In The Red...........

iVillage Member
Registered: 11-30-2004
In The Red...........
10
Thu, 12-02-2004 - 11:29am

I am so grateful to have a place like Ivillage to get support and information from. What a concept!! I am a 26 year old married female and I am in debt.I feel like Im in an aa meeting.

I make decent money and my husband is picking up the rear, but that's never been an issue for us. Please bear in mind that we live in Northen California one of the most expensive places to live in the country. I love it here though, so moving is out of the question. This is my home.

We have separate bank accounts. I think problem #1 is that we are constantly in the hole with the bank. Dam that overdraft protection. Last week before I got paid, I was $400 in the red. I know that that's not a lot of money, but if it's occurring every two weeks, it adds up. It's basically borrowing money from yourself and paying a very high interest rate. If I overdraw $200, by the time payday rolls around, I end up $400 in the red. In addition to that, when it comes to our utilities, we always just pay the past due. With our phone bill, we didn't even do that and our phone is now disconnected. I've always considered myself an independent person. I hate borrowing money especially from my parents. Even if I know that I'll pay them back, it's like admitting that Im irresponsible. Fortunately, they've never had to help me pay rent or anything major. It's our immaturity I think. We don't think about the future. We always feel like we'll worry about it later. When later comes, we're stressed. Of course it will take a toll on the marriage too as we all know. But that's for another message board.

I've bought books on money management. My husband downloaded the microsoft budget program, we just don't commit to it. To top it off, Christmas is coming. Luckily we don't have children so we don't feel obligated to break ourselves to buy gifts. But we do have family we'd like to buy gifts for, I just don't know that that will happen this year. Then come new years, we'll be officially in tax season. That's a whole other posting.......I guess like everyone else, we just want to have fun. We live paycheck to paycheck and I get angry if we've paid all of our bills and can't do anything or go anywhere, so I play around with the bills to make sure I'll have some "fun money". I know it's wrong and probably our main problem.

What can we do as a young couple to get our finances in order and still be able to catch a movie and dinner once a month?

iVillage Member
Registered: 03-27-2003
Thu, 12-02-2004 - 11:51am

Congratulations on your decision to get this under control! It's wonderful that you are doing this before you have children and other responsibilities. Wish I'd been that smart!

You *can* be responsible and still have dinners out and movies sometimes, especially on two incomes. BUT, you will have to get things under control first.

My recommendation is to start by making a record of all your "must" expenses--phone bill, credit card bills, rent, etc. Don't forget to include non-monthly expenses like car repairs, tax bills, etc. (which you can total for the year and then divide by twelve to determine their monthly cost). Ideally this will total less than your monthly income (if not, then you will have to think about how to bring them down or bring your income up, but it sounds like this won't be a problem for you).

Next, you need to figure out exactly what you have that is past due, in collections, etc. A credit report can help with this--it is well worth the few dollars it costs to pull all three and see what is on there. You should do this regularly anyway to protect against credit fraud.

Once you know what you owe, you can begin working to get caught up.

Getting caught up may mean being hard on yourself for a month or two, which can be tough, but it will be so worth it.

Once you're caught up, you can create a budget that will allow for movies and eating out and whatever, in moderation. If you also take the time to track your spending for a week or two (writing down every time you visit the vending machine, buy a coffee, etc.) you'll begin to find out places that your money is going that may not be important to you. You can funnel that money instead to things that *do* matter to you. It's all about getting your money to work for you in ways that are important to *you.*

If you have trouble sticking to your budget, one method a lot of people swear by, is to put the money allotted for that activity into an envelope at each payday. You can spend until the envelope is empty, and then you have to wait until the next payday. If you get paid twice a month, this is not so hard to do--any deprivation you may feel will be alleviated by knowing that it's "only a week" or however long until you can fill the envelope again.

These are just a few things to get you started. Believe me, once we got caught up and on a cash-only basis, we began to feel not only more in control, but also wealthier. You'll actually have *more* money to spend, not less--and you can spend it on the stuff that really matters to you. It's amazing how quickly interest, late charges, etc., can eat up even a generous income. What a waste! LOL

Also, you should include in your budget at least a small amount for savings. Certainly, you should be saving every month for the irregular expenses that you calculated (repairs, etc.). You should also start a contingency fund in case something major happens--job loss, medical expenses, etc. And if you have a 401k opportunity at work, begin taking advantage of it, ESPECIALLY if your employer matches. It's like throwing money out the window not to take advantage of it. And it's relatively painless because it comes out of your check before you even see it, and because it's pre-tax it doesn't take as large a bite out of that check as you might think.

