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.