I have always been a thrifty person in general, and have tried to avoid debt. I grew up in a family that was always one unexpected event aware from government assistance, and I didn't want to live like that (never knowing when they power, gas, etc would be cut, or when we'd have to move... again.) But, that being said, I didn't really have the knowledge or tools of what to do with money once I had it. I also had no idea how expensive being "middle class" is - until I married someone who grew up that way.

We did just about everything possible wrong - got married too young (at 19), had kids too fast (at 20), had kids (2) - then got careers - then went to college (just graduated in 2010!!!). On the other hand, strangely we are in a much better place than most of our friends of similar ages who did everthing "right."

So now I'm in a place with only minimal debt other than a mortgage (which I am quickly paying down), and I'm looking to try and build wealth long term.

A summary of where we are:
Monthly take home pay* $4400 - 4600
Housing costs (mortg, escrow, utilities) - $1900 - 2000
Other debt payments (1 cc, 2 student loans) - $210
deposit to savings for reccuring maintenance costs - $200
Insurances other than health - $70
Groceries - $400
Eating out - $100
Childcare - $750
Kid costs (lessons, phys therapy, school fees, etc) - $350
Pet costs (food, shots, flea/heartworm pills) - $20
Gas and tag costs for vehicles (car and scooter) - $50

Total spending - $4150

Not great but it does leave wiggle room for savings and paying down debt
Next - Some context for the above, and my short term goals.

*take home pay has already had health insurance (whole family), life insurance on myself and husband, transit savings acct and health savings acct deducted. The variation is that my job pays both overtime and bonuses, so it does fluctuate slightly.

Context!

I am sure that you are all going - holy crap your housing costs are ridiculous!

So, why on this good green earth did we buy a house that clearly is out of our budget - given that I consider myself a thrifty person:

1) It allows us to live within walking distance of my inlaws, my grandmother-in-law, my husband's job, and public transit to my job. Together, this saved us approximately $200 a month in gas costs, not to mention wear and tear on the car, and time - the time especially has allowed me to move from a part-time job to a full-time job with occasional overtime, enhancing our finances even farther. In addition, our families are now able to share various things - such as lawncare equipment, and even cars for those occasional times when an extra car is needed, saving all of us a great deal of money.

2) My eldest son has an autism spectrum disorder. The public school district he is attending provides a number of therapies at the school at reduced rates that our insurance does not cover because of the large number of autistic kids attending the school. In addition, because the staff is so familiar with autism spectrum disorders, we have never had the nightmare arguments and fights with teachers or administration that many must go through. I feel that these two alone were enough to justify the move.

3) We bought our house at a very depressed price what is looking more and more like the bottom of the market for this neighborhood. Although it stretches our budget, I believe that we bought a great value - especially since it is the smallest and least developed house in the neighborhood, which tends to hold it's value. It also was simply a well built house - although it is a touch small for my tastes (765 sq ft, 2 bed / 1 bath), it doesn't have any issues with water in the basement or bugs or any of the issues typically seen in older houses (built in 1947). We did upgrade the plumbing, electric and hvac systems to increase the safety and efficiency of the house (this was folded into the cost of the house using an FHA 403b loan.) However, we have no plans of making any further changes except possibly if we have the discretionary cash to add a half bath in the unfinished basement.

next - this time i promise - short term goals.

Short term goals:

Pay off non mortgage debt. Get a side hustle (or 2, or 3) going.

Right now we have the following:

1) $2760 in cc debt - left from $8000. This was for a medical bill from 6 years ago that involved emergency surgery. Our old insurance only covered 80% of costs. I've been paying this down each time I get overtime or a bonus. This is my number one short term goal and I plan to have this gone before December.

2) $750 left of $1500 borrowed from parents to send my super smart eldest kid to a physics camp at MIT this summer. He got a scholarship for the tuition, room and board, but I still had to fly him there and back (and one of us there and back twice.) I pay them, per agreement, $15 per paycheck (biweekly). I am hoping to be able to pay off the lump sum from my christmas bonus - but I never assume I'm going to get it.

