Update on my debts

[Bob B.]

About six months ago, I posted my total debts. Now I'm posting an update to share my steps forward and my steps backward. A couple of notes: In November I estimated my Mort. 1 at $106,000. It was probably closer to $106,600 then. I also listed my monthly payment as $988, which it was, but that included taxes and insurance. The P&I payment is $738/mo.

As a reminder, Mort. 2 is a loan from family against the house I live in now. It will be repaid when our other house is sold.

My wife was involved in a minor traffic accident in February. She and everyone else in the van was fine, but the van was totalled. Thus the reason for the van loan listed at the bottom.

As posted in November
Mort. 1 - $106,000 $988/mo. 6.25%
Mort. 2 - $70,000 0/mo. 0.00%
CC 1 - $9,376 195/mo. 12.90%
CC 2 - $3,530 $150/mo. 16.99%
CC 3 - $4,330 $140/mo. 5.25%
CC 4 - $1,090 $310/mo. 5.78%
CC 5 - $4,255 $225/mo. 5.32%

Current
Mort. 1 - $105,500 $738/mo. 6.25%
Mort. 2 - $70,000 0/mo. 0.00%
CC 1 - $8,934 $183/mo. 12.90%
CC 2 - $2,848 $68.50/mo. 16.99%
CC 3 - $3,862 $140/mo. 5.25%
CC 4 - Paid in Full
CC 5 - $3,336 $195/mo. 5.32%
Van Loan - $7,894 $210/mo. 4.02%

Our total balance on credit card debt improved by $3,571. I'm pretty happy with that given that progress was made during winter heating season in Michigan. And we all know what has happened to gas prices over the past six months. We are caught up on all of our bills (nothing past due). But, our total debt situation worsened by $3,223.

[creditcardfree]

I think considering the circumstances you are doing great. Keep moving forward and find all the money you can to pay off those credit cards. Are you paying lowest balance to highest? What is your plan?

[disneysteve]

Good job chipping away at the debt. A couple of thoughts. Don't overlook the fact that you paid off $1,100 in mortgage principal (from $106,600 to $105,500).

Are you following Dave Ramsey? I see that the one credit card you paid off was your smallest balance rather than your highest interest rate. While that works, just keep in mind that you will spend less overall in interest charges if you go after the highest rate debt first.

What is your household income?

[Bob B.]

My income - $55,600/yr.
DW's freelance income (variable) - $5-10,000/yr. Wife is SAHM.
Foster care stipend - $4,800/yr.
Rental income (house listed under Mort. 1) - $8,700/yr. Hope to have that sold soon.

Currently trying to pay off CC 2 first because of 16.99% int. Then will shift to CC 1.

[Hector]

Seems like you are looking at your total debt and attacking debt with the highest interest first. I prefer that way.

It’s great that you don’t have any past due. Because of this fact, your credit score should improve slowly. I will keep an eye on credit card offer and will do balance transfer as soon as I get a decent offer.

What is limit of your credit cards? If you have available credit on CC 3, 4 & 5, call them ask for balance transfer rate (one time fees). If it is not very high, do balance transfer.

Why did you feel need of getting a van worth 8k? I am sure that one can get reliable van around 5k.

[disneysteve]

Originally Posted by Hector

Why did you feel need of getting a van worth 8k? I am sure that one can get reliable van around 5k.

I don't think 8K for a used vehicle is unreasonable at all for a couple earning upwards of $65,000/year. Yes, you could always go cheaper but it certainly isn't necessary and it just accelerates the timeline of when you'll need to replace it. If you can get 8 years out of an 8K van vs. 5 years out of a 5K van, the end result is about the same.

[Hector]

Originally Posted by disneysteve

I don't think 8K for a used vehicle is unreasonable at all for a couple earning upwards of $65,000/year. Yes, you could always go cheaper but it certainly isn't necessary and it just accelerates the timeline of when you'll need to replace it. If you can get 8 years out of an 8K van vs. 5 years out of a 5K van, the end result is about the same.

To me it makes sense if person is making 65k buying 8k car if he/she doesn't have much debt. I think the way to go is to pay cash for it. But this person is in a lot of debt. He knows that he needs to buy a car now and it has to be bought on interest. If I am in this much debt, I would look to save 3k in car plus ~4% interest on it.

