Monday, July 27, 2015

Budget Assessment 5: Debt and revised budget

To rehash the previous assessment points, we were trying to come up with enough to cover the following:

$260 for pre-school
$140 additional for medical expenses/ savings
$150 for IRA plan

So far we’ve cut $45 from utilities budget by enrolling in balanced billing, getting water leaks fixed, and other energy saving techniques. We are working on cutting at least $30 in the diaper funding by starting potty training DS B (who proudly made his first pee pee in the potty this past weekend). We’ll be tracking our grocery and fun money expenditures closely over the next two months and seeing how we can reign in our spending or possibly even make cuts. And, for now, the $8 Netflix stays…. Got major pushback on proposing that cut!

The last budget area to assess is our minimum debt payments. Our minimum payments are as follows:
$205 consolidation loan
$183 to my parents
$225 my student loan
$210 S’ student loan
We’ve received all of the new medical bills from DS L’s seizures and owe $1,909 to many different organizations so there are many different minimum payments.

We’ve decided to put the two student loans in deferment and use my anticipated end of year bonus to cover the accumulated interest. This frees up $435 in our budget to cover the pre-school and medical savings. We’ve negotiated with two of the smaller medical bills organizations to get payment plans set up and will owe $114 for the next five months to pay those two off. There are four additional accounts that are all under the same parent company but since they are different departments, they cannot be combined and the minimum payments are unaffordable. We have been advised to let these four accounts go into default at which time they will be sent to the parent companies central billing department. Once the central billing department has all four, they can combine and offer more flexibility in repayment length. I’m anticipating this process will take several more months and hopefully our first payment will be due after we pay off the first two bills.

The adjusted budget we’re working towards is as follows:

$1,170  29%      Rent & Utilities: gas, electric, sewer, water
   $580  15%      Insurance: Health, life, disability
   $270    7%     Cars: insurance and fuel
   $135    3%     Tech: phones, internet, Netflix
   $620  15%      Household: Groceries, diapers, toiletries, pets, etc
   $180    5%     Extraneous/ Fun: haircuts, clothing, dining out, projects, gifts
   $200    5%     Medical/ Savings
   $260    7%     Pre-school
   $585  14%      Debt: minimum payments
$4,000              Total after tax income


The goal is to have fully implemented all of the cuts and re-organization from our assessment by the end of this quarter, September 30. We will need to re-assess at the end of the year when our loans are close to coming out of deferment. For now, retirement savings is still off the table but is a high priority once we get a handle on this medical debt.

Monday, July 20, 2015

Budget Assessment 4: Household Costs and Extraneous/ Fun Money

The $650/ month Household Category has a number of individual items so I’ll break down this category and assess each item separately. Included under household are groceries, toiletries, diapers and baby items, and pets. We also have $180/ month for extraneous/ fun money. Currently it breaks out like this:

  $60 diapers, wipes, diaper cream
  $25 pet food, cat litter
$565 groceries, toiletries, laundry, cleaning supplies, general house upkeep
$180 gifts, clothes, haircuts, projects, dining out

In the first category, $60 for diapers and such, one of our boys is showing readiness to begin potty training. Of course this will be a process and we can’t really put a target date on when he’ll be out of disposable diapers but I can expect sometime this year we’ll at least be able to cut this number in half. Who knows, maybe both boys will be done with diapers by the end of the year. Once we begin the potty training process, I’ll also introduce reusable cloth training pants so at the very least we’ll see a minor reduction in the amount we’re spending on diapers. We already buy the absolute cheapest diapers we can find so getting them out of diapers is the only way we can save any more in this category.

In the $25 pet category, we are at the bare minimum. We have found the Costco food is comparable in quality to the more expensive foods we were using and it’s about half the price. This is a category that I would love to increase when it becomes possible because right now we are not doing any monthly heartworm or flea prevention and have nothing being set aside for vet bills. For now, I just don’t see how we can increase the money in this category.

The next category, $565 household and grocery, is one that we tend to go over on each month. To be perfectly honest, my record keeping in this category is not great as it tends to get blurred with the next category. My initial thoughts were that this category needed to be increased but I’m thinking what I really need to do is keep a better track on the next two categories to really assess where we are going over and why. I know we could do some things better in this category. I’d like to see us cutting down on the pre-packaged foods like individually wrapped cheesesticks, frozen meals like those I take to work as a back-up meal, and other processed foods. We could also have more vegetarian meals, it seems like we’ve increased our meat intake over the past year and particularly once I started meal prepping, as almost all recipes I’ve tried center around a meat. For the next couple months, I will be more diligent about tracking expenses in this and the next category and do a better assessment afterwards.

