My apologies in advance as I plan to throw a few different things all in this same post. I am ashamed to say that I've lurked here awhile and didn't post most of the great advice I've read into action. Here is my situation. I worked for a facility that made wind turbines. This year there is a production tax credit that helps customers pay for our product that is due to end at the end of the year if not renewed. So far it has been voted down but is up for vote again in November if I recall correctly. The company I worked for pulled a lot of next years orders and pushed them out the door this year so basically we worked ourself out of a job. They've cut 90% of the workforce.

I'm one of the lucky people that lost their job. I currently have no Efund and already live paycheck to paycheck. As of right now, I have another 4 weeks of regular 40hr paychecks and then get a lump sum payout for another 4 weeks. I was hoping for a little advice on life in general here, heh.

My current plan is to live off unemployment until I get a call back from the company. I'm 27th on the list for the entire plant out of 250ish so I should be within the first or second group of call backs is my guess. I can see the overall flaws of this plan but until I finish my bachelors degree, I have doubts about getting similar pay. For budgeting purposes I'm going to assume I'll get $350/wk from unemployment. My wife brings home around $700 every two weeks. We have a 6 mo old son that I'll watch during the day saving the extra trips to drop him off with my mom to watch. Below is what I consider fixed bills.

House $592 (Mortgage, insurance, taxes. No PMI needed) Government put 20% down for us through first time home buyers programs etc.
Car $490 I understand this is a pretty big problem. My car died and instead of doing what I planned, buying a used beater, I ended up with a new car. My wife kept talking about safety and how new would be better, etc. I also commute 80 miles round trip a day for work so at the time, it seemed to make sense to buy something I wouldn't have any trouble with.
Car Ins $140 Full coverage for two cars
Cell Phones $165 I'm aware this is also on the higher side and is one of the things on the list of possible cuts. Really would like to avoid it due to being grandfathered in on unlimited data plans.
My CC $25 (CC payments listed as minimums for now)
Her CC $25
Bestbuy CC $25
Chase CC $30
Electric $210 On average payment plan
Water $45
Hulu $8
Netflix $18 This will be doing down as we're dropping the DVD portion and just keeping streaming.
Trash $18 Due every 3 months so this is averaged out.
Internet/home phone $98

Total $1889
Projected Income $2800 based on four weeks of paychecks per month combined.

Ok, I also go to school right now because my job is still paying for it at the moment. I should be able to finish out the semester on their money. I'll continue to stay at home and watch my son so my personal gas needs should be extremely minimal. I estimate my lump sum payment to be around $1800 after all the taxes etc. I'm really not sure how I want to handle this money. Christmas is just around the corner and I've got a soon to be 10 year old step daughter (Dec 4th!). The wife and I have already come to terms with this being a weak Christmas and will not be getting gifts for each other. Until I either find another good job or get called back to my previous job, I was thinking of putting that severance pay into my checking account and using it as a buffer for the bills. What I mean by that is like all those budgets that use this last months money to pay for this months bills. I'd like to relieve the stress of not knowing if I'll have enough in the account to pay for the bills due this week.

Now for my debts! (CC APR as reported at creditkarma)
My CC $400 @ 19.99% $500Prepaid with the card closed. Need to pay them off to get my security deposit back.
Bestbuy $860 @ 19.99%
Chase $1015 @ 23.24%
Wife CC $470 @ 19.99%
Mortgage $76k @ 4.75% APR
Car Loan $26k @ 6.75%
Forgot to mention using my lump severance to pay off my CC to get security deposit back.

Almost last, I have a 401k with the company with just shy of 9k in it. I'm well aware that nearly everyone will say to leave it alone but knocking out these stupid debts sounds awfully appealing. Especially when you twist your mind to say that the amount they'll take in penalties and taxes is the amount the company put in so you're not really out anything! I immediately call BS on myself though, the ~5k I get now is beans compared to the tens of thousands I'll get from it down the road.

