Finance Qs, MIL edition
February 13, 2018 8:45 AM   Subscribe

An offer to help get my MIL's finances into this century revealed that she is living above her means. She does not live extravagantly and does not have any kind of addiction issue - just simply does not make enough money. Help me help her.

She is a sweet woman who has been a terrific mom to her kids and grandmother to her grandkids and I really want to help her, and not just stick a band aid on this. Divorced for 20+ years. Lived with her sister for a long time. Only within the last 5 years did she get her own apartment and car, which resulted of course in a rent and car payment that didn't exist before and I think that's when the problems started.

Her net take home pay each month is $2,287 & her monthly fixed expenses are $1,835 before gas or groceries. I've estimated gas at $100/mo and groceries at $300/mo which leaves $53. She is behind on every bill except rent. There is also $994 in credit card payments, all very past due. She's been making the minimum payment and has skipped a few months so a lot of this is late fees and interest.

I initially thought I would set up her bills on auto-pay, start her a mini savings account, and that would be that. However, she is behind on everything and I have no idea where to start digging her out of this hole. There is no extra money to throw at the past due amounts, especially as she is just barely skating by.

She lives in an average apartment that is average rent for the area. I took a look around and I actually think she could be in a slightly nicer apartment for what she pays now, but definitely nothing out there that is going to be cheaper. Her rent is 50% of her take home pay. Her utilities (electric, cable, telephone) are 12%. She doesn't have a cell phone. Car payment is 10% but its a lease until the end of next year, and she needs a car. Car insurance is 6%. We live far away and none of the other siblings have space to have her live with them.

We did give her a little bit of money in December b/c she told us she got behind due to christmas. So we gave her $500 but said we'd like to help organize this going forward. Clearly the $500 didn't even make a dent in the issues. It was put towards some of her credit cards, which have also now been cut up. We also are going to have an expensive year and while we have some savings, we are not really in a place to throw a couple thousand at this right now. We could certainly contribute a couple hundred every month going forward.

So for the question.
1) Which past due account do I tackle first?
2) There are 2 other siblings. Should I suggest we all chip in to make her whole again by paying past due amounts? Or do we all just contribute something on a monthly basis?
3) If you were going to pay one past due bill in full, which would you pay first?

I would also just take any other general advice about this.
posted by kmr to Work & Money (33 answers total) 4 users marked this as a favorite
I only have advice regarding which bill to pay first: get the credit cards current ASAP or she'll have a hell of a time getting a car when her lease is up. You don't have to pay them off or anything, just clear the past due amount so that they stop reporting late payments every month.

Beyond that, you can only do what you can do with what you have and your family is willing to pitch in unless and until either income increases or expenses decrease. That's just where she's at.
posted by wierdo at 8:51 AM on February 13, 2018 [6 favorites]

How old is she? Is her income from working, from social security, or both?
posted by DarlingBri at 8:54 AM on February 13, 2018

Sorry to threadsit but those are good questions DarlingBri, thanks. She is 60 y/o. Income is from working. She works 5 days a week from 7 to 7 as a teacher aid who also does the before and after school programs for extra cash. The income listed includes all monthly income.
posted by kmr at 9:00 AM on February 13, 2018

Does she have roommates?
posted by aniola at 9:01 AM on February 13, 2018

3) If you were going to pay one past due bill in full, which would you pay first?

The largest one with the highest interest.
posted by aniola at 9:02 AM on February 13, 2018 [3 favorites]

3) If you were going to pay one past due bill in full, which would you pay first? Utilities, specifically electricity. You can chip away at the credit card balance slowly, but you need to make sure she has power.
posted by ThePinkSuperhero at 9:05 AM on February 13, 2018 [2 favorites]

Shop for new car insurance - that seems high to me, but it's also a newer car if it's on a lease, so maybe it's the best you can do. Cut out cable and see if a pay as you go cell phone wouldn't in fact be cheaper (not sure if she has VOIP or landline). And, unfortunately, and consider sharing an apartment/house when her lease is up to split living costs. It isn't ideal, but it's what I'd do under similar circumstances. Rent should really be more like 30% of her income. I don't think she can cut back on food much unless she has food bank services available and will utilize them. I agree on trying to help clear the late amounts on the credit card(s), then pay the most costly debt as Aniola mentioned. Can her children assist at all, even temporarily, to stabilize her?

Can/will she at some point move to a less costly area when she retires?

You are a good person to try and nip this in the bud before it balloons into a bigger issue. I would say try to keep tabs on it going forward and do as you're doing and don't make her feel bad about it so she doesn't start hiding things from feeling shame about it.
posted by OneSmartMonkey at 9:05 AM on February 13, 2018 [8 favorites]

If that's the cheapest apartment around, it doesn't sound like she can afford to live alone. Rent that's 50% of her take-home pay just isn't sustainable, especially with that car payment. Is it a two-bedroom place, or could she afford a two-bedroom for the same price?

