HELP!!! Budgeting/Retirement/Planning

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Hi guys. I'm 31 years old and I still have no idea how to budget. It's a constant struggle. I really want to be able to retire one day and not have to live like my parents, pay check to paycheck while still in their late 50's. I've just stopped working because I'm on bed rest for my 2nd and last pregnancy. After that I'll be a stay at home mom for several years (I'm a teacher so it's not worth it to work and pay childcare). My husband makes good money but I have awful health (I have CVID, a lifelong costly condition) which guarantees I will always meet my out of pocked max for health care. We pay a babysitter to be with our son while I'm at doctor appts all month.  I'm really not sure how to work the copays into our budget or how to work playing off credit cards in our budget. My out of pocket max this year is $5 which I'm about to meet. Then we've having a baby in July so he'll reach his deductible ($1500) We owe about $22k (13% interest) in credit cards, and I have $20k in student loans (5% interest). I only pay the minimum on the student loan. We also spend an additional $300 a month in supplements alone which isn't factored into our budget right now. We have about $3k in savings too. I honestly don't know where to start. Neither of us had good examples for saving or budgeting growing up but we want to do better for ourselves and our sons.   This is our current budget with only my husband's income. 

Here is our current income.
<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}-->
Total Income $ 6,400.00
   
Credit Card ?
Health Care Payment 650
House $ 1,800.00
SRP $ 350.00
COX $ 55.00
Phone $ 75.00
Car Payments $ 570.00
Student Loan $ 140.00
House Gas $ 250.00
Car Gas $ 120.00
Home Care $ 50.00
DropCam 10
Home Warranty $ 65.00
Car Insurance $ 226.00
Cord Blood Banking $ 0.00
Food/House Expenses $ 500.00
Shopping/Entertainment $ 100.00
Gifts $ 40.00
Doctors ?
Prescription $ 40.00
Pool Stuff $ 75.00
Cleaning People $ 120.00
Yard guys $ 80.00
Babysitter $ 250.00
ADT $ 46.00
Home: $ 80.00
Pets $ 100.00
Prescriptions $ 40.00
Dental Payment 60
Total $ 5,892.00
Money Left $ 508.00



I'd really appreciate any advice. My husbands job doesn't have any kind of retirement plan so I know we need to start doing it on our own. 

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What is "SRP"?


1. stop spending soo much money on stuff. You'll get lots of input & criticism on that topic in coming posts.
2. use savings from #1 to pay off credit cards faster
3. when CCs are paid off then increase your retirement savings to 10%+

Theres no good reason 2 people making as much as you do should be having problems.


You can budget for your copays by looking at previous years doctor visit and then figuring copay costs for that # of visits. For example if you went to the doctor 10 times last year and 15 times the year before and your copays are $20 each then you might budget for $300 in copays.

Is your budget and income based on both incomes or just your husbands?

This is based on my husband's income alone. 

1. How's your credit? If you and your husband have good credit (740+), then I'd start looking at applying for credit cards with 0% introductory offers and do some balance transfers so you aren't paying 13% on your CC debt.

2.  How often do you have appointments and are you sure it isn't worth it to work? I'm sure you can answer this best, but if you're already paying $250/month for a baby sitter, why not work and pay a little more per month to send them do daycare? 

3.  $100/month for pets? Must be a big dog or an expensive pet.  We have two toy poodles and the only way I'm spending $100/month is if they're eating gourmet meals.  We wash (groom) them ourselves. 

4.  Are you and your husband fairly safe drivers and can you risk a higher deductible to lower your insurance? $226 sounds expensive for a car that you're paying $570/month on. 

5.  Can you go without cable? Can you cut your own grass instead of paying a yard guy? You can get a lawn mower off CL for $80 and do it yourself.  Cleaning people? What are they cleaning?  Shopping and entertainment? You should cut that completely or significantly. 

6.   How old are your kids? I'm guessing they aren't school aged as of yet if you have a baby sitter. 

I could dissect this more, but I think that's enough to get this thread going.  You're doing the right thing by reaching out to get some assistance and guidance. 


 

SRP is our  electric  company. Our ac bill is through the roof in the summer. It gets to be around $550 for a couple months in the summer (we're in AZ). We know we have poor insulation in the house. We had a company come out and quote us on more insulation but it would be around $7k!

I have doctor appointments usually at least 3 days a week. Yes, it's not worth it to work. Plus, with having CVID, I can't even work full-time. 