3) 13,786 between 2 student loans. Not bad for putting two people through college. The payment on this is $108 but will jump to $205 in January. We were able to keep it low by a couple of methods - obtaining a large number of low dollar amount scholarships, I worked for a company that provided some tuition assistance and because we were independent students with kids both going to school we qualified for several government grants (at least til the recession in 2009.) Ok - so this is more of a long term goal but I'm generally optimistic.


Side hustles -

1) Right now I have an etsy store where I sell my paintings - but it pretty much just breaks even with supply costs (at least I have a virtually free hobby!)

2) I signed up with task rabbit to use my paid skill set (administrative and executive assistance) to do odd jobs in the evenings - like gift wrapping, setting up home offices, and doing mailing lists for small businesses and independent contractors. I've only had one job so far, but I have hopes this may develop.

3) I am starting a seminar at our library on resume writing - I'll do this for free but also plan to put out business cards for my resume writing services - again, not high hopes but maybe I'll make enough for a few date nights.

Welcome to the forums Ms Kitty Cliche! The good news is you are not alone! There are many people on this site that have experienced success and have great advice to share. You are doing the right thing by asking questions. Here’s a little game plan to get your started. Questions I believe would be helpful are labeled by letters A-I and are in bold.


1. Make the Resolution: Spend less than you make. This is a tough one. Spending more money than you earn is common practice in the U.S., and increasingly in other countries around the world.

Learn to just say “No.” You must learn to say no to yourself, your spouse, and your children. This is called delayed gratification. It is essential to getting out of debt. A) Are you ready to make the resolution?

“Live like no one else [today] so you can live like no one else [in the future debt free].” – Dave Ramsey

2. Educate Yourself: The local library is a great resource. If you eventually want to purchase these Amazon.com or Half Priced Books is a good place to look. We used DR's methods and went through Financial Peace University twice (first the audio CD and then the Dvd series) and I can tell you it works. We have been debt free since the summer of 2011! B) Have you considered taking DR’s Financial Peace University course? The new FPU course is only 9 weeks (1.5 hour sessions) long now instead of 13 weeks (2 hours sessions).

I. Some good personal finance books:

• The Richest Man in Babylon By George Samuel Clason
• The Total Money Makeover By Dave Ramsey
• The Millionaire Next Door By Stanley and Danko


II. Some good Leadership Books:

• The One Minute Manager by Ken Blanchard, and Spencer Johnson, M.D.
• Who Moved My Cheese by Spencer Johnson, M.D.

3. Motivate Yourself: Getting out of debt takes commitment, energy, and intensity. This will require sacrifices. Set clear and achievable goals on one page or less. (I’d recommend the “The One Minute Manager” by Kenneth H. Blanchard and Spencer Johnson.) Put these goals on the fridge or as you walk out the door so you see them every day. Starting a financial journal on the GRS forum is a great idea. Reward yourself with little treats as you accomplish your goals. Normal = spend like there is no tomorrow. Being different or even “weird” by seeking to become debt free is a good thing. C) How are you and/or your spouse motivated?

4. Organize Yourself: Create a balance sheet. This helped us a lot when looking seriously at getting out of debt. D) What is your total debt? How much is the interest rate associated with each debt? What is the total pay off? What is your total Net Worth? How are you tracking your expenses (Excel Spreadsheet? Mint.com?)

Assets(stuff you own) – Liabilities(debts) = Net Worth

5. Choose: D) How are you going to get out of debt? – Lowest balance (Debt snowball) or highest interest.

If the debt snowball…

1. Create a list of all of your debts: credit cards, car loans, student loans, mortgages, etc…
2. Next to each one write down the total balance owed.
3. Re-order these from smallest to largest debts (use Excel to make this simpler.)
4. Pay the minimum payment on all of the debts – except the smallest one.
5. Put every extra dollar you can find towards paying off that smallest debt.
6. Celebrate like crazy when you get that first debt paid off.
7. Take the amount you were paying towards the first debt and put towards the next smallest debt. Do this until this one is paid off.
8. Celebrate again!
9. Continue this process until each one is paid off.

6. Cut Expenses: Sell something. Create a budget. Cut. Cut. Cut. F) What are some ways you can cut expenses out of your budget? See this thread. Once you’ve created your budget evaluate it periodically but most importantly - Stick to it!

