How am I doing? Help!

**snshijuptr** · 05-11-2010, 01:41 PM

So your total monthly expenses are $2,553. You are over the recommended 25% to spend on housing payments by $145. If I approximate 15% on taxes, then you are not accounting for about $860 a month.

I would focus on paying down your car before increasing your cash savings. Also if your cash savings is for an emergency fund, then you already have 9 months saved. If this money is for another purpose, then it should be designated as such. If it is not for another purpose, then you should be increasing your other savings or paying off your debt.

**ua_guy** · 05-11-2010, 02:09 PM

The un-accounted for money has two parts. First, I forgot to mention that $75/paycheck goes to my HSA that currently has a balance of around $2200.

The rest literally goes to the wind. I am paid 26 times a year--February and October are triple paycheck months the way it's broken out. I don't factor those in as they literally go to the wind (home repairs, one-time misc expenses like Christmas gifts, birthday gifts, one vacation per year).

I also claim 0 exemptions on taxes and traditionally receive about $800 back every year which also goes to the wind (misc expense). My s/o and I get an additional $8k back on mortgage interest deductions, which we split. That also goes to the wind. Literally. This year, $4500 went to tree removal and fixing up a rotted out master bathroom.

**Hector** · 05-11-2010, 02:28 PM

I agree with snshijuptr.
If I were you, I would stop contributing towards cash savings and will pay down car.

**snshijuptr** · 05-11-2010, 04:44 PM

Money never "goes to the wind". This mindset is trouble. The money goes toward a want or a need or housing, transportation, or entertainment, however you decide to create your budget. My personal preference is a Savings/Needs/Wants or 30/50/20 budget where each percent is dedicated to the respective category. For organization, I personally breakdown Needs & Wants into Billed and Flexible spending. I include in billed spending setting money aside for large yearly expenses like car insurance.

Find a system that works for you and set aside money for various purposes. Your cash savings might include an e-fund (a highly liquid just-in-case fund of about 6 month expenses), short term savings goals, and large yearly expenses. You should know where your money goes so you can best plan for the future.

**jIM_Ohio** · 05-11-2010, 06:55 PM

Originally posted by ua_guy View Post

Hello all, new member here. I've reached a point in life where I'm admitting to myself that I have the right intentions, but have managed money poorly. I'm 28. I'm hoping some of the well-advised and educated folks on here can take a look at my financial landscape and give me some pointers, stories, or advice.

Annual gross pay: $65,000

Cash savings: $25,000 (currently putting in 10% of gross pay)
Retirement: $10,000 (currently putting in 12% of gross pay)

Zero credit card debt.
Zero student loan debt.
No children.
No pets.

Monthly expenses:

$1500 mortgage (my half)
$189 car payment
$79 ins car
$45 ins bike
$40 gym membership
$50 garbage collection
$200 gas
$200 food
$50 clothing expense
$200 entertainment and eating out

My vehicle is 9 months old, purchased new. I currently have about $12,000 in equity. I owe $8700 on a 60 month, 4.49% loan, I have approx 50 payments left.

I also own a motorcycle which was purchased used and was paid for in cash. Current value is near $5,000.

The house is joint titled, owned with my significant other. We keep separate finances except for the house and major improvements which are split 50/50. The majority of the utilities and our cell phone bill are paid for by my s/o. More on the house later.

How are things looking?

I would focus on paying down your car before increasing your cash savings. Also if your cash savings is for an emergency fund, then you already have 9 months saved. If this money is for another purpose, then it should be designated as such. If it is not for another purpose, then you should be increasing your other savings or paying off your debt.

I agreed with this statement from another poster because you have a decent cash cushion already.

You are saving 20%+ of gross pay. Well done.

$1500 for half a mortgage is high. WOW.
I did not see utilities listed in budget- I see SO pays for them... one house, one budget IMO- this can lead to problems if you have $1000 of expenses here and $860 free cash flow left over... document it all, then itemize and categorize later, I don't think we have a good picture of situation yet to make good suggestions.

