Hi everyone, I've been lurking around here but not much posting. I'm hoping I can get some advice!
I just finished nursing school and started a new job last week. While I was in school, hubby has been bouncing around jobs because he can't find anything steady. He usually brings between 900-1200 home a month only!!!! It is always variable. Our monthly bills run at about 1200 WITHOUT daycare because I was getting daycare assistance while I was in school.
I had around 4000 in a savings, but since we were barely scraping by, it's now down to 2000. Our new income will be around 3000 total!
Honestly, I'm not even sure what to do with the money. I don't want to not have a plan and just spend it all. Everyone says when we're making more money, we're going to want to spend more. I don't want it to be that way!
We currently have around 7000 in cc debt. One is a credit card for almost 4000 that I think is soon going to be judged on us. Do you think I should try and settle this cc first with the 2000 we have left in savings and then start paying off the smaller cards?
Our total bills will be around 1200 + the 300 for daycare = 1500. So we're going to have around 1500 extra each month and maybe more sometimes with husbands variable pay.
Another thing... we own our land and an older mobile home free and clear and we hope to one day be able to buy a house ON THE GROUND! lol
I am starting RN school next month and that will cost around 6000 that I will have to pay in the coming year, but I will be on a payment plan. At this time next, I'm hoping I will be finished and then our income will probably go up another thousand. My parents are willing to help me with paying for my continuing eduation which is a major factor. We also own both of our newer vehicles free and clear. Hubby may need a new vehicle within the next year or two also.
Sorry for babbling, hopfully its all understandable. Any advice would be appreciated!
Since you are already in the habit of living on a lower income, you have a perfect opportunity to pay off your credit card debt and build up your savings, without feeling a new pinch. If you don't have easy access to the new money (have to transfer it out of savings to spend it), it's more "out of sight, out of mind" than if your checking account balance is suddenly huge.
I suggest setting up your paycheck as a direct deposit, with enough for your current expenses going in to checking, and the rest going in to savings. I wouldn't want to see you use all of your savings to pay of a CC right away, but attack those suckers as hard and fast as possible once you get another $2000 or so in savings.
You're looking at $500/month in education expenses, so put that in to your budget. If your parents will help with that, good for you! That's more money that can go toward credit cards, and then into savings, so you can have a sizable down payment (or pay cash) for that newer vehicle in a couple of years.
Good luck, and congratulations!
If the chips are down, the buffalo is empty.
I agree that you spend all you make unless you have a specific plan.
So here is what I would do:
Plan a lovely weekend at a hotel to reward yourself, and then get back to the grindstone. Get that debt paid off while you are accustomed to living frugally.
And then - keep living frugally! I want to barf when I think about all the money I wasted before I was laid-off and forced to examine our finances.
You can put a really nice chunk of change away for: emergency fund, next car fund, house fund, future baby fund, etc.
Congrats on finishing nursing school!
You will also have daycare expenses. And if you will be getting benefits with your job you will likely have to pay out some for insurance. And I am guessing you do not have a retirement plan...
$3000 is not that much where I live and I live in a pretty low cost of living area. Between work, alimony, child support, and rental income I make that much and we are still well below the poverty level. I wold focus on paying off debt, getting a good amount in savings and then start considering if your husband wants to go back to school. His employment options seem unstable at best.
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Regarding your CCs, have you considered transferring them all to one CC with the lowest interest rate? Just be sure you don't get charged any transfer fees. Then, just take that card out of your wallet and stop using it.
I agree with PP to have your paychecks direct deposited into your bank account. Then, set up monthly automatic payments to your credit card within a day or two of your normal payday. Same goes with your savings account... you can have an automatic transfer straight into your savings a few days after payday. That way, you never really "see" that money.
Do you have a retirement account set up yet? You can set up a pre-tax direct deposit into a 401K account, so you don't even see that money on your paycheck, and it goes straight to your 401K.
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Disclaimer: I am new to understanding finances, and still don't have that great of a grip on it, so take my advice for what it's worth....not much.
