Working Moms
EPQueen
member
Financial stability
EPQueen
member
in Working Moms
DH and I both have great jobs and together make around 200k yearly. However, we have around 160k in student loans, 2 car payments, a mortgage, and daycare to pay for. We only have around 6k in savings and are just barely making ends meet each month. Life is just getting much more expensive than we ever anticipated and it feels absolutely absurd that we make as much money as we do and are still struggling with finances. We obviously have made some purchases that were not the smartest decisions.
I'm not really sure why I'm posting this. I'm just frustrated and not sure how to remedy the situation when we don't have any extra cash flow...just want to be a better parent and role model for LO as well as to stop feeling stressed about finances.
Anyone care to share your financial situation and how you got there? Advice?
I'm not really sure why I'm posting this. I'm just frustrated and not sure how to remedy the situation when we don't have any extra cash flow...just want to be a better parent and role model for LO as well as to stop feeling stressed about finances.
Anyone care to share your financial situation and how you got there? Advice?
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Re: Financial stability
This. You are probably better off than you think. Many people who you think are doing better than you are likely living beyond their means or not saving. As long as you are paying all of your bills and saving for retirement, I bet you are actually ahead of your socalled peers.
Nearly 10 years ago when DH and I got engaged we went to see a financial advisor. We made decent salaries but had a lot of debt and minimal savings. Their advice: pay down the "bad debt" to free up cash to start saving. And so that is what we did. We paid off DH's car which was over 700/ mo car payment. We paid off our CC debt. We also paid off an investment house that we lost our shirts on when the economy tanked. So on paper we lost 100k, but at least we now have positive cash flow from the monthly rent. 10 yeas later we are still with our same financial planner, our income is higher, our debt is manageable mortgage and one student loan both around or below 4 and we are saving for our futures more aggressively then before.
So in addition to meeting with a financial advisor, you should make paying off bad debt a priority so that you have the cash available to meet your monthly bills, save for your financial goals, and fund your hobbies and family activities.
We read smart couple finish rich and it was extremely helpful.
Do you have a budget? You need one. And it needs to include "sinking funds" to plan for "unexpected" expenses like car repairs, yearly subscriptions, etc.
Also, if you make 200k and you're treading water, your fixed expenses are probably too high. Often, people have bloated lifestyles to go along with huge incomes. We make a good income - 120k - and we don't feel like we have tons of money coming in. Taxes take a good chunk of it, and daycare is expensive too.
Our situation isn't ideal, but we're working on it. We're using a modified version of Dave Ramsey's plan to get out of debt. We have a 3 month emergency fund saved and are putting ALL extra money towards debt. H isn't really on board, so it's going more slowly than it should, but in the first year we paid off about 25k in debt. We have 30k left, and then we'll be beefing up our emergency fund.
The simple answer is that we don't spend much money. I use mint.com to track expenses. We buy furniture and other big items used on Craigslist. Including our washer and dryer which I think were 50 dollars each and have lasted 4 years now with no problems. Our TV stand, DS's dresser, dining room buffet, toddler bed, nightstands and more are all from CL. We got one stroller for my baby shower and the second one I bought on Craigslist. Our dining room table is from Cort which sells previously rented furniture. I shop consignment and thrift stores for most of DS's clothes or get the children's place and target end of season clearance for the following year. I just bought a bunch of tshirts for next summer at 1.25 each online from children's place.
DH's car is 10 years old but we will keep it another 5. Just last week we replaced my 15 year old car with a new minivan at 0 percent interest. DH wanted to wait longer but it was having some weird engine problems and I was too stressed to drive it with a toddler and a baby on the way soon.
We rarely go to restaurants or get takeout unless its a special occasion. We are both pretty good about taking lunch to work. I probably go out to lunch one to two times per week. DH does less often. We shop at trader joe's, Costco and the regular store each week to get the lowest prices on things we use a lot of like fruit and organic milk.