[disneysteve]

Originally Posted by Hector

To me it makes sense if person is making 65k buying 8k car if he/she doesn't have much debt. I think the way to go is to pay cash for it. But this person is in a lot of debt. He knows that he needs to buy a car now and it has to be bought on interest. If I am in this much debt, I would look to save 3k in car plus ~4% interest on it.

That's a fair point. I wasn't thinking about the other debt - duh. Yes, someone with around 19K in credit card debt really didn't need to be taking out an 8K car loan at this point.

[maat55]

Debt 6 months ago 198,581

Debt today 202,374

Grade for debt reduction: F

My father-in-law drove a car for years that he paid 800.00 for. We paid 3700 for my wifes old pt cruiser that was in great shape when we sold it.

Your morgage has only dropped 1k in six months, likely you have a 30 year note.

How do you have a 2nd morgage that does nothing?

Movement on the credit cards is commendable, but getting a second job for a year will get you moving.

[creditcardfree]

Originally Posted by maat55

How do you have a 2nd morgage that does nothing?

OP has a loan from family that seemed to be used to purchase current home. OP stated it would be paid back to family when other home is sold, therefore, no progress on that loan.

[maat55]

Originally Posted by creditcardfree

OP has a loan from family that seemed to be used to purchase current home. OP stated it would be paid back to family when other home is sold, therefore, no progress on that loan.

I guess it is time for me to check my vision.

[DebbieL]

Did your insurance company not pay you the value of the van that was written off? If so, could you not have gotten a fairly comparable vehicle with that money instead of upgrading another 8K? I know that if I were to have my current car written off, the insurance would probably pay me about 5K or so. I'd just find another car for around that price and hope for the best (but I'll admit that I'm very "cheap" when it comes to buying cars). I'm in Canada, so I don't know how your car insurance works. Here it is mandatory, and you would get money for the value of your old car (or you can buy "replacement cost" insurance if your car is pretty new and you want to have it replaced with another new car for the undepreciated value).

[Bob B.]

Originally Posted by DebbieL

Did your insurance company not pay you the value of the van that was written off?

My wife was in a completely separate car accident almost two years ago. That car accident was 100% not her fault. The insurance company paid us the value of the van at that time, $1,800, if my memory is right. We had been driving around with a salvage title since then.

[Bob B.]

Originally Posted by maat55

Debt 6 months ago 198,581

Debt today 202,374

Grade for debt reduction: F

My father-in-law drove a car for years that he paid 800.00 for. We paid 3700 for my wifes old pt cruiser that was in great shape when we sold it.

Your morgage has only dropped 1k in six months, likely you have a 30 year note.

How do you have a 2nd morgage that does nothing?

Movement on the credit cards is commendable, but getting a second job for a year will get you moving.

I'll re-post again in another six months. Hopefully we'll have made better progress by then. Yes, the house is on a 30 year note. And yes, the second mortgage is a family loan. Nothing due until the first house sells.

[Bob B.]

Some numbers:

Debt to Asset Ratio - 77.6% (or I owe creditors more than 3/4ths of the value of my total assets)

Non-Mortgage Debt Payment to After Tax Income Ratio - 18.1% (or nearly 1 out of 5 of my after tax income dollars go toward paying off credit cards and a vehicle)

Total Debt Payment to After Tax Income Ratio - 33.5% (or just a smidge more than 1 out of 3 of my after tax income dollars go toward paying off all debt)

[KennySoward]

I agree that paying off the highest interest rate card first is the obvious answer, but don't feel too bad if you attack the smaller ones first. Sometimes it is easier (mentally) knocking off the smaller ones first.

Also, be careful with CC balance transfers to lower rates. If you have too many irons in the fire, it can be confusing. Just remember that your new cards still want monthly payments, even if it is O% interest. You have to stay on top of them all.

[jpg7n16]

Did you get your tax refund in yet? That could go a long way in knocking out some of the credit card debt. Use it on the highest interest rate debt, and save 3 times the interest!

I don't have too big of a problem with the $8k van - though if you had gotten a $4k one, you would still have made progress on the debt, even through the poor circumstances.

Without the car accident - you made great progress for your income in a 6 month span. Roughly $4600 of progress.

I'd grade you better than an F maybe a B. To get an A, just make a wiser selection on the replacement of the van. (an A+ if you had also paid down the highest interest rate the whole time)

But you're on the right track now. Just keep it up and you'll be debt-free before you know it.


Note to all students: take jpg's class, he's an easy grader