Managing the debt now that we are current.

[maat55]

Originally Posted by familyof4

I can see us being able to become debt free. We have about 15k in assets we can sell, we can take all of our savings and pile on the debt each month. But the things we do have and own outright, we need to discuss if we want to give those up. We are in the beginning stages of this plan and still are trying to become organized.

My mindset is not that I want loans for things, We have just never been taught and have been learning for many years. After awhile we got sick of the debt and are here to make a change. I know the habbits are bad and acknowledge all of it.

If my mindset had not changed, I would not have ever posted.

Don't take it personally how some of us have responded. Your debt load is extreme and we wish for you to fully understand this. You've learned to manage your money much like most people and unfortunatly it's not wise.

It's hard for some to believe that they can learn to only borrow money to purchase secured assets that go up in value and not for every consumer product they want. The statement you made above is very incouraging and I hope you use that emotion, as you change your outlook.

I strongly suggest that you read a few personal finance books. I highly recommend these:

The Total Money Makeover by Dave Ramsey
The Millionaire Next Door

[ActYourWage]

Originally Posted by sounderella

Wow Act, how'd you manage that?

About this time last year, I started to budget. I made sure that all my money that I was going to bring it for that month had a designated place to go. $$ for mortgage, $$ for food, $$ for gas, $$ for debt, etc. until all my money was spent before the month began. I got married in October and my wife and I joined our money into one account. We did the same as I mentioned above. I did use some savings (around $9,000), a tax refund (around $2,600) and lived straight by the budget. Once the ball got going, the faster we wanted to be deft-free. At first it did seem overwhelming to think we would have paid off over $30,000 in around 10 months but it is good to have our money working for us now.

[ActYourWage]

Originally Posted by familyof4

I can see us being able to become debt free. We have about 15k in assets we can sell, we can take all of our savings and pile on the debt each month. But the things we do have and own outright, we need to discuss if we want to give those up. We are in the beginning stages of this plan and still are trying to become organized.

My mindset is not that I want loans for things, We have just never been taught and have been learning for many years. After awhile we got sick of the debt and are here to make a change. I know the habbits are bad and acknowledge all of it.

If my mindset had not changed, I would not have ever posted.

I am glad to see you have changed your mindset. I am just trying to pump you up about getting rid of the debt. You really don't have alot of debt, you just need to realize how you got to this place in your life before you can proceed. Hope this helps.

[ActYourWage]

Originally Posted by familyof4

If my mindset had not changed, I would not have ever posted.

There are alot of people that want to be debt free and they begin asking, searching, etc. but they do not want to do the necessary things in order to accomplish those things. It is like someone wanting to lose weight, they read books, visit forums, etc. but they do not eat properly, exercise, etc. in order for the results to show. The mindset about the situation may have changed but not the actions.

I am willing to bet your mindset and actions have changed and I wish you the best.

[familyof4]

Here is a current snap shot. We paid some things, consolidate and it leaves us better off to deal with the upcoming year. Our salaries did not change much (2352 bi weekly), but we should see a raise within 3 months. I hope to take some of the savings and further reduce the debt. The only loans we currently on are Primary mortgage, home eq, my 401k loan, lease and my student loan.

Any more advice?

Mortgage / taxes/ home insurance___________________1,462.50 OWE 159150.00 6.5% fixed
Home Eq ___________________________________ 210.00 Owe 17800.00 7.25 fixed
Vehicle 1 Lease___________________________398.00 Have 18 payments left. Are advertising it for sale now.
Son / Daughter savings acct_________________40.00
401k Loan_______________________163.86 OWE 3100.00 6.75%
Auto Insurance_______________168.00
Snowmobile Insurance______________27.00
Life Insurance______________53.05
Student loan______________47.74 OWE 9300.00 6.1%
Power_________________90.00
Satelite_________________42.98
Cell Phone________________53.00
Home phone / DSL__________________25.55
Garbage_______________17.50
Heat_______________100.00
Spending / Gas / Food______________800.00
Savings / Emergency________________1020.00

[zetta]

Savings / Emergency________________1020.00

Is 1020 the balance in Savings/Emergency, or are you sending 1020 per month to this catagory?

How much per month can you put toward debt?

