Feeling like the Titanic!

**billchrz** · 03-09-2008, 03:11 PM

Do you have any friends or family around to help with the kids while you go back to work? Is that an option?

What kind of debt does the $3200/mo include? Car payments? Credit Cards?

Without knowing the entire story I think that you need to sell the house and rent for a few years until you get back on track.

**disneysteve** · 03-09-2008, 03:12 PM

Welcome. Sorry to have you join us under such circumstances, but I think you'll find many helpful folks here.

I think keeping a house you can't possibly afford is just going to bury you. The first rule when you find yourself in a hole is to stop digging.

Can you explain the situation with the house in more detail because I'm not clear. Do you have any equity? How exactly did the bankruptcy filing affect the mortgage, if at all?

If you sell the house, how much do you think you'd walk away with? And how much are acceptable sized rentals going for in your area?

ETA: I'd also want to know what the other debt consists of.

**noppenbd** · 03-09-2008, 03:34 PM

Until we get further details on your exact debts with payments, interest rates, and balances, we can't help much. But just looking at your house payment as a percentage of your income it doesn't look like the house is the main source of your problems. Assuming your gross is around $4500 or so a month then your mortgage is about 1/3, so it is high, but not completely nuts. Of course it is still a sizable chunk of your cash flow so reducing it by renting would certainly help (if a suitable rental would be much cheaper). In any case you are going to have to make some sacrifices, whether it is selling the house, downsizing your automobiles, or getting some more income.

**Hypersion** · 03-09-2008, 05:17 PM

Sorry, it's my fault. Blame me.

Seriously don't waste any energy on assigning guilt, you can't go back in time and change history. You have a problem, try and solve it.

Can you baby-sit other kids from home? Have a one-car family? Get some roommates?

"We live paycheck to paycheck. We have NO savings. We have no money to do things with our children. I've looked for help on other websites with general inquires and they are very quick to point the finger at my husband and I, saying it's all our fault. Well, yes. Neither of us are very good at sticking to a budget. In our youth (the majority of our bad credit is very old) we were also guilty of not minding our credit very well. But I don't know if this is all our fault. "

**tcrocker** · 03-09-2008, 07:33 PM

We don't have any current credit card debt if you can believe that. I'll try to break it down as best I can.

In October of 2007 my husband had an accident and we had no insurance. Because he had been drinking, the restitution could not be included in our Chapter 13. So we owe $2,984.40, that's broke down in $100.00 a month payments. Here's a list of the rest of our monthly reoccurring debt.

Mortgage: $1,485.27 / 8.5% interest Fixed / $154,629.05 balance
Restitution stated above: $100.00
Car loan: $155.33 / 7.3 % interest / $4,854.00 balance
Cable / Telephone / Internet : $150.00 a month
Electric: $60.00
Gas: $150.00 (avg.)
mobile phone: $155.00
sewer / trash: $50.00
water: $68.00
vehicle gas: $320.00
groceries: $650 per month

Those are our reoccurring bills monthly. Our income presently is $3634.00 and that's after the bankruptcy garnishment of $668.00 a month.

When I start working we'll be adding an extra $880.00 a month for child care. At the moment I have been looking for work and have 3 interviews next week. We have no equity in our home. We've been here for almost 4 years, but the interest is so high that we're paying $1,241.34 in interest a month and only $183.93 towards our principal.

After I'm employed I'll bring home about $1500.00 a month (I can't work for anything less than that).

My husband and I are not the best with our finances. I try, but more often than not I find myself failing miserably

**scfr** · 03-09-2008, 09:04 PM

Since you've had the house for 3 years and it is an ARM, am I correct in assuming that the rate of 8.5% is the initial rate (it hasn't adjusted upward yet)? If so, you can't assume the rate will go down or you will be able to refinance to a lower rate; the rate may go up.

The bottom line is that your expenses almost equal your income, and that's without any allowance for unexpected expenses or emergencies. Since your husband is already working so many hours, you are not working at the moment, and child care will take a big chunk of your income when you do start working, I'd focus on slashing expenses and that means making some sacrifices.

You probably won't like this and I don't blame you, but my suggestion is that you sell the house and move in to a 2-bedroom apartment. It will be crowded with 4 kids no doubt, but it can be done. I don't know what rents are in your area, but I'm guessing you could probably cut a good $6-700 off of your monthly expenses right there.

Then I'd look at cutting back on other expenses such as the mobile phone, cable, internet, and gasoline.

If you have more than 1 car, you may think about cutting back to just one for the time being.

Finally, I don't see car insurance on your list of expenses. You might want to add that to avoid any further problems.

You have some work ahead of you, and I wish you well.

