What should we do?

[porkpistol]

Hi All,

Recently my wife and I have come to find our neighborhood is going to crap. Crime is up, there have a been a few random shootings lately. Not murders but people shooting in the neighborhood have hit houses and stuff. We have a 9mth old daughter and own a home in this area. I have owned this home since April 2010. When I bought it, it was an FHA loan with only 3.5% down. So needless to say we basically owe more than it is worth right now. I have a few questions for you all about what we should do. We really want to move out and get away from this area. The house is small on top of the neighborhood going bad. I have $31,000 in our saving account. The comps in our area are being advertised for 55k (some less) we owe 59k on our home. These comps are a little larger and have new siding, roof, windows etc. Which our house has none of those and actually needs all of them. I have a few options that I have been going over with my wife as follows:

1. We can use half the saving and pay down the mortgage to get it to around owing 44k. Sell house as is. FYI it needs some TLC as is. Hope to sell soon and use the rest of the money for a down payment on a new place. This would only allow us about 10k for a down payment as I would want to keep some money in savings.

2. Use some of the money to repair and upgrade the home. This may include at the least new windows (11 total), new laminate floor in the kitchen, and finishing some projects that I have not finished. Use the rest of the money for a down payment on a new home.

3. We have a lot of debt. My concern even with a large down payment is even getting qualified for another loan. With this money I could spend 19k and pay off our vehicle loan at 6.25% and 237 per month balance of $6,588, personal loan at 13% and 337 per month balance of $2,609 (this will be finished April 2015), 2 credit cards totaling 10k in balances both at 19%apr and relatively 120 and 110 per month payments (fyi I have been struggling to pay these cards for years and am getting nowhere). I then have other miscellaneous credit cards with high balance/limit ratios that I could probably pay off too and be left with around 5-6k in the bank. The We would then pocket all that money (essentially between $800-1000)that we aren't paying monthly to save quickly for more upgrade money/down payment money for a new home.

We want to be in a home next that is large enough to expand our family and stay in for the foreseeable future barring any employment changes. I think having better credit scores and less debt will allow us to look at larger houses to accommodate our needs and not be stuck to a budget that won't allow us to buy a larger home. What do you all think? If you need any other info I can try and get that. Thanks!

[porkpistol]

Also, I forgot we bring home $3,400 per month. This $3,400 is used for bills, food, gas etc. Retirement savings and savings account has already been taken out of that total. Also, next year around this time I will have about 23k in student loans to begin paying on. This will be about $250 per month. So that is also another debt that will be added on to our current debt if not payed.

[porkpistol]

Honestly where we live at the entire city could potentially be like this. My problem is I don't want to get into anymore financial distress. We have been paying minimums on these loans/cc's forever and dumping money into savings. We could literally be debt free besides the house. What your saying I could do the same by using the money to pay off all my debts and then apply around $1000 per month to a mortgage that is currently $562 per month. And try to sell while doing that. Either way I will have to wait for the place to sell and can't go anywhere until it does, because we surely can't afford renting while still paying a mortgage. I have looked into renting as well and anywhere in this area or surrounding areas we are looking at upwards of 900 to rent a house big enough for our family. If I wanted anything cheaper I would have to stay in the area we are in currently.

[Permanent Temp]

Okay so here's what I am getting here:

1. You are in a bad neighborhood on a house that is upside down, owe 59K.

2. You have 31K in savings.

3. You have 10K in credit card debt at 19%.

4. You have a 19K worth of car loans at 6.25%.

5. You have a personal loan of $6,588K 13%.

6. You have more credit card debt that has not been listed here.

7. You have 23K of student loans coming up soon.

So far that means you have $58588 in debt without counting the unlisted credit card debts or the value of the house which bring your debt to $117588 again not counting the unlisted credit card debts. Are those the ones listed here: http://www.savingadvice.com/forums/d...off-first.html

Here are my questions.

In what form is this 31K in savings?

