Cash flow problems - best way to handle?

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MnyGrl
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Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 8:33 am

I am on a pretty tight budget. I live in a HCOL area and have a moderate income. This year I needed to get a new car so took a big chunk of money from savings. There have been a few other things that have come up as well, so my savings have gotten very low. I will need to pull some money out of savings for summer camps for the kids, and I am afraid of running out of cash this summer. I don't need a substantial amount - at the high end, this would probably be 5K or so.

I could:

1) get a 401K loan (there is a $175 setup fee, but after that the interest rate is fairly low, like 3 percent)
2) get a zero interest credit card, and hope I can pay it back by the time zero interest time period expires.
3) open a HELOC (I have about 100K in equity. At my credit union, it looks like closing costs would be around 1K; but I could use it if needed in the future.)

What would you do? Are there options I'm not thinking of? Thanks!

Sam1
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Re: Cash flow problems - best way to handle?

Post by Sam1 » Mon Apr 09, 2018 8:54 am

I’m confused. Did you lose your job? If not, you don’t need a loan. You need to revise your budget. There are always going to be things that come up and if you take out a loan, this is how you end up with significant debt.

Ideas:
1. Different childcare arrangement
2. Move to a less expensive house
3. Sell your car and take public transportation
4. Cancel vacations
5. Stop eating out

Etc.

barnaclebob
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Re: Cash flow problems - best way to handle?

Post by barnaclebob » Mon Apr 09, 2018 9:11 am

I would post my budget here and let us tell you suggestions on how to improve your budget. The only long term solution to a cashflow problem is to spend less or make more money. None of your proposals address either of those and in fact they all increase your spending.

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lthenderson
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Re: Cash flow problems - best way to handle?

Post by lthenderson » Mon Apr 09, 2018 9:17 am

MnyGrl wrote:
Mon Apr 09, 2018 8:33 am
What would you do? Are there options I'm not thinking of? Thanks!
4) Spend less.

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KlingKlang
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Re: Cash flow problems - best way to handle?

Post by KlingKlang » Mon Apr 09, 2018 9:18 am

You haven't given enough information about your financial situation to offer specific advice, so this will just be general comments on your post.

You need to learn to distinguish between 'needs' and 'wants'. Summer camp for the kids is a want not a need.

There will always be unexpected expenses or "things that have come up", that's life.

All of your proposed solutions involve acquiring (more) debt. Before you do this you need to come up with an accurate and honest assessment of your income and expenses. What is your monthly take home pay and what is it spent on? What expenses can you cut back on or eliminate in order to build up your cash reserves? You need to run your numbers, "hope I can pay it back" is not acceptable.

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Re: Cash flow problems - best way to handle?

Post by Jack FFR1846 » Mon Apr 09, 2018 9:21 am

Since 99% of people with cash flow problems seem to spend the national budget of Uganda on cell phones........

Cricket is $25 per phone all in for smart phone. If you're paying more than this, why? AT&T network. We even broke a phone and a new one was $20. Nobody needs a $1000 phone.
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Re: Cash flow problems - best way to handle?

Post by Sandtrap » Mon Apr 09, 2018 9:25 am

MnyGrl wrote:
Mon Apr 09, 2018 8:33 am
I am on a pretty tight budget. I live in a HCOL area and have a moderate income. This year I needed to get a new car so took a big chunk of money from savings. There have been a few other things that have come up as well, so my savings have gotten very low. I will need to pull some money out of savings for summer camps for the kids, and I am afraid of running out of cash this summer. I don't need a substantial amount - at the high end, this would probably be 5K or so.

I could:

1) get a 401K loan (there is a $175 setup fee, but after that the interest rate is fairly low, like 3 percent)
2) get a zero interest credit card, and hope I can pay it back by the time zero interest time period expires.
3) open a HELOC (I have about 100K in equity. At my credit union, it looks like closing costs would be around 1K; but I could use it if needed in the future.)

What would you do? Are there options I'm not thinking of? Thanks!
Budgeting:

Cash In. . . Cash out. . .
Maximize and protect the first, minimize the second.

List your expenses for actionable suggestions.
List a Portfolio Review per forum format for comprehensive suggestions and help.

Short suggestion. . . . distinguish "want" vs "need", new vs used car, etc. > more debt does not reduce debt.
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Last edited by Sandtrap on Mon Apr 09, 2018 9:29 am, edited 1 time in total.

junior
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Re: Cash flow problems - best way to handle?

Post by junior » Mon Apr 09, 2018 9:27 am

You could get the 401 (k) loan... but would you be able to pay it back?

You need to start figuring out how you are going to rebuilt an emergency fund.

BogleMelon
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Re: Cash flow problems - best way to handle?

Post by BogleMelon » Mon Apr 09, 2018 9:33 am

I use YNAB to budget for these expenses monthly. I know that after about 4 years my oldest car would say goodbye, so instead of waiting 4 years then wondering where to get the cash from, or invest the cash now in a 401K and take a loan later, I already saving monthly in a category for the car, keeping the actual money in a saving account (it goes like this: YNAB all categories balances = All money held in all checking and saving accounts).
That means, I will never be short in cash for those upcoming expenses..

To answer your question, I wouldn't do any of your posted suggestions. I would get a lower end car if really needed, stop retirement contribution for couple of months till I have enough cash for it... I don't have kids so not sure about camps and how important they are for them, but are they negotiable? May be people with kids can advice better on that..

Keep in mind that a loan from a 401K becomes due in full in 3 months, had you left your employer for whatever reason.