I think the main thing you need to help her with is reducing those fixed expenses (while staying current on the other bills as much as possible). Can she get out of the car lease?
posted by mskyle at 9:07 AM on February 13, 2018 [15 favorites]

So to avoid late fees, make sure something is sent to every account even if she can't pay in full.
In terms of what to pay first, start with the necessities - rent, electric. Cable bill, well it would be no fun if it got shut off, but worse things have happened. Telephone? YMMV, depends on how she uses it. Credit cards? Enough so they stop charging you fees, and then whittle down the interest payments over time. If you want reinforcement of priorities, find the utilities website and see if they have info on when they shut off power and what it costs to get it turned back on again.

Definitely ask the siblings and come up with a plan together. Even if they're as broke as you and don't have extra to help out right now, it's important to have everybody on the same page (stuff like birthday gift expectations, how family time together is spent, etc). If of course you're in contact and they're all on the same page, and your question was really pay it off now or pay month by month, I'd just explain the situation and let the sibs decide what they can do best. Be prepared for somebody to whine about fairness and that they've already done their part, because that's unfortunately what otherwise loving and kind people do when they're broke and worried. Hang in there, keep talking to siblings, reinforce that you're all just trying to help mom as best as possible in whatever way works best for each person.
posted by aimedwander at 9:07 AM on February 13, 2018 [3 favorites]

She has $994 in monthly minimum credit card payments? She isn't going to dramatically increase her income at her age, and she probably isn't going to pay those cards off before she retires. If that represents 2% of her principal, which is what the minimums are near, that is $50K in credit card debt.

I think her path forward here likely involves bankruptcy. Then a roommate to cut living expenses. As long as she is current on the car she'll be able to keep it. Sadly, seniors claiming bankruptcy is not uncommon at all these days.
posted by COD at 9:09 AM on February 13, 2018 [14 favorites]

Average apartment and average rent sound like places where she could make a change. Is she in a studio apartment? Can she downsize? Can she qualify for subsidized housing based on income or age? Can she live with a roommate? That fixed cost is a huge part of her expenses. Start thinking about moving her in the next 6 months. There are likely cheaper places, but you'll have to put effort into finding them.

Before that, though, get together with the siblings and pool money to get the credit cards paid off ASAP so she can start planning and saving for a move. If the credit card debt is in the tens if thousands, bankruptcy is a good idea. That'll be impossible to pay back.
posted by quince at 9:20 AM on February 13, 2018 [3 favorites]

There's no point dealing with the credit cards (other than the minimum to avoid late fees) until she's at least breaking even with her budget every month, which she can't with that ratio of income to fixed expenses. She'll be forced to go back to the cards anyway. If she's not in a position to make extra money somehow, the fixed expenses need to be changed. Cancel the cable and cut the rent. If there's really no cheaper single apartments, she needs to get a roommate. Get a cheaper car if at all possible.

Groceries can be cut below 300$ if she cooks from scratch and shops sales, but that's not going to give her the wiggle room she needs to break even when her fixed expenses are so high, unless you're willing to "top up" her income indefinitely.
posted by randomnity at 9:21 AM on February 13, 2018 [2 favorites]

Has she checked into the SNAP (food stamps) program?
posted by she's not there at 9:32 AM on February 13, 2018 [2 favorites]

An "average" apartment in an "average" area is all well and good, but your MIL is not making an average income. She just can't afford it. "All Your Worth" by Elizabeth Warren may help you get a handle on how to help your MIL. Getting her into a cheaper living situation, and possibly a cheaper car, are the first steps before she files for bankruptcy (don't file until she can reliably stay out of debt. Bankruptcy also costs money, by the way, but much less than what she would pay in credit card debt). At that point it's maintenance. Don't "upsize" her life after that.
posted by tooloudinhere at 9:35 AM on February 13, 2018 [4 favorites]

Thanks for all the responses. Just to clarify, its $994 total in credit card debt - not minimums. 1BR apartment with no room for roommates.
posted by kmr at 9:38 AM on February 13, 2018 [1 favorite]

Have you looked into whether she qualifies for SNAP or other Social Security benefits? At her age, the qualification criteria are more relaxed, and it could really help with her grocery budget. She's been paying taxes into the system all her life, so she shouldn't hesitate to use the benefits she paid for.
posted by ourobouros at 9:59 AM on February 13, 2018 [4 favorites]

Must she have a car?
posted by blerghamot at 10:05 AM on February 13, 2018

She could try to pick up extra babysitting hours on the weekends and evenings, since she's so experienced as a teacher. Even just 4-5 hours/week would help. And does she work over the summers?

