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Here is my living situation in a nutshell

  • Live in California
  • 2 kids (7 and 11)
  • Ex-wife
  • I am almost 40.
  • I rent

Financial situation:

  • Make about $170k (includes regular job + moonlighting) before taxes.
  • Kids school = $1000 a month (by court order they go to a private school - long story)
  • Alimony + Child support = $4000 a month. Per CA law it's auto-deducted from my paycheck (which is great - one less check to write).
  • Credit card debt - ex-wife left me with a ton of it (like $60k), I consolidated it all and paying $1400 a month for the next 3.5 years
  • Taxes - still paying off year 2008 through an installment agreement with IRS = $400 a month for the next 10 months. In addition, I have to file as single because I have the kids for 3 days out of 7, so my ex-wife gets to claim them and be head of household
  • Rent = $1300 a month
  • The custody battle of 2010 cost about $16k in lawyer's fees. Still owe the lawyer about 6k - not sure what the arrangement is going to be yet.
  • I started a 401k this year and with matching funds it is currently worth about $10k
  • Ex-wife does not work, never has (for any appreciable period of time) and probably never will.
  • My credit rating is horrible = 570 or so. After the divorce the ex-wife got the house, which was subsequently foreclosed on. But my name was still on the loan paperwork. Add the credit card debt and there you go.

My monthly paycheck is about $5000 (after standard deductions + alimony + child support). Then I have to pay $1300 for rent, $1400 for credit cards, $1000 for children's school, about $300 for utilities (cell, internet, gas, electric, etc..). As you can see, I have about $1000 left a month in income - which typically goes to children's entertainment, food, car insurance, whatever else comes up.

Basically, after all the expenses above I am living paycheck to paycheck. It is doubtful, that I can make more money (including moonlighting, I am already dead tired), since I am already at the top of my profession and make more than my peers.

It seems that I should be better off, but I am not. I am not saving any money and unless something changes, the kids will be on their own for college. My ex-wife is no help, as she is a financial deadbeat.

So I am seeking advice. What can I do to improve my situation?

John Bensin
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NeedAdvice
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    A little off topic... but DAMN marriage can really rip you a new one. I don't see how this arrangement is fair to you, but i guess it has something to do with the decent paycheck you bring home. – triforcelink Jan 09 '11 at 12:24
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    No, marriage doesn't rip you a new one, DIVORCE rips you a new one. – DJClayworth Jan 11 '11 at 16:42
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    would love to hear an update from the poster. Jan 2011 is a while back. is there hope for @NeedAdvice and others like him? – Randy L Aug 22 '13 at 05:45
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    @the0ther Here is the update as of today. I got a raise and reduced my moonlighting to a minimum, so all together I make about $185k. The court awarded me the custody Monday through Friday, so my alimony/child support went from $4k to $2.6k a month. Kids' school tuition went from $1k to $1.4k a month, but my older son is starting public school, so I'll only have to pay for my daughter's private school - should be half. My credit card debt (I mentioned $60k - it was actually $80k) is all paid off. IRS was also completely paid off. To be continued... – NeedAdvice Mar 06 '14 at 08:12
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    @the0ther ...continued. The lawyer has been paid as well. I rent a house instead of an apartment ($2200 vs $1300). The 401k is worth $70k (from $10k). Last week I also invested $6k via a Vanguard fund - first investment since the divorce happened. My credit score is over 800 on Transunion and around 700 for the other two. So reasonably good news. The only thing that troubles me is that I am incapable of saving significant amounts of money - I have only $12k in my savings account, which has been roughly the average of what I've had all these years. – NeedAdvice Mar 06 '14 at 08:18
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    @NeedAdvice WOW! maybe there's hope for me too. that's amazing, i'm glad to read your update brother. – Randy L Mar 06 '14 at 14:48
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    Please keep the triennial updates coming! – Paul Mar 11 '17 at 01:14
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    @Paulpro Sure. So 3 years later, my kids are 13 and 17. I still work at the same job making $175k, plus $10k from moonlighting. However, the entire office is closing down and we all got our walking papers as of the summer. The severance package is $50k after taxes - I'll probably invest the money.

    In 2016 or so, the alimony expired, so I was only on the hook for child support which is $900. My 17 year old will be 18 in 10 months, so the child support will be lowered to $300 (no idea why child support services calculated it that way). To be continued...

     – NeedAdvice Mar 12 '17 at 02:16
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    @Paulpro ...continued. I still rent in the same house for $2300 now. Still can't afford to buy my own, as SoCal prices are ridiculous. The 401k is now worth $132k (from $70k in last update). The vanguard fund I invested in 3 years ago is now $43k. My saving rate improved somewhat - I have $47k in the bank.

    I am torn between doing passive real estate investment and simply dumping cash into an index fund.