Expenses > Income = Bad & Expenses < Income = Good

7. Spouses get on Same Page: While every couple is different, you could consider reading the same materials, talking openly about your feelings, and sharing like goals. When you share goals, you are usually more likely to take the necessary steps to accomplish your goals. If you or your spouse are not on the same page, the process will be a lot more difficult. Communication is the key. Determine not to live life in the bondage of debt. Credit Cards are not the answer. G) Are you and your spouse on the same page?

8. Get an Accountability Partner/Coach: When you are getting out of debt, you want to be influenced by people who support your decision. Not everyone does. This can even include family. Hang out with friends who are frugal. Befriend people who enjoy movies at home instead of in the theater. H) Who do you know would be a good role model for you in getting out of debt and holding you accountable to your goals?

9. Save up for an Emergency Fund: $300 (if you make less than $15,000 a year), $500 (if you make more than $15,000 and less than $24,000 a year), or $1000 (if you make more than than $24,001 a year) respectively. Do this quickly hopefully in less than 2-3 months. Emergencies can and always will happen – car repairs, home repairs, hospital bills, etc. It is better to be prepared for when the emergencies happen. I’d say a good goal would be an E-fund with 3-6 months of household expenses. We have 9 savings accounts we use to save for emergencies and expenses we know will happen – car repairs, new car, new computer, medical bills, baby related, purchases, vacation, etc. We don’t even touch our E-fund anymore for most emergencies. I) What system do you think would work best for you?

10. Increase Your Income: Seeking a raise is a good place to start. Getting a second job part-time is a good idea too. If married perhaps the spouse who isn’t the main bread winner could get a part-time job making $1000-2000 per month. Or what about having a yard sale? Hopefully this extra income will lead to you paying off your debts sooner. Your income is your greatest asset. Time to stop giving other people portions of it through interest and fees! J) What ways could you earn extra income?

11. Set Financial Goals: Goals are the fuel that propel you through the slow days of debt repayment. Hey, the process will get hard and it will seem to drag on at points. You’ll want to quit and give up. You’ll start to think that your old way of living wasn’t so bad after all. These are the days you need to look at your goals and remind yourself of why you are making the decisions you are making. Make sure your goals are SMART – Specific, Measurable, Attainable, Realistic, Time specific. K) What goals do you want to establish for 2012? What are your long term goals over the next 5-10 years?

12. Stop Making Excuses: Sometimes, not always, we make excuses. I would get out of debt but …

Right now you have a perfect opportunity to change your life and create a new financial identity. Accomplishing goals always feels great. Imagine how you would feel if you paid off all your debt and didn’t owe any money to anyone! You are on the right road to change your family tree! L) Are you ready to make the changes necessary to get out of debt?


Hopefully this was helpful.

Your thoughts?

Thanks for the reply!

I think as far as your list I'm in a pretty good place.

1. Spend less than you make

I'm all good there. Right now, we have a paltry but consistent $200 or so left at the end of the month to put towards debt paydown and eventually savings .. someday investment.

2. Educate yourself

I've actually found alot of great information at Motley Fool and Investopedia. I have read Dave Ramsey's books as well as a number of other, similar personal finance books.

Personally, as an atheist, Financial Peace is a bit cloyingly religious - but I imagine for those so inclined it lends an extra layer of comfort. I've been looking for a personal finance group, and I'm actually thinking of starting one in my area, running it out of the library.

3. Motivate yourself

I would say I'm considerably motivated. I've been very, very poor (like, living in a car poor) and I definitely don't ever want that for my kids. In addition, I am watching my parents have to work in their 70's in jobs that are nigh unto physically impossible for them - and the attendent injuries and suffering that is going with that. It's pretty good motivation.

As for my husband? Not so much help. He grew up in the they buy-it-now, worry-about-it-later middle class. Fortunately, he has basically given me entire control over our finances, even down to I give him a "spending" allowance and he doesn't carry credit cards or atm cards.

