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 Post subject: I need advice.
PostPosted: Wed Dec 26, 2012 8:25 am 

Joined: Wed Dec 26, 2012 8:11 am
Posts: 10
My wife and I make a decent amount annually, $130k combined. Cashflow is a serious issue. We truly live paycheck to paycheck and have maybe $100 in our accounts at the end of the month. Our monthly cashflow is as follows.

net income $6950 (after taxes, deductions, etc.)
cable $50
electric $170
mortgage $1700
insurance $150
car pmts. $970
student loans $519
cable $70
daycare $1840
cell phone $160
gas $250

This leaves us with about $1000 for any extras like car maintenance, etc. food and diapers for two kids both under 2 years old.. that doesn't leave much to tackle debt/save.
Should we use our tax return and our $6k in savings to pay off one of the student loans which will free up $145/month? Should we try and pay a car down and get rid of it somehow? Should we lower our retirement contributions? My wife does $100 per check, I do 10%... If we have to just accept being tight what little we have... what should we do with it? save? pay down car loan? studnet loans? I'm open to suggestions. Thanks!


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 8:43 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
most people, when they can't afford something, don't buy it.

make cuts. You don't need cable. You don't need cable (you have it on there twice). You don't need two vehicles. You don't need a $160 cell phone bill. You may not even need to save for retirement.

So, what is most important to you? Start there, and then make cuts to crap you don't need, nor want.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 8:47 am 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 307
Location: Atlanta, Georgia
What are your interest rates on your student loans and car loans? Normally, I would say the smartest is to pay down the highest rate debt first, but if your priority is cash flow, which it sounds like it is, then tackling the lowest balance debt first may be your better choice because, as you noted, once it's paid off, that frees up the amount of that monthly payment to be used for other things.

A few other things to consider: Why do you have two cable payments? I'm hoping your cable/internet combined is actually under $100. Why is your cell phone bill so high? I've got an iPhone with unlimited data, and mine is still less than half of your bill. It's a bummer that daycare eats up so much of your income, but I hear the same thing again and again from all my work friends who have little kids, so I guess it is what it is.

Finally, I wonder if you and/or your wife are willing to trade in one (or two) of your cars for something less expensive. Paying $970 per month for two cars is outrageously high, sounds like you are overleveraged on the cars.


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 8:58 am 

Joined: Wed Dec 26, 2012 8:11 am
Posts: 10
LeRainDrop wrote:
What are your interest rates on your student loans and car loans? Normally, I would say the smartest is to pay down the highest rate debt first, but if your priority is cash flow, which it sounds like it is, then tackling the lowest balance debt first may be your better choice because, as you noted, once it's paid off, that frees up the amount of that monthly payment to be used for other things.

A few other things to consider: Why do you have two cable payments? I'm hoping your cable/internet combined is actually under $100. Why is your cell phone bill so high? I've got an iPhone with unlimited data, and mine is still less than half of your bill. It's a bummer that daycare eats up so much of your income, but I hear the same thing again and again from all my work friends who have little kids, so I guess it is what it is.

Finally, I wonder if you and/or your wife are willing to trade in one (or two) of your cars for something less expensive. Paying $970 per month for two cars is outrageously high, sounds like you are overleveraged on the cars.



Thank you for your reply. one is internet the other is DirecTV. internet is $50. We are leveraged on the cars, we made stupid purchases when I had a higher paying job... The problem is we are upside down as they are both new vehicles. purchased in 2011. My wifes car is $590 per month. We could get what we can for her car and roll the negative equity into a much cheaper car. We're probably $6k or so upside down on hers. and about the same on mine.


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 8:59 am 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
Bichon Frise wrote:
most people, when they can't afford something, don't buy it.


I think in America the opposite is true: most people, when they can't afford something, buy it on credit.

Anyway, I agree that $160 is too much for cellphones, even if (as I assume) this refers to two cell phone plans, one for you and one for your wife. We have evolved from not needing cell phones at all to "needing" them and then "needing" smart phones with data plans. Unless you actually need a smart phone for work (in which case your employer should be paying for it), nobody actually needs a smart phone and data plan: it's great to have but you can survive just fine without it. I pay $25/month for my cellphone, which is actually a smart phone but I use it as a dumb phone; if I want to download my email or surf the web I find a WiFi hotspot.

Also agree on the cars: that's a big expense. You may not be able to get by with just one car if you both commute to work in different directions, but you could probably get by fine with cheaper cars. A Honda Civic with 100,000 miles on it is less than halfway through its expected lifetime and wouldn't cost much to buy; it could last you six or seven years with few expenses other than regular maintenance. With two kids you don't need a big car: I'm friends with a family of four who drive a Honda Fit; they comfortably fit themselves, their kids, four bikes, and camping gear for a week in that little car (two bikes go on the roof and two go on the back).


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 8:59 am 

Joined: Wed Dec 26, 2012 8:11 am
Posts: 10
Our interest rates are 2.49% on the cars... we have 800+ credit scores. student loans have been consolidated and rates are from 4-6%.


