Need sound advice

[kork13]

A few places I'd make cuts... I apologize if I seem overly blunt at times, but the good news is that there really is alot of "give" in your budget here.
* Cable/Internet/Cell phone -- do you have premium cable channels? Cut them. Go to basic cable, or turn it off entirely. Change to the cheapest internet service you can get (short of dial up, perhaps). Cut out the frills on your cell phone--texting, unlimited minutes, data plans, etc. Only pay for what you seriously use/need each month. You should be able to drop this from $210 to about $130, if not less.
* Wife's cell phone -- as DS said, bundle her plan with yours. Again, drop the frills. A $40-$50 cell plan is enough for most people's telephone needs.
* Dining -- Cut it completely. Bring lunches to work, and cook your meals at home.
* Groceries -- $500 for two people (you haven't mentioned any kids)? That's insanity... You should easily be able to do this on $250-$300/mo. Shop for food by unit price ($ per ounce), and get store brands. Trim down the frequency of high-cost foods, like beef/other meats, cheeses, and pre-packaged foods. Again... COOK ALL OF YOUR MEALS AT HOME.
* Clothing -- I'm guessing you've got all the clothes you need... stop buying new clothes. Cut this down to $0.
* Personal care -- .... not really sure what this could be... $10 haircut for you every few weeks, and $30-$40 (I really don't know) for her trim/styling maybe once/mo... You should be able to take this down perhaps to $50/mo.
* Household/yard care -- do you have a yard/maid service? If so, lose them both. $20 to the kid down the street for a mow/trim every couple weeks, and one weekend/mo spent cleaning keeps a house in fairly good order. This can drop to $50/mo.
* Miscellaneous -- The ever-present and oh-so-misleading "miscellaneous"... Do you really know what that actually goes to? Try to find out, and minimize it. I'm guilty of this myself as well, but you really need to try to know where every cent goes, and if you don't need to spend it, don't. Try to bring this to no more than $50/mo on random little expenses. Everything else, you want to know exactly what you're spending your money on.


You CAN get out from under the debt you're in... it's just going to hurt for a while until you get used to controlling your lifestyle. You can do it.

[Granite]

I have had to cut back drastically due to loss of income. Here are some things I did:

*Cancelled land line
*Cancelled internet at home
*Grocery shop from sale flyers (stock up when you see items on sale)
Don't buy any new clothes (except for undergarments & items REQUIRED for work such as uniform) everything else can be bought second hand
*Don't eat in restaurants, no vending machines either
*Pack lunches daily for me and spouse
*Put spouse on a weekly allowance (cash only)
*make my own laundry detergent
*bake my own bread (bought a used bread maker for $8)
*track my expenses daily using an excel spreadsheet
*transfer balances to zero percent offers (you have so many cc's that I don't know if you will be able to do this)
*got a second job on top of my full time job
*bartered for things such as appliances and services
*cook from scratch, use the crockpot (items will cook while you are at work)
*cut back on pop or drink generic stuff
*no bars (buy alcohol on sale and drink at home) if you drink

[funwithdebt]

Thank you all for the advice on places to cut in the budget. Yes we will be canceling cable. Internet is needed for work as is my cell phone. We can probablly drop the telcom bill by about 100 bucks. I do think we can reduce grocery and dining out, the only thing I didn't really see is medical (perscriptions) in our original budget. The Home budget is supposed to be there to handle reapairs and such.

Could we drop a car and save another $500? Probablly, but its a pretty hard decision to make.

The biggest issue is that overall, we have tried several times to reduce our budget, and be frugal, and yet we keep ending up on the same situations. My wife has an ulcer from stress (her work is tough as well). In general, she feels that we've been unable to stick by this in years past, and she is tired of fighting this. And to her point, even if we do this, it will take years longer to pay all this off. (Unless the cards negotiate the balances down, but then of course there is income tax to consider).

