Review my ILs proposed budget

[y4m]

Working on a budget for our ILs.  They came to us maybe 8 months ago, once again with no credit left and no room to get more.  It was only about $10K in debt but we had them file for bankruptcy, because we weren't willing to pay for it.  A lot of it came from FIL being out of work for part of the year, but certainly not all of it.  They filed Chapter 7 and all the debts are gone now, so they have a clean slate (aside from a truly ridiculous amount of pointless student loans--our goal is to pay as little as possible on those as there is zero hope of paying them off). 

(For those who don't know the backstory, we have been helping them for years, including giving them one-time cash help, old cars, helping them get out of their multiple-mortgaged house, etc. since 2010).  

We had always figured we would have to help them on a month-to-month basis, and that time seems to have come. Rather than handing them money, we bought a house for them to live in. We'll pay the mortgage, but we expect them to pay the equivalent of their old rent (which was $750) into accounts that we access and monitor to be used (1) for landlord-type expenses, (2) as an emergency fund, (3) to help fund new cars.  The hope for us is to limit our exposure with a fixed amount of real help that is as efficient as possible (i.e. we grow equity).

Here's the budget we think they can manage:

$3400 - Monthly income (Note: there is a high likelihood FIL will be laid off again in the winter, but this is based on his full employment amount - there's an extra $300 or so/month when he's working, which should be most of the year).

SIL still lives at home but will move out soon - she is self-supporting but recovering from a surgery currently.  BIL is starting college away from home but presumably will be there on breaks (how to help BIL with a small tuition gap as well as concern about his very old car are other problems on the table to be solved).

-------
$500 - "Rent" to an account they own, but we monitor - nothing leaves this account without our explicit approval - we see using this for anything a landlord would normally be expected to pay, but also can function as an e-fund we control.  Taxes, Insurance, etc. are escrowed in the mortgage we pay and not included here.

$250 - New car fund - they have all old beaters so our hope is this will help us buy new beaters in a year or two when needed

$250 - "Save to spend" to cover occasional expenses they never seem to have money for - all transfers out approved by us (e.g. New Tires, big health bills, big vet bills, etc.)

$202 - Student loan payment - if they don't pay this, the company can garnish 15% of earnings, which (for now) is more.  This has been in deferral and then held for the bankruptcy until right now, so it's a new bill)

$300 - Utilities estimate (a touch lower than their old bill for a poorly insulated home--our hope is it will be even lower than this)

$300 - TV/Internet/Phone - ($60 for Internet, $94 for TV, $8 for Netflix, and $138 for phones) - current bills - I think they can lower these.

$600 - Groceries (all meals) (currently $1000, based on their last 6 months of bills - they do a lot of grocery shopping at Walmart so it is very difficult to actually assess what this money is today)

$50 - Pet food

$350 - Gasoline (based on current bills)

$50 - Prescriptions and usual medical (based on current bills)

$150 - Insurance (Car and Renters)

$100 - additional to Save to Spend when FIL is working, to smooth the difference with UE checks

That adds up to $3002.  Leaving them $400 for any entertainment, gifts, personal care, clothing, car upkeep, pet expenses etc. (backfilled by the save-to-spend account)

On one hand, this feels too generous.  On the other, this is basically a $450 haircut from their current spending in their current place, since we are asking them to pay student loans ($202) and new car fund ($250) which they do not do today - and they are already check-to-check.


I am very curious to hear your thoughts on the whole picture...

[y4m]

One note as we are looking at this. When FIL is at full employment, their HHI is $3500. Then it tapers down as the warm season ends to a low of $3000 during the winter months when he's on UE. So maybe there needs to be a "FIL unemployment fund" with $200/month during the working months

[babsbunny]

I like your last comment the most, that they are currently check to check but this new plan involves them paying another $450 in monthly bills. I think you should focus on this part as I'm hoping the money that was going to random stuff in the past gets focused to these bills and so it will not actually be a strain on them. (My comments are solely based on my could-be-way-off opinion that they were spending money too loosely somewhere.)

