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 Post subject: Living in a dream world for too long! HELP!
PostPosted: Thu Nov 08, 2012 2:17 pm 

Joined: Wed Nov 07, 2012 4:56 pm
Posts: 6
I've been reading a lot from this forum for a awhile now and I see how supportive and engaging the folks are here to help someone who is severly in debt. I haven't come across a topic yet in this Fitness Journal that has talked about getting out of as much non-mortgage debt that i'm in right now.

I guess i'll just get to the chase and come clean on my debt. I have $250K in non-mortgage debt which includes a mix of credit cards, time share (dumbest purchased i've ever made), student loans and HELOC. This is a result of 7 years of bad financial choices and also trying to keep up with people who actually don't mean anything to me! My family demographics is that i'm a 32 year old male with a wife and 3 month old son. I'm not even sure where to start. Any suggestions or criticisms would be greatly appreciated!

Monthly Expense Payments:
Mortgage - $2283
Utilties (Combined Electric, Gas, Water, and Trash) - $293
Cable/Internet - $128
Cell Phone - $150
Lawn Service - $40
Grocery - $200
Dining Out - $200
Movies - $28
Dry Cleaning - $25
Auto Gas - $225
Auto Insurance - $187
Home Insurance - $103
Automatic Savings Account - $200

Balance on Debt and (minimum monthly payment):
Macy's Card - $213.78 ($25)
Capital One Mastercard - $1,128.87 ($49)
Costco Amex - $1,111.26 ($35)
Ashley Furniture - $1,754.25 ($66)
Best Buy - $892.86 ($25)
BofA Amex - $6,507.86 ($109)
BofA UCR Visa - $8,285.25 ($197)
BofA Platnm Visa - $9,965.01 ($202)
Time Share - $15,773.53 ($291)
Chase VISA - $21,617.82 ($429)
BofA Home Equity - $54,756.74 ($187)
Graduate School Student Loan - $113,965.92 ($417)
Auto #1 - $10,300 ($343)
Auto #2 - $26,789 ($565)

Take Home Income:
Job #1 - $5790
Job #2 - $1525
Job #3 - $327

Assets:
401(k) - $24,000 - I put in 5% of salary to get 100% matching
Liquid Emergency Fund - $2875

I'm doing 3 jobs right now in order to allow my wife to stay at home with our infant son.


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Thu Nov 08, 2012 2:59 pm 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1123
Well, I've seen worse but I'll warn you...you're probably gonna get some suggestions that will be almost painful. Brace yourself!

Right off the bat I see a bills for cable, cell phone, lawn service, dining out, & movies that can be cut out entirely or al least to the very minimum. I'd sell auto #2 since your wife is a stay at home mother. That should also cut your gas, maintenance, & insurance costs. You shouldn't need 2 cars. Can you unload the time share? What's the status on the SL? Is it being repaid or on deferment? If you're paying on it already & the interest rate is low, just pay the minimum so you can focus money to the higher rate debt. I would suggest looking into a 0% introductory rate credit card but I suspect that your credit scores are shot with that debt load & you won't qualify.

Once you have cut to the bone, I'd probably start with the highest interest rate cards first or if you need a psychological boost go with the snowball approach on paying all of this off.

Good luck!


Last edited by Tightwad on Fri Nov 09, 2012 9:44 am, edited 1 time in total.

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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Thu Nov 08, 2012 3:06 pm 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1123
Out of curiosity, how did you rack up $114K in graduate school loans???


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Thu Nov 08, 2012 3:19 pm 

Joined: Wed Nov 07, 2012 4:56 pm
Posts: 6
I will definitely try to cut cable, cell phone, lawn service and dining out as much as I can. As for Auto #2, we have about $5k in negative equity on it and i'm not sure how to handle that. The student loans actually include my undergraduate loans from a private university and my master's in a private university, i'm paying on the minimum on the student loan at 4.25%.

My wife and I are going to try to go to a cash envelope budget system to ensure that we don't use our credit cards anymore. We actually put our credit cards in a small bucket and put it in the freezer!

We also have started reading up on Dave Ramsey and might start his baby steps program.


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Thu Nov 08, 2012 3:37 pm 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1123
mazdai6 wrote:
I will definitely try to cut cable, cell phone, lawn service and dining out as much as I can. As for Auto #2, we have about $5k in negative equity on it and i'm not sure how to handle that. The student loans actually include my undergraduate loans from a private university and my master's in a private university, i'm paying on the minimum on the student loan at 4.25%.

My wife and I are going to try to go to a cash envelope budget system to ensure that we don't use our credit cards anymore. We actually put our credit cards in a small bucket and put it in the freezer!

