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$50,000 In Debt...Advice Needed

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    $50,000 In Debt...Advice Needed

    Me and my wife have $50,000 in credit card debt. We also have a mortgage and 2 car payments. While probably not the best thought process I don't consider the mortgage/car payments as part of the debt I am looking to pay off because we need a house and 2 cars. Both cars have under $10,000 left to pay off. My salary is $80,000 (not including $3-$5K in potential bonuses) and my wife is a homemaker with no income. Our kids are 5 and 7 so this August she will go back to work part time as both kids will be in school full time...her income should be around $15,000. We have a plan that can get rid of 75% of our credit card debt in 1 year. First she would save every penny for 1 year when she goes back to work, lets say $12,000. We live off my salary now so we can definitely save 100% of her paychecks. Second we sell our house (owned for 7.5 years) for its current market value and after mortgage paid off and realtor fees we would have approximately $36,000. We believe we are eligible for a FHA mortgage which allows us to put only 3% down on a new house in the $175,000-200,000 range...which means we would have $30,000 left. If I take that $30,000 and add it to my wife's $12,000 after 1 year then we would pay off $42,000 of the $50,000 credit card debt after 1 year. After this we can easily pay off the last $8,000 in the next 3-6 months with our combined salaries. I am 40 and she is 38 so we are ok with starting over on a house mortgage if it means getting out of this mountain of credit card debt. Assuming we can sell our house and can get the FHA mortgage (3% down) on the new house...can anyone give any opinion/advice on if this is a good plan and maybe some other things to do or not do relating to our plan? Thank you in advance!

    Anything you owe money on is debt. You make a good amount of money but you need to change the way you live. Your broke and need to live that way. I would work on the credit cards because they probably have the highest interest rates. Based on your salary and the extra from your wife you should have the credit cards paid off in 12-18 months.

    How much is owed on the house?

    Never buy a house with less than 20% down and no more than a 15 year loan.
    Last edited by skives; 02-13-2018, 03:56 PM.


      I often think people over estimate how much they can pay off or how fast. While you can live on your income alone now and any income your wife brings in will go directly to debt did you also figure out the costs of going to work transportation / lunch/ wardrobe ? How happy will she be with entire income going to debt I know I like a small token amount to show for my hours at work.
      I would start with paying as much as possible on debt and see how that goes. Planning on what should happen does not always work out.

      As for the house unless you were planning on moving anyway to a different area or larger place instead of trying to use any and all equity to pay off credit cards. cleaning a slate that way sounds good but what would stop you from getting right back in debt when it seems so easy to start over. I think the struggle and discipline of finding a way to pay for it teaches you to NOT fall back into the debt trap.


        You really need to address why you have that much credit card debt. If it all came from spending, specifically over spending, selling your home is not going to make a difference. You will just end up with more debt again. It would be far better to reduce your spending and living expenses while increasing the income. Is there anyway your wife could get a job paying more than $15K?

        Also consider that refinancing your current home would be less costly than selling your home to buy a new one.
        My other blog is Your Organized Friend.


          That plan sounds complicated and unnecessary.

          First we will need to know how you ended up with $50K in cc debt, then we can go from there.

          BTW, I would classify any debt that isn't associated with an asset that cash flows to be bad debt. Your car, your house, your credit card bills are all bad debt.


            Originally posted by bjl584 View Post
            Your car, your house, your credit card bills are all bad debt.
            Lets not forget that real estate appreciates in value, has tax benefits and can be used to borrow against.


              Originally posted by james.hendrickson View Post
              Lets not forget that real estate appreciates in value, has tax benefits and can be used to borrow against.
              Hopefully it appreciates in value. But the average homeowner isn't making money on their home unless they own a duplex and are house hacking by renting out the other side. Yes, you can borrow against your primary residence, but how many people are using that equity to purchase a cash flowing asset? Most are doing remodeling or paying down other debts. My point was that I think OP is wrong thinking that his house and his cars aren't debts.


                Welcome to SA. I think it's really smart to focus on getting CC debt paid off. Is your wife onboard with that plan? It's really a big hassle to list, sell a house, arrange new financing, buy another, pack up move, and all the resultant expenses that won't necessarily give you the pay off you expect.

