Budgeting Help Needed

[inovermyhead]

Hi everyone,

I read the boards at MSN for a few years, and decided to follow you all over here. I'm hoping you'll be able to offer me some advice.

I am down to the wire every month and constantly feel broke. I track my monthly budget on Mint, but keep having unexpected expenses coming up to throw me off budget. I'm trying to dig myself out of debt and cut expenses. I've listed my monthly bills below.

Mortgage: $800
BofA credit card: $270
Groceries: $200
Emergency Fund: $150
Charity: $141
Gas: $140
Car Insurance Savings: $100
Personal Allowance: $100
Internet: $60
Roth IRA: $50
Chase credit: $37

A few notes: My mother lives with me and pays the electric bill and sometimes helps with groceries.

My take home pay varies based on OT. It is rare that I don't have OT, but the amount can never be predicted. I save 15% of my base pay into a 401k. I usually take home about $2200 a month.

My credit card accounts are closed because the companies wanted to increase my interest rates. By closing the accounts I negotiated decent rates so the monthly payment is fixed.

I'm on a contract for internet. I no longer need the pricey plan I'm on, so will cancel in April when the contract expires. I plan to move to a roughly $25 service.

I appreciate any constructive advice you all have.

[Lindz85]

How much longer do you have on these credit cards? Can you get a part-time job? Can your mother help any more with the payments? Can you get a roommate to move in?

[inovermyhead]

I have 3.5 years left on the Bank of America card. The Chase card I'm hoping to be able to reduce by half with a bonus in about six weeks.

My mother's finances are unbelievably bad. Very long story, but getting help from her beyond the electric is unlikely. She works part time and no longer has a vehicle, so she's actually sharing mine. She can't afford to buy another, has no retirement savings, etc.

Her working more doesn't seem to be an option at her place of employment. With the vehicle situation, a second job for her isnt' feasible for her or me. In addition to that, my job is unpredictable in hours. I am usually on call and often work late. Taking a part time job would force me to give up the additional income I earn which is about $10,000 a year, but based on certain factors has the potential to be even higher.

In addition to my mother living with me, she has allowed my adult brother to live in my house. He has been unemployed for 2.5 years and seems to have no success finding a job even at retail places such as Wal-Mart. He has no vehicle either and is taking up the third bedroom so renting out a room is not an option at this point.

[stats45]

First, let me say that I have no perfect record on drawing boundaries with family. I let my absent, jailbird, abusive, addict mother use me for money and lodging when I was a teenager. It took years to draw boundaries and when I finally did she didn't want anything to do with me. It was emotionally damaging and difficult, so I imagine that dealing with something like this with family members that you actually care about at all (if this is the case) has to be hard. Whatever you do, I just hope you look out for your well-being.

That said, I would suggest you draw clear boundaries with your family. Set limits on how long they can stay (especially the brother). Emphasize that this is your place and that while they are there that you have the final say on all matters relating to the home and finances. It might be hard to do at first, but you can't live forever reacting to other people's troubles. Unless the long-term plan is to have them live with you forever (and from your tone I can't imagine this is the plan), they have to develop the resources to care for themselves. You do them no favors in the long-term by providing an easy way out of their troubles.

It isn't just about an immediate budget either. What happens if she starts dating or your brother starts dating? What happens if one of them starts to come home late at night? What happens if your friends aren't comfortable coming by after you shared your concerns about the situation with them? This is more than just about finances, your long-term emotional well-being is at stake as well.

In sum, I don't think this is about advice on a budget. The deeper question is about emotional decisions that I hope you find the strength to make, even if they are difficult at first. If you look at this situation and your first instinct is to look at things you have been doing 'wrong' (like overpaying on a cell phone), you have a long way to go. I sincerely wish you the best.

[jk70]

inovermyhead:

I'll just stick with the financial part; although at some point you'll need to do something like stats45 said. Anyway...

First off, excluding OT how much do you take home and can you live off of just that. If that's possible I would budget off of that? OT is unpredictable so try this step first.

Second, what are the interest rates on the 2 cards? You say the monthly payment is fixed but I assume you are still paying interest on them?..does that mean you can't pay more?

Leaving any possible cuts aside, you have 352 leftover. what happens to this amount.

With respect to your family, don't say a word about your finances.

[haapai]

Well, the good news is that you are saving a lot and paying down a lot of debt relative to your income.