In what form is your retirement savings and how much is going in there in every month?

Why do you need 31K in savings and yet carry credit card balances and have a personal loan?

How are you currently managing your money? Do you use mint? Paper and pen? Do you know what your monthly expenses are? How much are your monthly expenses?
Is the 9 month old baby your only child?

Why do you have 19K in car loans? Can you trade these in or sell them to get something more affordable?

How much room do you think you need in a house? You say you want to upgrade but really if the 9 month old child is your only child than you could probably do fine with a one or two bedroom apartment while you sort out your debts.

My point is you need to figure out what is most important to you.

It seems to me you want another house that is big enough in a nicer neighborhood. In order to get that you need to sell your current house and get a handle on your debts. In order to figure out if you can handle that financially you need to figure out what your complete financial situation is right now and trim the fat.

Financially it seems you have savings and retirement covered but you don’t seem to have a handle on your debts or what your financial priorities are.

The fact that you've been struggling to pay off your credit cards while taking out personal loans, car loans and amazing a large amount of savings says to me that maybe you aren't looking at the whole picture clearly.

I think that if I were you I would reanalyze my situation and downgrade. I would look into doing what I could to get rid of the house (with the smallest amount of money invested due to the your 60K plus worth of non house debt.) I would look again at that car loan and see what you could do about improving that situation, (trading down etc.) I would look at the retirement situation and temporarily contribute to only the point where I would get a match so that I could get rid of debt faster. I would then look into getting an apartment in a nice neighborhood at a reasonable cost not worrying too much about space. With a baby only you could even live in a studio apartment if need be as long as the cost was not outrageous. In the time in the apartment I would focus on living frugally and not amassing any new debt while paying off the old debt. Once that is settled I would ramp up savings and look into getting a new house.

Right now you need to use the $31K as efficiently as possible. You'll need some of it to help with getting rid of the house in all likelihood. You'll need some of it to get an apartment. You'll need some of it to make sure you have 5-6 months of expenses as an EF. For now I wouldn't touch that money at all until I figured out what to do financially. I would however probably start funneling that money that was going toward savings to paying off the credit cards and or the personal loan assuming you don't have a penalty for paying that off more quickly. One main focus would be lowering your monthly output toward debts and expenses.

This is not a pretty or easy to fix situation that you are in but if you prioritize and are reasonable about wants vs needs you’ll dig yourself right out of this debt hole and get back on track in no time to get to your dreams and out of financial distress. You’ve proven you can save money now you just have to figure out how to get a better balance so that you don't rack up any more debt.

[autoxer]

We have been paying minimums on these loans/cc's forever and dumping money into savings.

Why are you doing that? You are paying an incredible amount of interest in order to keep that money in a savings account, so what is the benefit of keeping that money in the bank?

Just looking at the debt that you listed (you mentioned other debts, but didn't provide the details),

$10k in credit card debt at 19% interest is costing you $158/month
$6,588 car loan at 6.25% is costing you $34/month
$2,609 personal loan at 13% is costing you $28/month

That's $220 in interest that you are paying to the bank every month. You can't affod to keep paying that much in interest. What is stopping you from just writing checks to pay off the credit cards and personal loan completely?

If you get rid of all of this debt, then you can afford to rent a house in a nicer neighborhood.

Talk to a realtor about selling the house, to find out how much $$$ you will really need to get out of it. It may not be worth replacing windows, if it doesn't raise the value of the property by more than what the windows cost. Will it be too difficult to sell because the windows aren't new?

[porkpistol]

Sorry I was typing this up quickly this morning before I left for work. I should have been more clear.

1. Car balance is $6,624 at 6.25% payment of $237 per month. Will be payed off July 16 if minimum payment is continued.

2. Personal loan is balance is $2612 at 13% payment of $337 per month. Will be payed off April 15.

3. The 2 credit cards that I want to pay off total 10k in debt at 19% each.

4. I have another card with a $4,000 balance at 22.5%, one at $2000 at 20%, one at $1,500 at 13%, 2 at $1,000 at 22%. Cards totaling $9,500.