Our credit is good (750+). Great idea looking at 0% apr credit cards. 

We have 3 cats and 1 dog. Our dog has spinal issues so he has insurance to help with the cost. The insurance is $45/month but it's great insurance and completely worth it every year. 

The insurance is for our 2 cars, home, and my wedding ring. Both  cars are leased. 

We don't have cable. We do pay for internet (my husband works from home most of the time), Hulu, and Netflix. 

I'm  on bed rest that's why we have cleaning people to help take some of the burden off my husband.

You're right about entertainment, we can cut that down. 

Yes, our son is only 3 so he's not in school yet. 

I really appreciate the advice you guys. Thanks for not being mean about anything. We're just trying to do better. 

 

Jessie4us said:   SRP is our  electric  company. Our ac bill is through the roof in the summer. It gets to be around $550 for a couple months in the summer (we're in AZ). We know we have poor insulation in the house. We had a company come out and quote us on more insulation but it would be around $7k!
  
Are you saying that a single month in the summer is $550?     Or that $550 is the total for 2 months?

Is the $350 your average monthly usage year round?    thats pretty high even in AZ.

How much would insulation cut your AC bills?   It may be very well worth spending $7k on.   Or you and your husband can buy some blown in insulation and rent a blower and fill your attic yourselves.


 

$550 a month for about 3 months in the summer. I'd say $350 is an average over the entire year. 

I never even thought about doing insulation ourselves. I'll have to research  that some more. Thanks for that idea!

Jessie4us said:   I have doctor appointments usually at least 3 days a week. 

 

  
Then you've got ~12 copays a month.   Your budget for copays should be cost of copay x 12 per month or more to add margin for additional appointments.   Right?



 

Car payments = $570

What cars? How much do you owe on them? Whats the interest rate?

The problem is that with our insurance we pay 100% until we reach our deductible, then we pay co-pays until we reach our out  of pocket max. So, the 100% can be difference at each  doctors appt. Does that make sense? 

We have two cars that are leases. My husband can write part of his car off for his side business expense. I owned my own business too until I had to stop working in December and I would use the car to drive to clients houses so I was able to write that off for my business too. I don't think there is interest on the leases. 

Jessie4us said:   I have doctor appointments usually at least 3 days a week. Yes, it's not worth it to work. Plus, with having CVID, I can't even work full-time. 

Our credit is good (750+). Great idea looking at 0% apr credit cards. 

We have 3 cats and 1 dog. Our dog has spinal issues so he has insurance to help with the cost. The insurance is $45/month but it's great insurance and completely worth it every year. 

The insurance is for our 2 cars, home, and my wedding ring. Both  cars are leased. 

We don't have cable. We do pay for internet (my husband works from home most of the time), Hulu, and Netflix. 

I'm  on bed rest that's why we have cleaning people to help take some of the burden off my husband.

You're right about entertainment, we can cut that down. 

Yes, our son is only 3 so he's not in school yet. 

I really appreciate the advice you guys. Thanks for not being mean about anything. We're just trying to do better. 

 

  
Got it.  That gives me, and everyone else a better understanding. 

So you're spending nearly $11k/year on cars. It's time to start looking at cash cars.  Even if you're paying every few months to have a mechanic wrench a thing or two, you'd be spending far less than what you're spending now.   When are your leases up on the cars?

You and your husband need to sit down and look at what you're willing to sacrifice cutting in order to get a grip on your finances.  You are one finance disaster away from being in significant financial trouble.  With you being pregnant and having a child already, that is a recipe for stress on a marriage. 

I'd cut all these :

Home Warranty $ 65.00
Pool Stuff $ 75.00
Cleaning People $ 120.00
Yard guys $ 80.00
ADT $ 46.00


Home warranties are mostly not worth the cost. Do you have a multi-year contract with ADT probably? Cancel as soon as your contract obligation is over. Switch to a self monitored system or pay $15 for simplisafe or just do without a security system.
Clean your own pool, clean your own house and mow your own lawn.

If you weren't in debt with no retirement and struggling to budget I wouldn't frown on hiring a maid and lawn guy but you can't afford those luxuries.

I know you're right. We have 2 years left on my husbands lease and 6 months left on mine (the bigger car that we drive the kids around in). 

jerosen said:   Car payments = $570

What cars? How much do you owe on them? Whats the interest rate?

