Not sure what to do.

[garetjax2002]

I should have came to this forum first, but earlier today I took out a 401k loan for $23,500. I took out this loan because I am running low on funds, and I make less money per month than the expenses I have. I know that this is only going to fix things for a while, and once this money is gone I am really going to be hurting. I will give you some additional details to facilitate your ability to give me the best advice possible. That is what I need right now. Some guidance. Some direction from someone that has been in similar trouble before, or just someone that is great with helping people figure out their debt situations.

I have a truck that I owe $14000 on ($229 per month). I have 10 credit cards that I owe a combined total of $25000 on (approximately $500 month). I have a debt consolidation loan that I owe $30,000 on ($750 per month). I have an existing 401k loan that I owe $4800 on (Bi-weekly payments of $87). I also have a house payment of $1011 a month. These are the debts that can be paid off. I also have cable ($85 per month), cell phone ($165 per month), internet ($74.99 per month), pest control ($45 per month), security system (49.99 per month), electricity ($200 per month average), water ($25 per month), garbage ($25 per month) bills that total $670 per month. That's approximately $3330 a month in bills and I only bring home approximately $2700 per month and I am about to start bringing home about $400 less per month when the new 401k loan payments start coming out of my check for the $23,500 401k loan I just initiated.

I have good credit. I have scores of 700-730 through all three credit bureaus. So I might be able to move some money around through loans or balance transfers.

Please I'm begging you to help me resolve this situation. I don't expect to be able to do anything about this quickly. I just need some guidance. I need to become more disciplined. Every time I pay off my credit cards I slowly start to use them again and before I know it I've put too much on them. I don't want to keep living my life this way. Please help.

[TheKayla]

Is anyone else dependent on you? Is there any other household income coming in? Either way, there is a ton you can cut out, which it seems you're just taking on more debt instead of fixing the issue at hand. You need to get to a point where you're making more than you're taking out.

Some things you can do today:

- Cut out cable
- If unneeded for work or any other special circumstances, but out internet
- Cut out any other discretionary spending that has gotten you into this credit card debt -- this includes entertainment spending, unneeded shopping, expensive groceries, etc. Sit down and balance your budget and only include your needed expenses. Set a budget for food, stop buying new clothes, etc.
- Find free versions of entertainment -- get a library card and take up reading, look for free events in your area, take up running, stop buying entertainment until you have your budget and debt in a good place
- Be very frugal about your utilities, take shorter showers, keep the lights turned off, use the AC/Heat less and not until its needed, etc.
- Use coupons for food and other necessities. Find cheaper and often times natural solutions for others (use vineger to clean instead of pricey cleaning products, and other frugal finds)

Some things you can do in the near future:

- Move to a cheaper home, and even a cheaper location. Where are you living now? There must be alternative housing that's cheaper
- Sell your truck for a cheaper version, or otherwise pay it off immediately with this loan and use it till it dies (I'd strongly suggest the first)
- Sell things you don't need and use it to pay off debts (after your budgets balanced, as to not just to keep you going in this direction for longer)
- Find another part-time job, or if possible work more at your current job. Ask for a raise; increase you income in some way. Don't try to increase your income at this point in any way that will make you spend money (like starting up a business with a bunch of new needed tools and expenses)
- Grow or forage for your own food (or hunt/fish if thats your thing). Also could be considered a hobby and entertainment

Once you're to a place where you can make all of your payments, keep motivated until its gone, and then build that wealth with some with some newfound tools! I suggest reading blogs there, GetRichSlowly, Mr. Money Mustache, and the like for more ideas and motivation. Soon you'll be able to start contributing fully into your 401k and pay the money back, build savings and a safety net, and be much more comfortable.

First and foremost though -- stop taking on ANY more debt, in ANY form. At this point you're better off moving back i with parents or asking for other assistance before borrowing any more from your future.

[disneysteve]

You can't borrow your way out of debt.

Let me say that again.

You can't borrow your way out of debt.

What you've just done doesn't help at all. It just moves the debt from one place to another. I assume your plan is to use the $23,500 to pay off other debt, but that doesn't leave you any better off than you already were.

What would I do?

1. Cancel cable tv. That is a total luxury that you can't afford.
2. If you aren't locked into a contract, switch to a pre-paid cell phone. If you are in a contract, find out what the early termination fee is and do the math to figure out if paying the fee will still save you money in the end.
3. Drop internet service to the cheapest available option, even if it is slower.
4. Cancel pest control. You can go to Home Depot and buy a bottle of pesticide for under $10 and do it yourself.
5. Sell your truck. If it sells for less than you owe, use some of that 401k loan money to cover the difference. Then go out and buy a replacement for $5,000.
6. Consider cancelling the monitoring on your security system. The system will still work. The alarm will still sound to scare people away. It just won't automatically call the police.
7. INCREASE YOUR INCOME. Get a second job. Sell stuff. Do whatever you can to earn more money to throw at your debt.

