Trying your forum: 12K in debt (groan!)

**autoxer** · 02-05-2014, 04:24 AM

A 'Line of Credit' won't get you out of debt, it will just move the debt around, and if you just bought the house, then you probably don't have enough equity for them to give you a line of credit, so I wouldn't even consider that an option.

You are in your current position because of your spending habits, so you need to address them first. If the budget isn't working (they never really worked for me), try writing down every single thing you spend money on, as you are doing it. Carry around a notebook and when you buy lunch, write that down. When you buy gas, write that down. After a month, you can get a better snapshot of how you are actually spending money and you can start to choose which things can be eliminated without feeling deprived.

Once you start looking at all of your expenses, you can make some serious cuts. If you are brave enough to post your budget here, we can identify anything unusually high.

**JoeP** · 02-05-2014, 04:50 AM

We need more data, like your monthly income and where your money is being spent. List each category and the amount spent on each every month.

Are you saying that you normally pay off your credit card every month, but starting back in May you didn't pay it off and now have $12k on it? If so, what were the expenditures?

For the moment, I'd go Dave Ramsey on your situation.

1. Focus on getting an emergency fund set up so that if you have an unexpected situation like the car breaking down or a plumbing or furnace emergency, you won't have to add to your debt by putting it on your credit card. I'd shoot for $2500 for now.

2. Then attack the smallest debt and pay minimums on the others until that smallest debt is paid off, then move on to the next debt. Repeat until all your debt is wiped out. It may help to reduce your expenses (your monthly expenditures will help us advise) and possibly sell stuff like a car in order to have extra cash to work with. It may make sense to sell a car and buy one less expensive.

**disneysteve** · 02-05-2014, 04:55 AM

I agree that we need more info. We need to see your income and expenses and understand where this debt came from.

Just based on what you've posted, it sounds like you bought a house you couldn't afford since until that point, you were debt-free (and you had to wipe out your savings to buy it). I'm curious to see what % of income is now going to housing costs. It shouldn't exceed 28% but I'm guessing yours is higher than that.

I also agree that you can't borrow your way out of debt. Taking a line of credit does nothing at all to fix your problem (except possibly lowering your interest rate).

If you know you will get a large tax refund, absolutely adjust your withholding so that doesn't happen any more. You need that money in your pocket, not in the IRS' pocket.

**rlk67** · 02-05-2014, 09:07 AM

awesome

Yes, I'll give budget info later. Big Northeast snowstorm, need time to shovel. Thanks for everyone's input, I have comments later. Please (please!)...stay tuned.

**rlk67** · 02-05-2014, 09:35 AM

very briefly in between shoveling

2000 mortgage, not due to home price, but taxes are obscene (9300 a year). Jobs are here, can't leave. 7400 month income. 12K privat tuition ("Oh, now we're getting somewhere!") OK, but that's the reality.

I have exact year end breakdown of budget from CC company (my bank), I'll tell later.

**disneysteve** · 02-05-2014, 10:13 AM

Originally posted by rlk67 View Post

2000 mortgage, not due to home price, but taxes are obscene (9300 a year).

So is that $2,000 total including your taxes and insurance?

If so, that's not bad. That is 27% of income which is just at the upper limit of where you should be. The problem isn't the house as I had suspected it would be.

Certainly the $1,000/month for private school isn't helping matters but let's see the rest of the budget when you can.

**Pari77** · 02-05-2014, 03:40 PM

If I owed $12k on a CC and the interest was say 21% and I could take a loan on the house at a much lower interest, and I knew that I would not use the CC again unless I could pay it off each month, then I might think about it. However, if I am merely falling short each month of my bills, I would look at alternative options.

**rlk67** · 02-05-2014, 05:04 PM

well, yeah, I could use a 'savings guru'

Yes, the 2000 includes taxes and insurance. When we bought the house, we sort of thought is was do-able.
I agree with all of the budget comments, and the 'line of credit' comments, and the 'better to get more monthly pay' comments, and other very insightful (though-provoking comments.)
I'm not sure about paying off the student loan or car before the CC. If the CC goes up too much more, then it's out the window, and I never had two credit cards. And my minivan, btw, is the only car we have and not big enough for my family (!) and we need to upgrade, but can't.

Well...so why is the balloon growing, and why so much since last May? Let's explore...I need to find my year end summary. Stay tuned.

[I like your nickname DisneySteve, but one trip to Disney for us would set us back three years.]