I would set some mid term and short term goals

1) Pay off car and then "never" finance a car again (plan to pay cash) you do this by doing the following:
a) double current car payment
b) send an additional $189 (current car payment) to savings as part of a car fund

2) budget better-
a)establish a vacation budget- maybe $200/mo and set that money aside- if you know how much you spend on vacations, divide by 12 and save that each month
b) I would do the same for gifts- create a generous gift budget ($1000/year) and send $80 to that so you have $1000 near xmas to spend on gifts.
c) Utilities- the house has one budget. How many incomes contribute to budget do not affect the fixed costs of the house (like taxes, utilities, upkeep, repairs). If SO leaves you, you might be up a creek. You also did not list savings or income of SO and that does influence things significantly IMO

IMO its OK to not track every penny budgeting- you are saving 22% of gross for you... if SO works are they saving too? If SO makes same amount you do and does not save, you are really only saving 11%, and that paints a MUCH MUCH different picture. If you are not tracking every penny, that is OK, but the big ticket items (like vacations and house repairs and gifts) should be accounted for "generally". If you budget $1000 and spend $1200 or $1500, that is OK... but just spending $1500 or $2000 without saving is not a good habit to be in. Leads to impulse spending IMO.

3) set some other goals
a) pay off mortgage
b) specific vacation (dream vacation)
c) retirement savings target... your retirement account is "behind" but because you save 22% its only a matter of time before it catches up top where it needs to be- do some investigation here so you know when you are on track.

**ua_guy** · 05-11-2010, 09:04 PM

Let's assume the s/o is like a business partner in this case. In reality, it's much more than that, but our finances are separate for various reasons. IMHO, his finances are a nightmare, and my advice and suggestions are interpreted as paranoia and/or blame. Talking about it never puts us in a good space together.

Is there any worth to writing a check for the car balance today out of savings, and then putting that $189/month additional into a 401k or back into savings? It's costing approx $30/month to finance the vehicle--the rest goes to principal. But then again, that money can make what, about 8% in my retirement account?

Or, would it be wiser to keep financing the vehicle (as it's got equity), keep my cash savings, and divert that extra 10% that I save in cash, to the retirement account? (which is a 403b, FYI)

There will be a separate thread re: the house. It is the financial thorn in my side.

**jpg7n16** · 05-11-2010, 10:19 PM

Is the cash your portion of the emergency fund? or both of your EF?

And sorry, just to be clear - are you married? (your sn says "ua_guy" and you referenced his finances)

How comfortable are you with investment risk? Have you ever taken a risk questionaire?

What is important to you about your money? What goals are important to you?

Would you rather have a mortgage and a huge retirement account? Or a paid for home?

**jIM_Ohio** · 05-12-2010, 04:49 AM

Originally posted by ua_guy View Post

Let's assume the s/o is like a business partner in this case. In reality, it's much more than that, but our finances are separate for various reasons. IMHO, his finances are a nightmare, and my advice and suggestions are interpreted as paranoia and/or blame. Talking about it never puts us in a good space together.

Is there any worth to writing a check for the car balance today out of savings, and then putting that $189/month additional into a 401k or back into savings? It's costing approx $30/month to finance the vehicle--the rest goes to principal. But then again, that money can make what, about 8% in my retirement account?

Or, would it be wiser to keep financing the vehicle (as it's got equity), keep my cash savings, and divert that extra 10% that I save in cash, to the retirement account? (which is a 403b, FYI)

There will be a separate thread re: the house. It is the financial thorn in my side.

LOL you have a business partner you cannot discuss money with
I still think this is a problem... bump the mortgage thread, its not showing up in new posts for me...

My point is you need to have control of 100% of the costs for the house, even if roomate is kicking in $1500 for half the mortgage and another $1000 for utilities.

If the relationship ends, you need another $2500 in income to cover these expenses.
If SO fails, you need another $25000 to cover same expenses

You need to plan for the worst, and you are spending around $900/mo without accounting for it

The single best thing you can do is get on same page with SO on finances.

My wife and I were polar opposites financially when we met. The best example I will use is her credit score was maybe 550 and mine was about 730. The next best example I can give is her idea of budgeting was making sure her next paycheck could cover her bills so this paycheck could buy clothes, do her nails, and be spent.