5. We owe 59k on the mortgage at 5.7%.

6. Student loans will kick in around August at around 23k, I am not sure of the rate right now I would have to get paperwork out and look it up.

7. I can't answer why we have so much money in savings, I have just always stuck a lot of money away. I also received a small inheritance about 3 months ago of 7k that added to that total.

8. I want to move from here but I also don't want to carry this debt any longer. We can afford all of these payments but it is mostly paying minimums each month. We have a budget for groceries and eating out is a rarity in our house. Daycare costs us nothing because my mother watches my daughter while we are at work. I don't see the point in renting a house/apartment when it will cost me more than where we live now. Why wouldn't it be smart to pay off the majority of this debt and then focus all the extra money towards saving for a downpayment and offloading the house.

The savings money is just in our standard savings account at our bank. It is making us no money I just add to it each month. I contribute 6% currently to my 401k, I can drop to 4% with company match.

All we use to manage our money is Moneywiz, just a basic checkbook app that syncs between devices to keep up to date between my wife an I, I allocate money for bills, groceries, gas and the rest goes to savings currently in the form of about $300 per month. Sometimes more depending on if I get overtime.

To end I just met with a real estate lady. She basically layed it all out on the line for me and pretty much exactly what it would cost me out of pocket to sell my home. Total came to be just over $24,000.

Okay so here's what I am getting here:

1. You are in a bad neighborhood on a house that is upside down, owe 59K.

2. You have 31K in savings.

3. You have 10K in credit card debt at 19%.

4. You have a 19K worth of car loans at 6.25%.

5. You have a personal loan of $6,588K 13%.

6. You have more credit card debt that has not been listed here.

7. You have 23K of student loans coming up soon.

So far that means you have $58588 in debt without counting the unlisted credit card debts or the value of the house which bring your debt to $117588 again not counting the unlisted credit card debts. Are those the ones listed here: http://www.savingadvice.com/forums/d...off-first.html

Here are my questions.

In what form is this 31K in savings?

In what form is your retirement savings and how much is going in there in every month?

Why do you need 31K in savings and yet carry credit card balances and have a personal loan?

How are you currently managing your money? Do you use mint? Paper and pen? Do you know what your monthly expenses are? How much are your monthly expenses?
Is the 9 month old baby your only child?

Why do you have 19K in car loans? Can you trade these in or sell them to get something more affordable?

How much room do you think you need in a house? You say you want to upgrade but really if the 9 month old child is your only child than you could probably do fine with a one or two bedroom apartment while you sort out your debts.

My point is you need to figure out what is most important to you.

It seems to me you want another house that is big enough in a nicer neighborhood. In order to get that you need to sell your current house and get a handle on your debts. In order to figure out if you can handle that financially you need to figure out what your complete financial situation is right now and trim the fat.

Financially it seems you have savings and retirement covered but you don’t seem to have a handle on your debts or what your financial priorities are.

The fact that you've been struggling to pay off your credit cards while taking out personal loans, car loans and amazing a large amount of savings says to me that maybe you aren't looking at the whole picture clearly.

I think that if I were you I would reanalyze my situation and downgrade. I would look into doing what I could to get rid of the house (with the smallest amount of money invested due to the your 60K plus worth of non house debt.) I would look again at that car loan and see what you could do about improving that situation, (trading down etc.) I would look at the retirement situation and temporarily contribute to only the point where I would get a match so that I could get rid of debt faster. I would then look into getting an apartment in a nice neighborhood at a reasonable cost not worrying too much about space. With a baby only you could even live in a studio apartment if need be as long as the cost was not outrageous. In the time in the apartment I would focus on living frugally and not amassing any new debt while paying off the old debt. Once that is settled I would ramp up savings and look into getting a new house.

