Help with my budget

[disneysteve]

I don't understand how my income can be "too low" and maybe someone here can explain it in a way that makes sense to me. I make $43,000 a year. I'm certainly not getting rich, but that doesn't seem low to me. My brother makes less than $30,000/year and he's raising THREE kids on his own and seems to be doing just fine. I've got friends who make $10/hour and drive nice cars and go out to eat almost every day and have $200/month cable TV packages. My closest friends have a combined income that's about the same as mine. They also have a two-year-old, but their house is much nicer (and bigger) than mine, they have two car payments, and it seems like they're always buying the latest gadgets. People live on minimum wage (my mother did it raising my brother and I), so how could my income be too low at $43,000 per year?

I can absolutely guarantee that the people you describe are not doing nearly as well as you think they are. They likely have zero savings. They are unlikely to be contributing to their retirement plans. They are almost certainly up to their eyeballs in debt and probably even have things in collections for failure to pay.

Think about it. How can someone making $10/hr pay a $200/mo cable bill?

There is nothing wrong with your income. At 43K, you are only a bit under the national median. The problem is that your lifestyle and spending habits need to match your income. That's where your problem lies. You are spending as if you earn more than you do, which I assume is because your household income was higher prior to losing your wife. Now you are stuck with some things like the car and mortgage that aren't so easy to get out of.

[maat55]

[QUOTE]

Thanks for the responses so far! I need all the help I can get so I appreciate the suggestions. To answer a couple of questions:

1. I realize the car payment is high, and I wish I could get rid of it. The car was purchased a few years ago when my wife's income added another $2500/month. We only needed one car so we traded in our two cars for one really nice one. I can't afford it on my own, even after the payment was lowered, but I don't know what to do about it. I owe another $15,000 and it bluebooks for around $11,500 private party and $10,000 trade-in. Either way, I'd take a hit of $4-5k and I don't have that much in savings to cover the difference.

Who holds the note on the car?

You need to talk to your auto lender and inform them you wish to sell the car and refi the difference with them.

Then you could go to your bank and borrow enough to buy a much cheaper car. You may not lower your payment shorterm, but the idea is to lower your debt and shorten your term.

[Hector]

Car loan is 15k and car’s market value is 10k.
People know about car loan, is it possible to
Sell this car, Get 10k, Pay 7k towards car loan, Buy a used car worth 3k or so
OP still owes 8K to bank, but his payment will be down to 50% or so and it will likely to bring car insurance down????

OP, did you ever think about having garage sale? Get rid of all the things that you don’t need and pay that money towards car loan. Also get to the cheapest cell phone plan ASAP. I personally think $35 a month for pet food is a luxury in your current situation. You might wanna think hard about it.

I am impressed that you are not neglecting the reality and willing to work towards being debt-free. Good job. I know its tough but you are on the right path.

And yeah, don’t think a lot about people around you. About how they can afford all these? In America, because of credit card and other available loans, people often buy a lot more things than they can afford. You cant see their real financial health by observing them from outside. These people are likely to have no retirement and/or savings and once they stop getting paycheck their word flips upside down. And later it happens, its wrost!

[jpg7n16]

I've been working on my degree. I graduate at the end of this month. I only had two terms left when my wife died and I already had a big student loan debt at that point, so after taking some time off I decided to go back and finish.

Dang man, sorry to hear that.

So I looked at your numbers a bit... how in the world is your paycheck only 2525? 43k a year is $3583/month. 2525 means that they are holding out 30%. You should be filing as head of household, and only be in the 15% bracket. Not even counting how your income will be much lower due to all the exemptions, and deductions you'll get to take.
2010 Tax Rate Schedules: Marginal Ordinary Income Tax Brackets for Year 2010

Do you get a huge refund at the end of the year?? How much are you deferring to your 401k? You should have another 15% at least in each and every paycheck.

(1-.15) * 43,000 = $36,550 = $3,045.83 <--this should be closer to what you should get paid

Could you use an extra $500/month?? Talk to HR and change your withholdings...

[gallan]

Could you use an extra $500/month?? Talk to HR and change your withholdings...

Sorry to sound like a complete idiot, but how do I do that? I'm paying what I've always paid in taxes. I got a $3000 refund this year, which I used to pay off the last of the credit card debt and get a little into savings. I just thought that was normal. I've always gotten a big refund.

[b4freedom]

Sorry to sound like a complete idiot, but how do I do that? I'm paying what I've always paid in taxes. I got a $3000 refund this year, which I used to pay off the last of the credit card debt and get a little into savings. I just thought that was normal. I've always gotten a big refund.

