Research and Conversations

My co-workers are excited about the book I'm writing. They all want to talk about my process and my ideas. I think it's fabulous to receive such instant feedback, but some of the conversations it has prompted have blown my mind.

In the break room yesterday, I was speaking with a woman who is in her late 40s. We'll call her Kelli. Kelli lives alone, on one income. In previous conversations, Kelli has revealed that she has multiple maxed out credit cards that she only pays the minimums on because that is all she can afford. She is stressed and worried about her finances on a daily basis.

Kelli enjoys her McDonald's breakfast meal at her desk every morning. She can also be found at least once, and often more, per day at the Coke machine buying sodas. She wears stylish clothes and has a vast collection of gorgeous name brand dress shoes.

When Kelli and I were chatting about cost cutting and budgeting, she said "I know, I know.. the first thing everyone says is stop buying scratch offs!" Kelli is firmly entrenched in the "It's only $5 crowd."

I can rattle off 10 ways for Kelli to cut her costs without even having to think really hard about it. I can refer her to any number of my favorite blogs. She may have a heart attack if she read Lynnae's blog over at Being Frugal or Frugal Dad's words of wisdom.

I'm considering giving her a free copy of the book, when it's finished. I have a feeling she is going to provide me with a lot of valuable data for my research. It makes me a little sad to have these conversations. People like Kelli are why I am writing this book and starting my business in Household Finance Coaching.

Charity - Giving Until It Hurts

While prepping a guest post earlier in the week, something was niggling at the back of my mind. The post was about helping my brother financially, even when he was making bad decisions. I couldn't shake the feeling that there was more to the story.

Just a bit ago, it hit me. Wes and I are charitable to a fault, at times. Yet, until recently, we never really stopped to think about our own long term financial situation. Even now that we're watching every penny, I find that we're still in that Giving mindset.

Money has never been much of a top priority to me. I've been dirt poor the vast majority of my life. Until four years ago, when I met Wes and we eventually combined our houses and incomes, I raised 3 daughters, with no child support, first well below and later just barely above what the government considers poverty level. Even when I was destitute, my door and kitchen were always open to family and friends (chosen family). What is mine is yours. It's just how families do things where I'm from.

Although the debts were there, and accruing interest, and not going away, Wes and I ignored them. They were just insurmountable, so we just let them be the elephant in the room.

Wes enjoys giving to our friends and family as much as I do. We just do it in different ways. He insists on picking up the tab whenever we're out with friends. In fact, he does this so often that it's made a few of our friends uncomfortable.

Over the years, I have allowed people to move in with me and not pay any expenses, although I was barely making it myself. I've hired family members who were in a rough place financially to clean my house, or groom my pets, or work on my car, even things I was perfectly capable of doing myself. I've found reasons to "just have this lying around" when someone I care about has a need. And, yes, I've even loaned out money to the tune of hundreds (adding up to thousands) of dollars that I knew I'd never be repaid. It didn't matter... I was just helping.

When I finally decided that it was time to take control of our finances and get this debt handled, it required a large shift in the way we responded to those around us. My extended family has gotten accustomed to treating us as the Bank of Wes and Momma. Wes has offered to "be the heavy" and let them be mad at him for saying no, but I've learned to say no on my own. I'll continue to do so until our debts are paid, our retirement accounts are fully funded, and our children have college educations.

I no longer say "Yes" when people call me for money. I do, however, offer to help them with a budget. When the conversations start to angle around to how tough their financial situations are, I nod my head and agree that we're all having a tough time. Wes and I go out far less with friends, and try to make sure that the time we DO get to spend with friends is about the relaxation and enjoyment of their company. Since we know that we're likely to insist on paying, we have decided to entertain at home more.

We still give when we can, and when it's important to us. We still live under the belief that if you're family and you're in need, we'll do all we can. We've just adjusted our priorities a little and shifted the ways we give. At least until all this debt is gone.

Rumbly Grumbly Day for Momma

A lot of my favorite bloggers write about Gazelle Intensity. The basic premise is that you focus on reducing your debt with all the intensity of a Gazelle outrunning a cheetah. I'm amazed at the lengths at which some people are able to go to accomplish this. I admire the dedication and fortitude that it takes to stick with this plan.