Good luck!
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MnyGrl
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Re: Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 9:36 am

barnaclebob wrote:
Mon Apr 09, 2018 9:11 am
I would post my budget here and let us tell you suggestions on how to improve your budget. The only long term solution to a cashflow problem is to spend less or make more money. None of your proposals address either of those and in fact they all increase your spending.
I am posting my monthly budget. I currently have about 100K in home equity, 350K in retirement accounts, and about 20 years until retirement. At this time, my monthly SSN payment (at 66) would be about $2244. I also get a substantial amount back in taxes - this year about $6500. Unfortunately I spent it on new car, so that's why I'm short on savings.

I also wanted to add that I am not able to leave my job or sell my house at this time. I would be open to leaving my job next year and could probably make 15-20K more if I changed jobs. Housing is expensive where I live, but I can't move due to school/custody issues. Would be open to moving in about 10 years (when last child is launched).

I appreciate your input!

(deleted)
Last edited by MnyGrl on Mon Apr 09, 2018 6:09 pm, edited 1 time in total.

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Re: Cash flow problems - best way to handle?

Post by steelerfan » Mon Apr 09, 2018 9:40 am

barnaclebob wrote:
Mon Apr 09, 2018 9:11 am
I would post my budget here and let us tell you suggestions on how to improve your budget. The only long term solution to a cashflow problem is to spend less or make more money. None of your proposals address either of those and in fact they all increase your spending.
This!
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MnyGrl
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Re: Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 9:42 am

KlingKlang wrote:
Mon Apr 09, 2018 9:18 am
You haven't given enough information about your financial situation to offer specific advice, so this will just be general comments on your post.

You need to learn to distinguish between 'needs' and 'wants'. Summer camp for the kids is a want not a need.

There will always be unexpected expenses or "things that have come up", that's life.

All of your proposed solutions involve acquiring (more) debt. Before you do this you need to come up with an accurate and honest assessment of your income and expenses. What is your monthly take home pay and what is it spent on? What expenses can you cut back on or eliminate in order to build up your cash reserves? You need to run your numbers, "hope I can pay it back" is not acceptable.
When both parents work, it is a need. They are too young to be left home all day. This is just a local rec center type camp and is the least expensive option we've been able to find.

260chrisb
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Re: Cash flow problems - best way to handle?

Post by 260chrisb » Mon Apr 09, 2018 9:42 am

I would say none of the above. Seems like you're trying to borrow your way out of upcoming expenses. Like borrowing your way out of debt; it never works. Perhaps the best thing to do would be to stop the contributions to the 401K for as long as it takes you to get better cash flow.

livesoft
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Re: Cash flow problems - best way to handle?

Post by livesoft » Mon Apr 09, 2018 9:45 am

My kids went to cheap summer day camps when both of us were working. This meant cost was considered dependent care and thus we got a tax break. Or the kids went to visit the cousins. Or we had a neighborhood teenager watch them.

The costs were well under $5K.

So I think the best way to handle this is to spend less as was already mentioned.
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onourway
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Re: Cash flow problems - best way to handle?

Post by onourway » Mon Apr 09, 2018 9:52 am

Good job posting the budget.

What do your numbers look like after your typical monthly spending on variable expenses? I suspect there isn't much left - but this is where the savings is likely to come from.

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Re: Cash flow problems - best way to handle?

Post by lthenderson » Mon Apr 09, 2018 9:54 am

MnyGrl wrote:
Mon Apr 09, 2018 9:36 am
Total Fixed Monthly Expenses (TFME) $3,448.14
Net Income (after TFME) $1,344.78
What are your average variable monthly expenses? Some of those listed in that category like food at restaurants, toys, entertainment, misc, etc. are the easiest to cut if money is needed elsewhere.

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Pajamas
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Re: Cash flow problems - best way to handle?

Post by Pajamas » Mon Apr 09, 2018 9:55 am

It's not a cash flow problem. You have been spending more than you make and plan to continue that and hope you can catch up later. The three solutions you propose are not really solutions at all, but delay tactics, and have costs that just exacerbate the problem. None of them are attractive. The best solution would be to reduce your spending and increase your income.

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Re: Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 9:57 am

onourway wrote:
Mon Apr 09, 2018 9:52 am
Good job posting the budget.

What do your numbers look like after your typical monthly spending on variable expenses? I suspect there isn't much left - but this is where the savings is likely to come from.
We are pretty frugal. When we really work on it - don't eat out or shop (and no unexpected expenses come up) we can save about $7-800 month in addition to what goes automatically into 401K. In the summer we can't do that, we pretty much spend all of it due to summer camps and travel expenses.

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Re: Cash flow problems - best way to handle?

Post by quantAndHold » Mon Apr 09, 2018 9:58 am

MnyGrl wrote:
Mon Apr 09, 2018 9:42 am
KlingKlang wrote:
Mon Apr 09, 2018 9:18 am
You haven't given enough information about your financial situation to offer specific advice, so this will just be general comments on your post.

You need to learn to distinguish between 'needs' and 'wants'. Summer camp for the kids is a want not a need.

There will always be unexpected expenses or "things that have come up", that's life.

All of your proposed solutions involve acquiring (more) debt. Before you do this you need to come up with an accurate and honest assessment of your income and expenses. What is your monthly take home pay and what is it spent on? What expenses can you cut back on or eliminate in order to build up your cash reserves? You need to run your numbers, "hope I can pay it back" is not acceptable.
When both parents work, it is a need. They are too young to be left home all day. This is just a local rec center type camp and is the least expensive option we've been able to find.
For the doubters, summer day camps are often cheaper than day care or nannys for school age kids. For several years, our kids spent most of the summer going from camp to camp.

