our plan; any suggestions?

[jamreed02]

I've got all our financial information in one spot now, and we've got a bottom line (-$7870). No money in the bank whatsoever (though it's finally payday), $8675 in credit card debt, and $797 invested in college funds.

{just realized that I don't have student loans in this total... DH is in college now, with about $5000 in loans. we're going to try to pay for his classes from now on if he gets a hoped-for and deserved promotion. He's a junior right now, can we pay off the student loans before he graduates? or will there be penalties?}

The plan so far is loosely based on Ramsey's baby steps. Right now, we've got one problem credit card that is going over the credit limit every month because of the interest, so we're going to pay that one down a bit before we start saving up a small emergency fund of $1000.

After we have the EF set up in our local bank account, we'll start a debt snowball. Right now, we've got 2 credit cards: #1 is $6588 at 17.24 %, #2 is $2087 at 23.99%. We'll pay off #2 first, then #1. I called #2 today and requested a lower APR, which we should get... our credit score is very good, I've never paid my bill late with them, we have a good debt to limit ratio, and we have excellent credit (just over 700 FICO). #1 is the one that keeps getting bumped over the limit.

I have an offer to transfer all my balances to a new card at 0% interest for a year, then 8%. Should I consider that? How much will it affect my credit score? We want to buy a house soon, so credit score is important to us right now.

After that, we'll save a larger EF. With monthly bills (not including credit card payments, of course) and gas (a little extra in case DH has to drive all over town looking for a job), food, and an allowance for other spending ($200 to cover extra expenses that might occur from unemployment) We'd need about $1500 a month to get by. So our EF will need to be between $4500 and $9000.

How much do you think we should have in this EF?

We're planning to keep the original $1000 EF in our local account, with the remaining EF in an online bank. Right now I'm seriously looking at HSBC at 5% interest, but that could change by the time we get to this step.

I'm not entirely sure what we should plan next: I'd like to save for a house, and the baby steps say to save for retirement. Right now, we're renting from DH's parents, and it's not a very comfortable living situation, since they let themselves in our home whenever they want, and complain if it's not absolutely spotless (ever do that with 3 young kids running around?but I'm getting a little off-topic). On the other hand, we have nothing at all saved for retirement. DH's new boss doesn't do a 401k, so we'll do an IRA.

Do you think we should save a 20% (approx. $20K) downpayment on a house, or start the retirement accounts first and try to find an apartment for $100-$200 extra in rent or stay where we're at and tough it out?

After we've got the house, and are contributing a solid 15% to retirement, then we'll start funding the college funds again.

OMGoodness, that's a long post... what do you think? how would you do it if you started out in this situation?

[Ima saver]

Re: our plan; any suggestions?

First, I would tell you to definately take the 0% credit card and transfer as much as you can over to it. Next you need to start on your emergency fund. To me, $1000 is not that much in an EF, but it is better than nothing.
You did not mention, how much can you save each month? With 3 kids, I would shoot for an emergency fund of about $5000.
Then I would throw all the money that I could at paying off those credit cards.
After that, it will be time to open a roth IRA and start saving for a house.

[jamreed02]

Re: our plan; any suggestions?

right now, we can save about $800 per month. in about 45 days DH's employer is going to decide which open job DH gets. He was hired like an intern, to see how well he could function, and they've thrown him into two complex networks to see whether he'll become an engineer or a technician. so far he's really impressed people there, and I think he'll get the engineer position, which could double our income. if that happens, we'll have close to $3000 to save each month.

[Ima saver]

Re: our plan; any suggestions?

That is great!! Yes, I would transfer to the 0% card and build up your emergency fund of $1000. In a month or two, you will have enough to really start paying down those credit cards. If you get to the savings of almost $3000 a month, you could get those cards payed off before the end of the year.
Then build your emergeny fund up and open that roth ira.
Then saving for a house in a savings accout with decent interest (online?)
Only when everything is done, do you worry about the college accounts. You can borrow for college, you cannot borrow for retirement!!

[autoxer]

Re: our plan; any suggestions?

After we have the EF set up in our local bank account, we'll start a debt snowball. Right now, we've got 2 credit cards: #1 is $6588 at 17.24 %, #2 is $2087 at 23.99%. We'll pay off #2 first, then #1. I called #2 today and requested a lower APR, which we should get... our credit score is very good, I've never paid my bill late with them, we have a good debt to limit ratio, and we have excellent credit (just over 700 FICO). #1 is the one that keeps getting bumped over the limit.

I have an offer to transfer all my balances to a new card at 0% interest for a year, then 8%. Should I consider that? How much will it affect my credit score? We want to buy a house soon, so credit score is important to us right now.

That balance transfer sounds good. Make sure you read the fineprint and understand their fees, so you aren't surprised later. It's tough to predict what that will do to your FICO, but that will save you over $130/month, so I wouldn't worry too much about the FICO. Also, paying down your balances and lowering your utilization will increase your FICO.

Do you think we should save a 20% (approx. $20K) downpayment on a house, or start the retirement accounts first and try to find an apartment for $100-$200 extra in rent or stay where we're at and tough it out?

After we've got the house, and are contributing a solid 15% to retirement, then we'll start funding the college funds again.

You don't need to save 20% to get into a house. It helps reduce the expense by eliminating the PMI, but you can get a mortgage with less. Consider starting a Roth IRA, because your contributions could be available to help with your downpayment. That way, you can start saving for a house and for retirement at the same time.

$200 extra a month to get away from the in-laws. I would have to meet them to decide whether that is a good investment.

[debtfreeme]

Re: our plan; any suggestions?

If you are a sahm make sure that you open a spousal roth ira as well. Then you can each save 4k per year. This is very important.

Transfer to 0% card as much as you can but do not go over 75% of your card utilization as this will affect your score. transfer what you can and pay off the other wuicker. start with the higest rate card.


with 3 kids and planning for a house i would aim my ef saving to about 10k to be honest. then when you save for a house make sure that the future of your emergency find is at a minimum 6 months or ALL expenses. If you are going to have 3k to save each month, post paying off the cards. This should take no time at all to get to 10k, bank it someplace and forget it is there.

Then start saving for a house doan payment. investigate different ways to get the down payment often there are programs with grants or very low loans to get the down payment together, but make sure you have a minimum of 6 month in your ef of all expenses and even ones you are not expecting.

What about yor cars or transporation issues? are you going to need to replace any vehicle in the next two years?

[jamreed02]

Re: our plan; any suggestions?

What about yor cars or transporation issues? are you going to need to replace any vehicle in the next two years?

We've got a lease on a van and an older pickup truck. We're going to sell the truck, probably find a smaller car that's more fuel efficient, used of course. And once the lease is up on our van, we'll either buy it or find a cheaper one fsbo.

[Ima saver]

Re: our plan; any suggestions?

Don't ever lease again, it is a big no no!

[jamreed02]

Re: our plan; any suggestions?

our student loans are gaining interest while he's still in school. we just don't have to pay them until after he graduates (he has a stafford loan). And I was thinking of paying off his student loans AFTER the credit cards are all paid off.

[jamreed02]

Re: our plan; any suggestions?

oh, and I went online and filled out the forms for the new 0% APR card. no fees, no transfer fees, good! they say it could take up to 30 days, but I've never had to wait that long... So wave bye-bye to the attrocious interest rates!