As a foster parent your life is already pretty hectic. Money problems will just add more stress to the craziness. In today’s article I’ll cover 5 reasons you may be having money problems and what you can do about it.
1. Too Much House
I get it. We all want to live the American dream.
We want to live in a nice home with all the comforts and amenities we can possibly get.
We want a big yard, wooded lot and possibly an acre or two for the kids to explore and play in.
I know this because these are the same things I want. There’s nothing wrong with wanting a nice home for you and your family.
One thought to consider, are you wanting or do you already have more house than you can afford?
If you’re mortgage payment (including homeowners insurance and escrow for taxes) is more than 25% of your take-home pay then you may have more home than you can really afford. The absolute max should be 35%.
My wife and I have purchased several homes over the last 20 years due to job relocations. In general, the mortgage company advises you qualify for a bigger mortgage than you should really take on.
Stick to the 25-35% guideline and you’re on the right track. Otherwise, you may need to consider downsizing. My credit union allows you to make a lump sum extra payment and then they’ll recalculate the mortgage payment without the refinancing hassle. That’s something to check into as well.
2. Too Much Car
I’ve not had a car payment since September 2009. In general, I’m a proponent of paying cash for a car. It’s something my wife and I put money back for every month. We plan ahead.
I know this can be difficult as a foster parent, especially if you need a large vehicle.
Before my wife and I got out of debt we bought a brand new 15 passenger van. We needed the space. We have 4 kids of our own and we had 4 extra kids in foster care. There was no other vehicle big enough!
It was a bad decision to buy a brand new one, but that was the decision we made at the time.
It’s possible you may be in a situation where you have not one, but two car payments. Do you really need two car payments? Can you sell your vehicles with payments and buy used vehicles at a much lower payment or pay cash for them?
I know this can be very difficult. I’ve been there. Think for a moment about not having a car payment (or two) and how that would help with the money problems you may be struggling with.
3. Eating Out
Eating out at lunch time is one of my biggest weaknesses! It’s so easy to get up, get ready for work and just run out the door without packing a lunch.
Eating out in restaurants can add up super fast! If you just spend $6 per day (fast food) during the work week (20 days per month) that $120 per month!
Add on top of that the daily Starbucks coffee and grabbing dinner on the way home for the family periodically and you could easily be spending $300-$400 per month eating in restaurants!
The only way to stop the madness is to plan ahead.
Figure out what you’re going to pack in your lunch before you go to bed at night. Make it part of your nightly routine. Sit down over the weekend and plan a dinner menu (keep it simple) for the coming week. My wife uses small whiteboard that sits on the kitchen counter. She makes a bullet point list of the dinner entrees for the week. That’s it – simple.
Slow down long enough to think about tomorrow and the coming week. Plan your meals and avoid the restaurants.
4. Spending Money You Don’t Have
I remember being in college and walking across campus to class. There would be tables set up manned by fellow students. They would be giving away t-shirts or 2 liter beverages.
All you had to do was sign up for a credit card!
Those are the years a lot of us learned the bad habit of spending money we don’t have. The credit card companies were genius when it came to marketing to young adults.
Then we graduated with student loans and credit card debt. The bad habits then carried on into adulthood.
If you find yourself still depending on credits cards you need to put a plan in place to break the cycle. Priority one is to stop using the cards. Priority two is to pay off the debt. Then you’re in a position to plan ahead and save for future expenses rather than using a credit card.
5. Put a Stop to Money Problems With a Household Budget
The biggest leverage you have in putting a stop to money problems is your household budget. If you don’t have one you need to create one today.
It’s a simple principle, but not always easy to put into practice. Decide where your money will be spent before you spend it.
You have no choice, but to stop assigning spending categories to your money if you’ve already reached zero. At this point you’ll have to make some decisions about what gives in your budget.
You’re making decisions ahead of time regarding how your money will be spent. As a result, it’s easier to say no the next time you’re tempted to splurge on something that’s not in the budget.
We Paid Off $34,000 in 21 MONTHS!
Learn the same tools and processes we used to get out of debt and stay out.
If you’re struggling and having money problems there are 5 possible issues you may be causing the chaos:
- Buying more house than you can afford
- Car payments
- Eating out in restaurants
- Relying on credit cards
- You don’t have household budget
Take steps to address each of these areas and you’ll see your money problems start to subside.
photo credit: Miran Rijavec