foreclosures and short sales available. Could you get a home for less than $256,000? You could always move up later when your finances are more secure.

[nalto]

As a gentle reminder, 10% tithing is a suggestion. Give until it hurts, yes, but don't hurt yourself to the point you may turn to the church for help. I second what others have said. Drop tithing to a lower percentage, and volunteer to make up the rest. Once you get back on your feet, brining it back up to 10.

[Rocky Mtn Saver]

Jan 10, 2012 11:58:11 GMT -5 Peace77 said:

MidJD is correct. You won't get a refund. The IRS will make sure that you pay them one way or another. They will take your refund and if you don't pay them quickly enough, they will take the rest of the money right out of your bank account. Your best best is to pay them NOW.

Then, Pay off the other debts that are charging you interest.

Did I understand correctly that your take home pay is $36k and you want to buy a home for $256,000?

I believe her take-home is $48,000, or $4055 per month. She has been aggressively saving for the home.

Sealy, if you were to pay off the IRS and State of California now -- which I agree you need to do quickly -- you would still have enough for your home down payment, wouldn't you? As I recall, you have until at least the summer before your home might become available, so you can always rebuild that amount without the taxman breathing down your neck!

[constanz22]

Even with a 48K income, a 250K house is a huge stretch... yikes, especially with all the other debt. I make 50K and no way in h.ell would I even consider this! I have a similar amount of debt and I wouldn't be comfortable buying a 150K house!
sealy, I don't know the back story, but, what is the huge urge behind buying a house, and doing it NOW?

[Rocky Mtn Saver]

Jan 10, 2012 13:11:20 GMT -5 constanz22 said:

Even with a 48K income, a 250K house is a huge stretch... yikes, especially with all the other debt.

Agreed. Sealy, have you gone through pre-approval for the mortgage?

[ses]

I see you have the 5% down payment for your house but how much will you have to have for closing costs. I understand you have spoken with the developer but have you met with an independent banker for pre-approved mortgage? They could help with first time homeowners programs,too.

[Rocky Mtn Saver]

Jan 10, 2012 17:37:18 GMT -5 ses said:

I see you have the 5% down payment for your house but how much will you have to have for closing costs. I understand you have spoken with the developer but have you met with an independent banker for pre-approved mortgage? They could help with first time homeowners programs,too.

Also, with only 5% down, will you have to do PMI? That can jack up the payments a fair bit.

[sealy]

My takehome will actually go back up to about $66,000. It's lower now because they closed out my old contract when I switched jobs.
I haven't used my CC at all this month (I know we are only 12 days in but my goal is to not use it at all).

They are paying closing costs.

I've been waiting for a long time to buy this one particular house. It was 304,000 but I have decided
to switch to a smaller house on the same lot.

[Clever Username]

Jan 12, 2012 8:54:21 GMT -5 sealy said:

My takehome will actually go back up to about $66,000.

I thought I remembered this was the case.
Back in my original note about finding/shooting elephants* I think I remember that you went about $20k into credit card debt with this downturn in income.

I understand the math is a gross simplification but, is this vaguely accurate:
your income dropped about $20k/year.
You incurred $20k of debt.
Now that your income has rebounded.
You are breaking even.

*Once I shot an elephant in my pajamas.
How he got in my pajamas, I don't know.

[ses]

Sealy--That is great that you haven't used your CC!

Do I have this right--you are going to be buying a new house in a current development and the developer is going to cover closing costs?
Who will be extending the mortgage. Will it be with an independent bank? Have you been pre-approved? Please, please have an attorney skilled in real estate on your side throughout this process. I am always jittery when so much of a deal is controlled and administrated by one party. Especially in today's economy

[ses]

Just saw this and thought of you

Don't bite off more home than you can chew
How much house can you comfortably afford? For most people, the answer is a house with a purchase price of no more than three times their annual household income. Rationale: The cost of a home includes much more than the monthly mortgage payment. It's also property taxes, insurance, upkeep and other expenses. Typically, these costs total 2% to 3% of your home's price each year. Assuming a 20% down payment, a 30-year fixed-rate mortgage and interest rates in the 5% to 6% range, the three-times-your-income rule will translate into total housing costs of roughly 30% of your gross income.

Calculator: How much house can you afford?
More on Forbes.com: 10 common money wasters

By my rough calculations your housing will cost $1600-1800/month plus your regular utilities which will probably go up if your house is bigger than your current apartment.

[sealy]

*Once I shot an elephant in my pajamas.
How he got in my pajamas, I don't know.

thanks for the laugh ses

it won't be started until perhaps 6 months or more. I am praying that I'll be able to pay my CCs down real low and then add more money to my house principal so I will be able to pay it down quickly.

