Financial Troubles

[Jimbo2k]

I'm starting this thread in hopes to get some useful advice on this situation that my parents are in. Im sick of seeing my parents both in their mid fifties, have to suffer so much because of their debt.

First, we live in Ontario, Canada. My parents are both teachers. With those 2 incomes alone they bring in almost $140,000 /year gross. You may be thinking, well thats decent coin, how hard could their situation be ? Well, basically they are slaves to their debt.

They made some bad decisions earlier in their life, that has thrown them into debt, and they haven't been able to get out of it. If you need details about what mistakes I am refering to I can do that.

Anyway, thats not all my parents make in a year. My dad also has a couple side jobs, that brings in another $20,000 / year.

I'm not entirely sure about what they've done to try to get out of their debt. They've talked to financial advisors, taken out 2nd, maybe even more mortgages, consolodated their debts several times, they just can't climb out of their debt. They have maxed credit cards, loans, etc.....

They aren't money splurges either. They are living very middle-income life. Our house was worth 140K , which has almost doubled to 260K in 20 years because of the property values going up around here. We have 2 cars for 4 drivers (me and my little brother).

Lately it feels like their situation is just getting worse. Complaining about not having money to get basic things like groceries or toiletries. They have to wait until pay day to do anything.

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So im pleading for help, if theres anything you know of that can help them out, such as methods of cutting debt or whatever. If you need more details, let me know.

 

[Klippymitch]

It's sounds like the Interest of their debt is killing them.

 

[John_Galt]

ahhh. You're not telling us everything.

They can't be making that money and not splurging somewhere.

One has a gambling problem, or they're splurging. (Assuming they're not literally burning it).

Tell them to take their access money for the month(After the necessities: House, food, cars, etc) and put a minimum payment on all their credit cards, take all the excess cash on the highest interest credit card. When the card is payed off, cut it in half, because they're obviously not responsible enough to have one.

Once all their credit cards are payed off, tell them this is the rule they have to live by, "Don't spend money you don't have.", The rule can be bent for things like needing expensive car repairs or a new one. But god damnit, money trouble at 140k/year. Jesus, are you guys buying pianos for every room in the house?

 

[John_Galt]

Just explain what this event in their past is. They make just under $2000 a week after taxes. They're mortgage is 140k/20years = $700/month(This is rough)

So they have $8000/month in cash flow in.
They have $700/month in cash out.
They have (let's say) $1000/month cash out for cars and insurance.
They have food, let's say $500/month cashout.
They probably have cable internet stuff $80/month cashout.
Gas $500/month cash out.

So that's $2780 out, with $8000 in. So what is roughly costing them about $5000 a month?

 

[Jimbo2k]

Alright, I took the responses here into consideration, and you guys raised valid points...there is so much money coming in, where could it all be going?

Wrong.

I just had a discussion with my parents, they sat down with me and showed me their budget.

First of all, my parents make a huge amount of money, this is true. But the implications of this is a huge tax bracket.

My dad is making huge $$ but hes also nearing a 50% tax bracket, which means just in taxes alone the government is *cough* stealing 50% of his money.

My mom is about 35% tax bracket.

I did the math and my parents bring home $92,500 after taxes and deductions (teachers get deducted alot ie: pension, benefits etc...) Yes, believe it or not, $160,000 gets reduced to $92,500. It is bull sh*t but what can we do about it ?

Next , $92,500 net isn't bad...compared to their expenses, it isnt good enough.

Mortgage: John_Galt, your figure may be true for a normal family...but my parents have taken out loans on their mortgage as stated above. Their mortgage payment is 1800$ /month after taxes.

Their other most notable expenses are:

The 2 cars: they've had to take out a loan to purchase one, and we are leasing the other. This means about 1600$ /month with the car payments, gas and insurance. No word of a lie.

Food: 1000$ / month. My 2 parents, an older brother, me and my younger brother...we are all into working out, so we eat a lot.

Income tax: $500 / month. Turns out my dad owes about $7,000 at the end of the year on taxes thanks to not paying enough income tax on his other jobs (such as night school, refeering basketball, and working part time at beer store).

I've tallied all of these expenses and it comes to $77,500 / year (with just the regular expenses). Factor in incidental expenses and it gets higher (such as repairs for the house, and for the cars (brakes, oil changes etc...)

Still think my parents have gambling problems?

 

[SamePendo]

Still think my parents have gambling problems?

Never take that attitude towards someone who is trying to help. Never did he take an offensive attitude. These guys will probably help you out again if you ask for advice because they could care less what someone over the internet and won't remember you.

But people in life remember faces. Beware.

 

[musclyjerk]

If you're sick of seeing them suffer why don't you and your brothers stop eating so much and put your desires for more muscle mass on hold until YOU can afford to support your interest in lifting.

Question is: How much do you really want to help your parents and are you willing to make that sacrifice for them?

You wanted advice, there you have it my friend.

The Muscly Jerk

 

[John_Galt]

heir mortgage payment is 1800$ /month after taxes.

So how much debt are they in? Half a million at one point?

Anyway, I can help.

