Help Me Stop My Financial Bleeding-Please!

**skydivingchic** · 09-23-2008, 09:37 AM

Car Insurance - Why is this so high? I have full coverage insurance on a RAV4, full coverage on a Honda Shadow motorcycle, condo owner's insurance, AND disability insurance for less than that. Shop around.

Food - is that for 1 person? If so, there is lots of room to cut there. My grocery budget is around $350/month for 2 adults in a high cost of living area. That includes cleaning supplies and paper goods and I know that I could cut down with minimal effort.

The kickboxing/jujitsu could go or be cut down if you are serious about getting out of debt.

I would recommend taking all but about $1000 from your EF and putting it onto the LOC. That would leave you with about $5200 total worth of debt to pay off with whatever extra you can come up with. I would also stop the $150/month mutual fund contribution until this is cleared up.

**glock35ipsc** · 09-23-2008, 09:48 AM

This is what I would do if it were me:

Use all but $1000 of your emergency fund, and sell your mutual funds, and pay off your LOC. There will be about $750 or so left on it.

Then:

1] Give up Kickboxing/Jiu-Jitsu for < 6 months
2] Stop contributing to the Mutual Fund
3] Stop contributing to the Roth IRA
4] Cut out the entertainment for < 6 months

That, on top of you credit card payment of approx $66 a month will give you around $750 a month. Pay off the rest of the LOC.

Then with that $750, plus the $150 you were paying on the LOC, and ANY extra money you come up with beyond this, the credit card should be paid off in about 3 to 4 months.

THEN:

Put that monthly payment that was used to pay off your credit cards to build your emergency fund back up to where you have about 6 months expenses saved up.

THEN:

Start fully funding your Roth IRA ($416/month). Then you can put any extra you want back into your mutual funds.

It is entirely possible for you to be completely out of debt before the end of the year.

**** EDIT: Forgot to add - see about raising the deductibles on your car insurance to lower the monthly premium.

And you can probably lower your food costs a great deal if it is just you. Even it it is for two.

**glock35ipsc** · 09-23-2008, 09:53 AM

One more thing: Once you have no debt, and your emergency fund has enough cash to cover 6 months of expenses, you will have no need for the LOC or CC.

**noppenbd** · 09-23-2008, 10:04 AM

I see the biggest problem here is planning around irregular income. What I would do is plan fixed costs around the lowest check amount. If that is $1081, that works out to $28K a year, or $2340 a month. Your fixed expenses (not including the entertainment, Roth, or mutual fund) are $2370. I am assuming $1081 has 6% 401k contribution built into it.

On a strict budget you should be able to set aside $1081 each paycheck to just cover your fixed expenses. This should be put in an account which you cannot easily touch but is used for paying fixed monthly expenses.

When your paycheck is higher than $1081 you can allocate the extra to debt and entertainment. Keep entertainment as small as you can (maybe $200-300 a month). Take this out as cash and spend as you go. When entertainment cash is gone you are done for the month. Take the remaining extra and apply it to debt (starting with LOC, then progressing to CC). You should be able to pay down all the debt very quickly. Assuming the car loan is a reasonable interest rate, once debt is paid down you can either raise the 401k contribution or resume contributing to Roth and/or mutual funds. I would make sure you are maxing Roth before investing in taxable mutual funds.

**glock35ipsc** · 09-23-2008, 10:06 AM

Man, wouldn't it be good if I could lay out all my thoughts at once? LOL!

As far as your budget goes, start out with the necessities first. Food, utilities, rent, fuel; just the bare necessities. Have it spent on paper before you spend the money.

Once your debt is gone, budgeting will become a lot easier.

Do you make a base amount, or are you strictly commission?

**jIM_Ohio** · 09-23-2008, 10:12 AM

Originally posted by MaverickSB View Post

Hello-

My base salary is 33k annual (gross). Commission makes my annual around $70k annual.

Rent: $850

Car Payment: $260

Car Insur: $170

Kickboxing/Jiu-Jitsu: $190

Cell/PDA: $105

LOC Loan: $150

Utilities: $85

Food: $320

Gas: $240

Roth Contribution: $100

Mutual Fund Contribution: $150

Entertainment/Misc: Whatever is left over. I try to put away an additional $200-$300 a month.

Savings:

401k: $5,600 (contribute 6% of checks, amx of company match).

