This & That: Reality Check Edition

S Wrote: I’m 23 years old and still live at home… Culturally Punjabi girls stay at home until they are married. It has been tough finding a full-time regular employment but I have had great experience with different government agencies as a casual for the last 4 years making decent money. I’ve worked since I was 16 and I took care of all my personal needs as my mom provides me with shelter, food and payment of my education. I’m still attending university in the evenings and during the day I work (I got a temporary full time position until March 2015)

Anyways, there is my history… my concerns are….

1) I’ve worked for 7 years and don’t have much of a savings. Although I am not in debt, I am not saving nearly enough.

2) I have a lot of discretionary income because I live at home and now that I want to get married soon or move on in my life I’m scared of the reality of going into the real world and trying to take care of my self. How can I transition my self to be financially stable on my own?

3) I want to save for a condo or a house…but I don’t know how to make my money grow.

Gail Says: Making your money grow (investing) isn’t your problem right now, not spending money (saving) is. If you’re living at home with no financial responsibilities, you should have a whack of cash piled up somewhere. The fact that you don’t means you’re cash flow management and your priorities aren’t lined up. So, step one is to decide how much you want to save each month. Step two is to set up a high interest savings account and have that money moved automatically so you don’t spend it. Get a move on.

 

W Wrote: My husband works full time and I work part time. We have a toddler son and another child on the way. Though I work part time, I pay for the mortgage & child care, debt repayment, and my husband picks up the rest of the bills, though with lots of protest. He doesn’t believe in budgeting, believes the money he makes is HIS money to spend as he wants and I’m not left with much to put towards savings, debt repayment or fun. Can you please give me some advice about how to get through to him on the importance of budgeting together, and that it is a good thing. ANY advice would be greatly appreciated!

Gail Says: So let me get this straight, your part-time income is the family money covering the big expenses and his money is his money? Are you frickin’ kidding me? Why would you allow this dynamic to be established? The first thing you should do is a spending analysis to show where your money and his money have been going and figure out what your needs and wants are. If he is unwilling to show you his bank statements/credit card statements and talk about the money then you need to make it clear that if you’re a team working together, you both need to know what’s going on. If he still continues to obfuscate, I suggest you tell him that you don’t intend to pay for anything anymore. You may very well need a big fat emergency fund and now is the time to start building it so all your money will go into a savings account in your name. I know this sounds drastic, but if you’re already into child #2 with this man and he’s not acting like a partner, tough steps must be taken.

If he is willing to sit down and discuss the money, then it’s time to create a budget where you contribute proportionate to your income. If you make 70% of the income, you pay 70% of the family bills. This includes the mortgage, childcare, utilities, all kid-related expenses, food; anything the “family” NEEDS. Wants are a whole different matter.

 

T Wrote: Had a question regarding negotiating a mortgage renewal. My mortgage term comes due December 1, 2014. I have begun shopping around with all banks and lenders, as any good consumer should do. For the record, I never pay “Sticker Price” and I enjoy the art of haggling and negotiating. That said, I figure, all the big lenders want my business badly. Am I crazy to think I can use this as leverage? Many see mortgage renewal time as a pain; I see it as an incredible opportunity! My tactic would be to offer my mortgage business ($220,000), and in exchange, they would write off the balance of my Line of Credit ($15,000). In the long run, they are going to make more than $15,000 from my mortgage, and I will be funnelling more business their way (will also need a car loan soon).

I think of this as “Win-Win” as the big banks can afford to write-off old “smaller” business for new “larger” business. I think of this as my own personal “Bail-Out”. I also realize that they might say “If we do it for you, we have to do it for everyone” but I don’t care about “everyone”, I care about “Me” and my finances. Will this idea get me laughed out the door? Or does this idea have any merit at all?

Gail Says: I don’t know how much luck you’re going to have with your strategy m’love. Asking a bank to eat $15K up front isn’t going to win you any friends. You’d be better off figuring out what reduction in interest rate would garner you the same $15K in savings, shopping the market place to find something that matches (or as close as possible) and presenting that as your strategy. Then you could consolidate the debt to your mortgage and come out even.

 

 

B Wrote: First, thank you for the inspiration, and motivation you provide!!! I’ve watched every episode, every series, and have just finished reading “It’s Your Money” and have just one outstanding question…is there a percentage you suggest to save for a downpayment towards a house? OR should I pay off all my student loan debt before I think about saving?

The Facts:

graduated with an MBA last year
working full time for a year
consolidated my huge student loan debts under a line of credit at a lower interest rate
….zero
every spare dollar….towards paying off debt
renting a condo

Is it smarter to get out of the renting game or the debt repayment game first?

Gail Says: Owning comes with so many more responsibilities financially that being in debt just makes it so much harder. Why not do this? First, figure out what you’d likely spend to buy a place of your own. Calculate the mortgage payment. Add in the property taxes (monthly), utilities, property insurance (I pay about $120/month) and maintenance (estimate $400/month for now, it probably needs to be more, but that’s a start). That’s what it’ll cost you to carry your new home. Subtract the rent you’re currently paying. Put the difference towards getting your school debt paid off. When that’s done, take your full debt repayment amount and use it to save your downpayment.

 

D Wrote: I’m having a hard time making a budget. I suppose my question is, what exactly are the percentages of my income that I should be spending in what category, ie. Rent, food, etc.

 

 

M & TJ Wrote: I just returned to work from maternity leave. While on leave we had the landscaping/deck done and paid with this on our line of credit. We are finding funds very tight now. We both each have two student loans (total of 4 payments per month), a joint line of credit ($32,000), one vehicle loan, and a mortgage. We desperately need to find a way to free up some money and pay some of our debts off. Is it worth it to consolidate student loan debt? What is the best way to begin digging out of this mess?

Gail Says: What in heaven’s name made you take on debt while you were on mat leave? For a deck and landscaping? Really? Didn’t it occur to you BEFORE you took on this debt that it would be a good idea to see how much it would end up costing you once you had factored in the interest? And why would you think your cash flow wouldn’t also have to be affected. Sure you can consolidate your student loans IF you get a lower interest rate and IF someone will give you the credit to cover them. But what you really need to do is stop spending money. Since you’ve had your fun and spent money you haven’t yet earned, now is the time to cut back to the bone so you have the money to pay back your loans. It doesn’t matter what ‘want’ you must go without — coffee, eating out, cable, cell phone data plans, clothes, and the like — you dug this hole and now you must dig yourself out.