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  • Need some expert advice

    Here is my profile. I'm open to some sound advice and I think I've come to the right place:

    1st mortgage(I/O) Original: 284,800 Balance: 284,617
    2nd mortgage Original: 71,200 Balance: 69,997

    Total: Original: 356,000 Balance: 354,614

    Home vale: (From Zillow) Estimate: 316,000

    1st mortgage is fixed at 6.75% until Feb 2012 when it becomes an ARM.
    2nd mortgage is fixed at 8.577%.

    Credit Cards: Total: 28,316.58


    X 22.80% 75.00 1,056.00
    X 19.99% 120.00 5,050.00
    X 17.99% 55.00 3,059.22
    X 14.99% 85.00 3,700.00
    X 14.00% 90.00 4,487.22
    X 12.65% 130.00 4,427.00
    X 12.07% 95.00 5,021.00
    X 9.99% 95.00 9,210.00
    X 9.99% 50.00 1,915.00
    X 7.50% 105.00 6,965.00
    X 10.40% 20.00 1,828.00
    X 4.99% 81.00 3,377.58

    Student Loans: 22,000

    Personal Loan: 6,800 (0% interest, new windows for home)

    Savings: 2,000

    My wife just got a raise so we have about $600 above our budget every month to allocate.

    So many questions: Do we tackle credit cards, 2nd mortgage, emergency fund or all of the above.

    We are really lost, not sure where to turn. Should we see a financial planner? Any advice will be appreciated.

  • #2
    I don't think that you NEED to see a financial planner, it may be comforting to meet with someone who has experience dealing with people in your situation though. I would recommend you get that credit card debt out of the way first. It's just going to keep sucking money out of your pockets until it's gone. I would then build up an emergency fund before considering any investments. The relief of having your credit card debt gone and the security of the emergency fund will put you in a pretty good place to start building up some financial assets through investments or starting to pay off your mortgage. I would focus on the mortgage because there probably isn't a very good chance of finding an investment that is going to earn much higher than 8.57%. Not having to pay those interest payments is as good as having an investment that yields the same rate of return.

    Please post any more questions you might have and I hope this helps. Feel free to message me personally for any more advice.

    Comment


    • #3
      I would tackle your credit cards first-you would be able to get the 1056 paid out in less than 2 months and then tackle the 1800 one.

      I also recommend that you pick up Dave Ramsey's Total Money Makeover book and stop charging anything. You have the baby emergency fund all set-he recommends the BEF at 1k so you could actually take a $1000 and throw it at the 1,056 and be done with that card. It is all about your security gland.

      Are you getting any 0% balance transfer in the mail? You might want to take advantage of that.

      Can you get a second job to help increase gettng the Credit cards paid off faster.

      Comment


      • #4
        Originally posted by TryingReallyHard View Post
        Here is my profile. I'm open to some sound advice and I think I've come to the right place:

        1st mortgage(I/O) Original: 284,800 Balance: 284,617
        2nd mortgage Original: 71,200 Balance: 69,997

        Total: Original: 356,000 Balance: 354,614

        Home vale: (From Zillow) Estimate: 316,000

        1st mortgage is fixed at 6.75% until Feb 2012 when it becomes an ARM.
        2nd mortgage is fixed at 8.577%.

        Credit Cards: Total: 28,316.58


        X 22.80% 75.00 1,056.00
        X 19.99% 120.00 5,050.00
        X 17.99% 55.00 3,059.22
        X 14.99% 85.00 3,700.00
        X 14.00% 90.00 4,487.22
        X 12.65% 130.00 4,427.00
        X 12.07% 95.00 5,021.00
        X 9.99% 95.00 9,210.00
        X 9.99% 50.00 1,915.00
        X 7.50% 105.00 6,965.00
        X 10.40% 20.00 1,828.00
        X 4.99% 81.00 3,377.58

        Student Loans: 22,000

        Personal Loan: 6,800 (0% interest, new windows for home)

        Savings: 2,000

        My wife just got a raise so we have about $600 above our budget every month to allocate.

        So many questions: Do we tackle credit cards, 2nd mortgage, emergency fund or all of the above.

        We are really lost, not sure where to turn. Should we see a financial planner? Any advice will be appreciated.
        you need to address your whole financial outlook.

        If you only plan to use the $600 extra, you will be in a tight spot for a considerable amount of time.

        Pay loans in the order you listed


        X 22.80% 75.00 1,056.00 $600 pays in 2 months
        X 19.99% 120.00 5,050.00 $600 pays in 9 months
        X 17.99% 55.00 3,059.22 $600 pays in 6 months
        X 14.99% 85.00 3,700.00 $600 pays in 6 months
        X 14.00% 90.00 4,487.22 $600 pays in 8 months
        X 12.65% 130.00 4,427.00 $600 pays in 8 months
        X 12.07% 95.00 5,021.00 $600 pays in 9 months
        X 9.99% 95.00 9,210.00 $600 pays in 16 months
        X 9.99% 50.00 1,915.00 $600 pays in 3 months
        X 7.50% 105.00 6,965.00 $600 pays in 12 months
        X 10.40% 20.00 1,828.00 $600 pays in 3 months
        X 4.99% 81.00 3,377.58 $600 pays in 6 months

        In 88 months you can be cc debt free

        A better solution is this-
        List gross income
        apply 20 percent of this to debt payment
        live on the other 80 percent

        If you use this technique, I would assume the 28k is gone within 2-4 years (this depends on your gross income).

