New Budget

[timetosave]

Regarding the "Cornell University" degree, I know someone who has 1 BS degree, and 2 Masters degrees (and a paid for house). He is sending his 2 sons to a local community college for the first 2 years, and then on to the Wharton school of business. Notice that I emphasize this man is highly educated, and is sending his sons to a lower level school for the first 2 years to save the expense of sending them for 4 years to the same expensive school.

Thanks for the input. I'm glad that works for your friend...it simply does not work for me.

G

[myself]

My husband has the mortgage, and his car payment. I created my debt and it is my responsibility. We have never actually had 'shared finances' never. I do not look to him for anymore than he already does. He is disabled. DD receives SSI and after I chewed him out that money is now going into an account for her use (savings). He does more than his share financially around the house...more than his share. An example of dh...he received a settlement for over 100,000.00 a few years ago and spent in in 3 months (the rest of the story can be read in my previous posts).

I wish he would take our daughter's future seriously.

The credit cards are on my credit report...they have been written off. That means I no longer get the annoying calls and they just sit there (I still owe the money) and they hurt my credit but I do not make any payments on the amounts and they just sit there. Right now I want to get the car/education loans paid off then I will concentrate on them.

I'd have to say you should take your finances seriously (much like you want your husband to take your DD's education seriously).
You've stated the following:
Income: $2,257
Outgo: $1,688
Left over: $569
Tax return (this year from another thread $6,595): $549
So, in reality you have $1,118/month left over every month.

Now, add in the fact that you chose to lease (which means a vehicle payment forever if you keep leasing). Right now, that's a $500/month car payment. You may want to consider the following:
1) Change W-4 withholdings to give you more back throughout the year
2) Have $569/month plus whatever extra you get after adjusting your W-4 withholdings automatically sent to an ING Direct account.
3) After the lease on your current vehicle is up, pay cash for a vehicle from the ING Direct account, or for that matter if you want to keep the leased vehicle, pay for it in cash.
4) This will leave you with about $1,600/month leftover (extra amount shown above, plus the vehicle payment). Send $333/month into a Roth IRA for both you and your husband, and another $300/month aside for your DD's college education. That still leaves you with $600+ every month, since you no longer have a vehicle payment.

[timetosave]

Thanks again for the input. I have no intention of changing my deductions but I will be working very hard to get the car paid off.

G

[creditcardfree]

Timetosave, is your car leased? You mentioned something about a SmartBuy somewhere and that you will pay off car and then keep for the next 10 years. Is that correct? If so, that doesn't sound like a lease. Could you clarify...probably again...for everyone?

[timetosave]

Ok, these are the details of my Smartbuy:

SmartBuy is a purchase transaction that is like a lease because monthly payments can be lower than with traditional financing. That’s because the monthly payments are based on the portion of the vehicle you expect to use during the SmartBuy term plus a finance charge. However, with SmartBuy you own your vehicle.

At the end of your contract you have several options, including keeping your vehicle by making a final balloon payment or simply returning your vehicle and paying a disposal fee (if applicable).

SmartBuy is available in a limited number of states. Ask your GM dealership/retailer about availability.



I am making two payments a month (starting this month) in order to get the car paid off in the next 18-20 months. The extra paid each month goes to the principle. I will also be using a portion of my tax return to pay this down and more of it next year (2400 of my return is going into my EF to get that funded and crossed off my list of to do's for this year, next year that fund will be already there and I will have more of my refund to put towards the car).

G

[LuxLiving]

Ok, these are the details of my Smartbuy:

SmartBuy is a purchase transaction that is like a lease because monthly payments can be lower than with traditional financing. That’s because the monthly payments are based on the portion of the vehicle you expect to use during the SmartBuy term plus a finance charge. However, with SmartBuy you own your vehicle.

At the end of your contract you have several options, including keeping your vehicle by making a final balloon payment or simply returning your vehicle and paying a disposal fee (if applicable).

SmartBuy is available in a limited number of states. Ask your GM dealership/retailer about availability.



