Need sound advice

**KTP** · 04-06-2009, 05:25 PM

OMG, did you just start making 150k a year or have you been making that much for awhile? Normally 150k a year with a 200k house and you would be sitting pretty.

What in the world did you put on credit cards that cost 200k???

**disneysteve** · 04-06-2009, 06:16 PM

Welcome. I'd like some more info.

1. Break down the $4,500 in monthly expenses for us.
2. Break down the secured debt. How much is house? How much is cars? What are each of those assets worth today?
3. Where did the CC debt come from? How was that money spent? Was it spent mostly on experiences (travel, dining out, show tickets, etc.) or was it spent on things (jewelry, clothing, electronics and such)?

**funwithdebt** · 04-06-2009, 08:32 PM

$4500 in monthly expenses include
$1700 mortgage (1st and 2nd, 30 and 15 yr fixed respectively, decent intrest rate, includes escrow)
$570 for 2 car payments.
$1200 for gas, groceries, entertainment, medical
$700 for utilities, insurance, telecom
$200 for savings (although that doesn't seem to work out)

The house was purchased for 185,000 maybe sell for 200,00.
Cars are pretty new, both 2007, one used and purchased this year. Want to keep them as I plan on keeping them for 10 years.

The debt, about 20,000k due to a really bad tax mistake and rest was stuff we didn't need and trips we couldn't afford.

So pretty much stupid stuff. Kept telling ourselves, oh we'll fix it, and "It'll be ok" But its not.

Are them some place we can save, sure, we might be able to eek out $500 a month, but that's not going to help out very much.

We are just tired and unsure. My wife doesn't have confidence that we can do this without either a DMP, and I'd almost rather be in chap 13 than the DMP. It seems like I've read too many horror stories about them.

**creditcardfree** · 04-07-2009, 05:30 AM

Is DMP, a debt repayment plan? Those can be quite costly and it really is something you can do yourself. I have a sister in law who went through bankruptcy...it has worked out okay for her. Of course, now they pay about 18% for vehicle loans! That is quite a hit.

Personally, I would avoid the DMP and look to make my own plan. So many of us here, have paid off our own debt with a plan. It can be done.

You will probably need to break down your expenses even more, so we can help you find some areas where you can cut. How much of the $1200 is medical? Have you cut cable? Entertainment should be cut to near zero at this point. You need every available dollar towards paying this debt.

I'd look at your insurance, increase the deductibles on the vehicles if you have a cash cushion to cover it. Ours are at $1000. If you have whole life insurance, look into term.

Yes, an extra $500 towards debt repayment isn't going to change this tomorrow, but it is a start. Make a start to make ANY change and you will be better than where you are right now. Once you see some progress, you will get motivated to make other changes that right now you may not be willing make.

Please try something....before you agree to a Chap 13 or DMP.

**disneysteve** · 04-07-2009, 07:43 AM

I'm not convinced that bankruptcy is the way to go (and DMP is never the way to go), but we need details. You've given a general overview but if you want the best advice, you need to post more than a summary.

List each debt individually giving the balance, the monthly payment and the interest rate. Don't lump together the mortgages or the cars or the credit cards. Give each one separately. List the current market value of each car. List your budget line by line. For example, you listed "gas, groceries, entertainment, medical" but we need to see how much goes to each. Also, break down the income. Do you both work? How much do each of you earn? Finally, do you have any savings? Are you contributing to retirement plans?

You also need to be taking a good hard look around you and starting to sell everything that isn't nailed down. Surely, that 200K in credit card debt bought some nice things that you still own. Even if you could recover 20K by selling stuff, it would be make your situation that much better. And an extra $500/month would absolutely make a difference. Don't think for a minute that it wouldn't. Besides, saying it wouldn't matter tells me that you are acknowledging that you are still spending at least $500/month more than you need to. You're never going to fix this without changing your mindset about spending.

**funwithdebt** · 04-07-2009, 07:53 AM

I will work to get details out tonight. Gotta work for now to pay the bills

**bjl584** · 04-07-2009, 08:09 AM

I wouldn't file Chapter 13. You make enough money and have enough assets of value that can be sold to help you get out of debt. I would start by clearing out the garage and selling everything that you absolutely don't need. Put it in the paper, have a yard sale, whatever. Then, I would move onto the cars. Sell them and buy a couple gently used cars that you can pay cash for. Then, move to the household expenses. Cancel cable, internet, stop eating out, turn the a/c and heat down a bit, cut coupons, etc. As a last resort, sell the house and downgrade to something smaller or rent until you get back on your feet. All those steps should go a long way to helping you. I would also recommend picking up a few books on Finance. Dave Ramsey and Suze Orman are a good place to start. Good luck!

