Poster in need of advice

[bjl584]

This is from an anonymous poster looking for help.
There isn't much to work with here, but here it is:



My wife and I just had a baby. She is no longer working to stay home and raise the child. I make decent money, but we both came into the marriage with debt and now I’m taking it on alone and it’s overwhelming. I have credit cards maxed out that I’m not able to pay on, thankfully we only have one car payment but it’s steep. I used a HELOC to help consolidate but even with that it’s hard to pay bills.

And advice for ways I could start to manage this better? Or financial assistance I’m not aware of?

[myrdale]

Get a second job.

Have the wife get a work from home job.

Trade the "steep" car payment in for something you can afford.

It's their choice for the wife to be a stay at home mom. Nothing wrong with it but that decision comes with a price, decreased income.

100% of the time, rolling credit cards into a HELOC is a bad decision. Before you did it the worst the credit cards could do was ruin your credit or maybe sue you. After you do it, now your home is in peril of foreclosure since you borrowed against it. And now the credit cards are balance free waiting for you to max them out again!

[Fishindude77]

Pretty similar advice here.
When you find yourself in a hole, the first thing you need to do is stop digging.
* Cut up and quit using the credit cards. Make all purchases cash or debit card using money you actually have.
* No more dumb ideas like HELOC'c to consolidate debt. You've only traded one kind of debt for another and you've put ownership of your home in a much riskier position.
* Get a cheaper vehicle.
* Find something your wife can do to bring in some income. Work overtime yourself or pick up a second job.
* No eating out, no vacations, no frivolous spending, no unnecessary costly fun, etc. until you get things turned around.

This is a great case for the Ramsey baby step plan. If you're not familiar with it, learn about it and start using their methods.

[myrdale]

The original comment about a "steep" car payment stuck with me yesterday.

A basic rule of thumb.

Your the total value of all motorized vehicles you own (car / boat / motorcycles) should not cost more than half your annual income.

If you earn a $50,000 per year income, you shouldn't own a car which cost more than $25,000.

If you earn a $100,000 per year income, you shouldn't own a car which cost more than $50,000.

If you earn $100,000 and you own a $30,000 and you want to buy a $15,000 boat and a $5,000 side by side that is fine.

If you earn $100,000 and you own $50,000 car (fully paid for) can you buy another $50,000 car? In my opinion NO.

This rule above is partly based on what payments you can afford, but it is also based on how much depreciation you can afford as well.

[Petunia 100]

Do you have a second vehicle which is paid for? Sell the financed one and become a one-car family. Have you considered selling the house and moving into an inexpensive rental? Have you considered the possibility of your wife working a part-time job on weekends and/or evenings while you stay home with the baby?

It's wonderful that your wife is staying home with the baby but it is an expensive choice. You're likely going to need to rearrange other choices like where you live and what you drive.

Do you have a written budget? Do you know where all of your money is going? If no, now is the time to sort it out.