I am making two payments a month (starting this month) in order to get the car paid off in the next 18-20 months. The extra paid each month goes to the principle. I will also be using a portion of my tax return to pay this down and more of it next year (2400 of my return is going into my EF to get that funded and crossed off my list of to do's for this year, next year that fund will be already there and I will have more of my refund to put towards the car).

G

Hi timetosave, Good to see you perservering!!!

Some questions, if I may?

Will you have the money put back for the balloon payment on the car or is that issue being resolved by the extra payments you are planning to make? If you plan to keep the car after the balloon date do you have the balloon money already? Where is that to come from? What would happen if you kept making the regular payments on the car and put the extrapayment amount back in a MMaccount to save for the balloon payment?

You said something about the money in the emergency fund being there next year so you don't have that to worry about it next tax return. Here is where I have a question/comment...

Is there room in your current budget to allow repayment of any monies taken out of the e-fund? I'd say w/apprx. 2400.00 in an e-fund what you have there is what many on this board call a mini-e-fund. Used for UNEXPECTED EXPENSES...like needing a car repair to the tune of say $750 in a month that only has $25 extra in it.

That money will come out to pay the repair bill...do you have room in the monthly budget to put that back in w/o derailing other plans? What I'm trying to imply is that e-fund money is not necessarily static, but can be used but then needs to be put back out of income.

A mini e-fund is to handle the unexpected crop-ups, whereas a true emergency fund is more to handle a layoff, firing or short-term disability.


I'm not sure if it was in this thread or the other one you mentioned that you were planning on taking extra after payments from current income to save for DD education. Is that extra-money coming after you've set aside money for car-repairs, christmas, upcoming band expenses, recurring riding fees or expenses, etc.?

If not, you're going to be having lots more future mini-emergencies that will eat that money up - just wanting to be sure you have plans to return it rather than think it's a one-time deal.

On the tax-deductions (sorry if I appear to be poking the bruise but DH was similar to your thinking in this vein for a number of years)...have you researched the consequences of not being able to pay your tax-bill?

IF you reduced your deductions and got more income and perhaps came up short, WHAT EXACTLY HAPPENS? Will they take your birthday away?

It seems odd that one would be willing to owe other people money and not be able to keep current on certain debts (hopefully all past for you), but not the government?

I'm not sure I follow the logic...but, have you done the research? I haven't -- so not sure I know the exact answer but I'm assuming if you came up a few hundred short, you'd be able to make payments to the government the same way you do to Sears.

If that isn't accurate, then have you followed up on the link that is here in one of these threads on checking the government's own website and their calculations as to what someone making your income could conceivably owe and then coming out a few hundred long where you do get a small refund back, just not such a huge one? (This is what we did. Then I monitor it thru the year to be sure we are on track to meeting the projected tax.)

Have you actually talked to someone in your payroll department or human resources about how to get more dollars in the paycheck and yet not owe any additional taxes?

Good on you for sticking to it!

[kv968]

Will you have the money put back for the balloon payment on the car or is that issue being resolved by the extra payments you are planning to make? If you plan to keep the car after the balloon date do you have the balloon money already? Where is that to come from? What would happen if you kept making the regular payments on the car and put the extrapayment amount back in a MMaccount to save for the balloon payment?

I've been thinking the same thing. I've read over the past posts and to me no matter how pleasantly GMAC puts it, you don't "own" the vehicle. Sure you'll own the vehicle after you pay off the final balloon payment but to me it's still pretty much a lease. With that, I don't feel you'd really benefit from paying it off early. I don't think there's any interest being accrued by the monthly payments you're currently making, so paying it off early wouldn't save any money. I know you want to pay it off totally and get it over with (within 22 months you said), which I can understand. However you might be better off putting the extra payments in a MMA, as LuxLiving suggested, and getting some interest of your own off of that money for remaining 2 years of the Smartbuy. Then when the end of the "lease" is up, take that money and pay off the balloon payment. By my math, if you put those extra payments in a decent paying (~5%) MMA, you would have an extra $400-500 by the time the balloon payment is due. Just my $.02

[timetosave]

Hi timetosave, Good to see you perservering!!!

