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Dear Liz: I am a single, 38-year-old mother of a college student and make about $80,000 a year, which isn’t too bad considering my upbringing. My parents were alcoholics, and thus I never had a financial role model. Now that I am making decent money, I need to know how to spend it appropriately. What I mean is that even though I bring home $4,000 a month, you would think that I make minimum wage if you saw my house and the way I live.

I think the problem is that I spend a lot of money on wasteful things such as eating out. I try to track my spending but don’t do it consistently. I would like to stop wasting money and buy a bigger, better home than my current town house. I spend $845 on my mortgage, including taxes and insurance, have two car payments totaling $700 plus $200 a month for insurance, utilities of $200, a home equity line of credit payment of $200 and a student loan payment of $200. I also have $4,000 in credit card debt. I contribute 6 percent to my company 401(k), which has a 3 percent match, but I don’t have an emergency fund. I know I should be paying myself first, but I don’t know how much. I’m just at a loss. Can you help?

Answer: First, give yourself credit for what you’re doing right. You bought an affordable home, you’re keeping up with the payments, and you’re saving for retirement.

Your big problem is your debt. Your car costs alone are high, given your income and other expenses. That $200 payment on an interest-only home equity line of credit indicates you’re carrying substantial debt there as well. And the proper amount of credit card debt is zero. All these indicate you’re living above your means, despite how you might feel.

If you want a budget that works, get your “must have” expenses down to 50 percent of your take-home pay. That includes your housing, transportation (including gas), utilities, food, insurance and minimum loan payments. Then you can devote 30 percent to “wants,” such as clothing, vacations, entertainment and dining out. The remaining 20 percent of your pay goes to savings and debt repayment, starting with that credit card debt.

Dear Liz: I have tried to work with my bank to modify my mortgage loan for the last six months. I send it every piece of paperwork it requests, but nothing is done. I bought my home for $280,000 and it’s now worth $110,000. My payments are very high and I’m getting depressed.

Answer: Contact a housing counselor approved by the U.S. Department of Housing and Urban Development. You can find links at www.hud.gov. This free counselor can review your situation and help you deal with your bank.

You may need to face the possibility that a loan modification may not help. Sometimes to create an affordable payment, lenders would have to reduce the amount you owe, which few are willing to do.

Liz Pulliam Weston is the author of the book “Your Credit Score: Your Money and What’s at Stake.” Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon Blvd., No. 238, Studio City, CA 91604, or via the “Contact Liz” form at www.asklizweston.com..


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