Help me figure out how to better allocate our 300k income.

[Anonymous]

Plenty of us have two young children, two full time jobs and no housekeeper. GASP!!!!!

[Anonymous]

8:32 had some good advice for you, OP. I think you should check out a financial guy on the radio named Dave Ramsey whose main advice is that people should get out of debt and stay out of debt. You are not atypical but it is crazy to have $300K in HHI and be going into credit card debt. You need to cut down on your expenses. For me, the most obvious thing is to cut out the car payment and the housekeeper - don't buy that car at the end of your lease and buy a crappy beater for $2K. You also need to pay down that student loan debt so you have more cash flow every month. One way to do that is to temporarily stop putting money in your 401k. I know people will balk at that but in my opinion, you're crazy to save for retirement while going into credit card debt to do it. Save for retirement in a few years when you get out of this hole. Absolute number one thing you must is live within your means so you stop racking up more debt. Then cut your lifestyle and pay down those student loans so you'll have more cash flow every month. And PPs are right that child care expenses will go down once kids are older.

[Anonymous]

Someone may have asked this already but are you overpaying on student loans?

It's not worth it to overpay on student loans while going into cc debt. CC debt is the worst kind.

[Anonymous]

OP: I have a similar HHI but not hobbled by as huge of a mortgage. Be on the lookout for a broker who will do a no-cost refinance. You can get it lower than 4.2. We have refinanced 2x (both no cost) and our mortgage is now $2200/mo (on a $700k house we bought in 2004). It was more than $3000+ before refinancing.

Your child care costs aren't terrible for two kids, honestly. I pay $2200 for only one kid.

But we do not have student loans, car payments or CC debt. I would really work on that.

[Anonymous]

Great tips from the PP.

Be honest here: how much are you actually spending on food? You need to include every time you stop by chop't for a salad, every starbucks coffee, every pizza that you pick up on Friday night. Are you cooking meals from scratch or are you relying on a lot of pre-prepared/convenience food?

Believe me, I know that with 2 under 2, it is hard to do this, but this made a huge cost difference for us: we plan meals and shop weekly. If you have a schedule of what you are eating, it takes the thinking part out of making dinner and makes it less tempting to go for the prepared food/quick run to grocery store/takeout. We can easily drop $30-40 on one takeout meal (our kids are older and eat more), but $30-40 buys probably 3 really nice meals from scratch, even shopping at Whole Foods! We started meal planning when our 2nd was born (so we had a 3 yr old and a baby). It was hard at first, but we've now built up a repertoire of go-to meals. 2 cookbooks I would recommend are Fresh Food Fast (Martha stewart) and Robin Miller's Quick Fix Meals (which includes meal "kits" & morph recipes that are great for making ahead when you have more time & then quick on the weeknight).

Personally, I would find other ways to save before dropping the housecleaner. That's me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:per month:
mortgage - $4,200 (too much).
car - $500 (payment and insurance)
bills/misc. - $800
student loans - $1600
child care for 2 under 2 - $2800
parking - $250
housecleaning - $240
groceries/gas etc. eat up the rest.

It almost feels like no discretionary income, and we both have credit card debt because things feel tight. what can we do about our mortgage? when we bought, I was making more, and have since gone part time. we have only owned for 2 years. would it make any sense to sell?

Well, let me tell you what I did - you take from it what you will. I'll be crucified on this forum for saying this, but I was struggling a bit with cash flow (on the same income), largely because the "little things" had eaten away thousands a month.

First, I worked towards paying off the car - in my case that saved about $700 a month.
Then I ditched cable and went with hulu and netflix, at a cost of $15 bucks a month instead of closer to $120. That saved another $100.
I ditched our home land line - who uses it anymore - saved another $50 a month.
I refinanced our mortgage saving another $200 a month.
I successfully contested our property taxes, saved about $50 a month.
I upped our insurance deductibles on our car insurance - we are not poor and I don't particularly care whether my deductible is $250 or $500 or $1000 - to me car insurance should be for catastrophic loss - but the monthly outlay is quite different - this saved perhaps another $20 a month.
I got rid our housekeeper and decided to do it myself - $250 a month.
I got rid of our lawn service, saved another $250 a month there. (Yes I was being robbed)
I got a programmable thermostat for our house, saved maybe $20 to $40 a month (surprisingly effective actually).
I shopped our home owners insurance around and saved another $20 or $30 a month.
I negotiated with maintenance companies (i.e. heating and air) during their low season for a better rate for annual services. Cant remember what I saved, but it was something.
I swapped cars with my spouse who has the much longer commute - almost to baltimore - but had been driving the low-mpg car. Not sure how much diff that made but its something.

