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Discussion Starter · #1 ·
In another thread someone recommended I post a budget to ask for advice on how to reduce our expenses and help us to pay down debt. I just don't see a way for us to make it work, but maybe someone else can.

Background: DH recently immigrated to Canada to be with me, and so far is employed only part time retail. He seems to be the one they call for extra shifts so if they do he makes close to $1000 gross a month, but is only scheduled about 10 hours a week so it could be less any time, and we never know.

He's also going to college in September and will be working part time then, but we don't know how flexible they will be nor how many hours he will get then.

My net income: 2200-2400/month
Dh's net income: 400-800/month, going down to 2-400 a month in September
I contribute 5% gross to my retirement every pay, matched by my employer, which is before the net above

Debt:

LOC: 20 000
CC 1: 9000
CC 2: 1250
Car: 3500

Monthly Fixed Expenses:
Rent: 900
Car payment: 500 (hopefully gone in April when I get my tax return)
Insurance: 350
Interest on my LOC: 150
Hydro: I don't know yet but at my last apartment was 35
Minimum on CC 1: 150
Minimum on CC 2: 50
I try to pay more to both, but they also get used back up so I am cycling there. I want to stop using them altogether, and plan to not use them after this. I have been good for about 2 weeks.
Total I can't change: 2100
So basically, my entire income is used up by fixed expenses.

Other expenses:
Dog food: around 100 a month
Gas: 150
People food, toiletries, other expenses etc: I guess whatever is left from his paycheck? so maybe 150 on low months to 450 on great ones?

That leaves non of my debt actually going down, as we are basically only paying interest. We have no cash, no emergency fund. I have a compelling need to pay off my car with my tax return to free up money for food and such now, and because when he goes to school in Sept we absolutely can't afford it.

Basically, I can't seen how its possible. I can never get ahead because I can't make a budget we can live on, so I give up and don't think about it. Any advice?
 

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In your situation, I would stop contributing 5% of your gross pay to retirement until you at least pay off one of your credit cards. What are their interest rates?

Why is your dog food so expensive? Are there other alternatives? Multiple dogs?

I don't know what is typical of your area. Have you recently checked for lower insurance rates?

Some thing don't appear to be budgeted. What about clothes? Household goods? School books and supplies once your DH starts school? Everything else?
 

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Well, why exactly are you using the CC's? Is it to buy ABSOLUTE necesities like groceries? Or is it to get take-out, and other treats?

I know nothing about low-income assistance in CA but is there a WIC or food stamps equivalent that you might qualify for?

It seems to me like you have a very tight budget but you *could* make it...... if you identify and stop the overspending! What about switching to an all-cash system and freezing/cutting up the CC's for 6 months or something?

If you are able to pay off teh car with the tax return, you need to set up an automatic payment of 500/month to your CC so you never see the money!
 

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Since the car is going to be paid off in April, then that frees up $500. If it isn't going to be paid off in April then I'd consider selling it.

I listen to Dave Ramsey and what he might say in this situation is that you have an income problem. I understand your DH just immigrated and so I don't know what limitations he might have on employment or if it is just generally an inability to find a FT gig. What is his professional skill set? Does he have any training/certification/education?

If possible, housing should be no more than 25% of your take home, can you find a less expensive option?

I agree that I would also stop the retirement contributions, temporarily, while you get back into the black.

One thing that is important to note is that it is unlikely that your (and your DH's) income is not going to remain flat. Sure you might not be able to pay down debt over the next year or two but you can get in the black and start living on what you earn instead of what you earn plus credit cards (no judgment at all, BTDT!). Then as your financial situation changes, you will be in a place to actually pay down debt.

I'd also keep track of every penny spent and categorize it so you know how much you're spending on dog food, how much you spend on groceries, how much you spend on gas, etc. When I first did that I was amazed at how off I was with my estimates.

Good luck! I think that looking at your budget on paper is the first step in turning things around.
 

