Helping my mother out of financial hell

[miked0801]

Hi all. I have decided that it is time for my mother to get her finances under control. We're not talking about saving credit - at this point she has none. I'm just talking about getting her finances under control such that she can get off the paycheck to paycheck routine. BTW, she has agreed to allow me to help

 

So here's the situation coming in:

Assets/Income:

She makes 1K every 2 weeks and is currently claiming 0 on W4.

 

Liabilities:

Sallie Mae: 5.5K at 10% - $89 a month

Sallie Maie: 400 at 9% - $33 a month

3 HSBC backed CCs maxed at 300, 500, and 750 with rates in the 40s and silly insane fees.

Medical collections of 1K - payments of 100.

Car/insurance of 300.

Cell phone/internet of 160 a month (YIKES!) that is on contract for 9 more months.

Rent of 300

Rx monthly of 150

Cigarettes of too much a month (1-2 packs a day - oh crap that's a lot of money of 300 or so)

Gas of 120 a month.

Fun money of $200 (10%)

 

The good news is that she has more coming in than going ou right now.

The bad news is that she is behind 2-3 months on everything.

 

Here has been my strategy thus far:

1. I took the CCs away so she doesn't get another 100 per month per card in overdraft and late fees.

2. I changed her withholding to 4 to allow an extra 100 a month in income. I did some quick math and she will be fine at tax time.

 

After that, I paid the minimum on the medical bills (as they can only charge 12% here in WA).

I then paid 1 month on both Sallie Mae loans as they are the least in interest and fees. She will still be behind a couple months, but won't fall further back.

Next, I paid the 3 CCs down to the point where they had $50-100 of room in them so that when the nexdt round of screw you fees come in, they can't add another overdraft to the list.

That left $150 this pay period for gas, cigerettes, and fun.

 

Next paycheck is rent, car, screw me verizon, and Rx. The left-over there I will put aside to go towards the CCs in 2 weeks.

 

Anything else I should consider or any tricks I am missing?

[Easy Rhino]

In terms of just spending less, some questions:

 

- You may be locked into the phone provider, but still have a chance to change the plan to something cheaper. Possibly get the phone bill under $100?

- Can anything be done with the prescriptions, like fiddling with insurance or generics, or those statements at the end of ads that say "if you have trouble paying for drugs maybe we can help"?

- How about the smokes? Besides just smoking less, is there a cheaper way to get them?

 

Getting on the phone with each of the late lenders and just saying "hey, I'm kind of hosed here, but trying to repay, what can you do to help?" might get lucky.

 

I think you have the right idea with the cards. Get each out from overlimit thread, then pick one and pay it off and move to the next. I'd say start with the one with the highest rate, but I guess they're all nuts, so I'd go after the smallest balance.

 

Finally, she could probably put at least 1 on her W4 just in general, and still not have to worry about tax underpayment.

[BBQ123]

Maybe cut the fun money

 

Also don't take away the credit cards. Go 100% rewards cards to get cashback.

[TxQuiltGirl]

Maybe cut the fun money

 

Also don't take away the credit cards. Go 100% rewards cards to get cashback.

 

 

 

 

You honest to God cannot be serious. This woman is behind on EVERYTHING so you recommend another credit card.

 

Seriously do you ever read what people post or do you have the same six sayings ready to cut & paste? The OP didn't ask if anyone thought a rewards card would help his or her mother. Did it ever occur to you that her FICO is probably shot to hell?

 

Oy vey I can't believe the things you post sometimes.

[nicnac]

Maybe cut the fun money

 

Also don't take away the credit cards. Go 100% rewards cards to get cashback.

 

Hello? You seem to have missed the part where she is getting hit with overlimit and late fees on her cards and is months behind. Why yes, get her a rewards card, that will solve the problem!

[nicnac]

Double post

Edited July 23, 2006 by nicnac

[miked0801]

Quote: BBQ123

Maybe cut the fun money

 

Also don't take away the credit cards. Go 100% rewards cards to get cashback.

