Eagle, what is the OP going to do with $200 a month worth of gas? Wash the road tar off the Volt?

I think you are missing SS and Medicare taxes as well. Those are 7.65% in addition. There are also state taxes to consider. There are 4 states without an income tax. Texas is one of them. Given that the OP is moving away from TX, there is a 3/49 chance that the new state has a state income tax to be paid.

$1200 a year is very high for car insurance as well, especially for someone not insuring a car.

Well as always, DH I appreciate your consistent attention to detail.



I estimated $50 a week for gas on the Ford Explorer. Sorry overlooked the Volt until the winter comment. So that's another $200 to go towards paying off the debt at least until December/January?



The OP didn't specify he was moving out of state. At least I don't recall that. The OP just stated his home was in the state of Texas. In Texas on a salary similar to his I had we paid 12% ($115 a week including SS & Medicare) in Texas. Wouldn't it be 46/49 chances the new state has income tax?



Granted $1200 is a bit much. Perhaps $400-600 is a more realistic number? But again I assumed that he would be responsible for the Explorer. My oversight.

According to the ever-helpful IRS website, there are nine states without an income tax:
Alaska
New Hampshire
Tennessee
Florida
South Dakota
Washington
Nevada
Texas
Wyoming

if i were facing that situation, i would be more inclined to eliminate the completely unsecured (credit card) debt first, and then work on knocking down the principal on the car loan to match the present value of the car. the interest rates on the card balances are higher than the car loan, so you'd be making bigger headway against the interest with this approach.

the $10k you're planning on receiving/using will eliminate the card balances entirely and take out a good chunk of the negative equity from your previous car. so you'd see two balances gone altogether (major progress!) and i assume at that point you'd be quite close to being able to sell the car and use the proceeds to pay off the loan.

Actually 47/49. It's only June and a mistake already this year!

I don't understand the logic here. It makes no difference if you have negative equity unless you plan to sell.

Ok. Some of those tax investment income but that clearly is not applicable here.

Updated Sample Budget. Changed to 19% estimated taxes. This is based on the OP's original idea of taking a hit on the vehicle by selling it (and using the 10k bonus on the negative equity), paying off that debt, and using his Dad's vehicles for the next year or so. Also assuming the student loan and mortgage have a lower interst rate than the other debts...

Debt Description ------ Balance ------------- Interest
CC #2 --------------- $3,000.00 ------------ 14.00%
CC #1 --------------- $3,900.00 -------------- 8.00%
Car Note ------------ $29,000.00 -------------- 7.90%
Student Loan ------- $15,000.00 -------------- 6.00%
Mortgage ---------- $139,000.00 -------------- 5.00%


Gross Yearly Salary Pre Tax ------- $50,000.00 *

Taxes (19% estimate) --------------- $9,500.00

Yearly Salary Post Tax -------------- $40,500.00

Monthly Income: Salary ------------ $3,375.00

Rent Received TX Home ------------- $800.00 **


*For this sample budget I didn’t include bonuses.
**For this sample budget I assumed $800 net meaning taxes would already be deducted.

Expense ----------------------------- Budgeted ---------- Actual ---- Notes & Due Date (If Applicable)
1. Fixed Expenses
1a. CC # 2 ------------------------------- $ 1,150.00 ----------- 2BD --------
1b. CC # 1 ----------------------------------- $81.67 ------------ 2BD --------
1c. Student Loan -------------------------- $200.00 ------------ 2BD --------
1d. Mortgage ----------------------------- $1,100.00 ------------ 2BD -------- ***
1e. Health Insurance ---------------------- $200.00 ----------- 2BD ---------
1f. 401k? ----------------------------------- $333.33 ----------- 2BD --------- *****

Total Variable Expenses ---------------- $3,065.00 ------------- 2BD --------

*** As you mentioned includes insurance and taxes
**** You can get a discount (4-10%) by paying this 6 months at a time.
***** Assuming an employee savings of 8% ($333.33) savings on income pre tax and an additional 4% (or $151) match of employers.

2. Variable Expenses
2a. Charity ----------------------------------- $10.00 ------------- 2BD ------
2b. Gifts ------------------------------------- $10.00 ----------- 2BD ------
2c. Groceries --------------------------------- $250.00 ----------- 2BD ------
2d. Eating Out ------------------------------- $100.00 ----------- 2BD -------
2e. Cell Phones ------------------------------ $55.00------------ 2BD ------
2f. Internet ----------------------------------- $35.00 ------------ 2BD -------
2g. Home Maintenance/Repairs ----------- $150.00 ----------- 2BD ------
2h. Entertainment ---------------------------- $80.00 ------------ 2BD -------
2i. Savings E-Fund --------------------------- $500.00 ------------ 2BD -------
2j. Miscellaneous --------------------------- $20.00 ------------- 2BD -------

Total Variable Expenses ----------------- $1,110.00 ----------- 2BD

Total Expenses ------------------------------ $4,175.00 ---------- 2BD
Total Income --------------------------------- $4,175.00 ----------2BD
Difference ----------------------------------------- $0.00


Comments? Is this probably a little more realistic?

