Need advice on personal finance

[amberbamber]

Ok I'm really sorry if this gets to long. I just want to put all the info out there so I'm not backing up and having to re-tell!

My family's combined income is around 95,000. I am a SAHM and my husband is in middle management for a construction co.

Here are our bills-

DH's truck - still owe 14503.24 (financed at 7.20%)
My van - owe 30847.80 (it is leased, Yes, we now realize it was a HUGE mistake)
CC#1- 11013.05 (0% until Sept 07)
CC#2- 8132.35 (10.24%)
CC#3- 4000.02 (0% until April 07)
Student Loan #1- 19266.76 (8.8% interest)
Student Loan #2- 2234.73 (2.34% interest)
Mortgage 209,535.90 (7.5 % interest)
One personal Loan 2700.00 (0% interest) (this is owed to our parents so we don't have to pay monthly at the moment, but we would like to pay it off as soon as possible)

Monthly bills include-
Power-150.00
Water 40.00
Term Life insurance 25.00
Cable, Internet, and Phone 165.00
Whole Life Insurance for 2 kids - 41.00
Whole Life Insurance for DH - 55.00
529 Plans for 2 kids- 100.00
Trash- 16.00
Auto Insurance - 118.00
Whole Life Insurance for myself - 28.00
Gas (heat) 100.00
Cell Phone 51.00

We have started paying ourselves first each time my DH gets paid.
So we have an emergency fund started with around 1700.00 in it.
We also have 3 IRA's with a combined amount of 4500.00 in them.
I have a mutual fund that has about 1700.00
My Dh has stocks that are valued at 3900.00 right now.
He also has a 401k valued at 45000.00
Then we have one CD to be cashed in, 4/07 for 518.00

We barely have enough left over every two weeks for groceries. So, we are constantly putting groceries and gas on the CC's. We know this MUST STOP.
We are currently trying to sell our home for around 238,000. And move into his parents house (they are not living there) and the rent will only be 700-800 a month. That will save us alot.
We are also getting rid of the cable which will save us approx $40 a month on that bill. When we move, I plan on only getting internet and phone. And cutting out absolutely everything else I can think of. Any ideas? Any advice? I need it. This is getting overwhelming to me. My DH and I rarely see each other because he is picking up odd jobs to make extra money. Anytime he gets any extra money we put it directly toward a CC.

Gees, now that it's all written down, I feel terrible. This is NOT the legacy I want to leave for my three children, nor do I want my DH to never see me or his children because he needs to work to make extra money. HELP!!!

[Snoopy2645]

Well this may seem weird but how old are the kids?? And are they boys or girls or both I ask because you could possibly save on clothes by handing them down!!!

Then if you can I would get a pt job around my dh I did this & got into demos made ok money doing that & got alot of free food so helped a ton on our food bill!!!

Then I would get rid of at least the leased car & buy a cheap gas saving car I also did that I bought a taurus it was great on gas!!!

Then I would try to buy the house from his parents & not rent it!!! And only do free things with the kids I have done this for 2 years & havent ran out of free stuff yet to do!!! Also have a huge sale when you move & put all money made towards debts then start doing rebates coupons & ebay!!! And go to garage sales this has saved me a ton I started this year doing it & am so sad I didnt do this years ago if you are the first one thier you can usually find GREAT DEALS!!!

Oh ya & check into term life ins instead of whole that whole is a big HOLE!!

Its seriously usually a huge rip off!!!

[Ima saver]

You need to write down everyday what you spend money on. You make a lot of money and should not have so much debt. The first thing I would do is get rid of whole life insurance. First of all, you do not need it on the children. You shuld get term life for yourself and your husband. You must quit charging anything!

[Ima saver]

I also would stop the 529 plans and use that money to pay down the credit cards. You can start contributing to them again when you are out of debt.

