Please help. Too much debt, reduced pay.

[BillyShoeShineBoy]

I've been working for the same employer now for over four year, making a good wage. I make $26.61 an hour, and get a little over 40 hours a week. My take home pay is about $1780 every two weeks. Before I got that job, I worked retail for many years, struggling to make ends meet. Four years ago I felt like I won the lottery, and didn't handle the increased pay very well. Plus, until recently, I could depend on lots of overtime. I made numerous financial decisions based on maintaining lots of overtime. Well, the overtime is gone, but I still have the bills, and I would appreciate any advice I can get.

I'm married, my wife has medical issues and can't work. I have two sons at home, one in community college (he's on a program where we don't have to pay for that), and one is a junior in high school. Take home pay (Income) is $3,560 every four weeks.

We rent a three bedroom apartment that is across the street from my younger son's high school. This is a high rent area, and the rent is $1,575. We investigated other rental situations, but that rent is typical in our area for a three bedroom apartment (north of Seattle). We have a year lease.

We bought a 2012 Hyundai Accent a little over a year ago, and I regard that as the most glaring of many poor financial decisions. The car we traded in on that Accent had negative equity, and they added that negative equity into the loan. Our payment on the car is $325 a month. I estimate based on the Kelly Blue Book website, that there is roughly $2,000-$4,000 negative equity in the car.

We are on a debt repayment plan with Consumer Credit Counseling for most of our credit card debt. That payment is $268 a month for about three years.

Our Chase credit card would not work with Consumer Credit, the balance is approximately $1,000.

We don't use smart phones, but our entire family has cell phones. We pay Verizon $89.00 a month.

We have the cheapest cable TV a person can get (we don't even get the Discovery Channel), and internet, and phone through Comcast. The monthly payment is $58 a month.

In addition to the Accent, we have an old Ford Taurus Wagon (it's paid for). We have only liability insurance on the Ford, and the minimum that we are required to on the Accent. Neither of my children have driver's licenses. The older one doesn't really want one (I don't quite understand why), and we've told the younger one that he has to have a job and be able to pay for insurance before the can get one. The monthly payment for auto insurance is $160.

We used to live in another state, and when we moved here, we put much of our stuff into storage. The storage payment is $86 a month.

I think that that is everything. Food, entertainment comes out of what is left over.

I would love to get rid of the Accent. I would be willing to let them repossess it, but I think that I would still be on the hook for the negative equity. Even if they let me make payments on that, I don't know what those payments would be. We've considered trading in the Accent on a cheaper car, but then even if we could get financed, there would be still be negative equity getting added onto that loan.

I don't want to declare bankruptcy. I would appreciate any advice that anyone can offer, and I thank you in advance.

Bill

[anna_chronistic]

I think I'm confused -- you said $3,560 is every two weeks, but I assume you meant every four (roughly $3,560/mo, plus two "extra" paychecks a year, which I won't even take into account at this point). Taking that amount and subtracting the expenses you listed (and I assumed $100/mo for the credit card with the $1,000 balance), I see end balance of $899/mo. That is without utilities (unless they're included in rent?), without groceries, gas, clothing, fun money, retirement, etc. Do you have an emergency fund? You mentioned your wife cannot work and has high medical bills - I don't see those listed either.

I think most people on this board are opposed to bankruptcy unless it is absolutely necessary. I'm still working on paying down debt, but the advice I've seen here has been really helpful. However, usually the helper finance-elves require a bit more info before they feel comfortable making recommendations. Can you give a fuller listing of your debts and assets?

[BillyShoeShineBoy]

Oops. Yes, that's every Four weeks.

That $3,560 figure was every four weeks. I've edited the original post to correct that. Sorry.

I'm not sure what more to give. I have no savings. I think that the only asset I own outright is the Ford (a 1994 Taurus wagon, of unclear mileage--there's only five digits on the odometer).

I think the original post listed all of my debts. Over $10,000 debt in various credit cards, most of which are on the Consumer Credit Counseling plan. Chase that's not. Balance on the Accent as of today is $16,557.09. No 401k, although I do have a pension through my employer that is untouchable until I retire.

Bill

[disneysteve]

Welcome.

As you already know, there are a variety of problems here.

1. You can't afford your apartment. You are spending about 44% of your income when the guideline is not to exceed 28%. So you need to find a place renting for $900-$1,000. That might mean moving a little farther from town. It might mean a smaller place. Maybe the kids will need to share a room.

2. What is the total that you owe on the car? It might be worth replacing it with something much cheaper, even with the negative equity, to reduce your overall debt load and your monthly payment.