Right now you need to use the $31K as efficiently as possible. You'll need some of it to help with getting rid of the house in all likelihood. You'll need some of it to get an apartment. You'll need some of it to make sure you have 5-6 months of expenses as an EF. For now I wouldn't touch that money at all until I figured out what to do financially. I would however probably start funneling that money that was going toward savings to paying off the credit cards and or the personal loan assuming you don't have a penalty for paying that off more quickly. One main focus would be lowering your monthly output toward debts and expenses.

This is not a pretty or easy to fix situation that you are in but if you prioritize and are reasonable about wants vs needs you’ll dig yourself right out of this debt hole and get back on track in no time to get to your dreams and out of financial distress. You’ve proven you can save money now you just have to figure out how to get a better balance so that you don't rack up any more debt.

[porkpistol]

I can't tell you exactly why we are doing that. Cause I'm retarded when it comes to credit cards? I like to save money. I'm not really sure. As I just stated it will cost 24k to get out of this house. That is if she can sell it for 40k. She doesn't think upgrading anything would be worth it, in my area square footage is what sells and I can't really add that on. So bottom line I drain my savings to pay for the house to get rid of it. Leave about 7k in the savings. Or get rid of all my debt beside the house. Stay here and bank all that money, increase our credit scores, and sell at a later time.

Why are you doing that? You are paying an incredible amount of interest in order to keep that money in a savings account, so what is the benefit of keeping that money in the bank?

Just looking at the debt that you listed (you mentioned other debts, but didn't provide the details),

$10k in credit card debt at 19% interest is costing you $158/month
$6,588 car loan at 6.25% is costing you $34/month
$2,609 personal loan at 13% is costing you $28/month

That's $220 in interest that you are paying to the bank every month. You can't affod to keep paying that much in interest. What is stopping you from just writing checks to pay off the credit cards and personal loan completely?

If you get rid of all of this debt, then you can afford to rent a house in a nicer neighborhood.

Talk to a realtor about selling the house, to find out how much $$$ you will really need to get out of it. It may not be worth replacing windows, if it doesn't raise the value of the property by more than what the windows cost. Will it be too difficult to sell because the windows aren't new?

[Permanent Temp]

I can't tell you exactly why we are doing that. Cause I'm retarded when it comes to credit cards? I like to save money. I'm not really sure. As I just stated it will cost 24k to get out of this house. That is if she can sell it for 40k. She doesn't think upgrading anything would be worth it, in my area square footage is what sells and I can't really add that on. So bottom line I drain my savings to pay for the house to get rid of it. Leave about 7k in the savings. Or get rid of all my debt beside the house. Stay here and bank all that money, increase our credit scores, and sell at a later time.

Don't be so hard on yourself. You know you have a problem with the credit cards. You admitted it. Now figure out what do you think you can do to make sure you don't rack up credit card debt?

It took me racking mine up to their maxes twice and paying them off twice to recognize that they are a tool for credit and not actual money. I was also saving up an EF and doing that while paying them off was determination enough to never be there again. Plus the calculators on the interest. If you were to calculate how much you paid in interest while socking away money in the EF that would probably be a really sobering number.

You also figured out what your options are on your house. Now you just have to figure out what your next step is.

So these are your debts:

Car: $6,624 at 6.25%

Personal loan: $2612 at 13%

Credit cards: $19,500 at interest rates listed below in order posted by OP
10 K (over two cards)at 19%
4 K at 22.5%
2 K at 20%
1.5K at 13%
1K at 22%
1K at 22%


Mortgage: 59k at 5.7%

Student loans: 23k % currently unknown

Total non-mortgage debt: $50836
Total debt: $109,836

Aside from the house issue that you are working on your credit cards are what have you miffed. Problem with credit cards is they take discipline to use.

