How do you start when you feel so overwhelmed?

**Broken Arrow** · 05-15-2008, 06:14 PM

Hey... thank you for sharing such deep thoughts with us. I appreciate your candor and I can sympathize with your anxiety....

I suppose it wasn't to long ago when I felt the exact same way. All I remember was being stressed for a long time, but that I also knew the only way to "cure it" for good was to just keep plugging in those debts and savings, no matter how small my contributions were.

I remember when I sort of vowed to start saving too. I took out a $20 out of my wallet and vowed that no matter what, I wasn't going to spend this. To this day, I still have it. I use it as a book marker for whatever financial book I am currently reading.

So, that's how my journey started, with a lot more mess, a lot less planning, and with only a $20 bill.

But anyway, what I mean to say is that I hope the very best for you. Many on here have been through that or is going through that now. We're all pulling for you.

**disneysteve** · 05-15-2008, 06:38 PM

Wow. I'm overwhelmed just reading your post and not knowing where to begin to respond.

Some thoughts, in no particular order and with no particular endpoint.

You say you anticipate being in the red for each of the next 8 months, but at the same time, you say you are saving $645/month. If you've got $645 going into savings, you aren't in the red. You are in the black. That's a good thing.

I don't know what the heck you are driving but 36K for another 6 years!!! I would be tracking that vehicle's value regularly and as soon as your loan balance drops to what you can sell it for, pull the trigger and get rid of it. From then on, don't ever buy a vehicle if you have to finance it for more than 3 years. Any more than that is a sign that you are overextending yourself and buying something that you can't afford.

Finally, for the moment, a $9,000 tax refund is nuts anytime, but especially when you are carrying $12,500 in CC debt and over $100,000 in debt overall. He needs to change that W-4 tomorrow and you guys can start putting that $750/month toward debt repayment.

It can certainly all seem overwhelming, but you just need to take it piece by piece. Identify one thing you can change for the better and change it. Then move on to the next thing you can change, and change that, and so on.

You can do it if the two of you work together to make it happen. It will take time, but you'll gain strength and motivation from watching those balances fall. Post them on the fridge and do something special every time the total drops by $1,000. Open a bottle of wine or order a pizza or see a movie, some little splurge to celebrate.

And keep coming here with questions and for support.

**creditcardfree** · 05-15-2008, 07:01 PM

You could sell the vehicles...and finance the difference of the amount you sell for and the remainder of the amount you owe. You would need to talk to someone at the bank and let them know what you are doing. Something to think about anyway.

I would first change withholdings. Once you see the differnce in pay, apply that amount to CC.

Consider stopping retirement temporarily...6 mos to a year, but only if you are really going to attack this debt. Don't do it if you are not committed.

Downsize vehicles...that's where 1/2 your debt is...in depreciating assets.

Pay off student loan and then work on the home equity.

Just my opinion. Take it one step at a time. Have a plan and then work the plan.

Steve had a great idea when he suggested little rewards along the way. For me...it would have to be the wine!

**AmbitiousSaver** · 05-15-2008, 07:20 PM

Thanks guys.... I just got off the phone with him and mentioned about the withholdings. Its amazing, I think for the first time we're both 100% on board that something has to change with the finances. Cause he'll come to me and ask me for a pair of shoes for $50 and I tell him we can't afford it, but then I go to a Pampered Chef party and spend $50... so I told him I recognize I have no accountability. But I mentioned the W4 like you suggested and he actually sounds willing to do it... just said he's worried about them not taking enough out in taxes and then having to owe at the end of the year.

How do we figure out what the right withholding amount is? I claim 2 and make around $40K, he claims 0 and makes $33K taxable income (but he gets like $20K additional in untaxed benefits from the military)... and we have a family of 6 now.

**Snave** · 05-15-2008, 07:36 PM

I may be out of bounds here, but the marital counselor is an idiot. The number one reason people divorce is over money. So, for him to hard-line it and say you take over the finances is dumb. I hope he/she is just hard-lining it so that you both see what the other is feeling, but there are better ways to get a point across. Anyway, it sounds as if you have quickly learned that both of you need to take accountability. I wish you luck. As for your situation, the cars have got to go. You make 77K and have 50k in car loans. What kind of car do you drive with a 36K loan? Take the loss of the money and probably the harder hit, your pride, and sell the things.

**creditcardfree** · 05-15-2008, 07:39 PM

Go to the irs.gov website here. The W4 has a worksheet that will walk you through how many withholdings. Last year we claimed 9 and still received a refund. Those child tax credits make it hard to have not enough withheld. We have two children, too. Our income was about $55k taxable.

Don't figure in the non-taxable income. It is not calculated in your taxes.

**maat55** · 05-15-2008, 08:08 PM

As you stated, you should sit down and write out your budget. Then you should get a huge carving knife and cut it to the bone. Sell the 36000 car even if you have to borrow from the bank.

Stop saving money and change the W-4 to free up that money and put every penny towards the debts. Get rid of the cable and everything else you think you have to have but do not.