These are just a few ideas to get you started. Be proud of yourself for taking the first steps!

Blessings,

Heather

iVillage Member
Registered: 02-19-2004
Thu, 12-02-2004 - 2:06pm

I used to be where you are. It's been a slow road that would have gone faster had I known about this board. Years ago I had to get a handle on what I owed and when I had to pay it. So I created a spreadsheet and I listed all my bills, the amounts due and the due date (for example, Rent $700, due the 1st, Electric $60, due the 15th). Then I would check off each month when the bill got paid, so I always knew exactly which bills I was caught up on, and which one's I was behind on.

Over the years it evolved so now I also have a column for each paycheck. I plan out months in advance which paycheck I will used to pay what bills, so I can see in advance if I'm going to run into a problem. For example, if my paycheck on the 15th is allocated to cover 5 bills, but I have a sixth bill that is due on the 14th and there won't be any money for it, I can either plan to pay it late or see if I need to skip another bill to make sure the other one gets paid. Basically it lets me know if I am okay, or if I need to prioritize one bill over another.

I also track my spending. I don't track what I use for the vending machine. But I do know what I spend with my debit card. I keep my checkbook in excel and I can look back and see how much I spend on eating out, shopping at Target, at the grocery store, for gas, etc. I try to use my debit card as much as possible. I take my lunch to work and I can usually stretch $20 for the whole week, so most of what I spend does get tracked. Based on what I spend, I estimate how much I want to budget for cash withdrawls, groceries, gas, prescriptions, entertainment, eating out, etc. Each payday I pay the bills I have planned to pay, and then set aside enough money for those other expenses I will have the next two weeks. I actually make an entry in my checkbook for $150 for groceries (this is sort of like the envelope method in the previous post, but I don't use cash). When I go to the grocery store, I will enter in my checkbook "Safeway, $100, 12/1/04" and reduce my budget item from $150 to $50. Then I know I have $50 left for groceries until I get paid again. I do this for every forseeable expense, and I also put $50-$100 in an 'other' category because I always have unforseeable expenses. Some budget items I know exactly what I'll spend, like prescriptions. Other one's are guesses but are generally good, like gas. Over time I have gotten better at knowing how much money I need to set aside, simply because I pay attention to my spending habits and try to make my life fit my budget.

I try to put some into savings each time, but I'll admit I haven't been very good at that. I think the trick is to figure out what you have coming in and what you have going out. If the math doesn't work, you either need a second job or cut some expenses somewhere. You do need to budget a little something for entertainment, even if it's just renting a few movies. But if you do a budget and stick to it, then at least you'll know what you can afford and what you can't afford. Maybe you can afford to go to the movies once a month, or maybe twice a month. As long as you aren't going 4 times a month when you only have money for one movie. That is what gets you into problems.

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iVillage Member
Registered: 05-23-2004
Thu, 12-02-2004 - 2:51pm

Congratulations on deciding to take control of your money!
That's the first step.
Believe me, we are still very much in "baby steps", but it feels so much better than just drifting along hoping for the best.

I think you're going to have to be determined not to overdraw at the bank. That is a huge hurdle for you from what you've said. "It's basically borrowing money from yourself and paying a very high interest rate." I'm sorry, but I have to disagree here. It's borrowing from the BANK not yourself. That's an important distinction because if you let yourself think of it as "borrowing from yourself" even at a very high interest rate, it's easier to do. It's like you're claiming money you're confident you're going to make. You're spending your FUTURE earnings instead of what you have right HERE and NOW. That's dangerous.

Before the DH and I could make any real progress we had to make up our minds to never borrow another cent for anything, meaning no more restaurant meals, movies, etc. on credit cards (or the assurance that overdraft protection will kick in and we will be covered, and next week will "make it up").

You've gotten good advice about tracking and budgeting. I think getting current on everything is the best bet for a first step.

You want "fun" money, but I know from experience that wondering how this week's bills are going to be paid, and where groceries are going to come from is the far from "fun".

