Need help is getting rid of debt

[americangolden]

Our family is paying for all the wedding so that is all said and done and don't have to worry about that.

We are going to put anything we can up on ebay that we dont need and put it twords the debt we have.

With the best buy loan yes I think we are going to get nailed with all the added up interest if we don't pay it off before the 0% promotion is done .

These are debts in both of our names we have had our money combined for a while now so this is all the debt nothing is missing from what I posted.

[skydivingchic]

You have a serious cash flow problem. Adding up your monthly expenses comes to $2302 (assuming the $74 for water utilities is what you have to save/pay each month) or $2277 if the $74 is total for 3 months. Either way you have more outgoing that incoming.

As has been mentioned, the house is killing you. At 42.5% of your income for just the mortgage, you will never get any traction. The rule of thumb is no more than ~28% of your income to mortgage and no more than ~32% to total debt repayment. You are at 55.5% total debt to income ratio. And that is just the minimums.

The things I see in your budget which could be cut - cable, the gym membership, going out, and cigarettes.

As others have said, start selling anything that is not an absolute necessity, get part time jobs, pick up random jobs like mowing lawns, babysitting, etc. Every month you continue like this you will add ~$300 to your debt. Can you get a rent out a room in the house to help pay your mortgage?

If you get money for your wedding, pay off the Best Buy card immediately to avoid the back interest charges. Then put $1000 into savings, then pay off as much else as possible.

Ultimately, you need to be saving around 20% of your gross pay. At LEAST 10% to retirement - 15% would be better. The rest should be used to build a 6 month emergency fund, paying off debt, and saving for mid term goals.

[snshijuptr]

Originally Posted by elessar78

BTW, if you're getting married, consider registering at Bed, Bath, and Beyond because you can return gifts purchased from your registry for cash!

This is absolutely NOT TRUE! I registered there and they would only give me $900 back. They told me never to ask again for money. Register at a universal registry for items that you really need, such as stuff that will need to be replaced in a couple years or items for home maintenance then encourage cash. Tell both parents and all your attendants. If your fiance has a shower, be prepared to receive awful gifts if you don't register.

[Ima saver]

I agree. Start a small emergency fund with the wedding money and use the rest to pay off all your credit card debt.
I love dogs too, but $50 a month for food seems a lot to me.

[cicy33]

Originally Posted by americangolden

Best buy was for a fridge and stove for when we moved into this house. I set aside a bunch of stuff to sell like a nintendo wii+games+fitness board lots of old baseball, football & basketball cards and some other useless stuff I dont need anymore.

We were also thinking of using all of the money we get from our wedding to put twords debt but not sure if it would be better to put this into savings?

American family insurance is for 2 cars full coverage.

Getting rid of all that sounds so easy but so hard at the same time.

I know I am going against the grain here but I don't agree with selling off your stuff like your wii and stuff. Instead, why don't you set up wii parties? Lots of people love to get together and play. This could cut down on going out and that would save money. My reasoning for this also is this. you have already bought it. You won't get your money back and when you are out of debt you will buy it again, thus wasting money. I understand getting rid of stuff that is useless but this could be a money saver with friends and having fun at home. we have one and I love it!

[americangolden]

Originally Posted by skydivingchic

You have a serious cash flow problem. Adding up your monthly expenses comes to $2302 (assuming the $74 for water utilities is what you have to save/pay each month) or $2277 if the $74 is total for 3 months. Either way you have more outgoing that incoming.

As has been mentioned, the house is killing you. At 42.5% of your income for just the mortgage, you will never get any traction. The rule of thumb is no more than ~28% of your income to mortgage and no more than ~32% to total debt repayment. You are at 55.5% total debt to income ratio. And that is just the minimums.

The things I see in your budget which could be cut - cable, the gym membership, going out, and cigarettes.

As others have said, start selling anything that is not an absolute necessity, get part time jobs, pick up random jobs like mowing lawns, babysitting, etc. Every month you continue like this you will add ~$300 to your debt. Can you get a rent out a room in the house to help pay your mortgage?

