Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis, and February is “insurance month.” I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.
LastDollar is thirty-three years old, an entrepreneur and single mom with two children with learning differences in private school. To learn more about LastDollar, read the bio published last month in advance of Naked With Cash. LastDollar is on Team Neal, with Certified Financial Planner Neal Frankle.
In this month’s update, LastDollar adjusted some of her previous numbers. So if you read her previous update, where she wrote about her progress through the month of 2012, some details below might be different. Her January 2013 update discusses her financial progress during that month, with a table that shows her progress over the past few months. LastDollar’s own analysis will be followed by feedback from Neal Frankle, CFP, and budgeting expert Jacob Wade from iHeartBudgets.
Keep reading for the details.
Comments and analysis from LastDollar
I had to make some adjustments to numbers reported previously, as I discovered I made a few mistakes (literally missed some accounts that should have been added into the numbers). I feel like I finally have it all documented now!
In January, I worked the part time job all month and realized it’s costing me money to do it. About $2 a day to be exact, after I factor in my new babysitting expenses required to get there and the increase in gas for the commute. On non-school days however — school vacations, snow days, holidays, and summer — it would cost me $30 to $40 per day to keep this job. Needless to say, I have an appointment to talk with my supervisor either to put in my notice to quit or to give them the option of allowing me to do the work from home.
This month I paid more than my monthly payment for my car loan because I have a few hundred dollar back balance I’m trying to pay down. Plus, I had to send them more because they were starting to call looking for the money.
I made a double payment to the IRS for 2011 taxes because I missed November. This puts me back on track to pay $150 a month toward the total obligation for 2011, but I’m terrified to do my 2012 taxes and see how much I owe since I’m not done paying for 2011!
Insurance. I mentioned I have a $50,000 whole life policy that I got when I was 19 years old and a $100,000 term life policy to help my kids if I should go before they’re adults.
Neal asked if that was enough insurance, and the fact is I’m sure it isn’t, but I don’t see how I can pay for more insurance “just in case” when I’m struggling to pay for our current expenses today. The reality is, if I die, the kids would then go to live with their father. It would be up to him at that point to make sure their needs are met and the $100,000 policy should at least help get them through until they are adults. I hope.
My biggest concern as far as insurance goes is my lack of health insurance. From time to time, I look to see what it would cost me to get health insurance in New York as a self-employed individual, and the rates are outrageous. Not only are the monthly premiums high, but they have high deductibles and don’t cover vision, dental, or prescriptions at the lowest rates. At the higher premiums, the deductibles are lower and you can get limited dental, vision and prescription coverage, but there is no way I could afford to pay for it.
I go to the doctor once a year and the dentist once a year and pay for it out of pocket, and it has worked for me over the last six years, but it’s always on my mind. I don’t know what I will do if I’m injured or get really sick. I just don’t know what I can do to fix the situation.
Feedback from Neal
It’s great that you looked into changing your work situation and have taken action around it. Nice job! What other alternatives do you have to earn more? Have you had a chance to look into other options?
The pattern I see with paying down your loans and IRS debt is that you are working very hard and trying your very best, but are still a bit behind the eight ball. You got a little behind on the car payments and the tax payments. And, if I understand correctly, you have not made payments on 2012 taxes. OK. So this isn’t going to be easy to turn around but I’d like to really focus on this. The only way to do this is get ahead of the game.
I’d like you to think about how you can get a little bit ahead. I want to really push you to build up a fund so you have the money to pay for the car and the taxes and other expenses that come out of left field sometimes.
This won’t be easy –- I get it. But if we want to push the ball forward, that’s what has to be addressed. Maybe once you speak with your supervisor maybe you’ll get a raise and that could help address this challenge. Whatever you have to do –- you know better than anyone else. But in order to improve your finances, this problem must be resolved.
Your strategy on life insurance is understandable but not optimal. I wonder if it makes sense to cash in the whole life policy and use the cash value to pay off debts and then use the saved premiums to purchase more term.
I get what you’re saying about health insurance. This is indeed very tough. However, I would again suggest that you consider looking at the possibility of finding work with an employer that offers health insurance. In this day and age, I do not personally feel that going without health insurance is an option. It has indeed worked for you so far but it’s just not prudent.
Feedback from Jacob
I’m sorry to hear that the part-time job didn’t pan out. I would suggest exploring other options for earning an income form home online. Being in the personal finance community, I have seen other bloggers get paid for doing online surveys, freelance writing, being a virtual assistant, and many other methods. Heck, my sister even gets paid to do “mystery shopping,” which might be kind of fun, who knows! But most of all, I would try not to get discouraged with the job not working out, and approach your supervisor with a plan for you to work from home. If you show that you want to do the job, and have a plan to do it from home, it may just work out.
As for your taxes, I would suggest doing them just to see where you are at, but you might need to file for an extension at this time, until you have paid off your previous obligations (hopefully before April 15th). And remember, if you do owe money for this year’s taxes, it’s due on April 15th, even if you do file an extension.
I saw your reply from last month about the rotating schedule for paying off bills. I do agree, it’s probably easier to keep collectors at bay than to stop paying, but at some point, you may need to make the choice at some point. If you have to, I would start with the credit cards, because they can’t turn off your lights!
I do wonder, how much would you say your car is worth? If it’s worth more than you owe, an option could be to sell (private sale, like Craigslist or newspaper), and then get a good, reliable used car with that leftover money, and be done with the debt. Just an option to think about, though I know it is more difficult if you don’t have access to any other transportation while looking for a new vehicle.
I know it’s hard to think about creating a budget when you’re behind on your bills, but it’s essential to see all the dollars coming in, and where they are going. If you would like me to put together a budget for you, just connect with me on my contact page. I’d love to get into the details and see if we can come up with some ideas to help sort things out and get ahead of these bills. Or you can share with the readers here on your next update and we can work it out then.
Again, thank you for sharing and I commend you on your hard work and dedication to care for your kids.