Embarressing financial situation.

[Quynne]

Hi everyone, I am a newbie. I am seeking wise financial advice and have looked in many places. My husband and I are in a very difficult financial situation. I lost my business and my husband's overtime was cut at about the same time. We also have three children. I won't spend too much time explaining the "why" behind our situation. However, we are not big spenders or anything like that. We have just experienced some hardship and admittingly didnt handle it well so now we are paying the price.

After struggling with finances, we have found ourselves in quite a bit of credit card debt. What is worse is all the cards are in collections. We are desparate for a solution. We paid the cards when we could...even had payment arrangements with a few. However, times continued to deteroiate and the cards were sent to collections. I know that is irresponsible and akin to stealing and all that. Believe me, we kick ourselves everyday. This weighs every heavy with us. We want to make this right. We want to start paying this debt off. We do not want to go bankrupt.

Ok...so my question is where do I start? Is credit counseling or debt reduction companies an option or is that simply making matters worse? I know the first thing to do is bring in more money. My husband is working 60 hours a week and can work no more...he drives for a living and his hours are capped. I am not working right now...however, daycare for my kids costs about as much as I was making while I worked. Maybe that is just an excuse...I don't know. I am willing to work but I hate the idea of bringing home only about $100 a week working full time. Would that even make a difference?

Ugh....we are stressed...in way over our heads and don't know the first step to take. OUr credit is shot. We don't have a credit card that isn't in collections....wait...we have one that isn't. We are embarressed, exhausted, and feel like failures. However, we want to make this right and feel like we don't have any direction. We considered credit counseling or a debt reduction company but have been told mixed things about that option. We don't want to make anymore mistakes that will haunt us for years to come. We were told to make payments on small balances and then work our way up. However, since the cards are in collections I am not sure if that is even an option.

Again...confused and in need of some sound advice. Thanks so much!

[marla]

I think that you have taken the first step posting in this forum. If you are really looking for help, the best step to take is to list you budget in the forums. This will allow everybody here give suggestions on what you may be able to do to get your finances in better order.

Credit counseling may be an option later, but I think that you will get just as good or better information from the people here.

[sweeps]

I agree with marla. First step is to get your spending under control. Only way to do that is lay out the budget and cut out the excess. You may have to make some tough choices for a while.

There are some ways to make small amounts of money here and there. You may have some things that you can sell on ebay or at garage sale. There are surveys you can take online for a few bucks here and there.

Can you also list your credit card balances, interest rates and how long they've been in collections?

[Broken Arrow]

Please take heart, and know that you are not alone.

There is no shame in wanting to get your finances under control.

[disneysteve]

Kudos for taking the big step of posting here and opening up about the problem.

I agree with marla that if we have all the info, you are likely to get great help here. Without knowing more details, we really can't give any useful advice so if you are willing, please post your current household income, debts (broken down by card, balance and rate), and expenses.

[Hot dog]

1st make sure you downsize everything If you have cable get bunny ears if you eat out eat in if you go to the movies go to the library instead. There is a lot of good advice here if you will be a little more specific. Can you babysit in your home to bring in extra $$?

[tifnglen]

maybe you should think about food stamps? you will have extra money to pay off some debt. I know you probaly dont want to do that but you seem like your really in a bind.

[fairy74]

I agree that you need to post actual figures, there are some true budgeting geniuses here (not me at all, but others come up with some really amazing solutions)....don't lose heart!

[Quynne]

I am very thankful for all of you! You are very understanding and kind. I will get my accounts together and post them. Here is a general idea and I will fine tune it when I get my papers in order:

Income: $50,000

House payment: $720.00

Car: $320.00 (will be paid off next month)

Cable: $36.00

Gas: $150.00

Electric $70.00

Phone/internet: $60.00

Cell phone: $89.00

Groceries: $120 (weekly)

Fuel: $100 (monthly)

Credit Total: $20,000 approx. total

2nd mortgage: $200.00 (monthly)


The cards have been in collections for months. One card has been in collections for a year with no payments being made. I will gather the details on that. I think the short answer is that I need to bring in more income. I have looked into child care for my youngest and it is $120 a week part time! Insane! Maybe I can entertain the idea of earning money out of my home. I can try babysitting again. I do have an ebay account and have sold things in the past. I am willing to do surveys however I am not sure where to start. If anyone has any ideas to earn extra money I can apply strickly to debt please let me know. I had thought about typing for people...since I type about 70 words per minute. I will even clean houses for the time being to get this paid off. I just need some direction. As time goes on I feel more lost. I just need some focus.

