Every Day

Update On Our Two Couples

I finally heard from our last couple who I am mentoring last night. So it is time for an update.

The Jones have done very well since we first talked a few months ago. They have cut their grocery bill by $50. a month by using their leftovers which they used to throw out. Mrs. Jones cut the bill down to just $ 30. this month by trying the grocery challenge. She is using up items that have been lingering on her pantry shelves. She has also been making a price book so that she knows the cheapest place to buy items. She and her Hubby have been eating healthy by keeping meals simple. That is a savings of $ 170. in just the past three months. She told me that they added that to the fund for her high risk pregnancy. 

She and Mr. Jones decided they will use cloth diapers. She has been able to get a few dozen by buying them at garage sales. She said she was very excited when she found a brand new package of 10 that someone had never used at one of them for $2.00. Her family is throwing her a baby shower where she hopes to get a start on stocking disposables. They are going to ask people to bring a box to enter into a raffle for a gift basket. She has registered her list of wanted baby items at a site she is using.  

They have not gone out to eat in 7 weeks. She said she is enjoying cooking at home. However Hubby is getting the bug to go. So they compromised. They are going to go out for dessert at a special place in town that they both love. She convinced him that it would be cheaper than spending a lot of money on dinner and they would enjoy it just as much. The leftover money from their budget will go to the pregnancy fund also. 

They cut their clothing budget by $25. a month. She borrowed maternity clothes from a friend. They are also looking at cutting their entertainment budget in the next month or two.

Hubby did some research on cutting their car insurance. But he found out that they already have the cheapest policy that they can get. He will look at it again next year. 

I am amazed at how well they have done over the past couple of months. It’s not easy to cut when you are used to spending a set amount of money. But they are doing well and I am cheering them on to continue. 

Bruce and Noreen are doing very well also. Noreen found a part time job -20 hours a week. She is making about $300. a week after taxes, Social Security and Medicare are taken out. She just started last week and got her first paycheck last Friday. She is going to be paying all of her paycheck toward debt. So that will be about $1350.+ a month. Congratulations to her for quickly finding a job.

Remember that their budget was $ 8539. more per year than they were bringing in in income.  Her yearly income of $16,200. more than makes up for this deficit.

But they also have been cutting expenses. I told them they needed to cut everything except the basics in order to get rid of this debt. They discussed it and decided to cut another $688. per month out of their budget. They have reduced their monthly costs by cutting groceries by $50. a month, no restaurant or takeout which was $150., clothing by $75. leaving just $25. to spend when their son needs something.
They also cut their entertainment and misc. by $200.,
their household by $50., no travel which gives them another $120., and their home phone which gives them $43. more for debt payment. They did not want to cut their Cable TV or internet because they both use the internet and the son likes to watch some shows on TV. I told them to look for a cheaper option to give their son a choice of shows like Netflix. They are working to reduce their utility bills.  I will be working on this with them this month. Their plan is to dump every penny extra they have next month on their debt.

I have been teaching them how to cut their food bills all month. Next month we will touch on a lot of subjects that will teach them how to lower their costs not just for now but how to be frugal in the long run so that they can spend their money on the things that are more important to them.

If you have a any comments or suggestions for any of the families for this next month on what they can do, please feel free to leave a comment. They read the comments every couple of days. I gave them a  Big Congratulations! They are starting to get the “frugality bug”!

Every Day

Family Number Two

The second family who has asked for advice are the Jones(not their real name). They are in their 20’s.  Mrs. Jones is pregnant with their first child. They rent an apartment in the Midwest. Their net income after all deductions is $ 28,281. divided by 12 months equals $ 2357.

Here are their expenses each month:

Rent: $ 950. 
Groceries: $ 150.
Restaurants and Take Out: 60.
Clothing: $100.
Entertainment: $75.
Household: $25.
Travel: $100.
Medical Co Pays: $100. 
Car Insurance: $95.
Gasoline and Oil: $55.
Cell Phone: $ 64.
Electric and Gas: $75.
Emergency Fund: $50.
Renter’s Insurance: $ 10.
Miscellaneous: $ 50.

Total Monthly Expenses: $ 1959.

They have been putting the extra $ 398. into a savings account in case they have extra medical expenses with Mrs. Jones high risk pregnancy. They have a good health insurance policy through Mr. Jones employer.

This is what they have saved:

Retirement Fund: $2100.
Emergency Fund: $2000.
Medical Savings:  $1592.

When they were married a year ago, they took their cash wedding gifts and opened their retirement fund and their emergency fund. Mr. Jones has started contributing to his 401K through work and it is a deduction from his paycheck.

With a baby on the way, they are starting to think about buying a home. They would like to save a deposit of 20% down so that they don’t have to pay PMI. Housing is not really expensive in the area they live in but they still need to save $20,000 – 30,000. depending on how much they spend plus closing costs.

They want to know if they should start putting some of that $398. into a house deposit account? They also want to be able to save more money than what they are saving.

I told them I thought it was great that they didn’t have Cable TV or internet. He said it is included in their rent. They also have no car payment because they have a paid for car that her parents gave them as a wedding gift.

Mrs. Jones is not working because of her high risk pregnancy. They will rethink that after the baby is born. Her parents live close and would love to babysit. 

When I first looked at their finances, I thought this couple is doing great and they are for only being married about a year.  I also think it was very smart of them to fund some of their savings with wedding gift money.