If you get money for your wedding, pay off the Best Buy card immediately to avoid the back interest charges. Then put $1000 into savings, then pay off as much else as possible.

Ultimately, you need to be saving around 20% of your gross pay. At LEAST 10% to retirement - 15% would be better. The rest should be used to build a 6 month emergency fund, paying off debt, and saving for mid term goals.

I guess this is my main problem, having more bills than what we make in money each month at the moment.

[americangolden]

Originally Posted by cicy33

I know I am going against the grain here but I don't agree with selling off your stuff like your wii and stuff. Instead, why don't you set up wii parties? Lots of people love to get together and play. This could cut down on going out and that would save money. My reasoning for this also is this. you have already bought it. You won't get your money back and when you are out of debt you will buy it again, thus wasting money. I understand getting rid of stuff that is useless but this could be a money saver with friends and having fun at home. we have one and I love it!

It was a waste of money we bought it used it for a week and it has been sitting there so even if we lose out on some money selling it we will come ahead a little bit with the extra money we can get from it.

[cicy33]

then definitely sell if not using! We go through periods of not using but for the most part use it. We are actually considering a second base unit because I use it mostly for exercise and then of course no one else can use it. I keep it in my bedroom cuz I am a little shy about working out in front of others. this is our entertainment as we don't really go out.

[elessar78]

Originally Posted by snshijuptr

This is absolutely NOT TRUE! I registered there and they would only give me $900 back. They told me never to ask again for money. Register at a universal registry for items that you really need, such as stuff that will need to be replaced in a couple years or items for home maintenance then encourage cash. Tell both parents and all your attendants. If your fiance has a shower, be prepared to receive awful gifts if you don't register.

Really? See we returned all the gifts we had doubles or didn't need and did not come close to $900 but they gave us cash. Did not think there would be a cap on it. Thanks for the heads up. I think we got about $400 back.

We weren't out to get cash out the deal either. We needed the stuff we registered for, but it was nice to be able to get cash back instead of store credit.

[creditcardfree]

Originally Posted by americangolden

I guess this is my main problem, having more bills than what we make in money each month at the moment.

Additional employment will make a huge difference. Both of you should be looking for additional employment and other ways to bring in cash.

Can you take a break on paying your Dad? That money could go to those credit cards.

[RAYT721]

Are you aware that your 2nd loan figures doesn't balance? You are stating 43 months x $40/month to pay off $3789.02? Even without interest 43 x $40 = $1720.00.

[cicy33]

Originally Posted by RAYT721

Are you aware that your 2nd loan figures doesn't balance? You are stating 43 months x $40/month to pay off $3789.02? Even without interest 43 x $40 = $1720.00.

I ran the numbers on this with the 8% on a site and the amount with interest at 8% is only about 1983. I would definitely check this. or perhaps a typo?

[creditcardfree]

Originally Posted by RAYT721

Are you aware that your 2nd loan figures doesn't balance? You are stating 43 months x $40/month to pay off $3789.02? Even without interest 43 x $40 = $1720.00.

Since this is a second mortgage, it could have a balloon payment at the end of the loan term. This is another thing to watch out for as the loan term comes to an end.

[snshijuptr]

If you want a snowball calculator, CalcXML has a great one through helpmefinancial.com

Restructuring Debts For Accelerated Payoff | HelpMeFinancial.com

I punched in your numbers with the current 0% rate on best buy, $100 extra toward your debts, and $1000 from your wedding and it says it will take you 9.3 years to pay it off. It gives you a schedule of how much to pay to each debt every month and when the rollovers will focus on that debt. It also lets you know how much you are saving from any overpayment. With $100 overpayment, you will save $16,708 and 4.7 years.

[americangolden]

Awesome thanks!

[fe2o3ez]

First of all, good luck. This is always a tough position to be in, but you have all of your best earnings years aheaad of you, and if you are smart, it will be fine. (that goes for finances AND marriage!)