Wes and I just aren't those people. We have two debts, total. My student loan is $6,000ish and is direct debited monthly from our bank account. Since this debt provides me with a tax deduction, I'm not incredibly worried about paying it off early.

A recent review of our tax situation reveals that our total back tax debt is $77,537. The tax debt WAS down to $65,963, but we just had to add another $11,574 to that number for 2007 (after the $25,000 we already paid). These are the numbers that keep me up at night. I send payments every month, and snowflake when I can, however, Wes and I don't make this our top priority.

I cut costs where I can. I shop with the Grocery Game. I turn out lights whenever I leave a room. I take shorter showers, have a high efficiency washing machine, and line dry our socks. We eat out less, shop less, say "No" to our children more often than we want to. We're making moves to a more frugal lifestyle, but we never had an extravagant one before. We're already living on less than 40% of our gross income. There aren't a lot of corners left for us to cut (that we are willing to cut).

I think the real problem with the tax debt is that it has so many negative emotions attached to it. We get anxious and more than a little angry that we can't seem to dig out of this hole. The interest and penalties accrue at 6% apr, compounded daily, plus .5% per month. The IRS won't negotiate payment arrangements because Wes doesn't have steady income and I don't make enough to cover our basic expenses. They have put our account on "non collect" status, but it will continue to accrue penalties and interest until our income is more stable.

Today, I'm not interested in getting this debt paid off. Today, I want to stop saying "No" to my family because the IRS has better plans for our income. /rant

Is my snowflake too small?

I felt a little silly yesterday, sending a Billpay for $3.11 toward a $75,000 debt. I sent one for $3.89 not too long ago. I just wonder what the people who have to process these payments think of the insane woman paying an extra $3.11. Do they laugh? Do they make snide comments?

Not that I really care what they think. I put no stock in the elusive, yet omnipresent, THEY. But, it does make me wonder about the true cost to others. The bank has to transfer the money to the Billpay company. The Billpay company has to print the checks and put them in envelopes and add postage. The post office carries the check to the company. The company's mail room delivers it internally. The payments department has to log it and apply it to my debt. All of these steps just so my little snowflake can melt against the furnace that is my debt.

But, I sent it anyway!

Cell Phone Bill - Take Two

Last month, I wrote about an adventure with our cell phone plans and my attempt at cutting some of our costs by lower the plans. After carefully combing through this month's bill, I am pleased to announce that not only is our bill correct, but it's less than I budgeted! So, that's another $3.97 snowflake toward back taxes.

Snow Flakes to date: $18.33

The Ordinary Family ... or Not

As I've said before, our family is very complicated. Wes has 3 children from 2 previous marriages. I have 3 children from a previous marriage. We're what is becoming the new normal family. The Brady Bunch of the new millenium, if you will. Our family stretches out like this:
YL (Young Lady) 18: In college near Nashville, TN
YL 17: Lives with her mom ner Memphis, TN and goes to high school
YL 14: Lives with us, goes to high school
YL 12: Lives with us, goes to middle school
YL 10: Lives with us, goes to elementary school
YM (Young Man) 10: Lives in South GA with his mom and goes to elementary school

We live in the Atlanta, GA area. We are "Wealthy" according to the government's determination. I make roughly $40,000 a year and Wes makes triple that on an average year. HOLY COW, that's $160,000 gross salary. How in the heck are we in so much debt?

I've read many of the other personal finance blogs and I'm absolutely in awe. How people manage to make it on what they do, is astounding to me.... and then, I look at our numbers again ... and our children... and I remember. Our financial reality is far far different than some people.

Our financial reality includes $27,624 per year in child support and a 28% tax burden (yep, that's $44,800). This brings our real income down to about $87,576. Still not too bad, right?
So, how the heck does a family that clears $87,000 a year end up where we are now? Well... it takes effort!!

