Author Topic: Reader Case Study - $231k in debt and need help!  (Read 29875 times)

shanghaiMMM

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Re: Reader Case Study - $231k in debt and need help!
« Reply #100 on: January 19, 2017, 11:46:43 PM »
OK. This is it now Dashh. You've had 101 fantastic, helpful, practical ideas.

It's now up to you to go away and implement the ones you choose.

Keep us updated and best of luck!

larmando

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Re: Reader Case Study - $231k in debt and need help!
« Reply #101 on: January 20, 2017, 11:20:47 AM »
One thing that I wanted to point out is something that you said earlier OP, that you and your wife would be on board but then you would get take out or eat out and your wife would follow suit and not cut back. YOU are the leader! So lead. I suggest leading with expenses that are related to yourself and the household like organizing meal prepping for the week by looking at grocery store flyers for deals, doing the grocery shopping and cooking or packing freezer bags for crock pot meals and not eating out, etc. Show her that the money that you are saving the family is going to debt then it sounds like your wife will follow with fewer nail/hair appointments, shopping, etc.

This is a great suggestion and much appreciated.  I have to take the lead on this and I know she will respond and commit as well.  In fact, she will probably be as good if not better at it than I am once she sees I am finally serious about it.

And that is also why the Frontier has to go. It doesn't matter if it's paid off or not, economical or not, better or worse: you can't ask her to sell her stupid antimustachian car and get to keep yours. Besides that the house has to go to: you really need to move close to your work and in a smaller place. You really can do with a two bedroom. Maybe three. *at most*. Anything else is a fancy luxury and not for a time of debt. And the commute. Come on: you work in the same direction 60 miles away? Unless houses are double the price you are moving 50 miles in that direction *minimum*.

larmando

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Re: Reader Case Study - $231k in debt and need help!
« Reply #102 on: January 20, 2017, 12:09:59 PM »
Couple more comments:
- You don't really "live" in an area if you have to commute every day 60 miles round trip. Try to find a place where you can actually live. Having it be much smaller will help you make sure you don't fall for needing to "fill it" with new purchases. Freeing time will be much better for your children.
- If you lived in an HCOL area reducing house wouldn't be so easy (you'd have the same mortgage on a two-bed apt): count yourself lucky.
- Leveraging your "new to your" cars *might* make sense if and only if you do *serious* change.
- "shelter" is a need, "mcmansion" is not.

All in all if I were you I'd opt for renting, especially at the very reasonable prices you mentioned. It might also help it with your wife: next time you buy it can be a compromise between barebones and mcmansion, that you can really afford, without double closing costs, etc. Any equity *not in a house* will have much better return on your debt.

dashh

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Re: Reader Case Study - $231k in debt and need help!
« Reply #103 on: January 25, 2017, 11:39:13 AM »
Hello all,

I wanted to give everyone more background/context around how my wife and I ended up in our current debt situation.  I took some time to reflect on how it happened and it is really a combination of many factors over time.  The debt is partly a reflection of the typical American consumer lifestyle of a couple making a decent living.  It is also a result of making mistake after mistake financially – poor choices that are embarrassing when I look back on them.  I think if I dig even deeper, there are some underlying psychological issues that have fed our bad choices.  I am really trying to figure out where this behavior has come from and writing this post has helped me begin to peel some layers back.
 
The good thing is that I have slowly been waking up to the fact that this lifestyle and behavior is not sustainable.  Better late than never I suppose.  It has been detrimental to our lives in many ways, some hidden to me until I recently found MMM and this forum (cost of commuting).  So in no particular order here are the problem areas I was able to come up with:

1)    Budgeting (or lack thereof):  We have never really budgeted in our entire married life, which is over ten years.  I think we ended up just doing what a lot of people do – basically spend everything you make.  Then when you get a raise, your lifestyle/spending increases proportionally so you still never get ahead.  But even worse, you end up spending more than you make in order to “afford” things beyond your normal spending.   You start by throwing the Honeymoon on the AMEX…then years later the Disney cruise…then the new furniture you need to fill up your new house, etc., etc.  You end up saving nothing and one day wake up and see you are in tons of debt after years of this unchecked behavior.  This especially happened in our case since we make pretty decent money and you just think you can afford these things when in reality you cannot. 

2)   Automobiles:  I believe I picked up my very misguided perspective on vehicles from my dad.  He is now 70 and still has a car payment.  Up until recently, he probably traded for a new car every freaking year for as long as I can remember.  I started out leasing cars in my twenties because I could then “afford” a really nice car on the cheap monthly payments.  I then traded and bought several cars on loans (yes rolling negative equity into several of them).  Several years ago we even bought two brand new cars on payments on the same day!  How fucking stupid that decision was when I now look back.  I really do not know what possessed me to do it, but we are feeling the effects years later.  I finally wised up after I bought my truck many years ago and decided to keep it until I paid it off (which will happen in two months!)  Better move on my part for once, but in the meantime we had our second child and decided our sedan was not big enough so we bought a new Pilot.  At least we went used that time but again, a very poor purchase especially given my wife’s commute!  Oh and I forgot to mention I was out of work when we bought the Pilot!  I deserve a collective MMM facepunch for that one.