Some questions, if I may?

Will you have the money put back for the balloon payment on the car or is that issue being resolved by the extra payments you are planning to make? If you plan to keep the car after the balloon date do you have the balloon money already? Where is that to come from? What would happen if you kept making the regular payments on the car and put the extrapayment amount back in a MMaccount to save for the balloon payment?!

I will actually be paying off the car before the balloon payment is due. I did not consider putting the extra monies into the bank and making regular payments, I was told that because the extra money goes to the principle that it would be wise to pay it off early.

You said something about the money in the emergency fund being there next year so you don't have that to worry about it next tax return. Here is where I have a question/comment...

Is there room in your current budget to allow repayment of any monies taken out of the e-fund? I'd say w/apprx. 2400.00 in an e-fund what you have there is what many on this board call a mini-e-fund. Used for UNEXPECTED EXPENSES...like needing a car repair to the tune of say $750 in a month that only has $25 extra in it.

That money will come out to pay the repair bill...do you have room in the monthly budget to put that back in w/o derailing other plans? What I'm trying to imply is that e-fund money is not necessarily static, but can be used but then needs to be put back out of income.

A mini e-fund is to handle the unexpected crop-ups, whereas a true emergency fund is more to handle a layoff, firing or short-term disability.


I'm not sure if it was in this thread or the other one you mentioned that you were planning on taking extra after payments from current income to save for DD education. Is that extra-money coming after you've set aside money for car-repairs, christmas, upcoming band expenses, recurring riding fees or expenses, etc.?

If not, you're going to be having lots more future mini-emergencies that will eat that money up - just wanting to be sure you have plans to return it rather than think it's a one-time deal.!

Thank you so much for saying this. I had not thought ahead that far. Right now I am setting the foundation (that's the way I'm looking at it). Get the EF (or mini EF) set up and leave it alone (this tax refund is not expected for anything but my use)...that is an important part of my being able to get sleep at night. This is probably emotional saving but it is money put away that I'd not even considered before. This is the first step for me. Thank you though I need to go back and re-think the 'budget'

On the tax-deductions (sorry if I appear to be poking the bruise but DH was similar to your thinking in this vein for a number of years)...have you researched the consequences of not being able to pay your tax-bill?

IF you reduced your deductions and got more income and perhaps came up short, WHAT EXACTLY HAPPENS? Will they take your birthday away?

It seems odd that one would be willing to owe other people money and not be able to keep current on certain debts (hopefully all past for you), but not the government?

I'm not sure I follow the logic...but, have you done the research? I haven't -- so not sure I know the exact answer but I'm assuming if you came up a few hundred short, you'd be able to make payments to the government the same way you do to Sears.

If that isn't accurate, then have you followed up on the link that is here in one of these threads on checking the government's own website and their calculations as to what someone making your income could conceivably owe and then coming out a few hundred long where you do get a small refund back, just not such a huge one? (This is what we did. Then I monitor it thru the year to be sure we are on track to meeting the projected tax.)

Have you actually talked to someone in your payroll department or human resources about how to get more dollars in the paycheck and yet not owe any additional taxes?

Good on you for sticking to it!

As much as I understand that this will give me more money during the year I'm afraid of a couple of things:

1) that the extra money in my paycheck will be spent foolishly
2) that I will owe money to the government at the end of the year and not be able to pay...thus putting me in financial problems with the government which is far more reaching than any creditor

Once I feel more financially savy, once I have money in the bank and feel a little more secure, once I have some of my debt paid down and have more room to breathe (I'm getting there, much better now than when I was approx. 6 months behind on my car payment) I will re-think this. Right now I'm simply not comfortable with this option. I will work around it for now. I'm sure this will be a thorn in everybodies sides and it will continue to come up so I can't ignore it forever. But right now I'm not comfortable with the idea of not getting that refund back.