That doesn’t change the fact that something has to give in the budget. What you’re doing isn’t sustainable. For one thing, some of the items that you’re zeroing out, like the car insurance, shouldn’t be zeroed. They’re ongoing expenses that you need to pay on an ongoing basis, even if they’re not due this month.

Unless your divorce agreement requires it, I would drop the 529 savings until you’re maxing all possible retirement accounts. If your budget is this tight, the kids will get financial aid. If they won’t get financial aid because of dad’s income, then dad should be paying this.

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Re: Cash flow problems - best way to handle?

Post by rtr-molar-doc » Mon Apr 09, 2018 10:00 am

The best 'cash flow' advice I ever got was from an old farmer when I started my dental practice in 1982. He told me not to try to live like a Rockefeller when you are earning like a ditch digger. I laughed, but never forgot that wisdom.

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Re: Cash flow problems - best way to handle?

Post by goingup » Mon Apr 09, 2018 10:01 am

You're a planner and that's good. Is it possible you're "overplanning" this and requiring too much cash cushion?

I might try to tough it out through summer without any loans. Belt tighten as you go and just run lean. If you secure a loan before you need it I guarantee you'll inflate spending and your financial situation will worsen. Long-term you can't "outrun" a cash-flow problem unless you find a way to add more income. If that's not possible, you have to reduce expenses.

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Re: Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 10:01 am

rtr-molar-doc wrote:
Mon Apr 09, 2018 10:00 am
The best 'cash flow' advice I ever got was from an old farmer when I started my dental practice in 1982. He told me not to try to live like a Rockefeller when you are earning like a ditch digger. I laughed, but never forgot that wisdom.
I am recently divorced with two kids. I have never lived like a Rockefeller.

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MnyGrl
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Re: Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 10:04 am

quantAndHold wrote:
Mon Apr 09, 2018 9:58 am
MnyGrl wrote:
Mon Apr 09, 2018 9:42 am
KlingKlang wrote:
Mon Apr 09, 2018 9:18 am
You haven't given enough information about your financial situation to offer specific advice, so this will just be general comments on your post.

You need to learn to distinguish between 'needs' and 'wants'. Summer camp for the kids is a want not a need.

There will always be unexpected expenses or "things that have come up", that's life.

All of your proposed solutions involve acquiring (more) debt. Before you do this you need to come up with an accurate and honest assessment of your income and expenses. What is your monthly take home pay and what is it spent on? What expenses can you cut back on or eliminate in order to build up your cash reserves? You need to run your numbers, "hope I can pay it back" is not acceptable.
When both parents work, it is a need. They are too young to be left home all day. This is just a local rec center type camp and is the least expensive option we've been able to find.
For the doubters, summer day camps are often cheaper than day care or nannys for school age kids. For several years, our kids spent most of the summer going from camp to camp.

That doesn’t change the fact that something has to give in the budget. What you’re doing isn’t sustainable. For one thing, some of the items that you’re zeroing out, like the car insurance, shouldn’t be zeroed. They’re ongoing expenses that you need to pay on an ongoing basis, even if they’re not due this month.

Unless your divorce agreement requires it, I would drop the 529 savings until you’re maxing all possible retirement accounts. If your budget is this tight, the kids will get financial aid. If they won’t get financial aid because of dad’s income, then dad should be paying this.
The 529 plan is part of the divorce agreement so can't drop it.

I have always paid the car insurance out of my tax refund since it's always due in March.

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Re: Cash flow problems - best way to handle?

Post by Nate79 » Mon Apr 09, 2018 10:05 am

Sell your new car and downgrade to a 3-4 year old car. Use this money to pay for summer camps.
Stop eating out - buckle down and rebuild the emergency fund. The poor money habits have to stop if you want to get ahead and not dig yourself into a hole.

Stop getting a tax refund. Adjust your withholdings so that you take home the correct amount, not give uncle sam a zero interest loan.

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Pajamas
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Re: Cash flow problems - best way to handle?

Post by Pajamas » Mon Apr 09, 2018 10:06 am

MnyGrl wrote:
Mon Apr 09, 2018 10:04 am
The 529 plan is part of the divorce agreement so can't drop it.
Is the summer camp also required?

Does your ex have the capacity and willingness to shoulder some costs beyond what is required?
Nate79 wrote:
Mon Apr 09, 2018 10:05 am
Sell your new car and downgrade to a 3-4 year old car. Use this money to pay for summer camps.
The numbers on that would probably not work out favorably. The new car is no longer new.
Last edited by Pajamas on Mon Apr 09, 2018 10:08 am, edited 1 time in total.

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Re: Cash flow problems - best way to handle?

Post by CAsage » Mon Apr 09, 2018 10:07 am

There are likely some discretionary items somewhere in your budget. Is the 529s deposits legally mandated? It's pretty generous to put that much cash towards 3 years of college; in your place, I would be planning community college and then pay for the last 2 Or borrow it then, Try living like you have been laid off for the next couple months - cancel cable, internet only, scrub the cell phone bill to the cheapest low-data plan you can find. Pets are expensive luxuries for people on budgets. Just for a few months, no new clothes, no eating out (takeout cheaper than dining out, and I know that working and with kids it's tough to cook). And yes, if your children are young, then they need supervised daycare (aka camp) during the summer. If possible, see if there are any relatives they can "visit" during the summer for a free week of daycare, or invite granny to visit. Or trade off a week of vacation with another parent to take turns running your camp for both sets of kids.