All told, I estimate I saved somewhere around $1,500 to $2,000 a month.

This is awesome, and along the lines of what I was looking for -- thank you. Yes, obviously, first steps are going to be eliminating the cc debt. The next step is student loans. We are stuck in the lease for a year but plan to buy a cheap car after. I can also start metro/busing it again.

[Anonymous]

OP, our income is half yours but maybe the tools are still helpful. We had cc debt, school tuition, and we just seemed to be getting deeper in debt...and yet on paper we didn't do or have anything that other people with our income have/do. We started using You Need a Budget (YNAB) and it has helped us so much. I feel like a cheesy infomercial here, but it helped us get out of debt and start living within our income. It is a budgeting tool that instead of budgeting once a month or quarter or whatever, you budget each dollar as it comes in - give it a job - and then every dollar is in a category. It has a smartphone ap, and so you look to see if you can go out to dinner. Money all done? No going out to dinner. Its like the cash envelope system, but for all your expenses.

[Anonymous]

we have similar experience to share as previous PP:
cut the cable
VOIP
no housekeeper or cleaning service
no lawn service
drive paid off/used cars
bus/metro
meal planning - crock pots are handy, pinterest is full of prep ahead and freeze recipes
if you receive bonuses - apply them to debt retirement - first credit cards and high interest consumer debt, then student loans. same goes for raises.
we joined a credit union, and last year refinanced house through the credit union - reduced monthly payment from about 3500 to 2600
Modest regional vacations - which are good with little ones anyway
drink the free coffee or bring your own
I continued to save for retirement while retiring debt. The biggest advantages in retirement saving are time and compound interest & I didn't want to miss out. I've had many disagree with me though.

Dave Ramsey is good advice. Also written in boom times so a little pie eyed now, but Smart Couples Finish Rich has good advice & Millionaire Next Door gives good insight on substance vs. style.

[Anonymous]

It's tough at that income especially if you bought your first decent house after 2000

[Anonymous]

I cannot highly enough recommend Dave Ramsey's 7 baby steps. You can check out his books at the library (free) or read a lot about them on his website (free). Absolutely great. He's an evangelical nut, but just ignore that portion and use his baby steps. They are simple, easy to follow, and provide a lot of support along the way. Really, go read his stuff now.

[Anonymous]

Very good advice above but I'm not sure you can refi at lower than 4.2% right now, OP, unless you go for an ARM. 30-year fixed rates are at 4.25% right now for loans above $417K which I assume yours is. Keep an eye out, though - there was a fairly big jump a couple of months ago and rates will hopefully come down.

[Anonymous]

Anonymous wrote:It's tough at that income especially if you bought your first decent house after 2000

will you stop already?

[Anonymous]

Thanks so much for all the great advice. I realize we make a great deal of money, we are just in a crunch right now because we bought the house too quickly and it was too expensive, and subsequently I reduced my hours and we had a second child within a year (unplanned, obviously), so we are in serious catch up mode. Got the apps, called around and reduced cable, phone bill, cancelled gym membership, etc., so I think we are on the right track. Strict no Starbucks policy, and no eating out (we never go out to dinner anymore but we both eat lunches out). Also, I extended my leave so we were without my paycheck for awhile. So now I have a plan to pull out of debt and start saving again.

[Anonymous]

Anonymous wrote:Thanks so much for all the great advice. I realize we make a great deal of money, we are just in a crunch right now because we bought the house too quickly and it was too expensive, and subsequently I reduced my hours and we had a second child within a year (unplanned, obviously), so we are in serious catch up mode. Got the apps, called around and reduced cable, phone bill, cancelled gym membership, etc., so I think we are on the right track. Strict no Starbucks policy, and no eating out (we never go out to dinner anymore but we both eat lunches out). Also, I extended my leave so we were without my paycheck for awhile. So now I have a plan to pull out of debt and start saving again.

Sounds great OP. Way to be proactive! Yes, I try to limit myself to one lunch out a week, it really adds up!!

[Anonymous]

Anonymous wrote:Thanks so much for all the great advice. I realize we make a great deal of money, we are just in a crunch right now because we bought the house too quickly and it was too expensive, and subsequently I reduced my hours and we had a second child within a year (unplanned, obviously), so we are in serious catch up mode. Got the apps, called around and reduced cable, phone bill, cancelled gym membership, etc., so I think we are on the right track. Strict no Starbucks policy, and no eating out (we never go out to dinner anymore but we both eat lunches out). Also, I extended my leave so we were without my paycheck for awhile. So now I have a plan to pull out of debt and start saving again.

What exactly did you say to cable and phone people to reduce your bills to them? This is something "they" always tell us to do, but I don't know how likely it is that I will be able to convince the rep to help.