I assume the medications part is going to grow over time, and if all these are fixed expenses each month, then something else has to decrease.

BIL is going to have a tough time but will need to help out by having a summer job if he's at home. Maybe he can get more financial aid now that his parents filed for bankruptcy?

You and your DH are real troopers for helping out.

[y4m]

Jul 19, 2015 12:51:32 GMT -5 babsbunny said:

BIL is going to have a tough time but will need to help out by having a summer job if he's at home. Maybe he can get more financial aid now that his parents filed for bankruptcy?

He gets an extra $4000 in unsubsidized Stanford loans this year ($5000 next year and then $6000 junior and senior year) but he still has a gap of $7000 this year that we don't know how we will solve.

But man I would have felt better helping to solve it if he'd found a way to spend this summer working.

[lys]

BIL needs to get a PT job while in school. I would not support his personal spending money while in school - that he needs to fund himself.

[Pom]

You guys are saints. Your family is very lucky to have you.

[4speedy]

Whose education did the student loans pay for?

[sfy]

I think the budget looks good and should work well in theory, but based on everything you've written (both in this thread and in the past), I don't know what will make them stick to this. I am wondering if there is any way for you guys to somehow have tighter reins on this. I'm not sure how--one thing I considered was having them use gift cards/prepaid cards for some of the expenses like groceries and gas, but that could be a logistical headache. I'm not sure, but it feels like the question is not whether the budget works but rather how to make them adhere to the budget, because imo, this is not really an income v. expenses issue as much as it is a failure not to needlessly spend issue.

[y4m]

Jul 19, 2015 14:22:03 GMT -5 4speedy said:

Whose education did the student loans pay for?

Theirs. Well not really an education... More like it was a way for them to borrow more money for living expenses by enrolling in some classes. This happened during DH's childhood and we've known about them for years. They have been in forbearance as long as we could keep them there, but that time has run out.

There are Plus loans for SIL's schooling, but she pays those.

Now with the bankruptcy, they can't borrow for BIL's education. Not being able to borrow was honestly one of the features for us.

[y4m]

Jul 19, 2015 14:52:29 GMT -5 @vicmo said:

Are you guys going to manage this? Like you set up the budget and pay the bills or some of the bills? I know you said you'd approve the save to spend stuff.

Well we will certainly have visibility into the savings stuff on a regular basis. Freezing credit and running regular credit reports is also a condition of this help (although I need to make sure DH doesn't get distracted with work and forget to do these).

I'd rather not have to physically dole out money but I'm open to suggestions.

The bankruptcy and forced savings should hopefully serve as a backstop against hem getting into trouble again. Hopefully.

[y4m]

One of the things we are struggling with is the save to spend category vs the extra money in their budget monthly. What should each of those be used for? What is the best way to have tracking to make sure they are spent wisely?

Honestly they can stick to a budget when they have to (as evidenced by the past few months with no credit), but they show no ability to anticipate future bills. If they are flush one month, it is spent. With no regard for the fact that the car will need new tires next month. The accounts are our way to backstop against that as much as possible. If they miss a savings target or have to dip into it, we know instantly.

Anyone know of a bank account that can be set to email (me!) anytime there is a transaction. Part of the challenge is these cannot be our accounts--otherwise this would be rent and taxable at our income. So I need as much visibility as possible into accounts that are not mine. They have always shown themselves open to doing this (we have access to everything now) but DH will get distracted and not watch (which is how we got back here in some ways). I will not.

[y4m]

Jul 19, 2015 15:37:53 GMT -5 @rennido said:

What about hooking their bank account to mint and you can monitor that from there?

Brilliant idea!

[y4m]

Jul 19, 2015 15:40:43 GMT -5 @vicmo said:

Could you have them give you access to watch the accounts via Mint? I can see transactions in some of my H's accounts that I don't have actual access to. (He had to sign into the accounts via Mint.)

I would set the save to spend up with the assumption that they will spend every dollar outside of that. Maybe they would be able to handle, say, an unexpected $50-100 expense with their "extra" cash each month, but I would assume everything else will get spent down to the dollar.