I would like to try two more months at being on a tight budget, and see if that will work.

I'm also curious to hear your opnions on Chap 13, and honestly why you find it a bad idea.

[funwithdebt]

I would love to get a second job, but I travel work at times so that would be difficult. I do Software Development, and would love to moonlight if I can find it.

[Granite]

bankruptcy shows up on your permanent credit record and can affect your ability to obtain employment if you have to switch companies at some point in the future.

I don't recommend it as you are just going to pay someone to do what you are able to do for yourselves

sit down together as a couple and read the Total Money Makeover by Dave Ramsey. make a plan to get the debt paid off. Get a poster board or start charting your debts and payments. be a team and work on it together. You have a great income, and you can do this.

I paid off 20K in debt last year on an 80K income. If I could do it, my husband is a big spender who smokes and drinks $$$$$ you can do it too !

[kork13]

TThe Home budget is supposed to be there to handle reapairs and such.

So is this actually going to a savings account set aside for home repairs? Or is it just "there if you need it", and when unused, it slips into the "miscellaneous" category? It's a great idea, just make sure it's ACTUALLY going to repairs (or saving up for them), not simply an added buffer in your budget.

The biggest issue is that overall, we have tried several times to reduce our budget, and be frugal, and yet we keep ending up on the same situations.

It's very hard to change your habits, but quite simply, unless you change them, you'll only find yourselves in this situation time after time.

I'm also curious to hear your opnions on Chap 13, and honestly why you find it a bad idea.

In my eyes, 3 problems with bankruptcy... First, it's irresponsible and dishonorable... A person racks up tremendous debt, then decides to give up and gets it all wiped away--all the while, to the detriment of the creditors. Second, it's absolutely terrible for your credit. Not only can you not get a car loan, credit card, mortgage, or whatever.... But you can be denied employment, insurance rates go up, you have to pay huge deposits on your utilities, landlords can reject you as a tenant, etc. Lastly, it's like giving liposuction to someone who still has a terrible over-eating habit... You're spending more than you can afford, and if you get it all wiped away, you'll just get back in debt (to the analogy, they'll just put the pounds back on). Pay it off (exercise off the pounds), and you'll learn how to truly control your expenses and lifestyle (control the weight), and you'll be a more knowledgeable, responsible, and disciplined person.

[disneysteve]

I'm also curious to hear your opnions on Chap 13, and honestly why you find it a bad idea.

In my eyes, 3 problems with bankruptcy... First, it's irresponsible and dishonorable... A person racks up tremendous debt, then decides to give up and gets it all wiped away--all the while, to the detriment of the creditors. Second, it's absolutely terrible for your credit. Not only can you not get a car loan, credit card, mortgage, or whatever.... But you can be denied employment, insurance rates go up, you have to pay huge deposits on your utilities, landlords can reject you as a tenant, etc. Lastly, it's like giving liposuction to someone who still has a terrible over-eating habit... You're spending more than you can afford, and if you get it all wiped away, you'll just get back in debt (to the analogy, they'll just put the pounds back on). Pay it off (exercise off the pounds), and you'll learn how to truly control your expenses and lifestyle (control the weight), and you'll be a more knowledgeable, responsible, and disciplined person.

I agree with kork13. You've told us this:

we have tried several times to reduce our budget, and be frugal, and yet we keep ending up on the same situations.

Guess what. Bankruptcy won't solve that problem. Your current debts will get wiped off and before you know it, you'll be right back in debt because you didn't fix the spending problem. Now is when your back is against the wall and you absolutely must cut back. If you can't do it now, what makes you think you'll be able to do it after bankruptcy?

I'm definitely not suggesting that paying off 200K in CC debt will be quick or easy. It will likely take 5 years or maybe even more (or less if you can sell a lot of stuff to raise cash or find another way to boost income). You created this debt. It is your responsibility to pay it back if you are able and from all you've posted so far, I think you are very capable of repaying your debt.