Thanks all! I will look into my actual balances on the cards and interest rates. I am not sure if some of those rates matter now that the cards are in collections. We did pay for a year on one card through a payment plan the card company set up but it didn't seem to make a dent in the balance. UGH.

[Ima saver]

I tell you what, house cleaners are in short supply. I think that is a great idea.

[disneysteve]

Is that income figure gross or net? If it is gross, what is actual take-home pay? You can't pay bills with gross, only with net.

What are the minimum payments on the cards and their interest rates? And can someone explain to me what happens when a CC gets sent to collections? Do you still get to make monthly payments or do you have to pay the whole thing at once? I have no idea how that works.

It's great that the car will be paid off next month. That will immediately give you $320/month to use toward debt repayment.

Obviously, cable should be turned off for now. And I'd reevaluate the cell phone though if you are in a contract, you might be stuck with that bill until your contract is up. As for phone and internet, investigate your options there. There may be cheaper choices in your area.

[anonymous_saver]

I think that it may be hard to earn about the same as you are now with house cleaning, I think you may want to stick it out a bit and try things as they are now.

(1) You will soon have $320 extra each month. Use this to save one months worth of an emergency fund (in a high interest account like Emigrant), and then put the rest towards the highest interest debt that you have.

(2) Could you get rid of your phone line at home, since you have a cell phone? That could save a bit of cash. Also, it may suck, but could you cut out cable out for a year or two until you get things more under control?

(3) Are you contributing to your companies match in your 401(k), this is still extremely important, even though you are trying to pay off a lot of debt.

(4) How much is your 2nd mortgage for and what is it's interest rate?

(5) What about things like going out to dinner every now and again, or what about clothes, or other things like necessitites like shampoo, paper towels, etc. How much do you spend on these things?

(6) What is your take home pay each month?


To me it sounds like the amount of debt you have is something that you can handle. It may take a few years, but I think you can do it. Have you tried to lower any of your interest rates on your credit cards?

Hope we can help, and sorry about all of the questions!

[fairy74]

I agree with disneysteve, cable needs to go asap and cell phone or landline, whichever is easier to get out of. How many people are you feeding on that food budget, can you cut it down at all?

[Scanner]

Agree, let's look at this like a business and give some things the axe here.

First of all - good news - you got an extra $320/month the next month - car is paid off.

That's not chump change and could start the snowball process to pay down some debt.

Cable: $36.00

Get the $14-18 package with just the premium channels

Potential savings: $150/year

Phone/internet: $60.00

Cell phone: $89.00

Something has to go here. As inconvenient as it is, you could probably access the internet at a public library or work. Not that we don't want you to visit here but desperate times call for desperate measures.

Then drop the landline or the cellphone line. At the very least, you could get a Tracphone, with about 360 minutes per year for $110.00 - that's what I paid.

Potential savings: $900+/year

Groceries: $120 (weekly)

Actually, that doesn't sound that bad to me but I bet from the tone of the other posters, you can get that down. Let's say we shave it to $100/week -
Potential savings: $720/year

Fuel: $100 (monthly)

Not much you can do about that.

I think what's missing here is really a bonafide budget. You have left a lot of things out - car insurance, car maintenance, taxes/home owners (escrowed or not?), home repairs, which tells me you probably aren't accounting for them. Are these the things ending up on the credit card?

Examining a credit card statement would be valuable to see your spending pattern.

I think you are in a bit of a pickle in that you're in collections with everyone of them - that would reduce your chances of consolidating or refinancing your debt if they have made a report to a credit bureau.

I would work on the smallest balance first with the $320.00, retire that debt, and work your way to the next one.

Most of all, a mindset of change is needed.

I think the extra income ideas are great too.

I think once your accounts get into good standing once again though, within 1-2 years and some of that balance downpaid, credit card companies will start offering you good rates again to refinance - think of them like whores in that regard.

[sweeps]

Get the $14-18 package with just the premium channels

Was this a typo? I'd be very interested to find a cable provider that offers cable for $14 a month. And that's for the absolute basic cable, let's not even talk about premium channels.