It sounds like they'd be well-served by a program like YNAB but that they wouldn't keep up with it or spend according to their budget.

I'm reading the YNAB site now and it's so on point.

[y4m]

Anyone used the YNAB software? I love this model

[redheadk]

If you are concerned that they won't be able to leave the "save to spend" money in their checking account, have them transfer it to the savings account. I think the max number of withdrawals a month is 6? That should cover their needs and they can withdraw the money as it's truly needed without it being in the "spendable" checking account.

[AAM2012]

Jul 19, 2015 16:22:55 GMT -5 @vicmo said:

Jul 19, 2015 16:12:19 GMT -5 y4m said:

Anyone used the YNAB software? I love this model

I do use it. It's awesome, if you follow it. If you are the sort of person who would see that you've run out of money in the restaurant category but you go out for dinner anyhow because (insert list of reasons) then it won't work.

Agree with this.

However I do love the flexibility because if we do go out to a restaurant when we shouldn't it comes out of our "fun money" or we have to reduce our budget availability for the next month.

[Nonny]

If they aren't currently locked into a phone contract, look into something like Cricket Wireless. You have to buy a phone, but the plans are significantly cheaper than the major carriers, but use the major carrier networks (we're on AT&T with our plan).

Is the money for bills going into the same account as the money for saving for future cars and/or when FIL will be unemployed? It might be easier for them to save if the savings are in a separate account that is sort of "out of sight out of mind."

Do you have a plan when FIL won't be able to work anymore? I'm guessing from this budget and their past histories that there isn't much in regards to retirement savings.

[kadams767]

Honestly, I'd open a separate save-to-spend account in their names, but not give them the information to access it, and they give you that money every month to put into the account or set up an automatic electronic deposit. I know you want to avoid being the one to dole out money, but I am in a similar situation with my mom and it is 100 times easier for me to be one with access to one account and have her call me and tell me when she needs money and what it's for than to constantly worry about her spending it all and calling me in the end anyhow.

[y4m]

Jul 19, 2015 18:10:29 GMT -5 mofongo said:

OMG, you are VERY kind!

Or possibly a total sucker.

[msmerymac]

If FIL isn't working, it seems the $450, plus a good chunk of the gas budget, and maybe a little save to spend money here and there, should make up the difference. Key word being should.

[y4m]

It's actually kind of crazy what a small difference there is between his actual paycheck and his UE paycheck. Luckily he is inherently driven to work. Now if MIL ever faced that choice...hard to imagine her working

[ESF]

You are amazing for doing this. Seriously.

Here's my concern. If they really want credit, they can probably find payday loan places to get it. I'm not certain how those places work, but I am fairly certain they can find some that don't pull credit before lending.

So I'd be careful about being too strict and austere because that might set them up for failure, and in turn, put more problems in your lap. I think this budget does a good job in that respect.

That said, I would try to figure out a way to hedge that risk because $500 for crap will turn into several grand or more very quickly. So for example, if their issue is that they are the type to go wild over buying Christmas gifts or new electronics or whatever, that's not going to change overnight. I'd consider building in an additional "save to spend" line item that gives them a "windfall" to get that shit out of their systems and avoid the payday loan temptation. If on the other hand, their problem is just general disorganization and shitty math skills, then maybe a different approach is needed, so maybe it's that you make clear that should new debt arise, there will be x and y consequences, and you stick to them. If it's both, then do both.

Good luck to you. You are daughter in law of the year.

[y4m]

They are definitely not going crazy on electronics or toys or gifts or anything. Honestly it is hard to pinpoint where it goes - they don't have nice things (which was key to the successful chapter 7).

Case in point: we are looking at YNAB and thinking "sweet--in July they have no rent and it's a 5-week extra check month". They can start right off paying next month out of last month's checks.

Except apparently they've already ordered a year's supply of daily disposable contacts for BIL and that money is earmarked for it ($350). Not an inherently terrible decision, but like in the grand scheme of things--can you buy that stuff online?!?!