Here is what I would do:
1. First of all, pay down the credit cards aggressively (as quickly as humanly possible). Don't change your lifestyle at all, unless you downgrade of course, until they are completely paid off. (then once the balance is $0, you will want to continue using them for just one thing every month, liike gas only, and pay it off each month, because using the card monthly improves your credit score (as far as I understand), which is important to have). So I'd keep at least one card, and use it monthly for your credit score.
sidenote: With the $2,000, I would try to strike a balance between paying off the credit cards and still keeping some of that for emergencies. It is important to have an emergency fund, because that prevents you from having to put more on a credit card when something bad happens, like an unexpected car repair or a speeding ticket. So I'd keep at least 1,000 in the emergency fund (savings account). But how much you need in emergency funds (aka, liquid savings, something you can access right away) will vary based on how many people are in your family, your monthly expenses, and what could go wrong.
2. Once credit cards are gone, start building up your savings account. I am confused if that 6000 for the RN is something you are paying or your parents? If it's you, start putting lots of money in your savings account, so you can pay for that with cash, not float it on a credit card or take out a student loan (which are worse than they seem, trust me). If I were you, I'd goal to have at least $10,000 in your savings account, at least to start out. If not, $20,000, since 6,000 might be for school and since your husband may need a car in a year, etc. Since you have children, having liquid savings is important if something really bad happens to you and you can't work, etc. Suze Orman says to have 8 months of an emergency fund in savings.
3. So you'll be working, huh? Congrats on that. :) Is your employer going to have some kind of 401k plan for you? I would personally start contributing like $20 a month to it, just to know you are actually doing something (for the principle of it), until CC's are gone. Then build the emergency fund, while maybe upping retirement contributions. I'm not sure if nurses have the benefit of your employer matching your 401k contributions up to a certain point, but if that happens, it will probably happen after you've been employed for like a year? But when/if that happens, you always be sure to match the employer's contribution up to the limit, because otherwise, you are passing on free money. And that is free money that will grow to become a lot more by the time you are 65, not like the kind of free money that's, "a new car!!!!!" which will be worthless 30 years from now.
So whether it's a 401k, or whether it's opening up a rothIRA, etc......the whole point of this #3 is that you need to start getting in the habit of saving for retirement now, in some kind of organized fashion, not just in a liquid savings account. This is more important than saving up for your next home, in my opinion. Saving for a nicer home would be #4. Start the habit of saving money every month for retirement now, because startign at the age of 28 vs. age 33 vs. age 40 are all huge differences....."the time/value of money".....basically, money compounds itself, and the earlier you start, the amount will go up exponentially as you age. If you were to project it out (which I don't understand the calculations but my husband does and he shows them to me), you would be amazed at how X amount now is vastly different at age 65 by starting a few years earlier (late 20s vs early 30s). It's just how exponents and compounding works.
Once you start thinking about all these things, you'll be amazed at how tripling your income is really not going to make as big of a difference in your lifestyle now as what you would think, considering you owe thousands in credit cards and are just starting out as a young family, establishing savings. I know investing and saving isn't glamourous, but by asking this question, you are showing interest in your future and being smart with your money. The truth of the matter is, it's the right thing to do and you will be in better shape than most Americans for doing it!!!!! Your "net worth" will go up exponentially as you start investing and saving instead of spending on things like a new TV, a night out, etc. You are loving yourself and making your life important, by taking care of yourself for the future, and giving yourself peace of mind (aka, you won't develop panic attacks at the age of 35).
The bigger shame would be to find yourself 10 years from now in a place where you look back and say, "wow, I just worked for 10 years, but where did all my money go? I spent it all and I'm in no better shape than I was in my 20's." So be disciplined and invest! :) And don't invest in things where people are making a commission off you and so of course they say it's a good idea. Be savvy when it comes to stuff like that. Watching the Suze Orman show online or on CNBC has helped me with that.
Another thing to think about, since you have children, is term life insurance. NOT whole life insurance, which is supposedly a rip off. Since you are young, it should be pretty cheap. If you or your husband should die, God forbid, things wouldn't change too much financially at least.