**Tree0164** · 03-10-2008, 01:08 AM

I think that there is a couple of places to cut down the budget and make it less tight.

Groceries $650 is way to much. You should be able to cut that down by $200 atleast. There are a lot of ideas on frugal cooking etc

Mobile phone $155 a month change plans

Also can you adjust your tax witholdings on your husband's check.

Are you getting a tax return back this year? If so put that towards the repayment plan.

You also may want to consider working at home. There are some legit work at home customer service jobs that you can do overnight while the kids are sleeping.

Saving Advice Forums

http://www.savingadvice.com/forums/personal-finance/124-legit-work-home-jobs.html

**noppenbd** · 03-10-2008, 04:37 AM

When you initially said that you had "debt" of 3200 a month I thought that was not including expenses. Your situation is very tight but you can get out. The fact that your car payment is low and you have no credit card debt is very helpful. I agree with scfr and Tree0164 that you need to get on a very strict budget.

I would recommend you read Dave Ramsey's book "The Total Money Makeover". He advocates using the envelope system; that means each category has a certain amount of cash allocated to it at the beginning of the month (or after each paycheck) and that is used until gone, at which point you need to either adjust your budget for the following month or just stop spending in that category!

Here are some specific ideas off the top of my head:
-Reduce your food bill. I would look into buying food in bulk and cooking large meals for the week, and then freezing the extra or eating as leftovers throughout the week. You should be able to cut that grocery budget down to 400 a month. No eating out for you for a while.
-Reduce your cable/phone/internet bill. Look into bundles from the cable or phone company (in our area about $100 a month), or cut cable to basic and join Netflix. Look into cutting your telephone plan to the bare mininum (should be around $10 a month before fees), eliminating most outgoing calls and all long distance calls, and just using your cells.
-Your water bill is high (ours is around $70 every 3 months), so look into ways to cut water use (don't shave in the shower, use the sink instead; don't run water while shaving or brushing teeth; only run full loads of laundry and dishes; get a water-saving shower head and aerators for your faucets)
-Going down to one car may be difficult to impossible if you start working. Can you sell your vehicle to eliminate the car payment, and buy a reliable paid-for used vehicle with the cash, also looking for better fuel-efficiency? That would cut down on your fuel costs. If not, can you join a credit union and ask them about refinancing your car at a lower interest rate?
-When you start working does your husband have access to a dependent care flexible savings account (FSA)? If so, you can put up to $5000 a year into it pretax to pay for daycare, which will save you around $1000 in taxes.

If you can keep to a tight budget you should be able to save up a small emergency fund ($1000) in 2-3 months, at which point you can start to think about paying down debt, increasing your emergency fund, and saving for retirement. But first you need to get your spending under control. This is not to imply that you have been living the high life, only that you are not tracking your money sufficiently to see where you can reduce costs.

Of course all of these things require sacrifices (some major), and you may ultimately decide that you would rather sacrifice the house than make all these smaller cuts. Ultimately it is up to you which sacrifices you are willing to make. Don't wallow in your past mistakes but look at what you can do in the present and future to correct your path. Make sure you and your husband are on the same page. If he is that desperate to keep the house, he has to be willing to make the other cuts. By the way, I don't think the current house payment is completely out of line for you if you can tame your budget. I would look at all the other expenses before you decide to sell the house, especially in this market. You may have trouble getting into a decent apartment with damaged credit.

Dave

**aida2003** · 03-10-2008, 05:39 AM

I'd like to add my 2 cents opinion, too.

.

I agree with other people's advice including tightening your spending budget.

BTW, what state/city do you live?

Someone suggesting selling your house, considering that you've got an ARM mortgage. When will it adjust to a new rate?
The sale of the house would be good if your net proceeds after sale (sale price - agen commission - other expenses) will equal the balance of your mortgage.
If you decide to sell the house, first you'd need to explore rent prices in a reasonable area (maybe closer to DH's workplace...?). If you can get a deal for less than $800-$900, I'd go for it.

Why is your grocery bill so high? Do you eat out a lot, make many carry outs or do you buy lots of unnecessary (=junk or other) goodies?
I think it's feasible to cut $650 down to $500.

Why is your TV/Internet/Phone bill so high? Do you, guys, spend time outside at all or is all leisure time spent in front of TV and PC?
Who watches cable? I'm guessing not DH since he's busting himself with all the overtime.
I'm hoping our family's habits will not change in the future, but we have NO cable (we've got "Rabbit ears" on our TV). We have a land line for the total of $30/mo. (bare bones line, we don't spend time talking either) + $10/mo. Dial-up that is used maybe twice a month (OK, I admit I use Internet at work a lot

: paying bills, forums, personal emails).
Like someone suggested, consider Netflix if you watch movies/cartoons a lot or check out your library first for FREE. We prefer library and then we spend lots of time playing inside or outside (around the house, playground, going to a park).