3. Get the stuff out of storage today. If you don't need the stuff, get rid of it. If it doesn't fit in your home, get rid of it. Get down to the basics, the stuff that you really need. Paying over $1,000/year to store stuff that you don't need makes no sense. The whole storage locker epidemic is mind-boggling. Millions of people are spending millions of dollars to store stuff that they really don't need. In most cases, it would be cheaper to get rid of the stuff (sell it if you can) and buy things again if and when you need them.

4. Since you are no longer getting overtime, you have plenty of time to get a second job.

5. You all have cell phones so you don't really need a land line. And nobody really needs cable tv. See how much it would cost to cut back to internet only. That should save some more money.

Finally, listing your entire budget would be very helpful. Also include the balance and interest rate for each debt.

[breathemusic]

I can't reflect this in hard numbers, but even if your wife can't work, there are things she can do that will at least help save money. If you get coupon booklets from people you know who get the paper but don't clip coupons, she could take the time to plan out your weekly shopping so that you get items on sale at the various local grocery stores and also use coupons to save money. It would cut down on the grocery bill at least.

I agree with Disney Steve that you could probably just cut cable TV and the landline. If your kids really need some form of entertainment, get a netflix or hulu account for a couple bucks a month.

Sounds to me like both of your kids are old enough to have jobs to help with some of their own personal expenses. The one old enough to be in college could certainly contribute a little bit toward expenses, while the younger one could at least make money to buy whatever fun things he wants so that you don't have to give him money any time he wants to go out with friends and such. Plus, kids should have jobs to teach them responsibility and about financial management anyway.

Also, your wife may not be able to go out and get a regular job, but there are plenty of creative ways to make a little money on the side. There are even survey sites that let you take tons of surveys and you can earn gift cards to various stores that you might normally spend money anyway. Every little bit can help.

[BillyShoeShineBoy]

Thank you. Here are some answers to your questions

Thank you. Here are some answers to Steve's suggestions:

1. I live in the Pacific Northwest, north of Seattle. The only apartments in the price range that has been suggested are one bedrooms. If I went maybe 30 miles further north, I might be able to find apartments in that price range. Plus I have a lease for another 10 months or so. Finally if there is anyway to stay here until my younger son graduates (he's a junior now), I would like to do that. However, if I have to move, I will, but I want that to be a last resort.

2. The remaining balance on the Accent is $16,557.09. I spoke with Hyundai Motor Finance earlier today, and we're working on a two month extension. I know that only delays my problems, but I'm hoping that will give me some time to figure out what to do with it. Trading it in on a much cheaper car is something that we may very well do. My fear is that we will still end up with a $300 payment even on a cheap car because of the negative equity.

3. My wife and I have been going around and around for years on the storage. The storage is in Kansas. We're in Washington state. The stuff in there that has sentimental value could fit in the Accent's truck. We would be willing to sell/abandon everything else. It's getting to Kansas that's the issue. And we've discussed just abandoning it altogether. Also, right now my wife is investigate busing down by Greyhound, shipping back the sentimental stuff, and selling everything else.

4. I've made several applications to get a second job. Yesterday I even had a job interview with a pet store. The interview went well, but my full time job only gives me Wednesday and Thursdays off--they want weekends. My job is a driving job, and I don't want to endanger the people that I share the road with by working a second job on my work days. I'm still trying to see if I can find something on my days off.

5. The land line will probably go away. We don't watch that much TV, anyway. We'll see how much we can save by going internet only.

Finally, I'll work with my wife and post a more detailed budget, including balances and interests in anther post.

Thank you very much. I really appreciate this.

Bill

[BillyShoeShineBoy]

Survey sites?

Sorry for the double post, while I was writing my last post, breathemusic posted his/her's post. I've never heard of "survey sites" before, can you post a link to one?

Bill

[disneysteve]

Thank you. Here are some answers to Steve's suggestions:

1. The only apartments in the price range that has been suggested are one bedrooms. If I went maybe 30 miles further north, I might be able to find apartments in that price range. Plus I have a lease for another 10 months or so. Finally if there is anyway to stay here until my younger son graduates (he's a junior now), I would like to do that.
Unless you can break the lease, you're kind of stuck. Long term, though, you can not spend 44% of income on housing. That isn't sustainable. I'd be searching for where you will move in 10 months so you're ready to go when the lease is up.
2. The remaining balance on the Accent is $16,557.09.
So you owe 16.5K and have negative equity of maybe 4K max. Sell the car for 12.5K. Buy a replacement for 5K plus the 4K in negative equity. That gives you a new loan for 9K instead of owing 16.5K. Drops your payment about 45%.
3. It's getting to Kansas that's the issue. And we've discussed just abandoning it altogether. Also, right now my wife is investigate busing down by Greyhound, shipping back the sentimental stuff, and selling everything else.
I think that's a good plan. Remember, it's costing you over $1,000/year to keep it there. Take a few hundred dollars, clear it out and be done. You'll save in the long run.
4. I've made several applications to get a second job.
Good luck finding something that fits your schedule.