Getting a $3000 refund is giving uncle same an interest free loan while you can't make your bills and run up the credit card. Talk to HR and have them change your forms so that you bring home more in each pay check and then get a smaller tax return next year.

[b4freedom]

Do you get a huge refund at the end of the year?? How much are you deferring to your 401k? You should have another 15% at least in each and every paycheck.

(1-.15) * 43,000 = $36,550 = $3,045.83 <--this should be closer to what you should get paid

Could you use an extra $500/month?? Talk to HR and change your withholdings...

This is good advice. However, there will be other taxes as well. And,3000/12 = 250.

[jpg7n16]

Sorry to sound like a complete idiot, but how do I do that? I'm paying what I've always paid in taxes. I got a $3000 refund this year, which I used to pay off the last of the credit card debt and get a little into savings. I just thought that was normal. I've always gotten a big refund.

It all has to do with your W-4 which is the responsibility of HR/payroll.

It's called a "refund" because each paycheck when you "pay" your taxes, you've paid too much - so you get a "refund." Most HR departments will withhold too much, because people psychologically feel better about getting a refund than having to pay extra.

Use this W-4 calculator at irs.gov to figure out what your form should say:
IRS Withholding Calculator

If you had your taxes withheld perfectly, your refund would be $0.

[jpg7n16]

This is good advice. However, there will be other taxes as well. And,3000/12 = 250.

Yeah I forgot the SSI taxes oops! (1-.15-.0765) * 43,000 = 33,260.5 /12 = $2771.71

2771.71 - 2525 = $246.71 and the deductions/exemptions will make that slightly higher.

[b4freedom]

Look at this graph: http://www.threesources.com/pix/impl...0rates%202.png


I didn’t create it. It’s not the one I was looking for, but it will illustrate the following point.

You’re in a financial trap. It’s the trap right above poverty and right below lower middle class. (The graph is older and for a family of 3. With a newer graph showing a family of 2, I'm certain you'd be included.)

See, this is my main source of frustration. I don't understand how my income can be "too low" and maybe someone here can explain it in a way that makes sense to me. I make $43,000 a year. I'm certainly not getting rich, but that doesn't seem low to me. My brother makes less than $30,000/year and he's raising THREE kids on his own and seems to be doing just fine.

I don’t know what state you live in, but take a look at this page: Department of Human Services | Welfare Services

Do you think you qualify for any of those services? Take a look: http://www.state.nj.us/humanservices..._chart0410.gif


At $43,000/year with 1 child, you probably don’t qualify. But, you’re brother who makes $30,000/year with 3 kids does qualify. What are all of those services worth? What is free day care worth? Food stamps? Etc.? Do you think your brother pays taxes? He probably pays no federal and very little state.

You make too much money to qualify and you are paying taxes. You’re in the trap, that dip, between poverty and lower middle class. It’s hard to get out of that dip, and most people don’t get out. One bad decision or unfortunate event and they are back down. It’s actually worse then living paycheck to paycheck. Your costs of “surviving” probably exceed your income. You have no emergency fund, no safety net.

But! But! But!

You should make more money. If you want out of the poverty trap, you need to make more money. However, making more money won't solve all of your financial problems either. It'll help. But, you'll need to get an education about money. I’d suggest reading more personal finance articles, going to the library and picking up a personal finance book. Start basic, work your way up. Find things that work for you. This site is a good starting place to learn. Learn what the rich and upper middle class do with their money versus what the poor do with theirs. There is a big difference.

I've got friends who make $10/hour and drive nice cars and go out to eat almost every day and have $200/month cable TV packages. My closest friends have a combined income that's about the same as mine. They also have a two-year-old, but their house is much nicer (and bigger) than mine, they have two car payments, and it seems like they're always buying the latest gadgets. People live on minimum wage (my mother did it raising my brother and I), so how could my income be too low at $43,000 per year?

All of your friends are either poor or lower middle class. Ask them how they do it. How much credit card debt do they have? How about their mortgage? Is it interest only? Etc. I think you’ll find that they aren’t as well off as you think they are. They’re just trying to keep up with the neighbors; trying to put on a big show. But, they’re still poor and lower middle class. You need to start looking at the longer term, larger picture, and not the one next door.

Summary: You’re not making enough money to get out of the trap. But, you’re making too much money to qualify for help. Dead zone.

[Bryan Cooper]

Double check your current tax withholding. I work with folks on their budgets and find that many times they have enough money if they just change their tax withholding. It is better to have that money every paycheck instead of getting that big tax refund the following year. Good luck. Bryan

[Moonblossom]

Do you or your son get SS since your wife has passed away? Can you ask for hardship deferal? I would stop cable,internet, lower cell phone plan and stop saving for your son until your income goes up which I would think would happen when you graduate correct?