Back again....need to turn things around

[hehateme000]

I'm going to go against the grain and say pay off the credit cards before worrying about an emergency fund. If you put it towards your cards, eventually you'll have an extra $610 of power to work with. If disaster strikes, you can use the credit cards as your liquid funds. Even if that happens, you'll be better off than if you just saved because you wouldn't have saved as much with all that credit card payment due.

Warning: if you take that as an excuse to load up your credit cards on "emergency spending" and not build an emergency fund, I will personally reach through the internet and slap you very hard (is that cyber bullying?) You have to commit yourself to not using them with even more resolve than you would an emergency fund. I actually really like the idea above of freezing them in ice!

Note on children: Kids really don't have to be expensive at all.
Babies: If your wife can nurse him or her and you puree your own baby foods and you already have clothes/ equipment from your previous kids/cousin hand me downs, then they are pretty much just diapers ($30/month?)
Toddlers: Again fairly cheap. They eat very little and their clothes are widely available. It is easy to pick up a box stuffed with 2T boys clothes (or whatever you need) at a garage sale, thrift store, or Facebook page for like $15 and you can resell them at cost and get the next size for the same cost. As for going places and experiences, you need to break your mindset that it costs big bucks. Crowd out the bad with good. Don't think "I can't go to Disneyland" think "let's feed the seagulls fries at Burgerking". Your kid will love it! Take your kid to the beach, play "go fish", invite friends and have muffins at the park, ask your friend if you can give your kid a ride on their quad. There are TONS of experiences that are likely more memorable than expensive trips.
Small kids: my oldest is almost 4, so I haven't done it yet, but I imagine it is similar to toddlers. Writing from my own memories as a kid... They will be a little more likely to remember big things, so I wouldn't shake my head at you for doing something special, but you don't need to do big things every summer. We did a cross country drive when I was 8 that was memorable, but that is the earliest big thing I remember.

Bottom line: while they are little, your money has the most compound interest ahead of it and they won't really appreciate the stuff yet anyways. Invest in debt reduction now so you can do the lifelong memories when they are teenagers.

Thanks milly! I know either way I go will still get me to my goals, but I think I would rather force myself to save the EF and then pay the small cards off. My mind wants to pay off all the small ones too, but I need to get used to the idea of having some extra money saved up instead of relying on credit cards. I do agree though that by paying off my cards it will free up more money to work with every month, but luckily I have some extra every month to be able to save my EF first AND pay off my credit cards within the next few months.

You are absolutely right with the kids. They were not as expensive as I thought they would be! In fact they are only expensive because I choose to spend money on them. If we really wanted to, we could save a lot by using hand me downs and buying used things. I definitely would rather set them up for the future instead of focusing on right now. I am glad I can finally see that

[hehateme000]

Question:

Should I start making payments on my student loan, or defer them for a little while longer until I get rid of these smaller CC's? I just looked and my balance is a whopping 46k, and the interest that is accruing every month is $192. Should I at least be making that minimum payment, or defer it for a few more months?

[disneysteve]

I was talking with my wife about having to charge something on the card so it stays active

Why do you need to keep it active? The only reason to do that is if you intend to use it again sometime in the foreseeable future. I think you are fooling yourselves and wasting $30 just to hang onto a relic of the past you are trying to escape.

[msomnipotent]

If it were me, I would defer them a little longer and then use the money I would have needed for the smaller credit cards to pay the student loan. Some would argue that paying the highest interest charge is the way to go, which does have its merits. I prefer to narrow it down to smallest number of outstanding loans so I don't miss any payments. That would screw you up more than paying a little more interest for a little while longer will.

[porkpistol]

If it were me, I would defer them a little longer and then use the money I would have needed for the smaller credit cards to pay the student loan. Some would argue that paying the highest interest charge is the way to go, which does have its merits. I prefer to narrow it down to smallest number of outstanding loans so I don't miss any payments. That would screw you up more than paying a little more interest for a little while longer will.

I would continue to defer too. Get an EF saved, get the smaller CC balances paid up first, and then move to the student loans.

[LivingAlmostLarge]

What are the two cars you drive? I don't think the gym unreasonable. I think tanning is but that's because I thought it wasn't good for you. And cell phones well stop buying expensive phones but it's a done contract I assume?

But back to the cars? It's just sinking you and will sink you forever. What is it that you are driving? The $14k and $41k? I get that they are underwater.

But even honestly the $25k car is a bit much for you right now. In five years in a better position. I think a $10k minivan used like Monkey Mama would have been the best bet for your wife. And a beater but gas sipper for you.

This will really make the biggest changes in your life. By driving such expensive cars you also have more expensive car insurance. Here's the deal you can't afford the more expensive car and dumping it even being so underwater is the real savings.

[GoodSteward]

I should definitely look into that. The homeschool alliance we go through gives us a budget of $2,500 per kid, per year and we can use it on things like field trips, zoo tickets, etc. And a lot of stuff that we can't use it directly on, we can pay ourselves and then get 100% reimbursed. There are definitely free things we can do and thank you for bringing that up. It really is not about the big trips, I just have always felt that way for some reason. I did not get it as a kid and always wanted to be able to give it to my kids.

We homeschool, but I haven't heard of an alliance that gives out thousands for free. Do you have to pay to be part of this? Is it state funded?

[GoodSteward]

EF vs paying off credit cards is debatable. You do free up cash flow with paying off CCs, but with the risk of using them again without an EF. If you get an EF and have an emergency, you still have no cash and CC debt. On paper, it's six of one half a dozen of the other.