 

 

LMAO! Rewards cards

 

Ok, back to reality. I'd be surprised if her FICO is above 450 (discharged Bks and 60/90s all over the place). The only credit card offers she gets are 300 limits that start with 170 in fees from day 1. Thank you, but no.

 

Now on cutting fun money, if you have ever been forced unwillingly to budget, you know that if you don't have at least a little money to play with, the budget will fail. That fun/bribe money goes to her before anything else - it's the pay yourself first principal even in a financial trainwreck. We're talking 10% and with the increase coming from the W4 change, it won't be felt.

 

To Easy Rhino:

Great idea on the phone plan. I will give that a go tomorrow. Cutting that in 1/2 will go a long ways towards fixing other bills.

 

Nothing can be truly done with the Rxs, she has generic where possible and is covered by some insurance, but one of the prescriptions doesn't (yet) have a generic and it costs an arm and a leg. We are looking into order by mail to help out with this though.

 

Smokes - these are the last things she needs, yet I cannot cut her money flow off and her cigerettes as well as I would be instantly fired. I will ask her if there's any "generics" she can get on these.

 

And on the taxes, I calculated it out and if she had nothing withheld for the remainder of the year, she would still get at least 1500 back (she has 1 younger dependent still.)

 

A bit of info on the CCs, The cards have 35%, 29%, and the "best" card only charges 18%

 

Other things I looked at:

* 2nd job temporarily? She already works 50 hrs a week salary where she is. Working more is not possible.

Q* uit smoking? Not in this high stress situation.

* Give her a loan? Maybe eventually, but that would not solve the underlying issue and would only dig her deeper. We're talking about someone who was only paying bill collectors when they called her and "demanded" payment over the phone via her ATM card. Grrr. I've told her never to do that again and may have to close her checking account if money starts "magically" disappearing.

 

Keep the ideas coming. The phone thing if possible will allow me to have the CCs paid off in under 4 mos.

[Seabee]

Is this an actual budget based on actual spending? What about food? I didn't look closely, but there may be other monthly needs that are missing.

 

Could you share what has changed so she has more coming in than going out? Obviously that was not always the case or she would not be 2-3 months behind.

 

Have you considered a Prosper loan for the 3 CCs? Even a 30% Prosper loan would be better than 40%.

 

Be sure to remember to reevaluate the IRS withholding at the start of the year so she doesn't end up short next year.

[miked0801]

The rent she's paying is to her mother - she's living back at home. Food and such is provided by grandma. I've looked at her bank statements to get a feel for her spending and these bills do pretty much cover it.

 

She's 2-3 months behind because she wants more than she can afford. "oh I have credit! what a nice X. I need that..." It's never her fault - things just always eem to pop up.

 

And on the loan part - I have the funds to loan to her if and when we get to that point, but I'd rather fix the problems than to put her more in debt. I loaned her some money in the past to break her out of "payday loan" hell - and that was paid back in full so I know she will pay me back at least.

 

Bah, what a poor situation this is. Fixable, but I don't believe permanent unless I do this forever...

[Keishala]

Liabilities:

Sallie Mae: 5.5K at 10% - $89 a month

Sallie Maie: 400 at 9% - $33 a month

 

Are these student loans? If so, the interest rates are ridiculously high. See if it's possible for her to get them consolidated.

[TxQuiltGirl]

Liabilities:

Sallie Mae: 5.5K at 10% - $89 a month

Sallie Maie: 400 at 9% - $33 a month

 

Are these student loans? If so, the interest rates are ridiculously high. See if it's possible for her to get them consolidated.

 

 

 

These would be PRIVATE loans and thus unconsolidate-able.

 

But if she should fall behind on these, she CAN expect to be sued and a judgment placed on her file. This is the most pressing debt I see on the list that needs to be brought current. If it isn't, as I said, it can lead to pretty unhappy endings.

[54regcab]

Does she have a degree to go with the student loans?