Annual expenditures
$13,044 - Mortgage
$9,400 - All utilities & telephone expenses
$9,100 - Groceries and household
$9,000 - Back Taxes
$6,500 - Health Insurance
$6,000 - My 401K (Maxed at 15% of my income)
$5,000 - Travel expenses to visit YM 10 (he lives 4 hours away and we see him every other weekend)
$5,000 - Gas (auto)
$3,900 - Wes' discretionary budget
$2,600 - My discretionary budget
$2,050 - Auto Insurance
$2,500 - Auto Repair and Home Repair
$2,000 - Clothing
$1,500- Dry Cleaning (work clothing and ROTC uniform)
$1,416 - Student Loan
$1,000 - Medical copays and prescriptions
$876 - Gym Membership

This leaves roughly $6,690 per year to pay extra toward the $70,000 in tax debt that continues to accrue interest daily. None of these numbers reflect entertainment, Christmas gifts, birthday gifts, last minute emergency trips, major home repairs, or any other number of things that come up in a year's time.

Yes, we could cut out the Gym membership, but this is something that Wes uses, on average, 4 times a week and I use twice a week. We're both overweight and working to improve our health. This is an expense we are not willing to cut.

I sat down with Wes last week to see where we can cut corners and limit our spending. He just smiles and hugs me and goes along with the discussion for my sake, but the truth is, cutting spending is not the real problem. Our only expenses that aren't really required have been cut down to almost nothing. I've been tracking and tweaking and adjusting for over a year now. When I get frustrated because I can't understand how we make SO much money, and still have so little at the end of the day, I go back and look at these numbers again. For a little while, it definitely does help me to understand that we're working at it, even if we're not gaining a lot of ground.

*Experiment #1 - Yesterday's spending
$25.01 on gas

The Beginning

My story is a little different than most of the PF blogs I read on a daily basis. I did get into credit card problems in college and defaulted on my student loans. Being from a poverty stricken area and watching my mom just rack up bad debt and walk away from it, it wasn't hard for me to ignore those bills coming in the mail and allow everything to go into collections.

However, once I separated from my first husband and moved to Atlanta, GA, I got a decent (for me) full time job. I called up the federal financial aid office and got the ball rolling on refinancing those loans to get them into good repayment standing. It wasn't easy to raise 3 daughters on $10 an hour in an expensive area with no other means of financial support, much less pay off debt while I did it. But, when you're determined, you'd be amazed at what you can do.

While I made darned sure to make those student loan payments every month, I completely ignored the two credit card bills I had. All total the debt was about $1500 in credit cards. So, I just concentrated on being able to feed and house my children and let those two debts go to the wind. They eventually got charged off by the credit card companies. I definitely don't recommend this as an avenue for dealing with debt, since it wreaked complete havoc on my credit rating. But, I kept on paying (still am) those student loan payments.

Right now, our total outstanding debt looks like this:
Student Loans: $4,700
Back Taxes: $70,000
Mortgage: $148,000

I paid off my mini-van two days ago, 9 months early, so we no longer have a car payment. That's one less worry. I know that doesn't look like "alot" to some people, but believe me, $75,000 in unsecured debt is not any fun to look at. My goal is to have that paid off by January 2010 (2 years!).

Getting Started

I've written blogs in the past, but never targeted ones. This one is devoted to our family's trip on the road less traveled.

I met my husband almost 4 years ago. We'd both been divorced, him twice, me once. I had three daughters that lived with me. He had two daughters that lived with their mother, and one son that lived with his mother. So, we've got 6 children ... in 4 cities ... in 2 states. Their ages range from 10 to 18 and grades from 4th to Freshman in college.

I work a full time job. With the most recent round of layoffs, my husband Wes (not his real name) and I decided to start our own consulting firm. He has an incredible business concept with lots of interest so far. He's even gotten the ball rolling on, not one but, TWO contracts in the last two weeks. This is astronomical for a startup business that only opened its proverbial doors two three weeks ago.

However, when I married Wes, he and I both had baggage from our "past lives". He also brought with him $70,000ish in tax debt, to toss in with my student loan from college and my car payment.

This blog will be my way of keeping track, and sharing with you, the progress we make toward financial independence, the growth we achieve as a family, and as a business.

Feel free to keep me company
Momma