I would suggest focusing on repaying the 401k loan first. It is the smallest debt, and the 2nd highest interest rate. Get that money back in your account and compounding toward your retirement. Never borrow from it again.

[jIM_Ohio]

$800 for gas food and discretionary spending seems high considering the debt you are in.

$88 for home phone, dsl and cell phones is high because you cannot use all 3 at same time. Elimate home phone line for example.

Based on your take home $(2352), you should be setting aside 20% or $470 per pay period into 401k or applying this amount to debts in addition to current payments. You need to cut spending and live on less than you earn.

Apply the 20% to debts until debt free
then use 15% of this to fund 401ks
then use the other 5% of this to increase the emergency fund.

[familyof4]

Originally Posted by zetta

Is 1020 the balance in Savings/Emergency, or are you sending 1020 per month to this catagory?

How much per month can you put toward debt?

I would suggest focusing on repaying the 401k loan first. It is the smallest debt, and the 2nd highest interest rate. Get that money back in your account and compounding toward your retirement. Never borrow from it again.

1020 is the amount per month we can put into an account.

I was thinking of taking that amount and depositing it bi weekly (510) into a higher yeild MMA. Then after 12 months dump a large chunk of that on the home eq loan.

800 per month does not go far, that is 200 per week with both my wife and I working.. gas alone is little over 100 per week, then food is high, small spending amounts. we don't eat out, we don't shop at stores for things we don't need. We are funding 9% into my 401k currently and I think have been doing a good job at getting the monthly bills under control.

[myself]

Originally Posted by familyof4

Here is a current snap shot. We paid some things, consolidate and it leaves us better off to deal with the upcoming year. Our salaries did not change much (2352 bi weekly), but we should see a raise within 3 months. I hope to take some of the savings and further reduce the debt. The only loans we currently on are Primary mortgage, home eq, my 401k loan, lease and my student loan.

Any more advice?

Mortgage / taxes/ home insurance___________________1,462.50 OWE 159150.00 6.5% fixed
Home Eq ___________________________________ 210.00 Owe 17800.00 7.25 fixed
Vehicle 1 Lease___________________________398.00 Have 18 payments left. Are advertising it for sale now.
Son / Daughter savings acct_________________40.00
401k Loan_______________________163.86 OWE 3100.00 6.75%
Auto Insurance_______________168.00
Snowmobile Insurance______________27.00
Life Insurance______________53.05
Student loan______________47.74 OWE 9300.00 6.1%
Power_________________90.00
Satelite_________________42.98
Cell Phone________________53.00
Home phone / DSL__________________25.55
Garbage_______________17.50
Heat_______________100.00
Spending / Gas / Food______________800.00
Savings / Emergency________________1020.00

Since you have your spending pretty much under control.
A couple of suggestions:

1. $1,020/month toward savings/emergency should be directed toward your 401K loan to pay yourself back ASAP. Heck, you'd have it paid back in full in 3 months!
2. What's the balance of your savings? You should be prepared to replace the Leased vehicle when that lien is up. After paying of the 401K loan, start to build this up.
3. After saving up enought to pay cash for a replacement vehicle (or darn near it), work on paying off the other car loan ... if it's not gone already.
4. You didn't mention it here (I don't think), but I'm hoping that the kids are doing some work around the house for $40/month.
5. I honestly never heard of "snowmobile insurance". Is that to protect the rider, or from someone stealing it?

Overall, it looks like you're doing pretty well, contratulations.

[familyof4]

Originally Posted by myself

Since you have your spending pretty much under control.
A couple of suggestions:

1. $1,020/month toward savings/emergency should be directed toward your 401K loan to pay yourself back ASAP. Heck, you'd have it paid back in full in 3 months!
2. What's the balance of your savings? You should be prepared to replace the Leased vehicle when that lien is up. After paying of the 401K loan, start to build this up.
3. After saving up enought to pay cash for a replacement vehicle (or darn near it), work on paying off the other car loan ... if it's not gone already.
4. You didn't mention it here (I don't think), but I'm hoping that the kids are doing some work around the house for $40/month.
5. I honestly never heard of "snowmobile insurance". Is that to protect the rider, or from someone stealing it?

Overall, it looks like you're doing pretty well, contratulations.