3)   Cost of commuting:
I cannot even begin to estimate how much our commuting has cost us the past ten years although I am sure MMM can.  For that time period, we have had a minimum 60 mile commute each.  Combine that commute with the gas guzzling vehicles we have owned and it about makes me sick.  I have never really considered the true cost of commuting (financially, physically and mentally) until finding MMM.  That alone is really going to make a major impact on our family if we can get our shit together and take some action.   We really have to move closer to work and get more fuel efficient vehicles. 

4)   Housing:  So where do I begin with houses.   How about being house poor?  Like for ten years?  Because around ten years ago is when that adventure began.  It was 2007 and 100% home loans were plentiful.  We were in our first house that I purchased right before we got married.  It was surely more than we needed at the time (2,300 sqft) but not quite a Mcmansion.  For some reason, I thought it would be a good idea to buy a property with a lot of land.  So we find a very nice, very large home on 5 acres (and on a small lake no less).  It was a long ways from our work (2 hour round trip commutes daily), but we thought it was worth the drive to live somewhere we really love.  So we get 100% financing with an 80/20 loan on a $450k house!  Our income was not as good as it is now, but amazingly we still qualified for the loan.  Of course, we didn’t factor in all the other expenses a home like that comes with including exorbitant HOA fees to cover lake maintenance, property taxes, high propane bills (we were heating a 3,000 sqft home plus 1,500 sqft partially finished basement), commuting costs (especially when gas prices spiked) and the costs to repaint the home and furnish it.   We finally sold the home to downsize the mortgage and get a little closer to work but the damage was done.  We stayed there a few years before moving to our current Mcmansion property.  The bottom line for us now on housing is that we need to sell our current home and rent closer to work until we can dig ourselves out of debt. 

5)   Career/Job loss/House flipping:  I was laid off two years ago from a position I was in for ten years.  The company was acquired a few years prior and eventually decided to eliminate my role.  It was not a huge surprise to me and in fact it was what I wanted.  I was very unhappy there and had big plans to become a full time real estate investor.  I have struggled for years trying to find a career direction that I was more passionate about.  I was never particularly interested in finance/accounting but ended up in the field.  Around the time we bought the lake house I developed an interest in real estate.  I began to educate myself on house flipping and through the years have developed a great passion for real estate and renovating homes.  However, through that process I got involved with some lifestyle design/lifecoach/real estate gurus that cost me a lot of time and money.  Some of it was useful, but I went against my gut and took some advice that was financial suicide for us in the end.

When I was laid off I had a renovated house about to close and received a decent severance.  My gut told me to get another job, use the money to pay off debt and when it was all gone I could go for real estate full time.  However, I decided to take a huge risk and try flipping full time and use the flip/severance money to cover our expenses.  In the end, we didn’t adjust our lifestyle/spending and ended up blowing through the money.  During this time the market for foreclosures had slowed down and it was pretty hard to find my next deal.  I finally found a deal but would have to fund the renovation myself.  It also turned out that this property would need about double the rehab that my other flips required.  So we are burning through money on our normal monthly expenses combined with property renovations and you know where that story leads.  Meanwhile I am trying to find work – anything to cover expenses.  I had to stop paying on our credit cards just so we could cover the house and other living expenses.  It got so bad that we almost did not have enough to cover our electric bill one month.  I never want to be in that situation again.  I finally found a contract job (current position) and sold the flip and things stabilized – but the damage was done.  This was when the 35% personal loans came into play – they were a last resort that my wife took out just for us to stay afloat.  I also had used credit cards, a personal loan and a 401k loan to fund my rehab so that added another nice chunk of debt to the pile.  I learned a huge lesson from this in terms of my business – I was not in a position of strength going into the deal and it bit me on the ass in the end.  I was desperate for a deal, underestimated my renovations and sunk all my personal money in the deal with no income.  In the past, I had a full time job and could cover expenses and holding costs, but this time I screwed myself.  That will not happen again.

So that basically sums up how we are $231k in debt.  A very large part of this is on my shoulders and I really want to take the lead to make real changes moving forward.  I owe it to my wife and family to right this ship and clean up my mess. 

I am trying to reflect more and figure out the deeper why that led me to make all these bad financial decisions.  I believe my discontentment and issues with my career are a large part of it for me.  Maybe I thought on some level that buying cars and houses would help deal with that discontentment, but obviously it hasn’t.  I really wish I would have found MMM much earlier as it would have changed my perspective on work/career tremendously.  I would have been more apt to suck it up in finance/accounting long enough to become FI and then I could more fully pursue those other things in life that I really enjoy (real estate, renovations, family, reading/writing, etc.)   

I just need to sit down with my wife and talk this all out.  Obviously, our issues go beyond just cutting the eating out and shopping budget.  It may be difficult (at least at first) to persuade my wife to make the big changes I know we need to make because my poor decisions are the cause of much of this mess.  I am sure telling her we need to sell our cars and rent a townhome is not going to go over well.  But I am hopeful we can focus on our why and get started on this journey.  For me that is getting our family financially stable/out of debt, financially independent and saving for college and retirement.  Thanks to everyone on the forum for your continued support.

frugaldoc

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Re: Reader Case Study - $231k in debt and need help!
« Reply #104 on: January 25, 2017, 11:50:37 AM »
Thanks for sharing such a personal story. Listening to people tell these stories helps us all learn and gain perspective. I think many of us can relate to the "I wish I had found MMM earlier" statement. Had I stumbled upon his blog when I  first started work (which was impossible because it didn't exist yet" I would have made a few different choices.
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researcher1

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Re: Reader Case Study - $231k in debt and need help!
« Reply #105 on: January 25, 2017, 12:05:54 PM »
dashh -

I commend you for your extremely high level of self awareness.  It is refreshing to hear someone be so frank about how they got themselves into such a desperate financial situation.