After you have done all that, I would get a 0% credit card for the big items you can charge, followed by a HELOC. Look hard for one with no or low startup costs - for sure I never paid to open the one I used for minor remodeling! Good luck. Think starving student budget for a while!

Edit: I see you mentioned the 529 is mandated. Rethink that - can you really afford to pay that much toward college? Get out a sharp pencil and redo your withholding now to break even on taxes in 2018 - you need cashflow, deal with March 2019 next year!
Last edited by CAsage on Mon Apr 09, 2018 10:12 am, edited 2 times in total.
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Re: Cash flow problems - best way to handle?

Post by KATNYC » Mon Apr 09, 2018 10:09 am

MnyGrl wrote:
Mon Apr 09, 2018 9:36 am

I am posting my monthly budget. I currently have about 100K in home equity, 350K in retirement accounts, and about 20 years until retirement. At this time, my monthly SSN payment (at 66) would be about $2244. I also get a substantial amount back in taxes - this year about $6500. Unfortunately I spent it on new car, so that's why I'm short on savings.

I also wanted to add that I am not able to leave my job or sell my house at this time. I would be open to leaving my job next year and could probably make 15-20K more if I changed jobs. Housing is expensive where I live, but I can't move due to school/custody issues. Would be open to moving in about 10 years (when last child is launched).

I appreciate your input!

Here is current budget:

Fixed expenses:
HOA fee $131.50 (Due quarterly; value here is for one month)
Mortgage Payment $2,302.60 (Includes principal, interest, homeowner's insurance and property taxes)
Electricity $125.00 (estimated monthly average)
Water/Sewer $40.00 (about $120/quarter)
Phone, cable, internet $118.64
Netflix $10.99 (Streaming only)
401K contribution $0.00 5%, (automatically taken pre-tax from paycheck; company matches 5% (total about $666/month))
Insurance - Car $0.00 (Paid year in full in March from tax refund - $704)
Dropbox (file backups) $9.99
Newspaper subscription $3.99
Apple Cloud (iPhone storage) $0.99
Kids 529 account - 1/2 $314.00 (I pay for half of the kids 529 college accounts. Current total monthly amount is $628. On track to pay for least 3 years of college for each kid.)
After school care $115.44 (My portion of payment during school year. In summer we pay for full-time camp which is more expensive.)
Allowances for kids $40.00
Car Payment $235.00 (This payment will start in November - was delayed due to large prepayment, but I'm sticking in budget anyway. Will be for 4.5 years at 0 percent interest.)
Total Fixed Monthly Expenses $3,448.14

Variable Expenses:
My Health Expenses (medical/dental) (I have medical, dental, disability and life insurance premiums taken out of paycheck pre-tax.)
Food (restaurants & groceries)
Toys/Clothes/Entertainment
Car Maintenance/Gas
House Maintenance
Kids Expenses (medical/dental/activities) (Ex husband pays kids health insurance)
Pet expenses (vet, medication, food)
Misc

Monthly Income:
Job take-home $4,569.92
Child Support $223.00 (This amount is low bc he pays for the kids' medical insurance.)
Total Monthly Income (TMI) $4,792.92

Total Fixed Monthly Expenses (TFME) $3,448.14
Net Income (after TFME) $1,344.78
MnyGrl wrote:
Mon Apr 09, 2018 8:33 am
I am on a pretty tight budget. I live in a HCOL area and have a moderate income. This year I needed to get a new car so took a big chunk of money from savings. There have been a few other things that have come up as well, so my savings have gotten very low. I will need to pull some money out of savings for summer camps for the kids, and I am afraid of running out of cash this summer. I don't need a substantial amount - at the high end, this would probably be 5K or so.

I could:

1) get a 401K loan (there is a $175 setup fee, but after that the interest rate is fairly low, like 3 percent)
2) get a zero interest credit card, and hope I can pay it back by the time zero interest time period expires.
3) open a HELOC (I have about 100K in equity. At my credit union, it looks like closing costs would be around 1K; but I could use it if needed in the future.)

What would you do? Are there options I'm not thinking of? Thanks!
You are setting yourself up to deplete your 401K over time by borrowing against it, lose your home equity or create credit card debt for things that are not necessary. I wouldn't go into debt for summer camp. Adjust your tax withholding so you get your money now, not a refund at tax time. It may be time to revamp your budget (reduce spending) or to take on a second job or create a business. You can reduce your 401K contribution temporarily. Sell the new car & get something cheaper/older. We are in NYC so definitely a HCOL area but we don't have kids.

We also use YNAB to budget including bi-annual license fees, insurance deductibles & repair sinking funds so we aren't scrambling to come up with the money. What triggered us to start using YNAB was realizing we were spending nearly $1,000/month on food (groceries & take out) for 2 people. We are down to $562/month now. It would be easier to control if we both had office jobs that allowed packing a lunch with a refrigerator and microwave to use but that's not the case right now.

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MnyGrl
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Re: Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 10:13 am

Pajamas wrote:
Mon Apr 09, 2018 10:06 am
MnyGrl wrote:
Mon Apr 09, 2018 10:04 am
The 529 plan is part of the divorce agreement so can't drop it.
Is the summer camp also required?

Does your ex have the capacity and willingness to shoulder some costs beyond what is required?
Nate79 wrote:
Mon Apr 09, 2018 10:05 am
Sell your new car and downgrade to a 3-4 year old car. Use this money to pay for summer camps.
The numbers on that would probably not work out favorably. The new car is no longer new.
Camp (or some sort of full time child care for two kids) is required since we both work. This is probably the last year for camp for the older child; next year she will be old enough to take on some volunteer opportunities (like counselor in training with little kids).