I will pay the 401k back now.. especially since stocks prices are low and that 3k will work more for me now buying up stocks at a lower cost.

Our Savings is about 1k, we may need to pay a septic cleaning bill out of it (300.00)

There is no other car loan. we only have the lease with 18 more payments.

The kids, age 7 and 3, maintain their toy room and bedrooms.. the 7 year old does more of course. The money is more for a jump on college for books or fees.. they don't see that money nor spend it.

The snowmobile insurance is like an auto policy, theft, liability, collision and is required to ride in pretty much any state I would take them.

Thanks for the praise, we feel better about things and plan to continue to become debt free and saving more and more each month.

[anonymous_saver]

Originally Posted by familyof4

So I am attaching a clip of my excel sheet I am using to layout our expenses. I know there is room to cut, room for reallocation and we need to adjust some things. We also have room to sell a few small value assets to reduce the debt. We have not decided on anything but to organize yet and get on a start for the pay down. We are in the initial stages.

All bills are on time and the mortgage is paid up until July 1st. We get paid this Thursday and every two weeks after that. My first main question is with the 104.00 surplus, I want to reduce some of the credit card debt. There are two current cards we are required to make payment on each month. Card 1 has the lowest balance which is collecting interest at 730.00. Do we put the 104.00 on that card until it is paid? Do we adjust a little from the EF and savings to knock it off? Once we get in the groove, we can apply this logic to the next debt.

I realize we have 3 bills that are in deferred interest. One of those has a 430.00 balance, which we may be able to take a side job payment and sack it on that and close it. We can’t rely on any side money because it is not set in stone. The other two are decent sizes and I am not sure what the approach will be for those. The Appliances, we may be able to take out of the savings when January hits.. or we may get additional side work that will allow us to pay it in full or that might be a sale of an asset to pay them off. We have not decided this yet.

The tractor is more of a need. We dealt with older run down machines and they will just not handle the work we have on our property, we use this all year to cut grass, plow snow and maintain our property. This is something I will keep and pay on, even if I work in a bi-weekly payment schedule to reduce interest.

Another possible area we can apply funds is the heat bill. We can take the 100.00 per month we are saving and pay off debt, then deal with the heat bills as they occur in the winter. We are stocked with about 2 months of coal and have a monthly fill plan on propane which is then billed upon fill up.

Please save the lectures about the amount of debt, the position we are in… so on. I read it all in my first thread and I do agree with all of it. Lets try to stay focussed on the solution to the problem, not the fact that there is a problem.


Mortgage / taxes/ home insurance___________________1,462.50 OWE 160450.00 6.5% fixed
Vehicle 1 Lease___________________________398.00
Vehicle 2 Loan_________________260.00 OWE 4888.00 8.5%
Son / Daughter savings acct_________________40.00
401k Loan_______________________163.86 OWE 3900.00 6.75%
Personal Loan___________________260.00 OWE 5285.171 5.75%
Credit Card 1_______________40.00 OWE 730.00 14.5%
Credit Card 2______________40.00 OWE 1250.00 13%
Auto Insurance_______________185.00
Snowmobile Insurance______________29.00
Life Insurance______________52.00
Student loan______________47.74 OWE 9500.00 6.1%
Power_________________90.00
Satelite_________________42.98
Cell Phone________________53.00
Home phone / DSL__________________25.55
Garbage_______________17.50
Heat_______________100.00
Tractor (def interest till Sept 08)___________0.00 OWE 4799.00 not sure of %, I will find out
Appliances (def interest till Jan 09)__________0.00 OWE 2150.00 not sure of %, I will find out
Store Card (def interest till Feb 09)_______________0.00 OWE 430.00 not sure of %, I will find out
Spending / Gas / Food______________800.00
Savings / Emergency________________430.00

(1) Stop putting money towards your emergency fund. How much do you have saved up currently? Do you have it at a high interest online savings account? I would leave only one months worth of expenses and use the rest to pay off your highest interest debt - immediately. Also, make sure both of you are contributing to your employers' retirement account up to their match only.

(2) These are things I would do if I were you. Get rid of the leased car. If you have lost money on the deal, it doesn't matter. Sometimes we need to cut our losses you know? Once you get your finances in order, feel free to buy a used car with cash. Although I personally would suggest taking public transit to save a TON of money.