I would urge you to share your most recent post with your wife.  I think it would go a long way to explaining your thought process and accepting blame for the situation.

meandmyfamily

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Re: Reader Case Study - $231k in debt and need help!
« Reply #106 on: January 25, 2017, 12:34:47 PM »
I would have her read what you wrote here and listen to her thoughts!  You can do this!  You have really been thinking.  Better now than at 75!

Fiscal_Hawk

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Re: Reader Case Study - $231k in debt and need help!
« Reply #107 on: January 25, 2017, 12:43:34 PM »

  Maybe I thought on some level that buying cars and houses would help deal with that discontentment, but obviously it hasn’t.  I really wish I would have found MMM much earlier as it would have changed my perspective on work/career tremendously. 



You aren't the only one is this boat. I know many people like us. They have nice cushy corporate jobs that pay well but they don't really like. Like you, I think they figure they are "stuck" in that situation and therefore they compensate by filling the void of dissatisfaction with large consumer goods - New cars, boats, toys, electronics, shopping sprees, lavish vacations etc ...

Don't beat yourself up. It's easy to do. The good news here is you found MMM and you now are aware of a way out. A better way to handle your financial situation. Turn the ship around. There is still plenty of time. Grab a bucket and start getting the water out! Good luck and you may want to consider doing a journal too. You have a great story and it could help you on your journey.

dashh

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Re: Reader Case Study - $231k in debt and need help!
« Reply #108 on: January 25, 2017, 12:46:32 PM »
Thanks for the suggestions to have my wife read my post.  I think that will be a great way for her to truly see how we got to where we are.

dashh

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Re: Reader Case Study - $231k in debt and need help!
« Reply #109 on: January 25, 2017, 12:49:50 PM »

  Maybe I thought on some level that buying cars and houses would help deal with that discontentment, but obviously it hasn’t.  I really wish I would have found MMM much earlier as it would have changed my perspective on work/career tremendously. 



You aren't the only one is this boat. I know many people like us. They have nice cushy corporate jobs that pay well but they don't really like. Like you, I think they figure they are "stuck" in that situation and therefore they compensate by filling the void of dissatisfaction with large consumer goods - New cars, boats, toys, electronics, shopping sprees, lavish vacations etc ...

Don't beat yourself up. It's easy to do. The good news here is you found MMM and you now are aware of a way out. A better way to handle your financial situation. Turn the ship around. There is still plenty of time. Grab a bucket and start getting the water out! Good luck and you may want to consider doing a journal too. You have a great story and it could help you on your journey.

Thanks for this.  Yes, "stuck" is exactly how I have felt for the longest time it seems.  And then you compensate with buying and just make yourself even more stuck/trapped with each purchase...


Fiscal_Hawk

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Re: Reader Case Study - $231k in debt and need help!
« Reply #110 on: January 25, 2017, 12:56:49 PM »

  Maybe I thought on some level that buying cars and houses would help deal with that discontentment, but obviously it hasn’t.  I really wish I would have found MMM much earlier as it would have changed my perspective on work/career tremendously. 


You aren't the only one is this boat. I know many people like us. They have nice cushy corporate jobs that pay well but they don't really like. Like you, I think they figure they are "stuck" in that situation and therefore they compensate by filling the void of dissatisfaction with large consumer goods - New cars, boats, toys, electronics, shopping sprees, lavish vacations etc ...

Don't beat yourself up. It's easy to do. The good news here is you found MMM and you now are aware of a way out. A better way to handle your financial situation. Turn the ship around. There is still plenty of time. Grab a bucket and start getting the water out! Good luck and you may want to consider doing a journal too. You have a great story and it could help you on your journey.

Thanks for this.  Yes, "stuck" is exactly how I have felt for the longest time it seems.  And then you compensate with buying and just make yourself even more stuck/trapped with each purchase...

Yep. A good activity might be to organize a garage sale with your family. It will help you to try and figure out what stuff you don't need or want. It will also help you make a few bucks and put that towards your debt. It could be a great way to bring the family together and have it be a symbolic gesture of your new mustachian identity.

homestead neohio

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Re: Reader Case Study - $231k in debt and need help!
« Reply #111 on: January 25, 2017, 01:36:57 PM »
Following to witness the complete transformation to badass.  You can do this. 

Several different approaches have been recommended for getting DW on board.  You know her best, pick from the menu and try the most likely thing(s) to work.  If those don't work, move on to others.  Your coordinated efforts and mutual support will make this less painful and make your relationship stronger.  Shared adversity is a tie that binds.

