Reader Mailbag: Friends Without Work

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Using recorded financial data
2. Moving away from debt consolidation
3. Student loan forbearance
4. Stopping all retirement contributions
5. Chasing passions without self-sabotage
6. Dealing with college burnout
7. Emergency funds or debt repayment?
8. Debts and responsibilities
9. Homemade windshield washing solution
10. Earning money at home

Several of my friends have the week between Christmas and New Years off of work. This is making me sorely tempted to spend an unhealthy amount of the week goofing off with them.

After some discussion with my wife, we decided to limit hijinks to a New Year’s celebration and one single day of shenanigans, with the rest of the week being spent on getting a large number of year-end projects taken care of.

It’s a reasonable compromise.

Q1: Using recorded financial data
Since 2009, I have been tracking all of my expenses and earned income in an excel spreadsheet. The practice of tracking my cash flow has lead me to some positive behaviors: I’ve taken a conscious effort of curbing my eating-out habits and I’ve allowed for splurges on things that really make me happy (e.g. locally grown fresh produce) without feeling guilty. But even after a year, I still feel like I’m living paycheck-to-paycheck, and I tend to be left with only a few dollars each month when I balance out my spreadsheet (I will note that I consider savings as one of my regular monthly bills, i.e. any leftover cash at the end of the month does not include contributions to my retirement, emergency fund, or targeted savings accounts).

Because at the end of this month I will have accumulated exactly one year of personal financial data, I feel like I should do something with this. Are there any trends I should look for, ratios or percentages of income I should examine in certain budget categories? How do I use this data to reevaluate my situation?
– Stephanie

The biggest thing that such accumulated data can do for you is give you a real sense of your true budget – where you actually spend your money.

I would suggest totaling all of your expenses in each category for the full year, then calculating the percentage each represents of your total income. Then, go through each category and ask yourself if that spending is appropriate or whether it should (or can be) cut.

Looking at the amount you’ve spent in a category will often encourage you to re-evaluate how you spend within that category and push you to find more efficient ways to use your money.

Q2: Moving away from debt consolidation
I signed up for [debt consultation through a particular company] when I was a college student. I have been using them for about three and a half years now. At the time it seemed like my only option, but now that I am older and actually have a decent credit score I want to drop [that company] and just see about doing a balance transfer to one credit card and pay it off that way. Do you know if this is possible to do? Or at least maybe have any good directions to steer me into? I am paying $50 a month to [that company] that I could be applying elsewhere. Thank you in advance for your time.

– Kristen

It depends on the agreement you entered into with the company in question. Your first step is to get out your agreement with that company and find out what you need to do to terminate the agreement. It should be in the initial documentation provided to you when you signed up.

Of course, when you do figure out how to terminate the arrangement, they won’t make it easy on you. The monthly bill you pay them for their service is their gravy train and they don’t want to let go of it. They will most likely make it very difficult (as difficult as they can) for you to end the agreement.

If you find it unreasonably difficult to end the arrangement even after following the procedures in the agreement, contact a lawyer.

Q3: Student loan forbearance
Over the past few months, we have had a bunch of unexpected expenses that put a big dent in our emergency fund. In addition to these expenses, many of our bills increased as well. Our electric bill was through the roof because of the consistent 100+ degree days we had all summer, our water bill rate increased, plus our sewer bills have more than doubled because the city has decided to make repairs that should have been made decades ago. So, looking at our situation today, the emergency fund and little bit of savings we had is depleted, and I am having trouble getting the bills paid. I am looking for a temporary solution to ease the financial burden so that we can get upright again. I am considering applying for forbearance on student loans so that we can use the money that would go towards them and put it towards our other expenses. The student loans total about $10,000 and have a 3.58% interest rate, which means that over the course of the allowed year, it would accrue about $360 in interest, but over the short term, it would free up about $240 each month that I could use towards utilities, etc. Is there any reason why I shouldn’t go ahead and apply?

– Alecia

Your situation, from the information you provided here, is the reason that forbearance exists. You’re having difficulty paying the bills, while at the same time the lender doesn’t want to waste resources chasing people who can’t pay their bills right now. Forbearance helps you both for a while.

Look at it this way: if you don’t do the forbearance, you’ll likely have to go into debt of some other form to continue paying your bills. Those other forms of debt are going to have a higher interest rate than those student loans, thus your overall debt load will increase, as will your risk of defaulting and damaging your credit score.

Use the forbearance, then use your energy as best you can to ensure you don’t have to use the forbearance again.

Q4: Stopping all retirement contributions
I have a mountain of debt right now. I’ve read the TMM by Dave Ramsey and according to him he said to stop all contributions to your retirement account. So I did do that. I was only having $25 taken out of my paycheck towards retirement. It was being placed in a 401b account. Not a lot but all I can afford at the moment.

