i'm sarah, divorced mom to 1 dd(7). we homeschool and i work PT as the director of an after school program so that i can take her with me. i just started this job in october. my only health insurance is through the state we used to live in (and go back to every week for dd's supervised visits with my ex-husband, her father). dd is still covered under his health insurance. we have no insurance offered through my new job, no sick pay, no vacation pay, etc.
i have medical bills that i can't pay from when ex's insurance found out that we were divorced and retroactively billed all of the doctors for refunds of any payments they had made. the total comes to about $2021. one of them told me today that they might be able to write off the amount ($321) if i send them a hardship letter explaining everything. i'm calling some of the other ones today. i have payment plans set up with 2 of them ($1172). i'm sending the other 2 ($145, $383) $5 each today. the payment plan for 1 of them is supposed to be $40/month; i'm sending her $20 this month. the other that i'm paying on doesn't have a set amount but i'm sending her $20 this month also.
i also have 2 credit cards - Lowe's $884 at 24.99% and capitalone $262.54 at 0%. $377.58 on the Lowe's card is on a promotion that expires tomorrow. if i can't pay it off tomorrow, the accrued interest is $55.27.
i also have a student loan in hardship forbearance for $9169.27. this goes up every month due to accrued interest at 3.875%. no monthly payment right now.
total debt (including doctor that said they might be able to write off my account): $12312.18. i make (including $500/month child support and $260 food stamps): ~$1200/month. my only lucky thing is that my house and 2006 car are both paid off; i bought a HUD foreclosure that needs work with my equity buy-out from the marital home. it does not have home insurance because i can't afford the $700-900 for manufactured home coverage.
QUESTION: my dd has $260 in savings. would you use dd's savings to pay the Lowe's promotional balance off to avoid the $55 interest? she does not know that i currently have that money in savings for her; she thinks that it has already been spend during the time that i was unemployed.
Here's DR's plan:
Pre-Step 1: Get current on your debts and do a budget - am i considered current if i'm making $5/month payments, as long as i'm paying something?
0.1 No new borrowing. trying desperately!
0.2 Talk with spouse and get him/her on the same page as you concerning finances. n/a
0.3 Do a written budget done; it's depressing and stretched tight.
0.4 Temporarily stop all retirement contributions. not a problem!
0.5 Get current on all the basics (Shelter, Food, Utilities, Basic clothing). working on finding shoes to fit dd.
0.6 Amputate "toys" (bikes, boats, ATV's etc) to help snowball. no toys but am trying to sell of some collectibles and HS material.
0.7 Cut lifestyle (Cut cable, cell, extras, eating out) and/or get a second job to raise $1000 EF.. cell phone is covered by ex-h, we have basic internet and netflix, no cable, no home phone. the only eating out we do is when we drive to MD for visitation. i've already told dd that we have to stop that and i did a menu plan yesterday that includes snacks and meals, including portable meals for the weekend.
0.8 Get current on ALL bills. done, i think.
BS1 $1,000 to start an Emergency Fund
1.1 Chop up/freeze CC's (You have an EF now).
1.2 Get Health insurance NOW if in the US. on medicaid.
1.3 Get Life insurance NOW if you have considerable debt/your family couldn't make it financially if you died. can't afford yet.
1.4 Amputate cars that you can't pay off within 24 months
BS2 Pay off all debt using the Debt Snowball
2.0 Do the debt snowball, paying all your debts from lowest BALANCE to highest.
BS3 Three to six months of expenses in savings
3.1 Start car replacement fund
3.2 Save up 20% for home purchase OR pay down existing mortgage to the point you can drop PMI.
3.3 Start furniture or other non-essential stuff replacement fund
BS4 Invest 15 percent of household income for retirement
BS5 College funding for children
BS6 Pay off home early
BS7 Build wealth and give! Invest in mutual funds and real estate