I think you'll find that living in denial or claiming helplessness is what brings face punches from this crowd.  Commitment and informed action brings attaboys.  Post every single positive action you actually implement for encouragement.

frugaliknowit

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Re: Reader Case Study - $231k in debt and need help!
« Reply #112 on: January 25, 2017, 01:39:59 PM »
I would seriously consider filing bankruptcy.  While the Student and IRS loans are not dischargeable, likely the rest is.  Consider going into another field for about 10 years, until your bankruptcy disappears (you could also be "Mr. Mom", and pocket the daycare expenses...).  This could impact your wife as well if she changes jobs.
« Last Edit: January 25, 2017, 01:55:58 PM by frugaliknowit »

CmFtns

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Re: Reader Case Study - $231k in debt and need help!
« Reply #113 on: January 25, 2017, 02:35:32 PM »
The way I see it is that your high debt has actually slowly forced your real spending and lifestyle into a very reasonable number compared to your income. Your proposed budget had you spending $2,680 on expenses and $1,986 on your mortgage for a total of $4,666. You are actually spending less than half of your income to live if you had no debt beside a mortgage.

What that means is once you are out of debt you will be riding a speeding train driving down the golden rails straight into an early retirement. I know that someone in your situation can destroy this debt in around 5 years or even less if you are extreme about your situation... This is your chance to finally beat the debt for real. No relapse, no excuses keep your spending low and just get it done man.
« Last Edit: January 25, 2017, 02:37:29 PM by CmFtns »
"the only efficient way to get there is on the front of the wave" -MMM

honeybbq

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Re: Reader Case Study - $231k in debt and need help!
« Reply #114 on: January 25, 2017, 02:43:00 PM »
dashh -

I commend you for your extremely high level of self awareness.  It is refreshing to hear someone be so frank about how they got themselves into such a desperate financial situation.

I would urge you to share your most recent post with your wife.  I think it would go a long way to explaining your thought process and accepting blame for the situation.

+1. Coming clean that you have an addiction is step #1.

The rest is easy, comparatively.

shanghaiMMM

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Re: Reader Case Study - $231k in debt and need help!
« Reply #115 on: January 25, 2017, 05:38:49 PM »
+1 to the above. Fascinating background reading. Your post reads like someone who has swallowed the blue pill and awoken from the Matrix! Hopefully now you are aware of the issues, you can begin to be more mindful of your spending.

Another thing, now isn't the time to beat yourself up. Your past mistakes are done, over. There's nothing to be gained from dwelling on the negatives. Instead, focus your energy on tackling that debt!

Another +1 to the poster below - this kind of attitude will only gain support and encouragement. I'm following along because I want to see the transformation into MMM badass!

Rewdoalb

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Re: Reader Case Study - $231k in debt and need help!
« Reply #116 on: January 25, 2017, 08:52:26 PM »
When trying to eliminate your commute, talk thru all potential options with your wife and decide together what's best for the family.

1 - move to where you currently work
2 - find jobs for one or both of you near where you currently live
3 - one or both of you get a job that allows telecommute

I don't want you to sacrifice proximity to neighbors, church and the school district if not necessary. But a change is due.

+1 to rent for a few years
+1 that your situation is not hopeless
+1 to debt snowball/avalanche idea posted earlier, with 20%+ debts and then 10%+ etc.
+1 sell both cars for solidarity
Edit: oh, and I would sell the cars on Craigslist. When my wife went from SUV to used hatchback, the dealer was quoting a net cost of $6000 ($4k trade in and $10k Fit). We sold SUV on Craigslist for $8k and bought a similar Fit for $6k and came out cash flow positive - even with a newer, more efficient, less mileage car!

Stay active on here for accountability

How much does she like her job? Set a goal for HER to retire. I bet it could be done within 5 years...Would that motivate her? Steps needed: steady job for you, pay off debt, save down payment for a more reasonable house. At that point she could FIRE and you eliminate most child care, some clothing/personal care, and commuting costs.

Best of luck! I'm in the cheering section too!
« Last Edit: January 26, 2017, 05:47:00 AM by Rewdoalb »

FrozenBits

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Re: Reader Case Study - $231k in debt and need help!
« Reply #117 on: January 26, 2017, 01:13:02 AM »
Posting to follow and support you!  You have gotten a lot of great advice so far.  You got this!

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Sapphire

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Re: Reader Case Study - $231k in debt and need help!
« Reply #118 on: January 26, 2017, 01:42:32 AM »
Wishing you all the best Dashh - you will get lots of support here. 
« Last Edit: January 27, 2017, 01:26:05 PM by Sapphire »

Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #119 on: January 26, 2017, 01:48:52 AM »
Look, you have a very good combined income so you can get out of it. I disagree with the advice re bankruptcy, that one should be the last resort, you are in a situation when you can pay off all this debt. Yes, it will take some time, but it is doable.

I hope you can sit down with your wife and decide on the next action. Facing the situation is the first step. It looks like you have a plan for cutting expenses and a budget.

Pick a debt and attack it next month.

horsepoor

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Re: Reader Case Study - $231k in debt and need help!
« Reply #120 on: January 26, 2017, 07:09:42 AM »

Pick a debt and attack it next month.

Wit electronic payment, you can attack it.today.  I find snowflake payments motivational.  Get a $5 mail in rebate?  Go put $5 on your target debt. Stayed $50 under on the grocery budget?  Put $50 on the debt. It's satisfying to see the balance drop frequently when you're getting started, and you won't have the cash sitting in your account as a temptation to spend.

microwaves

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Re: Reader Case Study - $231k in debt and need help!
« Reply #121 on: January 26, 2017, 09:19:14 AM »
From my perspective: You have an income problem at this point, not a spending problem. But before I talk about that, repeat this:

Quote
I will not donate other people's money

You're talking about tithing, saving for your kids' education and inheritance or whatever, and it all seems like a dream. What money are you saving? Your income isn't your money--it's the debtors' money. Getting a loan to give money to other people is not the same as giving your money to other people.