The last category is the $180 “fun money” which covers gift giving, clothes, haircuts, dining out, and the occasional date night. As I discussed above, we go over in this category a lot. When I look at it on paper, I think $180 is a lot to be spending each month on extraneous stuff. But when I break it down into what it can actually cover, it doesn’t seem like much at all. Here’s an example of what $180 could cover in a month:

$20 1 take-out/ fast food meal out
$15 1 haircut
$30 gift for someone’s birthday/baby shower/wedding (this summer has been especially heavy on the special events)
$80 10 lunches out at approx. $8 each (we always try to pack food when we’re going out/ to work but aren’t always prepared)
$10 clothing item for 1 of us
$25 date night: movie tickets, drinks and popcorn


Perhaps I’m not prioritizing my debt pay-off appropriately and we should be forgoing most of the things on the list above. I think tracking for the next couple months to see how we really are spending in the grocery and extraneous category will help me understand where we can truly cut.

Friday, July 10, 2015

Budget Assessment 3: Housing, Insurance, Cars and Technology

I started a budget assessment in my last couple posts and today I’ll continue by looking at the first four categories in our budget: Household, Insurance, Cars, and Technology. These four categories make up 55% of our monthly expenses

The Housing categories include our rent, gas, electric, water, and sewer utilities. There’s very little we can do to reduce this category at the moment.  We are fairly diligent about energy savings although there are a few ways we could cut back a little more including:
-       Fixing the broken dryer timer, we have to set an alarm to remember to turn the dryer off since the timer is broken and there have definitely been a few times we forgot and over-dried our clothes/ wasted a bunch of electricity.
-       Fixing the small leak in our shower faucet and toilet. I’ve put in a work order with the rental management company so that should be fixed soon.
-       We can always look into moving into a cheaper place but probably won’t consider this until our lease is coming up next March as the termination penalty would outweigh any monthly savings.
-       More cold water washing, more line drying, shorter and cooler showers and other energy cutting things we can do to help reduce our energy use each month.

The Insurance category includes health, short and long term disability, life and rental insurances. I don’t feel that we are over-insured as we have very modest coverage for life and rental insurance; health insurance is what it is through my employer. Perhaps the disability insurance is a variable that could be cut however I think that would be a last resort and I honestly feel like keeping the insurance is a higher priority to me than paying off debt. It’s a fairly low cost of $31 a month and since my income is our only income and I have already experienced something (the pregnancy) that took me out of work, I feel it’s important to keep as a safety net until we are able to set aside a more substantial emergency fund.

In the Car category we have insurance, fuel and a small amount for maintenance. We perform almost all of our general maintenance for tire rotations and oil changes so there’s no reductions there. Bigger repair jobs we usually save up for out of our variable income and do it ourselves if possible. We have the lowest insurance rate I’ve been able to find so we’re also stuck there. The only thing I can think of that could help reduce these expenses is:
-       Riding our bikes more. I am working up to being able to bike ride to work and hopefully will feel comfortable in my ability by the end of summer. This is probably the least bike-friendly place I’ve ever lived (both my sister and my father have been hit by vehicles in this town) and my lack of confidence and skill on a bicycle need some more work before I’m willing to head out into serious rush hour traffic.
-       Walking or biking to the grocery more. There’s a store within walking distance and a bigger store within biking distance.
-       Be more diligent about combining errands and reduce the number of trips we take over to visit my family (about an hour and a half away from us).

For Technology we’ve got our cell phones, internet, and Netflix. We recently switched our internet provider and have the lowest rate we could find. We’re also fairly diligent about checking around for better cell phone rates but always end up staying with T-Mobile as the lowest cost provider. The last item in the category is Netflix. At $8 a month and our only set entertainment budget item, I hate to say goodbye to our cheap entertainment but I think we can cut it without too much pain.


In summary, I’d like to achieve at least a $10 cut in our utilities, a $10 cut in our fuel use, and the $8 cut for Netflix and get that $28 dollars allotted elsewhere.

Wednesday, July 8, 2015

Budget Assessment 2: What’s missing in the budget?