The bad news is that your cash flows are tight, tight, tight!

It is probably very smart to have your cash flows adjusted to tight, tight, tight in your situation. It probably prevents additional leakage.

The balances and interest rates would be handy. Also, how much is in your EF? Is the auto insurance savings a transfer to a savings account for the purpose of saving up for a quarterly or semi-annual payment?

[haapai]

Do you live in a warm climate or heat with electric? I don't see a heating expense.

[haapai]

No obvious phone expense either, but maybe your employer pays for it.

[whoisjohngalt]

In addition to my mother living with me, she has allowed my adult brother to live in my house.

This part bothered me greatly. I do not understand how someone, even a parent, can move in another person into a residence that is not theirs.

You will get some great financial advice on this board, but I firmly believe that you might have to deal with non-financial issues first or you might be in-over-your-head for a long long time, and not even due to your own expenses.

Good luck
Lena

[thinid]

If you're constantly feeling broke and "down to the wire" each month, you have no business giving to charity. You will soon need some yourself. I know there are probably good reasons why you feel the need to give to others, but if you can't take care of yourself first...
It sounds like you don't really have an EF. I would suggest taking that bonus in six weeks and setting it aside as an EF. It's tempting to use it to pay of the Chase card, but you only end up with an extra $37 each month. You really need an EF more than you need that debt paid off.
What is your employer match on your 401K? You could reduce your contribution down to the % that maxes the match and get some more money in your paycheck. Regardless, if you've been reading the boards, there are better places to put that money than a 401K.
I would recommend that you build your budget based off of you regular pay. OT is not reliable enough to plan on it always being there. Use any OT pay you get to either fund your EF or pay down debt. But you need to build a budget that allows you to get by on the income you can count on.

[Gardening Grandma]

You said your mother pays the electric, but I'm wondering what other utility expenses there are: Phone? water/sewer?, gas or propane?

If you are feeding 3 adults on only $200/mo, you are doing an incredible job - is that figure realistic?

Overall, it seems to me that you are doing a remarkable job on a very tight income. But, the elephant in the room is the non-contributing brother. Your mother did not have the right to allow him into the house without your permission. How long has he been there? Does he contribute anything at all to the household expenses? Is he even employable? (drug problem? criminal record? mental issues?)

[The J]

I agree with the others -- your problem isn't your income or expenses, it's the 2 people who are living with you, one of whom isn't contributing. Give your brother a deadline -- he has X days to get a job or get out.

[Plain Old Petunia]

Jan 28, 2011 11:11:04 GMT -5 The J said:

I agree with the others -- your problem isn't your income or expenses, it's the 2 people who are living with you, one of whom isn't contributing. Give your brother a deadline -- he has X days to get a job or get out.

Love this advice. Sit brother down and tell him, "I cannot afford to support you. If you want to live here, you need to find a job and begin pulling your weight." Then talk specific dollars and a specific time deadline. Because you know, you really can't afford to support him.

You also need to be firm with Mom. She is never again to move anyone into your house. It is your decision, not hers.

Does your family regard you as the "rich" one, owning your own home and all? I suspect they do.

People can't walk all over you if you refuse to let them.

[illinicheme]

I agree with the advice that's been given, especially the giving your brother a deadline to man up. I'd also cease the charitable giving for the time being. Use that money to pay off the credit card debt more quickly, and then resume giving in a few years when things are looking up for you. In the meantime, there are lots of non-monetary ways to give back to your community.

What are the "unexpected" expenses that keep coming up? Are they something that you can start saving for for the next go around? While the timing of things like car repairs might not be predictable, you can plan for the fact that they will be necessary at some point.

Is your car insurance $600 for six months? That seems high to me for one car. Do you have your home owners and auto policies with the same company? If not, look into that. It might save you a bit in discounts.

[beergut]

Drop the $141 charity contribution. By boarding your brother, you're already contributing to charity every month. Are you maxing out your 401k every year, i.e. hitting the $16500 limit? If you are not, why do you have a Roth IRA? Is it b/c you want outside investment options not available in your 401k? If you just want the tax-free growth potential, check to see if you have a Roth option inside your 401k.

[inovermyhead]

Thank you all for your advice. I definitely agree that my family situation is a large part of my problem, and will put a lot of thought into the suggestions you have made.

I'll try to answer a few things as for the finance questions.