With that said, you need to learn more about protected assets in your state. Once you know that, you can either make a plan for bankruptcy or realize that it isn't an option. I would guess that bankruptcy is more palatable than the latter is, but unfortunately, the future is going to be bleak regardless.

This brings to mind the manager/CEO in Breaking Bad who owed so much money that a (relatively small) check wasn't actually going to fix his problems. You've reached the point where you don't have significant cuts you can make to your (estimated) budget: Selling your house doesn't help because you haven't built up equity in it yet; your car, while inefficient, is nearly paid off; you could sell your other car (your wife's car?) but ostensibly you'll still need a second car, so the realized gain isn't particularly high; your entertain and restaurant budgets are insignificant, as are the potential savings in your grocery bill.

That's your income problem. You will need thousands of dollars more per month than you're currently making, and that money can only be used to repay your loans. It cannot be used for any other purpose; otherwise, you'll have converted your income problem into a spending problem, which is surely how you got to this place to begin with. I don't have any ideas for ways to increase your income by that much per month or else I would already be doing that, and usually you have to spend money to make money. (I will not donate other people's money.)

Is your debt problem unique? Is it dire? Is it insurmountable? No. The good news: You can do this! The bad news as well as the reality: You're going to either declare bankruptcy or live in (spending) poverty for the next decade or so unless you stumble upon a buried treasure chest.

The reason I say that is because you simply don't have enough money to address your loans and you'll need to be committed to not spending anything extra for years and years. No vacations, no time off, no movies, etc. Assuming you want to pay your loans back, the order you should do that is:


Total      Monthly   
Amount   Rate   Payment   Comments
Loan #1   $4,676   35.90%   $177      7?
Loan #2   $4,278   27.98%   $194      6
CC #9   $1,000   26.24%   $41         3
CC #1   $2,588   25.99%   $28         4
CC #2   $2,279   24.99%   $72         5
CC #3   $7,997   24.49%   $198   
Loan #3   $882   20.00%   $284      1
CC #4   $8,447   15.49%   $231   
CC #5   $4,376   14.90%   $109   
Loan #4   $31,148   10.75%   $720   
Student loan #1   $49,036   6.88%   $368   
Auto loan #1   $25,868   4.09%   $515   Honda Pilot
Auto loan #2   $1,172   3.84%   $525   Nissan Frontier    2
Student loan #2   $4,066   3.63%   $86   
401K loan   $27,743   3.25%   $565   
Student loan #3   $2,508   2.75%   $108   
CC #6   $17,711   2.00%   $339   5-year pmt plan
CC #7   $2,032   0.00%   $78         7?
CC #8   $16,662   0.00%   $309   5-year pmt plan
IRS   $17,290      $240   Requesting 72 month pmt plan
Total:   $231,758      $5,187   



Ordinarily, you're supposed to pay debt based on the highest interest rates to lowest rates, but because you have an income problem instead of a spending problem, I'd aim at unlocking more money per month before reducing your $230k balance. This order will give you almost $1,400 more per month that you can use to repay your other loans with. Unfortunately, though, you won't have any money to spend while you're doing this, and I don't think your family will be thrilled at that prospect.

Do you think your wife could get a credit card if she applied? Or could you get another one? I'm curious to hear other people's thoughts on this, but why bother having the emergency fund at all here? If either of you could get another credit card during an emergency, what's the downside of using it instead of paying in cash? More debt? They're already down $230k. I'd definitely prioritize freeing up that $1,400/mo by immediately repaying those loans, but I'm positive lots of people would be uncomfortable spending the emergency fund on existing debt. It seems like you're already in an emergency, and my guess is that you've been utilizing this strategy already in order to collect that many credit cards.

I have no knowledge of IRS policies in this context, but I would get more information about that and then decide whether to focus on repaying that or the other loans with the $1,400 per month.

The bleak outlook here is that even with an extra $1,400/mo (from repaying those loans), that's only $16,800/yr, or $168,000/decade. Selling your house eliminates your mortgage payments, but then I'm guessing your rent payments won't be considerably smaller. I wish it were easier to make $230,000 quickly (and with 0% interest), but short of a windfall, you're looking at working a lot.

BigRed

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Re: Reader Case Study - $231k in debt and need help!
« Reply #122 on: January 26, 2017, 09:33:48 AM »

Is your debt problem unique? Is it dire? Is it insurmountable? No. The good news: You can do this! The bad news as well as the reality: You're going to either declare bankruptcy or live in (spending) poverty for the next decade or so unless you stumble upon a buried treasure chest.