Her credit score is now about 720 and mine is about 770. She has a 401k and Roth IRA. She only spends money on extras once all bills are paid for. Took me about 5 years to teach her the error of her ways

There were MANY tense fights along the way. She took me comments as I did not love her or disrespected her. I took her emotional responses as being a PITA. Once we took the emotion out of money, the problems were solved much faster. You cannot ignore the problems, you need to deal with them. There is no second choice.

**snshijuptr** · 05-12-2010, 06:36 AM

Originally posted by jpg7n16 View Post

And sorry, just to be clear - are you married? (your sn says "ua_guy" and you referenced his finances)

I would instead state this as, ua_guy, do you live in a state where you can get married? Have you done so? Do you file taxes as singles? Have you made sure that the legal paperwork (wills, life insurance) supports you and your SO if something were to happen to either of you?

**ua_guy** · 05-12-2010, 07:47 AM

Originally posted by snshijuptr View Post

I would instead state this as, ua_guy, do you live in a state where you can get married? Have you done so? Do you file taxes as singles? Have you made sure that the legal paperwork (wills, life insurance) supports you and your SO if something were to happen to either of you?

Very perceptive. We are unmarried, file single taxes, and do not live in a state where we can marry--not even sure if we want to if that becomes an option. We have life insurance and such set up, the house it titled joint tenants in common with right of survivorship, but nothing beyond that. If either of us go, the other is ruined. We're not "there" yet...as you can see, we're having trouble even establishing a budget even after 7 years of living together.

He makes roughly $102k/year, 32 years old, zero savings, $30k in a retirement account and $4k in an HSA. He also has $70k in vehicle debt, and just finished paying off $25k in credit card debt. To his credit, he is now putting 12% into his retirement, but has a very loose plan for his "extra cash" that he has every month now that his credit cards are paid off.

We both have credit scores approaching 800...Not that it's important to me, but it shows that we pay our bills on time, in full, and he especially likes to use his available credit.

The house...I haven't created a separate thread yet. Maybe I should? We purchased 4 years ago at $440k, zero down. It was a fly-by-night interest only ARM for 80% and the rest was a HELOC at something around 10% interest. He drove the buying decision...I was very new to finances and had just gotten my first "real" job.

We've refinanced twice, after I learned what kind of hot water we were in. We would have been wise to sell when the loan paperwork was still hot off the copier.

The current structure is a total loan amount of $452,000, refinanced in March 2010. $408,000 is a 30y fixed, 5.375% traditional mortgage. The second is a true second mortgage, $44,000, 15y fixed...Can't remember the interest rate, but I want to say it's 6.75%. The house just e-appraised for $436k for the refi. We also had a realtor do a CMA, and she would list the house at $400k.

The house is a flaming heap of ****, pardon my language, but I'm being kind. It's 1440sqft, built in 1968 and had far more damage/problems than we or the inspector saw or imagined. The roof has been replaced twice in 4 years of ownership, and everything inside the house is done wrong. Under trim and layers of paint is a "flip" gone very wrong and it's costing us dearly. We estimate the house needs an additional $50k in work to be "right" --and obviously we do not have the money nor is the house worth putting that kind of money into. It's ugly.

At this point I am looking at a strategic foreclosure, although believe it or not I have moral issues with it. I'm also looking at the rest of my late 20's and early 30's and trying to choose the lesser of two evils--dealing in cash for 7 years, or facing financial suicide by staying in the house with my s/o who believes money is no object.

One of the reasons I posted this thread is because he keeps telling me "we're fine, we can afford the house, everything is okay, these things take time." There's some truth to that, but that model works better with a nicer home that needs only routine maintenance where the tenants (us) didn't spend the first 4 years pissing money into the wind on an interest only loan.

The other option is selling now with estimated net proceeds at -$95,000 if we use a realtor, or renting the house out at a loss of ~$1,000/month. Or staying and living in the mess, which will eventually (almost has) destroyed our relationship.

**jpg7n16** · 05-12-2010, 09:29 AM

Originally posted by ua_guy View Post

... We have life insurance and such set up, the house it titled joint tenants in common with right of survivorship, but nothing beyond that. If either of us go, the other is ruined...