As you have probably heard there are two main established methods for paying off credit cards: Snowball and avalanche. It seems that you have listed them by highest to lowest amounts when you listed them not accounting for interest rates or treating the two 19% cards and two separate balances. What is your reasoning for wanting to pay off the 2 cards that total 10K at 19% first?

People make mistakes all the time that's how most of us started out here. We just own up to it make a feasible plan and chip away at the debt.

Right now you would have to pay out 24K to get out and be left with 7K which still means you have to figure out where to live next.

Or you could stay in your house for a time and pay off your debts like this. If you pay off the Car and Personal loan it would free up $574 a month.

You could then start by paying the minimum plus $574, once you pay off a card you roll that amount to the next card to pay them all of quickly.

If you were to do snowball you would do them in this order (this is without knowing what is on each of the 19% cards respectively):
1) 1 K at 22%
2) 1 K at 22%
3) 1.5K at 13%
4) 2 K at 20%
5) 4 K at 22.5%
6) 10 K (over two cards)at 19%

If avalanche you would do the following (again this is without knowing what is on each of the 19% cards respectively):
1) 4 K at 22.5%
2) 1 K at 22%
3) 1 K at 22%
4) 2 K at 20%
5) 10 K (over two cards)at 19%
6) 1.5K at 13%

This would help you to quickly eliminate your credit card debt putting you in a better position overall. I did this with my credit cards the second time around and with this calculator http://www.vertex42.com/Calculators/...alculator.html.

All the while you would be saving yourself thousands of dollars in interest essentially putting money back in your pocket. Once they are paid off I would also try to figure out which cards I could cancel without affecting my credit score.

If you focus on it this way, and refrain from racking up any more credit card debt you could be well on your way to being credit card debt free while still having significant savings which seem to give you peace of mind.

[porkpistol]

Yeah I think being so upside down in the house currently it would be silly to waste 24k to get out of it. We can easily afford it. We just owe more than its worth. And in time that can be changed. I get my original post talked about the area we are in and that it may have become dangerous. But it is generally good people around here. We have good neighbors and they look out for each other. Another part of the drive to get out is the house is small, and we are a growing family, but we will find a way to manage.

But my next question is you think I should just pay off the car and personal loan? That is $9632 out of the 31k we have saved. We would have over 21k in savings still. I could pay off the other 2 cards worth 10k and add another $220 respectively to my $574 per month for a total of $794 per month to put toward snowballing debt. Whiles still maintaining $11k in our savings which is slightly over 3mths of savings. Why not get more money per month back in our pockets instantly to pay down cc debt quicker while still maintaining what I would consider a significant savings account?

Thanks for all your replies, this is very helpful.

Don't be so hard on yourself. You know you have a problem with the credit cards. You admitted it. Now figure out what do you think you can do to make sure you don't rack up credit card debt?

It took me racking mine up to their maxes twice and paying them off twice to recognize that they are a tool for credit and not actual money. I was also saving up an EF and doing that while paying them off was determination enough to never be there again. Plus the calculators on the interest. If you were to calculate how much you paid in interest while socking away money in the EF that would probably be a really sobering number.

You also figured out what your options are on your house. Now you just have to figure out what your next step is.

So these are your debts:

Car: $6,624 at 6.25%

Personal loan: $2612 at 13%

Credit cards: $19,500 at interest rates listed below in order posted by OP
10 K (over two cards)at 19%
4 K at 22.5%
2 K at 20%
1.5K at 13%
1K at 22%
1K at 22%


Mortgage: 59k at 5.7%

Student loans: 23k % currently unknown

Total non-mortgage debt: $50836
Total debt: $109,836

Aside from the house issue that you are working on your credit cards are what have you miffed. Problem with credit cards is they take discipline to use.

As you have probably heard there are two main established methods for paying off credit cards: Snowball and avalanche. It seems that you have listed them by amounts when you listed them not accounting for interest rates. To me that would be a set up for failure. Setting my sights on that big amount first would seem so insurmountable that I would probably lose steam.

