Financial Austerity

[Magic Johnson]

Okay, work is a bit slow so I'll start off with some questions. See above in red.

Also, what is the current minimum payment on the credit card. You didn't mention that.

First step here is to figure out exactly how much you're spending each month. You've given us a pretty good idea but there are a couple of pieces missing. What about auto and health insurance? Gas, auto registration, any medical expenses, any other costs you haven't listed?

There are 19 payments left on my truck. It will be paid off September 2023. According to KBB.com, the value of my truck is $11K.
The penalty for ending my phone contract early is $500.
Spend on electricity rest of year? I don't know. I just moved into this apartment on October 31.
I pay no other utilities - my landlord pays water and garbage.
If I dropped cable, and paid only internet my monthly payment would be $30
My current minimum CC payment is $37.
Gasoline - so far this month I've spent $160. In January I spent $360.
Auto registration - $170 per year due in November.
Medical expenses - nothing related to physical health. I have a history of depression and suicidal ideations. Fortunately, I'm not depressed right now (divorced 10 months, new job that I like, and a new girlfriend). But I am seeing a psychologist twice a month ($62/visit) for $124 per month. I plan to see my psychologist for at least as long as I am having this custody dispute with my ex-wife. I'd like to show the Court that I'm doing my best at self-improvement.
Auto Insurance - $65/mo. My comprehensive deductible is $100 and my collision deductible is $500.
Life Insurance (term life) $47/mo. I have $250K in life insurance.
Renter's insurance. $31 per month. I have $40,000 in coverage, and I don't own even close to $40K in stuff that's in my apartment. But when he sold it to me, I remember him saying something about slip and fall coverage too.

What's taken out of my paycheck: (I get paid twice a month, so I've doubled what is taken out of each check for a monthly cost)
Retirement - $394
Soc Sec - $250
Fed tax - $322 (I should see if I can reduce that)
State tax - $146 (probably reduce that too)
Employer sponsored life insurance - $18. That's $57K in coverage, or approximately one year of salary.
Health insurance - $106. That covers just me.
Dental insurance - $68. That covers my kids and me.
Medicare - $58

[Magic Johnson]

I just did my spreadsheet. I used an income of $4,545/mo., gasoline of $340/mo., auto registration of 14/mo., child support of $1.2K/mo., food $300/mo., laundry $60/mo., and other expenses as listed above.

I did not include my psychologist (I'd put that more in a court cost, just as my attorney). I also did not include what's left on my 2021 federal income taxes.

That leaves a net of $70 per month.

[Magic Johnson]

Here's what I'm thinking.

Obviously need to reduce what's taken out each paycheck on fed and state income taxes.
Truck? You guys will probably want me to sell the gas guzzler. I still owe $6,300 on it. Obviously, I could sell it. I just don't know how the mechanics work on that - selling something I owe money on. Plus, I'm not good at sales. I've always only traded in vehicles. I doubt I could get top dollar for it.
Phone - $500 to break the contract. I'm like a lot of people, I'm on my phone a lot. I use it a lot - more than just for games, but games, too.
Cable (I didn't ask about cost to break contract). I watch quite a bit of TV. Plus, when my kids do come over, it's good to have TV.
Credit Card - $37 will go up as I accrue legal fees.
Gasoline - could decrease if I sold the truck. Not sure how much? Probably not halve?
Life insurance - at total coverage of $307,000, I'm not over-insured. When I had my old job, I carried about $715,000 plus the $250K, so almost a million in insurance.
Renters insurance. It's a buck a day. But I don't need $40K in coverage. I guess $15-20/mo., if I could get it cut to that is better than $31/mo.
Food at $300. Not sure on this. I just googled it. Obviously, I've been spending way more than that. $10/day sounds awfully cheap. What do you guys see around here?

[Magic Johnson]

I had another thought - I could stretch my federal income tax debt out to six years. On Saturday, when I was finishing my taxes, I saw that there was a choice between 4 payments over 1 year, or six years of monthly payments, and of course my first thought was to pay it off faster.