                Worse, the way mortgage amotorization works, the initial 10 years of payment goes mostly to interest; smallest sum to principal. Check figures for 2017, monthly payment X 12 $ _________. Allocation: paid in interest, how much to municipal taxes, how much HOA [if applicable], insurance, principal reduced since December 31,2016 $_________?

                Are you open to consider other ideas to pay down CC debt?
                How many CCs? Are you are willing to list CCs from highest sum owed, to lowest sum owed & interest rate? Is $ 80K net?


                  I think you plan has a lot of ifs in it. One I didn't hear, but perhaps it is no longer a concern if either one of you got 'snipped', is if your wife doesn't end up pregnant again. Life happens.

                  Very much you have to figure out what you are in debt for. What did you buy that you can sell off and put towards the bill? Selling your house doesn't seem to be a very good idea as there are always more expenses that you expect to do so. Your house might not sell for what you want and you may not find another for the price you can afford that you want. You need to tackle this debt one bite at a time.

                  If you post your income and outgo, we might be able to help you find ways to cut expenses. You seem to be trying to pay off the debt without changing your expenses/habits. You need to take a good hard look at where your money is going, and we can help. Expecting your wife to work for a year and save every penny isn't going to work out real well as the first time you have a tight month, her income will come into play and as another poster mentioned, she is going to want something for working if just some spending money. Unless all the cc debt was run up jointly, if it was mostly your fault, she will resent having to do 'unpaid' work to pay off bills you made. Besides it is a big if that is 6 months into the future. Will she be even able to find a job at that income? Are you going to be ignoring the cc debt in the meantime?

                  Too many of your ideas are being made up and not very realistic and are very convoluted, especially the selling the house bit.


                    As someone who was in the same boat and had to pay off even more than you, I see a problems with your plan.

                    Are you pre-approved for a mortgage? I'm not sure you could qualify for a new mortgage with that much debt. We barely qualified for a refinancing and only got it because our retirement funds made up more than 1/2 of the mortgage (and then my husband cashed out his 401k, but we won't get into that). There is an excellent chance that your new mortgage rate will be higher than what you already have, and then add in the higher payment from only putting down 3% as a down payment. Your new house will have to be significantly cheaper than your current one to save even a little money per month.

                    Unless your wife has some skills, you should assume that she will be making close to minimum wage for the first year, especially if she has been out of work for the past 7 years. Maybe she does. I'm just assuming. Also, there are not many jobs that are well above minimum wage and only have a 20 hr work week. By the time you figure in extra gas, lunches, clothing, occasional baby sitters when the kids are off of school or sick, taxes, etc, she will probably be bringing home about $8,000 or $9,000 a year.

                    I think a better plan would be to make out a 3 year repayment schedule that includes money for an emergency fund. See what your credit score is and if you can get a few low interest balance transfers. I wouldn't even take out a home equity loan at this point because it might compound your problems. Get the budget under control first and then explore more options. You definitely don't want to put every single cent towards paying off your debt. Most people snap and splurge, and then you are right back where you started. And even a little emergency turns into a big one when you don't have any money to pay for it.


                      Wow the plan is way too complex and you are doing nothing but paying closing cost on both ends. I rather go with a home equity line than your complex plan.


                        I missed the point why you are selling your current home?

                        Are you buying a home that costs more or less than the current home?

                        Mentioning that you can get a FHA with 3% down shows your poor financial habits.

                        Your math is too exact and with selling/buying a home you need to plan for unexpected expenses... Also, you'll need to buy boxes, bubble wrap, storage unit perhaps, etc. Are you paying for movers or renting a truck?

                        Is your current home move-in ready? will an inspection flag anything that you will need to fix/replace?

                        I think your plan is weak and will lead to more debt. sorry...
                        Last edited by Jluke; 02-15-2018, 05:13 AM.