I would say that ex has the capability, but not willingness, to pay more. :)

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Re: Cash flow problems - best way to handle?

Post by Nate79 » Mon Apr 09, 2018 10:16 am

Pajamas wrote:
Mon Apr 09, 2018 10:06 am
MnyGrl wrote:
Mon Apr 09, 2018 10:04 am
The 529 plan is part of the divorce agreement so can't drop it.
Is the summer camp also required?

Does your ex have the capacity and willingness to shoulder some costs beyond what is required?
Nate79 wrote:
Mon Apr 09, 2018 10:05 am
Sell your new car and downgrade to a 3-4 year old car. Use this money to pay for summer camps.
The numbers on that would probably not work out favorably. The new car is no longer new.
Sure, that new car has lost money driving it off the lot and the longer selling it is delayed the more it will lose money. If needed they can downgrade even older until their finances are appropriately under control.

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MnyGrl
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Re: Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 10:19 am

Nate79 wrote:
Mon Apr 09, 2018 10:16 am
Pajamas wrote:
Mon Apr 09, 2018 10:06 am
MnyGrl wrote:
Mon Apr 09, 2018 10:04 am
The 529 plan is part of the divorce agreement so can't drop it.
Is the summer camp also required?

Does your ex have the capacity and willingness to shoulder some costs beyond what is required?
Nate79 wrote:
Mon Apr 09, 2018 10:05 am
Sell your new car and downgrade to a 3-4 year old car. Use this money to pay for summer camps.
The numbers on that would probably not work out favorably. The new car is no longer new.
Sure, that new car has lost money driving it off the lot and the longer selling it is delayed the more it will lose money. If needed they can downgrade even older until their finances are appropriately under control.
Hi, since this is a temporary problem I am probably not going to sell the car. As I said in an earlier post, I am willing to get a new job next year and could probably earn 15-20K more. For complicated reasons I can't change jobs right now. I am just trying to get through the summer and then I can get back into balance.

I am divorced so there is no "their."

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Pajamas
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Re: Cash flow problems - best way to handle?

Post by Pajamas » Mon Apr 09, 2018 10:21 am

Okay, to answer your original question, it looks to me that the credit card would be the best solution if you could be certain that you would have it paid off completely before paying interest. Otherwise, it seems that the 401(k) loan would be best. The HELOC is just too expensive. I am not sure what I would do in your situation. I guess you could do the credit card with the 401(k) loan as a back-up plan to pay off the credit card. To be clear, that brings you right back to the fact that none of these are really solutions but temporary delay tactics and that you need to reduce spending and/or increase income.

Also I see you may be changing jobs. Before taking a 401(k) loan, be aware that there are consequences in that case.
Last edited by Pajamas on Mon Apr 09, 2018 10:24 am, edited 1 time in total.

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CAsage
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Re: Cash flow problems - best way to handle?

Post by CAsage » Mon Apr 09, 2018 10:26 am

Keep the car! It's cheap enough already.... Speaking as another solo parent, you really do need a reliable car with no one to pick you up at night when the old one dies. But do scrub expenses. Lower your withholding. Cut expenses like the Great Depression was around the corner - just temporarily. Is a family loan out of the question? Then, I would take any no-fee loan for the summer....

And if her children are young she MUST HAVE DAYCARE! Summer camp is not a luxury - parents get arrested for leaving young children unattended. Seriously. Though I'm not sure exactly what age that changes, check the law in your state...... If they are 12, they don't need daycare.

Phone, cable, internet $118.64 - cancel cable, cut phone to cheapest plan around.
Netflix $10.99 (Streaming only) - cancel for now?
401K contribution $0.00 5%, (automatically taken pre-tax from paycheck; company matches 5% (total about $666/month)) - reduce until your cash-flow better?
Dropbox (file backups) $9.99 - cancel that, buy one flash drive for backup
Newspaper subscription $3.99 - cancel
Apple Cloud (iPhone storage) $0.99 - cancel
Kids 529 account - 1/2 $314.00 (I pay for half of the kids 529 college accounts. Current total monthly amount is $628. On track to pay for least 3 years of college for each kid.) - talk to a lawyer about dropping this. You can't afford it.
Allowances for kids $40.00 - cancel. Find alternatives where they can earn money from neighbors doing chores, or do without. Yes, if your cashflow is that tight, this is a luxury....
Last edited by CAsage on Mon Apr 09, 2018 10:41 am, edited 1 time in total.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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Pajamas
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Re: Cash flow problems - best way to handle?

Post by Pajamas » Mon Apr 09, 2018 10:31 am

MnyGrl wrote:
Mon Apr 09, 2018 10:29 am

If you can tell me where I can get free childcare for two kids for 11 weeks, I'm all ears!!
Sounds to me like he is offering to take them for the summer. Free dental work for the whole family, too! That's the beauty of Bogleheads, people helping each other. :beer

oldfatguy
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Re: Cash flow problems - best way to handle?

Post by oldfatguy » Mon Apr 09, 2018 10:34 am

MnyGrl wrote:
Mon Apr 09, 2018 8:33 am

1) get a 401K loan (there is a $175 setup fee, but after that the interest rate is fairly low, like 3 percent)
2) get a zero interest credit card, and hope I can pay it back by the time zero interest time period expires.
3) open a HELOC (I have about 100K in equity. At my credit union, it looks like closing costs would be around 1K; but I could use it if needed in the future.)

