What would you do?

[hmd2009]

Hello all! I've been reading this site for a few days now and you guys are really helpful, so I thought I would ask a question in regards to my situation.

I am currently employed but on short term disability until, around April of this year. I will come off of disability and will have to quit, as I cannot work at the location I was previously working, as my job was filled in my absence and there are no openings there. Of course, I am sure my company will offer me something just so they say they did, but they don't have any other contracts in my state so I would have to relocate for this to happen. DH had a job offer back home and we decided we would take that. Our house is currently for sale, but its unlikely we'll see a buyer any time soon, as the housing market there has been stagnant for years.

Now, DH has a job lined up that would pay approximately $21/hour. I previously made approximately $36/hour, so it would be a substantial pay cut. I will look for a job once there, but my research thus far shows few IT jobs (my specialty) in the area. I plan on going back to college hopefully next fall to open my horizons in the IT field. As a note, I would be using my Montgomery GI Bill and the version that passed congress last year will pay all tuition costs, plus books and fees, and pay me a monthly stipend of about $1200/month, so it wouldn't be more money out of our pocket for me to go back to school.

Our dilemma is mostly I don't know if I should be paying off debt like there's no tomorrow, because of the impending pay cut, or saving money to make minimum payments until we are back on solid footing. $21/hour certainly won't pay our bills. Here is a breakdown of our finances, and yes, I realize we're in pretty deep, that's why I'm here, trying to get our lives turned around.

Current Savings (Dollar Saving Direct, 4% APY) - 12k
incoming monthly income - 9100 (this will all go away at the end of April and DH will start his new job), a combination of my pay and compensation i'm receiving, this is all after taxes.
Mortgage - $959/month (inc. taxes & ins)
Home Equity Loan - $200/month
Cell - $80/month
Credit Card Payments - $500/month
Utilities - $400/mo (heating costs in Maine aren't cheap)
Groceries - $400/month
Car Payment 1 - $504/month
Car Payment 2 - $160/month
Taxes for Cars - $150/month
Medical Collection - $450/month (will be paid off in April)


Obviously, we have a bit of CC debt at various interest rates, from 9.0%-22%. My credit isn't good enough to get lower rates or 0% offers, I tried. Conventional wisdom says pay those down as the money in my savings account is making money at a much smaller rate than the CC companies are making off of me, but I am just not sure if I should be throwing all spare money at that, as we would only be able to pay off a small amount of it before I lose my job anyway. So, should I be throwing extra money into savings to cover us until our financial situation is stable again, or try to pay off as much debt as I can? Breakdown of our debt:

Credit Cards = Approx 30k
Car loans = Approx 20k
Mortgage - 106k remaining
home eq loan - 23k remaining

Also, we will need to find somewhere to live when we move for DH's job as well, so we would be paying a mortgage on a house that may never sell AND rent in the $400-$600/month range as well.

Also, I need to leave something in savings, in case the house does sell. We will need to pay the 6% realtor fee, as our house won't sell at profit.

Please help!

[minnie1928]

Would it be possible to rent your home instead of selling it? That way you wouldn't need to pay the realtor fees and perhaps you could sell it down the road when RE values have risen (hopefully). Could you rent it at a rate that would cover (or nearly cover) your mortgage and related expenses?

Also, car pymt #1 looks high. Can you sell the car and pick up a cheap beater car with cash? That might also lower your car insurance expense and taxes (I don't have experience w/ car taxes, so that's a guess on my part).

My initial thought is to keep the cash, but with your credit card rates as high as 22%...wow! Can you post balances and rates?

Drop the cell or change plans, maybe prepaid?

[hmd2009]

Would it be possible to rent your home instead of selling it? That way you wouldn't need to pay the realtor fees and perhaps you could sell it down the road when RE values have risen (hopefully). Could you rent it at a rate that would cover (or nearly cover) your mortgage and related expenses?

Also, car pymt #1 looks high. Can you sell the car and pick up a cheap beater car with cash? That might also lower your car insurance expense and taxes (I don't have experience w/ car taxes, so that's a guess on my part).

My initial thought is to keep the cash, but with your credit card rates as high as 22%...wow! Can you post balances and rates?

Drop the cell or change plans, maybe prepaid?

Hi Minnie, thanks for the response! My DH just got the cell phone for his freelance business before all of this happened, so he stll has like 19 months on the contract and the fee to cancel would be high. I got rid of my cell phone, though, to save money. His freelancing so far doesn't bring in much, but it got him the job he will start in April. Maybe $200/month.

Also, not really wanting to rent the house, as it needs some work and we'd end up putting alot of money into it to make it rent-ready. We'd rather sell it outright, full disclosure on what needs fixing.

As for the car, I'm upside down by like $9k (embarassing, I know). I am going to do some research on that though, to see if it might be better to tack the 9k onto a 2 or 3k loan, although thats possibly putting myself in the same position with little savings and a worse car. What do you all think?

[disneysteve]

Welcome to the site.

Can you break down the credit cards for us? List the balances and rates. The standard advice is to pay debt from highest to lowest interest rates but in your case, if you have one or two cards with small balances, paying them off (regardless of the rates) could help boost cash flow and decrease your monthly minimum payments which could be very helpful going forward.