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i'm going to work from the lower numbers you gave for each of you, for a total of $2600 coming in each month.

the next 2 months will be like this -

Rent: 900
Car payment: 500
Insurance: 350
Interest on my LOC: 150
Hydro: 50
Minimum on CC 1: 150
Minimum on CC 2: 50
Dog food: 100
Gas: 150
Groceries (incl toiletries): 200

yeah, $50/week is not much for groceries, but it sounds like there are just two of you (no kids?) . . . you can do this. you can get through these two months without using your credit cards. if you or dh can earn more, and we're talking potentially up to $600 more per month, throw it against the car loan. you aren't certain your tax refund will cover it, so do everything you can to get rid of it. if the refund is "close but no cigar" it will still only take you a couple more months to do it. otoh, if you throw every penny you can at that car loan for the next two months, maybe the remaining balance in april will be less than your tax refund. then you'll have money for the beginning of a small emergency fund or to take out a chunk of cc #2. that would be awesome.

post-car-loan budget through september:

income: $2600
Savings: 200
Rent: 900
Insurance: 350
Interest on my LOC: 150
Hydro: 50
Minimum on CC 1: 150
SNOWBALL on CC 2: 350
Dog food: 100
Gas: 150
Groceries (incl toiletries): 200

continue on your tight grocery budget. also see what you can do about insurance and dog food. by september, cc #2 should be gone. also by september - your dh should have something else lined up for work. but if he doesn't, here's what i see as your fall/winter budget.

income: $2400
Savings: 200
Rent: 900
Insurance: 350
Interest on my LOC: 150
Hydro: 50
SNOWBALL on CC 1: 300
Dog food: 100
Gas: 150
Groceries (incl toiletries): 200

again, you guys continue to have potentially higher incomes than listed, and can use that to make extra payments against your credit card. you have a savings, so if something comes up (like car maintenance, a vet bill, other other essentials that are not on the budget), you won't have to use the credit cards. there are no extras. dates are free - like a walk in the park, "renting" a movie from the library, free day at the museum. it will be tough but you can do it.

look at the financial position you will be in a year from now, if you do this - even without increasing your income at all. at this time next year, you would be looking at using your tax refund to eliminate the remaining balance on cc #1 and then you will only have the LOC to work on. and without the payments on the credit cards and the car, that will burn away quickly, but only if you two decide together to change your life, and decide every day to make responsible choices. it will take extra time and planning to live within a strict budget and not use your credit cards, but you can do it if it's really important.
 

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Good suggestions!

Chances are, your CC2 is at a higher interest rate than the car. When you get your tax refund, you might consider paying off CC2 first (freeing up $50/month), putting the rest toward the car, and paying off the rest of the car as fast as you can. Eliminating CC2 will allow you to close out that account.

I agree that you need to start tracking every penny you and DH spend - when you itemize EVERYTHING, you might see more places that you are spending unnecessarily. Can you increase the deductibles on your insurance to reduce the premiums?
 

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Quote:

Originally Posted by nd_deadhead View Post
Can you increase the deductibles on your insurance to reduce the premiums?
This will be a great strategy once the OP has at least an emergency fund and the deductible saved.
 

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Discussion Starter · #8 ·
Quote:

Originally Posted by SeekingJoy View Post
In your situation, I would stop contributing 5% of your gross pay to retirement until you at least pay off one of your credit cards. What are their interest rates?

Why is your dog food so expensive? Are there other alternatives? Multiple dogs?

I don't know what is typical of your area. Have you recently checked for lower insurance rates?

Some thing don't appear to be budgeted. What about clothes? Household goods? School books and supplies once your DH starts school? Everything else?
Credit cards are 19% each, LOC is 6.75, car is 8.1. Dog food is a worst case estimate. Its for 2 dogs, one needing grain free and the other on seniors food. I want to try finding a cheaper alternative but the one dog is very sensitive so I have to be careful what I switch to. I am thinking of trying raw if I can find a cheap source for meat.

