Activities

What a Difference a Week Makes

by Gerry O'donoghue - Boot Camp Advisor


What a Difference a Week Makes

Last week, I wrote I was ready to pull the plug on Boot Camp — I'd been
working with Natasha a couple months, and still hadn't received the basic
information I needed to help her. It felt like we were going nowhere. But lo
and behold, Natasha pulled through.

Last week, I wrote I was ready to pull the plug on Boot Camp — I'd been
working with Natasha a couple months, and still hadn't received the basic
information I needed to help her. It felt like we were going nowhere. But lo
and behold, Natasha pulled through.

She finally sent me her income and expense worksheet, which is a summary of
how much she believes she spends on various items during the month (i.e.
rent, childcare, groceries, etc.). We ended up having a very productive
week, which brought a renewed energy to the process of helping her tackle
her financial problems, specifically her late rent and credit card debt.

Finally having some financial information from her gave me what I needed to develop Natasha's Plan of Attack.

This plan should be two-fold. First is to generate positive monthly cash
flow, which will hopefully allow her to enter a Debt Management Program
through a credit counseling agency. The second part funded by the large tax
refunds she is expecting in February (about $9k).

Natasha's summary indicated a potential cash flow shortfall of about $900
per month, which initially shocked me. But upon review, I saw that she
included the total rent and childcare amount for the month, which included
Zak's share of $654. So her negative cash flow starting point is about
$250/month — still not good, but within striking distance if changes can be
made.

Natasha is getting very large refunds, mainly because of the earned income
credit. Her 2009 refund of $9k is probably on the higher side because she
was out on maternity leave this year leaving her income much lower. But I
expect that her usual total refund amount will probably be in the $5k to $6k
range. Generally getting big refunds is nice, but Natasha really needs more
take home pay to help pay her regular living expenses so I have recommended
that she decrease her withholdings by about $300 per month. Her refunds at
tax filing time will be smaller, but she will get to use the money when she
really needs it. This one move could get her cash flow neutral, and now we can get
down to cost cutting.

The family car is costing about $300 to maintain (gas, insurance, repairs,
etc). With an old car, big repairs can happen at any time so we discussed
whether she felt she could get by on public transportation for a while. It
does not seem so right now since she needs the car to get to school, but we may
have to revisit this if we can't cut enough in other areas. Over the next
couple of weeks we will be working on managing other costs such as cable,
cell phone, groceries, clothing, etc.

Natasha had also been putting $50 per paycheck into savings bonds for her
boys, but she has bravely decided to discontinue this for a while so she can
use that money to take care of other obligations.

Her large $9k refund in February will allow her to pay off her share of the
back rent (about $2k), assuming it can be pushed off that long, which we
will discuss over the next few days. I would also like her to use some of it
to set up an emergency saving account as well as funding a chunk of her
credit card debt.

I wrote this plan out in an email to Natasha, and after she got it, we
talked for nearly an hour on the phone — more than the total time we had
talked to date. She was very excited, and for the first time I felt she was
really engaged in the process with me.

I haven't received Natasha's expense journal yet, but I have decided to
stick with Boot Camp — and Natasha — because she made a big stride forward.
She promised to send the expenses to me and I'm hoping this momentum will
continue.

The one major wild card is all this is Zak. He has got to be on board with
paying for his obligations for Natasha to have any chance. From what
Natasha says, it doesn't seem like he is in a place where he is ready to
make a change for himself, but at the very least, if he pays for his share
of the rent and childcare it will allow Natasha to start building a brighter
future for her and their boys.