But if that ends up meaning borrowing high interest money to stretch it out anyway...?

[disneysteve]

Let me first say that you're likely going to get responses that might seem harsh or rude but please keep in mind that many people here have been in similar straits and did the hard work needed to improve their situations so they know what they're talking about. You don't need to follow every bit of advice people give, but don't blow it off either. At least take the time to read it all and think about it and do your best not to take any comments personally. We don't know you. All we know is what you choose to tell us, so that's all we have to go on. We're purely looking at the numbers.

There's a lot to unpack here so I'll take it in bite size pieces.

First comment is that you can't leave known expenses off of your list of expenses. It doesn't matter how you mentally classify your psychologist or legal fees. They are expenses and you have to pay them. Add those costs to your total monthly expenses. And add the $463/mo you will be paying to the IRS? Your spreadsheet needs to list EVERY expense you have to pay.

What this really highlights is that you do not have a $70/mo surplus. You are actually operating at a deficit. I haven't run the numbers yet but it's a fairly substantial deficit (and I don't know how much the legal fees will be). Unlike the government, individuals can't live this way. I mean you can for a little while by running up the credit cards but it isn't sustainable. You need to make the changes necessary to get your spending equal to or, ideally, less than your income.

It's late and I worked all day but I'm off for the next couple of days. I promise to come back with more specific comments going line by line through what you've shared. And by the way, kudos to you for being open to doing that. Not everyone will, and it's impossible to give meaningful advice without seeing the whole story.

[Magic Johnson]

You're right, of course...

Alright, with those adjustments, I'm at -$570/mo.

I edited my final number. I had the wrong number in for health insurance - I failed to double it.

[Magic Johnson]

Income	$4,545
Expenses
Child Support	$1,200
2021 Taxes	$463
Rent	$450
Retirement	$394
Truck Payment	$344
Gasoline	$340
Fed Tax	$322
Food	$300
Soc Sec	$250
State Tax	$146
Electricity	$125
Psychology	$124
Health Ins	$106
Phone	$84
Cable/Internet	$69
Dental Ins	$68
Life Ins	$65
Auto Ins	$65
Laundry	$60
Medicare	$58
Credit Card	$37
Renters Insurance	$31
Auto Registration	$14
Total Expenses	$5,115
Net	-$570

[bjl584]

Income	$4,545
Expenses
Child Support	$1,200
2021 Taxes	$463
Rent	$450
Retirement	$394
Truck Payment	$344
Gasoline	$340
Fed Tax	$322
Food	$300
Soc Sec	$250
State Tax	$146
Electricity	$125
Psychology	$124
Health Ins	$106
Phone	$84
Cable/Internet	$69
Dental Ins	$68
Life Ins	$65
Auto Ins	$65
Laundry	$60
Medicare	$58
Credit Card	$37
Renters Insurance	$31
Auto Registration	$14
Total Expenses	$5,115
Net	-$570

I would stop contributing to retirement for the time being.
I'd also look into picking up a side job.

Those are not ideal, but they will give you a short-term solution and get you out of the red.
Once you have some breathing room you can start to look for some more creative/complex ways to trim your budget and get yourself back on track

[myrdale]

If you sold the truck for $10k, and paid off the $6k you still owe, you'd have $4k to spend on another cheaper vehicle. Honestly in this case, I think I'd just stick with the truck as is.

I don't like the language of "I stole from my retirement". You took money out, you paid taxes. That is not stealing.

In retrospect, I would never take money out to pay credit card dept. Paying the IRS for taxes? That could go either way. But at this point it is water under the bridge.

You can make big gains on the food budget. It's really hard (and I fail it daily) but with disciple you can eat for dollars a day.

Is the life insurance whole life or term? I'd only keep term, and only till the kids are old enough that they will be out of college.

Instead of getting rid of the phone, see if you can go down in data or something? I pay $50 per month, with 2g of data and I never break that amount (yes there are better deals I am sure).