I have had many conversations with them since they first contacted me. I have told them that I would continue to earmark that $ 398. for the high risk pregnancy. Then when they baby is born, if all or most of the bills get paid, they can just earmark it for their home deposit savings. I also reminded them that they need to get some life insurance for when the baby is born. Mr. says he already has it through work. 

They had a little outstanding credit card debt;however since I first starting talking with them, they have paid that off.

Since they would like to save more money out of the paycheck, they need to cut their expenses. I do not believe that they can cut their groceries. It is pretty low. Nor can they touch the household amount because they will be needing diapers soon. However, they could consider cloth diapers which would be much cheaper in the long run. 

The expenses I think they can lower or cut are clothing, restaurants and take out, entertainment, travel,and perhaps their car insurance although it is pretty low compared to what I pay. So these are the ones they need to work on.

Okay, now it is your turn to give them your $ .02!
What do you think they should do?

Lastly, I wanted to let you know that Bruce and Noreen want to thank all of you who gave them advice.  

I will be updating you once a week on what they are doing.   

Every Day

Family Number One

I told you previously that I have agreed to give advice that hopefully will help two families who have asked for my help with their finances. Both families have asked that I keep their names anonymous. I have agreed. 

So couple number one are Bruce and Noreen(not their real names). They are in their mid- forties and have one son who they would like to see go to college. Bruce has a professional office job and Noreen is a stay-at-home mom. They live in a home in suburbia in one of the Northeastern states.

I am going to give you their net income and expenses after Bruce’s Federal and State taxes, Social Security, Medicare taxes, 401k deposits, and healthcare payments through his employer have been taken out. They have $ 55,397.  yearly left for all other expenses.

I want to remind everyone that this is a no judgement site. I and you are here to help with suggestions not criticism. Bruce and Noreen have told me that they made some bad choices in the past so they have $21,000. in credit card debt. They have consolidated them onto the lowest interest card and they pay $1500. a month towards paying them off.  

Their monthly spending that is deducted from the $55,397. figure is as follows(all numbers have been rounded):

Mortgage and Property Taxes:  $1298.
1 Car Payment:  $ 570.( a second car is paid off)
Groceries: $ 300.
Restaurants and Take out: $150.
Clothing: $100.
Entertainment, Hobbies, and Misc, etc. – $250.
Household: $160.
Travel Savings: $120.
Car Insurance(2 cars): $160.
Gasoline and Oil: $ 121.
Car Registration and Inspection: $ 19.
Car Repairs, Tires and Other Maintenance: $100 
1 Cellphone: $60.
Home Telephone: $43.
Electric and Gas Bills: $ 183.
Cable TV, Internet: $123.
House Insurance: $ 71. 
Credit Cards: $1500.

Total Monthly Spending: $ 5328.
Total Yearly Spending: $ 63936.

They have $125,000. in 401K savings.They have drained their bank savings to help with their credit card payments. They only have $2,000. left which is $500. more than one monthly payment. They have no emergency fund. 

Any spending that they can’t account for they have added into their entertainment, miscellaneous figure above.

They are spending $ 8539. more per year than income. Hence they have asked for advice on how to fix this. They were absolutely shocked once they started tracking their income and expenses to find how much money they were in the negative. This is the reason why everyone should track this every month. Otherwise you have no idea what you are spending and for what.

I asked how they have kept afloat and they told me by spending down their savings which was an inheritance they received. But as you can see they don’t have much left.  They also rob Peter to pay Paul within their budget.

My first look at this told me a few things. They are paying too little on their debt so the interest is eating them alive. They must cut expenses and Noreen needs to make some income by either finding a job outside the home or finding one that she can do from her home at least until the credit cards are paid off. They need to sell anything in the home that is not being used to help pay their debt. I don’t think their grocery spending is out of line for a family of three. But with careful use of every morsel of food and all the other tips that I will give them via the blog this month, they should be able to knock $100. a month off of that spending. The restaurant and takeout and clothing budget spending needs to stop until their credit card bills are paid. The miscellaneous budget needs to be reduced. 

I asked them what the household amount encompasses. They said it is everything for the house inside and outside except for food. So basically it is HBA, cleaning products, personal care and yard and house maintenance. That probably can not be reduced by much. But they can try.

I also noticed that they had no money shown to pay for garbage pickup or water and sewer. They told me that it is included in their property taxes. 

The monthly travel savings needs to be stopped until their debt is paid. 

They can research other auto and home insurance companies to see if they can lower those amounts. The gasoline and oil figure is reasonable since Bruce commutes to his job and Noreen only runs local errands. 

Perhaps they can cancel the home phone since they have two cellphones. Bruce has one that his work pays for and Noreen uses the one they pay monthly for.

I will show them how to reduce their gas and electric bills. 

Can they look at cancelling cable and using some other services that are cheaper until their credit card debt is paid?

The lack of an emergency fund is one of the reasons that their credit card bills became so high. Every time prior to the inheritance, they would use the cards when an emergency came up.  

I also see no money spent on gifts and I asked them why. They said they charge them especially at Christmas. 

They have to do everything they can to reduce expenses and bring more income in to the household to pay off credit cards, bring spending into line so that it is less than income coming in. They have no choice or they will lose everything in the long run. They also need to do this so that they can save an emergency fund and save some money for their son’s college education.  

Being in their mid forties, they also need to ramp up their retirement savings.

These are my quick thoughts. This month I will show them how to cook cheaper meals at home and never get takeout or eat at a restaurant. They do have a stockpile and are doing the stockpile challenge this month along with me and others.

Anyone that has any quick thoughts for this couple, please feel free to comment.   

I will introduce the other family in my next post.