Wipe Out Debt in 12 months?

**Jluke** · 06-24-2015, 06:54 AM

I agree you have to satisfy the back taxes first, then tackle the car loan and make sure the furniture account is paid off before the 0% expires.

Download an amortization schedule in excel for each loan and enter the loan details. See what impact extra payments have on the life of the loan and the overall interest paid.

based on the numbers you provided, it almost appears that you are at break even with your income versus expenses? In order to accelerate payments you'll need to have positive cash flow.

You may need to cancel the entertainment subscription and use that $40 towards a loan.

**bjl584** · 06-24-2015, 07:00 AM

I understand that the VA will allow you to buy a house with no money down, but that doesn't mean that you should do it.

How much are you planning on putting down on the house? 20% should be your goal.

**autoxer** · 06-24-2015, 07:21 AM

Originally posted by originaljerk View Post

I'm horrible at budgeting to say the least.

Budgeting sucks. We can certainly draw up an ideal budget, but if it isn't livable, then it won't last. You listed 4700 in income, 2795 in expenses, so if no money slipped through your fingers, then you have a surplus of $1,905 / month. If those numbers are accurate and you put all of the excess funds towards the back taxes and car loan, then you could just about eliminate both of those debts by next march. But that doesn't allow any flexibility.

Without actually tracking your expenses, it is really tough to figure out how much you are actually spending. Try tracking your actual spending by writing down each expense and totaling up each category at the end of the month. Carry a small notebook, jot down each time you buy groceries or buy prepared food. When you really know where your money is going, it is easier to shift your priorities. You'll start to think that buying a house is more important than buying a cup of coffee and when that happens you don't feel deprived, because it was a conscious choice.

The interest rate on the car is obscene. Can you sell the car?

**snafu** · 06-24-2015, 08:52 AM

Welcome to SA and congratulation surgery and recovery from your battle with cancer. Your taking on that car loan at 24.59% speaks volumes of your current credit score. I hope you know you can get an annual update/score from one of the four large services at no charge once each year. This might help you make corrections to improve your score.

Have you made any inquiries about home purchase? What interest rate are you likely to be charged? What purchase price do you anticipate based on your specific location? What is driving this plan? Would monthly cost PITI [Principal, Interest, Taxes, Insurance [mortgage insurance & homeowner insurance] be less than current rent $ 765. + $ 250. utilities [$ 1015] ?

I hope you'll follow autoxer's suggestion to track every dollar spent, to identify where money slips through your fingers. It could make a big difference in clearing old debt and moving forward.

**doingitallwrong** · 06-24-2015, 09:38 AM

Current income $71,000 after taxes and child support monthly is approximately $4700/mo.

Is that correct? Given that, plus your other monthly expenses, it looks like you're in the hole almost $1600 per month. ($71,000/12=$5,916 per month income, loan payments of $930/month not including back taxes, child support of $4700/month, living expenses of $1865/month) If that's really the case, you'll need to make some dramatic changes, not only to get your debt paid off, but to keep from accumulating more.

**Singuy** · 06-24-2015, 11:19 AM

I'm not sure if the OP listed child support as an expense or income..but from the post it looks to be expense which means there's no way to get out of debt with a 4700 child support monthly.

**originaljerk** · 06-24-2015, 05:09 PM

Originally posted by Singuy View Post

I'm not sure if the OP listed child support as an expense or income..but from the post it looks to be expense which means there's no way to get out of debt with a 4700 child support monthly.

Sorry about not making that clear. After Child support my take home pay is $4,700/mo on average. The average is built over 21 months since I'm commissioned. Some months I make more, some a little less, but that is the average. Due to a very creative divorce my monthly child support is $315/mo and that is already taken out before I get my pay so I treat it more like a tax than a bill.

The reason for the interest rate on the auto loan is I filed a BK in 2008 due to the mortgage industry crashing, I worked in the industry. Hence it was a huge hit to my own personal income. I was riding the bus an hour and a half every morning and night to go to work and had no choice but to pay the interest since I had only the BK left on my credit if I wanted a car loan. Lack of credit history forced me to use credit to get the loan and pay the horrendous rate.