[greedy4chips]

I would also get rid of the "whole life" insurance policies, especially on the kids. Insurance is only to replace one's income. Your DH should have a term policy for at most 20 yrs, actually until the kids are out of college. At that point there is really no reason to have insurance, since you could work. The only exception might be if the house is not paid for. And even that is questionable since you really have no reason to have a huge house when all the kids are grown.

Term insurance on your hubby would allow you to put the difference into paying off debt.

If you can come up with $1500 per month by selling the house as you stated you are trying to do and renting, I think you will be debt free in 2 yrs. I don't think selling the house is the best idea. You are going to pay 6% or $14000 in fees to the realtor. That is huge, plus when you rebuy in a yr or 2 the home prices will appreciate (hopefully for them, but not you) so your $238k house may be $250k. If you like the house keep it. If its the only way to balance the budget then sell it.

My steps to freedom...
1. I would transfer the $8300 to another 0% card or to one of the 2 you currently have or pay that one off first!

2. Stop the whole life policies ($100/ month saved + any cashout of the cash value can be used to reduce debt).

3. Stop the 529 for now. In 1 yr you will be able to put much more in to make up for the lost year's contributions.

4. Pay off the personal loan ASAP. This will allow you to get another loan if needed and they will be more apt to do it since you paid this one back quickly.

5. Check into refinancing the student loan #1...you may be able to get a better rate. If not, I would put extra money towards this one only after all other debts are paid for.

6. Check into getting out of the van lease. At $600+/month that is killing your budget.

7. Look into refinancing the house. You should be able to get a 30 yr for much less than 7.5%. This also allows you to have a free month with no mortgage. This helped us a ton when we refinanced. We put the closing costs into our mortgage and paid extra principal to cover that amt within a yr. I would never finance closing costs for 30 yrs.

My honest opinion of your finances is you have too much insurance payments and that van lease.

I think you have a very workable debt amt. Do you get a big tax refund? I am thinking you must be itemizing on your taxes and getting a huge refund or taking home $1500/wk, if not you should be.

You are not in any worse position than I was 4 yrs ago! I have 8, 6, and 4 yr old children. I worked 60+ hrs/wk and made $78k my best yr. We had comparable debt, mortgage, and insurance. We just did a few things and voila we are basically debt free with just a mortgage and 0% CC (that money is sitting in CDs making us interest). We paid for our $28k loan on our SUV, my $6k car loan, wife's student loans ($2600 or so), ended our universal life insurance ($160/month), redid my W-4 to take home an extra $160/wk, lowered my 401k to save another $150/wk (reduced to 6% company match amt), and just stopped eating out and spending wildly for 1 yr. It was amazing how fast the debts disappeared!!!!!

Good luck! Keep us up to date.

[amberbamber]

Here's my idea about the whole life insurance for my kids- they will pay for their weddings and or that can be a nice gift for a down payment on their first house.

I checked the policies about cash value...and honestly with all the money we've already put into them I'd cry at what we would actually be getting back from them. Still think it's a good idea?

We will be stopping the 529 plans for 1 year. Then we will pick it back up.

The lease on the van we'd have to pay a 2500 penalty for early return, plus an over the mile fee @ 10 cents a mile- over by about 2000 miles. Plus we'd have to pay the difference in the value that the van is now. It's a 2006 Honda Odyssey. So, I can see that being about $5000 to just get out of it. Does that make sense? We don't have the $5000 right now to even think about doing that.


The Student Loan #1 cannot be refinanced...as it already has been. Combining about 4 loans total.

The personal loan is 0% and to DH's parents so it's really not on our radar right now. But eventually we'd like to pay it back, KWIM?

Thanks for all the advice. I really am doing everything that I can to conserve, we cloth diaper both of our children that are in diapers, I hang clothes on the line, etc. I am very frugal, but some very spur of the moment decisions and bad decisions at that have caused us to get to this place. I have never felt so out of control of debt in my life!
Thanks again, keep it coming! PLEASE!