We also have started reading up on Dave Ramsey and might start his baby steps program.

Dave Ramsey is a good start if that's what it takes. As he would say "I don't want to see you in a restaurant unless you are working there!" Don't just try to cut these things out...do it! You can live without cable. You can have a $10/month cell phone bill. Cut your own grass. You can do it.

As for the car being upside down, I'd still sell it eventhough you'll be on the hook for the remaining balance. You can have that knocked out in no time & have $565 to go to debt repayments each month.

Also, with 3 jobs, I'd take a look at my pay deductions & make sure you are not having too much taken out for taxes at each pay period. That's nothing but a interest free loan to Uncle Sam.


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Thu Nov 08, 2012 7:12 pm 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
Hi and welcome! I'm glad you posted. You know now that it's time to buckle down and get serious about paying everyone back.

I agree with Tightwad...you have to cut expenses. With a new baby, are you still dining out worth $200 a month? That seems really high to me.

The gas also seems really high. Is there any way you can decrease your gas costs?

Your mortgage is also really super high. I'm assuming that price you paid for your house may have been reasonable when the wife was working, but now it's way too much for your income. Have you considered refinancing it? Also, with such an expensive house, why the HELOC?

Since you have a lot of smaller loans, I think the snowball method would work well for you, because you will feel accomplished when getting rid of those small loans, and then using the minimums on those to pay for the next loans, etc..

Is your wife crafty? Perhaps she can make things while she's waiting for the baby to wake up, and she can sell some of her wares to make extra income.

I would also consider decreasing your retirement for a year or so just to make some headway. It kind of sucks to do that, but desperate times call for desperate measures.

Finally, cut off those lights, and close the curtains!! My boyfriend gets on my nerves because he leaves one room and leaves the lights on full blast, and then he leaves the next room and leaves both sets of lights on. In my house, the room I'm in has the lights on. Everything else is dark. Of course, I live by myself, so no one cares that the rest of the house is dark, but my electricity bill is fairly cheap. And speaking of homes, do you have a programmable thermostat? It works wonders.


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Fri Nov 09, 2012 8:08 am 

Joined: Fri Jul 29, 2011 8:38 am
Posts: 188
You have a lot of debt, but you also have a large income and it sounds like your wife is on board with making changes. That's worth a lot!

There aren't a lot of Dave Ramsey fans on this forum, but I think his approach to getting out of debt would work great for your situation. When you have your debt cleaned up, ignore his investment advice and instead, come here for suggestions of books/websites that are better to learn from.

You've gotten some good suggestions on changes to make. A few more ideas/suggestions:

--The Mr Money Mustache blog has suggestions on prepaid cell phones that might help you get started on switching your phones
--Sell some stuff - With all that credit card debt, I bet you have a lot of things you could sell. eBay, Craigslist, Amazon, garage sale - maybe this could be your wife's "job" when baby is napping?
--The $200 per month going to savings - Pick an emergency fund amount you can live with - maybe $3,000 since you're almost there - and then send that $200 per month to whatever debt you're focusing on.
--You have 5 credit cards under $2,000. I'd focus on those first for the psychological boost.
--You're total debt is overwhelming - Choose one debt at a time and put every extra penny towards it. You'll be amazed at how quickly you can make progress when you focus intensely on one thing at a time.
--Consider every suggestion - When we started getting our finances in order, some ideas sounded ridiculous at first. Then, within a few months, the idea sounded better and better and I found a way to make it happen. So don't refuse to consider something; instead, file it away to reconsider later.

Keep us posted on your progress. You'll get a lot of support and ideas here. Good luck!


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Sun Nov 11, 2012 12:51 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5309
Welcome to the forums! As you've already seen, there are lots of people here willing to help you. You've already gotten some good advice. I am glad you are open to hearing it because, frankly, you are going to have to make some significant sacrifices if you are going to get out of debt.

I'm a critic of Dave Ramsey for many reasons. But your situation is one where I think his suggestions make sense, with some modification for your specific situation. Just don't even think about paying for his books or course. Check the book out of the library or borrow it from a friend.

There are a few things I'd do immediately including cutting the expenses already suggested. And get that $215 credit card paid off just so you have something to pat yourself on the back over.

Aside from that, keep posting here for encouragement!


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Mon Nov 12, 2012 6:11 am 

Joined: Fri Jul 10, 2009 6:57 am
Posts: 371
Welcome! Tightwad, peachy, and fiddlefaddle have all given you a great list of places to start -- keep coming back to those lists of suggestions. You might post an edited list of your debts with the interest rates added in.

I agree with all of the cuts they've suggested, so my advice is going to be less focused on what to cut and more on how to make it work and keep it going.