4. Organize Yourself

I use Mint which is a great tool and motivator. I love the iphone app that shows your cashflow for the month. It's an easy way to show my husband, see- we really don't have enough for that.

I also use a number of excel calculators to help make decisions about what to do with extra money - such as which debts to paydown.

5. Choose a Method

I'm in the pay off my smaller debts first - which mostly aligns with the highest interest method.

6. Cut expenses

Could we cut more - probably yes, but I'd resent it alot. We've pretty much cut everything that didn't provide significant value to us. No cable, very basic phone service, replaced the second car with an inexpensive scooter, do most maintenance ourselves.

We do get high speed internet because it allows me to work at home, which saves money since I don't have to take off work when something needs to be done during the workday. We also use skype for keeping in touch with long-distance family members and use a VOIP phone service which is much less money.

We also do go out to eat about twice per month, but I've budgeted in for it, and we use it as a special time to enjoy food that is difficult for home cooking.

7. Spouses get on same page

My husband, while lacking in day-to-day motivation is definitely on board. So much so that he's basically put me entirely in charge of the money so he can't spend it all.

8. Get an accountability partner or coach

Not so much on this one. That's what I'm hoping for with this journal.

9. Emergency Fund

I'm about half way there - not bad since I started in May.
Of course, mine is for emergencies only. I have a seperate savings account designated for car maintenance, home maintenance and appliance replacement.

10. Raise your income

I've moved from part-time work to full-time (mostly because having a shorter commute allows me to do this.) I'm also looking for some side hustles for extra cash.

11. Get long term goals

I'm actually planning on putting up a post later today with my medium and long term goals.

12. Stop Making Excuses

I would say I don't. I know I haven't always made the best choices, but I'm trying to change my decision making going foward, instead of just wallowing in misery about regrets. I've defintely made some positive changes (saving for the future, changing jobs to get better health insurance, budgeting) but I know we won't really be able to move foward until we get out from under our debt.

Looks like you are right on track! Keep up the good work Ms. Kitty!

Starting a PF group out of the local library sounds like a fantastic idea.

2. Educate yourself
Regarding Financial Peace – Yes, I can see where that might not appeal from a religious standpoint. Lot’s of the principles are still good. I’m going to check out Motley Fool and Investopedia.

3. Motivate yourself
I had a friend who lived out of a car for a year. Seriously difficult situation I wouldn’t wish on anyone. I’m sorry about your parents having to work into their 70’s. Yes, my parents will probably be in similar situations.

That’s good that you are the one working on the finances. We use adult allowances as well.

4. Organize Yourself
Mint.com is a great tool! Way to go!

6. Cut expenses
Sounds like you got a handle on things. Good job!

9. Emergency Fund & 10. Raise your income
Sounds like you have a plan for your E-fund & possibly raising your income.

Getting out of debt will be fantastic. Seems like you are on your way becoming debt free! Keep moving forward!

Today - it's all about the goals.

To recap, my short term goals (next 6 months)

1. Pay off approx 2700 on my citi card left from an unexpected medical bill (ah, to be young and not fully understand how insurance companies will screw you and your credit). Right now, I split the cash at the end of the month between paying on this card and putting funds in my emergency savings, since this card is at 21%(!)

2. Pay off the 750 I owe my inlaws for money borrowed for my son. Although no interest on this, I sincerely appreciate the number of times my parents and inlaws have rescued us financially and I never want them to think I take it for granted, so I try to make paying them back a priority always, and keep everything in writing so that no hard feelings can arise.

My mid-range goals (next 1 - 3 years):

1. Have a fully funded emergency fund ($1000)

2. Have a fully funded expected maintenance fund ($1000)*

3. Pay off student loans of approx 13,800

*Our car is getting quite old, so this may have to be raised.

Long term goals (3-5 years)
Otherwise known as where I want to be in 5 years.

1. Have no credit debt
2. Have no personal debt
3. Have no student loan debt
4. Have no car payment (ie, replace our car with one bought in cash)
5. Get rid of PMI (currently I am $37,000 away)

I know that some people may feel that with an 11 year old, I should be worrying more about his college fund, but I think that given the current method of paying for college, you are better having high cash flow than a big savings account. So my goal is to have maximum cash flow without sacrificing my family's happiness (ie, no working 7 days a week never being home).