Another one...they were looking at TV and Internet options for the new place and "just got overwhelmed by the choices" and decided to move their existing service over. So now they've forfeited the opportunity to get the new customer $300 gift card and discounted rate.

This is the shit that makes me tear my hair out. But as DIL, I have no desire to control their checkbook to the extent it would take to fix the fact that they just don't think.

[awick14]

I like the idea of using mint to track there spending, that's probably the easiest way for you to see all of their accounts.

You truly are amazing for doing this, I can see future problems coming with my ILs and I don't know if I could do anything like you are doing to help them.

[AAM2012]

Jul 19, 2015 19:09:40 GMT -5 y4m said:

They are definitely not going crazy on electronics or toys or gifts or anything. Honestly it is hard to pinpoint where it goes - they don't have nice things (which was key to the successful chapter 7).

Case in point: we are looking at YNAB and thinking "sweet--in July they have no rent and it's a 5-week extra check month". They can start right off paying next month out of last month's checks.

Except apparently they've already ordered a year's supply of daily disposable contacts for BIL and that money is earmarked for it ($350). Not an inherently terrible decision, but like in the grand scheme of things--can you buy that stuff online?!?!

Another one...they were looking at TV and Internet options for the new place and "just got overwhelmed by the choices" and decided to move their existing service over. So now they've forfeited the opportunity to get the new customer $300 gift card and discounted rate.

This is the shit that makes me tear my hair out. But as DIL, I have no desire to control their checkbook to the extent it would take to fix the fact that they just don't think.

Was there a reason they needed a year supply right now? I order ours once every 3 months or so but in YNAB split the costs into monthly installments.

Can you sit with them and write down all of their month costs (i.e. rent, electric, etc) and then write down all the yearly or semi-yearly costs (i.e. taxes, car registration, medical, car maintenance, etc) so they can be split up monthly? Also one you start using mint you can show them the true numbers and adjust.

[y4m]

This morning we are learning toward saying: You will continue to pay the same rent to us ($750 - $500 to the emergency fund and $250 to the car fund). We'll get them YNAB and ask that they go through the first few online courses at least (I have them to watch later today) - we want THEM to own making and keeping the budget for the rest of it. But we are going to sign off that the budget they make looks realistic and includes the stuff they habitually neglect like new tires.

I assume YNAB has some method for putting the money you're saving to spend somewhere... We want visibility into that account and into the YNAB tracking. The $750 we will control.

[niemand88f]

Jul 20, 2015 7:25:59 GMT -5 y4m said:

This morning we are learning toward saying: You will continue to pay the same rent to us ($750 - $500 to the emergency fund and $250 to the car fund). We'll get them YNAB and ask that they go through the first few online courses at least (I have them to watch later today) - we want THEM to own making and keeping the budget for the rest of it. But we are going to sign off that the budget they make looks realistic and includes the stuff they habitually neglect like new tires.

I assume YNAB has some method for putting the money you're saving to spend somewhere... We want visibility into that account and into the YNAB tracking. The $750 we will control.

 Yep - you could make a "car maintenance" fund and add $x every month and a "christmas" fund add $y every month, as many or as few as you want. I also have a "forgotten expenses" category that I throw some money in every month. As pp said, YNAB doesn't care if you keep all the $ in one account or you keep track of a bunch of accounts, you just enter the transaction under whichever account it came from. 

Note YNAB isn't like Mint - it doesn't link to your bank accounts. You have to enter transactions into the software or app yourself. It has really helped me but I go and enter my transactions almost every day.

[iheartmaui]

Jul 19, 2015 15:25:58 GMT -5 y4m said:

Anyone know of a bank account that can be set to email (me!) anytime there is a transaction.  

Lurker chiming in...

My grandmother has Wells Fargo and she gets emailed about any transaction over $25.  I'm not sure if she set the limit or if $25 is the lowest amount.

You mentioned YNAB.  We've had it for a few years and it's been life changing.