I am a single mom raising two beautiful girls. Problem: I am a high
school teacher that already works a side job at a Junior College and I
clean two houses for extra income; however, I am still $1,000 behind each
month. Yes, my ex pays child support, but I can’t seem to make ends
meet. I am not living extravagantly; I really just need support from
something. I don’t think I could be approved for governmental assistance
because of my career. Do you have any suggestions?
Maria

Good question! Basically Maria is spending more money than she takes
in. That’s a common problem. Let’s see if we can’t find a solution for
her and others in a similar situation.

Maria’s options are few. Increase her income. Reduce her expenses. Or
some combination of the two. We’ll begin by looking at her income.

We don’t know how much she makes so we’ll need to make some
assumptions. According to Salary.com the median salary for a high school teacher
is $48,805.

If we look at the U.S. Statistical Abstract for 2006, we see that 69%
of all households had income of less than $50,000 in 2003 (the most
recent data). If we add part-time income and child support to her teacher’s
salary, it would appear that Maria’s income is not the problem. And,
she’s right that assistance is unlikely.

So let’s look at her spending. Maria didn’t say, but if she’s falling
$1,000 behind each month and her income is over $48,000, it would appear
that she’s spending $60,000 or more each year.

How does that compare to the average family? Going back to the Abstract
we find that the average family of three spent $47,406 in 2003. So
unless her salary is significantly below the average, between it, her
part-time jobs and child support she should have enough money to support a
reasonable lifestyle.

But, she doesn’t have enough money. So where is it going? There are
three common places that family budgets get bent out of shape: housing,
food and transportation.

About one third of all the dollars we spend go to housing. That
includes mortgages and utilities. It’s possible that Maria is still living in
a house that she and her ex-husband bought together. In fact, they may
have qualified for the mortgage based on both of their incomes.

Typically it’s not possible for the ex-wife to continue living in the
same house after a divorce. The house payment and utilities are too
high. Maria should limit her housing expenses to no more than 35% of her
budget. Forty percent is an absolute maximum. If she’s above those levels
she’ll need to move to less expensive housing.

The next potentially troublesome area is her automobile. A little less
than 20% of the average consumer’s money goes to transportation
including gas and maintenance. Just like housing, if Maria finds that she’s
spending too much on her vehicle, she’ll need to trade-down to something
more affordable.

The final big area of routine expenses is food. We spend about 1/8th of
our money on groceries and foods prepared outside the home. This is
often an area that ruins budgets. Especially for single parents. The
reason is simple. Maria’s schedule doesn’t leave her much time to cook. It’s
only normal that she’d use many ‘convenience foods’ as well as fast
food take-out to feed her family. But, that can get expensive if you do it
day after day.

How can she trim her food budget? There are a variety of tools she can
learn about. Among them is a ‘price book’ that will help her track low
prices. ‘Freezer meals’ can put a healthy, homecooked meal on the table
in minutes at a fraction of fast food prices. She might even want to
learn about forming a dinner swapping club. That’s where you cook one
meal for your family and additional meals (same menu) for the families of
your swap partners. They do the same for you. 

The only way Maria will know if any of these areas are in trouble is to
do some calculations with her checkbook and credit card statements.
Budget software can help her tally the expenses.

There is one other possible budget buster. That’s paying off past
debts. If Maria owed $10,000 in credit card debt, her minimum payment would
be approximately $400 per month. She could try to roll the debt into
lower cost home equity debt or she might want to contact a credit
counselor about setting up a repayment plan.

Maria will probably find that there’s no one solution to her problem.
She’ll need to make a number of changes to close the $1,000 a month gap.

If you’re in a similar situation you can check how your income and
expenses compare to the averages by doing a web search on “U.S. Statistical
Abstract”. Once you get to the Abstract, look for the section on
“Income, Expenditures, and Wealth” for specific tables. For instance, the one
on income came from Table 673.
__________

Gary Foreman is a former financial planner who currently edits The
Dollar Stretcher.com website and newsletters. If you’d like to stretch your
day or your dollar visit today!