Once you commit yourself 100% to getting out of debt, you will see results and then you will thrive on it. You are going to have to make some hard choses and sacrifices, but the results will be well worth it.

Read the Total Money Makeover by Dave Ramsey, it's just the motivation you need.

**Seeker** · 05-15-2008, 11:19 PM

Originally posted by AmbitiousSaver View Post

How do we figure out what the right withholding amount is? I claim 2 and make around $40K, he claims 0 and makes $33K taxable income (but he gets like $20K additional in untaxed benefits from the military)... and we have a family of 6 now.

The best site for figuring out Withholdings is the IRS site:

2008 Withholding Calculator

I believe you can input all the info (including deferred tax amounts) and arrive at the best number to use.

**snafu** · 05-16-2008, 01:52 AM

I'm not sure I read your list correctly. You have a $24,000. home equity loan unrelated to your mortgages [plural]. I have the impression you are paying car loans added to one another for vehicles you no longer own!
Adding to suggestions already posted, I believe you need to increase your income. Can you rent a room/share your home with a college student? Can you and DH get serious and knowledgeable about finance?

The 1st rule DH and I learned was that you only borrow/go into debt for items that have the potential to increase in value in the future. Your education has that potential as does your home. Cars usually only depreciate for so spending as little as possble for reliable transportation is a better plan. Hyundai isn't sexy but they offer reliable transportation really cheap.

Perhaps designate a figure for each expenditure. For example, $ X for utilities [hydro, phone, heat, water, etc.] $ Y for food which includes take-out-restaurant, $ W for auto expenses inluding gas, maintenance, insurance, parking etc? If you overspend in one category, you compensate by spending less in another category.
Because of the way interest is calculated it's important to work the figures to get out of CC, Auto and Equity debt as fast as possible or you will have an enormous albatross dog you and limit your choices in the future.

**AmbitiousSaver** · 05-16-2008, 04:12 AM

Originally posted by Snave View Post

I may be out of bounds here, but the marital counselor is an idiot. The number one reason people divorce is over money. So, for him to hard-line it and say you take over the finances is dumb. I hope he/she is just hard-lining it so that you both see what the other is feeling, but there are better ways to get a point across. Anyway, it sounds as if you have quickly learned that both of you need to take accountability. I wish you luck. As for your situation, the cars have got to go. You make 77K and have 50k in car loans. What kind of car do you drive with a 36K loan? Take the loss of the money and probably the harder hit, your pride, and sell the things.

Our take-home pay is $7850 a month... or $94,200/year... sorry for the miscalculation earlier. I was going off of what was on our 1040 last year between our W2s. In July our income will go up an extra $50/mo... and I have a performance review next week or two so I might get a raise there as well. And if DH gets picked up for the next rank, he'll get a $300/mo raise

The cars aren't fancy either... an '03 VW GTI that should be paid off next year if we adjust our withholdings. We downsized that last year... sold my '05 Accord and his '06 motorcycle to consolidate it into 1 payment... my car payment was $460... his motorcycle was $220... so we consolidated those and got him a commuter car, financed it for 4 years... and got the $435/mo payment. We were paying 3 vehicle payments at the time... with a Honda Pilot.... so I told him I was tired of doing that and we downsized to that.

My car is just cause we JUST bought it in February when we tried to make our Honda Pilot work but with 4 kids, they couldn't comfortably fit since the kids would complain the 3rd row seat was too small and you couldn't even fit groceries in the back (a must since I live 5000 miles away from family and when DH is deployed I don't have an option of leaving them at home or finding a sitter to go grocery shopping). So we got an '07 Odyssey. Which, the payment was the same as our Pilot.... and it dropped our insurance payment being a minivan vs an SUV

**AmbitiousSaver** · 05-16-2008, 04:33 AM

Originally posted by snafu View Post

I'm not sure I read your list correctly. You have a $24,000. home equity loan unrelated to your mortgages [plural]. I have the impression you are paying car loans added to one another for vehicles you no longer own!
Adding to suggestions already posted, I believe you need to increase your income. Can you rent a room/share your home with a college student? Can you and DH get serious and knowledgeable about finance?

The 1st rule DH and I learned was that you only borrow/go into debt for items that have the potential to increase in value in the future. Your education has that potential as does your home. Cars usually only depreciate for so spending as little as possble for reliable transportation is a better plan. Hyundai isn't sexy but they offer reliable transportation really cheap.

Perhaps designate a figure for each expenditure. For example, $ X for utilities [hydro, phone, heat, water, etc.] $ Y for food which includes take-out-restaurant, $ W for auto expenses inluding gas, maintenance, insurance, parking etc? If you overspend in one category, you compensate by spending less in another category.
Because of the way interest is calculated it's important to work the figures to get out of CC, Auto and Equity debt as fast as possible or you will have an enormous albatross dog you and limit your choices in the future.

The home equity loan is due to renovations we did on the rental... we replaced the flooring in the entire house (when we moved in we had to bleach the concrete slab cause the prior owners cats were AWFUL... we really tried to make it work... but then we moved in and realized how bad the smell was)... I replaced the appliances in the kitchen as they broke (fridge, dishwasher, stove)... we replaced the windows.