The above 5 items could mean (depending on the car payment) as much as an additional $1000 per month of free cash. That could pay for $12000 per year of college, enough today to pay for in state tuition at quality state college in my locale. Way more than enough to pay for community college + books. This doesn't even include any gains in wages that might occur for us in the next 7 years.

I've listed my background and my goals. Now comes the dreaded balance sheet - so I can see how I am doing on my goals. I plan on posting this bi-weekly to coincide with my paychecks.

8/13 balance sheet

Assets - Total 265,564

cash accounts
Checking - $840
Maintenance Savings - $75
Emergency fund - $165
Total $1080

investment accounts
Prosper (p2p lending)- $1069
Lending Club (p2p lending) - $26
Etrade (restricted stock grants) - $1408
Sharebuilder (dividend reinvestment acct) - $76
Fidelity 401k - $12,363
Kidlet 1 529k - $915
Kidlet 2 529k - $877
Total $16734

physical assets
Car (2002 subcompact) - $2500 - low end Kelly Blue Book
Scooter(2007 chinese knockoff) - $250 - craigslist average
House - $245,000 (average of zillow and trulia estimates)
Total $247,750

Liabilities - Total $258,447

Credit Cards
Citicard - $2730 (carrying balance)
Discover - $4087 (paid off each month)
Chase - $150 (paid off each month)
Total $6967


fixed rate loans
Mortgage - $236,548 (@5%, 332 months left)
Student loan 1 - $8233 (@6.4%, 82 months left)
Student loan 2 - $5960 (@5.2%, 82 months left)
personal loan from family - $739 @ 0%
Total $251,480

Net worth - $7117

Not impressive, but doing OK for just starting on trying to get out of debt. It's also nice to see my actions so far this year while just dabbling have done some good - in January I did this same exercise but my net worth was over 20k in the red.

8/27 balance sheet

Assets - Total $ 263,918.42

cash accounts
Checking - $ 1486.35
Maintenance Savings - $ 76.49
Emergency fund - $ 175.28
Total $ 1738.12

investment accounts
Prosper (p2p lending)- $ 1074.03
Lending Club (p2p lending) - $ 26.11
Etrade (restricted stock grants) - $ 1429.25
Sharebuilder (dividend reinvestment acct) - $ 75.12
Fidelity 401k - $ 12,545.28
Kidlet 1 529k - $ 919.18
Kidlet 2 529k - $ 881.33
Total $ 16,950.30

physical assets
Car (2002 subcompact) - $2500 - low end Kelly Blue Book
Scooter(2007 chinese knockoff) - $250 - craigslist average
House - $242,480 (average of zillow and trulia estimates)
Total $ 245,230

Liabilities - Total $ 258,905.89

Credit Cards
Citicard - $ 2758.35 (carrying balance)
Discover - $ 4425.92 (paid off each month)
Chase - $ 393.68 (paid off each month)
Total $ 7577.95


fixed rate loans
Mortgage - $236,548 (@5%, 332 months left)
Student loan 1 - $ 8244.57 (@6.4%, 82 months left)
Student loan 2 - $ 5969.87 (@5.2%, 82 months left)
personal loan from family - $ 565.50 @ 0%
Total $ 251,327.94

Net worth - $ 5012.53

9/11 balance sheet

Assets - Total $ 257,764.40

cash accounts
Checking - $ 686.89
Maintenance Savings - $ 185.28
Emergency fund - $ 101.55
Total $ 973.72

investment accounts
Prosper (p2p lending)- $ 1056.98
Lending Club (p2p lending) - $ 26.38
Etrade (restricted stock grants) - $ 1798.15
Sharebuilder (dividend reinvestment acct) - $ 74.23
Fidelity 401k - $ 13,031.09
Kidlet 1 529k - $ 927.93
Kidlet 2 529k - $ 893.92
Total $ 17,808.68

physical assets
Car (2002 subcompact) - $2500 - low end Kelly Blue Book
Scooter(2007 chinese knockoff) - $ 306 - Priceonomics est.
House - $ 236,176 - average of zillow and trulia estimates
Total $ 238,982.00