1. The feeling of progress is crucial; sometimes that's the only thing that keeps me going. So keep on posting your progress, not just for us but for yourself -- even if it's happening in small increments. Good for you for freezing your credit cards and making the decision to live only on cash! That's progress! Yay!

When I was focused on paying off $9000 in credit card debt, I kept an excel spreadsheet with a chart. Every single time I made a payment, I put it into the spreadsheet so I could see the line on the chart go down. Sounds simple, but it really helped. When I had the urge to use my credit cards, I looked at the chart to remind myself how much I wanted to see the line keep going down. Maybe put a paper chart on the fridge where you both can see it?

2. Q. How do you eat an elephant? A. One bite at a time! You will be making a lot of changes, but you can't make them all at once, and some of them will require more time to adjust to than others. You have a big goal: pay off $250K in debt. Take it in steps and focus on each smaller goal until you meet it.

Set yourself some goals. Make them reachable, because the feeling of progress will keep you going. I find I'm happier and more willing to keep going when I set reasonable goals and succeed than when I set goals that are too ambitious, fail, and get discouraged. How much do you want to try to knock out by the end of this year? One card? $500 in total? Anything gets you a bit closer to that ultimate goal. Also settle on next year's target: One auto loan? Or every credit card under $2K? Or what?

Start with the low-hanging fruit, and set yourself a couple of individual changes per month. So, for instance, this month, you might figure out how to lower the cell phone bill by $100/mo, and decide to stop eating out. Then next month, figure out how to cut the cable bill in half. Then the month after that, drop the lawn care. And so on.

Then snowball your debt payments. You can look it up online, but basically the idea is that you start with your smallest debt and knock it out, then add that payment to the money you send to knocking the next smallest debt down. Lather, rinse, repeat. So, for example, this month sell $200 worth of stuff you don't use on Craigslist. Use that to pay off the Macy's. Ta-da! One card gone! Progress! Starting next month, always put the $100/mo from the phone and the $200/mo from the eating out and the $25/mo Macy's minimum towards the Best Buy credit card until it's paid off (by the end of February). (lf meanwhile you find more stuff to sell on craigslist, or cut down your cable bill by 50%, it'll disappear even faster.) Then when that's paid off, you add the Best Buy minimum to your snowball, which is now at $350 a month, and aim it at one of the next smallest cards, which will take about 3 months to pay off. And so on. Any money you cut out of your monthly expenses, any minimum payment you no longer have to make, gets lumped together and thrown at your next debt target. The lump gets bigger over time, like a snowball rolling down a hill, and your debts get paid off.

3. If the fact that you're working three jobs is part of the reason you guys are eating out so much, then I think you should quit Job #3. After the eating out expenses, you are only netting $127 per month, and if it requires gas to drive to and from, your net is probably even lower. Eating at home is way cheaper but it requires more time to cook. If you weren't working the third job, you'd likely at least have the time to cook dinner, even if it's made ahead of time and put in the freezer for later.

4. If having a three-month-old is part of the reason you guys are eating out so much, then I suspect your wife is likely feeling pretty overwhelmed and tired, and expecting her to do lots of stuff to earn extra money (as a couple of folks have suggested) seems a little unrealistic to me. Yes, if she can pitch in, that is great, but at first I'd make it something manageable, like meal planning and trying out new slow cooker recipes to help cut out the eating out, or answering queries about stuff you listed on craigslist, or maybe identifying more stuff around the house that you can put up for sale. As the baby gets older and she feels more on top of the daily routine, she can figure out other things to do.

5. You say keeping up with the Joneses is part of what got you into this. Get yourself a new set of Joneses: people at the GRS forums and elsewhere online who are living frugally and paying off debts. We are social animals hardwired to try to impress each other, so use that to your financial advantage. Find people who are impressed by debt repayment, and make it your goal to impress them. Read blogs (the ones others have suggested) and library books about frugality: Amy Dacyzyn (The Tightwad Gazette) and Dave Ramsey and Joe Dominguez (Your Money or Your Life).

Good luck and keep posting! We are all cheering for you.

CecilyC


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Tue Nov 13, 2012 7:48 am 

Joined: Sun Apr 29, 2007 8:11 am
Posts: 1088
Location: Sunny Florida
You've already completed the first step of any debt attack and that is facing the music. Looking at what you owe, to who, the rates, the minimum amounts, etc. I am a Dave Ramsey snowball fan and with all those little debts you have, I would work smallest to largest for at least the first year. Get those little debts knocked out, cut those cards up, cancel those accounts.

