My financial breakdown - Advice, please!

[Onwards]

I recently went through a break-up, and my ex will be moving out soon. That changes my situation. Here's what it's going to be, starting November - any feedback or suggestions are appreciated!

Take-home pay: 2700/month

Expenses
Rent - 795 (small 2br house in small town)
Car payment 1 - 250
Car payment 2 - 267
*explanation about cars below
Cable - 30
Water - 35
Car ins. - 190
Cell phone - 30
Electric - 35
Trash service - 20
Groceries - 150
Gas - 150
Other (clothes, entertainment) - 150
TOTAL - 2100

Credit card debt, 2% interest until Feb: 2700

Savings, EF - none

My job is pretty secure, and I work from home. So here are my priorities:
1. pay off credit card before interest rate shoots up
2. build up EF

Here are some things I'm considering, and could really use some feedback on:
-Sell one of the cars. One car is for my mom, and she needs it, and in 2 years that'll be paid off and last another 10 (it's a toyota). The other car, I bought with the ex so he could commute to work, we wanted something reliable, but now he doesn't have a job, and I don't need something that...NEW! How do I go about selling a car that I'm still making payments on? I don't know if I'll make any profit from it, and then I'd need to buy a used car, which my lack of savings will prevent.
-Relocate. I can't really get a roommate here, small town, lots of meth heads; if I move to a nearby city, into an apartment, I can probably cut my costs by 350/month. But I'd need to save some money for moving expenses, and a new deposit, which would mean less money towards the CC. If I take it a step further and move in with a roommate in a nearby city, I can save maybe 500/month.
-Get a part time job. Probably something min. wage, I could make an extra 300/month.

How do I go about getting out of this paycheck-to-paycheck situation? There's so much to consider...any advice is VERY much appreciated.

[maat55]

You can put the car on craigslist and on corners with a sign. Go to KellyBluebook.com to get the value.

If you can move in with your friend it will help you a lot.
190.00 is a lot for insurance, you might up the deductable.
Save up a baby EF of 500.00
You might want to sit and read cheap books for a while saving some of the 150.00
You didn't list your card debt, but you can pay them smallest to largest or highest interest to lowest.

Selling a car and moving, along with getting extra work will allow you to pay down debt quickly. After debt is gone, build up 3 to 6 months EF. Invest in any 401k to the match now, if applicable. If you smoke, this would be a good time to quit. Having an EF and investing monthly, will end you living check to check.

List your cc and any other debts not listed above.

[Onwards]

Thanks, maat55; I listed my CC debt, it's $2700 with 2% interest until Feb. If I pay $600 over the next four months, I can knock it out before the interest rate jumps up.

I do have some other CC debt, which I plan on paying once I get out of this current situation:
-$500, no interest until May 2009
-$1600, no interest until Nov. 2009

I researched selling the car - since I'm still making payments on it, it's VERY tricky to sell it, because I don't hold the title yet.

The car insurance is 190 a month for two cars, full coverage (both cars are financed) and I only pay that 4 months out of every 6. So it's really more like $125 a month, if you spread it out.

I'm thinking of going about it like this: Get an extra job, pay off CC debt (the 2700 before Feb.), save mini EF, save for moving expenses and deposit.

I'm pretty good about living cheap. Most of my big expenses have a lot to do with factors beyond my control - a family illness, a financially irresponsible family member, and an unexpected breakup with someone who's in worse financial shape than I am. All of that wiped me out; live and learn. I don't smoke, and I do drive to a nearby city once or twice a week to socialize, but I don't buy drinks, I eat beforehand, and I try to carpool.

[jIM_Ohio]

You have 4 months to pay off the cc and then $600/month is freed up. Try not to make immediate changes to living situation (move, add roomate) until you know what is going on with cc paid off.

Cut out the entertainment in the mean time and the cc might be paid off in 3 months (will be close).

Once CC is paid off put the $600 into an emergency fund and look to move then.
Look to sell car and you will probably lose money on it, but cutting payment out will also free up cash.

It should be noted that you have $600/$2700 free once the debt is paid off. Meaning your situation is not bad, it just appears so because rent shot up, you inherited a car payment, and had little cash saved.

Get the debt paid off and you will have significant breathing room even if you choose to keep the car (if it is a new one- how long do payments last-it might be wise to keep the car and pay it off). Your situation is not dire, IMO.

