I am a single parent. I’ve always lived well below the poverty line. This September I am starting a real live grown up job that will pay me 4x what I’m used to living on. I need advice so I don’t go hog wild and make a bunch of rookie mistakes with my newfound riches.
Certain of my expenses will go up drastically. I’ll lose my childcare subsidy, for example, so daycare will go from $40/month to $600/month or more. I will have to pay for parking downtown and have fancypants work clothes. All of this is just part of it and I will work it out. After all my basic expenses are covered, however, I’ll have leftover funds. Probably at least $1500 a month. I won’t know how much for sure until I actually get a paycheque and bills for my new costs. how do I allocate this money? I want to be efficient with my money and not have my living costs get out of hand just because I have more cash. I want to stay frugal, but with less stress. Anyway, how would you prioritize the following?
-Mortgage – $44 000.
-Student loans - $40 000 (There is no interest on these until I finish my master’s degree, which will happen in ~2.5 years, and even then the interest will be prime and I will get tax breaks for having the loans. I am happy to ignore these loans for now)
-House – It’s a 120 years old and looks it, in a bad way. I love the location and lot size so I won’t move, but it needs serious upgrades. A lot of money could go into it if I let it. On the upside, work on the house will be reflected in the property value, as it’s in an up-and-coming area.
-Car – a 15 year old Subaru. The check engine light is on. I’m driving on the spare tire, and two other tires have slow leaks. Repair or replace? Keep using while I save? Discuss.
-My parents are at retirement age and, thanks to a medical emergency, have no retirement funds and serious debt. I am going to support them, at least in part. I think I’ll get them the kind of house they can retire in (no stairs, etc) and let them live there rent-free, so they can sell their home and have some money and also have lower living expenses. I would like to do this in the next five to ten years.
-I want to retire someday. I am in my mid thirties and have no savings.
-My younger son is profoundly disabled and will never live independently. Saving for my older boy’s education would be nice, but putting things into place for my baby is very important.
-I want to go on vacations and buy electronics and hire someone to clean my house and walk my dog… I could see the new money getting frittered away on these things and that would be terrible, but after years of very real deprivation I want to have at least a little fun money. I need some wisdom here.
Would you put everything into one debt or asset or obligation and go hardcore, then move onto the next category, or would you split the funds between goals/ needs? What % would you allocate to each?
I am so very lucky to be in this position and I am terrified of screwing up. Help me!
Main concern if it were me is transportation, having a reliable means to get to the new awesome job is very important. I would think about replacing the 15 year old car first, if it were me.
Next I would work on the debt, house or loans, but I would probably do the loans first, that is a lot in student debt, I complain about 5-10K
Retirement, I would do a match if your employer has that.
Your parents, do they qualify for any medicare/social security, keep that in mind.
I would total nix a housekeeper, and dog walker at least for the first year at your new job.
how is your emergency fund? That should be #1 if you dont have one already.
Honestly, I would live like you didn't have the new job and see how your new job expenses works out before putting large amounts into one area.
I would WRITE IT ALL DOWN.
Start with fixed expenses - Food, shelter, utilities, daycare etc. Then see what is left over. Does your new job have a 401k plan you can take part in? What about health insurance? Get those numbers as well. Get the car checked out, tires are important as is the 'check engine light'.
Wanting to care for mom and dad is noble but you need to make sure yourself and your children are cared for first. (i know i know)
Sounds like your biggest expenses are going to be daycare, housing, taxes, and insurance right now. maybe a car, based on what the mechanic says.
Congrats on the new job!!
Mom to J and never-ending , 0/2014 items decluttered, 0/52 crafts crafts completed
Seeking zen in 2014. Working on journaling and finding peace this year. Spending my free time taking J to swimteam
that's some good advice. thanks! I will develop something on paper this week. maybe a monthly worksheet so I can keep track of my savings categories or something. excellent.
regarding the car - I am not a car person. at all. and I live in an area where gas costs a lot. under these circumstances would you:
a. buy a small, new-ish car, with cash
-bought with cash!
-cheap on gas
- I can buy an almost-new tiny little hatchback, but need at least a midsize hatchback, preferably a station wagon or small suv, if I want to fit the kids and dog and gear for weekends in the country. these bigger cars are beyond my buying-with-cash means. I would get frustrated with an undersized vehicle and start scheming to replace it right away.