We aren't this cheap about every single thing but saving a lot where we can is what has allowed us to get by. I have a designer purse that I stalked online until it went on sale. We don't buy cheap shoes for anyone in the family but do watch for sales. We both wear suits to work and buy decent ones but again we look for sales or outlet shop. My friends are always surprised at how "responsible" we are with money but I feel like we have everything we need and lots of things we want. We just don't go out and spend without putting some thought and effort into it first.
Sometimes I get frustrated that we both worked so had and went to law school but have to watch our budget. But the truth is that we could have gone to firms and earned a ton, we chose different career paths for a lot of reasons. And we have a nice home and everything we need for our family. When I look at the numbers on paper or the computer screen I see that we earn and spend a lot every month. We just have to be smart about where that spending goes.
Try mint.com for a few months. It takes a ton of time to set up and play around with at first but it will give you a very clear picture of your spending. You may be surprised at things you could cut back.
When we needed new cars, we bought used and paid in full, so there wouldn't be any care payments. We currently rent and are saving up for a house. We use coupons anywhere we go and we searched around for the best daycare at the best price.
I am also a teacher and had worked at Title 1 schools for five years so the last 5,000 was forgiven. I think financial advisers will tell you to pay off the highest interest rate first and then work on paying everything else off. Is there anyway you can convert all your student loans together into one loan for a lower interest rate? That way you only have one loan payment instead of multiple. It may take a few years, but if you keep working at it and live within your means, you will be able to pay things off eventually.
I also use Mint, and it has been a huge help in tracking our spending and putting together a good budget that meets our goals.
We live in a VHCOL area, and for many reasons, not the least of which is a daycare payment of $2800/month, we've scaled down our expenses dramatically over the last year. I drive a slightly beat up but fully paid for Subaru with 90,000 miles when I would have once traded it in. Our other car, a hybrid that gets 40+mpg, will be paid off in a year. It's not a stylish luxury car like the ones I used to drive, but it's worth it to me because I want to be able to afford a car in retirement. We no longer live in a trendy neighborhood, and our commutes are a bit longer, but our mortgage payment is half of what it was.
Fundamentally, DH and I made a decision to focus on "more experiences, less stuff". That meant selling a very high-end dining room set that simply didn't work for us, buying a replacement from Ikea, and pocketing the difference. That means we only buy people one gift per occasion (birthday, Christmas) in our family-a big change from when DD1 would get 15 or 20 presents, but one that hasn't impacted happiness in the slightest. I don't buy clothes on a whim anymore. DD2 is dressed in Target and Carters instead of Baby Gap, Hanna Anderson, and Tea. And you know what? I don't miss any of that stuff at all.
I'm not saying this is the case for you, OP, but a tool like Mint can really help identify where you're spending more than you realize, and help you feel more in control of your finances. Good luck!
You have already gotten some great advice. I would also recommend that you read a couple of books like "The Millionaire Next Door" and "Smart Couples Finish Rich" that give you some guidance on how to change the way you think about money.
I agree with the other posters that it sounds like your fixed expenses are too high, so I would look at what you can cut out, or when you can be out from under these expenses. Such as, how much are you paying toward your cars and how long until they are paid off? If they are close to being paid off, keep plugging away and keep them after they are paid off. If you still have a lot of payments left or a high payment, does it make sense to sell the car for something more reasonable?
Definitely build a budget. Several years ago when DH and I wanted to buy our house, we put together our first detailed budget and tracked what we had been spending money on for the past few months. We were really amazed at how much money we wasted on small meaningless purchases and trips to Target. You may be bleeding money somewhere and not even realizing it right now.
A financial advisor can help you but you can also do this on your own with a little research and careful examination of your finances.
DH and I have kept our expenses the same over the past 10 years as our income has grown. All of the excess goes to savings, and some fun splurges here and there, but we don't spend anywhere near what we could. I can't really take the credit for that - DH is one of the most frugal people I know and actually has a hard time spending money. But his way of thinking has really rubbed off on me so now we are both pretty frugal.