Today we got paid and noticed that I had $25 taken out for my retirement account. I spoke with the pay roll dept and it was a mistake on their part. I could have a check re issued but decided not to. I plugged my paycheck into my budget and after all bills are paid I’ll have $57 left in my checking until my next pay check which is on the 28th.

So if I look at my paycheck right now I’m having the following automatically deducted out:

Xmas fund: $25
Emergency Fund: 85
Freedom Acct: $25
Retirement: $25

So do you think I should go back to having the retirement stopped or continue with the $25 deducted?
– Justin

People could argue all day about this one, but I don’t really think there’s a wrong answer here. In either case, you’re spending less than you earn and improving your financial state.

Without seeing your full picture, it’s hard to say which route really is the best. If you find that you’re getting value from Dave Ramsey’s plan, stick with what he advises. If you feel more comfortable contributing a bit to retirement, do that.

You’re not really losing no matter what you choose here, so don’t stress out over the choice.

Q5: Chasing passions without self-sabotage
I’m a second year veterinary student, and although I’ve always firmly wanted to be a veterinarian, I tend to settle on different specialties that interest me every six months or so. For a while I was certain that I wanted to be an equine general practitioner. Then I wanted to practice equine sports medicine. Most recently, I was convinced that I’d be an equine surgeon. Now, I don’t know – small/mixed animal practice, emergency medicine, and every variety of equine practice all seem like they could be right for me.

I want to have a a career plan well before I graduate, because frankly, switching around can be expensive and stressful. I would hate to have to practice in a particular field simply because it’s lucrative. I’m hoping to graduate with some small student loans, and I’m building an emergency fund and contributing to a Roth IRA while I’m in school. I’m also trying to get a wide variety of experience.

Do you have any advice on finding my passion in medicine without sabotaging myself later?
– Martha

Go to a person practicing each of these fields. Explain to them what you’re going through and ask if they have advice for you. Seek out any opportunities you can to shadow these people and get as close as you can to what they actually do.

It sounds to me like you simply love animals, particularly horses. Just keep in mind that all of the choices you have are great for these animals. No matter what you choose, it’s the animals that benefit.

I don’t know how important specialization is in the veterinary field, but I would trust the people who are actually practicing.

Q6: Dealing with college burnout
I am a senior in college at UNL (Nebraska) I’m a secondary education major and my endorsments will be in Spanish and English as a Second Language (ESL). I am hoping to get a job after graduation in my field in this town or at a nearby high school.

I’m at my last semster at the college and I’ll have one semester of student teaching in the Spring, and then I will be done. My question is this:

I have been working my way through college since day one. I’ve always had a part-time job to keep my head above water. However, this semester is not going to be easy.

I took 12 credits this summer (which really sucked) and I worked part time on top of it all. So, needless to say, I am very “burnt-out.” Ideally, I would like to quit my part time job so I can focus on my last year of school and really pour all of my efforts into it without being super stressed. I’d like to have time to study and have a life as well.

Here’s the situation:
I work M-F 7am-11am at a call center making $10.50/hr. (so that’s about 20hrs/week…about $800/mo or less) I leave for class immediatly afterwards and have class all afternoon. Plus, I also am going to be starting a practicum at a local high school for two hours everyday in a few weeks (M-F) this practicum is required for student teaching next semester. I also have a few night classes, one of which is once a week for 3 hours and ends at 9pm.

I live with my boyfriend (going on 3 years now) he works full time at a bike shop and works off of commission. In the summer, he makes about $3000/mo but in the winter months, he only makes about $1500/mo. He is taking classes part time. I am getting about $5,000 back in refunds from my students loans (I took out much more than needed because I know I am not going to work during student teaching, even though grants alone would pay most of school). My only major bills are my rent, $350 for my half, and my car payment $206/mo. I also have utilties which altogether are less than $100/mo for my portion. Plus, I have a dog, so I pay for his food, but he’s pretty low maitenence since I groom him myself.

I REALLY want to quit my part time job but I am torn. I want to do well in school and have room to take care of myself and be happy, but at the same time, I don’t want to be broke!

Do you think if I was frugal enough, I would be okay? or am I being just too wishful?
– Kayla

You’re burning the candle at both ends. There are only so many hours in the day and you’re essentially choosing between time spent studying to get the best grades or time spent working to reduce your bills.

If I were you, I’d choose the grades. The financial concerns raised by one semester of not working a part time job are much less than the problems that could be caused by a semester of extremely poor classroom performance. If you’re reached a point where you feel this is an either/or choice – and it sounds like you have – choose the classroom.

The only alarm bell I have here is a car payment that’s more than $200 a month. That indicates that you’re not driving a low-end car, which means that you’re making at least some financial choices that aren’t in line with getting a low-cost education. Take a look at your lifestyle choices and see if there aren’t any other areas you can cut back on while you finish up your degree.