With proper beneficiary and will planning, that's not necessarily true. It may mean however that you do not own enough life insurance. Do you each have enough to cover your portion of the outstanding debts and potential burial expenses?

Are you both the respective beneficiaries of each other's retirement/savings accounts?

The reason I brought this issue up is because there are some major differences in how your tax and estate planning should go. Beneficiary planning and a proper will are key in your situation.

He makes roughly $102k/year...

One of the reasons I posted this thread is because he keeps telling me "we're fine, we can afford the house, everything is okay, these things take time." There's some truth to that...

Well you are just barely within the 28% guideline for home costs. If your $1500 includes all the insurance, taxes, etc. you are right at 28% of your income. But if he's at the same $1500, that's only 17.6% of his income. You can see why this is a much smaller issue for him. $1500 for you is equivalent to $2,350 a month for him. (or 1500 for him, is only $955 for you) He feels about $550 less a month in rent. That would make a big difference wouldn't it?

I would say to keep your own EF separate from his. And if $25k is your EF, you have too much in the EF. 6 months (the high end) for you is around $15k. I'd say you should probably have between 10-15k, as long as you both have properly titled life insurance coverage. If something were to happen to him, then his life ins. should pay off his share of the debt. You could then refinance the remaining to arrive back at your $1500/month.

Then the question is what to do with the extra $10k currently in the EF. I'd probably just pay off the car, and put the last $1300 towards my ROTH for the year.

**jIM_Ohio** · 05-12-2010, 11:09 AM

Originally posted by ua_guy View Post

Very perceptive. We are unmarried, file single taxes, and do not live in a state where we can marry--not even sure if we want to if that becomes an option. We have life insurance and such set up, the house it titled joint tenants in common with right of survivorship, but nothing beyond that. If either of us go, the other is ruined. We're not "there" yet...as you can see, we're having trouble even establishing a budget even after 7 years of living together.

He makes roughly $102k/year, 32 years old, zero savings, $30k in a retirement account and $4k in an HSA. He also has $70k in vehicle debt, and just finished paying off $25k in credit card debt. To his credit, he is now putting 12% into his retirement, but has a very loose plan for his "extra cash" that he has every month now that his credit cards are paid off.

We both have credit scores approaching 800...Not that it's important to me, but it shows that we pay our bills on time, in full, and he especially likes to use his available credit.

The house...I haven't created a separate thread yet. Maybe I should? We purchased 4 years ago at $440k, zero down. It was a fly-by-night interest only ARM for 80% and the rest was a HELOC at something around 10% interest. He drove the buying decision...I was very new to finances and had just gotten my first "real" job.

We've refinanced twice, after I learned what kind of hot water we were in. We would have been wise to sell when the loan paperwork was still hot off the copier.

The current structure is a total loan amount of $452,000, refinanced in March 2010. $408,000 is a 30y fixed, 5.375% traditional mortgage. The second is a true second mortgage, $44,000, 15y fixed...Can't remember the interest rate, but I want to say it's 6.75%. The house just e-appraised for $436k for the refi. We also had a realtor do a CMA, and she would list the house at $400k.

The house is a flaming heap of ****, pardon my language, but I'm being kind. It's 1440sqft, built in 1968 and had far more damage/problems than we or the inspector saw or imagined. The roof has been replaced twice in 4 years of ownership, and everything inside the house is done wrong. Under trim and layers of paint is a "flip" gone very wrong and it's costing us dearly. We estimate the house needs an additional $50k in work to be "right" --and obviously we do not have the money nor is the house worth putting that kind of money into. It's ugly.

At this point I am looking at a strategic foreclosure, although believe it or not I have moral issues with it. I'm also looking at the rest of my late 20's and early 30's and trying to choose the lesser of two evils--dealing in cash for 7 years, or facing financial suicide by staying in the house with my s/o who believes money is no object.

One of the reasons I posted this thread is because he keeps telling me "we're fine, we can afford the house, everything is okay, these things take time." There's some truth to that, but that model works better with a nicer home that needs only routine maintenance where the tenants (us) didn't spend the first 4 years pissing money into the wind on an interest only loan.

