Forum Index
»
Off-Topic
Am I a financial disaster?
![[Post New]](/jforum/templates/default/images/icon_minipost_new.gif){kind=icon}
Anonymous
|
obviously this is TMI for all of my close friends so I need anonymous help!
18200 monthly HHI after deductions (maxing out 401k) 5200 mortgage with home equity loan from addition to house 3300 nanny (including employer taxes and payroll service) 1300 monthly tuition for DD1 (dd2 still baby) 1000 utilities (including housecleaner, cell phones, cable, etc) 1300 student loan payments 550 529 contributions 750 car payment (this is admittedly really huge -- DH treated himself to nice car. other car paid off) 150 biweekly weekend babysitting 150 parking 200 lawn care 2300 credit card bill (groceries, gym memberships, restaurants, gifts, clothes, diapers, formula, entertainment, any merchandise) 800 cash spending money (400 each per month for DH and Ime most things go on the credit card, which we pay in full every month but do it that way cause we like to get points and use them.) that leaves 1200 for savings every month -- not even 10% of after tax HHI. Ugh. Embarrassing. And this doesn't even account for one-time annual or semi-annual expenses, like auto insurance, which we just take out of savings. We have 50k in savings as our liquid emergency fund, but I feel like we should have more, and I feel like we should be accumulating it at a faster rate. We have some investments other than retirement, but not too much. We have no consumer debt. besides the hefty car payment, what are we doing wrong? Is the 2300 credit card bill really bad? Please don't be too mean. I feel bad enough already. |
MamaLlama
Member Offline
Member Offline
|
Oh, honey. If we were having a financial disasters contest, I am quite sure I would beat you. The prescription for solving these things, though, is the same, for the most part. Get out of as much debt as you can (meaning, yes, if you get a bonus this year, think about taking out the car loan). Cut expenses (push hair cuts back a week; are you eating the groceries or throwing half of them out like we do; can you call up your cable guy and get a better deal, etc.) I also noticed you are doing 529 saving (as do we). If you can get yourself to really look at that issue, some experts recommend saving for yourself first even over college. I just, from a mom hormone thing, can't even look at that, so our retirement savings takes the hit. Little cuts in expenses, though, do add up, and every little bit helps.
We have just come out of a cycle where everything seemed like it would go up and up and up forever, including our incomes. The wake up call here was that old adage about saving for a rainy day is true. Some people knew that; many (including me) did not fully take it on board. Hopefully you are young and have plenty of time to make adjustments that are appropriate. I am told I am still young enough, although, in my 40s, I don't feel so young. Good luck OP. |
Anonymous
|
I wouldn't say disaster.
What you have in savings will not cover you should there be a disaster or a a stint of unemployment. We had fifty thousand in savings last year, and my husband lost his job. It was 8 months before he found another job, and during that time we had an emergency and we had to use more than half of that money for something else. It has been really hard for us since then, because DH has gone back to work, but a lower paying job. I was let go from my job, which is alright since I only made enough to pay for daycare anyway. OP I think there are things you can cut back on. 150 for biweekly babysitting doesn't cover what you are spending while you are out, does it? Unless you are going out because you have business commitments, it is a great place to start to cut back. Date nights are great, but you can have a lovely picnic on the living room floor after the kids are in bed. You can also see about exchanging child care with friends. Lawn care and the housekeeper would be a place I would start to cut. Cut back on hair appointments and dry cleaning. Wear things more than once, or twice, before taking them to the cleaner. Keep your heat low, and your AC high, and cut back to basic cable. Stop eating out. It is bad for your waistline and your wallet. Only buy clothes when you need them, or from thrift stores. Especially for the kids, they don't care if their clothes were worn before. Plus you would be surprised how many clothes still have the original tags on them. good luck. |
Anonymous
|
I found this budget formula to be very helpful to gauge how I’m doing (and btw I learned about it this listserv!). Try working your money into this budget and see how you fare.
Have a 60-10-10-10-10 budget. 60% for household/bills/food etc. 10% retirement. 10% long term savings. 10% fun money. 10% short-term savings. I can’t sleep so I plugged in your numbers quickly and it looks like you are spending about 82% of your post-401k salary on household/bills/food etc (and with your salary you still should sock away an additional 10% more in IRAs). Give yourself a challenge to see how much closer you can get it to 60% - cheaper preschool? $200 a month in lawn care? Eat out at less expensive restaurants? And could you convince your husband to sell that car? That's a lot of dough when you have so many other monthly expenses. And I actually don't think the $2300 credit card bill is terrible - my family makes way less than you and we budget $2000 for food, diapers, eating out, trips to Target which is a lot but I feel comfortable that as long as we meet our 60/10/10/10/10 budget it's okay. ou may not be able to get completely to 60% but even if you can get it down to 75% and shift that found 7% to savings, that’s another $1270 you can put into your savings! Good luck! |
Anonymous
|
PP, that is helpful. I definitely want to get rid of the lawn care and perhaps cut back on the housekeeper. And can also do away with the date nights.
(although, lawn care, housekeeper and date nights are probably the only things saving my marriage.....and you know what they say --- it's cheaper than a divorce!) 
|
Anonymous
|
Why is your babysitting cost $150? How many hours is that for?
I don't agree with the suggestion to eliminate it. For me, it's a necessity. When will you be able to cut back on the nanny? Will you be able to do that as your children get older? |
Anonymous
|
150 is for 10 hours -- two saturday nights at 4 hours each, and one weeknight a month for two hours (that's not a date -- usually it's a night when we both get stuck at work and have to pay the nanny to stay. It happens about once a month, if that.)
