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!).