I put 2K down on a 2009 Ford Edge 2WD and got a loan for $12k at the crappy interest rate. I would sell it in a heartbeat if I did not need the tradeline on my credit bureau. But no tradelines means no house, even with a VA loan.

I've picked up 4 Secured credit cards since January, each gets a tank of gas a month charged to it and then paid off as soon as the statement comes out. This keeps the cards reporting which I need for the credit score to go up. These are the first credit items I took out since the BK, since the BK I have been on a cash only diet.

I moved from Ohio to Arizona in the fall of 2013 and got lucky getting a good job. Now I have a goal of buying this house so I have something real to leave my kids in another 30 or so years. I do have approximately $1700 - $2k per month after bills each month to work with for debt reduction.

Truck interest rate: 24.59
Back Taxes are currently 3% (Variable)
Student Loans 3.13% (Variable so these will go up I know)
Furniture is at 0% until 09/15/15 then it goes up to 24.99% Approx $2k owed on it.

Depending on the tax bill I can wipe those out in 3-5 months, just waiting on a friend who's helping with it all to finish polishing them up so they can be submitted and I can get the penalties and interest from the IRS. Some years I'm owed a refund, but can only take them for 2012 & 2013. Trying an appeal for the 2011 since they are only a few months past the final submission time when owed a refund.

Part of my savings is to put some extra money on the CD at USAA that is securing the card there. Hoping the higher credit limit on the card it secures helps the credit score, currently it's a 566 on FICO, yes I know that is crap.

Sorry if this seems disorganized, trying to figure out which to attack first, how to make sure the furniture is paid on time and not get my pay garnished for taxes.

**Goldy** · 06-25-2015, 04:47 AM

The good news is that your situation seems manageable with some budgeting and attention to detail. However, I don't think you will be ready to buy a house for atleast 2 years.

If I were you I would immediately sign up for Mint.com to help track spending so you can see where every dollar is being spent. Then assuming you have an excess of 1500/mo here is what I would do.

July pay extra 1500 to furniture.
August pay 500 to furniture and 1000 to truck
September pay 1500 plus snowball old furniture payment of 175 for a total of 1675.
October repeat
November repeat
December repeat
January paid off truck
Feb snowball truck payment of 375 plus 1675 extra payment to taxes and repeat.

If you can limit your spending using mint and increase your hours you can get out from the truck and furnature in under 6 months which would be great. I'm not sure how the taxes will come into play and if they will require you to pay those first before any other debts.

**feh** · 06-25-2015, 05:08 AM

Originally posted by Goldy View Post

The good news is that your situation seems manageable with some budgeting and attention to detail. However, I don't think you will be ready to buy a house for atleast 2 years.

+1

With your current debt load, there's no way you should be thinking about buying a house.

**autoxer** · 06-25-2015, 05:38 AM

Originally posted by originaljerk View Post

Now I have a goal of buying this house so I have something real to leave my kids in another 30 or so years.

The goal of leaving something to your heirs is great, but that's not a great reason to buy a house. It will complicate the estate, because a house can't easily be divided between three children and a house isn't necessarily a good investment, unless it is a rental property that provides cash flow.

**Eagle** · 07-01-2015, 12:28 PM

@originaljerk

Welcome to the forums! Looks like you've been through a lot with the lung cancer. Very sorry for that kind of hardship.

I would agree with others that buying a house in a year is not attainable. Not only due to your debt to income ratio but also due to the very low credit score. When speaking of buying a house good credit is ideal. No credit is doable. Bad credit is not.

You want a house to be a blessing not a burden. So a few observations:

1. You want to put 20% down on a house to avoid PMI (Private Mortgage Insurance).
2. You want to ensure that the house you buy is about 2 times or less your annual income.
3. You want to ensure that you can get a 15 year loan not a 30 year.
4. You want to have 6-12 months of expenses which is an emergency fund which is money just sitting in the bank.
5. And finally you want the house payment to be 25-30% or less of your take home pay.

I'd wait at least 2-3 years to clear up your credit, get on a budget, and knock out that debt. Best wishes!

Wipe Out Debt in 12 months?