  *Cringe* She said both cars are leased.

The cars need to go.

essie4us said:   ...
We have two cars that are leases. My husband can write part of his car off for his side business expense. I owned my own business too until I had to stop working in December and I would use the car to drive to clients houses so I was able to write that off for my business too. I don't think there is interest on the leases. 

  
side businesses?  What businesses?  How much income?
Do those side businesses require new cars and pay for those new cars?

When are the leases done?      Turn in the cars and buy beaters as soon as possible.

 

Thanks you guys You gave me a lot to think about. 

If we got rid of one of the  leases, do you know how bad the penalty would be for that?

Jessie4us said:   ..
If we got rid of one of the  leases, do you know how bad the penalty would be for that?

  
Actually that I'm not sure on and I didn't see you say the leases are 2 years and 6 months.  I actually meant that you should at least turn in the cars when the leases are done.

it may or may not make sense to turn them in now.     Check your lease contract for the terms.    I don't know typical terrms, but someone else here migh tknow how it usually works.   I don't know if its a good idea to cancel early.

 

$300 a month on supplements like vitamins? There's an excellent chance that those don't give any real benefit, and "benign" is one of the best things you can hope for them. Health and well-being are important, and I understand you have issues, but eating sensibly, moderate exercise, and seeking and following medical advice probably cover most issues for many people.

I've never paid for security services either, and would drop that. It sounds like someone's always home, and again, I am skeptical of the value of monitoring in any way. Is that what 'dropcam' is too?

Your CC debt interest is a killer, clearing that should be the top priority with your free cash.

Jessie4us said:   Thanks you guys You gave me a lot to think about. 

If we got rid of one of the  leases, do you know how bad the penalty would be for that?

  
First things first is to turn in the lease on the vehicle you ferry the kids around in when it's time.  Are you over on your mileage?  If so, you'll need to start preparing for that now because that will cost you $$$. 

You can easily find a beater car to ferry the kids around in for cheap.   If you're just going to appointments and back and running small errands, there's no need to get a car with a payment when you're not driving that often. 

I'd also recommend YNAB and / or Personal Capital so you can input all of your accounts to get an actual picture of your finances.  I'm sure your net worth is in the negative and that alone should be more than enough to motivate you and your husband to make some changes.   

The supplements help support my immune system and they do work as shown through blood tests. I also had cancer so it's really important I do everything I can to stay healthy. 



I'm off to another doctor's appointment. I'll check in with you guys later. 

Thanks  again. 


 

Alright.. some suggestions and feedback.

SRP $ 350.00
- This is astronomically high. Turn the thermostat UP to a higher temp in the summer. We live in AZ in a 1,900 square foor 2-story house. Our HIGHEST electrical bill in the summer has been $325. We also have a pool which takes electricity for the pump (as do you). We run 82 during the day and then 79 during the evening. In the winter months, our electricity bill is less than $100. Our house is built cheaply with no insulation like every modern house in AZ. Our average monthly electrical bill is $175.

COX $ 55.00
Dump the cable TV part of this. Go with the COX $39.99 internet only starter plan. We are heavy users and stream 100% of what we watch, no issues with their starter package.

Phone $ 75.00
Dump this completely. Move to FreedomPop. Sure, it isn't perfect, but it is FREE!

Car Payments $ 570.00
Don't lease cars. Once the leases are up, get rid of them and buy some older and affordable cars.

House Gas $ 250.00
Again, extremely high given your electricity usage. What is on gas? We have the hot water heater and furnace on gas, our average bill in AZ is $39 per month.

DropCam 10
Cheap, but it all adds up. Dump it.

Home Warranty $ 65.00
These rarely, if ever, make sense. Dump it.

Shopping/Entertainment $ 100.00
This can be cut back by 50%.

Gifts $ 40.00
Seems to be a lot given your situation. Cut it back 50%.

Pool Stuff $ 75.00
Do your own pool work. Chemicals are a couple hundred per year. Learn how to balance the chemicals yourself, backwash, etc and save a ton of money.

Cleaning People $ 120.00
No need for this. Dump it.

Yard guys $ 80.00
As mentioned by someone else, do your own yard work.

ADT $ 46.00
This is a luxury and not necessary.

Alright, based on these charges (most are easy to make, sans the cars) you are now saving at least $856 per month (could be more if you figure out the car situation)

Problem solved with very few sacrifices. Nice thing is, you are young and have time to recover financially (not sure of longevity issues with your medical issues, if any, however).