        You will need to cut back to live on 80 percent of gross income. What you cut is up to you.

        If you can refinance the house, even better.

        Comment


        • #5
          Also look into transferring from your higher interest rate cards to your lower interest rate cards.

          Comment


          • #6
            Originally posted by jIM_Ohio View Post

            If you use this technique, I would assume the 28k is gone within 2-4 years (this depends on your gross income).

            You will need to cut back to live on 80 percent of gross income. What you cut is up to you.

            If you can refinance the house, even better.
            Great advice, thanks. This is a good approach. We have about 7,000 per month in after tax income with 401K's maxed out to company matches. Our 401K have dropped from 40k to 28k in the last few months.

            How can we refinance the house when we owe more than it's worth - is there some program out there that I should take advantage of?

            Comment


            • #7
              Originally posted by zetta View Post
              Also look into transferring from your higher interest rate cards to your lower interest rate cards.
              This is a good tip. I just applied for 3 online cards and will transfer those higher rate balances and close out our old accounts.

              Comment


              • #8
                Originally posted by jIM_Ohio View Post
                You will need to cut back to live on 80 percent of gross income.
                I agree. Clearly, you have been living way beyond your means and that needs to stop or this will never get better.

                What exactly did you buy/spend to rack up over 28K in CC debt? If any of that was spent on things that you still have and can sell, I would be looking to sell as much as possible with every dollar taken in going directly to CC repayment.
                Steve

                * Despite the high cost of living, it remains very popular.
                * Why should I pay for my daughter's education when she already knows everything?
                * There are no shortcuts to anywhere worth going.

                Comment


                • #9
                  Pay loans in the order you listed


                  X 22.80% 75.00 1,056.00 $600 pays in 2 months
                  X 19.99% 120.00 5,050.00 $600 pays in 9 months
                  X 17.99% 55.00 3,059.22 $600 pays in 6 months
                  X 14.99% 85.00 3,700.00 $600 pays in 6 months
                  X 14.00% 90.00 4,487.22 $600 pays in 8 months
                  X 12.65% 130.00 4,427.00 $600 pays in 8 months
                  X 12.07% 95.00 5,021.00 $600 pays in 9 months
                  X 9.99% 95.00 9,210.00 $600 pays in 16 months
                  X 9.99% 50.00 1,915.00 $600 pays in 3 months
                  X 7.50% 105.00 6,965.00 $600 pays in 12 months
                  X 10.40% 20.00 1,828.00 $600 pays in 3 months
                  X 4.99% 81.00 3,377.58 $600 pays in 6 months

                  In 88 months you can be cc debt free
                  Remember that after you pay off one of the credit card debts you will have eliminated one of your monthly payments and you will have more money free at the end of the month to put towards paying off the next one. This means that it should take even less time. Just make sure that the money that you free up goes back in towards paying off that debt!

                  Comment


                  • #10
                    Everyone has given good advice so far. I would just add one thing. Have you addressed whatever it is that got you into $28,000 of CC debt in the first place? If not, that needs to be the FIRST step. If you don't address the spending habits, you are likely to make some progress on the CC debt for a while, but find yourself right back in the same place a little further down the line. Do you know where your money goes every month? If you are willing to list your expenses, there are people here that are great at helping you find places to cut. The more money you can throw at the debt every month, the faster you will get out of this situation.

                    I have heard that some mortgage companies are starting programs for people with high risk mortgages (and I would certainly consider an interest only ARM high risk) to help them refinance into lower risk mortgages. Some companies are also forgiving part or all of the difference in market value. It can't hurt to call and ask. The worst they can say is no.

                    Comment


                    • #11
                      How can we refinance the house when we owe more than it's worth - is there some program out there that I should take advantage of?
                      You have to contact your lender (Loss mitigation department) to discuss your option being up-side-down. You could argue that your expenses exceeds your income high enough that the probability of defaulting on your mortgage is high. Therefore, they might be willing to renegotiate a structured loan long before it even reset. It's at least worth it to try even if the chances are nil.
                      Got debt?
                      www.mo-moneyman.com

                      Comment


                      • #12
                        Originally posted by TryingReallyHard View Post
                        Great advice, thanks. This is a good approach. We have about 7,000 per month in after tax income with 401K's maxed out to company matches. Our 401K have dropped from 40k to 28k in the last few months.
                        What is your budget? You may need to cut out some extra such as cable tv and big cell phone plans. You could have a pretty good snowball if you are willing to be gazelle.

                        Comment

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