[Onwards]

Thanks Jim_ohio, I appreciate the perspective. It could definitely be worse; I'm glad I'm not in more debt than I am, and my income is stable.

Good points about prioritizing. If I cut out entertainment, I'll end up spending that money on trips to the psychologist - I work from home by myself, and I get cabin fever if I don't go out and spend time with friends. That being said, I'll still be socializing on a budget and looking for ways to cut corners!

I think I'll apply for a part time job, locally; that'll help me get the CC out of the way, then an EF, then start saving to move. And that'll knock down my costs even further, especially if I get a roommate or studio.

The car is relatively new, got it in the summer with 20k miles on it, now it has 25k and the balance is around $11k. It might not be worth the headache of selling--that'll probably be a last resort, and I don't think I'll need to go that far.

[jIM_Ohio]

Thanks Jim_ohio, I appreciate the perspective. It could definitely be worse; I'm glad I'm not in more debt than I am, and my income is stable.

Good points about prioritizing. If I cut out entertainment, I'll end up spending that money on trips to the psychologist - I work from home by myself, and I get cabin fever if I don't go out and spend time with friends. That being said, I'll still be socializing on a budget and looking for ways to cut corners!

I think I'll apply for a part time job, locally; that'll help me get the CC out of the way, then an EF, then start saving to move. And that'll knock down my costs even further, especially if I get a roommate or studio.

The car is relatively new, got it in the summer with 20k miles on it, now it has 25k and the balance is around $11k. It might not be worth the headache of selling--that'll probably be a last resort, and I don't think I'll need to go that far.

Fair about getting out- between $150 in groceries (for one person) and $150 in entertainment, I bet you could buy a couple 12 packs, invite some people over and save money.

I do understand getting out though...
if you work from home, and find a way to own a condo, you have big time tax writeoffs coming your way. Might be better to stay put, save some money, then buy a condo.

11k owed on car, $250 payments looks to be a 48 or 60 month payment plan?

The payment looks "OK", I would consider keeping the car, lowering the insurance (does not appear you use it much for commuting) and then bank the $250 once car is paid off to a "new car fund". By the time this one bites the dust, that car fund should have enough for a new one. I'd expect to get 15 years usage out of a car which is not driven that much.

$250/month=3k per year, 8 years without payments is $24k saved for the car.

One other question- do you get a tax refund? If so, how large?

[maat55]

Call your bank and ask them to give you the title with lean and when you sell it you can meet at your bank and pay the note off and get a lean release. If you are selling below the note, you can ask for a small personal note or save the difference in cash first.

The bank may just tell you to show up with buyer and give you the title at that time.

You should still start with a baby EF. It sounds like you are determined to get out of debt. Good luck.

[jIM_Ohio]

Call your bank and ask them to give you the title with lean and when you sell it you can meet at your bank and pay the note off and get a lean release. If you are selling below the note, you can ask for a small personal note or save the difference in cash first.

The bank may just tell you to show up with buyer and give you the title at that time.

You should still start with a baby EF. It sounds like you are determined to get out of debt. Good luck.

lean is supposed to be lien

[Onwards]

Fair about getting out- between $150 in groceries (for one person) and $150 in entertainment, I bet you could buy a couple 12 packs, invite some people over and save money.

I would totally do that, if I had friends in this town, but it's a really small town. It's mostly families, and a crowd in which the average age is 21. I don't really relate to either. I might've overestimated the 150/mo in entertainment and miscellaneous, though--it's probably more like less than 100 each.

I do understand getting out though...
if you work from home, and find a way to own a condo, you have big time tax writeoffs coming your way. Might be better to stay put, save some money, then buy a condo.

Since I'm an employee, I can't qualify for those kinds of tax breaks like an indep. contractor would (unless you know of something I don't?).

11k owed on car, $250 payments looks to be a 48 or 60 month payment plan?.

The payment looks "OK", I would consider keeping the car, lowering the insurance (does not appear you use it much for commuting) and then bank the $250 once car is paid off to a "new car fund". By the time this one bites the dust, that car fund should have enough for a new one. I'd expect to get 15 years usage out of a car which is not driven that much.

$250/month=3k per year, 8 years without payments is $24k saved for the car.

Yes, 5 years. I don't think I can lower the insurance, I've already told them I barely use it. And, that's an excellent idea about saving up for another car, although at that point I might choose to put that money towards retirement instead, and depend on used cars after this one gives out.

One other question- do you get a tax refund? If so, how large?