First step, you and your brother, go get jobs and pay for your own car insurance. Taht'll save your parents about $6000 a year. Unless you already pay your own, than good.

2nd. Even though it's hard to believe you guys are struggling, you have to cut back. Simple. You keeps spending at your rate, you get the same result.

3rd.

I've tallied all of these expenses and it comes to $77,500 / year

After the main neccessities that leaves you with $15000. Or an extra $300 a week. Use that $300 to pay down your excess credit cards.

Still think my parents have gambling problems?

Sounds like someone gambled away a lot of money with the debt your parents are in.


Money problems are easy. The question is, will they do anything about it?

 

[Jimbo2k]

Never take that attitude towards someone who is trying to help. Never did he take an offensive attitude. These guys will probably help you out again if you ask for advice because they could care less what someone over the internet and won't remember you.

But people in life remember faces. Beware.

I am grateful for the advice I am receiving or have received in the past, infact John seems to be the one who wants to help the most. I simply put the roll-eye smiley because he wasn't believing what I was writing...if my parents were compulsive gamblers I don't think I would write this thread as I would already know the problem, and nothing you guys could say would help, unless giving me the gamblers helpline or something

Anyway, I don't take the smileys on this site too personally, sorry if you do?

John_Galt

It wasnt so much a certain amount of money they were in debt. They made a few bad decisions 20 years ago such as getting into Amway while only having 1 income (because my mom was raising us). Then selling their house for less than they paid for it (lost 10,000$ on it -- they sold it because the interest rates on the mortgage doubled so they thought it was the best move). Also my dad didnt have the best money management skills...

As for the 300$ / week on the Credit Cards...they do have some surplus but its not quite that much. I told you their regular expenses. It just seems like their surplus is only enough to stay afloat. Something always seems to happen...like replacing brakes on a car -- $800...... or repairing a broken Sub Pump....

muscly jerk

Right now im unemployed, and just finished my last semester of school (college). I was let go at my other job, and have a job lined up, they just are waiting until mid December for me to start. Once that happens, I will probably be taking over 1 of the cars with my little brother so yea that should help.

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I was hoping there was a government program or somthing where they can lower your taxes or interest rates or somthing to help a struggling family?

 

[~attrACTION~]

John_Galt seems like he's been helpful. I'm not a financial expert of any sort but my family does well with money, so here are some tips:

What kind of cars are they paying for? If money is such a problem, sell them (especially if either is a gas-guzzler), and buy something used, 4-cylinder (fuel-efficient) instead. Plus, if something is 10miles or closer, ride a bike.

The house my folks and I live in has monthly mortgage of roughly $25k/month. Yeah, and I keep telling my parents we don't need such a big house. You may think this is a lot, but I think the $1800 is still a lot as well. You can downsize to an apartment or smaller home, live below your means for a while until you can pay off your debt. By downsizing and living below your means, I mean really below. The example of my family is extremely over our means. It's just me, my mom, and my dad. We use 2 rooms in the house, and we have like I don't know how many other rooms empty, 3 garages, an acre of land...and I have no idea why. I do remember, however, a time when we lived in a small apartment where I had to share a room with my parents. It was a tiny place, but we got by.

Save as much as you can! You would be surprised how much a few dollars can go a long ways. Like I mentioned, I live in a huge house. In fact, we have a couple homes. But my parents are teachers as well, and my mom is even retired! You would be very surprised to know that the income we have coming in from my dad's job is less than what you have coming in from both parents. However, we have assets, which you can also acquire if you save up money.

One thing my mother emphasizes constantly is savings. Every weekend she will sit down with the ads/flyers from the newspaper and find where is the cheapest place to buy milk, eggs, vegetables, etc. We'll buy groceries from maybe 6 different places, but save probably $50 a week.

Here are some other saving tips my Mom would probably give... (she should write a book)

**Electricity:
- Make sure you turn off the heat when you leave the house. Turn off any lights in rooms of the house that you are currently not in. If you leave the kitchen, turn off the light. There should never be any lights on if there is no one in that room.
- Same with electronics. Don't leave computers, TVs, or anything else on if you're not using it.
- Change the light bulbs in your house to a lower voltage/watts. This saves us $500/month, we just got a new house and changed all the bulbs with my dad. It may feel like a pain, but the extra cash is always nice.
- How many TVs or video game systems do you own? Understand that if you really want to pay off debt you can, but you may have to cut some of the extra entertainment out of your life.
- Do you have cable TV? That's $50 a month. What about high-speed internet, another $40 a month. Internet phone? Another $40 per month.

**Water:
- Take shorter showers, say 5-10min maximum.
- Buy a filter for your tap water, to avoid the cost of buying drinking water in bottles. A Brita filter is pretty nice, and they last.
- Don't wash your car at home. Paying $3-$4 for a cheap car wash is a lot more water-efficient.

**Food:
- Eat closer to nature. Meaning, junk food will often cost you more than natural foods.

**Other:
- Do you have any pets? They're just animals, you can sell them. If you feel bad about it, give it to a friend.
- Sell anything you don't need or use any more. This can make you good money actually. I'm sure, like most folks, you have an attic, basement, or garage full of junk. You probably have clothes, toys, or other stuff you don't even touch any more. Sell it on Craigslist, or on eBay.