I encourage you to stay focused, you're on the right track now!

iVillage Member
Registered: 03-31-2003
Thu, 12-02-2004 - 3:57pm

If you're like me, that 'dinner and a movie once a month' happens on the first Friday of the month, then the next Friday you say, 'okay, we'll go again tonight, and skip next month', until you're five years in advance on going out for dinner and a movie!! We're like that with the ice cream stand. We're full up on ice cream until 2006, ha ha!

Seriously, besides coming here, the best thing I did was read Jerrold Mundis' book "How to get out of debt, stay out of debt, and live prosperously'. You being so young might find it frustratingly outdated, but stick with it, the ideas are valid. It's a quick read, and has great ideas.

And, stop spending more than you make.

I also owned a beautiful home, my life's dream. But I had to sell it and move into a tiny apartment before the bank took it from me, because of my debt and mismanagement of finances. I thought that was something that was 'out of the question' too.

It's great that you're here, and you and your DH will be working together to get your finances under control, instead of letting them control you.

Keep posting here, I'd love to know how you're doing!

Lee Ann

Lee Ann

www.werenotafraid.com

iVillage Member
Registered: 02-19-2004
Thu, 12-02-2004 - 10:23pm

Here is the budget spreadsheet I use (there are others in this thread you can check out too):

http://messageboards.ivillage.com/n/mb/message.asp?webtag=iv-mljournal&msg=1861.9

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iVillage Member
Registered: 08-20-2004
Tue, 12-28-2004 - 3:33pm

I do the opposite.

"This is how much I make"

"This is the amount I need to pay my bills"

"This is the amount I need to invest to get to
where I need to be at 52"

That leaves - the amount I have left to do stuff.

Good luck to you doin it the other way. I honestly
hope it works out.

iVillage Member
Registered: 06-04-2004
Tue, 12-28-2004 - 3:45pm
I think everyone finds a way that works for them and that is great. It's also great when we can all share our way of doing things, I think it is really helpful for those who haven't quite got their way down pat yet! Everyone's ideas are great and I think appreciated by all.

~leanne

deciding to be happy doesn't mean that everything is perfect, but that you had decided to look beyond the imp

iVillage Member
Registered: 02-19-2004
Tue, 12-28-2004 - 3:51pm

I am not forgetting about saving for my retirement, and no, I don't just 'hope it works out.'

The reason I don't have an investment category right now is two reasons. First, I am using any excess income to pay off my one credit card (it should be paid off by fall 2005). I plan to save any excess income after the cc is paid to save for a down payment on a house. Second, in a year and 1/2 (about the time I will be buying us a house) my dd will be starting in public school (she's in preschool now) and I will save around $600-$700 per month (I won't have to pay for full day private school, although I will have some before/after school expense).

Once I am in the house and dd is in public school (summer 2006), the $600-$700 plus the other excess income I have (remember it was first used to pay off debt, then used to save for a down payment) will cover some of the mortgage payment (I anticipate my mortgage will be slightly more than my rent is currently) and the rest will be invested for retirement and dd's college education.

Investing is certainly important. But if you have little kids, daycare/preschool can be your biggest expense and you are less able to save because of it. Also, if you have credit card debt it is better to get rid of that before you invest because you will save more in interest expense than you will earn by investing. Right now my debt is on a zero interest credit card but that is only until the end of 2005, so my goal is to pay it off before the interest rate kicks in. Make sense?




Edited 12/28/2004 3:55 pm ET ET by firstamendment

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iVillage Member
Registered: 06-04-2004
Tue, 12-28-2004 - 4:09pm
Makes perfect sense to me, and I like you, have put a hold on saving for my future while I pay off my past. I don't have kids, but I have seen how expensive your costs are right now and it makes sense to me to hold off, plus if you are buying a house, you are making a huge investment in your future. Kudos to you! I think you are doing an awesome job and maybe it's hard for someone, not in the same position as you to understand. Keep up the good work, you and your daughter will be playing in your own backyard in no time! :)
~leanne

~leanne

deciding to be happy doesn't mean that everything is perfect, but that you had decided to look beyond the imp

iVillage Member
Registered: 08-20-2004
Wed, 12-29-2004 - 9:50am

I didn't mean that in a bad way, although
looking back reading it I can see how it
would be taken as such.

I was really referring to people with
this osterich behavior of deciding they
want to do do do stuff, when they really
haven't paid all their living expenses.

Your plan is a very sound one.

I'm also really happy to see so many people on
this board with real plans to be totally free
of the CC companies.