The Father works in sales (for commission). He used to work extra long hours but hated it. So now he works just the average 40 hour week The mother works too - but in a much lower paying job. They need two pay-checks because their expense are high. The father is responsible for over 75% of the pay-check.
Grandma is in a nursing home and Junior is at College - a cheap public school, not an expensive private university. In fact, he lives at home (rent free), to save money.
They used to own, but the real estate market fell apart and hit them hard. Now they rent their place, in a very safe neighborhood. The father insists he wants to keep his family safe and they therefore pay extra for a gated community with a private security force.
They have a lot of debt, but up till now they have been paying it off.
Here are some numbers:
They currently owe v13,562
Each year they overspend by about v1294
Their budget looks like this:
Grandma's nursing home = v701
Medical insurance: = v793
Rent for the high end safe community = v689
Food, and other mandatory (but still cut-able) expenses = v416
Discretionary (mostly consists of lots of small purchases) - this includes junior's school costs which are only about = v660
Total Interest they pay on the debt v197
Total payments each year are about v3,456
Note that they make less than v2,162. They are clearly in trouble.
Here is some background information, about 10 years ago, father worked a lot of overtime. He hated it, but when he was doing that, their yearly deficit was only v18 instead of v1653. (of course, back then they only owed about v5,674). In fact they thought they were going to get out of debt by now.
The family had arguments before about two main things: 1. Their large payments for Grandma. 2. Their large housing payments for a safe neighborhood. 3. Their large health insurance payments. Grandma has ALWAYS been a clear winner. Everyone loves her.
So, what should they do?
Here are the proposed solutions.
1. Father could reduce his hours even more and use that time to look for a better paying job.
2. They could take Grandma out of the nursing home and care for her at home. Note, Grandma has treatment needs and no one at home has the training to care for her correctly. Perhaps she would be OK.
3. They could move to a cheaper neighborhood and risk the higher crime rate
4. They could stop paying Junior's college, stop going to the movies (other discretionary funding), and demand Junior pay rent or get out.
5. Father could go back to working overtime like he used to. He hated his life doing that and always complained.
Also note even if you eliminate all discretionary funding (v660) and Junior pays what rent he can, they still won't match the shortfall. #4 alone can't solve the problem. #1 is a crap shoot. Maybe father will get a better paying job - but keep in mind that the last time he tried that he ended up with a WORSE job, not a better one.
Be honest, what would you choose. I would recommend Father go back to overtime and they move out of the gated community. If they do these two things, they have the best shot of returning to a manageable debt
The bright young men and women out there will have already realised that I have summarised the US government's debt problem.
Here is my cheat sheet:
v = billions of dollars
Rent at gated community = defense spending.
Grandma's nursing home = Social Security
Medical insurance = Medicare & Medicaid
Food and other mandatory (but cut-able) expense = non-discretionary budget items
Junior's college payments are all the social programs Democrats love.
Discretionary = discretionary budget
Junior paying rent would be raising taxes on the poor
Father working overtime = taxes on the rich.
The rest is pretty obvious.