Update of my financial situation.

[FoolFromAZ]

more than 15 months back when I first joined this forum, I had 280K on first and second mortgage combined. 25k on car, 55k of cc debt, emergency fund was 0, retirement accounts had 4K.

current situation, 276K on first and second mortgage, 21k on car, 45K on cc debt, emergency fund has 10k, retirement accounts have 24k.

meanwhile i had an employment break once and was out of job for a month and my wife was out of job for nearly 4 months. our combined income is 20K lesser that how much we made before the break.

Any suggestion or advice?

[Seeker]

Congratulations.

You've tackled and accomplished a lot these 15 months....

4k to mortgage paid
4k to car debt cleared
10k to CC debts cleared
10k to an emergency fund saved
and 20k to retirement saved

So in a little over a year, you've managed to better your situation by almost 50k.

You & your wife's income now is 20k less.... but you're both working now. Which is a good thing in this economy. And you have a 10k EF to fall back on if things turn sour.

Sounds like you're on the right track. Not sure what suggestions/advice you're looking for.

[FoolFromAZ]

Congratulations.

You've tackled and accomplished a lot these 15 months....

4k to mortgage paid
4k to car debt cleared
10k to CC debts cleared
10k to an emergency fund saved
and 20k to retirement saved

So in a little over a year, you've managed to better your situation by almost 50k.

You & your wife's income now is 20k less.... but you're both working now. Which is a good thing in this economy. And you have a 10k EF to fall back on if things turn sour.

Sounds like you're on the right track. Not sure what suggestions/advice you're looking for.

Thanks Seeker. should I stop sending money to EF and payoff cc debt aggressively from now? or take a loan from retirement accounts and pay off cc debt? or should I move funds from EF to payoff some of CC debt?

currently apr of all our cc debt is 6% or below. only 4K of that debt has variable intrest. rest of the debt is fixed as long as I dont miss any payments.

[jIM_Ohio]

Thanks Seeker. should I stop sending money to EF and payoff cc debt aggressively from now? or take a loan from retirement accounts and pay off cc debt? or should I move funds from EF to payoff some of CC debt?

currently apr of all our cc debt is 6% or below. only 4K of that debt has variable intrest. rest of the debt is fixed as long as I dont miss any payments.

good work
progress comes in small doses

I would divert MOST of the budget for EF to the debt

for example if you contributed $200/mo to EF, do $150/mo to debt and $50/mo to EF
add a little to EF
tackle the debt a little more aggressively

I might also only contribute retirement up to match, and apply all extra towards the debt as well.

[Seeker]

Re EF:

if your EF will cover 6 months of your current monthly expenses... I wouldn't touch it.

If your EF does not yet cover 6 months, keep adding to it.

If your job looks like it may go away, then consider a greater than 6 months EF.

Re retirement:

Retirements funds are just that... meant for retirement. Never borrow from it... never paralyze your future, let it grow unhindered by dips/delays as borrowing represents.

---

If the above is good enough for now, and you still have extra income:

Then I'd start paying more toward CC debts, beginning with the highest interest ones first.

[mom-from-missouri]

Good job, keep it up!

[ActYourWage]

good work
progress comes in small doses

I would divert MOST of the budget for EF to the debt

for example if you contributed $200/mo to EF, do $150/mo to debt and $50/mo to EF
add a little to EF
tackle the debt a little more aggressively

I might also only contribute retirement up to match, and apply all extra towards the debt as well.

I agree.

[Tree0164]

Good work!

I would focus on trying to pay off your credit card debt. I would keep the efund fully intact and be aggressive in paying off those credit.

1. Get the credit card paid off - credit card terms can change even though they say they won't once you get that noose off your neck.
2. Car

I would only do the match for retirement until your get the car and credit card paid off

[anonymous_saver]

Congrats on how you've done in the past 15 months. That is great, you should be proud of your family!

(1) Get rid of the car. Seriously. 25k on a car when you have 45k of credit card debt is too much. Even if you are upside down on the loan, take a loss if you need too. Buy a used car, take public transportation, something else, but that could clear up a huge amount of money every month.

(2) How many months of expenses does 10k cover for your family? I'd say if it's 6 months. Start putting all extra money towards the highest interest debt.

(3) Are you saving only up to your employers match in each of your retirement accounts? I wouldn't put more than the match while you are trying to get rid of this debt.