One thing my mom does is she will buy stuff at garage sales and sell them on Craigslist. It's just a fun hobby for her and makes nice extra cash. Like she bought a coffee table last week for $25 and sold it on Craigslist for $60. Not bad, considering it's cash, and more than double what she paid. If you can't find a job, you and your brother can save a little then do stuff like that, it only takes maybe an hour or two a week. Also try the barter section, and then sell when you get your hands on a good item. Remember, even broken stuff can sell! I once traded a couple old Tom Clancy books for a smashed, wouldn't turn-on PS2 and sold it for $47. Yeah, people are crazy, so take advantage.

Lastly, good luck. Even though we live very well, my parents had to do a lot of these things to get where we are today. Both of them had to work fast-food restaurants, live in ****roach-infested apartments, live in their cars, live in trailer homes/parks, etc. to barely get by most times. But if you keep at it, and really save your money well, be wise, you can get out of debt and live better. You know what's really funny though, my parents also got into Amway a while back. Luckily they got out pretty quick and realized to make it, you have to work hard. There are no shortcuts.

Although I was too young to remember most of those times, we've sometimes gone on vacation and visited the places we used to live. Sometimes I can't believe how tiny our old homes are, you feel like a giant. So, I feel where you're coming from. Best of luck.

 

[John_Galt]

I think there's a point with some people with the way they look at things. I know my mom is sort of like this, but they are more concerned about keeping the current lifestyle going, where I just deal with the monetary part of it (Living within your means).

Things need to be cut. Do what attraction said.

I'm assuming you're a male age 16-24 and so is your brother. Your guys insurance is a lot of money. Probaby double what your parents pay for themselves. I'm guessing you're also insured for both vehicles rather than one, which I'm guessing will cost them even more. But get a job and pay for your insurance, it'll give you a little responsibility and a little more understanding of money. Not to mention save your parents a lot. Trust me it's better in the long run.

There's usually a lot of crap people buy but don't need. It's sort of hard when you're used to doing it.

Does your family eat out a lot? Stop if you do.
You're probably going to school along with your brother and sister. Do you take lunches or do you get money from your parents and buy it? Stop if you do.

I think the problem is you guys live an upper middle class lifestyle, but don't seem to change it when your finances change.

Here's an exercise I heard of doing. Make a log of everything your parents spend money on in a week. Everything, from the car payment to a coffee.

At the end of the week add it up, and look at what you're spending. You'd be surprised. My mother always talk about how she's broke, but she can afford to spend $600-$900 a year on coffee at Tim Hortins.

I was hoping there was a government program or somthing where they can lower your taxes or interest rates or somthing to help a struggling family?

I certainly hope not. If the Canadian government does that, I'm moving the **** out of here. Just because your parents can't handle their upper middle class salaries properly doesn't mean tax payers should get the shaft.

 

[bob2007]

If you don't want debt, you have to make sacrifices. There is no excuse for struggling with 100 000 + combined salary when there are many families that survive on half that. But I'm sure there's other people out there that do the same. They live paycheck to paycheck, doesn't matter how much they make.

1. Consolidate your debt, get a loan to pay off all credit card debt.
2. You have 2 cars financed with loans, I'm sure they're decent cars or they can't be that difficult to pay off.
3. Everyone pays taxes, nobody likes it. It's not an excuse or reason. The reality is that you only make 50- 66% of your income.
4. Financial planners should be able to help, I've taken a financial planning course, its all pretty straight forward. Budgets, cutting costs, the financial models are all there. Or go borrow a book from the library yourself.

 

[Derek Flint]

$1600 per month for 2 cars is outrageous.

Sounds like your family is living beyond their means.

A while back, I got rid of a huge car payment, bought a good used car for less than 3K, and couldn't be happier no longer having that expensive monthly monkey on my back.

$800 for a brake job?

I've been doing almost all my own work on my cars for many years.

Why?

Because I simply can't afford to pay $800.00 for a brake job.

I have a friend in the same situation.

Makes good money, but lives beyond his means and always complains about money, or lack of.

He also spends as much as he makes, if not more.

Then there's this girl I know.

She has a $400.00 + per month car payment, yet drives less than 400 miles per month, as she lives 2 miles from her job.

She can get by with a good used inexpensive car, but the status of her car is more important to her, so she's spending more than a dollar per mile of driving. :crazy:

And she too complains about money problems.

I would also venture that your family is wasting money elsewhere as well.

 

[Bible_Belt]

All of these numbers are in Canadian dollars, right? I looked it up, and the Canadian dollar is about .85 US.

I used to do debt consolidations for people with equity on their mortgage and a lot of other high-interest debt. Basically, you borrow against your house equity to pay off the credit cards and cars. Then the payment is much, much lower and the interest is tax-deductible (in the US, at least.) The key is not running up the credit cards again. For one of my old college professors, I was able to lower his mortgage rate, move him two years ahead in the amortization, pay off all his credit cards, and lower his monthly payments so much that he was able to buy a new car with the newly available cash. He now has a new car and more money in his pocket at the same time.