Babysitting/part-time nannying could pay more per hour than a teacher's aid (at least it does where I live). So she might want to consider if she should do that instead of working in the after school program.
posted by yarly at 10:06 AM on February 13, 2018 [2 favorites]

If she lives in the United States, and if she was married for more than 10 years, she may be eligible to claim Social Security benefits on her ex-spouses account.
posted by Floydd at 10:07 AM on February 13, 2018 [4 favorites]

Her expenses are just too high. One thought is that the sibs could pitch in towards grocery card once a month ($100 each?) that could help cover some of those expenses, or she could go on SNAP or find another food bank to get food from for a while. Her car payment is also going to be too much - she can't afford a new car. She will really need to move into a roommate situation when her rent is up. She should also not have cable, sorry. If she has cheap internet, she can watch shows online AND it can be her phone.

You should be thinking not what you can do tomorrow, but what you can do over the year to get her out of this.
posted by Toddles at 10:13 AM on February 13, 2018 [1 favorite]

If she’s an experienced teacher, she may also be able to make side money tutoring, which seems to be more remunerative than babysitting.
posted by corb at 10:23 AM on February 13, 2018 [11 favorites]

You could try to put her on a list for affordable and/or senior housing. Not sure where you are located, but Portland (OR), for example, has affordable buildings specifically for seniors (although she could also qualify for non-senior housing as well). It looks like she qualifies on income for at least some of the apartments. If you google [your city] and "community development corporation" or "affordable housing", you could find what's available in your community.

I would also check in with the local Association of Aging type group (example) to see what help she could get.
posted by emkelley at 10:28 AM on February 13, 2018 [3 favorites]

Can she get out of her car lease and her kids chip in to get her a reliable used car? That might be an easier sell than moving out of an apartment that probably represents security and independence to her.

I would look into eliminating cable and home phone as well, or at least calling and demanding cheaper plans. That's an hour or two's worth of work that one of her kids could do that would pay off quick. Or could one of you cancel cable, bundle internet and phone, and spend an afternoon showing her how to use a Roku or other streaming stick?
posted by Snarl Furillo at 10:37 AM on February 13, 2018 [6 favorites]

From what you've said, she spends 50% of her income on her rent, 20% on the car, and about 12% each on groceries and utilities. Those add up to 94% of her income; it's literally impossible for her to make any headway without either increasing her income or decreasing at least one of these.

Per the Consumer Expenditure Survey, the average single woman in her late 50s or early 60s (table 4110 here, search for "Single females" - let's call her ASW for short) earns 50% more than your MIL, so she by definition should be below average in many categories of spending.

The ASW spends $320 on food, of which $212 is groceries - there might be some room to trim a little here. The ASW spends $80/month on car insurance, not the $140 your MIL spends. The ASW who rents spends under $700 on rent, not $1150.

The three easiest ways to make some substantial daylight here are 1) moving to a less expensive apartment; 2) getting a car that is cheaper to lease, insure and fuel up; or 3) moving to an apartment where she doesn't need the car at all - ideally one that is walking distance or on transit to her school, and walking distance to a grocery store.
posted by Homeboy Trouble at 11:16 AM on February 13, 2018 [7 favorites]

She'll be getting a tax refund this season, I assume? That may give you a tiny bit of cash to play with.

The order of payment is rent->electric->some service that gives her phone/Internet (even if it's only a smartphone)->minimum on most past-due card until you hit parity (to avoid going to collections)->minimum on highest interest rate card->rest of them (any extra loops back into highest interest rate card).

But unfortunately, people are right; you can't tinker your way out of this. What you should do is figure out what her realistic monthly income must be to meet her expenses. Realistic, not optimistic. Then you will know what gap you need to fill and how drastic the action taken must be.

You're very kind to be doing this for her. Please be patient and forgiving as you work with her (I know it can be very hard and frustrating). You need her to trust you and rely on your advice, and she won't do that if she feels judged or disregarded or scared.
posted by praemunire at 11:47 AM on February 13, 2018 [2 favorites]

1. Strongly seconding that she should pay a little on each debt. To show good faith, she — or you — should call each creditor, and come to an agreement for a small monthly sum ASAP. They need to understand she's not a deadbeat, and you need to understand what their expectations are for payment when money is exceedingly short.

2. Spend $25 on a digital antenna, so she can continue to use her TV. Then cut the cable, but keep the wifi, so she doesn't end up feeling deprived. My guess is she's probably very distraught about all this.