[kv968]

As much as I understand that this will give me more money during the year I'm afraid of a couple of things:

1) that the extra money in my paycheck will be spent foolishly
2) that I will owe money to the government at the end of the year and not be able to pay...thus putting me in financial problems with the government which is far more reaching than any creditor

Once I feel more financially savy, once I have money in the bank and feel a little more secure, once I have some of my debt paid down and have more room to breathe (I'm getting there, much better now than when I was approx. 6 months behind on my car payment) I will re-think this. Right now I'm simply not comfortable with this option. I will work around it for now. I'm sure this will be a thorn in everybodies sides and it will continue to come up so I can't ignore it forever. But right now I'm not comfortable with the idea of not getting that refund back.

I am totally all for someone feeling comfortable with their investment decisions because if they aren't, they won't stick to their plan. However I must admit in this case, you're really stacking the odds against you. You could free up quite a bit of monthly money by reducing your huge refund at the end of the year. But if this is what you feel comfortable with, I guess you'll just have to work around that. Regardless, always keep it open as an option.

Your #1 reason I understand because a lot of people get that extra money but it ends up doing no good since they just blow it on something else. However, as been stated by other posters, you could set up some sort of automatic saving/bill paying account using that extra money. That would help because you wouldn't even really see it.

You're a long way from your #2 reason becoming a reality though. With that big of a refund, you could safely get at least an extra $300/month and still get a check at the end of the year. But again, this is all up to you.

[timetosave]

I am totally all for someone feeling comfortable with their investment decisions because if they aren't, they won't stick to their plan. However I must admit in this case, you're really stacking the odds against you. You could free up quite a bit of monthly money by reducing your huge refund at the end of the year. But if this is what you feel comfortable with, I guess you'll just have to work around that. Regardless, always keep it open as an option.

I hope I'm not stacking the odds against myself. I think I've bettered the odds since coming here. I have come a long way. The decisions I've made in the past few months of being on this board were all based on my level of 'comfort' I've gone from being behind to being totally caught up on current bills debts and starting the new year putting away money in a Mini EF. I was able to stick with my plan because it did not hurt (mentaly as well as financially). I will keep an open mind about the change, it might happen some time this year...it might not, but it is not going to derail me in anyway from achieving my goals.

Your #1 reason I understand because a lot of people get that extra money but it ends up doing no good since they just blow it on something else. However, as been stated by other posters, you could set up some sort of automatic saving/bill paying account using that extra money. That would help because you wouldn't even really see it.

I was about to type how this wouldn't work but as I was typing it dawned on me that this would indeed work...I need to look into this more...maybe I am closer to chaning my deduction...

You're a long way from your #2 reason becoming a reality though. With that big of a refund, you could safely get at least an extra $300/month and still get a check at the end of the year. But again, this is all up to you.

I will look into this.

Thanks

[LuxLiving]

I understand Time To Save that you are wanting to allow yourself some time on this new track record you're building!

It IS good to get stable footing and know that you've got yourself under control and still have usuable oxygen before jumping back in the water for the next step.

Just remember (and I think you're getting it) that the folks on here are truly trying to help you...and the logic from many people who are currently on a decent financial footing are advising the same course of action.

We don't want to owe the government any more than you do....we'd just love to see you flying free towards your goals with as much wind in your sails as you can legally get! And ONE of the ways we got to that sound financial footing was when we saw we were facing the precipice BECAUSE we were being overly generous to Uncle Sammie was to back off on that generosity. Yea, give him his due, but no more!

Of course you already know this -- but the way most successful people get that way is to copy those that are already being successful. To reiterate what others have said is to get some of these payments taken care of/and do away with the idea of frivolous mistakes is to make them automatic.

Auto-draft -- It was scary to me at first. I thought there was no way we could set our payments on automatic - fears of bounced checks kept waving it's ugly head. BUT, when I did get a bit ahead (where you are now with the large tax refund lump) I set it up and it's been ticking along fabulously now for quite some time. Amazing what we can do when we just trust BUT verify. Direct deposits along w/auto-drafted payments WITH MONITORING is a wonderful thing.