**snafu** · 02-05-2014, 08:17 PM

I was captured by your ]We really do try to budget (no, really).] statement. It'll work for you when you manage your money via your budget. You set spending limits on your spending categories. Once you've spent the sum in that category spending stops. I suggest getting a free credit report from one of the four large reporting agencies in hopes of identifying a possibility of transferring credit card debt to a 0% interest account.

I wonder if your family could be convinced to accept some temporary cut backs while you and DW get better control of finances.

**rlk67** · 02-06-2014, 06:07 AM

couldn't agree more

Since I wrote that line, we've had a lot of discussion about budgeting at home. My wife is very willing to take our year end statement and do exactly what all of you have been saying, and we will.

I guess we need to figure out what to do with this CC first. I'm not sure what you mean about 0% interest 'account'. That means another CC with a 0% offer? The problem is that it only goes for a certain amount of time, and if it's not paid off, then it skyrockets to way above the 13% we're paying now.

We've noticed that most of our repetitive charges come from supermarket food and Walmart/Target type purchases. Very rarely we go out to eat, even to get pizza. Very rarely do we have a family vacation. We dont need to fix up our house. we work locally, so gas isn't the issue. I guess the supermarket, even though we don't 'overspend', is a good place to start.

**disneysteve** · 02-06-2014, 07:06 AM

Originally posted by rlk67 View Post

our year end statement

You keep mentioning this year end statement. Those are kind of useful to look at but they really don't give enough info to be helpful. Seeing a charge for $50 at Target doesn't tell you what you bought. Was it necessities like diapers, milk, underwear, and soap, or was it chocolate, DVDs, toys, and hair bows? You really need to break it down better than that.

I think the best way is to go old school. Each of you should carry a little notebook or use your smart phone to record every purchase you make for a month. Then you can sit down and review the list and see what were needs and what were wants, what can't be cut and what can.

**Petunia 100** · 02-06-2014, 07:41 AM

Originally posted by rlk67 View Post

I guess we need to figure out what to do with this CC first. I'm not sure what you mean about 0% interest 'account'. That means another CC with a 0% offer? The problem is that it only goes for a certain amount of time, and if it's not paid off, then it skyrockets to way above the 13% we're paying now.

How is that a problem? If you haven't paid the balance in full when the 0% period ends, you transfer to another 0% offer. Worst case scenario, you transfer it back to where it is right now. In the meantime, you use the money you would have paid in interest towards reducing your balance.

When I was using this method to whittle down my credit card debt, I made a habit of transferring the balance one month before the 0% period ended, so that I was never stuck paying interest at a high rate for a week or two.

**LivingAlmostLarge** · 02-06-2014, 07:50 AM

You don't have a budget or else you'd put it on here and let us see it. You think you have a budget but you probably don't. Do it and see where the money goes. I'll help.

Income

Expenses
-Mortgage - taxes, insurance, payment
-car loans?
-student loans?
-Private school tuition?
-Cable
-Cell
-Eating out
-Groceries
-Kids Activities
-gas for car
- heat/electric/oil
-car insurance
-life insurance
-medical/dental co-pays
-clothing
-any other budget categories I forgot but this will start you out.

I'm going to guess it's private school tuition.

**rlk67** · 02-06-2014, 07:54 AM

Don't worry, we'll keep feeding the kids

Two in diapers and one in nighttime'Pull-ups' adds up, but obviously that's not putting us over. (Then again, if we feed the kids less, then...)
OK, so we'll take a notebook and write down every expense. What about the idea of totally ditching the so-wonderfully-convenient-like-he's-my-best-friend CC, and only getting as much as we have cash onhand?
Incidentally, other monthly expenses include $800 health for the family--two individual plans, and kids are on state plan-- (which will only last until November since our President has kindly assisted our plan to be no longer available and only higher rate plans will be, gee, great idea, Prez), and 280/month for minivan (about 7500 left), and 89/month--school (about 9k fannie mae left). And 1000 childcare for two, in addition to the scholarship-just-14K (not 12 like I said)pre-taxed tuition. Utilities about 350/month, maybe more in summer.

It's interesting that net pay, meaning after tuition comes out and taxes, we qualify for many different programs. But gross pay, no way, and that's what everyone goes buy. We're not necessarily looking for programs, but it's interesting how it works out.

Trying your forum: 12K in debt (groan!)