GL!
Our income is similar to yours and I totally see how it's easy to get to the point where your ends just meet. Typically when you make more money you spend more--you'll want a fancier car, a bigger house--and before you know it your fixed expenses are super high and you feel trapped.
For us, we bought a house five years ago when we were making much less than we our now. We've since refinanced so the mortgage is even more affordable. Is refi an option for you? If you have crazy high car payments is selling an buying something cheaper and/or used possible? Are there other fixed expenses you can cut, like (god forbid I mention this one!) the house cleaner, lawn crew, etc? Can you downgrade your cell phone plan and cable? Eat out less?
I think you've gotten tons of good advice already, but I wanted to chip in my two cents on what works for us..
We live in a VHCOL area, and make roughly the same amount as you, but we were lucky to not have student loans to deal with. Some of the things that have worked for us:
Track everything you spend. Like others have said, mint.com is a great tool.
Make savings automatic and harder to access. We're each contributing the maximum allowable portion of our salary to our 401ks. Once payroll is deposited into our checking account, a set amount is transferred into an online savings account. It takes a few days to get that money back into checkings, we have no debit card for it or checks, so it's harder to access.
Control your lifestyle related expenses. Whenever either of us has had a promotion or salary adjustment, we adjust how much goes into the savings account. If we're getting a few hundred extra a paycheck, it's easy to spend. At the end of the day, we pretend we haven't gotten that extra and continue living with our same budget and just squirrel it away.
Pay for everything on credit cards - it's easier for tracking purposes. That said, we pay off our cards multiple times a month and have never carried a balance. We don't buy anything that can't be paid off immediately.
Contrary to what others have said, aside from cars, we DON'T buy a lot of used stuff, and we don't always buy the cheapest. A dresser from Ikea may be cheap, but it will have to be replaced sooner than something a little pricier. And it's not like we're out replacing dressers every year or so, so spending a bit more isn't a big deal.
Budget within reason. We try to save room in our budget for 'extra's. DH likes to play video games, I like to read. We both like wines. We have an allotment in our budget for 'fun' items. He can spend a certain amount on video games per month without me questioning him. Same for me with books. We're in two wine clubs, so those shipments are built into our budget.
We followed the Dave Ramsey program and snowballed our debt...we had some credit cards, two car payments and some student loans...we rented when first started. Two years later we only have our new house mortgage and one car payment (we made a rule only one car payment at a time so when we paid off DH's car I got a new car with payments for three years...once those payments are up...in two years...DH will get a new car).
It really helped us feel more secure and especially now with a baby. We still do a budget per pay period to ensure we are only using our "allowance" and saving money. It's difficult to do, and yes we made sacrifices...but now we have seen the light at the end of the tunnel and are enjoying our beautiful home and having money to spare for family vacations and to spoil DS a little bit!
Henry Cavill...You're welcome!
BFP #3: EDD 1/10/13 **DS born 12/30/12!!!**
BFP #2: MC 7/2/11 @ 12 weeks
**Missing our February '12 LoveBug**
BFP #1: MMC discovered on 12/6/10
The Simple Dollar
Get Rich Slowly
Mr. Money Mustache
Sorry I didn't provide links ...I'm mobile. They are popular blogs though, so you should be able to find them with a simple Google search.
I actually said Holy Sh!T out loud when I saw those student loan numbers.
What do you pay each month for that balance, can you refinance student loans to get a lower rate?
Do you need 2 car payments? Can you get rid of one car and buy a used one with cash to eliminate a payment? We are driving a 2004 and 2008 models to eliminate car payments which saves us $1k a month - nothing to sneeze at!
I just wanted to comment say your situation is similar to ours. Our combined SL debt is $300K and we make much less than OP. I just DGAF anymore. We're not as frugal as you are (but we should be) because I have decided I'm not going to be a slave to our SLs. We're on low IBR payments that will not put a dent in our debt but "hopefully" it'll be forgive in 20 years or something.
