DebtFreeGuru.com's - Tip of the Week - Monday, August 8, 2005
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How a Single Mom Makes it on $31K
Tricia has 3 kids, 2 mortgages, 1 car payment … and a salary of about
$31,000. While it's not easy, she's doing OK, thanks. Here are 15
lessons she learned the hard way.
By MP Dunleavey (as
seen on msn.com)
Editor's note: Columnist MP Dunleavey and seven other
women have come together online to strip away the myths surrounding
money, speak frankly about their finances and liberate themselves from
debt. Follow the quest for financial fabulousness of these
Women in Red every other
Monday in Dunleavey's column on MSN Money.
While I admire the folks who were born smart about money, my true heroes
are the ones who had to struggle to find that precious commodity I call
financial sanity.
Take Tricia, a single mom who lives in Pennsylvania. She supports
herself, three kids, two mortgages, one car payment and a couple of
student loans -- while still paying off her credit card debt -- all on
about $31,000 a year.
My first question, after squelching a sense of shame about how much my
husband and I spend with just two cats to support, was: How does she do
it?
A
series of unfortunate events
Before Tricia started taking control of her financial life a couple of
years ago, she faced one money calamity after another.
Married young, Tricia had three kids by the time she was in her early
20s -- and a husband who would spend the next 10 years on disability
from a work-related injury. But that wasn't the hard part.
A few years later, the home they'd bought and rehabbed burned down.
Though they were able to rebuild the house with the insurance money and
pay off their credit cards, it didn't cover the extra loan they'd taken
out for the renovations.
"Then we discovered Atlantic City," she says.
Losing it all
Gambling and her husband's fascination with get-rich-quick schemes --
"He sent away for those real-estate tapes, and we had a candle company
there for a while" -- drove up the credit cards again. Then they got a
windfall of about $80,000 when her husband's injury claim was settled.
Unfortunately, it was the late '90s, and her cousin was their broker.
"He was new at the company, so he was just taking all their
recommendations," she says. He put almost the entire windfall into tech
stocks.
"Gone, all of it, in the market crash."
Trying to turn the Titanic around
While some of this was just lousy luck, Tricia knew that longstanding
bad habits were also to blame. "I can tell you the all-too-familiar
story of the unhappy wife who shops to make herself feel better," she
says. "I never bought things for myself, always everyone else."
She knew there was a way to get on top of her endless money problems,
and despite the circumstances, she was trying to find it.
"I was always a fan of those financial self-help books, and whenever I
saw one at the library, I grabbed it," Tricia says. But as most of us
have learned, it takes years to change old attitudes and habits -- and
then you still have to dig yourself out of the hole.
It wasn't until Tricia divorced her husband a few years ago that things
hit rock bottom. "After he left, I just couldn't make ends meet," she
said. That's when she realized: It wasn't one thing that had to change,
it was everything.
Tricia's book of revelation
Tricia credits a close friend she made during that desperate time with
helping her change her financial philosophy. "This woman has a lot more
money than I do," she says, "and at first I was jealous and resentful."
Then she began to realize that the reason her friend had more money
wasn't because she was born rich but because she saved constantly and
only spent her money on what was truly essential.
Slowly, over the last three years, Tricia began a new financial life. It
hasn't been easy, but realizing she wanted more out of life than the
treadmill of debt and struggle has kept her moving forward.
Here are some of the ways she manages to keep body, soul and family
together on $553 a week, net pay, including child support.
Tricia's tips
-
Think different. "A big thing that's changed over the last two years is the way I think of shopping and purchases. I used to be more impulsive. I've learned to ask myself: 'Why do you need to buy that? Why does my kid need that?' Give me a reason to spend the money. I've really learned the difference between necessities and luxuries."
-
Use technology to your advantage. "I've been using money software for years," she says. She also uses a spreadsheet to monitor spending on certain items, from one month or week to the next. "I don't think I'd have this much control without software."
-
Plan ahead. Tricia uses the computer to map out all her fixed expenses (utilities, phone, mortgage) for the entire year. "That way, I see immediately when I spend on extras."
-
Live a balanced life. "I balance my checkbook daily. Some people might think that was crazy, but it forces me to see the numbers every day. If you make so many purchases during the week, it's too easy to say, 'I can't believe I spent all that money!'"
-
Pay off debt weekly. Tricia has about $4,000 in credit-card debt on two cards. In addition to making the monthly minimum payment, she sends an additional payment each week. "Another good strategy is to add whatever interest you were charged that month to your minimums. Every little bit helps."
-
Bank that tax refund. As she has for the last few years, Tricia is taking her $3,600 refund and putting it in the bank. "I know I could pay off my credit cards faster if I used that, but this is what covers all the unexpected expenses during the year."
-
Rely on the kindness of friends. When Tricia was trying to master these new habits, a friend suggested he could create an "escrow account" for her. She put extra money (like the refund) into that account -- and could only access the cash if she discussed it first with her money buddy. "That made it harder to ask for, so I only spent that money when I absolutely had to -- for heating oil or for something one of my kids needed."
Smart shopping; facing reality -
Never pay full price. "Clearance is my favorite word," Tricia jokes. Her other trick for finding high-quality items at low prices: consignment shops. Now her daughter is a fan, too.
-
Give up your fantasies. "One thing that contributed to my 'turning point' was reading a book, 'Women Who Think Too Much.' Something stuck with me. Many women are just waiting to be rescued. I wanted to be taken care of, but I'm the only one who can do that."
-
Wait before you shop. When Tricia knows she needs shampoo or groceries, she resists the urge to go shopping. "I have only (so) much budgeted for groceries. So when we get close to that amount, rather than go to the store, I say: 'What's in the freezer?'" Although she paid for her son's gas while he was in technical school, she gave him the same strict instructions: "You can spend X per week on gas. When that runs out, you don't drive."
-
Scale back the services. Because her house is in a rural location, Tricia has to pay for basic cable. But she took the long-distance service off her land line. "We never used it, and yet there were always these little charges on the bill."
-
Bargain for everything. To help out her two oldest children, Tricia struck a deal with the cell-phone company: three phones for $100 a month. Now she's trying to see if she can get a three-way discount on student loans: two for her college-age kids and one for her while she completes a BA.
Passing along what you learn -
Teach your children well. Tricia has no problem explaining the financial facts of life to her kids. Now that her oldest is done with technical school, "we've had several conversations about the fact that I won't be paying for his phone or his car anymore."
-
Keep learning. "Educate yourself," Tricia says. "Read anything you can that might help you stick to a plan." A favorite quote she read recently: "Squirrels end up with millions because they put the nuts away, not because they make lots of nuts."
-
Never pass up a freebie. "I love Nascar racing, so I work at the track when they race nearby. I raise money for our high-school band, and best of all, I can enjoy an experience that would otherwise cost $50 or more. My boss offered me tickets to see our local Triple-A minor league baseball team -- and it's through our local public broadcasting company. We will have VIP seats and be fed. What a great way to spend time with my children!"
DebtFreeGuru.com - Tip of the Week - Monday, August 8, 2005
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