The fact that you already have a 401k loan and a huge debt consolidation loan really raises a red flag to show that this isn't a new problem. You've been consistently living well beyond your means and it needs to stop. The bottom line is that you can't spend more than you earn - period.

[Bob B.]

Please I'm begging you to help me resolve this situation. I don't expect to be able to do anything about this quickly. I just need some guidance. I need to become more disciplined. Every time I pay off my credit cards I slowly start to use them again and before I know it I've put too much on them. I don't want to keep living my life this way. Please help.

I had a debt problem four years ago. I cut my satellite TV. To say I don't miss it at all would be an overstatement, but life does go on. Do you eat out a lot? Cut that out, too. That was one of my biggest problems/expenses.

One of my motivators was adding up all the interest I was paying each month to different debtors. Once I lifted my jaw up off the ground, I resolved that each month I would spend less in interest than I did last month. I set up goals for myself - like I paid $YYY in this month, in a couple of months, I want to pay no more than $ZZZ in interest. That's what kept me motivated. The only way to pay less in interest is to pay down principal.

Also, if you take a mis-step, and don't pay down as much as you had planned in a given month, it's not the end of the world. Keep at it.

If you are serious about the last part of your post, the part I quoted, what you will need to do is change your mind set. Question every purchase you make. Do you need it? Can you do it without spending as much money. You didn't mention, but I get the sense that you are single with no kids? If so, you are in a prime position to turn this around. It's easier to pick up a second job, easier to cut unnecessary expenses from your life. Easier to sell your house and buy something cheaper. Or rent. You need to change your financial mindset.

There is no secret formula. Income must exceed expenses.

[Petunia 100]

I noticed you posted this on City Data too, but never came back to answer any questions. I hope you will.

How much is your home worth vs. what you owe? How much is your truck worth vs. what you owe?

Your budget does not include anything for food, gasoline, medical expenses, home maintenance, car repairs, etc. These are all very real expenses, so your monthly budget is out of balance by much more than $630 (soon to be $1030).

The solution is to increase income, decrease expenses, or some combination of both. What are you willing to do? Get a second job? Rent out a room? Sell the truck? Cut cable? Cancel the alarm service? In my opinion, you need to do all of that and more.

Right now, you still have the luxury of choosing what you are going to do to bring your budget into balance. But it won't be much longer before you will not have sufficient available credit to keep juggling all of this. At that point, your choices are going to decrease drastically.

[JoeP]

While you're digesting the suggestions from others and ultimately making decisions to right yourself, please use hindsight to get at the factors that got you into this situation and then do not make those mistakes again.

[garetjax2002]

hey

I've been busy working a lot of overtime this week. You guys should be proud of me. I have been thinking about my best course of action and have been reading your replies. You guys have given me a lot of great ideas. I thank you very much. I will give you a thorough update soon of what I have decided to do. Talk to you soon.

[snafu]

What you've been doing isn't working. Keep doing the same thing and your situation worsens. You've already got a consolidation loan which explains, rather than bite the bullet and pay off creditors, you've borrowed to deal with old debts, exchanging one creditor for another. That has been compounded by an existing loan against your 401. What words will work to make you understand you need that retirement plan to pay for your living expenses when you are a senior, no longer working, no longer earning income. Can you cancel the latest 401K loan?

I hope you're willing to take responsibility for your actions and fix mistakes. We can offer better advice if you include the interest rates being charge on each of the credit cards, consolidation loan, 401K loan, vehicle loan, mortgage and anything else that charges fees/interest. 1 st, I suggest you add up how much interest and fees were assessed on all those payments in July. Multiply by 7 and you have some idea of what you've paid in interest since January. Are you shocked? Those sums did nothing to reduce the initial sums owed.

We want you to go forward and just now, you are in reverse mode, going backwards really fast. You have been buying and spending income not yet earned! The longer you delay important changes, the faster these debts continue to accelerate.

2nd, You need to list how much you must spend on needs like Mortgage, heat, light, water, trash, food, basic phone. The rest are 'wants.' They are all choices. Focus on net income, the sum remaining after deductions. I suggest you walk through your home and find items no longer used, needed or loved. take photos, write a brief description and list two or three at a time on your local 'Buy 'n Sell,' {Kijiji + name of city], Facebook sell, and CraigList. Any money negotiated goes to smallest debt. You determine a 'list price' by checking CraigsList or ebay or 1/2 replacement value and negotiate from there.

Look forward to your details, you can get out from under debt and control of your money.