The reason I say that is because you simply don't have enough money to address your loans and you'll need to be committed to not spending anything extra for years and years. No vacations, no time off, no movies, etc. Assuming you want to pay your loans back, the order you should do that is:


Total      Monthly   
Amount   Rate   Payment   Comments
Loan #1   $4,676   35.90%   $177      7?
Loan #2   $4,278   27.98%   $194      6
CC #9   $1,000   26.24%   $41         3
CC #1   $2,588   25.99%   $28         4
CC #2   $2,279   24.99%   $72         5
CC #3   $7,997   24.49%   $198   
Loan #3   $882   20.00%   $284      1
CC #4   $8,447   15.49%   $231   
CC #5   $4,376   14.90%   $109   
Loan #4   $31,148   10.75%   $720   
Student loan #1   $49,036   6.88%   $368   
Auto loan #1   $25,868   4.09%   $515   Honda Pilot
Auto loan #2   $1,172   3.84%   $525   Nissan Frontier    2
Student loan #2   $4,066   3.63%   $86   
401K loan   $27,743   3.25%   $565   
Student loan #3   $2,508   2.75%   $108   
CC #6   $17,711   2.00%   $339   5-year pmt plan
CC #7   $2,032   0.00%   $78         7?
CC #8   $16,662   0.00%   $309   5-year pmt plan
IRS   $17,290      $240   Requesting 72 month pmt plan
Total:   $231,758      $5,187   



Ordinarily, you're supposed to pay debt based on the highest interest rates to lowest rates, but because you have an income problem instead of a spending problem, I'd aim at unlocking more money per month before reducing your $230k balance. This order will give you almost $1,400 more per month that you can use to repay your other loans with. Unfortunately, though, you won't have any money to spend while you're doing this, and I don't think your family will be thrilled at that prospect.

Do you think your wife could get a credit card if she applied? Or could you get another one? I'm curious to hear other people's thoughts on this, but why bother having the emergency fund at all here? If either of you could get another credit card during an emergency, what's the downside of using it instead of paying in cash? More debt? They're already down $230k. I'd definitely prioritize freeing up that $1,400/mo by immediately repaying those loans, but I'm positive lots of people would be uncomfortable spending the emergency fund on existing debt. It seems like you're already in an emergency, and my guess is that you've been utilizing this strategy already in order to collect that many credit cards.

I have no knowledge of IRS policies in this context, but I would get more information about that and then decide whether to focus on repaying that or the other loans with the $1,400 per month.

The bleak outlook here is that even with an extra $1,400/mo (from repaying those loans), that's only $16,800/yr, or $168,000/decade. Selling your house eliminates your mortgage payments, but then I'm guessing your rent payments won't be considerably smaller. I wish it were easier to make $230,000 quickly (and with 0% interest), but short of a windfall, you're looking at working a lot.

This summary is too bleak, and I feel the need to correct it because it is likely to be demotivating.  dashh is paying $7100 in debt payments every month (this includes the $1400, since that's just moving one payment towards other debt).  Continuing at that rate, $230,000 is only 33 months.  Obviously, there's interest, but all of the 5 figure debt is 10% or less, so that shouldn't add more than another 1/3rd to the total.  If you can stick to your new budget, this debt is done in about 4 years.  And then, you'll have practice living at a savings rate of nearly 70%!!!  You'll be an instant super-mustachian at that point, plus the daycare will be done by then.  The sky is the limit.

dashh

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Re: Reader Case Study - $231k in debt and need help!
« Reply #123 on: January 26, 2017, 09:58:35 AM »
From my perspective: You have an income problem at this point, not a spending problem. But before I talk about that, repeat this:

Quote
I will not donate other people's money

You're talking about tithing, saving for your kids' education and inheritance or whatever, and it all seems like a dream. What money are you saving? Your income isn't your money--it's the debtors' money. Getting a loan to give money to other people is not the same as giving your money to other people.

With that said, you need to learn more about protected assets in your state. Once you know that, you can either make a plan for bankruptcy or realize that it isn't an option. I would guess that bankruptcy is more palatable than the latter is, but unfortunately, the future is going to be bleak regardless.

This brings to mind the manager/CEO in Breaking Bad who owed so much money that a (relatively small) check wasn't actually going to fix his problems. You've reached the point where you don't have significant cuts you can make to your (estimated) budget: Selling your house doesn't help because you haven't built up equity in it yet; your car, while inefficient, is nearly paid off; you could sell your other car (your wife's car?) but ostensibly you'll still need a second car, so the realized gain isn't particularly high; your entertain and restaurant budgets are insignificant, as are the potential savings in your grocery bill.

That's your income problem. You will need thousands of dollars more per month than you're currently making, and that money can only be used to repay your loans. It cannot be used for any other purpose; otherwise, you'll have converted your income problem into a spending problem, which is surely how you got to this place to begin with. I don't have any ideas for ways to increase your income by that much per month or else I would already be doing that, and usually you have to spend money to make money. (I will not donate other people's money.)

Is your debt problem unique? Is it dire? Is it insurmountable? No. The good news: You can do this! The bad news as well as the reality: You're going to either declare bankruptcy or live in (spending) poverty for the next decade or so unless you stumble upon a buried treasure chest.