3. Call her local representative at the State level, and explain the situation, and see how that person's office can advise — for subsidies, benefits, reduced rates of whatever kind. Again and again, I've found representatives can be exceptionally helpful with these kinds of issues. Whether she votes or not, she is their constituent, and it is their job to help her through the system when she needs it — and she needs it now.
posted by Violet Blue at 11:59 AM on February 13, 2018 [2 favorites]

She's not actually in that much debt, it seems. The real issue then is moving her into a cheaper living situation, or moving her into a new apartment where she can have a roommate, if that's an obstacle for her right now. It will be solved sooner than you think.
posted by tooloudinhere at 12:11 PM on February 13, 2018 [1 favorite]

There are 2 other siblings. Should I suggest we all chip in to make her whole again by paying past due amounts? Or do we all just contribute something on a monthly basis?
That $994 in credit card debt divided three ways can be knocked out in a few months. Make it an early birthday or Mother's Day present of no more credit card debt.
posted by soelo at 12:27 PM on February 13, 2018 [6 favorites]

She is 60 y/o. Income is from working. She works 5 days a week from 7 to 7 as a teacher aid who also does the before and after school programs for extra cash. The income listed includes all monthly income.

She is 10 years from retirement. She can retire earlier, but if she hangs out until 70, her Social Security will be higher, often significantly. The SSA calculators are really good, and it's worth your time to help her with that. It will also help with surfacing survivor's benefits if she is due any.

Anyway, you need that info because you need to see if the future looks better or worse for her, so plans reflect reality.

In between now and then, she may be eligible for SNAP. You can Google "Statename SNAP calculator" to see. That will cut her groceries. Her state's agency on aging can also tell you if she's eligible for reduced utilities or other programes. She also needs a budget. What you have is not a budget. A complete annual budget would be clothing, haircuts, a gift giving fund, some savings, an emergency fund, etc. It's a comprehensive plan. At that point you can as a family see how short she is, and decide how you're all going to help her.

Honestly, were it my MIL, I would kill the credit card debt for her ASAP. What she's paying each month for minimums and interest can go towards paying down other debts. However, I think you've made a serious error in cutting up the credit card. Freeze it in a block of ice in the freezer, yes, but your MIL has no savings and no emergency fund. How is she supposed to deal with an emergency without cash and without access to credit? You've basically put her one blown tire away from not being able to work.
posted by DarlingBri at 12:28 PM on February 13, 2018 [8 favorites]

One potential source of a little one time cash is unclaimed property. Just search for unclaimed property and her state and any previous states where she has lived.
posted by wsquared at 1:18 PM on February 13, 2018 [1 favorite]

Much good advice above! My thoughts on priorities:

- Pay utilities first.
- Enlist help from the other siblings. The situation is dire enough to warrant it, and nobody would want your MIL living in a shelter. Band together now to help turn the ship around.
- If you and the other siblings are able, then pay off the $1K in credit card debt between you over the next few months. It's doable and would make a big difference.
- If there are several credit card debts at varying rates of interest, I recommend paying off the smallest one first, regardless of the interest rate. The psychological win of checking it off the list is really important, because I'm sure she's been feeling awful and powerless about this for a long time. Then take the monthly amount she was paying on that and add it to the 2nd largest bill, etc.
- Start looking for affordable housing for her as soon as possible. Paying 50% of your income on housing, especially at that income level, is just not sustainable. And what happens when she retires, or, god forbid, loses her job? Look into services for seniors and see what you can find. Waiting lists can take a long time to clear, so I would do this right away. I'm guessing she will not be eager to move, but honestly, it's either that or lose everything slowly over time and being stressed every day along the way. Without getting a roommate, there is just no way for her to dig herself out at these numbers.
- Don't declare bankruptcy before doing your research first, as this could significantly impact her ability to find another place to live!

Thank you for being a good daughter/son-in-law and helping her with this! Good luck!
posted by widdershins at 3:13 PM on February 13, 2018 [6 favorites]

-Find her a cheaper place in a below average area. Downgrading sucks, but sometimes it has to be done.
- Cancel cable and landline and get a cheap cell phone plan (gift from siblings?)
- When the lease is up, see if you all can lend her 5-7k to buy a car
-$300 is a lot for groceries for one person who doesn't have money. You can get that down by almost half by dramatically simplifying her diet, using staples like rice, beans, canned tomatoes, the ugly vegetables that are on sale (cut and freeze at home) and cheaper proteins like bulk packs of chicken thighs and ground beef. Aim for produce that is freezable so it doesn't go bad before she has a chance to use it.
posted by WeekendJen at 9:09 AM on February 14, 2018

You should definitely call the credit card companies and ask them to 1) waive/reduce the penalties and b) put her on a low-interest payment plan. I did this successfully for one of my family members. Explain that she is elderly and doing her best; they should offer you something.
posted by yawper at 1:22 PM on February 14, 2018

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