Before I really dive into each category and assess what we’re spending our money on, I’d like to take a moment to talk about what is currently missing from our budget. Several biggies jump right out from our recent experiences.

First, we do not have enough budgeted for medical expenses each month. I looked at the last three years and we needed an average of $200 a month for medical expenses. Our current budget has a mere $60 a month allocated towards medical expenses and that’s also supposed to cover savings if our emergency fund needs replenishing. So there’s the big, huge, right-there-in-my-face, obvious reason we continue to stay in medical debt despite “paying off” the debt a couple times. We need to stop planning for a great, healthy, uneventful year and start planning for more medical expenses.

Another biggie, we do not have anything budgeted for pre-school and yet we will owe $260 a month starting in August and continuing through April. Really, this will be an ongoing expense since we intend on keeping them in pre-school until they enter the public school system. There is the possible exception that next year one or both will be accepted into the early public pre-school program due to their developmental delays and there will not be a cost associated with pre-school. I don’t want to plan on that though because I am very hopeful all the hard work we are doing will have them caught back up with their peers soon. The most conservative approach is to plan on spending $2,800 a year on pre-school and start budgeting for it in a monthly basis.

I’ve become skeptical that $1,000 is enough of an emergency fund, seems like the emergencies we have carry a bigger price tag. The other concern I have looming in the back of my mind is what happens if I lose my job for some reason. $1,000 would not cover that type of emergency. We need to re-assess if we really feel comfortable having only $1,000 in the bank to fall back on and balance that against our debt free goals.

The last issue that’s been looming in my mind for the last year is retirement. S has absolutely nothing saved and I have a meager $15k in an IRA that I rolled over from previous employers. I have not enrolled into my current company’s plan which matches 3%.  We’d need to squeeze another $150 out of the budget each month in order to be able to at least put in the minimum for the company match.


So there are the items I’d really like to have in the budget as soon as possible.

Monday, July 6, 2015

2nd Q 2015 report

Starting point (Oct 2011):

Student Loan 1 (My fed loan): $38,339
Student Loan 2 (S' state loan): $21,719
Student Loan 3 (S' fed loan): $5,454
Car Loan: $11,684
Credit Card 1: $10,577
Credit Card 2: $3,635
Credit Card 3: $0
Misc. small debts (S' small debts in collections): $5,443
Medical expenses: $3,672
Parents: $600

Total: $101,123

And here's where we are today:

Student Loan 1: $34,042
Student Loan 2: $18,367
Student Loan 3: $0
Car Loan: $0
Credit Card 1: $0
Credit Card 2: $0
Credit Card 3: $0
Misc. small debts: $4,349
Medical expenses: $1,861
Parents: $4,200
Consolidation Loan: $8,173

Total: $70,992

Paid off to date: $30,131 paid off + $733 in savings


Not as much progress as I would have liked but I suppose I should be happy to be moving in the right direction.

Monday, June 29, 2015

Budget Assessment 1

There have been a number of things that have occurred recently that have brought a budget re-assessment to the top of our financial to-do list. The biggies were deciding to enroll the boys in pre-school as early as possible, paying off our medical debt (again) only to have a medical emergency put us right back in debt (again), practically wiping out the e-fund to support S’ business, and the realization that we have been overspending on certain budgetary items for months which had been masked by the complicated system we created for ourselves with the credit card.

I’ve written more about each of these factors in other posts as they were occurring but as they say, hindsight is 20/20. Regarding the boys’ preschool and S’ business, I have no second thoughts that we made the right decision although how to pay for them is still up in the air. As for the medical debt and the credit card, they reveal a major flaw in our debt repayment plan and current budget: we just don’t have enough budgeted to cover our medical expenses and our household/ grocery expenses. Our mission to pay off our debt but having a limited income to do so was forcing us to cut budget items that, now obvious, couldn’t take any more cutting. What we ended up doing was “robbing Peter to pay Paul”.