Sometimes, bankruptcy is inevitable. When somebody making 40K racks up 200K in medical bills, for example, there's no way for them to pay it back, especially if their health condition affects their ability to work. I've got no problem with someone filing then. But if the debt is mostly from over-spending and you have a substantial income and plenty of fat that you can cut from your budget, you need to do that, not file to get out of it.

Look. We earn less than you, though not dramatically less. We save over 20% of our gross income. We could easily cut another 5% out of our spending if needed. You should aim to direct at least 25% of income toward debt repayment. That would be $37,500 in the next year. Add to that the proceeds of all the stuff you are going to sell and you should be able to knock out $40,000 or more of your debt over the next 12 months. And then another 40K the year after that, and so on. Any raises go 100% toward the debt. In 5 years, you'll have repaid at least 200K.

[funwithdebt]

Well, actually paying $5000 a month according to the snowball calc will have us out of debt in 58 months, give or take of course.

Now that does mean reducing the amount of things we spend on, and we are going to go to a cash basis for the next two months and see how this works out.

Now, of course, if there is a job loss, well then not much choice if that happens.

Regarding BK as being irresonpsible or dishonorable, I don't really see it that way. In a chapter 13, due to our income, I would likely pay back 100% of the debt owed to the credit card companies. Only in chapter 7 do you get a complete dismisal of all debt. In my case, the only negative to the CC company is that they don't get to make intrest on me.

Chapter 13 is a 3 to 5 year plan. I would be on a fixed budget and would have to learn to live on it as well. In addition, yes your credit is affected, but its not all doom and gloom, there are plenty of people that are able to obtain affordable loans and the CC scores are in the 700s soon after.

So we are going to pursue the snowball plan and our reduced budget for now.

[disneysteve]

Well, actually paying $5000 a month according to the snowball calc will have us out of debt in 58 months, give or take of course.

Chapter 13 is a 3 to 5 year plan.

So you are looking at about 5 years either way. That being the case, why would you consider bankruptcy? What's the benefit of going that route?

[tripods68]

You have 18 credit cards with monthly payments around $4200 per month. I'd look to CONSOLIDATE CONSOLIDATE CONSOLIDATE before anything else.

Make that 18 credit card to about 4 cards even if it takes you couple of years in the process. Forget about filing bankruptcy. There is a possibility a JUDGE won't approved because of your Income. Give yourself a 5 year plan in paying down these debts.

But seriously starts mowing loan yourself, cut clothing allowance, eliminate entertaining and/or miscellaneous that help pay down your bills.

[funwithdebt]

I already mow the lawn myself And do all the landscaping.

We haven't bought clothes in months either. As I said in the previous post, we are going to cut cable, reduce cell phones ( have to wait on the wife as her contract isn't up, but in Aug when it is her bill will drop to $50 a month like mine) I may cut the landline, but often have to fax expenses in. I'm looking for an online alternative.

We will be having a garage sale in a couple of weeks, and I'll be selling some things on ebay, etc...

I'm not sure how I can consolidate though, when I don't have any room on these cards, and most of them are closed anyway.

I will keep you posted on our progress and let you know how its going.

I did run through a snowball calc, and increasing our payment from about 4200 to 5000 will result in full payoff in 58 months. That may shorten or increase as we need to save the snowball amount or are able to negotiate lower payment terms and or settle with the cards for less than owed.

[adam_c]

Welcome to the forum Funwithdebt. First, I applaud you for being willing to put your life on display for a bunch of strangers. I'm sure that is tough, especially considering your income level and lifestyle.

A few questions I've not seen asked;
1. How old are you and your wife? How long married? Kids?
2. Do you feel that the two of you are in agreement on cutting your lifestyle and trying to be disciplined with your money?

It sounds like you guys have "lived well" as you've already admitted to. The social pressure you feel to keep up appearances must be enormous. I hope the two of you can keep your relationship strong while you try to make these changes.