Stop putting money for your son & daughter into a savings account. It is more important to get rid of debt first. Once you only have your mortgage payments left over, start this up again if you want.

As far as your 401(k) loan. NEVER take money from your 401(k) again. Please don't do this, this is important to keep your retirement money as retirement money.

Stop using your CC and don't get yourself in anymore debt. Only buy needs, not wants. No more weekend trips for awhile. Yes, this might be hard, but if you do it. You can get debt free much sooner!!

Unless you need the snowmobile or the tractor for work, get rid of them. I'm thinking the tractor may be for some kind of work, but is the snowmobile a luxery?

Even though your phone/internet doesn't cost much, I would get rid of it. Do you have internet at work? Do you really need a cell phone and a landline? I would get rid of this for a year or two until you get your finances in order.

If I were you, I would start to detail your food/groceries/spending money category. Start categorizing this like "necessities" for things like deoderant, or toilet paper. Try to cut costs here once you have an idea where you are spending your money. I suspect you may be able to easily cut out $100-$200 in this category. Again, these can be temporary changes, until you get your debt paid off.

(3) With all of the changes in "step 2", you will free up a lot of money. Once you do this start paying minimum on all debts and put ALL extra money towards the highest interest debt. Once that debt is paid off, go to the second highest interest debt. Keep in mind your debts that are currently at 0%, when they start charging interest make sure you re-evaluate what is your highest interest debt.

(4) I wouldn't actually suggest selling your home. I think that's a reasonable home to have with your income. Especially when you get everything else in order.

(5) Once your debts are paid off, start increasing your emergency fund and your retirement accounts.

I will look forward to hearing about what choices you make. Good luck, you guys can do this!!!

[jIM_Ohio]

Originally Posted by myself

Since you have your spending pretty much under control.
A couple of suggestions:

1. $1,020/month toward savings/emergency should be directed toward your 401K loan to pay yourself back ASAP. Heck, you'd have it paid back in full in 3 months!

Overall, it looks like you're doing pretty well, contratulations.

I would second this suggestion. If you are putting $1000/mo into savings while carrying debt, and that $1000 is around 25% of net take home right? That is high- so if you have an emergency just reduce the amount sending to bills, and no need for savings right now.

That $1000/mo

pays off 401k loan in 3 months

OWE 3900.00 6.75%

gets you $164 added to budget

oct-nov-dec
Then I would pay off
pays off store card in 1 month

OWE 430.00 not sure of %

jan
Then I would pay off

store card in 2 months

OWE 2150.00

feb-mar
Then I would pay off

tractor in 5 months

OWE 4799.00 not sure of %

apr-may-june-july-aug
Then I would pay off

vehicle 2 in 5 months

260.00 OWE 4888.00 8.5%

gets you $260 added to budget

sep-oct
Then I would pay off

credit card 1 in 1 month

40.00 OWE 730.00 14.5%

gets you $40 added to budget

nov
Then I would pay off

pays off cc2 in 2 months

OWE 1250.00 13%

gets you $40 added to budget

dec and jan.

If I did that right debt free in January of 2010 or sooner.
$500/month is added into budget then because all debts are paid off.

[familyof4]

anonymous_saver, jIM_Ohio.. although I appreciate your responses.. and it looks like you poured allot of thought into them. You really need to read all posts before you posts replies.

Go back and you will see the 401, we now owe 3100 on and the rest of the debt was rolled into a fixed home eq. We are able to take care of extra money now free to tackle the debt much quicker. We are down to Mortgage, Home eq, lease, student loan and 401k.

I think we have done well.. and not just by consolidating, although that helped the greatest.

Please read more carefully.

[jIM_Ohio]

Originally Posted by familyof4

anonymous_saver, jIM_Ohio.. although I appreciate your responses.. and it looks like you poured allot of thought into them. You really need to read all posts before you posts replies.

Go back and you will see the 401, we now owe 3100 on and the rest of the debt was rolled into a fixed home eq. We are able to take care of extra money now free to tackle the debt much quicker. We are down to Mortgage, Home eq, lease, student loan and 401k.

I think we have done well.. and not just by consolidating, although that helped the greatest.