That insurance is for 2 cars, content insurance and life insurance. And because DH is 20, he is expensive for car insurance. His is liability only too. Plus insurance here is expensive. I use the same company he did in NH and his policy is identical and about twice as much


I know there are things not budgeted. I just don't buy clothes because I don't have money. Books are coming from his tax return. Other things, I haven't figured numbers for.
 

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Discussion Starter · #9 ·
Quote:

Originally Posted by SuzyLee View Post
Well, why exactly are you using the CC's? Is it to buy ABSOLUTE necesities like groceries? Or is it to get take-out, and other treats?

I know nothing about low-income assistance in CA but is there a WIC or food stamps equivalent that you might qualify for?

It seems to me like you have a very tight budget but you *could* make it...... if you identify and stop the overspending! What about switching to an all-cash system and freezing/cutting up the CC's for 6 months or something?

If you are able to pay off teh car with the tax return, you need to set up an automatic payment of 500/month to your CC so you never see the money!
The LOC debt is from my divorce and subsequent inability to afford my commitments and/or know how to get out of them in time.

A lot of the CC debt was (and is) expenses relating to his immigration. Over $1000 in fees, plus medical, criminal checks, importation on his car. The whole thing ran us several thousand dollars. Some of it is gas and food. A bit is frivolous.

We don't have food stamps or anything like it and can't take any help for 3 years, as a term of my sponsoring him, even if we did have it.

I am planning on trying an all cash budget and hiding the cards. I just want to figure out the budget first so I know its possible, otherwise we will fail and be more discouraged.

I know I will need to put that 500 onto my cards. I think we will too if we find by then we are sustainable without it.
 

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How will he pay his tuition? Is he getting grants or scholarships? It's possible that he may be eligible for a bursary depending of course on the eligibility criteria at his particular institution.
Also, I know college is demanding, but it might well be possible for him to earn more than what you've quoted here while he's studying. If he's already working off-campus in retail, I assume he's got some work privileges. If not, or if his work privileges are limited, I know that at least in Ontario. international students are permitted to work and earn money on-campus. This could be doubly beneficial: work is closeby and more income.
 

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Discussion Starter · #11 ·
THANK YOU!!!!!!

Quote:

Originally Posted by doubledutch View Post
i'm going to work from the lower numbers you gave for each of you, for a total of $2600 coming in each month.

the next 2 months will be like this -

Rent: 900
Car payment: 500
Insurance: 350
Interest on my LOC: 150
Hydro: 50
Minimum on CC 1: 150
Minimum on CC 2: 50
Dog food: 100
Gas: 150
Groceries (incl toiletries): 200
We can do that. I lived on $60 a week for 2 in college, and I know how to cook cheaper now than I did then (ie am less snobby).

Quote:
yeah, $50/week is not much for groceries, but it sounds like there are just two of you (no kids?) . . . you can do this. you can get through these two months without using your credit cards. if you or dh can earn more, and we're talking potentially up to $600 more per month, throw it against the car loan. you aren't certain your tax refund will cover it, so do everything you can to get rid of it. if the refund is "close but no cigar" it will still only take you a couple more months to do it. otoh, if you throw every penny you can at that car loan for the next two months, maybe the remaining balance in april will be less than your tax refund. then you'll have money for the beginning of a small emergency fund or to take out a chunk of cc #2. that would be awesome.
I would feel SO good if we made it 2 months without cards! I KNOW I am getting 2500 back. I just mean that if I am able to file earlier than April, I won't have paid April's 500, so the car won't finish it. But it will be done by April, or maybe a small payment in May as I am not sure how they calculate the interest on it so we may owe a bit?

If we earn more I will throw it at the car. I have shaved almost 2 years off, and if we pay it off in April, we HAVE shaved off 2 years.

He is getting $1000 back on his taxes, which is either his tuition, or our emergency fund or going onto the smaller card. I don't know what is best?

