Please guide us in the right direction

[Kalyn]

Hi everyone. I've lurked these boards for a couple of weeks now - long enough to know that we've made some BIG financial no-nos, but we are trying our hardest to get back on the right track and to establish a secure future for ourselves. For the record, I am 29 and moved to the US about 5 years ago after finishing college. As such, I had absolutely no credit history, had never had a credit card in my life (yes, cue red flag here) and was pretty wet behind the ears when it came to making "good" financial decisions. My husband just turned 30. He had really good credit when he was younger but in 2005-2006, he went through some bad stuff with his family/stepdad and everything went south. We got married soon after I moved here but were living with my MIL for a year to get on our feet. He had just been laid off, I was fresh out of college with no job and nothing but a suitcase, and we essentially lived in a single room for over a year. Now we're both gainfully employed, living in our first home and have a car but you can probably guess the debt that came along with that. I know we have made a lot of mistakes along the way so please be gentle. Our goals at this time: (1) Pay off debt; (2) Fund an EF; (3) Start saving aggressively for retirement. When we bought our home I didn't know any better so we went in with a $10k DP on a $200k loan. We had NO furniture except our bed so a lot of CC debt is from getting the backyard done and buying furniture and stuff for the house. I recently decided to heck with my credit for a while and applied for several 0% cards to consolidate debt - the interest was scaring the heck out of me. AAoA has gone to hell in a handbasket as a result but we have 0% for s while so I can breathe a bit easier.

Household income: $90k. Take-home pay is about $5k/mo
Current mini EF: $700, working towards $1000 w/ $100 from each check.
I have 6k (was 11k, borrowed 5k) in my 457, DH recently started saving so 2k in his.
I contribute 3% right now and DH contributes about 1%.. neither company matches. We dropped these numbers from an earlier 5% each to tackle debt.

Expenses:
Mortgage: 1350 (escrowed, +PMI Bal: $190k @ 5%)
HOA: 141/4 = 47
SID fee: 279/6 = 47
Car note: 680 (0% for the life of the loan - 30k balance. Made some big mistakes here & rolled in negative equity from 2 vehicles)
Ins: 70
Power: 122
Gas: 60 averaged over the year
Water/sewer: 60
Groceries: 400 (Eating out budget included)
Cellphones: 110 (under contract)
Alarm system: 45 (under contract. $800 ETF)
Phone/Internet: 70 (can't cancel our landline because of the alarm system)
Cable: 60 (under contract until March - will be canceling right after)


Debt: Min pmt / Bal / Interest
CareCredit: 60 / 997 / 0% exp. 12/12. (This was $1600 last month, trying to knock it out by November.)
Home Depot: 25 / 2422 / 0% exp. 06/13
RCWilley: 120 / 2500 / 0% exp. 10/12
Discover: 60 / 2100 / 0% exp. 03/12 (haven't had a pmt due yet, min. pmt is an estimate)
Citi: 56 / 3700 / 0% exp. 10/14
ING Loan: 93 / 4900 / 4.25% (borrowed 5k against my 457 balance to pay down debt. 5yr repayment period)
DH's ACS student loan: 163 / 9300 / 2.63%

TOTAL EXPENSES: $3688ish.

I am looking to pay off the CareCredit first, then attack RCWilley followed by Home Depot using the snowball method, before working on our other credit cards. I deeply regret making the decision(s) we did that led up to our current car, but we are SO upside down on it (2010 Prius) that selling it is not even an option I want to consider. We only have one car but drive about 85mi/day between my job and his so the low gas cost is nice. Plus it is less than a year old so I am planning on driving it into the ground and beyond if I have to.

As I said I have never made a late payment on anything and we are, somehow, relatively comfortable in spite of the debt we are carrying but I deal with the finances exclusively and the stress alone is fit to kill me as i am a chronic worrier who needs to micromanage things. I want to be debt free (mortgage excluded) as quickly as we can and then look into investment options. I am reading so much about funding traditional/Roth IRAs etc but am still so lost that it's laughable. My sincere apologies for this huge wall of text but I would love any input and guidance you can offer at this time. Thank you!

[BMEPhDinCO]

First things first - breathe! It's manageable!!

I don't see anything for "fun" in your budget, or for things like car repair, house maintenance, medical emergency, etc...I do NOT consider that part of the EF and would suggest putting another $20 a month into a new account for each of these. If you like to micromanage, it makes it so much more fun to have multiple accounts for each big issue! ;-)

Second, you should have about $1,300 a month "available" - where is that going now? I would do this with it:
Oct. paychecks: $997 to CareCredit (GONE), $100 to each of accounts above to jumpstart them
Nov. paychecks: $1,000 to RCWilley, $300 to savings
Dec. paychecks: $1,000 to RCWilley, $300 to savings
Jan. Paychecks: $500 to RCWilley (GONE), $500 to Discover, $300 to savings
Feb. Paychecks: $1,000 to Discover, $300 to savings (by now, you should have your EF at $1,200 or so, around 1/2 of your months expenses if you had to go bare bones)
Mar. Paychecks: $800 to Discover (GONE), $200 to HD, $300 to savings
Apr. Paychecks: $1,000 to HD, $300 to savings
May Paychecks: $1,000+ to HD (GONE-kill it with extra from savings if necessary), rest to savings
June-Aug Paychecks: $750 to Citi, $250 to Ing, $300 to savings
Sept PC: $rest of Citi, $200ish to Ing, $300 to savings
Oct PC: $750 to Ing, $550 to savings

So in one year, you'll only have the ING loan (at ~$2,100), the ACS loan (at ~$7,350), the car, and the house....you'll also have at least one month in the EF and money in the house, car, etc funds for new expenses so you don't have to add to the debit balances...