Roth IRA: $1,500

Mutual Fund: $1,100

Emergency Fund: $5,540

Checking Account: $350

Don't cash anything out of an IRA. I would liquidate emergency fund and pay off the debt NOW, then look for ways to rebuild the EF using some logic.

I would group monthly bills into three categories- what you NEED to pay every month, what you NEED to pay every year and what is optional.

Examples- the bills in blue are required each month. I had $2220 as the monthy required (assuming LOC is paid in full).

I have 1081 as minumum income. It is tough for you to live on minimum, so I would cut the expenses listed in Blue until you can live on 2162 per month take home.

When you get a high paycheck, you need to contribute to the IRAs and the savings (the green text above). Make sure any large paycheck has 50% set aside (50% above the 1081); so if you make 3k, 3000-1081=1919, so save 50% of 1919=$960. The other 50% you can use for optional purchases.

IRAs get funded out of the 50% of the required expenses from the larger paychecks. EF should get replenished and be at least 6 months expenses, probably closer to 12. I would consider layering the EF. What I mean by layering is keep around 3 months expenses in cash, then put another 3-12 months expenses in a moderate investment which year over year returns more than cash (a 40-60 balanced fund for example). Keep the 2nd layer of emergency fund conservative. You just want it to earn 5% when the cash is earning 2.5%. If you lose your job or times get tough, you need something which historically preserves its value. I use PRPFX, other suggestions include Vanguard Wellesley and T Rowe Price spectrum income RPSIX.

I own both RPSIX and PRPFX for various reasons in various taxable and IRA accounts.

70k annual income
make sure 20% of this is set aside each year. 15% should be in retirement accounts (10500 per year) and 5% (3500) should go into savings (EF, layer 2 EF or other savings).

If you need a car, look at the 5% and layer 2 EF. Maybe you increase contributions to this portion of account when you need a car, then cash out a portion to make the purchase.

Stop financing things. On such variable income, if you make your "minimum" any higher, you will find it tough to meet all your expenses, which will make it tough to save.

In addition you probably want to transition bills so IRAs are included in the required part of budget (meaning cut expenses enough to max IRAs from 1081, not the bonus checks).

**MaverickSB** · 09-23-2008, 10:18 AM

Originally posted by skydivingchic View Post

Car Insurance - Why is this so high? I have full coverage insurance on a RAV4, full coverage on a Honda Shadow motorcycle, condo owner's insurance, AND disability insurance for less than that. Shop around.

****I just turned 25, so hopefully this will go down. I forgot to mention I only pay 9 months out of the year. My deductible is $1,000. The car is a 2001 Lexus IS 300.

Food - is that for 1 person? If so, there is lots of room to cut there. My grocery budget is around $350/month for 2 adults in a high cost of living area. That includes cleaning supplies and paper goods and I know that I could cut down with minimal effort.

******I see this all the time!! I can't figure out how to do it! What is everyone buying that is less than $350? I am training for competitions in kicboxing/jiu-jitsu, and am on a strict diet on chicken, fish, fresh fruits, vegatbles, and whole wheat grains. I only drink water and some coffee/tea, but thats all free at the office. Advice on how to eat healthy for much less would be awesome!

The kickboxing/jujitsu could go or be cut down if you are serious about getting out of debt.
***I train and compete. I hate my job, its one of the few things I look forward to at the end of the day, so this can't go. Its expensive, but I stay in at night to compensate. Plus, I committed for a year.

I would recommend taking all but about $1000 from your EF and putting it onto the LOC. That would leave you with about $5200 total worth of debt to pay off with whatever extra you can come up with. I would also stop the $150/month mutual fund contribution until this is cleared up.

****Thanks!

**Bimmer** · 09-23-2008, 10:19 AM

First and foremost, monitor your spending!!!!!!!!!!!!!!!!!! Kick the shopping habit, eating out, clubbing, chips and soda at the gas station or whatever it is where you lose track of spending.

Car insurance seems high. I insure three vehicles, including an older, red BMW coupe (not insurance friendly) for around $100 a month. Shop around.

Anyway to reduce gasoline costs? I assume entertainment for you means going out to places for fun/shopping/eating/etc. Try to limit that.

Stop the mutual fund payment, probably stop the Roth or at least reduce contribution. Apply to debt.

Kickboxing- maybe give up for awhile and downgrade to a regular gym membership for staying in shape? That's quite a bit of money. Unless this is your passion/favorite hobbby/social life center then I have more understanding in keeping it.

