Debt reduction with my resources.

[APR28]

My wife and I are both 40 years old and finally have income to make changes. We have 2 kids 11 and 3 and always had enough to be lower/middle class content. My wife has a Masters degree but never pushed herself and was always content making $26 K a year at her dead end no stress job. I finally convinced her to pursue a "real" job and is finally making $58 K a year. She has been working her new job for 1 full year. A house is now a realistic goal. We live in Mass so everything is more expensive in relation to our salaries. We never saved much but also never really struggled either.

We have already paid down some debt but hit a crossroads. I had a small boat loan that is paid off and only have one car payment down from two payments. The current payment only has 19 months left on a low mileage car.

Current assets:

Checking: $1,400
Savings: $4,800
Retirement: $18,400 in an annuity; $2300 in a 403 b from wife's new job.
$1600 in savings bonds; $1200 in new Roth IRA

Debts: $15,600 in credit cards and $7900 in auto loan.

Would cashing out the annuity be the best plan?

Getting a low interest personal consolidation loan?

Pay down debt with about $800-$1000 extra monthly cash?

Just not sure, maybe I feel I need a quick fix but also scared that I may be just rushing into more trouble.

[disneysteve]

My wife and I are both 40 years old

Current assets:

Checking: $1,400
Savings: $4,800
Retirement: $18,400 in an annuity; $2300 in a 403 b from wife's new job.
$1600 in savings bonds; $1200 in new Roth IRA

Debts: $15,600 in credit cards and $7900 in auto loan.

Would cashing out the annuity be the best plan?

Getting a low interest personal consolidation loan?

Pay down debt with about $800-$1000 extra monthly cash?

Welcome to the site.
Can you give us some more info? What is your total monthly household income? What are your monthly expenses?

Is the annuity held within a retirement account (I know 403b plans are notorious for pulling this crap - put a tax-free instrument inside of a tax-free account)?

[APR28]

Welcome to the site.
Can you give us some more info? What is your total monthly household income? What are your monthly expenses?

Is the annuity held within a retirement account (I know 403b plans are notorious for pulling this crap - put a tax-free instrument inside of a tax-free account)?

We also have $2K emergency cash reserves for car repairs

$5100~ : total monthly income after money into retirements

$400 : rent( family owned apartment building)
$225 : cell phone x3
$116 : car insurance for 2 cars
$348 : auto payment
$188 : cable/internet
$450 : credit card payments assuming minimum
$780 : daycare for 3 year old
$150 : gas/electric
$160 : gas for cars
$60 : youth soccer and baseball related fees
$480 : food shopping
$150 :clothing
--------------------------------
$2073 balance that is split between savings/ emergency funds/ entertainment

The annuity is a non-qualified annuity with a $30 surrender value. It's invested with Prudential Insurance. Ive had it for a while.

[ladonnarosso]

$450 : credit card payments assuming minimum

This statement is concerning to me. What is the total balance on the credit cards? Considering that consumer debt often carries the highest interest rates, I would suggest trying to get rid of this first.

[snafu]

With the year ending, this is a good time to review 2015 spending and possibly create a financial outline for 2016 and long term goals. What are interest rates on your car loan and CC [credit card]? Does the sum owing reflect special purchases or mostly regular costs like auto maintenance and operations, restaurants & foods, clothes, vacation etc? Approximately how much interest did you pay on these and other outstanding sums in 2015?

While your wife contributes to a 403b, are you likewise contributing to a retirement program? Do you believe your 11 y/o will go to Community College or university in the future? Do you anticipate helping with funding?

[APR28]

With the year ending, this is a good time to review 2015 spending and possibly create a financial outline for 2016 and long term goals. What are interest rates on your car loan and CC [credit card]? Does the sum owing reflect special purchases or mostly regular costs like auto maintenance and operations, restaurants & foods, clothes, vacation etc? Approximately how much interest did you pay on these and other outstanding sums in 2015?

While your wife contributes to a 403b, are you likewise contributing to a retirement program? Do you believe your 11 y/o will go to Community College or university in the future? Do you anticipate helping with funding?

Car loan interest rate is 4.44% with only 19 payments left. The car has 75K miles and runs great. All maintenance is up to date.