The negative equity on the cars is actually because of how many times we've flipped cars.

Trust me, I know its bad and I hope I don't sound like I'm trying to defend my position... I appreciate all the help and advice. But the cars and the houses are the only things I think are immovable because... I have four kids, we can't downsize to a Yaris or anything that size. And we tried looking at used vans but they needed transmission work or ended up putting us the same amount in debt as the van we have now... or we couldn't buy them cause being used they wouldn't absorb the neg.equity into the loan and the interest rate was higher. We tried looking at '03 minivans for $20-$25K but we had $6K in neg equity to roll over... so the only thing that would hold that was a new car. We even tried leasing just so we could be out of something in 3 years... but the dealer said a lease would be more expensive.

The only way DH and I justified the '07 minivan (which the dealer was trying to get us to buy the '08) was that we would keep it till it broke down cause we can't really "upgrade" the only thing else that can hold the 4 kids would be a suburban or something.

**noppenbd** · 05-16-2008, 06:10 AM

The thing you were not considering when you bought the new Odyssey is the depreciation. That vehicle is going to be worth 50% of what you paid for it in a few years and then you will be even more underwater on the loan. Every day that you keep the Odyssey you are losing money on depreciation, about double the amount you are paying in interest. The 5-yr depreciation on an 07 Odyssey is $12000! The interest is probably only about 1/3 of that over the 5-yr period!

In your situation, you need to stop thinking about interest rates and payments and start thinking about the debt as a whole, or even better your net worth as a whole. You cannot borrow your way out of debt, no matter how good the interest rate! If you sold the Odyssey and got $24000 for it, and bought a $5000 used minivan you would be in much better shape, even if you had to borrow from the HELOC to pay off the remainder of the vehicle loan. Because the used minivan won't depreciate much, you are saving the $12K in depreciation plus a chunk of interest over the 5 yr period. That $12K would pay for several transmission replacements! See where I am going with this? Most people justify a new car that they want by saying that the repair costs of an old vehicle make it worth it. But when you look at the numbers, it's just not the case.

Next, on the rental. You are losing money on this house every year. What makes you think that you are finished with the repairs and that you will not lose money again next year? This does not sound like a great investment for your kids college. You should consider selling it, taking the loss as a learning experience, and start a proper savings plan for college. Even if you put it in a simple savings account at least you are not losing money! It may take 2-3 more years before housing prices even start to rebound, and factoring in repairs, you may have continue to lose money all that time.

Honestly I think part of the problem is the accounting degree. I think you are being too smart for your own good in some cases, by using the numbers to justify purchases that really don't stand the light of day when you look at the big picture. I apologize if I am beating up on you, but I honestly think you need a complete change to your way of thinking if you are going to get out of this mess.

**AmbitiousSaver** · 05-16-2008, 06:24 AM

Originally posted by noppenbd View Post

Honestly I think part of the problem is the accounting degree. I think you are being too smart for your own good in some cases, by using the numbers to justify purchases that really don't stand the light of day when you look at the big picture. I apologize if I am beating up on you, but I honestly think you need a complete change to your way of thinking if you are going to get out of this mess.

No worries, I get that in order to "get real" with the finances on this - I'll probably need some hard advice. I've already adjusted DH's withholding... so I'm listening and no matter how hard the advice, I'm taking it to heart.

I guess the next thing I need to tackle is the rental... (I'm still hesitant on the minivan... but baby steps)... if we sold the rental the HELOC would be gone too. But when I last talked to the realtor about selling, it would take $22K to sell and that is if we got our asking price. It could probably go for $250-$275K and we owe $226K on the first mortgage (we pay $1695/mo with taxes/PITI/insurance/etc)... well and then another $255/mo on the HELOC. Plus $20/mo on HOA fees, and $152.50 on the property manager. And we only charge $1525/mo in rent cause that is what the market is for the neighborhood and the house.

We have good credit so I don't want to mess it up on a short sale or anything... but don't know what to do... hence, we've kept the rental and just got by. I have a feeling if we got rid of the rental and even broke even we'd be a LOT better off just by doing that.

**aevans1206** · 05-16-2008, 06:27 AM

I would definitely look into trading in your car for a cheaper one. Eating that money now saves a lot of interest over the life of the loan and gives you more cash NOW to pay off that debt. Then, take a hard look at what your NEEDS are per month in terms of expenses. I used excel to do that. Maybe get rid of cable, pare down cell phone, etc. etc. I plan our meals in advance to help cut grocery costs, make big pots of things that we can eat as leftovers so we aren't tempted to eat out. Research some tactics to help you decide what you need and don't need. Everything leftover goes towards debt. I've been down in the dumps, but being honest with myself about what our needs are has helped tremendously and I plan for every penny as it comes into the house. I'm not great at it, but am getting better. And I'd say DON'T stop saving. It's not an overly aggressive amount. Cut your expenses, but don't stop what should be your first expense--you.

How do you start when you feel so overwhelmed?