What would you do? Are there options I'm not thinking of? Thanks!
I recently opted for #3, but only because I was able to get one with no fees or closing costs. Otherwise, I would have gone with #1.

markcoop
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Re: Cash flow problems - best way to handle?

Post by markcoop » Mon Apr 09, 2018 10:38 am

Looking at you 3 options you suggested:
1) 401K Loan - Not a fan. $175 is 3.5% of the loan, which seems like alot just for a setup fee. Also, hate the precedent of going into the 401K when money is needed.

2) Credit card - If you know you will have the money in a few months, certainly seems the cheapest option. But what if you don't?

3) HELOC - I got my HELOC with no closing costs. I wonder if you can shop around to get a no-closing cost HELOC. HELOCs are not as good as they used you to be because many won't be able to deduct the interest with the new tax laws. However, I have a $100K HELOC that I have dipped into a few times for cases just as yours. I also have always liked knowing it was there in case of a real emergency (it's just one piece of my emergency funds).

So, if you could get a HELOC at no cost, that would be my number 1 choice. Otherwise, a credit card with a great into rate could work out. You said $5,000 at most. Maybe you won't even need to use it for that much. I do agree with many of the other posters that you need to look hard at what you are spending vs what your are earning and realize it is not always easy to pay back borrowed money in the future.

I have sent my kids to camps for many years. Yes, expensive. But I think they are so worth it.

Good luck
Mark

longleaf
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Re: Cash flow problems - best way to handle?

Post by longleaf » Mon Apr 09, 2018 10:42 am

MnyGrl wrote:
Mon Apr 09, 2018 10:08 am
rtr-molar-doc wrote:
Mon Apr 09, 2018 9:51 am
MnyGrl wrote:
Mon Apr 09, 2018 8:33 am
I am on a pretty tight budget. I live in a HCOL area and have a moderate income. This year I needed to get a new car so took a big chunk of money from savings. There have been a few other things that have come up as well, so my savings have gotten very low. I will need to pull some money out of savings for summer camps for the kids, and I am afraid of running out of cash this summer. I don't need a substantial amount - at the high end, this would probably be 5K or so.

I could:

1) get a 401K loan (there is a $175 setup fee, but after that the interest rate is fairly low, like 3 percent)
2) get a zero interest credit card, and hope I can pay it back by the time zero interest time period expires.
3) open a HELOC (I have about 100K in equity. At my credit union, it looks like closing costs would be around 1K; but I could use it if needed in the future.)

What would you do? Are there options I'm not thinking of? Thanks!
No one ever NEEDS to get a 'new' car. You WANTED a new car. I suspect you could have found a decent used car for less than 1/2 of the cost of that new car. No ones kids NEED to go to summer camp either - it is a nice luxury, but I honestly don't know any kids I grew up with that went to one and we all came out fine. Get as babysitter for as little as you can(someone you can trust). It takes some time and work to find someone, but people do this everyday. A babysitter that is reasonably priced isn't going to suddenly appear at your front door. Use some 'elbow' grease and get on it!
My car was 14 years old and I really did need a new one. I paid about $20K for a new Camry, but since I intend to keep it for at least 15 years, I bought new.
You are defending your lifestyle here, but you asked for advice on a forum dedicated to low cost investing. That trait and frugality often exist together. My father's current daily driver is 36 years old, and he can easily afford McLarens. No, you did not NEED a new car. Why didn't you purchase a used vehicle? This action is contrary to the help you desire, and will remain the focal point of criticism. I agree that you should not change vehicles at this time considering the type, but realize that the few thousand you could have saved would enable your spending to go on. You have reached the time where you have to understand the consequences of buying that new car.

As far as your cash flow issue:
Reduce pet expenses (cheaper food, less grooming)
Reduce "Misc"
Do not eat out

There is not a way you can escape this without putting in some effort and changing the way you live.
Frugality, indexing, time.

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C4NT
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Re: Cash flow problems - best way to handle?

Post by C4NT » Mon Apr 09, 2018 10:44 am

MnyGrl wrote:
Mon Apr 09, 2018 8:33 am

2) get a zero interest credit card, and hope I can pay it back by the time zero interest time period expires.
I had a cash flow problem a few years ago, I went with a CC with 18 months zero interest. I paid it off in less than a year. It was a stressful time. Now have an emergency fund.

Good luck.

Raabe34
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Re: Cash flow problems - best way to handle?

Post by Raabe34 » Mon Apr 09, 2018 10:48 am

HOA fee $131.50 (Due quarterly; value here is for one month)
Mortgage Payment $2,302.60 (Includes principal, interest, homeowner's insurance and property taxes)

Job take-home $4,569.92

None of the other things mentioned can help enough when over 50% of your income is going here. It might not be easy or conventional but something needs to happen here and yes I understand you can't move far.

The only other lever you can pull in the situation is income.

Otherwise I'm 100% sure you'll be going backwards 10-20,000 cash flow wise annually.

UncleBen
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Re: Cash flow problems - best way to handle?

Post by UncleBen » Mon Apr 09, 2018 10:52 am

Change your withholdings to get the extra $500-ish/month in your paycheck. Be sure to double check your 2018 liability under the new tax law.

What you and your spouse purchased together is now a home that costs 53% of your take home. It's very common for the custodial parent to try to maintain the status quo for their children. But you might want to take a serious look at other living arrangements. House "poorness" appears to be the root issue in your budget not a one time temporary cash flow problem. Summer camp will happen next year too and you don't want to get into a cycle of borrowing which will just compound the cash flow problem.