I also want to know more about car #1. $504/month is a lot of money. What is the car currently worth (kbb.com) and how much do you still owe? How many payments remain on car #2?

I see your point about hoarding cash, but I also see the need to cut expenses. The easiest way to do that might be to get rid of some of the debt. One thing that will help a lot is having the $450/month freed up from the medical bills after April but taking a little of that 12K in savings to retire a CC might work to your advantage.

[disneysteve]

I also think $400/month for 2 people is way too much. There are lots of folks here who feed a family of 4 or 5 for that much.

[hmd2009]

I also think $400/month for 2 people is way too much. There are lots of folks here who feed a family of 4 or 5 for that much.

I agree, it is alot. It's for 3 people though (one DS). It's usually not that high, but I'm 7 mos pregnant with twins and end up ordering out b/c I don't have the energy to cook and can't stand for long periods. I'm working on it, though, with DH's help, he's doing what he can to help cook (even though he's horrible at it )

I'll work on getting the CC info right now. Thank you guys!!

Edited to add, also, when the car 1 was about a year old, I hit a 1200lb moose in the early morning hours going to work (wooded area, walked right out of the trees in front of me) and did $7500 worth of damage to the car. Does this mean the KBB value would be even lower, since its title would say it sustained that much damage??

[minnie1928]

1 kid w/ 2 on the way...I'm assuming you have and will continue to have medical insurance through all this?

Also, assuming you could sell the house, how much would you need in order to settle? Would the sale price cover the mortgage and all other related debt?

[hmd2009]

1 kid w/ 2 on the way...I'm assuming you have and will continue to have medical insurance through all this?

Also, assuming you could sell the house, how much would you need in order to settle? Would the sale price cover the mortgage and all other related debt?

Minnie, the 2 on the way are being carried for friends of mine. I do have medical coverage that is continuing through April when STD ends, and will pick up ins with DH's new job at that point.

Still working on the CC numbers, be back soon.

[minnie1928]

Minnie, the 2 on the way are being carried for friends of mine. I do have medical coverage that is continuing through April when STD ends, and will pick up ins with DH's new job at that point.

Still working on the CC numbers, be back soon.

That's is amazing that you would do that for them...you must be a very special friend and they are lucky to have you!

[hmd2009]

That's is amazing that you would do that for them...you must be a very special friend and they are lucky to have you!

Thank you!!

[hmd2009]

Ok, here are my CC numbers. I was looking at the numbers above and looks like I edited out one of my loans, I know I put it in there, hmm.. It will be listed below though:

DH's CC's:
Paypal MC - 437.21, 21.24% (Will be paying this one off right away, when i called for the balance he was ratejacked AND credit line decreased, he's now within $60 dollars of his credit line!!)
Sears - 1693.91, 22%
NFCU MC - 2760.36, 14.9%
NFCU Visa - 2852.28, 14.9%
Merrick MC - 224.63, 21.70% (Paying this one off ASAP as well)
Cap One MC - 435.00, 14.9%
Dell Preferred Acct - 1800, 21.75%

My CC's:
Wal-Mart - 77.97, 14.9% (Paying off)
NFCU MC - 5780.32, 12.45%
NFCU Visa - 5464.95, 11.9%
Citi MC - 3307.87, 13.24%

NFCU loan - 5222.12, 14.75% (167/month)

This is all actually better than it was a few months ago. Right when I got put on STD I started madly paying stuff down, paid off several lower balance credit cards and a $7k loan that had a 19% interest rate

[hmd2009]

Also, I do have over 45k in available credit, but with the interest rates I have I don't think it would be a good idea to transfer over balances.

I also have a 10K LOC thru Navy Fed with a 14.9% APR, 0 balance, would it be a bad idea to transfer some of those 20%+ over to this??

Thanks again guys, in advance, for the help!!

[disneysteve]

Paypal MC - 437.21, 21.24%
Merrick MC - 224.63, 21.70% (Paying this one off ASAP as well)
Cap One MC - 435.00, 14.9%
Dell Preferred Acct - 1800, 21.75%(

I would take $2,500 from savings and pay off these 4. Three are among your highest rates and they have small balances so you can get rid of them and reduce your monthly debt servicing burden, thus improving cash flow. Getting rid of them also will improve your credit utilization ratio and bump up your FICO score, maybe even enough to call the remaining cards and get the interest rates lowered.

[disneysteve]

I also have a 10K LOC thru Navy Fed with a 14.9% APR, 0 balance, would it be a bad idea to transfer some of those 20%+ over to this??

Is the rate on the LOC fixed or variable? If it is locked in at 14.9%, I'd transfer the Sears balance to that. If it is variable, it is probably still worth doing because you'll save money immediately even if the rate goes up later.

[hmd2009]

Is the rate on the LOC fixed or variable? If it is locked in at 14.9%, I'd transfer the Sears balance to that. If it is variable, it is probably still worth doing because you'll save money immediately even if the rate goes up later.

Steve, yes it is locked in. Will do ASAP. Thank you!