People make mistakes all the time that's how most of us started out here. We just own up to it make a feasible plan and chip away at the debt.

Right now you would have to pay out 24K to get out and be left with 7K which still means you have to figure out where to live next.

Or you could stay in your house for a time and pay off your debts like this. If you pay off the Car and Personal loan it would free up $574 a month.

You could then start by paying the minimum plus $574, once you pay off a card you roll that amount to the next card to pay them all of quickly.

If you were to do snowball you would do them in this order (this is without knowing what is on each of the 19% cards respectively):
1) 1 K at 22%
2) 1 K at 22%
3) 1.5K at 13%
4) 2 K at 20%
5) 4 K at 22.5%
6) 10 K (over two cards)at 19%

If avalanche you would do the following (again this is without knowing what is on each of the 19% cards respectively):
1) 4 K at 22.5%
2) 1 K at 22%
3) 1 K at 22%
4) 2 K at 20%
5) 10 K (over two cards)at 19%
6) 1.5K at 13%

This would help you to quickly eliminate your credit card debt putting you in a better position overall. I did this with my credit cards the second time around and with this calculator http://www.vertex42.com/Calculators/...alculator.html.

All the while you would be saving yourself thousands of dollars in interest essentially putting money back in your pocket. Once they are paid off I would also try to figure out which cards I could cancel without affecting my credit score.

If you focus on it this way, and refrain from racking up any more credit card debt you could be well on your way to being credit card debt free while still having significant savings which seem to give you peace of mind.

[Dsquared513]

You really have to get rid of your credit card debt, 20% interest is too high. I know that having a good chunk of change in your savings account gives you the warm and fuzzies, but you will be saving literally thousands of dollars by paying off the cc's immediately. After that the personal loan should be next, as 13% is also pretty high. If you just can't bare to have less than 10k in your savings account then pay as much as you can and try to transfer the remaining balance to a 0% for X months card, I know this is not always possible depending on your credit situation but it seems like there are a lot of offers like that out there these days (I still have a year of 0% left on my amex blue preferred, I just use it for groceries and gas rewards, 6% and 3% back respectively). If having cc's is conducive to amassing debts for you then you should really cut up all but one card that you save for absolute emergencies. The fact that you like to save money and have done so on a regular basis puts you ahead of the curve in this country; however, your debts show that there is some sort of disconnect between your financial mindset and reality. Instead of focusing on savings you should probably focus more on your net worth, that will give you a more accurate idea of where you are financially. I understand that it is very comforting to have cash on hand for emergencies or down payments, I have kept cash instead of paying down debts before (although never at 20%!!), so I understand how someone can justify this; but remember that the human mind's proclivity for justification is what makes otherwise intelligent people make absolutely horrendous decisions in life. Other than the credit card debt my advice on your housing situation is this: The people who live in the houses in your immediate vicinity are more important to your health and happiness than the overall state of the community at large. If you get along with your neighbors and there are not loud parties or the neighbors teen kids breaking into your stuff then don't let the sensationalist news stories scare you away. Also, keep in mind that in 12 years when your dear teenaged daughter is locked away in her room across your large house you will look back fondly on those days when you didn't think you had enough space and realize that life will put more space between you and your loved ones than is ever necessary.

[Permanent Temp]

That's a personal choice and one you'll have to make. I would be happier with 5-6 months in a savings account but if you can do with 3 months worth that is fine. I have a different situation than yours.

Whatever helps you have piece of mind and pay off your debts ASAP. Just remember that it is a marathon and not a sprint. Paying off everything quickly is not going to help unless you exercise discipline in not adding to the debt. I learned that when I had to do it the second time.

Make sure that you are establishing good credit card/ money habits that will stick so that you don't end up here again and can just keep going forward toward your ultimate goals and priorities.