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MnyGrl
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Re: Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 10:53 am

longleaf wrote:
Mon Apr 09, 2018 10:42 am
MnyGrl wrote:
Mon Apr 09, 2018 10:08 am
rtr-molar-doc wrote:
Mon Apr 09, 2018 9:51 am
MnyGrl wrote:
Mon Apr 09, 2018 8:33 am
I am on a pretty tight budget. I live in a HCOL area and have a moderate income. This year I needed to get a new car so took a big chunk of money from savings. There have been a few other things that have come up as well, so my savings have gotten very low. I will need to pull some money out of savings for summer camps for the kids, and I am afraid of running out of cash this summer. I don't need a substantial amount - at the high end, this would probably be 5K or so.

I could:

1) get a 401K loan (there is a $175 setup fee, but after that the interest rate is fairly low, like 3 percent)
2) get a zero interest credit card, and hope I can pay it back by the time zero interest time period expires.
3) open a HELOC (I have about 100K in equity. At my credit union, it looks like closing costs would be around 1K; but I could use it if needed in the future.)

What would you do? Are there options I'm not thinking of? Thanks!
No one ever NEEDS to get a 'new' car. You WANTED a new car. I suspect you could have found a decent used car for less than 1/2 of the cost of that new car. No ones kids NEED to go to summer camp either - it is a nice luxury, but I honestly don't know any kids I grew up with that went to one and we all came out fine. Get as babysitter for as little as you can(someone you can trust). It takes some time and work to find someone, but people do this everyday. A babysitter that is reasonably priced isn't going to suddenly appear at your front door. Use some 'elbow' grease and get on it!
My car was 14 years old and I really did need a new one. I paid about $20K for a new Camry, but since I intend to keep it for at least 15 years, I bought new.
You are defending your lifestyle here, but you asked for advice on a forum dedicated to low cost investing. That trait and frugality often exist together. My father's current daily driver is 36 years old, and he can easily afford McLarens. No, you did not NEED a new car. Why didn't you purchase a used vehicle? This action is contrary to the help you desire, and will remain the focal point of criticism. I agree that you should not change vehicles at this time considering the type, but realize that the few thousand you could have saved would enable your spending to go on. You have reached the time where you have to understand the consequences of buying that new car.

As far as your cash flow issue:
Reduce pet expenses (cheaper food, less grooming)
Reduce "Misc"
Do not eat out

There is not a way you can escape this without putting in some effort and changing the way you live.
Thanks for your input. I don't regret buying the car since I got a very good deal on it, it has fantastic safety features and reliability (important since I am a mom) and drive my cars into the ground.

Other than buying a new budget car every 15 years or so, I live extremely frugally. We take one week long vacation a year, though we do have some weekend road trips. Our food budget for 3 people is less than $200 a month, and we rarely eat out (my kids love my cooking). We use the library for books, CDs and DVDs. I bring my breakfast, lunch and snack to work every day. We probably spend about $20 a month on dog food (no grooming needed as she has short hair). I don't spend much on clothing or shoes. As I said, in a good month we can save $7-800 dollars. My main problem is that buying the car in the spring and cleaning out my savings doesn't give me time to fully replenish it by summer (though I am trying).

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lthenderson
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Re: Cash flow problems - best way to handle?

Post by lthenderson » Mon Apr 09, 2018 10:56 am

MnyGrl wrote:
Thu Apr 20, 2017 9:02 am
I'm a working mom and also I'm divorced, so I'm the breadwinner by default (no alimony). I have two kids and make under 100K in a very HCOL area. My mortgage is about 50 percent of my take-home, but I have a lot of savings to fall back on if anything goes wrong. :happy
Based upon this statement made a year ago, I would make sure you increase your savings since a year later it has been depleted.
MnyGrl wrote:
Fri May 19, 2017 9:22 am
When I feel like my spending has gotten out of control, I do a "fiscal fast" for a month, spending only on needs. Even my kids get on board with it. It is amazing how much you can save.
It is time for another "fiscal fast".

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Tamarind
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Re: Cash flow problems - best way to handle?

Post by Tamarind » Mon Apr 09, 2018 11:01 am

I think the variable expenses are going to be the best target for cutting. You can get a little from cancelling cable, subscription services, and allowances, too.

How often do you eat out right now? How often do you eat meat? How much are you paying for entertainment/enrichment (as separate from childcare costs)?

The 0% card may be the best way to go to get the childcare for the summer paid for, but you will need to do the above anyway if you want a chance of paying it back.

I also second the poster who advised that getting a large tax refund means you are withholding too much during the year. If you got that rightsized you could have an extra $400-500 each month to correct your cash flow.

rtr-molar-doc
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Re: Cash flow problems - best way to handle?

Post by rtr-molar-doc » Mon Apr 09, 2018 11:02 am

You shouldn't have a mortgage (and 2 kids) if your mortgage takes 50% of your take home pay. That is insane!
Any financial advisor would tell you the same thing - that is pure common sense. You need to be renting.

longleaf
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Re: Cash flow problems - best way to handle?

Post by longleaf » Mon Apr 09, 2018 11:03 am

You can delay the problem with a 0% CC. After stabilizing consider searching for a raise or different employer with higher salary. You would greatly benefit from another tier of savings in taxable account.

Before you can stabilize you will need to reduce expenses somehow. Good luck
Frugality, indexing, time.

Nutmeg
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Re: Cash flow problems - best way to handle?