Could also dump the pet(s) and their costs. Yeah, it seems harsh, but you have a whole lot going on and an unhealthy dog with those costs is not helping.

There is so much wrong here that I don't even want to start...

Just.... stop everything you're doing.

Stop leasing Cars. You don't need the latest and greatest. In fact, you don't need 2 cars anymore if you're not working. Get 1 Clunker like a ~2008 Toyota Camry or something.
Stop paying so much for Cable/Internet/Utilities
Your Car insurance seems ridiculously high. I pay ~$600 for 6 months for 2 people with 2 cars. And thats with above average coverage.
Your utilities seems high. I know it's hot in Arizona, but you don't need to put your thermostat to 68 in the middle of summer days. How the hell do you have $250/m in gas? My gas bill is ~$26/m and that's with a gas stove and having to use the heater in winter.
Cleaning People? Lawn Workers? Baby Sitters? If you're not working this is an immediate cut
Cut stupid expenses like Home warranty.
You have a pool? Sounds like you're living above your means to be honest. I won't say sell your house and get a clunker house, but you've put yourself in a very ridiculous position given your extreme debt load.

Jessie4us said:   Hi guys. I'm 31 years old and I still have no idea how to budget. It's a constant struggle. I really want to be able to retire one day and not have to live like my parents, pay check to paycheck while still in their late 50's. I've just stopped working because I'm on bed rest for my 2nd and last pregnancy. After that I'll be a stay at home mom for several years (I'm a teacher so it's not worth it to work and pay childcare). My husband makes good money but I have awful health (I have CVID, a lifelong costly condition) which guarantees I will always meet my out of pocked max for health care. We pay a babysitter to be with our son while I'm at doctor appts all month.  I'm really not sure how to work the copays into our budget or how to work playing off credit cards in our budget. My out of pocket max this year is $5 which I'm about to meet. Then we've having a baby in July so he'll reach his deductible ($1500) We owe about $22k (13% interest) in credit cards, and I have $20k in student loans (5% interest). I only pay the minimum on the student loan. We also spend an additional $300 a month in supplements alone which isn't factored into our budget right now. We have about $3k in savings too. I honestly don't know where to start. Neither of us had good examples for saving or budgeting growing up but we want to do better for ourselves and our sons.   This is our current budget with only my husband's income. 

Here is our current income.
<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}-->

Total Income $ 6,400.00
   
Credit Card ?
Health Care Payment 650
House $ 1,800.00
SRP $ 350.00
COX $ 55.00
Phone $ 75.00
Car Payments $ 570.00
Student Loan $ 140.00
House Gas $ 250.00
Car Gas $ 120.00
Home Care $ 50.00
DropCam 10
Home Warranty $ 65.00
Car Insurance $ 226.00
Cord Blood Banking $ 0.00
Food/House Expenses $ 500.00
Shopping/Entertainment $ 100.00
Gifts $ 40.00
Doctors ?
Prescription $ 40.00
Pool Stuff $ 75.00
Cleaning People $ 120.00
Yard guys $ 80.00
Babysitter $ 250.00
ADT $ 46.00
Home: $ 80.00
Pets $ 100.00
Prescriptions $ 40.00
Dental Payment 60
Total $ 5,892.00
Money Left $ 508.00



I'd really appreciate any advice. My husbands job doesn't have any kind of retirement plan so I know we need to start doing it on our own. 

  
fully loaded up in every area you can spend lol ...

- Drop cap 10/month?  You don't need it ... just go with regular drop cam and drop the monthly service
- ADT for $45/month .... get rid of it .. and get simply safe or something similar - would be some cost up front, and then monthly you'll will cut it to half
- $65/month house Warranty?  Get rid of it ... those are very hard to collect, and they may not show up when you need them.  Just pay for stuff as they break
- $100/month for pets?   Is that an estimate or actual cost?  

Do you even have anything left over after paying credit cards? It's a "?" in your table and I don't think included in your total monthly spend as you've calculated so far. I surely hope that "?" isn't > $508.
This is going to sound harsh. You bought a home way outside your means. $1800 mortgage in AZ for a family of (soon-to-be) four is astronomical. (It may have been in your means with both incomes, but you're moving down to 1 income). Can you move to a cheaper neighborhood? This is like Scottsdale pricing. Sell and move and buy a house without a pool, with desert landscaping, smaller square footage (read cheaper AC costs too), and in a neighborhood where you ARE the Joneses don't need new leases on cars, home security, etc...Surely this can reduce your mortgage by 1/5 - 1/3.