                          Your plan isn't really feasible, but as I mentioned before, if you post your income and outgo, perhaps we can help you find a way to pay to get rid of the debt. What you have been putting into your mortgage up to this point has been mostly interest not much principle so unless you know what exactly what is owing on the house, you may 'make' even less than you think. This is where it would be good to see what you paid for the house, what is still owing, how much is your monthly payment. Someone with your kind of earnings shouldn't be completely tapped out financially. If you have a 30 year mortgage, you are almost 1/3 of the way through paying for it. I would hate to sell it and only recoup $30K if that much. This plan is way to convoluted to work out and epends heavily on various factors. Like how are you paying for those cc bills now and how did you plan on paying for them until the house is sold and wife goes back to work?

                          Your best bet is letting us help you find a way to stay within a budget. and get the bills paid off without selling the house.


                            More Details

                            I appreciate all of the comments. It is not relevant for now the reasons we got into so much CC debt. Fact is we are in debt and are already living almost check to check (we have $2000 in emergency savings). We rarely go out to eat (1-2 times a month) and I rarely go out to lunch for work. Bottom line is that we are already at the point where we are spending minimal amount per month so cutting back is not an option. My wife will be making anywhere from $10k to $20k for the first year or so as she is just getting back to the workforce after 7 years of stay at home mom. Trust me we are at the point where we cannot spend less as most of our monthly $ goes towards all of the bills and food.
                            I fully understand what goes along with buying a new house as this will be my 3rd house if I go through with it. My "complicated" plan seems simple to me with 2 big "ifs". If we qualify for a FHA loan with a 3.5% down payment and if we can sell our house for $220,000 or more. If we first can sell our house for that much then after realtor fees, taxes, etc. and after paying off mortgage remaining we would literally have about $35,000 from the sale of the house. 3.5% of a new house in the $180,000-$200,000 range leaves me with $28-$30K to put towards my debt. That would pay off 3 cards and i calculated what my mortgage would be and it would be about the same as it is now...maybe a little more depending on the final cost of the house. Then with my wife (who is 100% onboard with saving 100% of her income for debt payoff) using $10-%15k (net) in the first year that on top of house "profit" should pay off 80-90% of our debt. Then after that I can put my extra (after 3 cards paid off I would have $1100 extra monthly) income from the min payments of the CC's already paid off towards the remaining CC debt.
                            Again, assuming we CAN sell our house for at least $220k (which in our limited research that is feasible) and we CAN get qualified for a FHA mortgage with 3.5% down (definitely a question mark but it is free to find this out) then the plan should work right?
                            Bottom line is selling the house and getting the $30-$35k "profit" and putting that 100% towards our debt is the only way to pay off the debt within a few years. If we stay where we are it will take several years longer to pay off. Why not take the opportunity of using the equity "profit" now and get a fresh start (getting rid of all CC's except for emergency use) and living the right way from now on?
                            Not looking for other options as there are not really any other options to pay off CC's within a few years. I understand it is bad we got here so lets get past that point. What specifically about my plan outlined should i look out for or keep in mind or am not thinking about?
                            Thank you for any responses.


                              What specifically about my plan outlined should i look out for or keep in mind or am not thinking about?
                              I think we have pretty much answered that. It is a very convoluted plan with too many variables to deal with, and the actual money is all estimated until one houseand sells and another one is bought and the move is done. Then there is the problem with your wife trying to find a job once the kids are in school, and what she might or might not make is all estimated. That is assuing she can find a job that works for her hours, otherwise you may have to be paying before and/or after school day care while she is at work and that just takes more money.

                              You seem to only be interested in doing your plan and not interested in hearing about any other way to pay off the debt, so I am not sure what else anyone can say. I did a version of your plan when in $42K worth of cc debt not including car and mortgage. The husband would NOT stop spending. So we divorced, sold the house, I paid off any bill that had my name attached to it, and ended up with a $1000 left over. Considering the downpayment had been paid with $20K+ of a worker's comp payout, $1000 was a real kick in the teeth since I still suffer with the pain from that injury! I rented until I could find a place of my own that I could afford. He went on his merry way spending himself into debt that I doubt these decades later he has gotten out of yet. I think the only way I could be comfortable with your plan if if instead of immediately buying a place, you rented for a year or so until everything is paid off, and you have gotten your finances back on track.