Quote:
post-car-loan budget through september:

income: $2600
Savings: 200
Rent: 900
Insurance: 350
Interest on my LOC: 150
Hydro: 50
Minimum on CC 1: 150
SNOWBALL on CC 2: 350
Dog food: 100
Gas: 150
Groceries (incl toiletries): 200

continue on your tight grocery budget. also see what you can do about insurance and dog food. by september, cc #2 should be gone. also by september - your dh should have something else lined up for work. but if he doesn't, here's what i see as your fall/winter budget.
This store has said they will accommodate his schedule and so far they have been wonderful. So he should get plenty of hours then too. I just am afraid to count on it until I see how much he is able to actually do.

Quote:
income: $2400
Savings: 200
Rent: 900
Insurance: 350
Interest on my LOC: 150
Hydro: 50
SNOWBALL on CC 1: 300
Dog food: 100
Gas: 150
Groceries (incl toiletries): 200

again, you guys continue to have potentially higher incomes than listed, and can use that to make extra payments against your credit card. you have a savings, so if something comes up (like car maintenance, a vet bill, other other essentials that are not on the budget), you won't have to use the credit cards. there are no extras. dates are free - like a walk in the park, "renting" a movie from the library, free day at the museum. it will be tough but you can do it.
You make me feel so much better! I finally see a way out! I just couldn't make it work. I want to cry I feel so relieved. Especially as you used our pessimistic numbers and I am sure I can improve on them even if he can't work much. But you have real payments! And savings! And I won't starve!

Quote:
look at the financial position you will be in a year from now, if you do this - even without increasing your income at all. at this time next year, you would be looking at using your tax refund to eliminate the remaining balance on cc #1 and then you will only have the LOC to work on. and without the payments on the credit cards and the car, that will burn away quickly, but only if you two decide together to change your life, and decide every day to make responsible choices. it will take extra time and planning to live within a strict budget and not use your credit cards, but you can do it if it's really important.
OMG! I cant even believe we can be there. I had just about given up because it seemed impossible. That all our trying wouldn't matter because we just couldn't make it. You have really helped me see how to stay afloat and even to move forward! I feel so much better. Thank you so much!
 

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Discussion Starter · #12 ·
Quote:

Originally Posted by nd_deadhead View Post
Good suggestions!

Chances are, your CC2 is at a higher interest rate than the car. When you get your tax refund, you might consider paying off CC2 first (freeing up $50/month), putting the rest toward the car, and paying off the rest of the car as fast as you can. Eliminating CC2 will allow you to close out that account.

I agree that you need to start tracking every penny you and DH spend - when you itemize EVERYTHING, you might see more places that you are spending unnecessarily. Can you increase the deductibles on your insurance to reduce the premiums?
I have debated paying that card off first. I will close it as soon as it is paid in any case.

I am sure when we itemize everything we will see more places to cut. I have high deductibles already and he has liability only.
 

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Discussion Starter · #13 ·
Quote:

Originally Posted by MyTwoAs View Post
Since the car is going to be paid off in April, then that frees up $500. If it isn't going to be paid off in April then I'd consider selling it.

I listen to Dave Ramsey and what he might say in this situation is that you have an income problem. I understand your DH just immigrated and so I don't know what limitations he might have on employment or if it is just generally an inability to find a FT gig. What is his professional skill set? Does he have any training/certification/education?

If possible, housing should be no more than 25% of your take home, can you find a less expensive option?

I agree that I would also stop the retirement contributions, temporarily, while you get back into the black.

One thing that is important to note is that it is unlikely that your (and your DH's) income is not going to remain flat. Sure you might not be able to pay down debt over the next year or two but you can get in the black and start living on what you earn instead of what you earn plus credit cards (no judgment at all, BTDT!). Then as your financial situation changes, you will be in a place to actually pay down debt.