I've always leaned towards paying off debt vs building up cash. I hate payments and want that mess gone if I ever get into it. Even though the rule of thumb is EF then credit cards, when you are drowning with payments I have found freeing up money can be a breath of fresh air.

If you free up enough cash, you can usually cash flow a smaller emergency for that month and just not put moeny towards the cards. That's what i end up doing,and I never touch my EF.

[hehateme000]

Why do you need to keep it active? The only reason to do that is if you intend to use it again sometime in the foreseeable future. I think you are fooling yourselves and wasting $30 just to hang onto a relic of the past you are trying to escape.

I feel like having that 7600 limit makes my available credit go from 45% down to 32%, helping my score. I guess I feel like if I get rid of it then my score will tank and I'll have to start over. It's the highest limit card I have. I have tried applying for other cards like chase slate and get denied, and I never get offers from AMEX. I guess I need to learn that my credit is not my top priority anymore

[hehateme000]

Ok I will continue to defer the student loan payments...for now.

I usually like to pay my cards off as well first but because I've never done it the other way, I'd like to save the EF first and then pay the cards off. I feel like I have to get out of my comfort zone if that makes sense. It seems like the balances are small enough anyway to where the interest accrued will be minimal.

As far as my cars, we drive a '13 Honda Civic and a '16 Ford Explorer. The explorer is the one where we traded in her old Kia to get a bigger car for our family, but the only way to get rid of the Kia was to trade it in and have the bank gives us a loan for 120% of the new car. That extra 20% would buy out our old loan with the Kia. My interest rate is 3.24 so most of my payment is going to go to the principal. I really feel like we need to keep the cars because I commute 45 min one way, and she is going to need something that can fit 3 kids. I do understand that the car is too expensive for us, but the only other option was to keep our Kia and that car was ridiculously small. I feel like by the time we got the explorer we had already made bad financial decisions and this was just a result of it. I could be wrong but as soon as I have more cash flow I want to pay extra toward the explorer, and sell it as soon as I cross the break even point. Until then I don't think it will benefit us by getting rid of the car and still having a 600$ payment.

GoodSteward, here is the link my wife gave me:

http://www.pacificcharters.org/apps/pages/index.jsp?uREC_ID=309946&type=d&pREC_ID=727367

[LivingAlmostLarge]

Okay you have two relatively new cars. Maybe someone else with more car experience can weigh in. You bought a 2016 Ford Explorer for $25k but paid $41k because you rolled in negative equity right? That's more than 20% of price of car.

Second, I wonder if it wouldn't be better to look for a older, used minivan for $10k? Then roll that negative equity down from $41k to $25k say? You didn't need a new Ford Explorer, and I won't argue if you needed an explorer. (i lean towards yes on a bigger car than kia). But I do think you could have perhaps gone about it more economically and been more in line with your income. What would have been wrong with a used minivan except it's not cool?

Second, I think a 2013 Civic isn't a bad deal. But why didn't you get maybe a five year old used one since you put on so many miles? I'm not sure if it's worth it now.

But you are spending money above your means. The cars will come. You can buy a nice fancy new car in 10 years when you make more money and are more secure. Trust me it will come

Right now I see the two cars blowing the budget, and cutting $100 a month on the gym and tanning is not going to cut it. Very little space when you spend $1k/month on car payments and insurance. Maybe someone with more car experience can weigh in on how to make this more workable.

[porkpistol]

Okay you have two relatively new cars. Maybe someone else with more car experience can weigh in. You bought a 2016 Ford Explorer for $25k but paid $41k because you rolled in negative equity right? That's more than 20% of price of car.

Second, I wonder if it wouldn't be better to look for a older, used minivan for $10k? Then roll that negative equity down from $41k to $25k say? You didn't need a new Ford Explorer, and I won't argue if you needed an explorer. (i lean towards yes on a bigger car than kia). But I do think you could have perhaps gone about it more economically and been more in line with your income. What would have been wrong with a used minivan except it's not cool?

Second, I think a 2013 Civic isn't a bad deal. But why didn't you get maybe a five year old used one since you put on so many miles? I'm not sure if it's worth it now.

But you are spending money above your means. The cars will come. You can buy a nice fancy new car in 10 years when you make more money and are more secure. Trust me it will come

Right now I see the two cars blowing the budget, and cutting $100 a month on the gym and tanning is not going to cut it. Very little space when you spend $1k/month on car payments and insurance. Maybe someone with more car experience can weigh in on how to make this more workable.

I don't disagree with your entire post, but at this point anything he can cut will help him move in a positive direction. So cutting extras like worthless tanning is definitely the route to take if nothing can be done about the cars. With that much negative rolled into a new loan there isn't going to be much that can be done.

[GoodSteward]

GoodSteward, here is the link my wife gave me:

http://www.pacificcharters.org/apps/...pREC_ID=727367

Thank you. Site says "Is a free, publicly funded charter school. " That means it is charter, but that is state money you are getting. It also means the school teaches whatever is in the public system.

*that is based on the counties you live around. CA only. Nice resource for you guys.

[msomnipotent]

I feel like having that 7600 limit makes my available credit go from 45% down to 32%, helping my score. I guess I feel like if I get rid of it then my score will tank and I'll have to start over. It's the highest limit card I have. I have tried applying for other cards like chase slate and get denied, and I never get offers from AMEX. I guess I need to learn that my credit is not my top priority anymore

You are correct. Don't close the account. You need to keep your utilization ratio low and your credit score as high as possible. That way you can get your credit lines increased and consolidate some of your debt onto a card with low financing at some point. If you really think that you or your wife will use it, cut it up and just request a new one sent when you need to get the $30 cleaning. Then cut it up again.

[LivingAlmostLarge]

How's it going?