And now, the absolute worst part... I turn 30 in less than a month. There you have it. I'm sure I forgot something in all this rambling so feel free to call me out on something or to ask questions. Thanks!

Under the circumstances, there's two things that I think need to go are the car & the cell phone plan. I'd also drop the full coverage car insurance or at least on your ride since you aren't going to be driving much.

I'm not a huge fan of his, but I think you desperately need to find Dave Ramsey and start listening to him. Unemployment is not even the biggest problem here. Your list of credit card debts, and the fact that you live entirely paycheck to paycheck, tells me that you need to alter your attitude toward money.

I would immediately slash expenses. Sell the new car and go back to your original plan (if absolutely necessary) to buy a beater. Sell your smartphones on eBay and forget about your data plan. $165/month is outrageous for someone in your position. I'm in a very solid financial position and I would never think to pay for that. I have a prepaid plan that costs $12/month through PagePlus. Drop the Hulu and the Netflix INCLUDING the streaming content. Drop your home phone, and use Google Voice or Skype to supplement your new prepaid cellphone plan. Renegotiate your price for internet service. Start eating rice and beans for dinner every night.

I see at least $700/month in savings right there. Can you rent out a room in your house for some extra income? If there is any possible way to liquidate part of your 401k without paying a penalty, I would do it in order to eliminate your debt. Then we can talk about getting the rest of your financial house in order.

It's not too late to salvage your situation. Imagine what it would feel like to not even care which day your paycheck hits your bank account. Imagine what it would feel like to KNOW that you can handle any emergency, or support your kids through college, or adequately fund your retirement. By the time you turn 31 you can be completely turned around and well on your way toward enjoying that sense of financial security.

Tim

Ok, I'm trying to realistic about the car but I can't wrap my head around getting rid of it being beneficial at this point. I realize the mistake but fixing it is a whole different ball of wax. I purchased this car off the lot new which instantly makes me upside down on this loan. Taking it back to the dealer and eating the difference feels a whole lot like giving 10k away and having nothing to show for it. Correct me if I'm wrong but I don't see any win-win situation here. The full coverage insurance is a condition of the car loan so unless I get rid of the car, I can't get rid of the insurance or lower it for my car at least.

The phone situation is slightly better. We just renewed one line and so it's on contract until 2/14. The other line is on a month to month contract right now. I've done a little research and since I'll be out of a job and at home the entire time, I could suspend my line without billing, which is the month to month one, and allow her to continue on. I could also remove the phones insurance plans, which end up being about $13 a month for both lines. We've stuck with verizon this long because all of her family uses it and her total monthly minutes because of family and work are around 2k just by herself. We have a 1000 shared minute plan but usually peak those minutes at 900 or so per month. The rest are free for verizon mobile to mobile or nights and weekend minutes. If I suspend my line and everything goes the way I think it should, it will lower our bill by $50-55. I've looked at some tmobile value plans and think the unlimited talk+text with 2gb unlimited (speed capped after 2gb) would work pretty well. Only downside is that price is for bringing your own phone so will need consider that cost plus the ETF if I want to switch sooner.

I checked over our internet bill while I was at it and found out there is a lower tier. Tomorrow we'll get that lowered and try to get a discount on top of that. They do hate when you mention cancelling.

I do appreciate the feedback and I know my attitude towards money sucks. I could go into a song and dance and make excuses but my eyes are open and I'm ready to get my hands dirty in fixing my overall view of money. Getting my wife on board is going to be another battle however.

Edit: Forgot to add. I'm technically still employed with the company until mid November. As part of the severance I become 100% vested in the 401k. Right now only about 4k of the money belongs to me. How do you feel about me borrowing the max I can, which is just north of 2k, and not paying the loan back once I'm terminated. End results are I'm cutting my 401k balance by 25%. I'll still have 6k in the 401k which is better than cashing it all out and I'll have money to knock out at least two of the credit cards. I'd need to set back ~$500 for taxes right? I'm pretty sure I won't owe anyway for federal since I claim 0 exemptions but owing taxes isn't a situation I want to be in either. Also, let me know if this just more bad money management poison I'm spewing. Thanks again!