The reason I say that is because you simply don't have enough money to address your loans and you'll need to be committed to not spending anything extra for years and years. No vacations, no time off, no movies, etc. Assuming you want to pay your loans back, the order you should do that is:


Total      Monthly   
Amount   Rate   Payment   Comments
Loan #1   $4,676   35.90%   $177      7?
Loan #2   $4,278   27.98%   $194      6
CC #9   $1,000   26.24%   $41         3
CC #1   $2,588   25.99%   $28         4
CC #2   $2,279   24.99%   $72         5
CC #3   $7,997   24.49%   $198   
Loan #3   $882   20.00%   $284      1
CC #4   $8,447   15.49%   $231   
CC #5   $4,376   14.90%   $109   
Loan #4   $31,148   10.75%   $720   
Student loan #1   $49,036   6.88%   $368   
Auto loan #1   $25,868   4.09%   $515   Honda Pilot
Auto loan #2   $1,172   3.84%   $525   Nissan Frontier    2
Student loan #2   $4,066   3.63%   $86   
401K loan   $27,743   3.25%   $565   
Student loan #3   $2,508   2.75%   $108   
CC #6   $17,711   2.00%   $339   5-year pmt plan
CC #7   $2,032   0.00%   $78         7?
CC #8   $16,662   0.00%   $309   5-year pmt plan
IRS   $17,290      $240   Requesting 72 month pmt plan
Total:   $231,758      $5,187   



Ordinarily, you're supposed to pay debt based on the highest interest rates to lowest rates, but because you have an income problem instead of a spending problem, I'd aim at unlocking more money per month before reducing your $230k balance. This order will give you almost $1,400 more per month that you can use to repay your other loans with. Unfortunately, though, you won't have any money to spend while you're doing this, and I don't think your family will be thrilled at that prospect.

Do you think your wife could get a credit card if she applied? Or could you get another one? I'm curious to hear other people's thoughts on this, but why bother having the emergency fund at all here? If either of you could get another credit card during an emergency, what's the downside of using it instead of paying in cash? More debt? They're already down $230k. I'd definitely prioritize freeing up that $1,400/mo by immediately repaying those loans, but I'm positive lots of people would be uncomfortable spending the emergency fund on existing debt. It seems like you're already in an emergency, and my guess is that you've been utilizing this strategy already in order to collect that many credit cards.

I have no knowledge of IRS policies in this context, but I would get more information about that and then decide whether to focus on repaying that or the other loans with the $1,400 per month.

The bleak outlook here is that even with an extra $1,400/mo (from repaying those loans), that's only $16,800/yr, or $168,000/decade. Selling your house eliminates your mortgage payments, but then I'm guessing your rent payments won't be considerably smaller. I wish it were easier to make $230,000 quickly (and with 0% interest), but short of a windfall, you're looking at working a lot.

Thanks for sharing your perspective on my situation.  Several here have mentioned at least looking into bankruptcy and I have to admit that I am considering it at this point.  I have always been opposed to it because I wanted to honor my debts, but I am going back and forth on it the more I think about it.

It may not even be an option given our incomes, but it may be at least worth it to talk to an attorney to explore options. 

rpr

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Re: Reader Case Study - $231k in debt and need help!
« Reply #124 on: January 26, 2017, 11:58:48 AM »
One other option before declaring bankruptcy is to schedule a consultation with a local non-profit Consumer Credit Counseling Service (CCCS) office. Make sure that you can walk in and talk to a real live person. There are similar online agencies but I would avoid those as I'm a little skeptical.

The CCCS consultation is free. This organization usually has agreements with many lenders and can work to drastically reduce the interest rate. In effect this is a consolidation type of loan with a Debt Management Plan. You make one payment to the CCCS and then they pay the creditors. There is usually a small monthly fee. The CCCS works to make sure that the debt is usually paid off in 3-5 years. The CCCS agent should also let you know about all possible options including bankruptcy if applicable.

The big downside of this --
All credit cards will be immediately closed as you continue to make the payments. Your credit score will be affected, maybe not as much as declaring bankruptcy. Eventually, your score will start rising. This may take a few years (3-5).

The CCCS route is not for everyone and may not be for you. If you do go to a CCCS consultation, ask lot of questions. Take your partner along if possible. Ask for all the paperwork.

IMO, if you are able to pay off your creditors in  3-5 years even with the high interest rates, it is likely better to do it yourself without going to CCCS or without declaring bankruptcy. But it does not hurt to talk to both a CCCS agent and a bankruptcy attorney. 

The above information is based on my individual experience after talking to a local CCCS agent a long time ago. It is possible policies have changed. But it doesn't hurt to ask. 

MandyM

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Re: Reader Case Study - $231k in debt and need help!
« Reply #125 on: January 26, 2017, 12:59:27 PM »
You've reached the point where you don't have significant cuts you can make to your (estimated) budget: Selling your house doesn't help because you haven't built up equity in it yet; your car, while inefficient, is nearly paid off; you could sell your other car (your wife's car?) but ostensibly you'll still need a second car, so the realized gain isn't particularly high; your entertain and restaurant budgets are insignificant, as are the potential savings in your grocery bill.

I disagree with the above. Its focused solely on large gains, which a short term solution. Sure it would be great if there was equity to tap into to make a big dent in the loans. But there are are a ton of other reasons to consider selling the house and the cars and also to trim budget line items. For one, a smaller house typically translates to smaller utility bills, taxes and insurance. Moving closer to work reduces commuting costs and time.