Reality is you aren't going to sell your home - or move, but there are a lot of ways you can reduce your monthly spend. As mentioned:
- Dump security since you're always home
- Go for the lower Cox internet speed
- Look at 0% interest cards (I certainly hope you aren't growing those balances every month)
- Get out of your car leases ASAP
- Turn the AC up, and heat off...use the sun to your advantage and open shutters/blinds in the winter, keep them closed during summer, use ceiling fans and personal fans to stay cool. Consider going time-of-use with SRP, or their 3-6 plan, and put pool pump on a timer. DO NOT use AC during those hours, or pool pump, or water heater (if electric) or anything else that might consume a lot of energy. This might not be possible since you are home, but look into it, super-cool home prior to 3 O'clock, etc.
- Look into health savings plans and see if there is a way/vehicle for spending those dollars pre-tax.

Ideally you should be putting aside 15% - 20% of income into a retirement plan - higher end since job isn't contributing anything. If you're doing nothing now...that's going to be difficult to swallow. Start with 8-10% and increase it annually 2-3% so that you get there eventually. There are other forums that can give you details on where to invest and options (google: bogle head).

Best of luck! Sounds like you were dealt a tough card medically. But you're smart for looking for advice and thinking of ways to start taking control.

Other people have addressed the cars. Why is house gas bill has so high if your electric bill is so high also?

I asked myself this question before posting. Is it true, kind, & necessary? My post would not have passed all 3.

So I'll just wish the OP all the best.

Why three!!! ? Sounds like you got arrested or deported?

Someone has to take a stand against the overuse of !!!

Get off your ass and starting contributing. You are the biggest drag here. If you are home all the time (SRP bills prove it) why can't you do some cleaning? I feel for your husband who got such a bad deal.

You sound like prime candidates for a Dave Ramsey plan. Prepare for there to be lots of responses to this comment to the contrary... but hear me out.

Dave Ramsey treats budgeting like Weight Watchers treats dieting. You've almost done the hardest part: writing everything down. Just got to figure out that question mark.

From there, the "baby steps" are very straightforward:

  • Get a $1000 emergency fund saved up. This is in case you have a car breakdown, an unexpected medical bill - whatever - so you don't have to go into more debt.
  • Attack your debts. This is the most controversial part of the plan - how you should go about it. Ramsey advocates a "snowball" approach - paying off the smallest credit card first, and then cutting it up. He talks about attacking your debt with "gazelle-like intensity." That includes everything everyone on this thread has talked about. Get out of the cars and drive paid for ones. Cancel cable. Eat in, and eat cheap. Shop at Aldi. Switch internet providers to get an intro offer. Find generic versions of your supplements and/or 90-day discounts on your medicine... shop different stores and online to get the best deal. Cancel the dropcam, home warranty, raise your car insurance deductible and/or shop it, negotiate with everyone on everything, and every dollar you save goes toward paying off debt. Not only are you learning how to direct where every dollar goes, you're learning to defer gratification, and to live on less than you make.
  • While you're attacking your debts, give yourself, your husband and your children $100/month in "mad money." You can go cash, or you can open accounts on internet banks. Have it drafted at each paycheck. This way, if you are really jonesing for something... that new Bluray, those shoes, that new Roku box... you're not depriving yourself. If you want a $500 home theater projector, you can... in five months. Believe me, it feels great to buy something with cash (or "cash") and know you aren't adding to your debt.
  • When that's done, build up your emergency fund to 3-6 months expenses. That's $36,000 in liquid savings. I know, it sounds crazy right now, but imagine if you could? Car breaks down? No problem. CVID flare gives you additional medical bills? No problem. Roof leak? New roof. Done.
  • That's when you fully fund your retirement.

My wife also has a chronic illness. When I was 31, we were where you were (only with less income) and now that I'm 46, we are fully funding our retirement, our son's college fund, and ready to pay down the house. It's a marathon, not a 100-yard dash.

The link I added is to "Financial Peace University." Again, it seems counterintuitive to spend money to save money, but FPU is basically a support group for finances in the same way Weight Watchers is for weight loss or AA is for alcoholism. You see other people succeeding (not in total, dollar-for-dollar detail) and it spurs you on to do just as well or better.