The other option is selling now with estimated net proceeds at -$95,000 if we use a realtor, or renting the house out at a loss of ~$1,000/month. Or staying and living in the mess, which will eventually (almost has) destroyed our relationship.

I suggest solving the problem by combining all expenses and all income on a single balance sheet.

With two incomes, one 102k and other 65k, and not much consumer debt other than cars, I think you have the ability to fix this situation easily, efficiently, and quickly.

Here are steps I would look into with some editorial comments identifying my view of the problem:

1) House might sell for 400k and you owe 452k. 44k of this is the second mortgage.

I would take some of the extra income from partner and pay down the 2nd mortgage. I realize this ties up cash flow, but it should also help prevent need to do a short sell, and should also eventually improve cash flow.

2) House is falling apart. 50k in estimated repairs needed. The reason I suggest combining finances is 50k of repairs can be done without much financing needed, if you can categorize the repairs and get them done over a 2-3 year period of time.

3) 70k in car debt. can you detail this? Is this a bad car loan (where debt from car A was rolled into financing of car b or someone which is financing a humvee or BMW fully loaded? I would look to pay down this debt aggressively.

Don't solve problems in order I listed, I just see those as 3 problems 160k of combined income can solve "easily" and if you think about them you can probably get all 3 done efficiently over a 5 year period of time.

If partner is not on board with this, get rid of him.

**snshijuptr** · 05-12-2010, 01:02 PM

I truly believe that partners should share finances, but sometimes that would just cause more problems than not. The problem is that you both have tried to have a bit of both. You own your largest asset together, yet you do not share the rest of your expenses. You say that you are upside-down on the house right? Well then you might want to discuss with your SO if you can drop out of the house and instead pay him rent. I'm not really sure what that does to your credit, but you will then be able to really separate your finances. You can pay your SO a competitive rent (less than your current housing payment), and he can keep the house. Then the repairs, mortgage, and eventual sale are all his responsibility. In addition, your money will be truly separated.

**ua_guy** · 05-12-2010, 02:27 PM

Originally posted by jIM_Ohio View Post

I suggest solving the problem by combining all expenses and all income on a single balance sheet.

With two incomes, one 102k and other 65k, and not much consumer debt other than cars, I think you have the ability to fix this situation easily, efficiently, and quickly.

Here are steps I would look into with some editorial comments identifying my view of the problem:

1) House might sell for 400k and you owe 452k. 44k of this is the second mortgage.

I would take some of the extra income from partner and pay down the 2nd mortgage. I realize this ties up cash flow, but it should also help prevent need to do a short sell, and should also eventually improve cash flow.

2) House is falling apart. 50k in estimated repairs needed. The reason I suggest combining finances is 50k of repairs can be done without much financing needed, if you can categorize the repairs and get them done over a 2-3 year period of time.

3) 70k in car debt. can you detail this? Is this a bad car loan (where debt from car A was rolled into financing of car b or someone which is financing a humvee or BMW fully loaded? I would look to pay down this debt aggressively.

Don't solve problems in order I listed, I just see those as 3 problems 160k of combined income can solve "easily" and if you think about them you can probably get all 3 done efficiently over a 5 year period of time.

If partner is not on board with this, get rid of him.

Responses to your points:

2) Is a strategic foreclosure out of the question? Bottom line is both of us are "through" with the house and its problems. It's been a nightmare. Even if we sink $50k into it, it's still going to be a 40 year old 1400sqft home in a neighborhood of like-era homes (although, ours is the smallest). We're looking at 5-7 years before the house breaks even on the selling price, and by then we've sunk another $50k plus what we've already spent on fixing its problems (probably $50k).

3) His vehicle debt is spread across a car and a bike. $10k is owed on the bike, but he's right side up, and 2 years into a 48 month loan. The car is new (12/09) and he paid MSRP ($57k) and rolled around $3k of negative equity from his previous car. (That was not a good day for me). Total monthly vehicle payments ~ $1500 just for his.

And to snshijuptr: That scenario is impossible. I can do a quit-claim on the house, but that doesn't pardon me from the mortgage where I am a co-borrower. And...we aren't separated, we're in this together. With his current debt, he would not qualify for the full mortgage, and I certainly wouldn't based on income alone.

How am I doing? Help!