Liabilities - Total $ 259.695.33

Credit Cards
Citicard - $ 2767.30 (carrying balance)
Discover - $5804.74 (sadly it looks like I will be carrying part of this over)
Chase - $ 422.12 (paid off each month)
Total $ 8994.16


fixed rate loans
Mortgage - $236,216.41 (@5%, 331 months left)
Student loan 1 - $ 5943.29 (@6.4%, 81 months left)
Student loan 2 - $ 8202.65 (@5.2%, 81 months left)
personal loan from family - $ 565.50 @ 0%
Total $ 250, 701.17

Net worth - $ -1930.93

Some notes from this month:
1) Had to have 7 trees taken down due to immediate falling hazard thanks to drought = $1100
2) Back to school with 2 kids – required supplies + fees ONLY = $622
3) Yet more car repair fun – car was hit while parked by an uninsured driver. Our insurance covered it, but we had to pay our $1000 deductible first - $1000
4) Took advantage of tax holiday to buy husband a new suit with 2 extra pairs of pants and 5 new work shirts (his work clothing was worn and repeatedly patched- due to his irregular size thrift finds are extremely rare) - $362
5) Replaced outgrown school uniform items for kidlet 1 - still have plenty of hand me downs for kidlet 2. Luckily got some thrift store finds which really helps the money, shoes were bought new for both during tax holiday - $112
6) Had 3 loans at Prosper go to no longer collecting status (a charge off and 2 bankruptcies.) Also, 7 are now late. I'm still turning a profit, but it has gone from $23 / month to 7.85 / month. Which means I am no longer withdrawing interest income from the account.
7) Paid $300 for a half table share at local art fair. Sold 2 pieces for $250, so a small loss. But passed out 1500 business cards for my etsy store - hopefully that will get some sales from this. Still learning how to sell art and how to choose pieces for a market. What was selling (according to kidlet one who was scoping things out for me) were mostly landscapes. I only brought 2 landscapes, both of which sold. Most of my pieces are abstract botanicals (my personal favorite to paint) but are probably less general buyer friendly.
The negative will be erased in 3 days when our paychecks clear. But still… just not a good couple of months.

9/28 balance sheet (a little late this round – new job is awesome but a time suck)

Assets - Total $ 262010.73

cash accounts
Checking - $ 2561.22
Maintenance Savings - $ 0.00
Emergency fund - $ 151.55
Total $ 2712.77

investment accounts
Prosper (p2p lending)- $ 1015.93
Lending Club (p2p lending) - $ 26.57
Etrade (restricted stock grants) - $ 2896.80
Sharebuilder (dividend reinvestment acct) - $ 74.60
Fidelity 401k - $ 13313.92
Kidlet 1 529k - $ 937.47
Kidlet 2 529k - $ 905.67
Total $ 19170.96

physical assets
Car (2002 subcompact) - $2200 - low end Kelly Blue Book
Scooter(2007 chinese knockoff) - $ 247 - Priceonomics est.
House - $ 237680 average of zillow and trulia estimates
Total $ 240127

Liabilities - Total $ 257885.92

Credit Cards
Citicard - $ 2812.51 (carrying balance)
Discover - $ 4181.03 (sadly it looks like I will be carrying part of this over)
Chase - $ 97.41 (paid off each month)
Total $ 7090.95


fixed rate loans
Mortgage - $ 236216.41 (@5%, 331 months left)
Student loan 1 - $ 5961.36 (@6.4%, 81 months left)
Student loan 2 - $ 8223.72 (@5.2%, 81 months left)
personal loan from family - $ 393.48 @ 0%
Total $ 250794.97

Net worth - $ 4124.81

A much better couple of weeks. All income, almost no expenses outside of groceries.

Way to go on the positive net worth! Keep up the good work!

Thanks Eagle. It was a pretty bad month money wise - I can't say I feel like I made bad decisions during the month, but our already drained efund just couldn't keep up with unexpected stuff (school fees doubling, dead trees, car issues).

Luckily, with my new job, my paychecks should jump a few hundred a month and that is going to majorly help out!