**funwithdebt** · 04-07-2009, 09:00 AM

Here is the breakdown:

Total inflow after taxes, etc ...
Husband: $6,630 per mo
Wife: $2,928 per mo

(everything is per mo)

Auto
Car 1: $372
Car 2: $250
Fuel: $200
Insurance: $210
Service: $50

Utilities
Internet/Cable/Cell: $210
Electricity: $120
Gas: $70
Sprint Cell (wife's cell): $80
Water: $70

Home
Mortgage 1: $1300
Mortgage 2: $300

Flexible Spending
Dining: $150
Groceries: $500
Clothing: $200
Pet Care: $50
Personal Care: $100
Household/Yard: $200
Misc.: $200

Credit Card Debt
Nordstrom $1,457.96 $73.00 21%
Best Buy $2,300.00 $50.00 0%
Chase - disney $3,600.00 $200.00 11%
BOA $5,944.59 $132.00 16%
BOA $8,099.93 $132.00 8%
Discover $10,325.64 $200.00 16%
BOA $11,351.20 $366.00 28%
Discover $11,716.00 $220.00 16%
BOA $11,759.68 $248.00 14%
Citi AA $13,478.04 $200.00 7%
Chase $13,691.74 $273.00 11%
BOA $14,229.69 $364.00 19%
BOA Gold $14,836.65 $357.00 17%
AMEX- blue $15,987.40 $357.00 11%
Citi $19,256.54 $288.00 17%
AMEX Starwood $22,064.00 $425.00 14%
Citi - $25,574.58 $352.00 15%

Total per month in credit card debt: $4,237

The flexible budget is something we just revised to help with this situation.

If we stick to the budget (which that is the #1 problem), our end of the month would look like this:

Inflow $9,558
Outflow $8,732

Net $826

Our biggest problem is sticking to a budget.

Any advice would be appreciated!

Thank you!

**Granite** · 04-07-2009, 09:13 AM

my advice is to quit living beyond your means ! you need to get some self discipline and pay off some of these credit cards. Try reading everything you can on debt reduction. If you file BK or do debt consolidation, that is a huge mistake. You can tackle this debt but you must work with your spouse and get a plan going together to do it !

**disneysteve** · 04-07-2009, 09:16 AM

Now we're getting somewhere. Still some details missing, though.

Balance on each mortgage and interest rates.
Balance on each car loan and interest rates.
Current market value of each car.

I see a lot of room for improvement. Why does your wife have her own cell plan? It would likely be cheaper if both of you were on the same plan, and that's assuming there is even a good reason for each of you to have a cell phone (I realize some jobs require them). Cable can be cancelled. Keep internet. I'm of the opinion that it is far too valuable a resource to give up.

Does "Dining" mean eating out, as opposed to "Groceries" which is food at home? If so, that's $150 that you can eliminate easily. Stop eating out.

$200/month for clothing is ridiculous. I'd bet that you each have a closet full of perfectly good clothes. Keep wearing them. Don't buy something new unless you specifically need to replace something that has worn out. And then hit the thrift shops or consignment stores to find what you need.

What does the "Household/Yard" category include? If you are paying a landscaper, cancel the service. You can pick up a used lawnmower for $25 or $30 and cut the grass yourself.

What things fall under "Misc."? $200/month is a lot of blow money given your circumstances.

That leads us to the credit cards. I would reorder that list from highest interest rate to lowest. That's the order in which you want to attack them. I'd suggest one modification to that, though. Put the Nordstrom card at the top of the list. It is 21% vs. 28% for the highest, but it is also your smallest balance. That extra $500/month (or more) can have that one cleared in 3 months. You guys should never be setting foot in Nordstrom again. That place is pure luxury, frivolous spending. There isn't a single necessity item sold within their walls. Just forget they exist.

Do you have any savings or retirement accounts? Are you still charging on any of your credit cards or does your monthly income meet your spending?

**geojen** · 04-07-2009, 09:59 AM

Originally posted by KTP View Post

OMG, did you just start making 150k a year or have you been making that much for awhile? Normally 150k a year with a 200k house and you would be sitting pretty.

What in the world did you put on credit cards that cost 200k???

How is this post in any way helpful?

**Gjowers** · 04-07-2009, 10:02 AM

I would second starting with the Nordstrom card. You can have that one paid off in no time. You then might move on to the Best Buy card since the balance is not very large. You can pay that off in a couple of months and, having built some momentum, can then move to the higher interest rate cards. I would suggest cutting up all of these cards immediately. You don't need the temptation.

Probably the toughest things for you will be 1) not getting overwhelmed by your situation, and 2) discipline.

Both will require a team effort. Keep the big picture in mind, but focus on smaller goals so that you'll see progress. Set goals together, write them down, map out a plan, and review your progress every night if necessary.

Cut your spending. You can do it, and you may just get used to doing without some things you thought were necessities.

**geojen** · 04-07-2009, 10:03 AM

I agree with DS on the things that you need to cut from the budget. I would go one step further and ask if there is anything that you have purchased that still has the tags on it. If so, you may be able to return those items and get the money credited back to your cards. Specifically the Nordstroms card--have you been going out and buying a bunch of clothes? If you can return some things, do it. It will help bring down those balances.

**disneysteve** · 04-07-2009, 11:14 AM

Originally posted by KTP

What in the world did you put on credit cards that cost 200k???

Originally posted by geojen View Post

How is this post in any way helpful?

What the credit card debt is from is very important for the reason I mentioned above. If it was spent on things, things can be sold, or returned as you pointed out. Good point about the returns, by the way.

Need sound advice