Post by Nutmeg » Mon Apr 09, 2018 11:07 am

Note that the tax reform bill has lengthened the period of time you have to pay back a loan from your 401(k). In the past, you had only 60 days after changing jobs to do so without penalty. Now, you have until October of the following year.

https://www.forbes.com/sites/ashleaebel ... 27e2640f73

However, if you borrow from your 401(k), you forego the potential earnings on those funds while the loan is outstanding (in addition to having to pay the processing fee).

I recommend seeing if you can estimate your 2018 taxes and perhaps changing the withholding amount to reflect that in order to increase monthly cash flow. If you do that, you should set aside some money each month for your March car insurance bill. This will also help you if there is a delay in receiving your tax refund in the future.

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djpeteski
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Re: Cash flow problems - best way to handle?

Post by djpeteski » Mon Apr 09, 2018 11:07 am

Sam1 wrote:
Mon Apr 09, 2018 8:54 am
Ideas:
1. Different childcare arrangement
2. Move to a less expensive house
3. Sell your car and take public transportation
4. Cancel vacations
5. Stop eating out
+1

The options presented by the OP I would rank from quite horrible, to horrible. This may not be a short term cash flow crisis, things could get worse. The options presented will turn a crisis into a full out emergency. It is best to not spend future income now, as we really have no idea when or if it will come.

BuckyBadger
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Re: Cash flow problems - best way to handle?

Post by BuckyBadger » Mon Apr 09, 2018 11:10 am

Although you may have been better served to spend less and gotten a reliable used car, that's water under the bridge. You got a good reliable car that should last you many many years. So lets move on from that.

Some of the easy low hanging fruit is non-negotiable due to your divorce agreement, so we can move on from that (i.e. the 529 contributions) as well.

Also it seems like your current situation is a result of the divore to some extent? Perhaps you bought the house on two incomes and now it's down to just you. I'm just speculating, but a little more reading comprehension and compassion from some of the rest of the commentators would be nice. I think the OP is trying to make the best of a bad situation that she found herself in. I don't think this was all of her own making.

If I'm reading your budget correctly, you're coming out about $1300 a month ahead? Is that correct? And you think you'll only be about $5000 behind when it comes time to pay for summer camp? That's not so bad. And you have a few months to go.

So some thoughts:

1) Change your tax withholding. I know you said you plan on using your tax refunds for certain things every year, but it would be better if you could use/save that money ahead of time, wouldn't it? Now, I'm not sure how much you're paying or what your exemptions are, but if it's possible for Uncle Sam to take less out of each paycheck that would be a good move. That could give you up to $500-$550 a month to play with. If that refund is coming because of credits, then this won't work.

2) Make sure you're getting that $1300 a month. Keep to that budget. Save that money.

3) Make some cuts. Cut down on the things that you can. Entertainment. Food/dining. Miscellaneous. If you can get that $1300 up to $1500 or $1600 a month and can save it that'll be nearly $3000 by summer. More than that if you can tweak your tax withholding.

4) Payment plan/cashflow for summer camp? Is there a way to pay for summer camp in installments? If there isn't anything obvious, ask. It looks like you could cash flow summer camp if it wasn't all due at once at the beginning of term.

5) Zero interest credit card. I'd use this. Looks like you just need to float a few thousand for a few months, and if you can iron some things out ahead of time, it won't even be very much you need to float.

6) Try to avoid this in the future. Bump up that emergency fund and make sure it's large enough to cover a big emergency. Hopefully you won't have a big expenditure like a car for a long time, but having at LEAST $10k available would give you a lot of peace of mind. And you can get there quickly if you can bump up your monthly savings a bit and make a few cuts.

Good luck!
Last edited by BuckyBadger on Mon Apr 09, 2018 11:13 am, edited 1 time in total.

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MnyGrl
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Re: Cash flow problems - best way to handle?

Post by MnyGrl » Mon Apr 09, 2018 11:10 am

rtr-molar-doc wrote:
Mon Apr 09, 2018 11:02 am
You shouldn't have a mortgage (and 2 kids) if your mortgage takes 50% of your take home pay. That is insane!
Any financial advisor would tell you the same thing - that is pure common sense. You need to be renting.
When you live in a HCOL area, and you are divorced and have kids, sometimes the rules are a bit different. Renting in the area where I need to live (for my kids to attend school) is more expensive than what I am paying now, and I get tax benefits from owning. I have done all the research. I don't feel comfortable giving out my zip code, but I believe it is the most expensive suburb within 10 miles of DC, so you might be able to Google and figure it out. In my divorce agreement, we stipulated that the kids would stay in this school system. They love their schools and I am willing to live frugally to ensure that they can stay in these schools.

I am newly divorced and this is a temporary problem. I have never had any credit card debt or student debt, and definitely know how to be frugal. I will be looking for a new job next year, so that we have more breathing room.

kelvan80
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Re: Cash flow problems - best way to handle?

Post by kelvan80 » Mon Apr 09, 2018 11:11 am

Can you drop cable, allowances, Netflix, and eating out for the summer? If you do this combined with adjusting your allowances you may be able to make it without taking on new debt. I also recommend looking for a high school age sitter looking to take on your kids in your home. I think it would be cheaper than camp and every little bit helps. I didn't see cell phones in your budget?

BuckyBadger
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Re: Cash flow problems - best way to handle?

Post by BuckyBadger » Mon Apr 09, 2018 11:12 am

duplicate
Last edited by BuckyBadger on Mon Apr 09, 2018 11:13 am, edited 1 time in total.

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