How long ago did you buy the car? $10k seems like a pretty steep devaluation if it's fairly new. Hell, my car is 5 years old (bought brand new) and it's value is just NOW hitting $10k less than I paid, according to Kelly Blue Book. What is the KBB value of your car? What if you advertised and sold it yourself instead of taking it back to the dealer? (You usually can get more money for the sale that way.)



Have you shopped around for insurance? Go online and get quotes from different companies and see if anyone will offer you cheaper rates for the same coverage. Do you have your homeowners and other insurance with the same company as your car insurance? If not, you can usually get discounts for bundling.



If you're absolutely dead set against getting rid of the phone, at least see if you can get a discount from Verizon. I was with Verizon for years before I found out that I could get a 15% discount off of my monthly bill for being a federal government employee. (Ironically, I found this out when we switched to Sprint, but low and behold, they have this as well.) There are a bunch of other companies they give employee discounts to as well. Can't hurt to ask.



I've never heard of a 401k (or any other retirement plan) that doesn't require you to pay back the loan immediately if your employment is terminated. By immediately, that means within 30 days. If you do not pay it back, there are even more penalties, fees, etc. you are charged. Look very, very closely into the terms of your 401k before you decide to go down this road. You could end up making the situation much worse.

Yes, it is. You are trying to rationalize a lot of mistakes. These mistakes are what put you in this position in the first place, and correcting them is the way forward.

First, there must be some real sacrifice. You have no liquid savings, very little in your 401k, and you are paying 19-24% interest on credit card debt. That means you were enjoying a lifestyle that you couldn't afford even when you did have a job. It's important that you recognize this. So at least until you get back on your feet, you have to pare back expenses to the minimum for food (i.e. rice and beans), shelter, insurance, utilities, and transportation. A cellphone plan that allows you to chat for 2,000 minutes and use 2 gb of data does not qualify.

Regarding the car, forget about taking it back to the dealer. That's too easy. You need to work hard and sell it yourself over Craigslist, eBay, etc. You don't have a job right now, so you have the time.

Regarding your cellphone contract, pay the ETF. The fee only amounts repaying Verizon for the subsidy you got upon purchasing the phone. You get to keep the phone after you leave Verizon, and then you can sell it on eBay.

Go see the website for PagePlus. They use the Verizon network. You can keep the same phone number. The basic phone costs $50. If your wife really can't reduce the minutes she uses each month by utilizing Skype or Google Voice, they offer an unlimited voice/text plan for $40/month. You can keep a cellphone for emergencies for as little as $2.50/month (pay $10 every 120 days).



Yes, this is critical. How does she feel about the situation? Does she feel any stress from living paycheck-to-paycheck? A desire to feel financially secure was an important motivator at first for my wife and I to make short-term sacrifices and save.

Today we feel secure, so dreaming about a nice future together is probably a bigger motivation. We talk about our dreams of paying cash for a home in our favorite city and retiring early. When we start itching to buy something, we ask ourselves if the money could be better spent on those dreams in the future.

Tim

That $10k is already gone, whether you sell the car or not. If you sell the car, you could dramatically lower your monthly obligation for car payment AND insurance payment. That could make a nice big difference in your finances every month.

Think of a potential car sale as acknowledging the hole you are in AND taking steps to get out of the hole faster and more safely. Not acknowledging the hole doesn't mean it isn't there

Good luck!

This was your first mistake.


You're about to be down to one paycheck & no financial plan...she better get on the train real fast.


AlohaBear hit the nail on the head. You don't get to cash it out & walk away.

You are getting great advice here. The bottom line is that it is time for you and your wife to suck it up and live within your means. She married you for better or worse. Welcome to "worse." Work together to get through this.

You cannot afford your car. Sell it and take it back to the dealer. You must stop the bleeding NOW. Don't wait until you are unemployed.