Anyway isn't sad that a law degree has become such a big burden for most?
http://balletandbabies.blogspot.com
I can see how you'd feel that way. We started married life together 7 years ago with $125K in student loans. Being in BigLaw, my salary increased dramatically year over year and we kind of got caught up in living the lifestyle that I saw all my friends/colleagues living. Luckily, we decided to really buckle down and tackled our debt. I know lots of people choose to make minimal payments on their loans, but I find the emotional stress of carrying non-mortgage debt to be too much for me; so we put $2,500/month towards our loans to get those paid off. Once that was paid off, I felt so much better.
I'd say that we were pretty reasonable in our spending before DS came along; but after he came along, we had to cut back further. Some of the things we do now: bought a Roomba to cut down on frequency of cleaning service; got a high-end washer to cut down on dry-cleaning costs; asked ILs to watch DS 1 day/week; stopped buying books and started borrowing them from the library; cancelled cable; and take the bus to work (parking was $550/month). We used to spend lots of $ on eating out or entertaining at home, now when it's just DH and I going out, we either use the Entertainment Book or Groupon coupons. I used to love throwing big parties at home where food would cost hundreds of dollars, now when we entertain at home, we throw burgers on the BBQ.
We tried to be even more frugal than that but I felt that was making me depressed. So we still have our Starbucks everyday, still go for an expensive dinner with friends once or twice a month, and still go on nice vacations. I still get a spa treatment every quarter and DH still gets to play golf once a month. It's definitely do-able! You just need to look at your budget very closely. And try not to compare with your friends. Almost everyone I work with have 2 cars in the family, have million-dollar homes, and have a nanny. But I'm happy in the knowledge that we are financially secure and are on track to retire at 55! Good luck.
(shortened the quote tree)
Sigh. Yes we honestly didn't expect our law school loans to impact our lives so much. We actually took less loans than many of our classmates but it's still hard. Sometimes we talk about how our day to day lives would be different without the $1,500 per month in loan payments, but it just gets depressing. I've been reading Dave Ramsey and some other sources to see if it makes sense to try and pay them off but it's so out of reach with our income level and housing prices in our area. We may focus on paying off our mortgage before DS starts college instead - it's actually more likely to happen and there will never be mortgage forgiveness!
We still have 5 years on both our auto loans, and would lose money if we sold them, so our plan is to pay off the small amount of cc debt we have and then focus on paying off our cars as soon as we can. It just seems like it will take forever since we don't have much extra to work with. We already live a pretty frugal lifestyle. Hardly ever dine out, don't spend much on clothing, etc. we just made a few big purchases that I wish we could undo. All we can do at this point is move forward try to pay down the debt. Just depressing I guess. Thanks for all the book and blog suggestions, from what I've looked at so far they all seem very helpful.
Here's to getting back on track!
Don't have anything to add for OP, just wanted to chime in on my dissatisfaction with my law school student loan situation, which I realize is my own doing. I graduated with $120k in student loans to a $40k job. DH never went to college and earns nearly what I do. With IBR, my payment is $55 a month, and I'm pretty committed to doing ten years in government so that the balance will be forgiven. I'll be 35 then, and until then, it feels like we'll never get ahead. I participate in the government retirement program, DH has no retirement savings right now, and we have no other savings. We fight a losing battle with credit cards. We also have a one-car-payment rule and a relatively affordable mortgage on a modest home. We watch every dollar and it's miserable. Complaints over!
Our combined income and student loan burden are similar to yours. We bought our house when I was pregnant with DS. We knew how expensive daycare would be for an infant, so we decided to keep our house budget WAY below what we were approved for. Our mortgage is a very small percentage of our salaries, much lower than average housing expenses.
We don't currently have a financial planner, although we have talked about meeting with one. For now, I try to focus on not buying new stuff if I can make do with old stuff. This is easier for me than it is for DH. We don't have car payments, so our next financial priority is paying off my student loans. I definitely agree with PPs that your "peers" are likely living beyond their means.