I'd also keep track of every penny spent and categorize it so you know how much you're spending on dog food, how much you spend on groceries, how much you spend on gas, etc. When I first did that I was amazed at how off I was with my estimates.

Good luck! I think that looking at your budget on paper is the first step in turning things around.
It will be paid off in either April or May in any case. It depends on when I get my tax return. I can't file until April because I need a tax form I can't get until March. So if I get it late April, it won't pay off my car as April's payment will be outstanding still. But if its early May it will be.

DH has only had one job ever, and that retail. He transferred to the Canadian version of the store he worked at before. My city has lots of retail, but they never hire FT. This place wanted to offer him a ft job when he started, but that changed when they heard he was going to school in the fall. But he's been averaging 30 hours a week, and they said they offer scholarships and will work around his school schedule so for now it seems worth it to stay.

This housing is by far the cheapest we could find, more than 200 less than any other dump we could find


Thank you for your advice. We will start tracking and living on cash, and get a handle on our debt. This thread has really reassured me.
 

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Discussion Starter · #14 ·
Quote:

Originally Posted by sanguine_speed View Post
How will he pay his tuition? Is he getting grants or scholarships? It's possible that he may be eligible for a bursary depending of course on the eligibility criteria at his particular institution.
Also, I know college is demanding, but it might well be possible for him to earn more than what you've quoted here while he's studying. If he's already working off-campus in retail, I assume he's got some work privileges. If not, or if his work privileges are limited, I know that at least in Ontario. international students are permitted to work and earn money on-campus. This could be doubly beneficial: work is closeby and more income.
I hope he can work more. Its community college, 2 years. Plus he has 2 semesters of paid co ops, so that will help after the first 2 semesters. We are using his tax return for the first semester's tuition and will save up for the second semester. Then his co op should pay for the third and the same for the fourth.

He is a permanent resident, so can work anywhere he wants, and pays resident tuition fees. I am honestly expecting him to work more than I quoted. I just want to know we can make it if for some reason he can't. Then the extra can go right to the cards because we weren't counting on it, you know?
 

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In addition to what others have said, I would adjust your tax withholdings. If you are getting $2500 back from the government, that means you are paying them more than $200 too much every month - money that is later returned to you without interest while, at the same time, you are paying 19% interest on your debts. That extra $200/mo. would help to knock out those debts much faster.

Between adjusting your tax withholdings and (temporarily!) cutting your retirement savings, you could be looking at $300-$400 more in your budget each month. As others have said, I'd use the tax refund from this year to pay off that second credit card. I'd use the ~$1000 that is left as a baby emergency fund for use only in emergencies. An online bank would be a good place to keep this, so that it is easily transferrable to your local bank, but not immediately accessible via ATM/debit card or check. That will prevent you or your SO from accidentally using any of it for non-emergency spending.

Then your budget might look more like this:

Income: $3200
Rent: 900
Car payment: 500
Insurance: 350
Interest on my LOC: 150
Hydro: 50
Minimum on CC 1: 150
Dog food: 100
Gas: 150
People food, toiletries, other expenses etc: 300

That leaves your $550 leftover for debt repayment. If you can manage to put all of that onto your car loan for the next few months, you should be done by May. That is two of your debts knocked out in three months!!
Then, you could move onto your higher balance credit card but I think if I were you, I would spend May through September stockpiling your extra cash so you have more of a security net when your SO starts school. That way, until you work out the kinks of that major change in your lifestyles, you won't risk falling short for the month and falling back on your credit cards.

And, of course, in the meantime you could both look at ways to increase your income.

It sounds more than do-able to me!
 