Drop your cell phone. You might need a phone but definitely no date. Get a cheap prepaid plan. Your wife needs to live within her 1000 minutes. Her family and friends should help by realizing you are out of work and she can't afford to gossip so much.

Don't cash out the 401k. Bad idea all around.

Start looking for work NOW.

Drop Hulu, Netflix, etc. entirely. Yuo don't have time to watch TV. You should be spending your time studying, networking, working on your resume, and looking for a job.

In the best case you get called back quickly. But even that is only a stopgap until the next layoff. You need to face the facts. That tax credit you mention is very unlikely to be renewed unless it is short term. It's called the fiscal cliff. Read up on it.

Sorry to be so harsh. But you created this situation. People are giving you good advice and you are mostly dismissing it because you don't want to give up the things you cannot afford. Until you lose that attitude and face reality nothing anyone says will help you.

The 10k I was referring to is how much I'd still owe if I sell the car. KBB shows a private sale should fetch $15.8k. I still owe around 26k for the car so just as a guess that is at least another 12 months of payments.

I am running into problems with the same kind of logic for paying the ETF for the phone. At this point it would probably be ~$300 for the ETF and ~$50 for a phone. Suspending my phone line should be cheaper than switching her to an individual plan. Another big problem for her is coverage as we travel through back woods Missouri at times and in her mind nothing else works. I'll look more into PagePlus if it's basically on the verizon network it might be an easier sell to her.

I also have Verizon. They do NOT make it clear but I am fairly certain that you can drop everything but basic phone with minimal minutes without breaking your contract. That should get your save you over $100 a month.

With respect to the car, is it the only car you have? Another possibility might be to sell your second car (wife's car?) and give yours to her. It doesn't reduce your payment but it raises some cash that you can use to make the payments on the car you are underwater on.

Your Wife needs to also understand that your ship is sinking. She's been the one helping you make these poor decisions, if not the devil on your shoulder. Fixing just your behavior doesn't help the overall problem.

Also, if I were ever to be let go, I'd be down on the corner near a home depot with all my tools standing with my amigos looking for work. I'd dress clean, I'd have tools and I'd make very clear that I speak english and I am not a worry to bring to your house and endanger your family. Plus, I don't need to use your shovel, I have one right here (which is a serious downside to hiring these people, besides the fact that they have been known to abduct children). While getting back on my feet, I'd have no qualms about collecting the cash from these jobs and unemployment, as long as it is temporary and you are really looking for work. Do what you need to do to keep your family afloat.

Again, it's all for naught if you and your wife are on separate pages.

You have buried yourself with high interest debt. If you have to eat rice and beans for 12 months to dig your way out, then that is what you have to do. That sucks, but that is the consequence. I guess it's better than eating rice and beans for the next 48 months to pay off the whole $26k.

Here are more numbers regarding the cellphone issue: You said you can lower your current bill to $55/month if you suspend a line. That will cost $1,320 over the next 24 months. If you pay the $300 ETF you can probably get your $300 back by selling the phone on eBay, so that's a wash. Then you pay $50 for a new phone and a MAXIMUM of $40/month (for unlimited minutes) going forward. Cost over the next 24 months is $1,010. If your wife reduces her usage, cost can be $770 (1200 minutes/month), or even $338 (250 minutes/month).

By the way, I spend some time in the "back woods" too, and that's why I specifically chose PagePlus to be on Verizon's network.

Tim

I notice in your list of bills you have not mentioned health insurance. Please don't tell us you will be going without when you are unemployed, especially with kids!

Also, why do you have full coverage auto insurance on both cars? I realize it is a requirement for the one you have a loan on but surely not the other one. Maybe you can reduce it to only liability. Also, look into increasing your deductible to $1000. That could easily save you a lot.

Health insurance was picked up by my wife as soon as we caught wind of the job situation and comes out of her paycheck before budgeted income. Both cars are already on a 1k deducible and we are weighing our options on keeping her car right now.