You CAN do this. 

RedBeard, I really appreciate your kindness and your advice. I'm going to take it. I already called one of the car dealerships to see if we can get out of the lease. I applied for a credit card for a 18 month 0% balance transfer so we can knock down the debt. 

I feel like most people don't get how hard it is having a chronic illness.I already feel like a drain on my husband regarding the finances. I already have a lot of shame with my illness. 

No matter what, we are going to cut down until we can pay off our debt and start saving. 

I really appreciate all the advice on here. Thank you all. 

justignoredem said:   ...I won't say sell your house and get a clunker house...
I would. $1800 house payment + $75 pool + $80 yard + $120 cleaners + $50 home care (what's that?) + another $80 for "home" (what's this?) + insanely high gas and electric = cannot afford, and don't really need to. Sell your house and rent a smaller 3-br condo. Since hubby works from home, just find the cheapest that's not too far from whatever doctors you need to see. Can't be that expensive in AZ.

Does the $1800 house payment include homeowners insurance and property tax? Do you itemize property tax and mortgage interest on your tax return? This is important in the rent vs own calculation. You didn't mention anything about your tax situation, which could be thousands of dollars in difference between what you actually have and what you think you have. My guess is that on his income alone with a 3 or 4 person family you aren't saving anything on those deductions and my guess is that renting would be much more affordable.

scripta said:   
justignoredem said:   ...I won't say sell your house and get a clunker house...
I would. $1800 house payment + $75 pool + $80 yard + $120 cleaners + $50 home care (what's that?) + another $80 for "home" (what's this?) + insanely high gas and electric = cannot afford, and don't really need to. Sell your house and rent a smaller 3-br condo. Since hubby works from home, just find the cheapest that's not too far from whatever doctors you need to see. Can't be that expensive in AZ.

Does the $1800 house payment include homeowners insurance and property tax? Do you itemize property tax and mortgage interest on your tax return? This is important in the rent vs own calculation. You didn't mention anything about your tax situation, which could be thousands of dollars in difference between what you actually have and what you think you have. My guess is that on his income alone with a 3 or 4 person family you aren't saving anything on those deductions and my guess is that renting would be much more affordable.

  
I get it, and I sort of agree... but buying/selling a new house would be another 6% of their home value expense for realtors, as well as closing costs, bank fees, inspection fees, etc... Doesn't seem like a good time to pile on any further. I think I would prefer selling and getting an apartment for a bit to build up some funds? 

Anyhow, Overall I agree I just think it would be pretty tricky to effectively accomplish for the OP.

^^^ I meant sell and rent, not buy. Not that tricky if they're not under water on the mortgage and the demand is there.

Yes, the $1800 includes PMI, taxes, and all that. 

We have about $120K in equity in our house. We'd really rather not sell. We're going to try to cut down on all other expenses before we consider that.

Jessie4us said:   We have about $120K in equity in our house. We'd really rather not sell. We're going to try to cut down on all other expenses before we consider that.
  If you have over 20% equity in your house and you have private mortgage insurance (PMI) then I'd recommend trying to get rid of that insurance fee.

You want to NOT live paycheck to paycheck in your 50's.

The way to do that is similar to what I used to try when we were a single income family:
1. From numbers, your hubby's income seems to be $100k+. Let's assume it is $100k. Stop thinking of it as $100k - but rather think of it as $65k. The rest of the $35k needs to go to his 401k (18k) and both of your Roth ($11k post tax).
2. Many people live on $65k. But, that is not what you have available to you. You have only saved for retirement so far. How about kids school? Unforeseen expenses? Downpayment for the new house you need to buy?
3. You need further, separate savings for all those! Well - the $65k is delivered to you guys in two paychecks per month, right? Save one and spend another!!
4. A $65k salary will roughly be $2300-$2500 paycheck after all taxes etc.

So, your "means", while ensuring all obligations are met - is about $2300 - $2500/month. I see that you have set yourselves up to live waaaaaaaaaaaa.....aaaaay above your means.

Look at how people who can spend no more than $2500/mo live! You don't like the absolute trash neighborhoods that will get you? Well, look for the immigrant ones where the FOB Chinese and Indian folks go for safe places with reasonable schools - but zero frills! Many of these guys make $70k/year and have huge obligations to meet "back home". It must be possible to live like these folks since they ARE doing it every day!!