[Ima saver]

Drop all whole life, the only person that gets money out of that is the guy that sells it and he wants you to think it builds up all this cash value. it does not, drop all those policies. Leasing a vehicle is one of the worst things you can do, Clark howard calls it "the fleecing of americans" It is not leasing, it is fleecing.
what are your car payments, house payments? Etc.
You need to have a written budget, do you?
I would get out of the lease even if I had to borrow money from the parents again. Then I would buy a year old car and finance it there.

[Diolla]

Originally Posted by amberbamber

Here's my idea about the whole life insurance for my kids- they will pay for their weddings and or that can be a nice gift for a down payment on their first house.

I checked the policies about cash value...and honestly with all the money we've already put into them I'd cry at what we would actually be getting back from them. Still think it's a good idea?

If they have paid so badly so far why would you want to dump more money into them? I will guarantee they will never be worth what you pay for them. Once you are on a more solid footing put the same amount away in a savings plan or mutual fund and you will have more for your children.

Originally Posted by amberbamber

The lease on the van we'd have to pay a 2500 penalty for early return, plus an over the mile fee @ 10 cents a mile- over by about 2000 miles. Plus we'd have to pay the difference in the value that the van is now. It's a 2006 Honda Odyssey. So, I can see that being about $5000 to just get out of it. Does that make sense? We don't have the $5000 right now to even think about doing that.

You are right you don't have the Cash available right now, it is possible you can get a loan to get out of the lease and buy a used car and still reduce this payment. Even you admitted the lease was not a good idea, I would look into ANY possible way to get out of it.

Originally Posted by amberbamber

The personal loan is 0% and to DH's parents so it's really not on our radar right now. But eventually we'd like to pay it back, KWIM?

The emotional toll on these kinds of loans can be the biggest cost. Just make sure the in-laws know you haven't forgotten them.

Originally Posted by amberbamber

Thanks for all the advice. I really am doing everything that I can to conserve, we cloth diaper both of our children that are in diapers, I hang clothes on the line, etc. I am very frugal, but some very spur of the moment decisions and bad decisions at that have caused us to get to this place. I have never felt so out of control of debt in my life!
Thanks again, keep it coming! PLEASE!

I think you can pull it out, you and your DH seem to have a good attitude. Just make a plan and work towards it. If you don't have one you need to work out a written budget for your spending so every penny works as hard as it can for you.

[disneysteve]

Wow. I've got a lot to suggest. I'll try and organize this but apologize in advance for jumping around.

First, can you give us a monthly budget, rather than just total debt? How much are you bringing home each month and what are your monthly bills including debt payments? That would make things a little clearer.

Absolutely get out of all the whole life policies immediately. Call your agent tomorrow and cancel all of them. They are a huge waste, especially for the kids. There is no reason at all to have life insurance on your children. You would not suffer any financial loss if they were to die (other than funeral expenses, which you could save for much more efficiently on your own). You do need a term policy on yourself even though you are a SAHM. If you were to die, your husband would need to pay for childcare and household help until the kids were grown.

It's nice that you want to save for the kids' weddings, but that just isn't realistic right now and a life insurance policy isn't the way to do it.

Is your husband currently contributing to his 401K? If so, how much, and is there a company match?

Stop the 529 contributions. It makes no sense to be putting money there while running up CC debt to buy groceries. You've got to realign your priorities.

Can you lower your auto insurance premium by raising your deductibles?

So that gives you:
$40 from cable bill
$96 from whole life (I didn't count yours as you will buy term instead)
$100 from 529 plans
That's already $236/month freed up. I would put a little of that, maybe $25-50 toward boosting the emergency fund and put the rest toward debt repayment. I recommend starting with CC#2 with the 10.24% rate.

I'm concerned about the 0% CCs because it sounds like you have no plan to pay off those debts before the 0% period expires. Do you know what the rates will be when they expire? Probably a whole lot higher.