Does your bank allow you to go online to monitor your accounts?

Hang in there girl, you are getting it!!!

[kv968]

I hope I'm not stacking the odds against myself. I think I've bettered the odds since coming here. I have come a long way. The decisions I've made in the past few months of being on this board were all based on my level of 'comfort' I've gone from being behind to being totally caught up on current bills debts and starting the new year putting away money in a Mini EF. I was able to stick with my plan because it did not hurt (mentaly as well as financially). I will keep an open mind about the change, it might happen some time this year...it might not, but it is not going to derail me in anyway from achieving my goals.

I've read through all the posts and you've come a long way. I applaud you for that I didn't mean that coming here was stacking the odds against you. I meant that by not freeing up some of those overpaid taxes throughout the year, you're just making it unnecessarily harder on yourself to pay debt and start saving, that's all.

[disneysteve]

Once I feel more financially savy, once I have money in the bank and feel a little more secure, once I have some of my debt paid down and have more room to breathe (I'm getting there, much better now than when I was approx. 6 months behind on my car payment) I will re-think this. Right now I'm simply not comfortable with this option.

I will keep an open mind about the change, it might happen some time this year...it might not

I was about to type how this wouldn't work but as I was typing it dawned on me that this would indeed work...I need to look into this more...maybe I am closer to chaning my deduction...

I think the absolutely most important thing is what you've expressed here. You are open to change. You are willing to look at things differently than you have looked at them in the past. You are willing to consider new ways of doing things. With that attitude, you WILL succeed. You didn't get in your current situation overnight and you won't get out of it overnight either. If a few months from now, things are much more stable, as I think they will be, you will probably feel much more comfortable adjusting your witholding at that point. That sounds like a great plan to me.

[greedy4chips]

I haven't checked in on you in a few months. It looks as if you are getting a little bit ahead of your debts by working on your budget and prioritizing your debt payoffs.

When we were in debt a few years ago we used our big tax refund and changing our deductions as a real "magic pill" that helped our situation immensely. We had a 9k+ return and another $750 by changing our deductions to 11 (which is what we actually were allowed by the calculations).

I understand that this may not be what you want to do, but it is just an example of what worked for us and many others.

Cornell University is a very lofty goal for anyone at approx. $25,000 per semester for undergraduates. Even if you could save $1000 per month for the next 5 years with a 10% return you would only have enough saved for perhaps 3 semesters. So by those numbers she would have to have a large student loan debt when she graduates, of around $125,000. Of course any grants would reduce this amount and also any scholarships.

There is good news though, she has time on her side. She needs to start looking into what grades are necessary to get admitted to Cornell (very good ones). What scholarships she could qualify for and what she could do to qualify for others. Many scholarship recipients do community service type work, which always looks great on any application. She should start applying for scholarships now. The reason is simple, she will gain a lot of experience writing essays for the applications and as she begins to win some of them she can see what seems to work and what doesn't seem to work.

Just so there isn't any confusion about how I worded my post, I am just stating what I have read as good path to take when trying to finance college.

I also see you having the vehicle paid off completely in 14 months if your numbers are correct and you do the changes to your W-4 to fully maximize your take home. You could put $1500/month towards that badboy and then when the balance is $0 you will have that $1500 to put towards college or other debt in whatever fashion you choose.

I have a great theory on debt...shoot whatever comes down the road first. Retirement is the furthest off and you wouldn't be the first person to wait until late in life to start socking away money for it. DDs college expense is the next farthest off and if you had more time I would say the growth of starting to invest for it now would pay off, but IMHO you just don't have the financial position to attack everything and do it properly.

Money put into paying off the vehicle can always be recouped by selling the vehicle in an emergency. Money put into certain investments may not be available without penalties or loss of value (vehicle too).

Good luck with whichever path to debt relief you choose!