Cell phone? That's very expensive.

We have an emergency cell phone only that is carried by my DH. I'm considering to get one for myself in the future. We paid $10 for a phone + $6.20/mo. for service. If you like talking a lot, that might not fit your style.

So, that's my 2 cents.
If you could alter your lifestyle temporarily (including selling the house probably + getting a job), I think you could easily get back on your feet.

Good luck.

I

**disneysteve** · 03-10-2008, 06:35 AM

I think noppenbd gave some good advice. There is definitely room for improvement on your expenses. What you are spending on cable, land and cell phones and internet is WAY too much. Switch to the most basic cable service, usually $10-15 (we pay $11.30 with tax).

Cut out all extras on the phone service like call waiting, caller id, voice messaging, etc. Just get basic phone service. And make sure you are not paying any fee for long distance service on the home phone. Use your cell for all long distance. We pay $23.40/month for our land line. We pay $29.95 for high speed internet. So a total of $65 where you are spending $150.00.

For our cell phones, we are on a family plan with AT&T. There are 5 of us with phones and our monthly bill is $125.00, less than you are paying for 2 people.

I also think your food bill sounds high. I know there are 6 of you but you should be able to knock a hundred or more off that bill.

**anonymous_saver** · 03-10-2008, 12:31 PM

Originally posted by tcrocker View Post

Mortgage: $1,485.27 / 8.5% interest Fixed / $154,629.05 balance
Restitution stated above: $100.00
Car loan: $155.33 / 7.3 % interest / $4,854.00 balance
Cable / Telephone / Internet : $150.00 a month
Electric: $60.00
Gas: $150.00 (avg.)
mobile phone: $155.00
sewer / trash: $50.00
water: $68.00
vehicle gas: $320.00
groceries: $650 per month

Those are our reoccurring bills monthly. Our income presently is $3634.00 and that's after the bankruptcy garnishment of $668.00 a month.

I added up your bills quickly and got that your total monthly bills are $3,343.60. With a take home pay of $3,634.00, that would leave you with $290.40. I can understand how that sounds scary to someone with 4 kids. That money has to pay for necessities like shampoo/toilet paper, co-pays, clothes, shoes, home repairs, spending money etc.

If you work and take home $1,500/month, and pay for day care, you will take home approx. $620 extra. Add that to the $290.40, and you will have $910.40. That could help you guys get in the right direction. I suggest that when you get to this place, decide how much you need for necessities and "fun" money. Maybe this has to be as low as $100 for the whole family per month for awhile, maybe $50. But my point is that you should decide together and stick to it. Then with ANY EXTRA MONEY, pay off your debt. Normally, I would say pay the highest interest debt, but in this case, I think that is your house? I might actually pay off the car loan or the restitution first instead. Once you pay off everything except your mortgage, perhaps you would be able to refinance? Also, once you pay off everything but the mortgage, I would start building up an emergency fund A.S.A.P.

Good luck with your job interviews. I second the thought of using a Flexible Spending Account for both your medical and day care needs.

Please tell me your husband is putting up to the match in his 401(k)? You should do the same once you start working again.

Once you start working again, I hope your husband can calm down (a bit) on his hours, or perhaps looking for a higher paying (with less hours) job?

How long will your husband's wages be garnished?

Is there a way to get a cheaper car? Perhaps one with better MPG?

**tcrocker** · 03-10-2008, 07:11 PM

I can't thank you guys enough for all the valuable advice. I am going to go to the library this week and try and pick up that book if I can find it. My husband and I do not live 'expensive'. I mean, we don't wear name brand shoes or clothing, we don't drive expensive cars. I have a 2001 Ford Windstar that has quite high mileage. My husband DID have a very good point A to point B car that my mother gave us for free (!) but he wrecked it .... thus the payment to Shelter Insurance monthly

I have been arguing with Sprint for the better part of 3 years about our phone bill. I call, complain and they SAY they are adjusting it to the basics and my bill should be under $100 a month for both of our phones. Then, two months later, it's back up over $100! Our cable/ internet / landline phone are bundled through Charter cable, it's about $180-$200 a month. We live just south of Saint Louis Missouri.

I've checked into houses around here and a 3 bedroom home rents for no less than $950 or so.

Last year, we fell REALLY behind on our mortgage. At that time, it was $1224 a month. We spoke with the home retention department and they worked out a loan modification with us so that we were switched from an ARM to a fixed interest rate - which was a plus. The catch was they tacked on what we owed to our loan and that raised our payment to what it is now - $1425.27.