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Discussion Starter · #16 ·
Actually, no, I never get a tax return. This year is only a technicality that allows me to get any back. See, DH landed in Canada in December and worked in Canada. So he counts as if he lived here all year, but he only earned 300 in 2009 in Canada. So I get to count him as a dependant. He will not be one in future years as he will earn too much. Its just a one time treat
 

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Quote:

Originally Posted by karkli View Post
In addition to what others have said, I would adjust your tax withholdings. If you are getting $2500 back from the government, that means you are paying them more than $200 too much every month - money that is later returned to you without interest while, at the same time, you are paying 19% interest on your debts. That extra $200/mo. would help to knock out those debts much faster.

In some places, such as Canada, it is impossible to avoid a tax refund in certain situations. For instance, it is commonplace to have a refundable tax credit on rent paid. If you're low-income and you pay rent, you will probably get a substantial refund on your rent. You can't adjust withholdings to account for this. The "withholdings" form is very specific and you can only change your withholdings based on specific information such as estimated income, whether you're a student, whether you have dependents...you can't just pay less tax because you think you'll end up with a refund.
Also, in Canada, Registered Retirement Savings Plans offer refundable tax credits based on your income. So you can expect a refundable tax credit of up to 50% of your contribution and the only time you get this money back is when you file your income taxes--and again, you can't adjust your withholdings to account for this.
There are lots of other refundable tax credits that you can't really account for before filing your taxes. Tax refunds are not always refunds of taxes actually paid, besides. There are lots of refundable credits for expenses that there is no way to account for on withholdings: sports for kids, child care, RRSP contributions, etc.

So, in Canada, getting a tax refund is often not a result of poor accounting. In fact, those who end up with big refunds have often planned very well.
 

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Discussion Starter · #18 ·
Just a big THANK YOU to everyone who helped me on my budget. I sat down with a trust spreadsheet and worked out a plan! DH was just asked if he would take on a new responsibility at work that gives him a guarunteed 10 hours a week more, so his minimum income has increased to around 600 a month! And if they continue to call him for the extra shifts for the back room, he may even make closer to 1000!

I used the lower estimates in the budget and added some expenses I hadn't even considered before (change for laundry!) and put away some money every month for his school expenses (instead of putting it back on the cards). Its certainly tight, but I think we can do it.

If we can stick to the budget, in 1 year we will have an emergency fund and have my car and one card paid off and good headway on the other. Plus I think the budget is manageable! Wow!
 

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Discussion Starter · #19 ·
Quote:

Originally Posted by sanguine_speed View Post
In some places, such as Canada, it is impossible to avoid a tax refund in certain situations. For instance, it is commonplace to have a refundable tax credit on rent paid. If you're low-income and you pay rent, you will probably get a substantial refund on your rent. You can't adjust withholdings to account for this. The "withholdings" form is very specific and you can only change your withholdings based on specific information such as estimated income, whether you're a student, whether you have dependents...you can't just pay less tax because you think you'll end up with a refund.
Also, in Canada, Registered Retirement Savings Plans offer refundable tax credits based on your income. So you can expect a refundable tax credit of up to 50% of your contribution and the only time you get this money back is when you file your income taxes--and again, you can't adjust your withholdings to account for this.
There are lots of other refundable tax credits that you can't really account for before filing your taxes. Tax refunds are not always refunds of taxes actually paid, besides. There are lots of refundable credits for expenses that there is no way to account for on withholdings: sports for kids, child care, RRSP contributions, etc.

So, in Canada, getting a tax refund is often not a result of poor accounting. In fact, those who end up with big refunds have often planned very well.
This is true. My RRSP comes of before taxes so I don't get a refund for that, but other things we can't change the withholdings on.

But the reason I hate canceling my RRSP is because if I pay 100 to it, I save 50 in taxes and am matched by my company. So the 50 gets me immediately 200. And I can borrow 20k from it towards a down payment for a house one day. So I hate losing that 150 a month of free money towards it.
 

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Quote:

Originally Posted by dealic View Post
Credit cards are 19% each, LOC is 6.75, car is 8.1.
In that case, definitely run the numbers on using the tax return to pay off the credit cards instead of the car. Set up a spreadsheet and see what happens with either scenario.
 
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