Lastly look up the book by Dale Carnegie "How to Stop Worrying and Start Living". Go to the library if you have to and rent it for free! I promise it will help put some things in perspective for you.

[Magic Johnson]

Another one - my very small hometown (about 2,000 people) was without a grocery store for about 4 years. About a year ago, someone bought and reopened the store. I don’t know if you’ve ever lived in a small town without a grocery store, but it sucks.

So, I really want to support the grocery store, which is the more expensive option. The town where I work has two cheaper grocery stores. They’re not really close to my office, it’s like an 8-10 minute drive across town to get to those stores from my office.

Thoughts on where I should buy my groceries?

[Magic Johnson]

If you sold the truck for $10k, and paid off the $6k you still owe, you'd have $4k to spend on another cheaper vehicle. Honestly in this case, I think I'd just stick with the truck as is.

I don't like the language of "I stole from my retirement". You took money out, you paid taxes. That is not stealing.

In retrospect, I would never take money out to pay credit card dept. Paying the IRS for taxes? That could go either way. But at this point it is water under the bridge.

You can make big gains on the food budget. It's really hard (and I fail it daily) but with disciple you can eat for dollars a day.

Is the life insurance whole life or term? I'd only keep term, and only till the kids are old enough that they will be out of college.

Instead of getting rid of the phone, see if you can go down in data or something? I pay $50 per month, with 2g of data and I never break that amount (yes there are better deals I am sure).

Lastly look up the book by Dale Carnegie "How to Stop Worrying and Start Living". Go to the library if you have to and rent it for free! I promise it will help put some things in perspective for you.

My life insurance is all term. I think I’m on the cheapest data plan for my phone, but I can check.

[Magic Johnson]

I would stop contributing to retirement for the time being.
I'd also look into picking up a side job.

Those are not ideal, but they will give you a short-term solution and get you out of the red.
Once you have some breathing room you can start to look for some more creative/complex ways to trim your budget and get yourself back on track

I can definitely look for a side job. I have availability on Monday, Tuesday, and Thursday evenings. Wednesdays are parenting time, and weekends belong to my girlfriend - weekends are the only chance we have to see each other.

Any side income I earned would not be 1:1 available for debt repayment. Some of it would go toward child support.

Im not sure what I think about not contributing to retirement. I’m maximizing my employer match - that’s free money.

[bjl584]

Im not sure what I think about not contributing to retirement. I’m maximizing my employer match - that’s free money.

You are correct.
It is free money.

But, you are upside down almost $600 a month.
You need to get cash flow positive in a hurry.

Once you have some breathing room, start making some extra money, and take a better harder look at your budget, then you can restart your retirement contributions.
If you move quickly, then you'll only be missing out on a few months' worth of contributions.

Having money a few decades from now is useless if you are completely drowning today.

[james.hendrickson]

Magic Johnson I wanted to take a minute to commend you for having a difficult conversation in a public venue. A lot of people never reach out and have the kinds of conversations they need to move their finances forward.

So - good for you man. Its only going to get better for you here on out.

[myrdale]

Im not sure what I think about not contributing to retirement. I’m maximizing my employer match - that’s free money.

It looks like you've done a pretty decent job at working out a basic budget. With fact that you've already withdrawn money from retirement and you're looking into a side job, I'd hope there'd be some means to continue contributing to retirement, at least up to the company match. But the popular opinion is most likely going to be stop contributing for now.

For buying groceries, you might consider working out list of what you need for the week, and then try to limit yourself to once a week or a couple times a month going to the store. I think you can mark eating out off the to do list for the future. As much as I love Subway, I have a hard time getting out of there for less than $15 now days, that is enough money to easily feed me three meals or more, if I really worked at it.

I'd avoid Dollar General or those sort of places for buying food. They aren't "bad" but they are not really set up with the options you need. Walmart is as good as anything, but again if they are a county over, plan and go only when necessary.