I'd look at increasing income, $1K every 2 weeks is low for somebody with a college degree.

[Keishala]

Liabilities:

Sallie Mae: 5.5K at 10% - $89 a month

Sallie Maie: 400 at 9% - $33 a month

 

Are these student loans? If so, the interest rates are ridiculously high. See if it's possible for her to get them consolidated.

 

 

 

These would be PRIVATE loans and thus unconsolidate-able.

 

But if she should fall behind on these, she CAN expect to be sued and a judgment placed on her file. This is the most pressing debt I see on the list that needs to be brought current. If it isn't, as I said, it can lead to pretty unhappy endings.

Actually, according to Sallie Mae's site, private loans are now consolidate-able. I suppose the rate is decent considering they are private though...

http://salliemae.com/after_graduation/mana...ans/private.htm

Since she has credit issues, Sallie Mae's a no-go...but there may be other institutions willing to consolidate for her.

[CargoJon]

Do the school loans offer any kind of hardship forbearance that she can apply for, at least until she gets caught up? Not sure if private loans do that or not, but worth looking into.

 

How much longer till the medical collection is paid off? $100 / month for 10 months should have it paid...I might tell them to pound sand for a couple months just to get her back caught up...it's not like it will ruin her credit worse if she puts them off for a month or three to get back on her feet.

[miked0801]

Thanks all for the replies.

 

The med collections aren't that big of a deal at this point. In WA, they can only charge 12% interest + fees (Usuary and such). As such, they are going to pound sand for until the CCs aren't charging $100 in fees per month (on top of 40% interest.)

 

The student loans info above is interesting. She hasn't received any notices of collections or such from them yet, but I wouldn't be surprised to see somthing like that soon.

 

On the degree - nothing beyond a 2 year and a couple of "tech" degrees. One of the loans (the smaller) was to Sylvan learning centers for my youngest sister so that won't get her a pay raise. I am to understand that she will get a 3% COLA type raise any day now so that will be nice.

 

Thanks for the replies thus far again. It shouldn't take too long to sort this out...

[hlburi]

Maybe cut the fun money

 

Also don't take away the credit cards. Go 100% rewards cards to get cashback.

 

wow! Second post... and here I was wondering how long it was gonna be before you came in here talking about using rewards cards.

 

 

[camclearbrook]

Now on cutting fun money, if you have ever been forced unwillingly to budget, you know that if you don't have at least a little money to play with, the budget will fail. That fun/bribe money goes to her before anything else - it's the pay yourself first principal even in a financial trainwreck. We're talking 10% and with the increase coming from the W4 change, it won't be felt.

I understand needing some money for fun but 10% when you are paying that much in penalties and fees seems like alot. The pay yourself first usually means investing or reteirment not new outfit at the mall.

Other things I looked at:

* 2nd job temporarily? She already works 50 hrs a week salary where she is. Working more is not possible. And she is only bringing home 1k a week?

Q* uit smoking? Not in this high stress situation.

* Give her a loan? Maybe eventually, but that would not solve the underlying issue and would only dig her deeper. We're talking about someone who was only paying bill collectors when they called her and "demanded" payment over the phone via her ATM card. Grrr. I've told her never to do that again and may have to close her checking account if money starts "magically" disappearing.

 

Keep the ideas coming. The phone thing if possible will allow me to have the CCs paid off in under 4 mos.

 

Good luck I know how hard it can be to help family. My sisters finances are a trainwreck no matter how much me or my parents try to help. There is always something that she needs to buy with her "fun" money. She could be debt free if she went a few months with using her "fun" money towards debt repayment.

[grammers]

Smokes are expensive, and aren't helping her health (and Rx costs!)so why not make paying for them part of her "fun money" rather than a line item in the budget?

 

So, up her "fun money" to $350 ( it's current $200 plus half of the estimated $300 for smokes) and let her pay for them out of her fun money.