I used to get a pretty decent one, but I only used to make 25k or so per year, before taxes. Now I make more like 45k. Taxes are taken out of each paycheck. The income taxes here in Oregon are relatively high--no sales tax, though, which helped when buying the car.

[Onwards]

Call your bank and ask them to give you the title with lean and when you sell it you can meet at your bank and pay the note off and get a lean release. If you are selling below the note, you can ask for a small personal note or save the difference in cash first.

The bank may just tell you to show up with buyer and give you the title at that time.

You should still start with a baby EF. It sounds like you are determined to get out of debt. Good luck.

I'll look into this. The only problem is this loan is financed with the bank of hawaii!!

And yes, I am determined to get out of debt. I've steered clear of debt since I went to college and I'm *very* uncomfortable with having a credit card balance! It's a good discomfort to have...

[maat55]

lean is supposed to be lien

I'm hungry, got food on the brain.

[maat55]

I'll look into this. The only problem is this loan is financed with the bank of hawaii!!

And yes, I am determined to get out of debt. I've steered clear of debt since I went to college and I'm *very* uncomfortable with having a credit card balance! It's a good discomfort to have...

Just call them and get their requiremnts for transfer.

[jIM_Ohio]

Since I'm an employee, I can't qualify for those kinds of tax breaks like an indep. contractor would (unless you know of something I don't?).

Who does your taxes? I would suggest looking into this. If you OWNED I know you could qualify for the home office deduction. I am not sure if that deduction is available if you rent.

You would need to itemize to claim this and it would not make sense to itemize unless you had more than 8k in unreimbursed business expenses or similar. But if you owned a condo, the interest would be deductable and would make you itemize to claim it, so the whole schedule A opens up, with the home office deduction one of the many deductions to look at.

Yes, 5 years. I don't think I can lower the insurance, I've already told them I barely use it. And, that's an excellent idea about saving up for another car, although at that point I might choose to put that money towards retirement instead, and depend on used cars after this one gives out.

Why can't you lower it? Ask for a higher deductable. Find another agent. I assume you are a female? $2400 in car insurance is more than my wife and I pay and we have two new cars and she has tickets on her record.

We have an insurance agent which is independant. Every 12 months it seems he switches who our house and car coverage is thru and my bill keeps getting lower without coverage changing. Find an independant agent and that should save you close to $100-$150 per month.

I used to get a pretty decent one, but I only used to make 25k or so per year, before taxes. Now I make more like 45k. Taxes are taken out of each paycheck. The income taxes here in Oregon are relatively high--no sales tax, though, which helped when buying the car.

Is the refund larger than $1200? If so consider changing w-2 so you get that $100/month in your paycheck. Get the debt paid off sooner and improve your cash flow even more.

[maat55]

QUOTE] But if you owned a condo, the interest would be deductable and would make you itemize to claim it, so the whole schedule A opens up, with the home office deduction one of the many deductions to look at.[/

COLOR]


Are you allowed to write off only a percentage of the interest and utilities based on the size of your office or the whole condo? I was under the impression it was only the square footage percentage of the office.

[Onwards]

Who does your taxes? I would suggest looking into this. If you OWNED I know you could qualify for the home office deduction. I am not sure if that deduction is available if you rent.

You would need to itemize to claim this and it would not make sense to itemize unless you had more than 8k in unreimbursed business expenses or similar. But if you owned a condo, the interest would be deductable and would make you itemize to claim it, so the whole schedule A opens up, with the home office deduction one of the many deductions to look at.

I did a little research and you're right, I can deduct business use of my home, even if I just rent. The thing about me being an employee is that I have to be able to prove that I work from home at the convenience of my employer, which I can do. Here's the IRS link: Home Office Deduction

Why can't you lower it? Ask for a higher deductable. Find another agent. I assume you are a female? $2400 in car insurance is more than my wife and I pay and we have two new cars and she has tickets on her record.

I don't pay $2400, I pay about $1500, and that's for me and my ex, who's 28. And he stays glued to the insurance policy because he cosigned for one of the cars. I don't have an agent; I use Geico. I'll look into what an agent can do for me though.

Is the refund larger than $1200? If so consider changing w-2 so you get that $100/month in your paycheck. Get the debt paid off sooner and improve your cash flow even more.

I checked, my refund was less than $1200. But an excellent idea nonetheless. Taxes pull out a whopping 28% of my paycheck. I think I need to re-examine that...Does that sound too high?