See my comments in red.

[siggy_freud]

Hey Billy,

I'll try and not repeat the good advice others have given too much. There are two things in particular that I see, one of which hasn't been mentioned.

You stated that you pay $160 a month for car insurance, paying for the bank-required minimum on the Accent, and what I assume is the state required minimum (liability) on the Taurus. That's $1920 a year, and seems ridiculously high unless your driving record is atrocious. I'm not here to judge that if it's the case, but as a comparison, I'm 27, have 4 speeding tickets and one accident, all 4 years or more older, and full coverage, including 250k/500k/250k and low comprehensive deductible, on a 2012 Chevrolet Volt. I pay ~$305 every 6 months, or $610 per year. When is the last time you've shopped insurance. If it's been more than two years, you could probably save significant money. Your two vehicles should not cost more than 50-80 a month to insure at your coverage levels, assuming decent driving records. It's something worth looking into, and could save you measurable money per month.

The second point is just a reiteration of what has been mentioned, and that is losing the land-line and cable. Though this is a good idea, the way Comcast often "bundles" their services, it may not actually save you money, as suddenly internet alone will cost the same as it does with those other joined services. However, if you CAN find a standalone internet package, either from Comcast, Quest, FIOS, Centurylink, etc, I think you'll find you can do without TV. My GF is a much bigger TV watcher than I, so when we went with just high-speed internet, we picked up a couple of blu-ray players that had wireless internet and apps build in. Then we signed up for netflix, and hulu premium, and between those two, at a cost of $15 a month, we could watch almost everything we needed, still on TV. Not only that, but we weren't subservient to the recorder or show's schedule, but watching things whenever we wanted.

Just some food for thought. I know it seems dire now, but the hardest part is those first steps of digging out. You'll get there.

[Tree0164]

Can you survive on 1 car for a bit? If so, sell the 2012 car privately sell and try to get the closest price what you owe on the loan.

Can you look at renting a 2 bedroom home once your lease is up? Your boys will need to share a room for a bit but it would lower your housing payment.

Can your wife work at all? is she on social security disability?

Can you get a second job part time job?

Your boys should be paying their cell phone share? Get prepaid phones once your contract is up.

There are alot of things missing from your budget

[disneysteve]

You stated that you pay $160 a month for car insurance, paying for the bank-required minimum on the Accent, and what I assume is the state required minimum (liability) on the Taurus. That's $1920 a year, and seems ridiculously high unless your driving record is atrocious.

This type of comment comes up periodically so let me address it again.

Auto insurance rates vary widely depending on geography. My wife and I are 48 and have great driving records. No tickets. No moving violations. One accident for my wife 11 years ago. That's it. I would love to be paying only $1,920/year. We have two older cars (2000 and 2006) and we pay $1,385 every 6 months. And when we lived in Philadelphia, the rate was double what it is here in NJ.

So if you are fortunate to live in a low-cost insurance area, enjoy it. Just realize that many people don't enjoy the same. A high rate is not an indication of a bad driving record.

[siggy_freud]

This type of comment comes up periodically so let me address it again.

Auto insurance rates vary widely depending on geography. My wife and I are 48 and have great driving records. No tickets. No moving violations. One accident for my wife 11 years ago. That's it. I would love to be paying only $1,920/year. We have two older cars (2000 and 2006) and we pay $1,385 every 6 months. And when we lived in Philadelphia, the rate was double what it is here in NJ.

So if you are fortunate to live in a low-cost insurance area, enjoy it. Just realize that many people don't enjoy the same. A high rate is not an indication of a bad driving record.

That could very well be the case. I guess the root of my point should have been, "if you haven't checked car insurance quotes lately, do yourself a favor and ensure you couldn't save money by doing so."

[LuckyRobin]

On the car insurance, he has two boys that are of driving age and his wife, so that rate very well could be for all four of them. Insuring any male under the age of 21 will make the rate very high, let alone two of them.

[victor06]

For me you really got a good income which is you only need is to manage them.Most of the time we are very careless to our money and we are spending too much on non sense thing.Well you start controlling your self on spending money specially if not need and make a list so you can see.

[p_wyt_12]

You really are in trouble with those payments you have to do. In case your wife can still work, she can visit this link Real ways to earn money online and see if there's anything that could fit what she can do. All she needs is a computer and a reliable computer and I'm sure she'll earn from it. You can also try some of it while you are still looking for a part time job. Also, if you can find a 2 bedroom there I think it's also a good decision to have the kids share a room. They are both male so I think they'll understand. Hopefully you can get everything in place soon.