Interest rates on the credit cards: 3.5% BofA, 8.99% Chase

Roth IRA: I started this several years ago before I had any debt and have not stopped contributing. I definitely need to reevaluate this account though.

401k: 3% company match if I contribute 6%. I was contributing 10% but increased to 15% in Nov. to lower my AGI as I was very close to qualifying for the retirement tax savings credit.

I'm familiar with the advice to contribute just enough to make the match and then put the rest toward Roth, but based on the negative performance of the Roth, decided for the time being to contribute aggressively toward the 401k as I'm getting a 27% rate of return on the 401k investments.

My employer pays for my cell phone.

Car insurance is $540 paid every six months. I try to budget for that and set money aside monthly. I was in a crash a year ago which caused the costs to increase somewhat, so it's a bit high.

I put aside $90.00 every 2 weeks into an HSA account for medical expenses. I have a high deductible plan and want to be aggressive in saving enough to meet the deductible for emergencies. Overall, I'm in good health so I don't dip into this fund except recently for new glasses.

$1500 in my emergency fund. Working to aggressively increase this and putting a minimum of $150 per month. If I have extra income, it goes to this.

My unusual expenses have been $750 in car repairs, $300 in plumbing needs, a few odd things at Christmas. Definitely things I could save for, but put a dent in my savings over the last 4 months.

As for the bonus, I've been deliberating over the value of paying down the Chase card. As was pointed out, it would only free up $37 a month, but would eliminate my smallest debt and highest interest debt. However, I might be better off simply increasing the emergency fund. I welcome your comments on this.

In the 6 years I have held my job, I have never had a paycheck without OT. With the nature of my job, OT is guaranteed, although how much is never predictable.

Thanks again.

[jk70]

I'm familiar with the advice to contribute just enough to make the match and then put the rest toward Roth, but based on the negative performance of the Roth, decided for the time being to contribute aggressively toward the 401k as I'm getting a 27% rate of return on the 401k investments.

what is the timeline of these performance #'s....last year there were plenty of small cap funds that hit in the high 20's but realize that 27% each year is not sustainable...

I don't get why you had negative performance in the Roth. can you list what it's invested in?

[Gardening Grandma]

$1500 in my emergency fund. Working to aggressively increase this and putting a minimum of $150 per month. If I have extra income, it goes to this.

As for the bonus, I've been deliberating over the value of paying down the Chase card. As was pointed out, it would only free up $37 a month, but would eliminate my smallest debt and highest interest debt. However, I might be better off simply increasing the emergency fund. I welcome your comments on this.

Since you do have $1500 in an EF, personally, I'd take the $150 and add it to the $141 you have going to charity, and add that to the $37 going to the Chase card. And I'd direct any OT or bonuses there as well. I know it's "only $37/mo" but it's nearly 9% (I haven't seen the balance). That would be $328/mo in addition to any OT/bonuses.

And I'm going to reiterate: I congratulate you for doing remarkably well in a tight situation. Karma for your forthrightness.

[DVM gone riding]

Let me just make sure I understand this line correctly: "Your mother (who is totally smooching off you) decided (without your say) to let your (no good loser) brother move in!!!

Ok I have a really simple solution-kick them both out (or at least the brother) and I bet all your problems will be solved.
If you can't kick them out-clearly the reasonable solution-then inform them that effective immediately you get all money they make and you will give them an allowance!

[Peace77]

I suggest:

1. Give brother a deadline by which he either starts paying rent / contributing to household expenses or leaves. Give him a rent amount and deadline date and time. After the deadline passes and he still does not have a job, change the locks or have a locksmith re-key the locks.

2. If the Roth is not doing well, stop contributing to it for now.

3. Decrease the charity giving for now.
If you reduce giving to $100 and add the $50 that was previously going to the Roth, you could increase your payment to Chase to $108.00 and increase your EF deposits to $170 per month.

I put aside $90.00 every 2 weeks into an HSA account for medical expenses.

Do the funds in your HSA account stay there until you use them? Some accounts are only good for one year and the funds have to be used by the end of the year or forfeited. If that is the case, put less in the HSA and more in the EF.

[Gardening Grandma]

Do the funds in your HSA account stay there until you use them? Some accounts are only good for one year and the funds have to be used by the end of the year or forfeited.