One last thing, is be very encouraging to your spouse, and try to help him find something stable. It is amazing how just believing in someone and encouraging them gently, reaps rewards. Try to help him brainstorm ideas on how he can keep the same job for awhile, or how he can up his earning potential. Once you start paying down things and saving, you'll probably start asking yourself how you can end up making even more. The feeling of financial security can get addictive, so you might as well maximize both of your earning potentials. Always build your husband up verbally, and make him believe in himself, and believe he can do it. I think if he sets some goals, like says, "I want to be able to earn X dollars a month so we can put it towards ______ (saving for next car, building our children's college fund (I think it's called a 529 plan?)etc)" he will find a way. So don't let the fact that you guys are making more, allow him to get too comfortable. It is nice when both partners can feel like they are contributing in a solid way to finances. So if you encourage him and set goals together, maybe he can find a way to make more too, just because he is feeling optimistic and in control. I find when things are planned, I feel more in control.
Hope some of that helps!!!!! Sorry so long.
Observation: your income is very low before the increase; keep in mind that if you are receiving any type of assistance, that is likely to go away with the increase in income. So you would need to account for that.
I'm glad you're wanting to make a plan.
First thing I would do is change your view of that money. It is not "extra". To think of it that way lends itself to spending on the basis of 'Oh, well this is the extra money'. You will have some new expenses, and you also have debt obligations to take care of, and savings to build up. So there really won't be much "extra". But I do understand feeling like this is a buncha money, because we're living on about $1100/mo, so $3000/month would feel (at first) like a load of moola, for sure. :)
My advice: Spend it all on paper before you even get the check.
IOW, make that plan. Using your take-home pay (after taxes and other deductions), budget your living expenses, daycare, what you will be paying on your debt, and your savings. If you feel like you want to use some for "fun money", put that in the budget and stick to it, so that you don't overspend because you feel like you have more wiggle room.
There is so much great advice and input on here already so I just wanted to share one of the main things that helped us keep our budget was to make sure we always set aside money for 'fun'. We ate out, went to a theme park, mini trips or something more personal like a new wallet for DH or new shoes fo me. It just made us feel more positive knowing that in all the bill paying and saving we could enjoy ourselves with the money we earned :)
Is that $3000 net or gross? I ask because it sounds like you are an LPN living in a lower cost of living area (based on your daycare costs). I am an RN living in a relatively high cost of living area and I don't bring home a whole lot more than that working full time (plus call hours). Here, LPNs make much less than RNs.
Just wanted to be sure you were sure of the number before you start making plans for it :) Congrats on finishing school and being accepted to RN school. It is hard to get through, but very rewarding... and a good way to support your family!!!
Edited: Oh, I see now that your dh brings home around $1000 a month... I was thinking that the $3000 was entirely your income :) Again, congrats, and welcome to the world of nursing ;)
I agree it makes a difference on whether that's 3000 net or gross per month. Either way, I've been in a similar place! And I think that in a low cost of living area it IS plenty to live on. You just need to make smart, frugal choices whenever possible and stay away from the Jones' mentality.
I think it's been mentioned but I give a thumbs up on:
- Setting up retirement fund (I guess a 401k? I'm Canadian)
- Make a budget
- In that budget have a line for fun money for you and your DH. Can be $5 a month or $100. Whatever it takes to give you a little something without feeling like you NEVER get to spend money. It will keep you from buying a little something to splurge that would add up or blow a small pile because you get tired of being so "good" all the time.
- Have an amount automatically transferred to savings each pay day. (This is really, the best advice we've ever had)
- If you like seeing results, make a little chart or something to check off how much debt you've paid down.
- When DH and I were at our rockiest financially, we would sit down together each week to decide where the money should go. It kept us on the same page and aware of our situation. That way all the stress wasn't on one partner to figure it out while the other wandered blindly/happily through life spending money left and right. Later when things got better we continued with it, to share the JOY of how well we were doing.
- Have a goal to work towards. What motivates you? For us it was buying a house. Now it's fixing it up. Soon it will be having children.
You own your land right?
Have you thought about getting a line of credit for your debt? It is a lower rate interest loan which you would probably get due to your assets. I would then take your "extra" money after each pay and put it on the line of credit until it is gone. If you do it online it is very visual and rewarding.
Personally, I would also put the $2000 right on the debt but some people are against that.