Friend's budget

[disneysteve]

However, it's also a mental game. In most cases, debt is a result of living above your means, so the idea of cutting all cards is a way to force you to avoid using debt at all, even for emergencies(everything is an emergency when you have a spending problem).

Exactly. A big part of becoming financially responsible is changing your mindset. If you continue to think you don't need savings and can just charge whatever comes along, you're never going to get out of the cycle you're in.

Taking that first step (which is why DR calls it "baby step 1") and setting aside a little savings so that the next time something crops up, you don't whip out your credit card, can be a powerful motivator to show you that, "hey, maybe I really can do this".

[bjl584]

Why does she have a $1000 car payment on a $22k loan? Payment should be less than $400.

[disneysteve]

Why does she have a $1000 car payment on a $22k loan? Payment should be less than $400.

That’s the balance. The original amount was probably much higher. I think those cars went for 60-70K new.

[LivingAlmostLarge]

The cars we sat and she'll be getting back $5000 2017 when she gets the rest of her paperwork to file her taxes. They went to mediation and settled kids and filing status. So she's now able to do it.

Second she was saving 20% or $400/paycheck = $800/month to 401k. We cut that to 10% for now. I told her we'd get back to 20%.

The cars situation is such that the car as $90k new. It was a new Yukon Denali XL fully loaded She is fully aware and wants to dump the car. It is now just a matter of finalizing the transfer or title and loan. Should she sell it privately? She called and found out the lien is at $15,300 left. She's already sunk in this past year $10k into it.

She has an EF. She has $5k in cash her mom is holding. We're trying not to touch it.

Instead I told her work with what she has to try and pay stuff down.

She wanted to be sure she can pay off the 0% CC before the 12 month promo period expired and didn't trust herself to keep the cash. So she sent it in. She's very confident of paying off the 0% CC and not having it hit her.

The $154 mom's car is because she got into an accident so her mom bought a new car. They need two cars with her working and her mom watches the kids after school. She's paying that.

Her divorce is contentious enough that they have a GAL and she was told no less than 3 bd. That's how you lose your kids. He'd haul her back to court and then take the kids.

So should she try to sell the car private party? Trade in? I haven't ever sold such an expensive car private party. Assuming she gets $6k should she use the cash and try to get a better car?

Pay off CC? Lawyer?

[disneysteve]

She has an EF. She has $5k in cash her mom is holding. We're trying not to touch it.

Why is her mother holding her EF? Why isn't it in an online savings account earning 1.6% interest?

The $154 mom's car is because she got into an accident so her mom bought a new car. They need two cars with her working and her mom watches the kids after school. She's paying that.

Why is she paying for her mother's car? We need more details here. Is she supporting her mother?

We need to see her budget. It's too hard to try to piece it together bit by bit from what you've posted so far. Can you sit down with her and come up with one complete budget including everything? I don't know about everyone else but I'm not at all clear on what her situation actually is. You haven't listed full expenses. We need numbers for gas, insurance, food, clothing, activities, etc. We need to know how much she actually has to work with each month.

So should she try to sell the car private party? Trade in?

You're always going to do better selling privately. When you trade it in, the dealer needs to leave a large enough margin for him to turn around and resell it.

[GoodSteward]

What is the goal for her SUV? If she only owes $15k, I doubt she will trade in and come out owing less unless she sells it and pays cash for something(she doesn't have cash I assume). If she can handle the payment, it might be better to just keep the SUV and have no payment within a year. At 1k a month and only owing 15k, I would imagine she could pay it off in 12 months with some extra thrown in. If she has to have the money from the payment, I would see if a bank might just refinance it for her to lower the payments. Total debt wise, I don't think trading in is going to really help. Especially trading into a van. It doesn't get that good of mpg either.

If you were really wanting cheaper, you would likely need to downsize altogether into a mid-sized car(or smaller). That would at least get much better mpg, and they are cheaper in general. You need to have some meaningful benefit if you will go through the hassle of trading in (and downsizing from that luxury). A decent van under 100k miles wll still be $10k-$15k depending on the maker, and I would avoid American made vans. It is a terrible payment, but what you do from here depends on what you need out of the situation.

[LivingAlmostLarge]

DS she doesn't have much of a budget. That's it. She hates budgeting and it's pulling teeth to even get her to do her taxes. It's one of those things that's how she got into this predicament.

She wrecked her mom's paid for car and is now paying off the difference between insurance and the new car. Her mom watches the kids so she feels it's a fair trade.

The Yukon gets about 7-8 miles a gallon. She's better off buying something for even $15-20k and getting a loan with even 20 mpg. She'd double her mileage and it's less used.

[disneysteve]

DS she doesn't have much of a budget.

Well then it's really impossible to help her. How can you advise her on how best to allocate her available funds if you don't know what those funds need to cover? She needs to sit down and figure out where all of her money is going each month. Only then can she come up with a realistic plan going forward.

[GoodSteward]

A Yukon should be getting closer to about 15 average, and a van gets around 19 average. if she is heavy footed in the Denali to hit that mpg, she'll be even more heavyfooted in the van because it has less power.

[creditcardfree]

LAL, I think you said she uses cash primarily. Can you get her to switch to a debit card? That way there would be a paper trail of where she spent money.

You could also ask her to save receipts. The only way to make a budget is to know how you have spent in the past, and adjust up or down accordingly to make the money do what you want it to.

Try to sell private party on the vehicle...if no luck in a short period of time consider trading it in, so she can move on.

[msomnipotent]

I would advise her to sell the Yukon to a dealer. I know she would get more money by selling privately, but she wants it gone ASAP, she has no experience selling privately, and she is under enough stress as it is without having to hope every day that it is sold before the next payment is due, and having to deal with tire kickers or worse.

If she is ready to buy a different vehicle, then trade it in. Make sure she washes the inside and out well, and practice haggling either way.

[LivingAlmostLarge]

She's not good with money. I think cash unfortunately manages her best because she has trouble even logging into accounts. I am trying to help her but she's not exactly able to. I guess it's too overwhelming. Money, kids, everything. It's stressful and exhausting so I just give her tips when I can. Like I shared my spreadsheet for tracking accounts but she won't really do it.

[Smallsteps]

Livingamostlarge,
I feel your frustration, as I too have had friends and even family in similar situations.
You simply cannot help those who do not want it. It is hard but I had to walk away from a good friend who begged for help and suggestions yet had an excuse why every possible tip could NOT work for her even before trying them.

Believe me someone who honestly wants help will overcome log on issues or adopt a spreadsheet in a heartbeat if she was committed to improve. Those whom have trouble sometimes give up after trying and not feeling like a success but if she is not trying at all she wants is the sympathy not help.