Last thought- This won't be the majority opinion here, but that's okay. If you really feel like you are at the end of your rope and you find yourself ready to make that phone call to the lawyer or the DMP company, just step back and throw the bills in the trash. Take six months off, turn off the ringer on your phone and you and your wife spend some time evaluating your life and your priorities.

Will it trash your credit? Sure, but no worse than your other two options. Six months from now, you'll have some cash on hand, you'll have your head on straight and you'll be ready to tackle these debts head on. Again, this is my version of the worst case scenario.

Good luck.

[disneysteve]

We will be having a garage sale in a couple of weeks, and I'll be selling some things on ebay, etc...

I would encourage you to do ebay for anything that you think is worth at least $10. On ebay, you are much more likely to take in an amount close to an item's actual value. At a garage sale, 10 cents on the dollar is pretty standard. So a $20 item might bring $2 at a yard sale while the same item might go for $15 on ebay. People complain about ebay's fees, but when you compare it to practically giving it away at a yard sale, you can't beat it. Also, if you have any larger items - tv, furniture, etc. - use craigslist.

negotiate lower payment terms

This is important and we've all neglected to mention this. If you haven't already done so, call every one of your credit card companies and request that they lower your interest rate. Point out that you've been a good customer and made payments on time (assuming that is true) but that the high rate is a problem. The worst they can do is say no. The best they can do is drop your rate which can save you hundreds of dollars.

[wnlbutterfly]

Well....I am confused too. If the snowball plan would take 5 yrs (on your own), and the Chap 13 is 5 yrs, why do the Chap 13? Other than it is a way to be forced to follow a budget plan. Are you two on the same page with this? Maybe one is spending when they shouldn't so the other spends too?

Of course a job loss would change everything (and would probably toss you to a Chapter 7 not 13). Are you current with the bills? I assumed you were.

I believe sometimes you really have to get to the point where you want to be debt free more than you want the new shiny toy. Until that happens the cycle is going to repeat itself. I am going to go out on a limb and say most of these purchases were "wants" and not "needs". Once you see that more clearly, it becomes a little easier to take those steps to paying down the debt.

Go to the library and check out some books, Dave Ramsey, Suze O.
You CAN do this, but you have to WANT to do this, both of you! GOOD LUCK and let us know how it is going.

[disneysteve]

I just want to review all of the numbers to emphasize how fixable this situation is.

You said in the initial post that your monthly take-home is $9,000. That's $108,000/year. You also said that your current monthly expenses are $4,500. That's $54,000/year. The other $54,000 is going toward debt payments, $19,200 to the mortgage and $34,800 to the other debt. Cut expenses by $500/month, which is simple and could be more if you really tried, and you add another $6,000/year to the debt payments. That makes $40,800/year going to repay your non-mortgage debt of about $200,000 (I haven't added up the actual total and you never gave us the balances on the car loans so we don't really know the total). Regardless, in 5 years, assuming no increases in income or expenses, you will have paid back $204,000. If either of you get raises and can hold your expenses steady, you can pay back even more by directing the entire raise toward debt repayment.

This does not account for the money you will earn by selling off belongings. I'm guessing you could raise $10,000-$20,000 by selling much of the stuff you bought with all of that CC debt. Return anything that you can. Take newer clothes to consignment shops or ebay them. Sell larger items on craigslist. Sell everything else of value on ebay and have a yard sale for the low-end stuff. Take anything that doesn't ultimately sell and donate it to Goodwill to reduce your taxes due which also saves you money.

This should be done and over with in no more than 5 years. Just 60 months. Start a countdown. Post it on the fridge. List each debt line by line and have a little celebration each time you cross one of those CCs off the list. Give yourself $20 or $30 to celebrate each time you pay off a CC. Maybe go out for a cheap dinner or see a movie.

You can absolutely do this with the money you have coming in.