WHEN I FINALLY REALIZED WE WERE IN TROUBLE, I POSTED THIS ON SEVERAL PERSONAL FINANCE FORUMS FOR HELP:
I need some advice on what to do! We have a ton of money going out which leaves us with little for food, gas, etc. and we're quckly falling behind! Not to mention we often get slapped with overdraft fees in our account, because we struggle to keep track of what's going out, timing with bills, etc.
At the beginning of this year we had two credit cards with high interest and high minimum payments, so we contacted Take Charge America and are using them to help pay that debt off. The good news about this is we have not used ANY credit since that time.
We also had our student loans deferred for one-year, but that time is now up and will have to start paying on them again.
We are way upside down on our vehicle loans, we could maybe get $8,000-$9,000 for each of them, but that leaves close to $10,000 left over.
We have also debated selling our home and renting or buying something for a lower monthly cost, but with the poor market (and our home equity loan) we are also upside down on this and would have about a $20,000 difference if we could sell for top dollar.
Our Debt:
Debt Total Owed Min Pmt Interest
Mortgage $144,714.97 $1,246.97 5.875%
Home Equity Loan $38,766.17 $463.25 10.66%
Car #1 $14,054.99 $415.00 8.84%
Car #2 $11,300.30 $265.00 8.39%
Student Loan #1 $38,192.57 $230.00 3.62%
Student Loan #2 $16,649.01 $131.00 3.62%
TCA $20,100.00 $515.82 2%
TOTAL DEBT $283,778.01 $3267.04
Our Monthly Expenses:
Item Monthly Cost
Utilities $185
Water $65
Phone/Internet $80
Mobile Phone $100
Direct TV $54
Insurance (all) $225
Storage $45
Child Care $600
TOTAL $1354
TOTAL MONTLHY INCOME (TAKE-HOME) = $5,200
TOTAL MONTHLY EXPENSES (not incl. food, gas, etc.) = $4621.04
LEFT OVER AMOUNT EACH MONTH FOR food, house items, misc. = $578.96
I have tried to set up a budget, but get extremely frustrated when I know I need to budget for food, household items, clothing, car/home repairs, gifts, pet expenses, school expenses, etc. and have a very small amount of money per month to do that with. I don't know how to prioritize these things. AND, if I'm supposed to set money aside for clothing, repairs, etc. and can't, what do I do when those expenses come up and it's either use money for that or to cover all the bills??
We have a 6-year old, 3-year old. My mother stays with us during the week and takes care of our kids (she goes home on the weekends), so basically we have a 5-person household (keep in mind grocery expenses, household items).
We have $0 in savings. My husband has started a small photography business and we're starting to gain some small income from this (I would like to put this toward a $1,000 emergency fund for the time being).
We have made EXTREMELY poor choices with our money from the beginning...that is even an understatement! We want to turn this around, but we are so overwhelmed, we don't even know how/where to start! I am open to/desperate for any feedback or suggestions! Please, be kind!
I GOT A HUGE AMOUNT OF RESPONSES THAT WERE VERY HELPFUL AND DEVELOPED THIS PLAN:
I would like to thank everyone for taking the time to respond to my post and give me some much needed financial advice! Two things I was able to get out of this experience: 1- A huge amount of great suggestions and 2-Hope that we can get out of this hole we have dug. I appreciate all of the positive and helpful feedback. I posted on several sites to get the most information I could.
I thought that I would share our plan developed from all of the wonderful suggestions I received:
Storage:
- Move everything out of storage and into the house, asap.
- Begin selling all unused/unneeded items in the house.
Phone/TV/Internet:
- We need to continue our internet service as we need this for my husbands photography.
- We will be dropping our landline phone and Direct TV.
Mortgage and HEL:
- I have looked into refinancing with our current lender and have been told that there is not enough of a difference in current rates (home is at 5.25% and HEL is at 11.25%) for it to be beneficial. Note: our current HEL rate is 10.66%.
- We may still consider a short sale down the road, but only after we have made other adjustments...I think this can be avoided and we can hold out until the market improves.
Cars:
- We have inquired with our lender about refinancing, however the lowest rate they offer is 7.696%, so it is unlikely we will be successful with this.
- We will inquire about rates/refi options with other lenders.
- We plan to either trade them in for cars less than $2,500
or
- sell the cars and buy cars less than $2,500 (however, I am not sure if we can get an unsecured loan to cover the difference).
Insurance:
- We currently have our life, home and vehicle insurance through State Farm.
- We plan to talk with them to inquire about a lower rate for our vehicles.
- We also plan to call around to other insurance companies to check rates.
- We will also add a gap policy on the home and vehicles because we are upside down on those loans. I understand this is a small cost (only a few $'s per month).
Student Loans:
- We will request another deferral.
Tax Withholding:
- We have adjusted this in the past and currently get a small amount back and I don't feel comfortable cutting this anymore to avoid the possibility of having to pay in.
Groceries:
- We plan to utilize Angel Ministries (there is a location nearby) where we can purchase groceries for $30/week.
- I also plan to utilize coupons more and shop for cleaning supplies, etc. at our local dollar store. It is an extra trip, but will save money.
Day Care:
In our area having two children in day care would cost WELL over $200 a week. We live in a smaller town in Wisconsin, I'm sure day care costs are much more in other areas and I'm surprised at the criticism I've received about the costs we pay for day care. I would challenge anyone to beat it. We are paying my mom $150 per week (or $30 a day) for one full-time and one part-time child. We are already saving a large amount of money on our day care. I can talk with her about lowering this, however we recently lowered what we paid her by $100 a month (we were paying her $35 a day, but since my son is in kindergarten, we reduced this) and she partially relies on this income as she retired early to do us a favor and watch our kids. There are many benefits to her watching our children: she is their grandma, she takes care of light cooking, laundry, etc. while she is home, we don't have to take the kids out to a day care center, we don't have to miss work if the kids are sick, we don't have to stress or rush home if we're running late at work to avoid late fees, and the list goes on and on.
Second Jobs:
My husband receives regular business doing photography, mostly through friends and co-workers. This comes at little to no cost to us, except his time which is by no means a lot. I received some criticism about this, but so far there have been very few negatives and financial cost to us as his business is becoming well established and he has several repeat customers.
Pets:
We have two dogs (one is 12 yrs old) and one cat. Our pet expenses are food, litter and yearly exams (we rarely have to pay above standard yearly exam fees...our pets have been very healthy). Our children are very attached to our pets and we are not willing to find other homes for them.
THEN SOMEONE SUGGESTED I START A BLOG, SO HERE I AM! I AM ALSO MAKING IT A GOAL TO REGULARLY BLOG ABOUT OUR FINANCIAL JOURNEY OUT OF DEBT AND INTO FINANCIAL FREEDOM. I LOOK FORWARD TO HAVING THIS OPPORTUNITY AND THE FEEDBACK AND SUPPORT FROM OTHERS!
I will admit I would feel a bit more secure just refinancing, but we'll see what the dealership offers for financing.