Reader Profile: Joseph

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.

Next in the series is FMF reader Joseph. He answered my questions (in red below) as follows:

Please tell us a bit about yourself.

My name is Joseph, I'm 35 years old, and I live in Montreal, Quebec, Canada. I am single and been single for the past 1.5 years. Before that, I was in a relationship for almost 4 years which ended badly. I live in a 1 bedroom condo that I purchase in 2008 and I've been an on-and-off reader of FMF since 2010. 

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

Since I live alone, I am the only breadwinner. :-) I work full-time as an ERP business analyst for a retail company. I’ve been there since April 2013. Previously, I was an ERP Consultant working on my own. And since the demand for my services declined dramatically over the past 2 years, I was forced to get a full time job instead of focusing on my consulting career.

Monthly Income

• Salary - Approx. $4000
• Total - Approx. $4000

Monthly Expenses

• Car - $280
• Car Insurance - $115
• Condo Mortgage - $1000
• Condo Insurance - $40
• Condo Fees - $240
• Property Taxes - $230
• Life Insurance – $20
• Electricity – $50
• Gasoline – $160
• Groceries – $300
• Internet (ADSL) – $45
• Housekeeping – $90
• Visa - $50
• MBNA - $500
• Line of Credit - $150
• Capital One - $150
• Savings - $580
• Total Expenses = 3420

What are the current financial issues you're facing (saving, paying off debt, etc.)?

My main issue is obviously debt. I have too much of it. I made a lot of mistakes growing up and I’m paying the price for it today. I was spending too much, not saving at all! Living the high life! Happy hours, going on trips, eating out every day, buying designer shirts, and the list goes on and on. I was making a terrible mistake and I was too young, immature and ignorant to realize it.

I discovered Dave Ramsey’s teachings a few years ago and I’ve been following his plan. It’s not always easy but I try to stick to it as much as possible.

I’m currently on Baby Step #2, the debt snowball. I recently completed my Emergency Fund of $2000. In my opinion $1000 is not enough when you have a mortgage.

My total amount of debt is about $25000 (without my mortgage). My mortgage is about $170,000 at 5.75%.

What are your plans for the future (retire early, build your career, etc.)?

My plan is focus is clearing up my debt. It causing a lot of stress and anxiety and I cant wait to get rid of it!

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

I really like Dave Ramsey’s teachings and ideas. I don’t always agree with him but I do agree that finance is 20% head knowledge and 80% behavior. God knows, i had a bad behavior. And i’m definitely not in a position to give anybody some financial advice. But If I had to say one thing to say, say out of debt! No matter what it is, credit car, car loan, line of credit, etc! whatever it is. Get rid of it asap!

Comments

[DM]

My boyfriend is in a similar situation with debt and is also working to get rid of it all. It's a tough process, but it's absolutely worth the feeling of accomplishment when it's gone. I went through it myself a few years ago, and learned a lot about myself in the process. Good luck!

[Mel]

You have a moderately tight budget. I see savings but I don't see retirement accounts. You should be continuing to invest even if only a little in retirement accounts.

I don't know the mortgage rates in Canada but in the US, you would be a candidate for a refinance. 5.75% is several points high here.

It's hard to give further advice without knowing total balances, equity and interest rates on CCs. I do commend you for bringing your finances to the blog and seeking advice.

[ashley]

I am sure that you work very hard but is there any way you would consider not having a housekeeper and putting that money towards debt?
I would pay off the highest interest rate debt first but if the snowball method is working for you that's great too. It doesn't have to be forever, just while you're paying off your debt. You're still young. It will feel like such a load off when all you have is a mortgage and no other debt.

[Jenny]

If Dave were here he'd say...
Cut the housekeeping service.
Cut back on the grocery bill (even if it means eating generic, cooking more from scratch, using coupons, or going meatless for your meals- BEANS AND RICE!)
Also, since its just you, do you need life insurance?

Best of luck.
Jenny

[Concojones]

Joseph, think bigger. Sell the condo, the financed car, pay off the debt, adopt a lifestyle like the one below, and start shoveling $50k/year into mostly tax-sheltered accounts. Ten years from now you'll have a million in the bank, and a family you can spend generously on.

http://answers.yahoo.com/question/index?qid=20120213061848AAuN9zs

[Anypaycheck]

Hi Joseph,

I am assuming the 4000K is your net income because then otherwise you would have negative cashflow. Even if it's net, I imagine it is a struggle to save that $580 per month because we all know that every month we make discretionary purchases that fall outside of the monthly budget. True?

As you mentioned 80% of the battle is behavior, that's why I think one should automate as much of that behavior as possible. I have a very firm philosophy that you should have your paycheck directly deposited into at least 4 bank accounts. I won't take up too much space here detailing the plan but email me if you want me to elaborate.

[AC]

Joseph, you are doing the right thing in taking steps to trim the budget and pay down the debt as quickly as possible. I know your overall debt feels like a lot but keep throwing as much cash as you can into paying it off and it really will get easier as the principal amount shrinks. I echo what some of the others have posted re: housekeeper and trimming other discretionary spending if you can. Also, your condo fees seem high to me (depending on the amenities offered). I don't have experience w/condo fees, only HOA fees so it might be different but I pay about $120/mo for our rental house's no-frills HOA that maintains front yards and a community pool, and $177/mo for our primary residence's HOA with a guarded gatehouse, full yard maintenance, community pool/jacuzzi, gym and lighted tennis courts). Something to consider: if you think you could sell the condo without a loss and can find a 1 bedroom apt to rent for less than the $1500 you are currently paying (mortgage + ins/fees/taxes) it might be worth it. Also if the apartment you find is closer to your work it would help pare down the petrol bill as well. This is just a suggestion for you to think about; only you can decide if you want to stay put or change the living situation.

Also, as an ERP consultant myself, have you looked into doing additional remote consulting in your off hours? I consult independently and there are clients out there who will pay upwards of $100/hr for the right technical resources. It depends on the ERP package and your skill set (programmers seem to make more than configurators for some reason) but it's worth looking into. As FMF frequently points out, maximizing the income stream makes all the saving/LBYM-ing easier. Best of luck to you/bonne chance!

[Paul]

Now that you've got a sizable emergency fund, you may also want to consider reducing what you put in savings to pay off debt faster.

Kudos for including housekeeping, knowing every person (including me) would suggest cutting that.

[david]

I do believe so. I do believe your article will give the individuals a good reminding. And they will express thanks to anyone later