Debt Elimination Question

**Permanent Temp** · 04-16-2014, 12:43 PM

I think we would need a bit more info like interest rates and monthly expenses. Also what have you done to curb the credit card debt? How did it get to that point in the first place?

I had paid off my credit cards in a lump sum and racked them up again. It wasn't til this time that I've managed not to rack up anything extra and its taken some willpower.

**Bferg45** · 04-16-2014, 01:01 PM

I have stopped using CC's except for business purposes when I travel. I always make a payment as soon as my company sends me my reimbursement. Well at least that is what we have started doing since we started Dave Ramsey in Feb. I doubt that we will ever use CC's again unless we are starving. I am actually doing CCCS for about $13.5K of my CC Debt. My wife owes 11K on a low interest card as well. We did Financial Peace and have the process down but what I am worried about is how we are going to eliminate this debt that we have built up. Im not worried about adding anymore to it.

**Petunia 100** · 04-16-2014, 01:19 PM

Well, how big is your shovel?

How much are you paying each month towards this debt?

**Bferg45** · 04-16-2014, 01:34 PM

I am paying the minimum's because that's all I can afford to do at this point. My question is whether I should sell my house and use the equity to pay off all my debt with some left over for our emergency fund/3 mos of exp. We live in an area where the housing prices are going up and up but the taxes are also getting very expensive. The taxes have gone up over 2K in the last year alone.

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**riverwed070707** · 04-16-2014, 01:41 PM

You'd rather sell your house than ask your wife to work?

Seen that scenario before. My dad prided himself on being the breadwinner and allowing my step mom to stay home afer raising her boys. Before he knew it they had their house foreclosed on becuase the debt was too bad to get out of and he was too proud to ask her to help. It didn't end well for them. Whether or whether not you sell the house your wife should get a job until you get out of this mess.

**Petunia 100** · 04-16-2014, 01:44 PM

What about increasing income and/or cutting expenses further? Have you already gone through your budget with a fine tooth comb to eliminate the "fat"?

Does your home fit your budget? Are you able to save each month towards future maintenance, your next vehicle, vacations, retirement, etc.? If not, selling makes a great deal of sense.

**ktmarvels** · 04-16-2014, 02:11 PM

Congratulations on taking the first steps toward becoming debt free. Knowing where you are, even if it is hard, is a great first step. Without posting your budget and/or if there is any savingsit is hard to see the entire picture and/or make suggestions on where you improve.

I assume/hope you and your wife are on the same page. You make a decent income, so with some lifestyle changes you should be able to get on your way out of debt. Not using the credit card is a great step. Next I'd try to sell things/downgrade to make some extra cash. Is Rainbow vacuum a vacuum? Can you sell it? Can you prepare meals at home rather than eating out?

If it is a priority to either save the house or to go without your wife working (or both), you might be able to do it. However, it means that every penny needs to be evaluated as it leaves your hand if it is getting you closer to those goals.

**dczech09** · 04-16-2014, 03:29 PM

I have to say that I am a bit confused. Your income is $6,950 per month and the minimum payments on your credit card is $6,550 per month?! I think you may have meant that your minimum is $655 per month on the credit card... that would make sense. That $6,550 number is WAY high!

You have a great income. Far above the average income in the US, so why you are broke has yet to be explained. I think the others are right; posting your budget may be helpful so that we can possibly provide some ideas where you can cut your lifestyle. I think you may be spending too much on other categories of your life, which is why you can only "afford" the minimum payments.

I am sorry to say, but you and your wife do not have the luxury of one of you being a stay-at-home-parent. Not right now. A stay-at-home-parent is only feasible when you can comfortably survive on one person's income. You have credit card debt, student loans, back taxes, medical debt, and a vacuum cleaner loan! Do you have a mortgage? Do you have an emergency fund? Are you saving 15% of the household income for retirement? Do you have good insurance in place? If you have kids, are you saving for their college? To the extent that things are not going on in those areas, you cannot afford the luxury of a stay-at-home-parent right now.

I don't think you need to sell the house. I appreciate your gazelle-intensity, but I don't think selling the house is the answer. I think getting on a game-plan that you and your wife agree with is the game-changer. I think cutting expenses that are out-of-whack is what you need to do. And getting some extra income in the door for a short period of time while you kill of the debt and get into a healthy position is what is necessary.

Talk to your wife about working. I am not saying that she should do this permanently, but even for a year or so, the extra income should be very helpful. Once you take down the debt, build an emergency fund, are saving for retirement/college, and have your household budget down like a science, she can stay home again.

With your current income, there is no reason you should be broke! You make over $80,000 per year! That is a great income! And with a second income, as well as some trimming of your budget, you should be able to eliminate your debt fairly quickly.

I echo the other concerns that you may end up back in debt if you sell the house to eliminate the debt. For the life of me, I do not know why you are so strapped for cash right now.

**skip17py** · 04-17-2014, 06:08 AM

If I was in your situation I would sell the home and clear all the debt. It is clear that you are stressed out being in the paycheck to paycheck cycle waiting for the next reimbursement check to arrive. By selling the house and clearing all debt, the relief you would feel would be priceless. In saying this, you must change you spending habits and live below your means. Good Luck.

**bjl584** · 04-17-2014, 06:57 AM

I think there is something wrong with your math. If you are just paying the minimum payments on the debts that you have listed, then it is unlikely that you are shelling out over $6000 a month in payments. Where is the rest of your money going?

**Eagle** · 04-17-2014, 09:31 AM

Originally posted by Bferg45 View Post

As I see it, we have 2 options...sell the house and pay off all our debt minus student loan. Rent for 2-3 yrs until we can pay a hefty down payment or ask my wife to go back to work. Im not excited about the 2nd option.

Thoughts?

Hey Bferg35! Welcome to the forums. It seems like you are starting to get your finances back on track. We used Dave Ramsey's method to become debt free before purchasing a house. You can do it!

Typically, there are more than two options in a given situation particularly relating to finances. In order to get a serious answer to your question of wether to sell or not we would need to know a few things to help you out.

1. What does your budget look like? Please list the expenses each month.

2. What can you shave off your budget? Do you have cable/satelite? Do you have a home phone? When was the last time you got a car insurance quote? What are you spending on eating out and entertainment?

3. What are the account balances on all your debts (mortgage, CCs, SL, Medical, etc.) and interest rates for said accounts? What are the minimum payments on your accounts?

4. Do you guys have kids? What kind of work experience and education does your wife have?

Consider too checking out this link about steps to get out and stay out of debt.

Hang in there and remember this is just a season of life. With some hard work gazelle intensity you can beat this!

Kind Regards,

**snafu** · 04-18-2014, 12:22 PM

Bferg,welcome to SA. I hope you'll supply sufficient details to allow us to suggest practical, helpful responses to your sell or not smart to sell question. Good on you to have decided to clear debt and understand Ramsey's system. It would help to have some idea of your spending patterns. Are you in a house that you can't afford? Are you paying mortgage insurance? What are you currently spending on Mortgage [PIT/PMI] Utilities, Food, Transportation vehicle type/yr/ payments/interest, maintenance/operations etc.

Is your CC $ 33K balance primarily spending future income? I hope you'll list items so we better understand your thinking. Are you willing to make some changes for the short term to get control of your money? Is DW on board to paying off debt and will she support your efforts?

Debt Elimination Question