Betsy’s Budget - Annual Household Income of $25,000.00
Salary Income (after taxes, social security, etc.): | $ 1,545.00 | |
Other Income: ChildSupport | $ 700.00 | |
Total MonthlyIncome: | | $ 2,245.00 |
Mortgage (Ex-Husband currently pays 50%) | $ 1,087.00 | |
Property Taxes (Ex-Husband currently pays 50%) | $ 108.00 | |
HOA Dues (Ex-Husband currently pays 50%) | $ 63.00 | |
Minimum Credit CardPayment | $ 75.00 | |
Cable (Ex-Husband currently pays 50%) | $ 42.00 | |
Home Insurance (Ex-Husband currently pays 50%) | $ 31.00 | |
Total Fixed MonthlyExpenses: | | $ 1,789.00 |
RemainingBalance: | | $ 456.00 |
Additional Expenses -Cash: | | |
Meals&Entertainment | $ 50.00 | |
Christmas& GiftFund | $ 25.00 | |
Personal / ClothesFund | $ 50.00 | |
Total AdditionalExpenses: | | $ 450.00 |
“Now, you can see why I don’t have a budget.” Betsy slid the final budget over to Ernesto and sat back in her chair. “I have slashed my expenses down to nothing and I only have six dollars left over. And that’s if I am super careful. I have no money for savings, a bunch of debt, and my ex-husband will only pay for his half of the house for a few more months. Then I will really be in trouble.”
Ernesto studied her budget. “Yeah, but this is a good start. OK, now let’s talk about your debt. Give it to me straight.”
Betsy took another pad and started writing down her debts. The list was longer than sherealized:
Department Store CreditCards | $ 1,176.00 |
“Pretty awful, isn’t it?” Betsy felt like cryingagain.
“Oh, I’ve seen a lot worse,” Ernesto said as he studied the list. He could tell she was upset. “I can see how you could get discouraged. But there is a way out of this debt and a way to start saving. But you need to make sure you are ready to start.” Ernesto looked up from the list of debts and met her eyes. “You need to put savings aside first before you spend money on anything else. At least ten percent each month. But, in your case, I think you should save even more money, since you are a single mom.”
“That seems totally impossible,” Betsyprotested.
“Americans like to spend everything they make. They buy the most expensive homes they can afford. They lease or take out big car loans so they can look cool in freeway traffic. Many of them are spending one hundred percent of what they make. And sometimes much more than that. Why? To impress their friends? Real friends don’t need to be impressed. They are more likely to respect someone who is living within their means. You need to do things differently, Betsy. You need to live on eighty percent, seventy percent, or even sixty percent of what you earn. This is how you get ahead and save that first million.”
Betsy considered Ernesto words. They made a lot of sense. She had been competing with her friends and neighbors in a game she couldn’t win. It was time to play a new game. “What choice do I have?”
“You have many choices. But to see this through, you will need conviction. You will need to be determined. You will have to say no to a lot of fun opportunities and things that seem important. If you are not all in, you will never make it.”
Ernesto studied her eyes carefully. “Are you all in?”
Betsy sighed and returned his gaze. “Yes, Ernesto. I am all in.”
“Great. This is what you need to do….” Ernesto started marking up her budget with a red pencil, as Betsy looked on. “Sell my car?”
“Absolutely. And your house, too,” Ernesto said in a gentlevoice.
“Wait a minute…” Betsyprotested.
“Betsy, you can’t afford your house, or your car. They are keeping you on a debt hamster wheel. The best way to free up money to pay off debt and build your net worth is by cutting your expenses.”
“But I love my house. It’s the only home James has ever known.”
“It’s a thing, Betsy. And you’re getting divorced. You will need to sell your house anyway.”
“I was sort of...