I appreciate the insight all. My main goal in all of this is to get a to a point where I eliminate as many monthly 'fixed' expenses that are debt and aren't really helping me enjoy life. All of the suggestions are good ones.

The reason to eliminate the car debt is simply to get rid of the monthly payment. At the end of the day though, either route I go (eliminating car debt or CC debt), I will still be paying out of pocket monthly to eliminate the remaining debt as is. That is why I asked about the 401k loan, as that would be a payment with minimal interest essentially to myself instead of to the CC company or to Toyota for the auto.

I'm hopeful that by next year at this time I can sell my home in TX (managing the property from OH won't be easy), so I can have peace of mind. The house is in a good neighborhood and in a really good school district (I wouldn't have purchased it if it wasn't). The home, if everything goes as planned, could actually bring in an extra $200-$250 per month based on what the renters market is like here in TX right now. I'm not factoring that into my monthly budgeting. I will stash that money away for any 'fixes' that need to be done to the house while I'm managing the property.

I appreciate the budget breakout. I loosely have my own, but I definitely don't go into as much detail as I should. I have been using mint.com lately to keep an eye on my goals and situation a little closer.

You live and learn...

I'd stick with my original suggestion of getting rid of the credit cards first, then the car. I would not be in a hurry to pay of the student loans or the mortgage, depending on interest rates. But the fact that you want to get rid of the car is a factor. I might do what you say and bank the pending bonus until you sell the car and use it to make up the shortfall. I think it is a fair plan if you will not be buying another car until you can save enough cash for it.

Your idea for taking out a 401(k) loan seems sound on the surface. But I'd agree with the others here that taking one of those loans can be a really bad thing to do. There are lots of pitfalls. However, if you have extremely good job security and if you will be 100% committed to repayment then it is an option to consider. It's definitely not something I would do personally though.

You should do your budget in a way that makes sense to you. It's good to have (at least) the level of detail that Eagle suggested. I personally don't like the fixed/variable breakdown but if that works for you then it's fine. The F/V breakdown always makes me think of fixed and variable costs in a business. A person does not have costs that vary with level of production so it just doesn't make sense to me. I don't like discretionary/nondiscretionary either because those categories have no real meaning to me. I can usually eliminate a nondiscretionary cost if I choose by changing my behavior for example. So they are as discretionary as anything.

The bottom line is, pick a breakdown that makes sense to you and use it. To me it is less about calling it a budget than understanding where your money is going. If you have a good handle on that then you are off to the right start.

I am skeptical the OP's past employer's 401k rules allow for a loan to be taken out if employment has been terminated. Most 401k plans make you pay the loan back in its entirety within a relatively short time frame (e.g. 30 days) if employment is terminated.

The new company allows the loan against the 401k as well, that is why I mentioned it as an opportunity.

I am going to go a different route after the feedback on here and thinking about losing out on some compound interest for a year.

Just for clarification, your new company would also need to allow a rollover from other 401k's/IRA's to be able to borrow against your old employer's 401k.

But, you need to be in a tight spot to do that. Go live in G'ma's basement, get the credit cards paid off, pay off the car and sell the house in TX. Move out when you either a) can't tolerate it any longer and/or b) have your debt down to a level you are more comfortable with.

What route will you be taking out curiosity?

I am definitely not taking out the loan against the 401k after speaking with a financial advisor and a few other friends it just doesn't seem like a good option. My situation isn't dire enough to make that move.

My options are really simple and it all boils down to the negative equity on the car which I won't have a specific dollar figure amount until I make the move back to OH later this month.

Options are:
A)Sell the car outright, use a portion of the $10k bonus and swallow the negative equity if it's not too excessive ($5k would be my ceiling). Whatever dollar amount I have left over from the car payoff I will use to pay down the CC debt.

B)If the negative equity is too much to bite off (more than $5k), I will pay off the $7800 CC debt with the bonus and use the remainder to pay down some of the negative equity in the vehicle. I will then try to 'catch up' on the negative equity by paying more than the minimum on the car each month.

With either scenario my goal is to eliminate the car and CC debt by Jan. 1. At that point I will start to chip away at the student loan and eventually sell the house in TX. If the house proves to be a profit center for me in the short term I may hold onto it for a few years and build more equity into the mortgage before I attempt to sell it.

With doing all of this, I hope to be able to continue to put away a good chunk of my take home pay each month and contribute to the E-Fund as much as I can. I hope to have at least $10k in the E-Fund at this time next year.