My Budget

[hamchan]

Hi there. I'm new to the boards but have been reading a lot. DH and I have been married since August of last year. I also have a 13 yr old daughter from my first marriage who lives with her dad for most of the year.

DH has a lot of health issues which unfortunately aren't really responding to the usual treatments and lifestyle changes like they should be. He was just in the hospital a few weeks ago and we found out he has congestive heart failure and was going into kidney failure. He has also been diabetic for about seven years and lost his vision about five years ago. He's had seven surgeries on his eyes and he can now see a very small amount but is still legally blind. He is only 37 and takes very good care of himself, so that all rather sucks. But anyway, we are trying to get our finances in better order.

We've done a spreadsheet, changed a few things to get them as low as we can or are willing to. We figured out that unless one or both of us misses more than a day or two of work each month we should be bringing in no less than $4450, so that is what we based this budget on. Depending on things like performance bonuses and how busy we both are our combined take home income could be as much as 5500. Most months it winds up somewhere near the middle. So I figured that anything over the 4450 we could just split between debt and savings, and once the debt is paid off just put it into savings.

This budget does not include DH's 401K, $20 a pay period into his HSA, life insurance and medical insurance for all three of us, disability insurance and a bus pass for DH. All of those are withheld from his check. Also some categories go up during the summer when my DD is here, but I also don't pay any child support during those months, so it basically evens out.

Rent 960

Cell phones (3) 150

Electric 60

Cable/Internet 100

DD's plane tickets 210 (3 flights a year from Alaska which range from 700-1100 RT)

Bus/Train Fare 100

Child Support 298

Student Loan #1 60 (minimum is 54, approx 1100 remaining)

Student Loan #2 110 (minimum is about 106, approx 4650 remaining)

Student Loan #3 90 (minimum is 89, approx 7500 remaining)

Massage Studio Rental 135

Professional Liability Insurance 17

Short Term Disability Insurance (me) 38

Required Continuing Ed Classes 20

Professional License Renewal 10

DH's Gym Membership 23

Netflix 9

Rhapsody 17

Science Museum Membership 9

Groceries (includes household, personal care, OTC meds) 400

Laundry (coin op) 20

Pet food and supplies for a small aquarium and two cats 60

Entertainment 50

Medical 100

Gifts 50 (includes Xmas so this might need to go up some)

Haircuts 60

Massage Therapy (medically necessary) 50

Misc 100

Personal Allowances 150

IRA account (mine, just starting it so no balance yet) 200

Emergency Savings 150 (At this time we have 100 in the account because of DH's hospitalization.)

Hospital/Urgent Care Bills 150 (should be no more than 2000, but we haven't gotten all of them yet)

Back Taxes 200 (minimum is 50, approx 700 remaining)

Credit Cards 144 (minimum is 50, approx 650 remaining, and should be paid off by end of June because work is reaaaallly busy until the end of Sept)

DD's College Savings 50

Short Term Savings (for DH's personal trainer certification right now, also new and has no balance yet) 100

[shaggy]

Sorry to hear about your husband's health issues.

My only comment would be to look more carefully at the entertainment categories. Netflix + Rhapsody + museum + cable + Misc + Personal Allowance is a lot of "fun money" per month, IMHO.

If you feel your budget is already tight, have you considered ways to bring in more money?

[hamchan]

I don't feel our budget is particularly tight at this moment. I am already working full time as a massage therapist and another 12-13 hours a week doing nails. DH is planning to do personal training part time in addition to his full time job once he gets certified (should be able to do that by then end of this year).

We already cut our cable and internet package down by $50 a month and downgraded our Netflix as well. We could cut these things further if we HAD to, but I'm not really feeling like we have to right now. The entertainment budget basically just goes toward eating out at restaurants and maybe two movies a year, and the personal allowances usually go to occasional lunches out at work, cosmetics, clothing, DH's vitamin supplements, eyebrow waxing, stuff like that. We have also cut our food/grocery budget massively in the last month. We used to eat out and buy sandwiches and salads at the deli all the time. We have started cooking at home a lot more.

Mostly where I get confused is how to prioritize our debt payments and savings. On average we have around 1300-1500 a month to put into these categories, but I never know how much should be going where. Last month I put 1260 toward getting four other credit cards paid off, plus half of a fifth one. But I only put 100 back into emergency savings.

[hamchan]

Oh, forgot to say that the misc fund is not fun money either. It's meant to cover replacing things as they break or wear out and other necessities that come up like driver's license/ID renewal, reimbursing DD's dad for various expenses, stuff like that.

[shaggy]

I'll be honest with you: If I had debt, I would cut my discretionary spending to the bare bone in order to get the debt paid off. I'm kind of allergic to debt; I paid off 60k in grad school loans in under 2 years, and it wasn't fun doing it.

If you're not willing to make further cuts to your discretionary spending, I'd do a 50/50 split between savings and debt repayment. having a bit in savings could help you out when you have an unanticipated expense; you could pay cash rather than adding to your debt. Hope that helps.

[hamchan]

I like getting debt paid down quickly too, but I'm not the only one in my home who makes these decisions, and relative to what we're bringing in the debt we have isn't enormous, I feel. It feels very manageable and I see no reason why we couldn't have everything aside from the student loans paid off by the end of the year, without sacrificing any more discretionary spending, and still be able to put a good amount into savings.