Q7: Emergency funds or debt repayment?
I read a lot of people asking your opinion about several things, and one pattern I found is the fact most of them are full in debts and at the same time having savings, usually summing the same amount they owe.

Point taken, my financial situation today isn’t bad—I don’t have any debts—but lately some unexpected expenses appeared, which totals more than my current emergency fund. I know I’ll have to use my credit to cover that.

My question is: do you believe it’s wise to manage the damages of these unexpected expenses and at the same time re-build the emergency funds?
– Igor

The reason people encourage an emergency fund is because the bank is an unreliable supplier of credit. At the whim of the bank, they can simply close your line of credit, leaving you in a very painful situation if your car breaks down or you lose your job. Banks do this quite regularly, reducing lines of credit or canceling credit cards.

On the other hand, if you have cash, it will get you through the emergency without much worry at all. Unlike a credit card or a line of credit, a bank can’t close off your access to the cash you have.

That’s why it’s a good idea to always have some cash on hand. No matter what happens to your credit, your cash supply will help you handle the emergencies in your life.

Q8: Debts and responsibilities
Nearly 11 years ago, my ex-husband and I filed bankruptcy as part of our divorce. Through the bankruptcy, my ex-husband reaffirmed on our house and I did not (he kept the house – I kept the car, children, and my self-esteem, which is all I wanted). I was told the mortgage would become his and I would have no responsibility for the debt.

Now, as I am working towards improving my credit score, I have discovered that his mortgage is listed on my credit report as my debt. I have filed two disputes with the credit bureau and have been denied having it removed, citing both the bankruptcy and divorce as reasons the debt isn’t mine. My ex-husband has been more than 180 days late on payments for the last several years, so you can imagine what my credit score looks like.

My question is: am I responsible for this debt even though I filed bankruptcy on it? And if I am not, how do I get it removed from my credit report? Please help, I am being penalized severely for a debt that isn’t supposed to be mine and I have no idea where to turn for help.

I have reviewed my copy of the bankruptcy papers and do not see anything that says simply the mortgage is no longer mine. I attempted to contact the lawyer who did our bankruptcy, but he does not return my phone call. What is my next step to have this removed from my credit report?

Also, I have talked with my ex-husband and he has not kept any bankruptcy papers. I was hoping he had a copy of the reaffirmation paper for the mortgage (like I have for the car which only has my signature). He also stated that a few years ago, he talked to the mortgage company and they refused to remove my name from his house.
– Christina

Typically, the only way to remove your name from a mortgage is through refinancing. If your husband did not do this, then your name is still on the mortgage.

Did your mortgage decree state that he had to remove your name from the mortgage through refinancing in a certain timeframe?

Another concern is whether or not you’re outside any statute of limitations to do anything about this. I would consult a divorce attorney with regards to this.

Q9: Homemade windshield washing solution
Do you have a windshield washer solution recipe that I can put in the car reservoir? Something less expensive than $2.00 I pay at the car parts store for 1 gallon.

– Mickey

I use a homemade solution most of the time.

I just take a gallon milk jug, fill it about a third of the way with water, add three drops of liquid dish soap, two or three squirts of whatever window cleaner I have on hand, and about half a cup of vinegar, then add water to fill it to the top.

In the winter, if you live in a cold climate, increase the proportion of vinegar in the mix, even up to as high as 1:1.

Q10: Earning money at home
I am 67 and my husband is 72. A couple months ago I had to ‘spend down’ our meager savings to split in half in order to have him approved by Medicaid because he needs care in Nursing Home. I am not physically able to care for him in his condition.

For this spend down, I bought a new ‘used’ car and paid off the mortgage on our condo (which is another whole story). I have around $19000 left in Savings(which is earning zilch, any suggestions?), have to pay Medicade $840/mo, plus pay off hospital and Nursing Home bills that were part of our outofpocket pay from AARP Medicare Complete.

We both have SS direct deposited to bank. I feel strapped on a monthly basis. I don’t have your talent for writing (I don’t think); my question… is there really any ‘work at home’ realiable, trustworthy ways to earn some extra money? And if so, what are they and how do I get in touch?
– Lani

There are no “work at home” opportunities where you can just sit down and earn even minimum wage at a computer without some very significant training. There are opportunities to earn a small amount through services like Mechanical Turk, but it takes a lot of time to get them to add up to much of anything.

Generally, when you’re trying to earn a living from home, you’ve either got a marketable skill set or you’re willing to slog through a lot of work that earns nearly nothing in order to build up something (like a popular blog).

For you, the best move you could probably make right now is to just make sure you’re utilizing all of the resources your community has available to financially disadvantaged folks, such as food pantries and the like.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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