$1800 housing cost in Arizona!! You must have a mansion! Seriously - you can't afford it, not with you guys going down to single income (an emergency) and your health issues (another emergency).

You have mentioned you are ashamed of being such a drag! In your position - I would not be ashamed of having any health issues, often that is not a choice one makes! However, I would be livid with myself for willfully ignoring many financial emergencies staring at you AND setting myself up for failure:
1. Wasn't it obvious 5 or 10 or X years ago that you may go down to single income after having kids? Why were you not set up to live and save within one paycheck at that time? Doing that (and saving/investing the other paycheck) would have given you several hundred thousand dollars of cushion to buffer the emergencies now!
2. While the healthcare issues can possibly be unforeseen - it is well known that a good portion of the population carry significant health issues. Why the failure to keep sufficient financial buffer for the unforeseen?

Both you and your husband should be ashamed of yourself of choosing to be parents while ignoring the extremely basic financial preparedness and sacrifices necessary to provide for a modicum of stable environment for the kids.

Sorry - had to unload since the FWF crowd was going soft on you due to your health issues! Your health issue may well be unforeseen - but your lack of financial preparedness is sheer neglect, especially "shameful" (using your words) if you were planning to become parents. And the "shame" is not on you alone - it's on both of you!

Okay - now that the unloading is done, how can you rescue yourself?

Plan, and plan hard how you can live within $2500/mo. Your medical bill will likely take away $550/mo. So let's say $2000/mo is left for the rest of the stuff.

That's the paycheck many working class people get. So not at all unreasonable to live within that!

Obviously you can't afford your $1800/mo house. But good news is Arizona is a cheap housing state. So you should have little trouble finding something that costs < $1000/mo. Rent perhaps so that you are not stuck with the breakdowns etc.

You have $120k in equity. Fantastic! Get that out and invest in an index fund, and shove as much of it as possible into retirement accounts!

Car leases for $570/mo?? Please! Get one $10k reliable older car and stick to it till the wheels come out.

It will take a long time, perhaps a few years, for you to completely unwind the unaffordable lifestyle you have build around it! But that is the choice you have to make. Do you want to live like you are doing and be paycheck to paycheck in 50's, and 60's and 70's (well - you thought you will get to retire - think again)? Or live within your means and have a decent life?

Skipping 39 Messages...
tree100 said:   
The thing that hasn't been mentioned is how or where to begin retirement investing with the previously mentioned $500/month they have. I'm taking it at her word that this exists and they have a savings account growing. Gosh I hope they have a savings account growing. And although I don't know that starting retirement investing now considering the debts they have is the best option, it is an "end goal" worth having. And starting to understand today how to do it when funds are freed up hurts nothing.

OP, I hope you're able to sift through some of this non-sense and see what your next steps toward your end goal are. Continue (with husband input) nailing down your budget. Cut unnecessary things. Pay off your debts (and please please please don't acquire more), and then start adding toward your retirement. Good Luck!

In my opinion, the best wealth building tool is income. The best wealth building method is through aggressive saving. Contributing to retirement investment while in debt and with unnecessary spending neglect both principles.
So no, I would not recommend them do any form of investing before the debt outside of their mortgage is completely paid off with emergency fund in place. In order to do so, they need to realize how to keep their living expense at survival level. Several of those unnecessary expenses are housing related in their case, that's the reason why they should sell their house and move into a rental during this process. It is just not negotiable. Sitting on a 120k while worrying about potential medical cost rise and retirement, while incurring interest from debt makes little sense to me.

The fastest way and order to solve their issue, again, in my opinion: 1. realize they have a spending problem and in need of a well defined goal that they need to work on ("do better" is not enough; save 1 million dollars in net worth in 10 years is); 2. live on nothing and get the debt paid off; 3. build a sizable emergency fund; 4. save for down payment for the next house and contribute to retirement account (e.g. IRA/Roth), HSA (for the husband side), 529 plan (for the kids). Unfortunately the only response that keep me interested so far is that she called the dealership about the car. I was looking for a response like "You mean I can pay off all my debt and save up a sizeable emergency fund immediately if we rent and sell our house? We are all for it" type of response. Before her attitude changes, anything else is smoke screen that is keeping the real goal away.
 
That's my thought process. Probably the simplest among all responses. But it takes a significant change from the inside.



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