It might make sense to liquidate your mutual fund and stocks and use that $5,600 to repay debt, but it would depend on the tax consequences of those sales.

[amberbamber]

First, can you give us a monthly budget, rather than just total debt? How much are you bringing home each month and what are your monthly bills including debt payments? That would make things a little clearer.

I will work on this tomorrow and post it ASAP! We do have a budget in place, but I need to type it out on here.

Absolutely get out of all the whole life policies immediately. Call your agent tomorrow and cancel all of them. They are a huge waste, especially for the kids. There is no reason at all to have life insurance on your children. You would not suffer any financial loss if they were to die (other than funeral expenses, which you could save for much more efficiently on your own). You do need a term policy on yourself even though you are a SAHM. If you were to die, your husband would need to pay for childcare and household help until the kids were grown.

After talking with my DH, we will do all of this, this week!

Is your husband currently contributing to his 401K? If so, how much, and is there a company match?

He is contributing 3% and his company matches up to 3%. So, he's getting a total of 6%. We do put money (randomly) into IRA's. But haven't been completely consistent with that.

Stop the 529 contributions.

They will stop next month. For one year and one year only!

Can you lower your auto insurance premium by raising your deductibles?

It's already $1000 deductible.

I'm concerned about the 0% CCs because it sounds like you have no plan to pay off those debts before the 0% period expires. Do you know what the rates will be when they expire? Probably a whole lot higher.

Yes, we do have a plan to pay them off. I am paying $270 a month on CC#3 (which only has a $25 min payment). Our goal is to have that paid off by 12-06 then I plan on taking the $270 and adding it to CC#2 plus the min. payment of $157 that we have already been paying. Like the snowball effect (isn't that what it's called?) Any extra money we are getting from odd jobs, (I sell books online), babysitting, etc is going towards paying CC#3 off.

It might make sense to liquidate your mutual fund and stocks and use that $5,600 to repay debt, but it would depend on the tax consequences of those sales.

Yes, right now I don't think that would be a good idea. Our hope to to get out of debt. And be able to put money into those accounts monthly.

[disneysteve]

Originally Posted by amberbamber

He is contributing 3% and his company matches up to 3%. So, he's getting a total of 6%. We do put money (randomly) into IRA's. But haven't been completely consistent with that.

They will stop next month. For one year and one year only!

You need to make retirement savings a priority over college savings. Your kids can borrow for college. You can't borrow for retirement. Putting away 3% of income (6% counting the company match) just isn't enough regardless of your age. How old are you both by the way?

I am paying $270 a month on CC#3 (which only has a $25 min payment). Our goal is to have that paid off by 12-06 then I plan on taking the $270 and adding it to CC#2 plus the min. payment of $157 that we have already been paying.

The fact that you are able to pay $245/month over the minimum shows that your budget isn't in such bad shape after all. Just be sure to also pay off #1 before the 0% expires.

Do you both really feel that selling the house is necessary? Are you doing that strictly to save money or are there non-financial reasons, too? From what you've posted so far, I'm not sure I see a financial need for you to get out of the house.

[creditcardfree]

Um...get your term life insurance first...BEFORE you cancel that whole life insurance. It would be awful if something happened in between.

I agree you need to get out...you will NEVER get your premiums back on whole life.

Just had to put my 2 cents on that.

[disneysteve]

Originally Posted by creditcardfree

Um...get your term life insurance first...BEFORE you cancel that whole life insurance. It would be awful if something happened in between.

A great point! I should have said this. Don't cancel your whole life until you have the term policy in hand. Of course, you can cancel the kids' policies right away since they don't need insurance at all.

[creditcardfree]

Does anyone know or remember what Dave Ramsey's advice is on getting out of a lease? Seems like he always has a good way to get out....I just can't remember the particulars.

[safari]

Many employers offer free life insurance at no cost to the employees. For example, I get coverage twice my yearly salary for free. If your husband's employer offers that benefit, he doesn't need to carry his own policy, or can reduce the coverage on his policy and pay lower premium.