- almost new might mean no warranty, or only a couple of years of warranty
note: I could buy a new-ish hatchback and also an ancient, full sized, camperized van, both with cash, and use the van for trips and such. insuring both at once would be costly, but it would make it possible to avoid car payments.
b. get a 0% financing deal on a prius v or similar vehicle
-my dream vehicle! cheap on gas, big enough for us to really use!
-I can get the longest possible warranty, which is very important to my non-car self.
-monthly payments of $500-$600, which is a lot. and I hate having payments
-that is a lot to spend on a car
the only other option is getting a bank loan for a bigger used vehicle, but the rates for those loans are terrible so i'd end up paying as much as I would for the new car.
what would you do?
If you have $1500 extra a month you could save up to pay cash for the vehicle you really want... how long would that take at that rate? Or you could get a used car loan (try a credit union for better rates) and pay it off as fast as you can.
The car seems like the top priority to me. Once you have that, you can start allocating your money to the other things and saving up. I think it would be worth talking to an expert re the best way to plan financially for your parents' care and that of your disabled son. They would know about the methods of funding, insurance, tax breaks, state aid, etc. that are available.
Once you start the job, there will be a lot of temptations; it will seem as if everything is a need because you did without for a long, long time. But they are not all needs; in fact probably very few of them are needs in the sense of food, clothing, shelter for you and your kids. You might be surprised by how exhausted you are for the first few months so cooking at night will be hard and it will be tempting to grab takeout or something. but try, really really hard not to. Pack your lunches, make dinner ahead of time on the weekends. Keep up the frugality and put as much of that salary away as you possibly can. Until you have at least 3 months income saved up. At that time I would start putting the equivalent of a "car payment" away in another account for your eventual car needs. You can use it even for a repair if you need to. But try to keep that blessed old car going for as long as possible. Do NOT start with the upgrades on the house; don't change things unless there is a serious repair need and then go cheap. This won't be forever, just until you get to a reasonable level of security. Get some life insurance for you with the kids as your beneficiary (if you are young and healthy, this can be very cheap and will help you protect your children); get some disability insurance if you can. After you get a nice solid emergency fund and the insurance needs are taken care of you need to look at retirement savings and just start putting that money aside before you start doing anything else. If you are lucky, you will solidify all that in a year, yes just one year. By that time you may have a raise. While you are living this way for that year, try to establish some credit and keep the credit score as high as possible; with good credit you may eventually be able to refinance your mortgage if the rate is high.
I would say next steps are to find a lawyer who can help you with your youngest child's needs. That will be pricey but worth every penny. B this time if your car gave up the ghost you may have bought a newer one; try to avoid the car payment, but if you did try to get it paid off asap. Now you have all of the basics covered; keep putting aside money into emergency fund and retirement and car fund (I think a car fund should exist for as long as one actually needs a car).
Then you can start to look at the house and your parents needs. But I would think that by then, your day care expense might be gone and you will probably be making more money as well.
I am in the same boat, just got my first fulltime job since becoming a single mom; I have totally followed these suggestions and now feel much more secure. It happened quickly and now I am starting to break discipline.
Another thing to put money towards: investments that will make or save you money down the line; further certifications to enhance your career; career counseling; exercise classes (because health is a seriously good investment); household tools, etc.
And, hey, the electronics will sneak in eventually. Trust me on that. : )
Congratulations on your new job!
I agree with most of the advice. I wouldn't make expensive changes to the house. (Though a little paint can go a long way to how you feel about your space).
I would also try to save some money and go through a few months with your new income and expenses before you make any big financial changes or decisions.
As for the car. We are also not car people and the car that we drive might be a good option for you. It is like a station wagon with 3 rows of seats and the back row folds down. We bought ours basically new for about a 1/3 of the cost of a minivan or "cheap" suv. It is smaller than a minivan but won't close in on you like a hatchback might.
ok for the car, I would buy the used one for cash it might be small and you might sceme to replace it. but I would save the 500-600 you would make in payments on the dream car to replace the hatchback. It might not be the only option but for me it would be the best.