Money in HSA accounts are good til you use them.
FSA (Flexible Spending Accounts) are use it or lose it within the year.

I believe the OP is talking about an HSA.

[inovermyhead]

Gardeninggrandma is correct, I do have an HSA. The dollars do not expire annually. I was trying to be aggressive in saving for this as I considered it an extension of my EF for medical costs. I checked my balances and am very close to having enough saved to meet the deductible, so I think I will reduce my contributions by half for the time being.

The advice you all have given on my charity contributions is appreciated. I'm not sure about ceasing charity entirely, but will immediately reduce the $141 to $70 and redirect the difference to my Chase balance.

As for the 401k, I do understand the 27% returns (over 1.5 years) are not sustainable. Since contributing helped to reduce my AGI for tax purposes, and it was the one area of my finances that seemed headed in the right direction, I just left it alone. I do want to be sure though that I am saving in the areas that will help me now and in the future. I'm not sure what I will do about this.

Someone asked about the Roth performance. I will try to find the investment details on that. I need to research moving my account from one company to another as the current company has been very difficult to deal with and assesses an annual fee that was not disclosed when I opened the account. I've just been assigned a new representative also, so this is probably the best time to make changes, and even consider stopping contributions until I make some headway in other areas.

Thanks for all the great ideas.

[haapai]

Will paying off half of the Chase balance with your bonus drop the minimum required payment? If so, to what? There's probably a name for that minimum amount that we will take as a payment when your balance is small, but I don't know what it is.

Knowing that number, and knowing how the lump-sum payment will affect your payoff date, will probably make you feel slightly more in control of your finances.

It might also be helpful to build some amortization tables for the BoA card that calculate the difference between payoff dates if you either keep paying $270 a month or if you drop your payment to the minimum amount required as it goes down. Considering how low the interest rate on this card is, I really have no idea what the results of this exercise would be.

I know that both accounts are closed, but I'm having difficulty believing that the payments amounts are truly set in stone. The minimum required payments should be decreasing, although at a very slow pace.

Do you still have access to online records of the account even though the account is closed? I've always wondered about this part of closing a credit card with a balance.

I have no idea whether you have access to credit in any form, or any idea what it will cost you. It's a pretty serious blind spot. None of us on this board know whether you have an open credit card with a 12% APR or whether a shortfall would send you looking for a payday lender.

[Plain Old Petunia]

Jan 31, 2011 0:42:02 GMT -5 @inovermyhead said:

Someone asked about the Roth performance. I will try to find the investment details on that. I need to research moving my account from one company to another as the current company has been very difficult to deal with and assesses an annual fee that was not disclosed when I opened the account. I've just been assigned a new representative also, so this is probably the best time to make changes, and even consider stopping contributions until I make some headway in other areas.

Well I can pinpoint the poor performance of your Roth for you. High fees and expenses. If you are assigned to a representative, then you are in load funds, which have commissions and typically high on-going expense ratios. The annual fee is only the tip of the iceberg. If you want your Roth to grow, transfer it to a low-cost custodian. Vanguard, Fidelity, or T. Rowe Price. IMO, Vanguard is the best choice, but the others are good too.

[inovermyhead]

Jan 31, 2011 9:51:09 GMT -5 haapai said:

Will paying off half of the Chase balance with your bonus drop the minimum required payment? If so, to what?

Yes, paying down this balance would reduce the payment to roughly $15 per month.

Jan 31, 2011 9:51:09 GMT -5 haapai said:

I know that both accounts are closed, but I'm having difficulty believing that the payments amounts are truly set in stone. The minimum required payments should be decreasing, although at a very slow pace.

The minimum payment on the Chase card will decrease as payments are made. The BofA card will not decrease unless I aggressively pay more than the $270 per month. The balance was divided into 60 equal payments and calculated with interest to give me the monthly due.

Jan 31, 2011 9:51:09 GMT -5 haapai said:

Do you still have access to online records of the account even though the account is closed?

Yes. I still have access to the accounts online to schedule payments and view balances.

Jan 31, 2011 9:51:09 GMT -5 haapai said:

I have no idea whether you have access to credit in any form, or any idea what it will cost you... or whether a shortfall would send you looking for a payday lender.

I do have an emergency credit card set aside. I don't know the long term interest rate on it, but it has an introductory 0% rate for 12 months. I will not use payday lenders. I've seen too many people get stuck in that trap.