I want to say that what you are doing is commendable. I'm proud of you for trying to get through what must be an extremely stressful situation!

[asmom]

Thanks Seeker. should I stop sending money to EF and payoff cc debt aggressively from now?

YES

or take a loan from retirement accounts and pay off cc debt?

NO, NEVER

or should I move funds from EF to payoff some of CC debt?

NO

My responses assumes that your jobs are stable and that 10K is adequate to provide for your family for 3-6 months if both you and your wife should lose your job.


After you pay off your CC debt, I would split extra monies between paying off the car note and building up your EF.

[FoolFromAZ]

Thanks everyone. I did not send any money to emergency fund until 5 months ago. Until then I used to send everything I had towards my credit card debt. before I had an employment break, I had reduced my cc debt from 55 to 45K. then i had to take money again during the days we were jobless. so it went back up to 55K. then again as soon as I got a job, I had to again pay cc debt aggressively. if we had not lost our jobs, we would have paid down another 15K or so of our cc debt. 5 months ago, pretty much all the credit card banks had reduced my available credit, that really made me to think about emergency fund. since then I only paid my min payment on all the cc and start put everything I could save to EF.

as far as our retirement account is concerned, I just put 10% of my income and my wife put 15% of her income. I never got any match from employer yet. I have to wait for another several months, before I get match. But I still put 10%. I wanted to make it an habbit. thats why I put 10% although my employer has not been matching. I put all out retirement money in aggressive funds.. and 50% of my 401k is on my company stock. my company stock was very very low few months ago.. so I took this risk of buying company stocks with 50% of 401k money I had at that time. fortunately it trippled in 3 months.. that pretty much covered everything that I lost in the last year. now I have moved funds from company stocks to other aggressive mutual funds.

to answer some of the questions,

Car is kind of very necessary for us, as my office is 12 miles away from home and my wife's office is 25 miles away and my daughter goes to the day care between my office and my wife's office. I usually drop my daughter at her day care and my wife takes public bus from there to her work. We need some reliable car. so oddesey we have work perfectly for us.


10k covers only 2 months of our expenses.


After paying all the bills, I have 2K every month. So I should send $1500 towards cc debt and $500 towards EF from now on.

[creditcardfree]

After paying all the bills, I have 2K every month. So I should send $1500 towards cc debt and $500 towards EF from now on.

Honestly, in my opinion, there isn't a right or wrong answer. Two months emergency fund is not a lot, but if you think it is fine for your family considering your jobs...then go with that plan, otherwise, send it all to the EF for the remainder of the year and you have a 4.5 month EF. After it is funded you could put the full $2K to debt.

It really comes down to your comfort level and which goal you want to give priority to. Both are great goals!!

[Seeker]

10k covers only 2 months of our expenses.


After paying all the bills, I have 2K every month. So I should send $1500 towards cc debt and $500 towards EF from now on.

If you have 5k of expenses each month (I hope that includes minimum payemnts on your debts), then I personally would not feel very comfortable with that $10k Emergency fund.

If either one of you lost your jobs, how much of the $5k of monthly expenses be paid... What percentage? Digging into CC and incurring more debt is a last resort.

6 months of EF is pretty standard... you and yor wife have already been through this once. While you're both working, build up the EF savings to 6 months minimum (30k and maybe larger if your area is difficult with trying to find work).

Then tackle the credit card debts.

I'd be curious as to your budget... probably some of that 5K is toward child care... but still there may be other ways to cut back on expenses.

[anonymous_saver]

I think it would help us give some more specific advice if you gave a detailed list of all of your monthly expenses. I think we could reduce that $5,000 by a bit for ya!

It really scares me that you put so much of your income into company stock. Would you consider putting it into something more like index funds?

I'm proud of you guys for trying to get a good handle on this!

[ktmarvels]

as far as our retirement account is concerned, I just put 10% of my income and my wife put 15% of her income. I never got any match from employer yet. I have to wait for another several months, before I get match. But I still put 10%. I wanted to make it an habit. thats why I put 10% although my employer has not been matching.

It depends on your income amount and tax bracket, but 'the wise ones' say you should invest in your 401k up to the amount they match and then invest in ROTH IRAs. So you might want to look into Roths until you get the match. I commend you for saving 10%, but there might be a better way to save it.