I think the reward of quick success is so important to maintaining the momentum. You guys could knock out those first five cards in no time. And then you could put all the payments for those first five debts towards the bigger credit cards.

I recognize that your wife can't work at this point, or you've made the choice for her not to work. But she can help by doing more cooking at home, making your lunches, etc. Frankly, there is no reason she can't mow the lawn while the baby is sleeping. If she is staying at home, she has got to be on board at helping keeping overall costs down.

I'd look at the car notes and the time share and scrapping two or three, but I'd do some more research. Also, I think you guys need to explore how you got into this mess. What did you spend the home equity on, why did you buy the time share, why the new cars, etc. I think there are probably some underlying issues that you guys need to explore and address so you can move forward with clear eyes.

Good luck to you! I can also tell you that you can search for my earlier fiscal fitness log from 2007 in which we paid down $55,000+ in just over a year. Yes your debt level is much higher and you only have one working person, but perhaps you can set up a 5 year plan.

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http://adventures-of-sam.blogspot.com
(Follow Sam's financial and real estate adventures.)


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Tue Nov 13, 2012 10:37 am 

Joined: Wed Nov 07, 2012 4:56 pm
Posts: 6
Thank you all for the suggestions and words of encouragement. Since I made my first post last week, we have cut our cell phone bills by $40 and will be getting rid of the lawn service. I'm still trying get lower my cable bill, i'm on a 2 year contract with that price because of the tv/internet/phone bundle. We have also decided to cut our eating our budget to just around $100 but we found that as we planned to eat more at home, our grocery bill was higher than normal when we shopped this weekend. We'll have to figure that one out.

Also what do you guys think about me cutting back my contribution to my 401(k), i'm doing the minimum to get full matching, which is 5% of my gross salary. As for the question about my tax withholding, I actually already claim 10, which is the max I could do to make sure that I don't owe any money to the IRS but also I'll be getting almost nothing for my tax refund.

My wife this weekend sold some things around the house that we don't use anymore on Craigslist and she was able to get $300!!! we are going to use that to get rid of the balance on the Macy's card....1 down and many more to go!

I will update everyone again as we make or break our progress....Thanks again!


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Tue Nov 13, 2012 11:03 am 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1123
mazdai6 wrote:
Thank you all for the suggestions and words of encouragement. Since I made my first post last week, we have cut our cell phone bills by $40 and will be getting rid of the lawn service. I'm still trying get lower my cable bill, i'm on a 2 year contract with that price because of the tv/internet/phone bundle. We have also decided to cut our eating our budget to just around $100 but we found that as we planned to eat more at home, our grocery bill was higher than normal when we shopped this weekend. We'll have to figure that one out.

Beans-n-rice, rice-n-beans!

Quote:
Also what do you guys think about me cutting back my contribution to my 401(k), i'm doing the minimum to get full matching, which is 5% of my gross salary. As for the question about my tax withholding, I actually already claim 10, which is the max I could do to make sure that I don't owe any money to the IRS but also I'll be getting almost nothing for my tax refund.

I wouldn't cut the 401K contribution yet. Not until every other option is exhausted. Doing so is nothing but robbing your future self of retirement money so you can eat out now.

For the love all things holy....please reduce your withholding. You're claiming 10 already just so you can get a refund??? Please tell me you're joking!!! All you're doing is giving the gov't an interest free loan. You need that money now not later.

Quote:
My wife this weekend sold some things around the house that we don't use anymore on Craigslist and she was able to get $300!!! we are going to use that to get rid of the balance on the Macy's card....1 down and many more to go!

Good. Keep it up.


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Tue Nov 13, 2012 11:17 am 

Joined: Wed Nov 07, 2012 4:56 pm
Posts: 6
Hi Tightwad,

I'm claiming 10 on my W-4 with holding so that I don't have a refund and i'm maximizing my take home pay every month. I haven't gotten a refund in the last 3 years because I claim 10 on W-4 with holdings.


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Tue Nov 13, 2012 12:02 pm 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1123
mazdai6 wrote:
Hi Tightwad,

I'm claiming 10 on my W-4 with holding so that I don't have a refund and i'm maximizing my take home pay every month. I haven't gotten a refund in the last 3 years because I claim 10 on W-4 with holdings.

Oh, sorry. I misread your post. My eyes are playing tricks on me today.


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 Post subject: Re: Living in a dream world for too long! HELP!
PostPosted: Wed Nov 14, 2012 8:50 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
Just to point out, the OP has $7642 in take home pay and $7002 in total living costs/payments (I think I added that up correctly). So, is this extra $640 being used in a debt snowball? Or, are the estimates off a bit? It is more likely the latter, which brings me to the point - every penny spent must be tracked at this point.

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"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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