[porkpistol]

You really have to get rid of your credit card debt, 20% interest is too high. I know that having a good chunk of change in your savings account gives you the warm and fuzzies, but you will be saving literally thousands of dollars by paying off the cc's immediately. After that the personal loan should be next, as 13% is also pretty high. If you just can't bare to have less than 10k in your savings account then pay as much as you can and try to transfer the remaining balance to a 0% for X months card, I know this is not always possible depending on your credit situation but it seems like there are a lot of offers like that out there these days (I still have a year of 0% left on my amex blue preferred, I just use it for groceries and gas rewards, 6% and 3% back respectively). If having cc's is conducive to amassing debts for you then you should really cut up all but one card that you save for absolute emergencies. The fact that you like to save money and have done so on a regular basis puts you ahead of the curve in this country; however, your debts show that there is some sort of disconnect between your financial mindset and reality. Instead of focusing on savings you should probably focus more on your net worth, that will give you a more accurate idea of where you are financially. I understand that it is very comforting to have cash on hand for emergencies or down payments, I have kept cash instead of paying down debts before (although never at 20%!!), so I understand how someone can justify this; but remember that the human mind's proclivity for justification is what makes otherwise intelligent people make absolutely horrendous decisions in life. Other than the credit card debt my advice on your housing situation is this: The people who live in the houses in your immediate vicinity are more important to your health and happiness than the overall state of the community at large. If you get along with your neighbors and there are not loud parties or the neighbors teen kids breaking into your stuff then don't let the sensationalist news stories scare you away. Also, keep in mind that in 12 years when your dear teenaged daughter is locked away in her room across your large house you will look back fondly on those days when you didn't think you had enough space and realize that life will put more space between you and your loved ones than is ever necessary.

This is an excellent outlook on my situation. Thank you so much for putting so much thought into your response. Juggling this kind of debt, even though we can pay for it monthly isn't getting us anywhere. We pay minimums and save the rest. Having so many payments a month is making me go out of my mind, and at times has taken its toll on my marriage. We are both at fault for the debt, and we realize that, so there is no hard feelings there. It is just that I take on the responsibility of managing the payments monthly and I see what we owe and sometimes it is hard to handle. I think the best option is to pay as much of the debt off as I can and still keep a decent amount in the bank in case of emergencies. I don't like the idea of paying every single card off and keeping one for emergencies. If an emergency does happen that just puts us in debt again. I can save some of the money, continue to add to it while paying off the rest of the cards.

That's a personal choice and one you'll have to make. I would be happier with 5-6 months in a savings account but if you can do with 3 months worth that is fine. I have a different situation than yours.

Whatever helps you have piece of mind and pay off your debts ASAP. Just remember that it is a marathon and not a sprint. Paying off everything quickly is not going to help unless you exercise discipline in not adding to the debt. I learned that when I had to do it the second time.

Make sure that you are establishing good credit card/ money habits that will stick so that you don't end up here again and can just keep going forward toward your ultimate goals and priorities.

I realize it is not a sprint, but I know if I can pay off what we have and not have to rely on credit for things anymore I won't need to worry about it anymore. I just can't justify dropping 24k to get out of this house currently. My wife and I just had a long talk about the situation and she agrees being debt free or nearly debt free right away would be a good choice for our future. We can make this house work until we are really ready to move on.

[doingitallwrong]

I just can't justify dropping 24k to get out of this house currently.

I think most would agree, based on your current situation and your follow-up posts. Your original post did make it seem as if you were in an increasingly dangerous situation, so it's good to hear that's not quite the case.

Juggling this kind of debt, even though we can pay for it monthly isn't getting us anywhere. We pay minimums and save the rest.

Yes, and in the mean time you're losing hundreds of dollars per month to interest on the debts. Do you ever look at your credit card bill, at the little box they now have to put that shows you how long it will take you to pay off the balance if you just pay the minimums? I'd guess some of yours say what, 18 years or longer? It's sobering.