[amberbamber]

Originally Posted by disneysteve

I am 27 and DH is 29.

That is the plan.

Yes, there are other reasons. The school system is much better where the other house is. Plus with DH being in construction, we plan on saving for the 20% down payment on building our own house. Living here we just don't see that possible. And the idea of saving 600-700 dollars a month to put towards credit cards is VERY appealing to me. Am I wrong in this sort of thinking?

I worded my initial post incorrectly. We are not putting all the groceries and gas on the CC, but usually by the end of the month it's groceries here and there that have to be put on there and gas also. So, I'd say it's about $100-$150 a month on the CC. I see now that I probably shouldn't be spending the extra towards the CC's and should be just keeping it to get us by at the end of the month, right?
We have also completely stopped dining out. I have a menu planned for the entire month and we stick to it totally. I plan it according to sales and we stock up at Aldi's (which is very cheap on things). In reading this board, I already feel in more control of our debt.
And I've already sent the email to the insurance agent about cancelling all 3 whole life policies. I will make the call tomorrow to cancel my whole life policy.

[Ima saver]

Great first steps!!

[amberbamber]

Originally Posted by creditcardfree

Does anyone know or remember what Dave Ramsey's advice is on getting out of a lease? Seems like he always has a good way to get out....I just can't remember the particulars.

ohhh, if you can find this, PLEASE let me know!!!!!

[disneysteve]

Originally Posted by amberbamber

Yes, there are other reasons. The school system is much better where the other house is. Plus with DH being in construction, we plan on saving for the 20% down payment on building our own house. Living here we just don't see that possible. And the idea of saving 600-700 dollars a month to put towards credit cards is VERY appealing to me. Am I wrong in this sort of thinking?

I don't know that you're wrong. Just remember that when paying a mortgage, you are getting something for that money. You are building equity. When paying rent, that money is gone. But is sounds like you've got other good reasons to be getting out of your current home. And certainly freeing up hundreds of dollars a month will wipe out that debt much quicker.

We are not putting all the groceries and gas on the CC, but usually by the end of the month it's groceries here and there that have to be put on there and gas also. So, I'd say it's about $100-$150 a month on the CC. I see now that I probably shouldn't be spending the extra towards the CC's and should be just keeping it to get us by at the end of the month, right?

Your credit cards should be at the bottom of your trash can in tiny little pieces. You have over $23,000 in CC debt. No way should you still be carrying and using them. As long as you continue to add to your debt, you will never get out of the hole. So yes, you should not be using your cards at all, ever. If you don't have enough money to make ends meet, then you need to trim your spending. We've already discussed a few ways to do that. If those cuts aren't enough, then you might need to reduce the amount you are sending to the CC to avoid taking on new debt. That isn't the best solution, but it might be necessary.

[amberbamber]

Ok here's our budget:

Cell Phone Bill: 51.00
Mortgage 1432.98
Van Lease 435.00
Power 150.00 (set up on budget)
Water 41.00
Term Life Insurance 24.05
Gas 21.00 (in the summer, in the winter it's around 170.00)
School Loan payment 55.00
CC#3-270.00
Cable, Phone, Internet 165.00
CC#2 155.00
Life Insurance Kids 41.41 (will soon be going away, paperwork is in the mail today)
CC #1 125.00
Medical Bills 60.00 (paying labor and delivery payments for 5 more months)
529 plans 100.00 (will be stopping next month)
DH's truck 100.00
Auto Insurance 118.01
Dh's School loan 200.00
Preschool payment 125.00
Trash 16.00

I do keep exact track of all of our spending. Groceries run between 300-400 a month. I am getting better with this. And gas for the cars has been running at about 200-250 a month. Misc spending is between 75-100.

2 of the 3 CC's we DO NOT use at all. They have actually never even been activated. The 3rd CC is usually for emergencies- although we've been using it for other things also. I am working on this though.