     – NeedAdvice Mar 12 '17 at 02:19
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    @Paulpro At this point in my life, my main concerns are upcoming expenses for kids (such as college) and being able to buy a house so I am not paying rent when I am 70. Other expenses that I anticipated, like buying my older kid a car, didn't materialize. Neither him or his friends are interested in getting car - they are all happy taking Uber. – NeedAdvice Mar 12 '17 at 06:02
  • Commenting just to hear your new update this year! You inspired someone in the other corner of the world that everything is going to be ok, thank you. – Tridam Jan 15 '20 at 16:32
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    @Tridam Wow, 9 years later. Here is the update. My kids are 15 and almost 20. I am 48. As I mentioned before, my office was closing down. Went looking for a job. Amazingly got lots of offers despite thinking that my high salary requirements would be a turnoff. Offered a job with SpaceX - it was an amazing place - but turned it down because it would mean 3 hours on the freeway daily. Got a job making $190k, plus $10k moonlighting 4 hrs/week. I have $15k in savings. My 401k is $260k (from $132k in last update). The Vanguard account is $77k. Credit rating = 800. To be continued... – NeedAdvice Jan 16 '20 at 18:23
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    @Tridam ...continued. Some setbacks. My old car finally stopped working. Got a new one - had a bad accident which totaled the car (insurance didn't pay [long story]), so bought another new one. So $50k total in cars. Medical expenses from accident. Other expenses are son's college and daughter's private school. Other than that, my daughter lives with mom on weekdays so my child support went up to $1674 a month. My ex still sues me regularly in family court trying to get more out of me. To be continued... – NeedAdvice Jan 16 '20 at 18:27
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    @Tridam ...continued. I got married in 2019 and my new wife is very much self sufficient and fun loving and is very easy to get along with (I honestly feel lucky). We started looking for a house just last week. I work from home now (started after the car accident) and it's nice. It's amazing how much office politics you miss when you are not in the office. I travel a lot more - expense in itself, but I really love it. So yeah, things are looking up despite the setbacks. – NeedAdvice Jan 16 '20 at 18:32

3 Answers3

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You sound like you're already doing a lot to improve your situation... paying off the credit cards, paying off the taxes, started your 401k... I'm in a similar situation, credit ruined & savings gone after the divorce. I know it feels like you're just spinning your wheels, but look at it this way: every monthly payment you make on a debt directly increases your net worth. Paying those bills regularly is one of the single best things you can do right now.

As for how you can improve your situation, only two things really jump out at me: 1) $1,300 in rent, plus $300 in utilities, seems quite high for a single man. I don't know the housing costs in your area, though. Depending on where you live, you could cut that in half while still living alone, or get a roommate and save even more. You might have to accept a "suboptimal" living arrangement (like a smaller apartment), but we all have to sacrifice at times.

2) That last $1,000... you really need to budget how it's being spent. Consider cooking at home more / eating out less, or trading in your car for one with lower insurance premiums. Or spending less money on the kids. You say it's for their entertainment, but don't say what that is... are we talking about going to the movies once a month, or rock concerts twice a week?

3) If the kids are on their own for college, it's not the end of the world. I know you want to provide the best future you can for them... help them get good grades, and it'll do more for them than any amount of money.

After all those & any other ways you find to save money, even if you can only put a hundred bucks in a savings account at the end of the month (and I'd be surprised if you couldn't put five), do it. Put it in, and leave it there, despite the temptation to take it out and spend it.

Benjamin Chambers
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  • #1. $1300 in the area I am at is actually pretty good for a 2 bedroom. And I am not living alone, typically I am living with 2 kids three days out of the week (but 5 days a week for the next several months). #2 When I entertainment, I mean taking them to a movie or circus or buying some toys. Thanks for the advice. – NeedAdvice Jan 08 '11 at 22:32
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I feel for your situation. I'm in a similar boat with "high" income yet little left over at the end of the month. My wife and I are steadily making major adjustments to fix that.

While reading your story, one thing that jumped out at me is that 3.5 years is not really a long time. So, the moment those credit cards are paid off (and other debts for that matter), DO NOT let that $1,400 return into your finances! Tuck it away someplace else and forget about it, as if it doesn't exist. You're already in the habit of doing without.

Keep the habit. Save the money.

From the first day that my wife recently took a new job, we put 25% of her paycheck into a checking account that's hard to access. It goes right in, direct deposit, and we never even see it. To this day, we don't even know the exact dollar amount going in...

...the crazy part is, we don't miss it as much as I thought we would! In fact, I just got a raise and I'm going to start forwarding the pay difference into that account, as well. At the end of the day, we all make our spending choices based on how much money is available. It never fails: with more income comes more "worthwhile" expenses.

My advice in a nutshell:

Over the next few years, whenever your income increases, don't change your habits to match!

That's our plan. Slowly but surely, it's working...

(I Hope that helps in some way)

gMale
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Keep paying down the bills. Attack them by balance (lowest first) or by interest rate (highest first). Talk to a local chapter of the National Foundation for Credit Counseling to see if they have any ideas. Perhaps you are a candidate for bankruptcy or some other drastic measure if you have a steady living situation and steady employment. (I wouldn't know, but honestly if your score can't get much worse so there isn't much to lose)

You are doing the best you can and because you care enough, you will do great and adjust going forward.

As a dad myself, don't worry about paying for your kids school or showering them with entertainment. Of course they need some, but time with you and knowing you are always there and stable will mean much more than buying their books. The best gift you can give your kid is a future where they don't have to support you, which is sadly more common than we sometimes think.

MrChrister
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    Thanks, but I doubt bankruptsy will help. It would only get rid of $1400 in monthly credit card debt. I'd still have to pay Child Support, Alimony, IRS, Rent, etc.. – NeedAdvice Jan 12 '11 at 08:15