I burn out fast if I don't have any flexibility in my budget to go to a restaurant or buy a magazine here and there. For basically all of my adult life I have done it out of necessity, and I'm done. I'm tired. My husband realistically is not going to reach retirement age and I don't want to spend every moment working or put every dollar into savings that he will never have the opportunity to enjoy. There needs to be a balance for me.

[riverwed070707]

So what is your intent in posting this? Clearly you are not looking for feedback on ways to cut spending. Did you have a question?

[hamchan]

How do I prioritize savings vs. payments on debt? Which debts should I pay off first? Should I be allocating my savings differently? Is there a category I am missing that I haven't thought about?

[disneysteve]

Mostly where I get confused is how to prioritize our debt payments and savings.

I think you are trying to do too many things at once so you feel like you aren't making progress.

I would stop paying extra, even $1, on everything except the tax debt. Get that paid off ASAP.

Next I'd focus on the credit cards and get those paid off. After that, I'd do the student loans paying the minimum on 2 and extra on the one with the highest interest rate. If they are all at the same rate, pay smallest to largest balance.

All of that said, however, I totally agree with shaggy. There is fat in your budget that you really need to cut to focus on the debt. Things like Netflix and Rhapsody are luxury items. Nothing wrong with having them if you can afford them, but to be paying for them at the same time you owe back taxes and credit card debt doesn't make any sense.

[bigdaddybus]

disneysteve nailed it.

I understand where you are coming from with your spouses health issues. My wife was diagnosed as at type 1 diabetic at 29 with no family history. Its been quite a journey over the last nearly 10 years since then with many ups and downs.
Its been an eye opener for us, and we definately spend more money together now that we would otherwise. But that being said, we have elected not to pay off our mortage fast and spend more now. We dont have any other debt, and by the sounds of it your debt is really holding you down.

If you post up the interest rates on each of your debts, I sure someone will post up the best payoff route for you as well as the total savings vs going down your current path. For me, that is motivating to see.

Good luck, I wish you and your husband the best

[hamchan]

Thanks Steve. That helps a lot. What about the medical bills? After the credit cards but before the student loans? Should I be putting any of the overflow into savings?

As I said before, if it were only me I'd be fine with paring down the extras some more, but DH makes these decisions too. We have already cut these expenses down considerably. I might have a long future to plan for but he is living on borrowed time. That changes priorities somewhat and I'm comfortable with that. DH uses the music he gets on Rhapsody when he goes to the gym, which he does six days a week. He says he would spend far more if he purchased the songs individually. We made the decision to cut down our cable package instead as there were tons of channels we never even watched.

In addition my DD is here for the summer and has not much to do while I'm at work. She can't leave the apartment when I'm not here. She uses Netflix several hours a day so I'd say we are getting our money's worth. I suppose we could suspend the account at the end of the summer as DH and I use it far less, but by then the taxes and credit card will be paid off, so I have a hard time getting too excited over putting another $9 a month toward debt.

[hamchan]

I have no idea what the interest is on the tax bill. I'm sure it's considerable. Until this month DH and I have been maintaining separate finances and he's been aggressively paying down the tax bill while I have been paying down the credit cards. Neither had huge balances to start with, but we want to buy a condo in the next few years so we need to free up the money we were putting toward payments so we can save up. We just opened a joint account last week and are in the process of switching everything over. Him being in the hospital has made us really reprioritize and change how we are doing things. It's a little overwhelming at times.

[riverwed070707]

Thanks Steve. That helps a lot. What about the medical bills? After the credit cards but before the student loans? Should I be putting any of the overflow into savings?

Medical bills usually have no interest. If thats the case here, I would likely pay the minimum while you continue to knock out the SLs in order from highest interest to lowest. If they are paid through the same lender, make sure they are applying the extra payments to the highest interest loan -- unless specified my lender will apply the extra to all of the loans evenly.

[hamchan]

That's a good point about there not being interest on medical bills. My only hesitation on this is that future medical bills are likely. I would hate to have to be paying on a bunch of them at once. At some point the goal is to have enough in savings at all times to cover the annual out of pocket maximum just in case all three of us get sick/injured in the same year, but I'm not sure how long that would take.

My other thought is that if something we're to happen with our income we will always have options with the federal loans, but not the medical bills. And too often when medical bills go way up it has an inverse effect on income. One of the student loans is private and that one I do want to get rid of pretty quickly.

[disneysteve]

Thanks Steve. That helps a lot. What about the medical bills? After the credit cards but before the student loans? Should I be putting any of the overflow into savings?

I would pay the debts in order from highest interest rate to lowest interest rate with the exception of the tax debt. Get rid of that first regardless of interest rate.

I have a hard time getting too excited over putting another $9 a month toward debt.

I think this is your biggest problem. You and your husband need to change your mindset about the debt. Is $9/month a lot? No. But it isn't $9/month. It is $9 for Netflix plus $17 for Rhapsody, plus $9 for a museum membership, plus $23 for the gym membership, plus $50 for gifts, plus cable TV plus college savings plus haircuts plus entertainment.... These are ALL luxury expenditures. Nothing wrong with any of these things if you can afford them. Right now, you can't afford them. You are only able to pay for them because you are holding onto your debts longer than necessary.

The bottom line is you need to decide if getting out of debt matters. Is it a priority? Right now, it sounds like it isn't. That's fine if that's what the two of you decide but you also need to realize that there is a price you are paying for not making it a priority.

Personally, I'd recommend slashing the budget for 6 or 8 months or however long it takes, get the debts cleaned up and then live within your means.