**MaverickSB** · 09-23-2008, 10:32 AM

Originally posted by glock35ipsc View Post

Man, wouldn't it be good if I could lay out all my thoughts at once? LOL!

As far as your budget goes, start out with the necessities first. Food, utilities, rent, fuel; just the bare necessities. Have it spent on paper before you spend the money.

Once your debt is gone, budgeting will become a lot easier.

Do you make a base amount, or are you strictly commission?

I make a base, 33k...so afetr taxes its $1081 every 2 weeks.

**glock35ipsc** · 09-23-2008, 10:35 AM

Originally posted by MaverickSB View Post

I see this all the time!! I can't figure out how to do it! What is everyone buying that is less than $350? I am training for competitions in kicboxing/jiu-jitsu, and am on a strict diet on chicken, fish, fresh fruits, vegatbles, and whole wheat grains. I only drink water and some coffee/tea, but thats all free at the office. Advice on how to eat healthy for much less would be awesome!

Buy in bulk! My wife and I both weight train - I am eating just over 5000 calories a day currently, she is cutting getting ready for a figure competition. A weeks worth of chicken breasts is about $7-$8 at WalMart. Look for farmers markets in your area for cheap fruits and veggies. A Whole Foods-type store (they are expensive, there are others, just using them as an example) is great for buying quinoa, oats, rice, couscous, etc on the cheap in bulk.

If you really want, you can be out of debt by year's end. Go back and check my first post (post #3).

**MaverickSB** · 09-23-2008, 10:37 AM

Originally posted by glock35ipsc View Post

Buy in bulk! My wife and I both weight train - I am eating just over 5000 calories a day currently, she is cutting getting ready for a figure competition. A weeks worth of chicken breasts is about $7-$8 at WalMart. Look for farmers markets in your area for cheap fruits and veggies. A Whole Foods-type store (they are expensive, there are others, just using them as an example) is great for buying quinoa, oats, rice, couscous, etc on the cheap in bulk.

If you really want, you can be out of debt by year's end. Go back and check my first post (post #3).

I don't have a Wal-Mart here (sucks, cause we have one in my hometown). We also don't have whole foods, but do have Gelsons/Lazy Acres. I usually just go to Vons, and the farmers market....

I'll try and hit up Costco for the meats and see if this reduces costs..

**boosami** · 09-23-2008, 12:38 PM

Is your commission regular enough to equate to ~$10k a quarter, or is it skewed? Normally, when you make a significant part of your annual pay through commission, you have to get ahead of the 8-ball to avoid using credit to fill in the gaps.

For example, if you can regularly count on $10k quarterly, you want to be in the position that you have $10k already saved up at the beginning of that quarter. Through the quarter, uou use that money to supplement your regular income, and replenish the fund with commission checks as they come in. That way you're not charging up a LOC and having to use all your commission to pay it off, which has too much of a chance to carry a balance through it all.

I'd focus on cutting expenses mentioned above, getting out of debt, and building your own "personal line of savings" until you get a quarter (or whatever unit of time) ahead.

**Seeker** · 09-23-2008, 11:17 PM

Originally posted by MaverickSB View Post

7/30: $5995

8/15: $1,081

8/30: $2200

9/15: $1,081

Sept 30th should be $2,700 after taxes.

Wow -- that's quite a fluctuation. Sales aren't probably very reliable right now, I can see a downward trend in your last few paychecks.

If I were you, I'd see if I could get a second part-time job -- inventorying maybe (night time work) or computer data entry or anything readily available in your area that you believe you'd have the energy for after a day of selling.

**glock35ipsc** · 09-24-2008, 05:20 AM

If you figure up just your necessities (I included your cell, since you are in sales), that comes to $2180. That is not including BJJ, Roth and mutual fund contributions, and entertainment. You say your base income is $2162.

If things went to hell for a couple of months, you don't make enough in your base salary to cover the basics. I would hope things don't get that bad, and they probably won't, but I like to plan in terms of worst case scenario, then when things go better than bad, I'm in good shape!

You have the ability right now to be completely out of debt by the end of the year. You could then fully fund the Roth each month ($416) and have money left over.

Bust your butt to make an extra sale or two for the next 3 months, and you will be home free!

Help Me Stop My Financial Bleeding-Please!