 

Once she really "feels" the pinch of how much they cost, it may be easier to switch to a generic brand, make one cigarette last a little longer, wait a little longer before lighting up the next one, etc. Those kinds of things would mean she is smoking (and therefore buying) fewer packs, leaving her more money for other "fun" stuff.

 

I know it's an addiction, and I know for somepeople it's just about impossible to quit, so I don't recommend cutting it out completely.

 

Also, if her credit is already shot, think about terminating the cell phone contract early, even with the $$ penalty. Put it on the list of bills to be paid and pay it when you get to it on the list. If she needs a cell phone, give her another $20 per month fun money to buy a pre-paid cell phone.

 

THe worst that can happen is that the cell penalty goes to collections and hits her reports. Can't do much damage if her credit's already in tatters, and frees up money each month to throw at the outrageous CC's.

 

Random ideas - take what might be useful and ignore the rest.

[PalmBeach]

cigarettes can be purchased less expensively at the major discounters (Sam's, Costco) or at least you could in past years. Many of the small retailers (Mom & Pop convenience stores) did this in the past. Try on the net from the reputable North Carolina establishments or Indian Tribes who will mail with out the state taxes to individuals. Do a net search and make sure they are reputable. Also there are sites where they import popular American brands but with the European tobacco mix..taste slightly different but are cheaper like you buy in a duty free store..Make sure they are reputable and use a credit card so that you can dispute if there is a problem (quality, delivery, etc.)...Good luck..

[crankySNH]

If her credit is already trashed anyway, have you considered signing her up for a (legitimate, non-profit) CCCS? They could most likely get many of her interest rates reduced and finance charges forgiven and they would put her on a payment plan and budget. You & she should understand if you take this route that all of her credit accounts will most likely be closed. But in this situation, perhaps that isn't such a bad thing. She will have to rebuild her credit and maybe the effort to pay everything off over a few years, stick to a budget, and rebuild that credit will make her appreciate credit all the more.

[shasta]

Maybe cut the fun money

 

Also don't take away the credit cards. Go 100% rewards cards to get cashback.

 

wow! Second post... and here I was wondering how long it was gonna be before you came in here talking about using rewards cards.

 

 

 

BBQ strikes again!

[miked0801]

Smokes just went into the slightly larger fun money fund.

 

I believe I can get the Cell bill switched WAY down in price through the same company.

 

And on CCCS, I would never subject a friend or foe to one of these agencies. They offer nothing that I could not do myself (and I'll actually pay the bills on time instead of sitting on the payments for months.)

 

I have an "appointment" with her tomorrow after work. We are going to change things around as suggested here. Here's hoping I don't have to be a psych consellor again as well...

[maporsche]

Maybe cut the fun money

 

Also don't take away the credit cards. Go 100% rewards cards to get cashback.

 

Wow, did you even read the post?

 

If I didn't just see you do this on another post asking for help I wouldn't have said anything, but REALLY, do you think this post really helped?

 

 

ETA: ditto on what everyone else said. There is some really solid advice here. I'm not offering anything new, just telling you that BBQ's statement is irrelevant until your mother gains some true financial control and reinforcing the solid advice other people posted.

Edited July 25, 2006 by maporsche

[miked0801]

Lol - her dogs got real sick this week and required a 100 dollar vet visit. So much for catching up this month. Grr.

[beth121]

I have a mother in a similar situation, and I'd ask that you take a few moments to think about if you really want to take the burden of your mother's finances on yourself. Personally, I think you are just inviting more stress into your life.

 

Your mother still smokes and requires 10% of income to be "fun" money. Meanwhile, she's got mountains of debt, little income, and is freeloading off her mother. She is incredibly selfish and obviously not at a point where she is willing to make sacrifices to be financially secure. Don't let her problems become your own.

 

Sorry this is so harsh, but I've dealt with similar situations for years. Trust me, it is not worth the stress. At some point your mother needs to learn how to take care of herself and stop relying on everyone else to get her out of tough spots.