It seems you'd be comfortable with about $10K in savings. If you paid off all of the credit cards and the personal loan, you'd be left with $8,900 in savings and I'm guessimating about $750 a month that was going toward all those payments. You could get the savings back to almost $10K in a month, since you're already putting $300 a month in. Then tackle the car, putting everything extra toward that payment. (Stop putting the $300 to savings, consider dropping your 401(k) down to 4% for a while, any overtime pay, snowflakes, etc. would go to the car.) Then you could either build the emergency fund up to $20K (six months' expenses), or just start throwing it all at the house. (Or work on both at the same time.)

You might also look into refinancing the house when you're able. (I think it's after five years with an FHA loan?) Your current rate isn't horrible but still about 1.5% higher than the national average. You'd want to look at closing costs, points, etc. and run the numbers to see if it's worth it, but a lower interest rate can of course help you pay down the principal that much sooner.

[porkpistol]

I think most would agree, based on your current situation and your follow-up posts. Your original post did make it seem as if you were in an increasingly dangerous situation, so it's good to hear that's not quite the case.



Yes, and in the mean time you're losing hundreds of dollars per month to interest on the debts. Do you ever look at your credit card bill, at the little box they now have to put that shows you how long it will take you to pay off the balance if you just pay the minimums? I'd guess some of yours say what, 18 years or longer? It's sobering.

It seems you'd be comfortable with about $10K in savings. If you paid off all of the credit cards and the personal loan, you'd be left with $8,900 in savings and I'm guessimating about $750 a month that was going toward all those payments. You could get the savings back to almost $10K in a month, since you're already putting $300 a month in. Then tackle the car, putting everything extra toward that payment. (Stop putting the $300 to savings, consider dropping your 401(k) down to 4% for a while, any overtime pay, snowflakes, etc. would go to the car.) Then you could either build the emergency fund up to $20K (six months' expenses), or just start throwing it all at the house. (Or work on both at the same time.)

You might also look into refinancing the house when you're able. (I think it's after five years with an FHA loan?) Your current rate isn't horrible but still about 1.5% higher than the national average. You'd want to look at closing costs, points, etc. and run the numbers to see if it's worth it, but a lower interest rate can of course help you pay down the principal that much sooner.

Yeah, it obviously makes sense to pay off everything but the vehicle since that is costing me the least amount of interest per month. From the calculators I used for early payoff on the auto loan. The original 60mth loan is scheduled to be payed off July 2016. Even just by putting $500 per month extra toward the payment it would be payed off in 8mths instead of 1yr 10mths. That is a hell of a difference. The vehicle loan would be gone by May of next year well before my school loans kicked in.

Well I think we have definitely settled on staying at the home for the time being. Debt reduction is more important and will be a huge weight off of the entire family. It will only help us in the future to be more financially stable, and with all of the debt gone and so many recurring monthly payments gone with still around 10k in the bank there should be no reason to use the plastic for anything anymore.

I think I will also look around for a different bank to put our savings in, see if I can gain a little interest off the 10k that I have in there, considering I have had 31k in there for a few months and haven't gained a thing off of the account it is in now. Seems wasteful to me?

[porkpistol]

I have another quick question if anyone could be of any help. I was thinking about adding our monthly payments water, gas, electric, car insurance, internet & cable etc. to one of these credit cards we are paying off. This card has a $4600 limit on it. It offers some cash back rewards. I have always wanted to do this to avoid paying multiple payments all throughout the month and just make bill management easier in general. Most of our cards have been tapped out and I was never able to accomplish this. I was going through my statements and interest is charged between the 19th and 21st every month. So basically I would need to pay off the balance on the card before then every month to avoid making the interest charges correct? I would check with the bill providers to make sure they don't charge any fees for paying with a credit card first but would this be a good option? Things like groceries and gas I would still be paying for directly out of our checking account and this card would be used for nothing other than paying recurring monthly bills.

I can set this card to be automatically payed monthly for dates ranging between the 11th-17th according to the website.