need help with debt?

**bjl584** · 08-22-2008, 07:44 AM

Sort of depends on your long and short term plans, but I can tell you that you are not going to find a safe investment that can guarantee you a 9% return. You would probably be better off paying down the debts.

**mike81** · 08-22-2008, 07:53 AM

I just updated my original post, i probably should have also mentioned that i'm 27.

**disneysteve** · 08-22-2008, 08:08 AM

Originally posted by mike81 View Post

Selling the car is not an option for me.

Why not?

if i could find a way to invest that money and get a return higher than 9% i could make some money and maybe pay off debt faster.

Forget it. Don't you think we'd all be doing that if it were possible? And you don't need to earn 9%, you need to earn about 12% to account for the taxes you'd pay on the investment.

This amex card is the one i use for day to day things. I always pay off any new charges plus send about 200 extra for the 800 dollar balance

You need to STOP using ALL credit cards IMMEDIATELY!. You absolutely shouldn't be using a credit card if you have a balance on it. You are paying interest on every purchase you make even if you send in enough to cover those new purchases each month. That is just really, really bad money management.

If you are getting a tax refund of more than a couple hundred dollars, you need to change your withholding so that you get more in your check each week and apply that money to your debt.

**disneysteve** · 08-22-2008, 08:14 AM

From your list, it appears that you should have $1,652 remaining per month. You are sending some of that in as extra payments on your debt. Where is the rest going? And that is not including any bonus money.

**mike81** · 08-22-2008, 09:00 AM

I'm pretty much living check to check. I havent been exactly keeping track of my month to month but i do know that at the end of the month i have nothing left. I am planning to get quicken and start tracking everything there. You did bring up a good point about my income tax refund. Right now on my paycheck i claim 0. But at the end of the year when i do my taxes i claim my self and my wife. My wifes job isnt on the books so i claim her as a dependent. For 2008 i recieved 7200 in refunds. I would love to know how i can change it so i have more on my paycheck. My only fear would be that i want to make sure that i dont owe money at the end of the year since i dont have any savings.

**disneysteve** · 08-22-2008, 09:33 AM

Originally posted by mike81 View Post

I havent been exactly keeping track

My wifes job isnt on the books so i claim her as a dependent. For 2008 i recieved 7200 in refunds. I would love to know how i can change it so i have more on my paycheck.

You need to start a spending log (your wife also) right away. You don't need a fancy computer program. All you need is paper and pencil. For the next month, you should each write down every penny you spend on absolutely anything. At the end of that month, sit down and split that list into two columns, Wants and Needs. Compare your total spending to your total income for the same period. If spending exceeds income, you have a major problem and need to eliminate things from the Wants column. If they are about even, you still have a problem because nothing is going to savings.

With your bonus and tax refund, you have nearly $3,000/month unaccounted for on your list. You should be paying off your debts and building your savings with no trouble.

**jIM_Ohio** · 08-22-2008, 09:58 AM

I don't think you appreciate the situation you are in.

I saw 71k of debt, including 30k for a car- what kind of car is it?

You lumped tax return in wwith your bonus- why? A tax return can be applied to a budget- a bonus should not.

I see no plan to get out of debt or improve the situation you are in.

In general send 20% of gross pay (not including bonuses or tax return) to debt and financial independance. You should then be budgeting on 80% of gross- after taxes this might end up being close to 50% of net.

$5576 monthly is a net income? That appears to be a net of 60k, I assume gross pay is about 90k or so.

I question the need for such an expensive car- I make more than you and drive a Ridgeline- much cheaper than what you have.

You do not appear willing to make sacrafices to fix the 71k of money you have spent, but not earned.

**mike81** · 08-22-2008, 10:05 AM

thanks alot for the info. Today i'm going to make sure to change my tax marital status and dependents. I already checked with my accountant. Do you think its a smart idea to save or should i just take all left over cash and apply it to my bills?

**jIM_Ohio** · 08-22-2008, 10:11 AM

Look at the 20% guideline first. You are looking for detailed answer to one specific question, but need a more general plan first. Can you afford to put 20% of gross to debt or investing? If not, you have a bigger issue than the questions you are asking.

**mike81** · 08-22-2008, 10:33 AM

I think once i start writing down all my expenses i'll have a better idea. But thanks for pointing me in the right direction.

**disneysteve** · 08-22-2008, 11:30 AM

Originally posted by mike81 View Post

I think once i start writing down all my expenses i'll have a better idea. But thanks for pointing me in the right direction.

After you do this, come back and post your spending list. Right now, you are bleeding money and have no idea where it is going. Until that stops and you get your spending under control, nothing else can be figured out.

**maat55** · 08-22-2008, 11:50 AM

If you are not on a budget and sticking to a set spending plan, you will find that you have a lot more money to pay debt with. Most people just blow through money without thinking. If you are determined to get out of debt and start a good financial plan, you have the ability to do so.

One thing you need to get in your head is that, your plan is more important than instant gratification. To say that selling the car is not an option is a bad mindset. If you had the right mindset, you would not be this far in debt.

I suggest that you can and should sell the car and replace it with a 5k car. Living on a good financial plan is as much or more a lifestyle mindset as it is a numbers game. You can have everything you want and more on a proper financial plan than you have now. You are living on tomorrows money at a higher cost.

Your lifestyle should be based on 80 to 90% of your take home pay at most. Investing in assets that produce income should be of high importance to you.

Here is what I would do if I were you:

Sell the car and use boa to finance the difference + 5000 car
Drop the gym's for now.
Pay the minimums on all debts
Take all spare funds and save an 2000 EF (should happen very quickly)
Take all extra money and payoff 800
With remaining, add to payoff of car debt on new loan.
Once car is paid, apply all extra funds to 42k debt.
After 42k is gone, build ef to 20k
Next, invest 15% of your gross income and use remaining to build car and etc. fund.

Selling your car will lower your monthly payment and enable you to lower your insurance costs. I highly suggest that you read The Automatic Millionaire.

Doing these things is easy for someone in the mindset to win with their money. Those who are addicted to consumerism will find it hard. Doing these things in this manner will change your mindset to one of a winner. Good luck.

**disneysteve** · 08-22-2008, 11:57 AM

Originally posted by maat55 View Post

Your lifestyle should be based on 80 to 90% of your gross income at most.

I'd have to disagree with one part of that, Maat. Lifestyle should be based on 80% of TAKE HOME pay, not gross. If you base it on 80-90% of gross, after you pay taxes, you're already in the hole.

10% minimum of gross should go to savings, ideally 15-20%. Taxes knock off another 25% roughly. That means take home is about 60-65% of gross. You should be living on that and no more. If you can't do that, you are living a lifestyle that you can't afford and you need to start cutting out luxuries like expensive cars, cell phones, cable tv, dining out, designer clothes, gym memberships, etc.

**maat55** · 08-22-2008, 12:06 PM

Originally posted by disneysteve View Post

I'd have to disagree with one part of that, Maat. Lifestyle should be based on 80% of TAKE HOME pay, not gross. If you base it on 80-90% of gross, after you pay taxes, you're already in the hole.

10% minimum of gross should go to savings, ideally 15-20%. Taxes knock off another 25% roughly. That means take home is about 60-65% of gross. You should be living on that and no more. If you can't do that, you are living a lifestyle that you can't afford and you need to start cutting out luxuries like expensive cars, cell phones, cable tv, dining out, designer clothes, gym memberships, etc.

Your right, I got the take home mixed up with the gross. The main thing is for OP to know to live on less than he earns. Thanks Steve.

need help with debt?