Managing the debt now that we are current.

[familyof4]

So I am attaching a clip of my excel sheet I am using to layout our expenses. I know there is room to cut, room for reallocation and we need to adjust some things. We also have room to sell a few small value assets to reduce the debt. We have not decided on anything but to organize yet and get on a start for the pay down. We are in the initial stages.

All bills are on time and the mortgage is paid up until July 1st. We get paid this Thursday and every two weeks after that. My first main question is with the 104.00 surplus, I want to reduce some of the credit card debt. There are two current cards we are required to make payment on each month. Card 1 has the lowest balance which is collecting interest at 730.00. Do we put the 104.00 on that card until it is paid? Do we adjust a little from the EF and savings to knock it off? Once we get in the groove, we can apply this logic to the next debt.

I realize we have 3 bills that are in deferred interest. One of those has a 430.00 balance, which we may be able to take a side job payment and sack it on that and close it. We can’t rely on any side money because it is not set in stone. The other two are decent sizes and I am not sure what the approach will be for those. The Appliances, we may be able to take out of the savings when January hits.. or we may get additional side work that will allow us to pay it in full or that might be a sale of an asset to pay them off. We have not decided this yet.

The tractor is more of a need. We dealt with older run down machines and they will just not handle the work we have on our property, we use this all year to cut grass, plow snow and maintain our property. This is something I will keep and pay on, even if I work in a bi-weekly payment schedule to reduce interest.

Another possible area we can apply funds is the heat bill. We can take the 100.00 per month we are saving and pay off debt, then deal with the heat bills as they occur in the winter. We are stocked with about 2 months of coal and have a monthly fill plan on propane which is then billed upon fill up.

Please save the lectures about the amount of debt, the position we are in… so on. I read it all in my first thread and I do agree with all of it. Lets try to stay focussed on the solution to the problem, not the fact that there is a problem.


Mortgage / taxes/ home insurance___________________1,462.50 OWE 160450.00 6.5% fixed
Vehicle 1 Lease___________________________398.00
Vehicle 2 Loan_________________260.00 OWE 4888.00 8.5%
Son / Daughter savings acct_________________40.00
401k Loan_______________________163.86 OWE 3900.00 6.75%
Personal Loan___________________260.00 OWE 5285.171 5.75%
Credit Card 1_______________40.00 OWE 730.00 14.5%
Credit Card 2______________40.00 OWE 1250.00 13%
Auto Insurance_______________185.00
Snowmobile Insurance______________29.00
Life Insurance______________52.00
Student loan______________47.74 OWE 9500.00 6.1%
Power_________________90.00
Satelite_________________42.98
Cell Phone________________53.00
Home phone / DSL__________________25.55
Garbage_______________17.50
Heat_______________100.00
Tractor (def interest till Sept 08)___________0.00 OWE 4799.00 not sure of %, I will find out
Appliances (def interest till Jan 09)__________0.00 OWE 2150.00 not sure of %, I will find out
Store Card (def interest till Feb 09)_______________0.00 OWE 430.00 not sure of %, I will find out
Spending / Gas / Food______________800.00
Savings / Emergency________________430.00

[gamecock43]

I like how you have that laid out. You can clearly see your monthly bills and total bills.
I am not so good with this type of question, but my opinion is to choose the slow and steady route. Yeah you can knock off one large 'owe' bill at a time, but you still need to make payments on the others, so the best bet is to:
1. stay organized as you are
2. stay motivated as you are
3. pay however you need to pay in order to do 1 & 2.
good luck, this does not look like a bad debt scenario compared to alot of people I know.

[familyof4]

I forgot to add in this thread (it is in my first) that we bring home 2321 every two weeks. That is after all taxes, health insurance and 401k contribution is made.

Give or take a few pennies...So that puts total bills and EF / savings at 4537 and our bring home at 4642. The 104 additional can be appliaed anywhere in the list.

Thanks for everyones help in advance..