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 9:01 am 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
jgoldenmba wrote:
The problem is we are upside down as they are both new vehicles. purchased in 2011. My wifes car is $590 per month. We could get what we can for her car and roll the negative equity into a much cheaper car.


Isn't all car ownership upside down? I can't think of any case where a car is worth more (or even the same) as what you paid for it, except for a few antiques.


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 9:02 am 

Joined: Wed Dec 26, 2012 8:11 am
Posts: 10
brad wrote:
Bichon Frise wrote:
most people, when they can't afford something, don't buy it.


I think in America the opposite is true: most people, when they can't afford something, buy it on credit.

Anyway, I agree that $160 is too much for cellphones, even if (as I assume) this refers to two cell phone plans, one for you and one for your wife. We have evolved from not needing cell phones at all to "needing" them and then "needing" smart phones with data plans. Unless you actually need a smart phone for work (in which case your employer should be paying for it), nobody actually needs a smart phone and data plan: it's great to have but you can survive just fine without it. I pay $25/month for my cellphone, which is actually a smart phone but I use it as a dumb phone; if I want to download my email or surf the web I find a WiFi hotspot.

Also agree on the cars: that's a big expense. You may not be able to get by with just one car if you both commute to work in different directions, but you could probably get by fine with cheaper cars. A Honda Civic with 100,000 miles on it is less than halfway through its expected lifetime and wouldn't cost much to buy; it could last you six or seven years with few expenses other than regular maintenance. With two kids you don't need a big car: I'm friends with a family of four who drive a Honda Fit; they comfortably fit themselves, their kids, four bikes, and camping gear for a week in that little car (two bikes go on the roof and two go on the back).


We have Verizon, each with a smartphone with a data plan. How do you have a smart phone without the data? who is your carrier?


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 9:04 am 

Joined: Wed Dec 26, 2012 8:11 am
Posts: 10
brad wrote:
jgoldenmba wrote:
The problem is we are upside down as they are both new vehicles. purchased in 2011. My wifes car is $590 per month. We could get what we can for her car and roll the negative equity into a much cheaper car.


Isn't all car ownership upside down? I can't think of any case where a car is worth more (or even the same) as what you paid for it, except for a few antiques.


Brad, I agree but what can I do about it? I'm open to the used Civic idea but banks won't lend $6k over value for a used vehicle with 100K miles on it. And I don't have the cash to satisfy the difference.


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 9:14 am 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
jgoldenmba wrote:
We have Verizon, each with a smartphone with a data plan. How do you have a smart phone without the data? who is your carrier?


I'm in Canada; here it's possible to have some smartphones without data plans, although I don't think it works for the iPhone. I have an antique smart phone (Nokia E71) that I bought unlocked about 4 or 5 years ago, and I set it up so it doesn't try to download anything unless I'm on WiFi. And I turned off the GPS, which requires cell data. Why bother with a smartphone if I'm disabling all those features? Because 1) I like having a keyboard I can type on instead of trying to type letters on a numeric keypad, and 2) I like being able to access email and web occasionally via WiFi. But I don't need data all the time, it would be nice to have but I can live without it.


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 9:16 am 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
jgoldenmba wrote:
Brad, I agree but what can I do about it? I'm open to the used Civic idea but banks won't lend $6k over value for a used vehicle with 100K miles on it. And I don't have the cash to satisfy the difference.


[reply deleted as it didn't make sense!]


Last edited by brad on Wed Dec 26, 2012 9:18 am, edited 1 time in total.

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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 9:16 am 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 307
Location: Atlanta, Georgia
brad wrote:
Isn't all car ownership upside down? I can't think of any case where a car is worth more (or even the same) as what you paid for it, except for a few antiques.

Brad, I think being "upside down" on a car loan means that you OWE more than it's WORTH. If you pay cash for a running car, then you're not upside down. (But you're right that in almost every case, the car's value has gone down since the time of purchase.)


Last edited by LeRainDrop on Wed Dec 26, 2012 9:21 am, edited 2 times in total.

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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 9:19 am 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
LeRainDrop wrote:
Brad, I think being "upside down" on a car loan means that you OWE more than it's WORTH. If you pay cash for a running car, then you're not upside down. (But you're right that in almost every case, the car's value has gone down since the time of purchase.)


Yeah, I didn't really mean all car ownership, but rather all leveraged car ownership. I guess it depends on how much money you put down on the car.


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 9:28 am 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 307
Location: Atlanta, Georgia
I found this resource from the Kelley Blue Book website about options when upside down on a car loan: http://www.kbb.com/car-advice/articles/upside_down-on-a-loan/?r=30661769253527980


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 Post subject: Re: I need advice.
PostPosted: Wed Dec 26, 2012 12:20 pm 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1200
Good advice so far. I'm still trying to wrap my mind around $1800+ a month for daycare!!! Is there not a cheaper alternative?


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