Here’s the budget that we were trying to adhere to (and failing) by amount, percentage of after tax income, and category:

$1,215  30%      Rent & Utilities: gas, electric, sewer, water
   $580  15%      Insurance: Health, life, disability
   $270    7%     Cars: insurance and fuel
   $135    3%     Tech: phones, internet, Netflix
   $650  16%      Household: Groceries, diapers, toiletries, pets, etc
   $180    5%     Extraneous/ Fun: haircuts, clothing, dining out, projects
     $60    2%     Medical/ Savings
   $910  23%      Debt: minimum payments
$4,000              Total after tax income

The only income we can count on is my bi-monthly pay check so that is what our monthly budget was based on. Extra income from my etsy sites, selling stuff off, tax returns, etc. go towards saving for one-time items that we need, like new tires. Once there’s enough set aside for the item, we make the purchase. We did a fairly good job of estimating what one-time items we might need and what extra income we can expect so far this year except that our extra income is frequently needed to cover the overages in our budget and we added a biggie with the pre-school decision.

I’m pretty much maxed out on bringing more income to the table. S is currently not bringing any income as he continues to focus on building his business up. Given the pitfalls we’ve faced trying to get his business up and running, we expect that his business will not be a significant contributor to the budget this year as most income will be put back into the business. Hopefully, next year we will start to see some profit. Options here include S holding on the business so he can find evening and weekend work to bring in some income or finding full time work which means the boys would have to go into daycare. Currently, we plan on sticking with the original plan of S focusing primarily on our sons (especially in light of the delays one of the boys is experiencing) and part-time on his business.

This is turning into a lengthy post so I’m going to end here. I’ll follow-up later with an assessment of each of our budget categories and how we might make adjustments to get our spending and budget aligned.

Tuesday, June 23, 2015

Credit card use

Throughout this process of paying off the debt there’s one cardinal sin we’ve always broken: we still use a credit card for regular monthly purchases which we pay in full every month. There are several justifications for our breaking the no credit rule and I’m sure most people will disagree with our decision. The method has been working for us for years, until recently. Before I get into our current plight, let me at least explain our justifications for continuing to use the credit card:

1.   It’s easier to pay one lump sum for a bunch of the little bills we pay each month. Our internet, phones, Netflix, medical debt, and utilities are all set up to auto-pay on the credit card. Since all these bills pretty much the same from month to month, it’s easiest for me to budget one larger payment and only have to remember to set up one payment each month.
2.   We get cash back rewards. It’s not much (2%) but right now, with such a slim income, any little extra helps.
3.   We also put the big items we’ve saved up for on the card to get the extra cash back.
4.   It gives us a wee bit of security in addition to our emergency fund. We pay the cc bill on the day it is released so there are several weeks of padding before the actual due date in case something comes up where we need to put that money elsewhere while we hustle up the cash to cover the unexpected instead of hitting our e-fund.

So now our current situation:
Earlier this year, we decided that we should try out paying for other things besides those listed above with the card to maximize the cash back. So we started putting everyday expenditures on the card like groceries, gas, diapers, etc. The idea was that we would take our cash for those budgeted items and put it in a reserve account so we could cover the expenses when the credit card bill was due. This worked reasonably well at first but it was complicated for me to keep track of everything since these other budget items where often variable and purchases are frequent and throughout the week. I was spending way too much time trying to figure out what expenses had occurred since the last time I transferred cash.  Also, psychologically, I did not like the feeling I got looking at a steadily increasing cc balance each month, even though the cash was there waiting to pay it off.

After a few months, I also realized that we were spending a little bit more on the credit card than we were setting aside and had been “dipping into” the next month’s cash reserves. The date that we were paying the card was also slowly creeping towards the due date. Basically, our little experiment failed. We are ok at paying set amounts and for large, saved for items on the cc but the smaller day to day stuff leaves too much room for error and overspending. So we’ll be transitioning back to our old method which will take a couple months since we overspent for several months.

Besides the basic lesson that making our finances more complicated like this DOES NOT help in the long run, there are also a couple other issues at play here that I’ll need to examine.
-    Were we going over budget each month because the cc was tempting us back to our old ways and giving us false security to overspend? Yes, I think we were guilty of this for at least a little bit of the overspending.
-    Were we going over budget each month because we don’t have enough budgeted to cover our expenses? I think this is a major factor, we’ve been so focused on “paying off the debt” that we are putting ourselves in a situation where we can’t cover the regular expenses.
-    Should we have dipped into the e-fund for some of the things that went on the cc? Yes, we definitely had a few totally unexpected things come up that should have been e-funded. We need to get comfortable with the idea that the e-fund is there to help us when we need it not some sacred account that’s untouchable.


Moral of the story, it’s time to get back to basics, assess the budget and simplify the finances.