[jIM_Ohio]

You don't list the interest rates on any of the loans. That could change my answers.

I would stop sending $430 to an emergency fund and reduce the debts.

pay off in this order:
credit card 1 (logic being that you can pay this card off within 2 months).
store card (logic being that you can pay this off in 1 months)
The apply the $614 to a higher balance loan
then next higher balance
then next higher balance

In general, pay off the debt with highest interest rates and unsecured assets first (credit cards before car, car before house).

The $614 is about 12% of your budget per month. Use this "cash" as emergency fund each month, but I would NOT put money into savings until all unsecured debt is paid off.

[familyof4]

I added the rates that I know right now. The rest I will find out.

[familyof4]

You don't list the interest rates on any of the loans. That could change my answers.

I would stop sending $430 to an emergency fund and reduce the debts.

pay off in this order:
credit card 1 (logic being that you can pay this card off within 2 months).
store card (logic being that you can pay this off in 1 months)
The apply the $614 to a higher balance loan

The $614 is about 25% of your budget per month. Use this "cash" as emergency fund each month, but I would NOT put money into savings until all unsecured debt is paid off.

Where are you calculating the 614.00 from? I don't see that, please define. Thanks

[jIM_Ohio]

$614 is $104 plus $40 plus $40 plus $430. two $40 debts paid off, plus the extra, plus the savings.

[familyof4]

$614 is $104 plus $40 plus $40 plus $430. two $40 debts paid off, plus the extra, plus the savings.

Oh okay, I get it.. but your post did not say two credit cards, only the card 1 plus store card.. which we are in deffered interest on.

Anyway, i would like to have a little savings set aside, we do have two children and with small day trips or a camping trip.. I don't want to pay everything to a credit card and leave myself without anything. I need to find a good balance. maybe not a whole 430.. but at least 100 per paycheck maybe until I can save more.

So basically make the usual monthly payment on the card for the due date... plus should I make a bi-weekly payment to the card every paycheck in the amt allocated to that debt payoff? I would assume that once I get the money, pay it on the card.

[maat55]

Here's what I would do.

Sell the lease car and borrow the difference.
Move to a less expensive home. (Your payment is more than 30% of your take home and needs to be 25% or less with your debts.)
Sell the snow mobile.
Stop child savings and apply to debt.
List all your debts from smallest to largest (Balance or interest, whichever you like best, beginning with unsecured debts)
Pay the minimums and attack the first debt on the list with every extra penny and move to the next as they are paid.
Adjust your deductables on your insurances higher.

You need to make getting out of debt your new hobby. You are riddled with debt. Sell everything you don't NEED. No eating out, no cigarettes, beer etc. Trim every expense you can. Get a second or part-time job.

You need to establish a lifestyle plan for your income.

Once you are debtfree:

No more than 25% of take home for a house payment.
Have an 3 to 6 months EF.
Invest 10% of your income. This means live on 90% or less of your income.
Pay cash for all consumer debt. Cars, tv's, eating out etc.

It makes no sense for you or for your children sake, to save small amounts of money when you have a large amount of debt. Getting out of debt and managing your spending better will be a more prosperous position for your family. You've gotten to where you are fairly slowly and probably don't see how extreme your situation is, but from my eyes, you need to make radical changes in your position and your mindset. Good luck.

[savingmama]

Anyway, i would like to have a little savings set aside, we do have two children and with small day trips or a camping trip.. I don't want to pay everything to a credit card and leave myself without anything. I need to find a good balance. maybe not a whole 430.. but at least 100 per paycheck maybe until I can save more.

This quote makes me think you need to readjust your current budget. You don't have $430 to put toward a EF/ general savings if you know that you will need to draw money from it shortly for activities for the kids this summer. An EF should be seen as something you don't touch unless it is an emergency, like you lose your job, or you are in a car accident or some appliance breaks, etc. These camping trips are something you forsee coming so if it is something you know you want to spend money on, so you should figure out how much it is going to cost and how much time you have before the activities start and then start saving money for it. (For example, if it will cost $600 and it is in two months, you would need to save $150 ever two weeks). I would make sure to distinguish the category from your general savings/ emergency fund category. That way you are aware of how much you really have to put toward EF or toward debt.

