Real Answers for Life’s Money Challenges
We are a two-parent household with three children under 10.
We make about $7,500 a month combined but still struggle and end up living paycheck to paycheck.
We have no savings.
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We do not have credit cards, and our student loans are paid off.
Our cars are paid off but often need repairs.
We will need a new one soon.
We bought a house last year.
Groceries are about $1,000.
Gas is about $200.
Then there are the extracurriculars, like swim lessons.
We have lots of medical bills since we have a child with mental health disorders.
What are we doing wrong?
Do we need a credit card?
Did we buy a house above our means?
Do we have to stop enrolling the kids in sports?
-Confused
Dear Confused,
Two things can be true at once.
you could be doing everything right yet still be struggling.
You dont have much fat to trim from the expenses you listed.
You dont have non-mortgage debt.
In a perfect world your housing payment would be a bit less.
The traditional guideline is that you shouldnt spend more than 28% of your income on housing.
But even if you downsized, youd need a new mortgage at a higher interest rate.
That would probably wipe away any potential savings.
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So Im afraid your kids extracurriculars will need to be on the chopping block.
You could see if there are alternatives to withdrawing them from their activities altogether.
Some community organizations offer a discount to parents who volunteer as a coach.
You may be able to findlower-cost activitiesthrough organizations like the YMCA or Boys & Girls Club.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Explain to them that we all need to have money saved in case we get sick or something breaks.
Check out the Consumer Financial Protection BureausMoney as You Grow guideto find more resources for teaching kids about money.
Focus on building a three-monthemergency fund.
Once you get there, you’re free to start adding some extras back into your budget.
Since you dont have savings, I think you do need to have a credit card.
You shouldnt use it for sports and other wants, of course.
But having a line of credit open offers you some protection in case you face an unexpected expense.
Though times are tough, try thinking of your current situation as temporary.
As your kids get older, your child care costs will probably shrink, giving you extra breathing room.
Ultimately, having emergency savings will provide more benefits to your children than any extracurricular activity can offer.
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