Please read more carefully.

I have read most of the posts, but when typing a reply, I can only look at most recent posts and I was copying from what someone quoted. Sorry.

[TBH]

I don't agree with the people who are counseling the OP to reduce his savings. As other people mentioned, it's not truly an EF, it's more of a savings account for irregular expenses. That is a CRITICAL step in the process of reducing reliance on credit. I do think it would be good, at some point, to set up a real EF, a do-not-touch-unless-the-sky-is-falling account. Very different from vacation savings which I think the OP mentioned using it for. Again, I think the kind of saving the OP is doing is really good. You can't stop the debt cycle unless you get a little bit ahead so irregular expenses don't force you to bust out the plastic again.

Also, I think 800 per month for food and gas for a family of 4 is not very high. If the OP owns a tractor and a snowmobile, I doubt there's a light rail system right outside the house. Probably it would be hard to get this number down very much. I also think phone expenses are quite low. How did you get a landline and DSL for such a low amount? Good for you.

Some other comments:

* I like that you consolidated the debt. Down with credit cards!
* I like that you have the leased car on the market
* $40/month for two kids for college is not that high. It's mostly to get in the habit of saving for them, and it will add up over time. I would not cut this out. This is all part of changing your relationship with money. You are going from being overextended and spending too much on stuff to being a family who is saving for your kids' education. To me the psychological importance of that is worth a slower debt paydown schedule.
* I agree that you should pay down that 401k loan ASAP. You have enough people tsk-tsking at you for having taken it out in the first place. It doesn't sound to me like you'll do that again.

The only tough-love thing I'd say is you should look at where that savings is going when you are putting it in your EF. If you're saving that much every month, and your balance is that low, I think you are probably tapping it for things that should be in your budget already. Where are clothes in your budget? Where is car maintenance? Where is the money that is going to make Santa Claus come this year? A more realistic budget, and separating out the savings for your EF and for irregular expenses, will help you get clearer about where your money is really going.

Good work, good luck, and keep us informed.

[familyof4]

Finally a straight shooter that makes sense.. thanks TBH.

My landline and DSL are in one bill I pay 25, my company refunds me 43.00 for the dsl for those times I need to work at home. Therefore i can not kill the landline, it will kill the dsl also. they come hand in hand.

I really raised my brow at some posters saying sell the house and you need to live off of bread and water. I realize i have debt, I realize that in the past, the debt has not been managed and things in life crop up... I made mistakes and took out loans.

Sometimes the off the hip comments to resolve an issue is not the way to go about it. You all need to realize that a calm steady approach with weighing many options will prove better than just automatically jumping. relax a little, think things out and they will come to you.

Now, we are making good money, have a savings plan in place. i feel we did well in the last three months by getting to where we are now.

I do agree that I need to break down the budget further and allocate to those things like vehicle maint, clothes, school expenses, vacation funds.

I am sure in the next 6 months I will be even further along and will look back at these posts and see from where we started.

My next steps are:
Eliminate the 3100.00 401k Loan.

Get out of the lease or at least make plans to replace the lease within 18 months with a no-loan vehicle.

Pay down my student loan faster, maybe even refi into a lower rate.

Pay off the HEL in under half the 10 year term.

Again, I am 31 years old and have time to make up for my mistakes.

[glock35ipsc]

Originally Posted by familyof4

I really raised my brow at some posters saying sell the house and you need to live off of bread and water. I realize i have debt, I realize that in the past, the debt has not been managed and things in life crop up... I made mistakes and took out loans.

Sometimes the off the hip comments to resolve an issue is not the way to go about it. You all need to realize that a calm steady approach with weighing many options will prove better than just automatically jumping. relax a little, think things out and they will come to you.

I haven't seen any "off the hip" comments, but I have seen a lot of very good suggestions that are well thought out. Sometime, radical moves need to be taken, like paying off debt instead of simply moving (consolidating) the debt. TBH may like that you moved the debt into a HEL, but that just took unsecured debt and moved it to secured debt, putting your home at risk. Yikes.....

Many of the suggestions I have seen are proven techniques to move one out of debt as quickly as possible and to start building wealth. That should be the goal.

Again, I am 31 years old and have time to make up for my mistakes.

Yikes, famous last words....