Second, I'm not big on telling people how to live their life, but from a financial standpoint, it seems you are shooting yourself in the foot by paying for a gym -- and smoking. they seem to counteract each other. Obviously, smoking is bad for your finances in a number of ways, including the increasing prices for cigarettes, lighters, health insurance, etc. Do what you can to stop (or to help your fiancee stop). It may be $30/ month now, but at age 24, and with inflation, just imagine how much it will cost you financially over your lifetime. And if you say that you will eventually stop, so it wont be for your WHOLE life, then why not stop now. Anyhow, enough of the soapbox.

In regard to the fitness center, it is a great perk. It can get you going in the morning, and is a great way to keep healthy habits going. HOWEVER, there are a thousand exercises you can do around your own home to stay in shape. Go to menshealth.com and search for some of them. Cancel the membership and use the $65 toward your debt.

I also agree with increasing income. Any second income will do. Sell furniture 3 nights a week. Become a bartender. Offer to become a part-time handyman for those that have projects, if you have the skills. Stores are always looking for part-time people to stack shelves on nights or weekends. $20 here and there will add up quickly.

(besides, if you work more hours, you get the social aspects of going out but dont have the time to do so. The "going out" amount will go down too!)

I don't know if I agree with the concept of selling your house yet. There are better ways to manage your debt and live below your means for now, and I am afraid in today's market you would take a bath that would be even harder to recover from - especially with a second mortgage sitting out there.

One last thing (I promise): dont forget to contact your credit card companies and ask them to lower your rates. The Visa and Old Navy will kill you in no time. My snowball order would be Best Buy, Old Navy, then Visa...

Oh, and I would put aside 20% of any additional income into UNTOUCHABLE savings for future emergencies. It wont seem like much, but in time you will be in good shape.

Let us know how you do!!

[americangolden]

Thanks for the advicve and yes we'd never sell the house that would be taking a step backwards lol

[woodie96]

Be careful....Never say "never"
Although it may appear now as a step backwards.....with your current expenses, you are spending about 50% in home expenses. That is a killer and makes it really hard to get ahead, or even break even.
IF, IF you were at the "norm" per say of no more than 30% in home expenses, then you would have an additional 400 bucks free each month to kick this debt down.
But I do understand the emotional aspect of feeling that it would be a step backwards.

[Joan.of.the.Arch]

Selling his house to move to something more reasonable need not be thought of as a step backward. How about thinking of it as stepping off of a wrong path, or a stony, hilly path and onto a right path or a clear, level path?

The choice of words we use can influence how we feel. Could be important to look for more positive words. In a society where people have moved domicile on average every seven years, I think it's possible to have a good attitude about moving, even from a house that you really like---especially when doing so could allow you to not only catch up with debts, but get ahead.

[BlackDiamond]

Originally Posted by americangolden

Thanks for the advicve and yes we'd never sell the house that would be taking a step backwards lol

Paying less than 50% of your income for a place to live is not taking a step backwards.

I pay $400/ month to rent.

I bring home $2442 every 4 weeks. I almost always make another $400 from my Ebay business, but we'll say at least $200 for the sake of argument. So let's call my monthly income $2600 to round down AND lowball my Ebay earnings.

I am paying just over 15% of my monthly income towards a place to live. I pay 21% if you count my basic utilities. That is way less than the norm. And I am perfectly comfortable and really like where I live. In fact, my best friend lives in the unit below me. And after all my bills are paid each month (housing, util, car, insurance, parking garage for commute, debt ), I have close to $1200 left over for gas, food and whatever else I please ("whatever else I please" is usually split between extra payments on my loan & savings).

I live way below my means as far as housing goes because I know WAY TOO MANY people who are paying more than 1/2 of their monthly income in housing expenses. My fiance thought it would be a super idea a few years ago (before we met) to purchase a house with his siblings. They are now 80K under water and all 3 of them paying more than half their income each towards the house.

If I were to buy a home now, I'd be taking a step back, IMO. I'm near Boston. My housing expenses would nearly triple. So as you can see, renting is not always a step backwards.