I have a really hard time managing money as does my husband. Neither of our parents were responsible financially with their money. We really had no one to learn from. We just were given a stand-up freezer to store larger packs of meat in, so I think that will help us out a lot.

The garnishment on my husbands check for the chapter 13 will last for 48 months. The bankruptcy trustee takes our income tax check (we usually end up with about $10,000!) so he changed his with holding so that he gets more money through the year instead of at the end of his year. He does participate in the 401K plan thank heavens. Now I haven't checked into the Flexible Spending program ... I never really understood how it worked

We both are at the point where we are ready to make whatever sacrifices we need to in order to get into a good place financially. I'm so worried over the fact that we don't have any sort of emergency fund whatsoever.

I've got three interviews this week ... so I'm praying that one of them will come through. I tried to explain to my husband that I don't want to lose our home ... I just don't want to keep spinning our wheels financially and ten years from now when our 13 year old is grown still have absolutely nothing.

edit:
Our grocery bill is really high. I do cut coupons and try to 'bargain' shop but I do tend to buy the 'name brand' soda, frozen pizzas and other items that I need to stop buying :-\. It would be a very hard thing for the two oldest of my boys to acclimate to but I think I should just start buying fruit etc. for them to snack on when they get home from school and before dinner. That would save a lot of money I think.

**disneysteve** · 03-11-2008, 04:33 AM

Originally posted by tcrocker View Post

Our cable/ internet / landline phone are bundled through Charter cable, it's about $180-$200 a month.

I just checked Charter's website. The price on that 3-service bundle is $99.97/month. That might be a promo for new customers, but all you should need to do is call customer service and ask to have your rate lowered or else you will cancel the service. They would much rather give you the advertised rate than lose your business.

ETA: To get that rate, you have to have not subscribed to their internet service in the past 30 days. So if they really hassle you (which they probably won't), just cancel for a month and then sign up as a new customer.

**noppenbd** · 03-11-2008, 04:38 AM

First off, you are going to make it. You have realized that you need to take control of your money, rather than letting it control you. I think you will benefit a lot from the Dave Ramsey book. You have realized that you need to be intentional about your spending. Rather than just accepting what things cost, you need to question your spending.

For instance, _why_ is your Sprint bill over $100? Are you looking at the item by item charges on the bill? Maybe you are being billed for services you don't need or never signed up for. This happens all the time and most people just pay the bill without looking at it, so the companies continue to get away with it.

Do you need to have a landline phone? Maybe you can eliminate it since both you and your husband have cell phone service. Either that or reduce your cable package. The bundles can be good deals but $200 is absolutely ridiculous for your situation. As disneysteve said, the easiest thing to do is call your cable company and ask if they have any specials, oftentimes they can give you the same deal as someone who is signing up for the first time. Even better, consider eliminating the bundle and just signing up for what you really need (maybe just rabbit ears and dialup internet or slow DSL?).

It sounds like you will be shopping more intentionally as well. Look for sale items rather than the brand you "always buy". Lose the brand loyalty. Also pay careful attention to the unit pricing which is displayed on every item in the grocery store. Oftentimes a name brand that is on sale is only slightly cheaper than normal and it would pay to stick with a store brand. Sometimes it is cheaper to buy a smaller box of an on-sale item than the bigger bulk package. I know it is embarrassing to do this, but when you are checking out, put your necessities on the belt first, and finish with your "wants". Watch the total on the register and if it goes over what you have budgeted, ask the cashier to restock the items you can't afford.

FSAs work like this: money is deducted from your paycheck pre-tax. For example, if you ask for $100 to go into the FSA, your gross pay will go down by $100. However, your tax withholdings are a percentage of your gross pay, so they will also go down a bit. The result is that putting $100 in your FSA will only reduce your take home pay by $75-80. So you are saving $20 right there. The $100 gets put into a holding account, either for medical expenses or dependent care. When you pay out for one of these things, you can fill out a reimbursement form, fax it to the FSA company, and they will cut you a check to pay back your costs. It seems complicated but you can save a lot of money on your child care. You can put up to $5000 per year in your dependent care FSA, which will reduce your take home pay by only $4000 or so but pay for $5000 in care, saving you $1000 a year. Since you are planning on childcare expenses of ~$900 a month, you should put the max in once you have stable employment.

If you can learn to really be intentional about your spending, you will be able to pay off your restitution quickly, save some emergency cash, and be ready for the time when the bankruptcy is paid off. Then since you have established a pattern of saving, you can really start to sock away a lot of money when your debts start to be paid off. Good luck.

Dave

Feeling like the Titanic!