Good job on working on your debt and keep going!

[abcd775]

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[Daylily]

Is it possible to drop the insurance on the snowmobile during periods of nonuse? We used to only insure our truck from April through September because that was the only time of the year we used it.

Watch the newspaper ads for offers from banks and credit unions to refinance your car loan. I've seen offers recently that advertised a 2% drop in the interest rate for refinancing a vehicle. Just as long as you don't extend the term, this might be a good idea.

Question on the appliances and store card that are listed as deferred interest. Is that really deferred interest or deferred payments? Is this the kind of thing that if you don't pay the balance by XX date then interest will accrue all the way back to the time of purchase?

[aida2003]

Considering the current house market you might not want to sell your house right now, but it you did it would help your budget a lot.

Actually, I'd rather sell the snowmobile. Is it your 'toy' or a necessity? If it's a toy, it seems to me it's just sucking money away; e.g. paying insurance when it's not in use.

I'd stop saving $40 for kids unless their account earns more than 14.5% (your CC #1). So, snowmobile's insurance $29 + $40 (CC min) + $40 (kids' savings) + $104 (monthly leftover) + a few $$ off any other savings would go against CC #1 balance. Result: paid off in 3-4 months.

Then I'd apply the total amount from the above + $40 (min for 2nd CC) to the bal. of CC #2.

If you sold your snowmobile, your both CC could be paid off within a month.

Not sure what you mean by deferred interest on your tractor and other cards. If they are the worst beast like I imagine now (e.g. if you don't pay the whole cash balance by the due date, you'll be slapped with the total interest for the deferred period of many months at let's say 20%), then be ready for a shocker in September. You better learn details fast.

That's my 2 cents.

[familyof4]

The furniture loan we had was accrued interest during the deffered period. The appliances, store card and tractor are 0%.. they start accruing when the promotion is complete.

I paid the furniture off and I am working on my plan to pay off all of the other debt. Starting with the lowest card first and applying that payment to the next and so on. It will be a process, but at this point we don't see any real pressing need to sell anything (we have the option if we see we are falling behind). Maybe further down the road if the debt is not being paid as we would like, but for now we are on the track we are satisifed taking.

I would not sell my house, unless I absolutely had to. It is not just a house for us. Family property and location is the best choice for us now. Not saying it would never happen, but it does not make sense for us to at this point.

[glock35ipsc]

Here's what I would do.

Sell the lease car and borrow the difference.
Move to a less expensive home. (Your payment is more than 30% of your take home and needs to be 25% or less with your debts.)
Sell the snow mobile.
Stop child savings and apply to debt.
List all your debts from smallest to largest (Balance or interest, whichever you like best, beginning with unsecured debts)
Pay the minimums and attack the first debt on the list with every extra penny and move to the next as they are paid.
Adjust your deductables on your insurances higher.

You need to make getting out of debt your new hobby. You are riddled with debt. Sell everything you don't NEED. No eating out, no cigarettes, beer etc. Trim every expense you can. Get a second or part-time job.

You need to establish a lifestyle plan for your income.

Once you are debtfree:

No more than 25% of take home for a house payment.
Have an 3 to 6 months EF.
Invest 10% of your income. This means live on 90% or less of your income.
Pay cash for all consumer debt. Cars, tv's, eating out etc.

It makes no sense for you or for your children sake, to save small amounts of money when you have a large amount of debt. Getting out of debt and managing your spending better will be a more prosperous position for your family. You've gotten to where you are fairly slowly and probably don't see how extreme your situation is, but from my eyes, you need to make radical changes in your position and your mindset. Good luck.

I agree with everything said here.