I can get rid of the nanny in two years, when my youngest starts preschool. At that point I will probably sign them up for aftercare at their school, or possibly adjust my work schedule so that I can go in really early and get them at 3:30 (the preschool offers full day.) I could get rid of the nanny now, if I had to. I could bring the baby to daycare in my office (1500/month) and sign the toddler up for aftercare at his school (I think it's a few hundred a month.) That would save me 1300 a month. But, I tried it already. I lasted three months. It was really hard. My husband works a ton so pick up and drop off were all on me. Going back to the nanny was so fabulous -- a luxury, I know. I guess it's an option, though. I would rather do that than switch preschools, because we believe the toddler is at a great place and can continue there for many years. |
MamaLlama
Member Offline
Member Offline
| Do you think you could find a nanny share? That might be a way to cut the expense but keeep your nanny. Although it won't be the same thing as having your person exclusively, it should still be much more convenient than the day care route. Full disclaimer: I've never done a share, although I fantasize all the time about a neighbor asking us to share our nanny with them. |
Anonymous
| I guess I'm not quite getting it. If you count the max of 2 401Ks and the $1200 a month you're saving, you're well over 10% savings. Those financial types want you to have 3-6 months of liquid savings on hand in case of emergency, which you kind of do. What's the problem? What's a "good" or "target" rate of savings? I guess I ask this because we have similar spending patterns as OP and similar income and, between 401K and savings, manage 10-12% of gross income. Is that low? |
Anonymous
|
Another formula I just saw in the USAA magazine and it is from Jean Chatzky:
35% -- Housing, includes mortgage, utilities, insurance, maintenance 15% -- Transportation, includes car loan, gas, insurance, gas, etc. 10% -- Savings, non-negotiable 25% -- Life, everything else, food, fun, clothing, etc. 15% -- Other debt repayment I guess one point which I find confusing, does your 401K count towards the 10% savings? Or is the 10% in savings additional? |
Anonymous
|
OP, you make about twice as much as our famly because my DH is going to stay at home (not really by choice or forever, but because his job is in a dying industry and I'm sure you can imagine what that means in this economy).
To me the elephants in your room include the car payment (obviously, you know that one) and the credit card PLUS the 800 in cash. I think those rather vague posts are where you might be able to scale back. Like other posters, we were just gleefully buying expensive food and throwing it away (leftovers, things we didn't use, etc) and also thought nothing of dropping 150 on dinner a few times a month. Of course, we did not have children yet at the time. The lawncare sounds like something I'd scale back on, but that's just me -- I enjoy being out there in the garden but if you detest it or you and DH are fighting about it, that might not be appropriate (unless you are stresed enough about finances that you feel it might outweigh the PITA of doing that sort of thing yourself). I don't believe that I would give up on date night, but agree that the babysitter might be scaled back. I feel sure that someone would exchange childcare with you -- we are looking to do exactly that with our friends (when baby gets here, that is). But you know, that is part of the problem of living away from extended family. My cousins just send their kids to grandmas on date night -- doesn't sound like an option for you. but hopefully you could get into a childcare share type of situation with another trusted family. A final thought is that it does sound like at least some of your expenses are temporary. As such, you might either make some adjustments to other controllable expenditures now and appease yourself by knowing they are temporary, or you could tough it out, knowing that you will be able to put more away in just a few years when the daycare and car payment expenses go away. I also agree with other posters on the 529. With a baby on the way, we were obviously also considering this. But we have a few more pressing short term goals that are important to the family (like getting to a year's worth of saved living expenses). So we will still do 529's but at a considerably lower amount. It really is the practical thing to do, even if one feels guilty about it. Good luck to you! |
Anonymous
|
OK, maybe I am the financial mess, because it doesn't sound like you are that bad. Are you contributing to retirement? That is the one hole I see.
Keep in mind you are contributing $550 to 529, and that is an investment. If you are also contributing to retirement AND have 10 percent savings, that is good. If you are not contributing to retirement, that is not god. Your credit card bill isn't obnoxious given you include groceries. That could easily be half, depending on what you buy. You could probably look at what you buy and cut back a little. For me, to cut back I postpone haircuts until I really need them, dye my own hair, try to use sales for groceries and stock up, do all of my own housework and lawnwork, use birthdays and X-mas for clothes (just tell my husband his gift to me is I go shopping then I only buy things I really need that are on sale). I also find simply putting off purchases helps me better think through if we really need it. We also rarely go out to eat or do take-out and I focus mainly on free activities for my son (he's 2.5 so it's easy at this point). My biggest problem is spending on my son. So I stake-out yard sales and used book sales when I feel the need to buy him something "new" He has quite the library at home of books that cost me 25 to 50 cents. |
Anonymous
|
Wait. Why do you have a full-time nanny and tuition? Or is the tuition a real school (versus daycare/preschool).
|
Anonymous
| Really, from a financial perspective, with your income, you are way underinvesting in your retirement. You will not save nearly enough to enjoy your current lifestyle after retirement. I know that school etc. is important, but any financial advisor will tell you that your retirement is more important than the kids' school money. There are always loans for that that the kid (or you if you have more money later) can pay off, but you will only end up burdening your children in later life if you have to depend on them for support. Focus more on retirement. $15,500 in a 401k isn't enough. |
Anonymous
| Oh, and your goal should be a 9 month cash reserve also.....don't know if you have that.... |