I would then pay off the ING loan by the end of 2012 - possible with the Nov & Dec at $1050 each and that will leave you free to kill the ACS loan and start on the car loan in 2013...your savings will still be lower than is great through the end of 2014 but if you really keep pounding (and hopefully bring in more money), you should have less than $3,000 on the car by Jan. 2015 and be free of the car by May 2015. Since it's a 2010 Prius, it should last another 4-5 years, giving you time to SAVE for the next one! Plus, you'll only have the mortgage by then.

So that's my thought - save hard until May 2015 and then relax a little! I realize it's a lot of money and a long time, but it's really less than 4 years - it takes longer to get a college degree! ;-)

[Kalyn]

First things first - breathe! It's manageable!!

I don't see anything for "fun" in your budget, or for things like car repair, house maintenance, medical emergency, etc...I do NOT consider that part of the EF and would suggest putting another $20 a month into a new account for each of these. If you like to micromanage, it makes it so much more fun to have multiple accounts for each big issue! ;-)

Second, you should have about $1,300 a month "available" - where is that going now? I would do this with it:
Oct. paychecks: $997 to CareCredit (GONE), $100 to each of accounts above to jumpstart them
Nov. paychecks: $1,000 to RCWilley, $300 to savings
Dec. paychecks: $1,000 to RCWilley, $300 to savings
Jan. Paychecks: $500 to RCWilley (GONE), $500 to Discover, $300 to savings
Feb. Paychecks: $1,000 to Discover, $300 to savings (by now, you should have your EF at $1,200 or so, around 1/2 of your months expenses if you had to go bare bones)
Mar. Paychecks: $800 to Discover (GONE), $200 to HD, $300 to savings
Apr. Paychecks: $1,000 to HD, $300 to savings
May Paychecks: $1,000+ to HD (GONE-kill it with extra from savings if necessary), rest to savings
June-Aug Paychecks: $750 to Citi, $250 to Ing, $300 to savings
Sept PC: $rest of Citi, $200ish to Ing, $300 to savings
Oct PC: $750 to Ing, $550 to savings

So in one year, you'll only have the ING loan (at ~$2,100), the ACS loan (at ~$7,350), the car, and the house....you'll also have at least one month in the EF and money in the house, car, etc funds for new expenses so you don't have to add to the debit balances...

I would then pay off the ING loan by the end of 2012 - possible with the Nov & Dec at $1050 each and that will leave you free to kill the ACS loan and start on the car loan in 2013...your savings will still be lower than is great through the end of 2014 but if you really keep pounding (and hopefully bring in more money), you should have less than $3,000 on the car by Jan. 2015 and be free of the car by May 2015. Since it's a 2010 Prius, it should last another 4-5 years, giving you time to SAVE for the next one! Plus, you'll only have the mortgage by then.

So that's my thought - save hard until May 2015 and then relax a little! I realize it's a lot of money and a long time, but it's really less than 4 years - it takes longer to get a college degree! ;-)

Thank you so much for your reply! I have to admit, although I was planning on a rapid repayment towards the cards, I didn't dare to think along such aggressive lines as you are! But when you break it down that way, it really does look completely doable. We have been making a concerted effort this month to not eat down, go to the store with a shopping list, not to make the daily "oh it's just a dollar" soda purchase from drive-throughs, etc and I gotta say, I'm LOVING looking at my account balance right now!!

Gonna kill the CareCredit account next Thursday as soon as the next paycheck comes in and start throwing everything I have at RCWilley. You're so right, it's just a year and we can absolutely do this!! Hugs - thank you!

[Kalyn]

Ps. You don't see anything fun in our budget because we have a bad habit of blowing through whatever is above our "cushion" the day before we get paid. No more of that!! Going to start doing more free fun stuff and stuff at home and saving that money towards other little emergencies that will inevitably arise

[photo]

Ps. You don't see anything fun in our budget because we have a bad habit of blowing through whatever is above our "cushion" the day before we get paid. No more of that!! Going to start doing more free fun stuff and stuff at home and saving that money towards other little emergencies that will inevitably arise

You could make a little list of extravagances to indulge in that cost little to no money. Then, when you feed you deserve a little reward, choose from your list.

[Kalyn]

Thanks for the great idea, photo I love deal-hunting and used to be perpetually on slickdeals and Groupon/Livingsocial. I had stopped that because "just looking" would very quickly turn into "Oh, that's cheap and SUCH a good deal"...Lol. I will have to start peeking on there every so often for a little indulgence or maybe staycation we can enjoy as an inexpensive reward.

Little victory - been doing REALLY well this paycheck, have stayed well within our budget and even have a little more of a cushion than I had planned on, so we killed our CareCredit card today. Dead, gone, ADIOS - a full year ahead of the promo expiration!!! I checked the most recent statement and felt this little thrill of glee at the $533 worth of interest they'll never get out of us!! Now on to RCWilley!

[maat55]

Your car is woth 18k to 20k. This leaves you with a 10 to 12k deficit. You could sell the car, take out a personal note for the 10 to 12k and buy a 8k car or less leaving you with 20k debt or less as apposed to the 30k. This is one option for getting rid of 10k or more soon.

Ask yourself this question. If I had a personal note of 10 to 12k, would I purposely go and buy a 18 to 20 car right now or buy a cheaper car? The 10-12k is already a loss, it may as well be on its own.

This is to give you a perspective on your auto debt versus your desire to be debt free. Part of going from bad habits to good habits is reaping rewards(seeing progress) and learning sacrifice(giving up temporary luxuries for higher priorities) and discipline(learning to aquire luxuries on a plan as apposed to when you want them)