We have quite a few store cards with 24.9% interest rates hence the big combined monthly payments. We constantly use Amazon credit or Paypal credit as our main online shopping.

We pay a few months then use any credit to fund our hobbies bringing the cards back to near max. We never max though only because Im cynical and believe credit cards will lower limit causing late fees.

Both me and my wife, despite our debt, have 720+ credit scores. We just need to figure a way to be ready for a house sooner than later. Ive had enough of apartment living for fifteen years. My neighborhood is slowly becoming more crime ridden and need to get my kids out of here.

[disneysteve]

$5100~ : total monthly income after money into retirements

$400 : rent( family owned apartment building)
$225 : cell phone x3
$116 : car insurance for 2 cars
$348 : auto payment
$188 : cable/internet
$450 : credit card payments assuming minimum
$780 : daycare for 3 year old
$150 : gas/electric
$160 : gas for cars
$60 : youth soccer and baseball related fees
$480 : food shopping
$150 :clothing
--------------------------------

You list expenses of $3,507, leaving an extra $1,593/month. You mention some going to entertainment. You need to set a budget for that. Let's say $200. That leaves you $1,393 for extra debt payments.

You've got $15,600 in credit cards. That will be gone in less than 11 months if you put an extra $1,393/month toward it. I wouldn't worry about the car loan at this point. The rate isn't bad and the payment is less than 7% of income which is reasonable.

There are expenses on your list that could be trimmed to speed things along. We pay less for 5 cell phones than you pay for 3. Your cable bill could certainly be cut. And you probably don't need to spend $150/month on clothing, even with growing kids. Hit up the thrift shops and consignment stores more and do swaps with friends and family with similar age/size kids.

We constantly use Amazon credit or Paypal credit as our main online shopping.

We pay a few months then use any credit to fund our hobbies bringing the cards back to near max.

You need to stop using credit cards TODAY! You will never fix this if you keep adding new charges. Cut them up and go to cash/debit only. If you aren't willing to take this step, you might as well forget the whole deal.

We just need to figure a way to be ready for a house sooner than later. Ive had enough of apartment living for fifteen years. My neighborhood is slowly becoming more crime ridden and need to get my kids out of here.

Getting into a better neighborhood doesn't require buying a house. You can continue to rent, just in a nicer area. There is no way you are ready to buy a house at this point. You need to pay off the credit cards. You need to have at least a 6-month emergency fund. That is $21,000 with your current expenses and your expenses in a house would be even higher meaning a larger EF. You also need a 20% down payment. Right now, you've got a grand total of $9,800 in savings. That's not even a 3-month EF and you have zero for a down payment.

If you truly want to buy a house in the next few years, you need to cut the budget and throw every penny at the debt. Don't take 11 months to repay it. Do it in 5 or 6. Then start saving all of that money to build your EF and your down payment fund. If 6 months from now you could start putting at least $2,000/month into savings, within 2-3 years, you'd have your EF and a down payment for a starter home.

[Jluke]

Pay down debt with about $800-$1000 extra monthly cash?

Just not sure, maybe I feel I need a quick fix but also scared that I may be just rushing into more trouble.

Your situation is quite easy to fix. Payoff your debts with monthly cash. STOP using credit cards until you are debt free. Of course I should thank you for your behavior as it probably helps credit card companies fund their rewards program.

Don't rush into buying a home. Do you realize how much money you will lose on mortgage interest to the bank?

If you don't prepare financially to be a home owner you will always be in debt

[PhilDanley]

Written Budget and a Plan

Happy New Year APR. Congrats on having the $2K emergency fund!

You've got extra income to tackle your debts with. How detailed is your budget? I'd recommend writing up a spreadsheet or using a free app to get this dialed in as accurately as possible so you know your true amount of money that can be thrown at your debts.

I'd pay the lowest balance first, regardless of interest rate. Make minimum payments on the other credit cards and the car loan. Once the first is paid off, tackle the second. And so on. You can probably be debt free in two years.

I don't think you need to do anything with your annuity. You've got the income! Just focus your income stream at one debt at a time and look for ways to reduce your other expenses. You can do this!