stanford73 wrote: ↑Tue Nov 26, 2019 5:16 pm
clip651 wrote: ↑Tue Nov 26, 2019 4:46 pm
stanford73 wrote: ↑Tue Nov 26, 2019 1:25 pm
I thought I'd include the budget we went over yesterday to get your input. We need to reduce our food/entertainment costs and our internet/cell phone costs seem high. You'll notice there is no budget line for estimated IRS taxes. No quarterly taxes have been paid in 2019. Thanks, in advance, for looking this over.
Dec. $10, 653
Nov-Dec 5,000 + SS
No CC debt
IRS (5% interest; bal $44, 672k) $575 (autopay)
Mortgage PITI(3.8%; bal $309k) $3,570 (autopay)
Citi CC (bal $8,833; 18.49%) $200.00
Cap One CC (bal $2,231; 24.40%) $86.00
Chase CC (bal $10,402; 16.50%) $255.00
US Bank cc (bal $6,140; 13%) $165.00
HELOC (bal $81,216; 4%) $377,00 (autopay)
Auto insurance (2 vehicles; PIF) $135.00 (autopay)
Dues (homeowner's assoc) $53.00
Sprint (3 lines) $200.00
Comcast (internet, cable) $247.00
Utilities (gas, water, elect) $500.00
Term Life Ins. ($600k) $367.00 (autopay)
Expenses (Dec.) 7,730
Net (Dec) 2,923
Expenses (Jan) 7,730
Net (Jan) 2,192
Expenses (feb) 7,700
Net (feb) 9,992
You have done a great job gathering information and getting started! Congratulations! Thank you for updating us. You can now begin to plan your path forward with real information to work with.
A couple of things stand out to me:
1) you say you've paid no estimated taxes yet for 2019. Do you have an estimate for what those taxes will be? Have you looked at last year's tax return and compared it with this year's income, etc? Others can better advise you on the nitty gritty details, but you'll want to get going on making a payment for 2019 taxes ASAP.
2) are there any liquid savings outside of retirement accounts currently?
3) The interest rates on credit cards are of course quite high. The one with the highest rate (Cap One CC, 24.4%) has the smallest balance ($2231). If there is any extra money around (after figuring out the tax issue), I would throw it at that one and try to eliminate that balance first. Then that monthly payment can be redirected to future taxes or another credit card, depending on where you are at. You can also keep an eye out for any balance transfer offers (preferably with the cards you already have, not with a new one) which might help you consolidate and save interest. Check the fine print and the timelines on the offers, though, and be sure you'd be saving and not setting yourself up for higher interest once the promotion period ends.
The way you've listed income, expenses, and net is confusing to me. (I can't tell how much you two made so far this year, for instance, or whether you both worked al through the year this year.) Are you saying you have an extra $2000 or so a month to work with? In that case, you can work on figuring out taxes and credit card payments to maximize use of that money. But somehow I don't think that's what you're saying here. (Do you mean you are short 2000-3000 a month, and haven't paid taxes yet??)
Again, congrats on excellent progress! Keep chipping away at understanding the present (and the past as needed) and planning for the future.
Thanks, cj, for the kind words and encouragement.
To answer your questions:
1) I don't yet have an estimate. I've asked my husband for our tax returns for the last two years and his YTD salary. Income is lower this year, and last year, he paid 2018 taxes in full. The IRS debt that remains is from bits and pieces of balances owed since 2011. So, he has been chipping away, but unfortunately, the biggest chunk of those payments was made with the HELOC funds.
2) The only liquid savings are in my emergency fund of about $3k.
3) Zero balance transfers are a great idea.
And, no, we are not short at the end of the month (came as a big relief to me). The "net" amount listed in the numbers above is what we have leftover at the end of the month after expenses, BUT without taxes calculated in.
Thanks for clarifying.
If he has been chipping away at the previous IRS debt with the HELOC, he hasn't actually been chipping away at the IRS debt at all. Just been changing it to a different type of debt. It's very important to stay current with the IRS payments, so that part is good. But don't fool yourselves that the IRS debt has been chipped away it if it's only been moved to a different lender.
Sounds like getting a handle on 2019 taxes (and then 2020) should be one of the next things on your list. You don't want to pay unnecessary penalties with your taxes, and going forward, you'll want to figure out how to be on top of them each year so that at filing time you're getting a small refund or owe a small manageable amount, and there are no big surprises.
So, if you are have a net leftover of $2000-3000 a month, and you don't have any liquid savings beyond a tiny emergency fund, where has that net extra money been going? The debts have been growing from what you've posted earlier, not shrinking, so I don't think more than minimum payments have been happening. I am not criticizing, just trying to help you figure out where the money has been going and will be going.
I suspect there are more spending and expense categories that you haven't discovered yet, as your list is pretty short. These may be things that just aren't obvious because they aren't a regular recurring expense. Stuff like Christmas and birthday gifts, travel, clothing, medical (premiums, copays, prescriptions, etc), furniture, any money spent on or given to kids, dog food and veterinary bills, hobbies, electronics, home and car repairs, gas for two cars, cash spending (look at all previous cash withdrawals from bank accounts the past year and try to guestimate where that cash may have been spent), etc. Some of those categories are probably a portion of your existing debts, but unless you are cutting all of these (and any other categories) out of your life altogether, you'll need to plan on how to pay them in the future.
If you don't have savings and aren't going to keep adding more charges to credit cards, you'll need to cash flow all of the things not on your list, and anything that would have previously gone on a credit card. And if you want to reduce debt, you'll also need to hunt for ways to increase your loan payments to pay things off faster. For instance, those minimum payments on credit cards will keep those credit card debts going for a LONG LONG time. I think credit card statements these days will actually tell you how long it will take to pay off a balance if you only pay the minimum, and how much total you will pay over that time compared to the current balance. Take a peek at each statement and look for that, but sit down first.
Again, wishing you the best and cheering for you! All of this is offered as things to think about along the way as you try to get control of your future and path forward. I hope at least some of it is helpful. (All the places I'm saying "you" mean you as a couple, since you and your husband are tackling this together.)