Comments on: Case Study

By: Megan Costa

Megan Costa — Fri, 23 Oct 2009 18:03:14 +0000

Well the first two things I can see immediately is your Satelite and Cell Phone bills.

You should cancel your satelite completely. That will give you another $150.00 per month to put towards debt re-payment.

You also need to lower your cell phone bills. $200.00 (depending on what and how you use them – ie. does your husband use it for work, or are they only emergency phones). My husband is a cell phone consultant (www.wirelessadvocates.ca), he works everyday with people to lower their cell phone bills. $200.00 is high. I am sure you could save half. Which gives you another $100.00 for debt re-payment.

You could also consider this…

No allowance. Or lower allowance, maybe $50 every two weeks.

Have you considered taking in a few kids for daycare. Its a great way to make money while still staying at home with your kids. Its what my mom did. She stayed home running a daycare for my entire child hood, and I loved it, always someone to play with. And you can easily make $500 to $600 per child.

By: Jenn

Jenn — Thu, 22 Oct 2009 20:28:50 +0000

In addition to all of the above, let it be known to friends and family that you’re making major changes to allow for you to spend the most time possible with your baby. If you aren’t comfortable letting everyone know the full extent of the situation then leave it at that. Let them know you are opting out of Christmas gift exchanges, events held in restaurants, etc. You’ll likely find that if those close to you know you’re make major efforts to cut costs they first of all won’t inadvertently sabotage your efforts, but you’ll probably find that they’ll pass on kids clothing and toys, suggest potlucks instead of costly get togethers, etc. Admitting you need to make some major alterations in lifestyle isn’t admitting failure, just that you now have a different family situation and it’s more important than “stuff” and debt.

By: Stephanie H.

Stephanie H. — Thu, 22 Oct 2009 07:10:02 +0000

Best I can tell based on the foggy information on Drew’s income you are currently in the hole over $600 per month. This situation is so tight you will have to make huge cuts. First if you have 2 cars sell at least one and pay off the car loan. This will also cut your car insurance, maintance and gas. If your home and jobs are near public transit you should get rid of both cars and save even more. If public transit is an option then vehicles are a luxury. If you do keep a car raise your deductables and if possible keep the vehicle with the best mileage. The next item you should look at is your student loans. You didn’t indicate the interest rates on these, so if they are lower rates than you credit cards then you should pay the absolute minimum. My student loans have interest only options for hardships, look into this but don’t defer if possible as you don’t want to increase the balance. If the $350.00 is for groceries only you should cut back considerably. Shop the adds. MSNs Women in Red forum has one specifically for saving money on groceries (I believe there is now one specifically for Canadian residents). Otherwise that should include all personal toiletries and diapers for the family. The Satelite has to go. You can’t afford it and there are plenty of ways to get your television fix for free if you keep your internet which you do need for a job search and the VOIP. Your cell phones should be prepaid. If Drew uses it for work then his employer should pay for it. At this point no one should have an allowance. If one of you must drive for work then you should only be paying out for gas. Is there an option for car pooling? This would cut down on the cost of gas and remember you could ask a little extra for the wear and tear of the vehicle. Next cut up every credit card but one and freeze it. Then sell anything that is not required to live. This includes books, dvds, cds, electronics, gaming system, clothing, furniture, old clothing still in good condition, childrens toys. Any required clothing purchases should be made at yard sales or thrift shops if you don’t know anybody to trade with. Take that money and start paying down the 28% APR cards. Then use the snowball system to work you way down the credit cards. Basically you pay the minimum on everything but the highest interest card.
I still don’t feel you have enough money due to the number categories missing from your budget.

Emergency Fund
Taxes
Retirement
Long Term Savings
Home Maintenance
Vehicle Maintenance
Entertainment

One option if your home is worth enough is to sell it and rent in a location with great public transit at a much lower monthly cost (bring it into the right range for your income). The other option is to make more money. You could watch kids in your home as others have mentioned or get more hours at the grocery store or start hunting for a job similar to the one you had before you went on mat leave. I assume if you were making that much money you have a marketable skill. Look outside the box for a new job. If you can use a skill from home to earn money. If you have time to spend watching television you have time to earn more money. You need to find free ways to entertain yourself. Good Luck!

By: Carol

Carol — Thu, 22 Oct 2009 03:27:59 +0000

Well……I would have to say the credit card debt is going to……..I will not say. Either you win the lottery or come into a nice little inheritance. As Gail would say you folks are in big ” doo doo ” .
Either you go out & make the money you use to make or sell the house. That is…..you have to get rid of the mortgage payments & find a place to rent for 1/2 the amount. Maybe you have a bit of equity in your home so once it is sold you can pay down some of that crazy credit dept: 1st. Home depot @ 28 %. OUCH. The banks are not so friendly when it comes to cleaning up our messes anymore. The future isn’t as bright as it once was ( well it was all a facade ). The good news is you have each other. Sell the house, cut some silly costs ie. Satellite @ 150.00 per month. Get down to the basics & get back to reality. You will be FINE.