[sealy]

A while ago I went through preapproval perhaps 2 years ago

[twinmama85]

Jan 10, 2012 0:10:06 GMT -5 sealy said:

Thank you ses and peace I will be stopping my savings and working on my debt.
I am hoping to get something back from IRS this year which will go towards paying off the
$ I owe them.
.

One, if you already owe, and you haven't set up installment plan yet, you are being raped with interest and penalty rates every month. Two, do you even know if you are going to get a "refund" for 2011 or are you hoping you are getting one? It isn't wise to sit back and "hope" that you get a refund to cover your prior year tax obligations. What are you going to do if you owe for 2011?? If you don't pay, they CAN AND WILL *eventually, not sure how long* seize your assets to pay the back taxes...this includes, but not limited to: Garnishing your wages, auctioning off your property, wiping out all of your accounts like checking, savings, etc.

Three, this coincides with One, PAY OFF THE IRS AS FAST AS YOU CAN! This needs to be your 3rd priority (this would be a $1000 EF, 2nd, take care of your household [food, utilities, shelter])

Four, if i were in your shoes, i would hold off on buying a house until you are out of this mess because you cant afford it. you dont want this house that you think is a blessing, to turn into a nightmare because you cant pay your payments. there is nothing wrong with renting and i am unsure why everyone thinks you have to have a house and mortgage to be "winning".

I would finally suggest Dave Ramsey, he is a Christian financial guru and I think you would be able to relate to his teachings. A lot of his advice is straight out of Proverbs and has been a tremendous blessing for my family. His plan is simple and easy to follow and there is no tricks, just plain Common sense.

Good luck!

[Peace77]

Dave would say to leave $1k in Savings for a starter Emergency fund.

Then, out of the rest of the savings, Use what you need to pay off the IRS NOW.

Then, Pay off the credit cards and other debt that charges interest. Why pay all that interest?

Then take the amount you were paying on the credit cards and put it into Savings. Have your savings in an account earning at least 1%. There are accounts that pay better. Mine earns 6% on the first $500.

Praying is good but it is also good to go ahead and do what needs to be done.
The bible says to owe no one except a debt of love.

[twinmama85]

Then take the amount you were paying on the credit cards and put it into Savings. Have your savings in an account earning at least 1%. There are accounts that pay better. Mine earns 6% on the first $500.

What bank is giving you that rate?!?!

[ses]

I'm not sure a mortgage pre-approval from two years ago is still valid, especially with changes in your financial status (eg. tax issues)

[Peace77]

What bank is giving you that rate?!?!

No banks are, for sure.

It's a credit union. After $500, the rate goes down but it pays the same for both savings and checking.

PM me for more info.

[sealy]

I didnt change my withdrawals for my taxes. I am hoping to get a refund so they can take it. I won't pay it off until after I file my taxes so I will know exactly how much
more I need to take care of my stuff.

The interest rate right now is 3.75%. The realtor talked to me about a 5 - 1 ARM not sure exactly how it works but I am researching it and aske a question on our board.

s

[twinmama85]

Jan 15, 2012 7:51:25 GMT -5 sealy said:

I didnt change my withdrawals for my taxes. I am hoping to get a refund so they can take it. I won't pay it off until after I file my taxes so I will know exactly how much
more I need to take care of my stuff.

The interest rate right now is 3.75%. The realtor talked to me about a 5 - 1 ARM not sure exactly how it works but I am researching it and aske a question on our board.

s

Dont do an ARM...the rates will balloon after the 5 years and if you cant refinance, you can end up with a ungodly interest rate.

I HIGHLY recommend you pay off the taxes immediately, because every month you let it sit, its compounding interest and penalties.

[Deleted]

Jan 15, 2012 15:15:58 GMT -5 twinmama85 said:

Jan 15, 2012 7:51:25 GMT -5 sealy said:

I didnt change my withdrawals for my taxes. I am hoping to get a refund so they can take it. I won't pay it off until after I file my taxes so I will know exactly how much
more I need to take care of my stuff.

The interest rate right now is 3.75%. The realtor talked to me about a 5 - 1 ARM not sure exactly how it works but I am researching it and aske a question on our board.

s

Dont do an ARM...the rates will balloon after the 5 years and if you cant refinance, you can end up with a ungodly interest rate.

I HIGHLY recommend you pay off the taxes immediately, because every month you let it sit, its compounding interest and penalties.

I agree with paying what you owe the IRS immediately (you have it in savings, it shouldn't even be open for discussion). I completely disagree about the ARM. Don't discount it outright. Weigh all your options and determine what is best for you, not what somebody else thinks is best.