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By: Ann

Ann — Thu, 22 Oct 2009 03:17:39 +0000

I’d think twice about the advice to sell the house and rent. As a landlord in Calgary, I’m currently renting out a 500 square feet apartment for $1300/month.

And I see too many assumptions being made in the comments, e.g. (1) they have equity in the house and (2) going from semi-monthly to monthly payments would reduce their total monthly mortgage payment amount.

Also, there are too many unanswered questions to provide meaningful advice. For instance:

1 – What is their current net income? I’m assuming $60k per year from this comment: “our credit card debt combined is costing us $1250/month! Basically, 1.5 of my husbands checks goes to the mortgage and the other .5 goes to credit card debt.” And if it is $60k net, that’s about $90k gross. That is plenty for a family of three, even in Calgary.

2 – What are the terms of the mortgage? Interest rate? Amortization? Remaining principal? Will they be whacked with a big-ass early termination fee if they break it?

3 – Do they have any decent equity in the house to make selling it worthwhile after the realtor, legal, and bank fees?

4 – Do they have non-registered investments that can be liquidated and applied towards the debt? Many people have employer savings plans that they contribute to but forget about because they don’t check the account regularly.

For now, I can only suggest (be warned that I’m rather harsh):

1 – Take a weed whacker to those expenses because they are insane. Calgary is not as expensive as some people are claiming; my step-father managed to raise a family of six while working as a glorified janitor.

2 – While I love credit cards because they simplify my life, this couple cannot be trusted with them and need to cancel them and go to a cash system. If the money’s not there, they can’t spend it and dig themselves deeper in debt. Also, don’t credit card companies charge interest on all new purchases the moment they are posted if there is an outstanding balance?

3 – Forget paying-the-smallest-debt-first-to-give-you-a-psychological-boost method. With some debt at 28% (seriously?!? why would anyone agree to this?!?), I’d go with paying off the highest-interest debt first and paying the minimum on everything else. Once the first one is paid off, then you move onto the next one and so on.

4 – Google Liz Weston.

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By: Computerhero

Computerhero — Thu, 22 Oct 2009 02:18:52 +0000

14. Ditch the allowance. You’ve alread had your fun, that’s why your so in debt. There should not be any exepense that’s unplanned from here on out.

It’s tough, you have two choices, keep on the train tracks to ruin, or make some sacrifices and grow up. It’s harsh, but it’s true. Defer gratification and you’ll get out of this mess and stay out.

By: Computerhero

Computerhero — Thu, 22 Oct 2009 02:13:29 +0000

1. Mortgage: Eliminate your accelerated payment. You’re better off doubling up your payment. Check out https://www.rbcroyalbank.com/cgi-bin/mortgage/mpc/start.cgi/results to play with the numbers, but you should only accelerate after maxing out your double-up, otherwise your wasting money and adding stress.
2. Car: Your car payments seen pretty decent, it might be worth trading down if you can.
3. Student Loans: You might qualify for interest relief, contact your lender and see if they can give you a break.
4. Phone: Depending on what you’re doing Primus might be cheaper. Shaw has a basic phone service too that you can bundle in, I pay $65 for high speed and basic phone, we don’t do enough long distance each month to justify a higher plan, and our cordless phone has a built in answering machine. Besides, if you’re on the phone and someone NEEDS to leave a message, they’ll call your cell, or call back.
5. Insurance: Is all your insurance bundled with the same carrier? I’ve found TD to be very cheap, not to mention they also have a discount if you work for the health region or are a UofC Alumni. (you can cheat and say you are, they don’t check.)
6. Satellite: Too expensive, bundle into your Shaw bill, Go with a Telus package, or if you’re with Bell, threaten to cancel. We got 40% off for 12months because I told them I could go to Shaw for $65/month, and I still had time left in my contract. But I was also willing to pay the $200 penalty to save the money I the long run.
7. Cell Phone: That’s pretty expensive. If you’re doing long distance on your cell, you might want to investigate Primus Talk Broadband, where you can Dial in and use your voip LD plan, it’s called Remote Phone. Alternatively, if your with Rogers, they have an Insiders plan which is $18.month and offers evening and weekends starting at 5pm. Call your provider and ask them to re-evaluate your plan, I do it every year.
8. Electricity, are you with Enmax? You should be, they’re the cheapest in Alberta, and you can go on and off contract at any time. You can change it once a month if you want to. If you go on electric contract with Enmax and get your gas off contract, you’ll be spending the most effiecently. The ½ cent increase you’ll pay every KWH will be greatly offset by the 12/month in Enmax Rewards you get back, which will pay your recycling and garbage fees.
9. Water: That’s insane, you either need to be metered or you have a leak (or both). According to Enmax the average Calgarian uses 7cubic meters of water/month and the average household uses 750kwh of power, if your numbers are higher than this, investigate as to why.
10. Internet: Bundle this with your home phone/tv provider, you’ll save money. Shaw will give you the quickest most reliable service.
11. Groceries: This is the only sane number you have. Good on ya, but it looks a little low given you have Kids.
12. Credit Cards: KILL THEM. If you get consolidation offers, take use of them. Especially if you have a line of credit. And remember, when you went to the bank and said your debt ratio was too high, if you have a LOC, they consider it maxed out even if it’s not. It might be worth moving student and credit card debt on to your LOC, then bundling that into your mortgage. Then burn the plastic.
13. Jobs: There is plenty out there if you keep an active eye. Don’t forget the government job boards, they’re getting better quality positions all the time. And don’t’ be afraid to market your services, you could offer day home services, or a laundry service in your neighborhood, that would keep you in your house and out of Safeway. Think of all the stuff you do every day and ask yourself if someone would pay to have that done, then print off some flyers and put them up around your area. Calgarians are very busy, personal services are easy to sell here, retail jobs suck in this market.

And please, do your family a favour, do not touch your credit cards. You don’t need them, it’s an addiction.

By: Risa

Risa — Thu, 22 Oct 2009 02:06:13 +0000

Erin,
I too am glad we didn’t go for “as much house as we could afford” (according to the bank), which is allowing us to have one parent stay home. But I have the part-time care plan in my back pocket just in case; once my boys get old enough to be left on their own for a few hours, I’d go back to doing math tutoring ($30-40/hour). We live walking distance to two elementary schools, and have several others within a 5 minute drive. And through various connections among my friends I know lots of Mom’s who need once-in-a-while care. Calgary has a LOT of people who moved here, which means grandparents may not be nearby to help out, so childcare is in particularly short supply. Even stay-at-home Moms sometimes need childcare. In my experience, most would prefer not to have to take their toddler along to doctor appointments (“Look at the wall while Mommy has her special pap test done, dear!”), while getting dental work, or while getting their hair cut, to say nothing of just the odd afternoon off for much-needed Mommy-recharging time.

By: Mrs. T

Mrs. T — Thu, 22 Oct 2009 01:44:28 +0000

If this were my financial picture, these are the things I would consider changing:
- decrease mortgage cost by temporarily extending the amortization back to 25 years
- returning to monthly payments rather than twice a month – save $192/month
- really consider selling the house to purchase a cheaper home or rental unit
- bundle my home phone/internet/cable which would save $50/month
- cancel satellite service – save $150/month
- cancel cell phones – save $200/month
- make a “gas” budget and stick to it rather than losing track of the true gas cost by bundling the cost into “incidental expenses”
- cut out those “incidental” expenses that you both have – could save you $50-100/month or more

Total savings: at least $650/month which could be diverted to debt reduction or divided up to cover essential needs.

By: Frugalistas.blogspot.com

Frugalistas.blogspot.com — Thu, 22 Oct 2009 01:22:35 +0000

Fuel, satellite, and high interest debt. Agree with a lot of posters that you need to cut the fat out.

By: erin

erin — Thu, 22 Oct 2009 00:52:01 +0000

Risa: Full time home daycare in Ottawa is about 35-45 per day in regular neighbourhood’s, but in more expensive neighbourhoods it’s between 45-65. It works out to about the same in both cities.
I’m just glad that we didn’t go for a huge mortage because we can now afford to live comfortably in our little house with only one income. Anything can change at any time and people need to start planning for change. Life isn’t always going to be the predictable world we hope it to be.

By: Ken H

Ken H — Thu, 22 Oct 2009 00:50:42 +0000

Wow, almost $61k on credit cards. Ouch, that hurts.

I have one option that might help: I notice that your VOIP ($22), satellite ($150) and internet ($37.30) add up to $209.30. Last year I switched from Shaw cable to Telus for everything – home phone (with call display and call waiting), high speed internet and TV including a video recorder. When I’m watching TV and people phone, the number appears on the TV so I can decide whether or not I want to get off my butt. I’ve got an insane number of channels – something like 200. My last bill, including a movie rental was $116 or a little more than half what you’re paying. If you went for fewer channels and fewer phone features you should be easily able to save $125 per month. I know Telus is a hated name in Alberta but it is an option that could save you some money.

I’d also examine your cell phone: $200/month is huge. My wife has a pay-as-you-go plan and she make a point of using her cell as little as possible relying on the home phone or e-mail instead. As a result, she has a phone that costs $10.50 per month.

By: Linda

Linda — Thu, 22 Oct 2009 00:23:54 +0000

I think Risa has a great idea regarding day care, full time or before and after school. Also a boarder or to rent out a portion of your home (ie. basement) are good ideas to increase income. Personally, if it is more costly to sell and rent then stay where you are. With the increase of income and the cutbacks that everyone has recommended that will be a great start. Try to reduce the interest on the cards and/or speak to the bank like Sparky recommended. Listen to Gail, read the site and push up your sleeves to get working. You can do it! All the best