For groceries and restaurant line items, I'd say the money savings is only half of the point. Bad habits are what dug this hole and good habits are what will get him - and keep him - out. Mindless spending needs to be reigned in on a day by day, dollar by dollar basis. And maybe at the end of it you spend about the same as you did last month, but there is value in the examination of each purchase beyond the money. "Do I really need to spend this money" should become the default thought that rolls through your head.
"Freedom lies in being bold." -Robert Frost

Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #126 on: January 26, 2017, 04:28:48 PM »
It is not all doom and gloom. I disagree with the previous poster that getting rid of the house won't solve the problem. It will ease up the burden.op has so little equity in the house that he will be better off getting rid of it and renting, because keeping the mcmansion is costing him over 2k a month just in mortgage. Plus taxes, insurance, cleaners, security, lawncare, maintenance and repairs .....it is a giant money pit they can't afford. He will probably end up with 0 after selling it, but it will free up cash. If you can find a decent rental closer to work for under 2k a month, you are good. Ideally, you should pay way less than that. Have a look at the rentals closer to your wife's or your workplace to get a realistic picture. Also, have a chat with local realtor to see how much your house will sell for and how quickly.

Same with the cars. How much can you sell the pilot for? Can you get enough to buy an econobox with cash? 2 of them? (might be dreaming here). The wife will have go give up driving that giant carpayment. I guess they are underwater with that car.

Is there anything you can sell asap to pay off those high interest loans? Bikes, electronics, jewellery, collectibles?

If losing face and social status is a problem, just ignore the joneses. You can't afford this lifestyle. Maybe style yourself as a reborn environmentalist, telling them that you are embracing minimalism, simplifying your life becase this consumerism is stressing you out and is bad for the planet. Being a tree hugging greenie sounds better than broke.

If the wife is not on board yet (and why not), do your research first and show her the numbers. If you have a solid plan and a timeline, you should be able to persuade her to slash and burn. Especially if you tell her that you should be able to turn your lives around in about 3 years. It is not that long to go without manicures, and with your incomes you will be able to build wealth and enjoy a comfortable lifestyle once this debt is gone.

Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #127 on: January 26, 2017, 04:39:22 PM »
Oops, sorry, i mixed up the cars. Definitely, sell them both, and whatever cash you are getting, this is your car budget. If you need to split it 80/20 to make the wife happy, so be it. But hopefully she will be reasonable. Btw i spent 7k on an old toyota 8 years ago, it is still going strong. 😀 have at least 3 years left in it.

MrsPete

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Re: Reader Case Study - $231k in debt and need help!
« Reply #128 on: January 26, 2017, 06:48:52 PM »
We are drowning in debt and have to begin digging out.  Obviously our primary goal is to get stable and begin paying down the debt.  I have a lot of mixed feelings right now – extreme embarrassment and shame, fear and a little bit of empowerment. 
Look at it this way:  One of you is working JUST to pay off your consumer debt.  A full time job's take-home pay gone to cover yesterday's luxuries /mistakes.  That's a big face punch ... but worse, you're still spending at the rate that got you into this situation! 

Things to consider:

- Sell the house and move to something smaller.  You say it's slightly below median, but 2900 sf is a big house, and almost 2k is a huge mortgage.  You say it's a great neighborhood, good schools, etc. ... but you're driving an insane distance to work in order to live in this place.  Realistically, you're trading family life to live in this great spot.  How does that make sense? 

- Yes, you are over-carred.  Between payments, maintenance, insurance, it's a huge cost.  You say the two of you work in the same city (but different schedules).  Look into getting on the same schedule, even if it means a pay cut.  Ditching one car would save you BIG BUCKS.

- If your wife JUST gives up the hair/nails, that could turn into roughly 34,000 for the 2-year old's college account.  And that's just ONE change.  Okay, it wouldn't really be that much because she's not going to go from $1200/year to 0 ... but she could slash it significantly to cuts at a $10-15/walk-in place and spend maybe $100-150/year, and that would go a long, long way towards college.

- Don't spend a single minute thinking about your credit score; instead, think about financial stability.  They aren't the same thing.  Your credit score is all about being able to borrow -- you can never borrow your way out of this.

- Your commute time has to be cutting into your family time.  Look into jobs closer to home; at the moment you need to work as much as possible, but once this is behind you, your quality of life will increase too. 

- You do realize that 100% financing is a mistake, and the credit union who offered it to you is not your friend, right?  However, if they're willing to lend, lend, lend, why not get a personal loan from them and use it to pay off the credit cards?  The benefit is that the credit card interest is insane, and a personal loan would have to be a lower rate.  Of course, if you do this, you must cancel the credit cards.   

- Your wife wants to drive a van or SUV.  Here's the question:  Would she rather drive a van right now and be like everyone else, or would she prefer to one day be able to pay for the kids' college and retire? 

- This is not an income problem.  You're earning 2Xs as much as my husband and I, yet we are debt-free, own two properties, are in the two-comma club, and have paid for one kid's college /are halfway through the second kids' college.  Your income is PLENTY ... it's your spending /your lifestyle that's inflated; however, this is a choice.

« Last Edit: January 26, 2017, 06:50:47 PM by MrsPete »

Pizzabrewer

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Re: Reader Case Study - $231k in debt and need help!
« Reply #129 on: January 27, 2017, 02:20:09 PM »


- Your commute time has to be cutting into your family time.  Look into jobs closer to home;   


This.

What is often lost in the here-and-now financial aspects of these discussions is the human/family cost.  You don't want to move closer to work because of school/friends/church/etc.  Yet you are both spending hours in the car each day while someone else raises your children.  Take it from someone who is chronologically much further along than you, time with your children is fleeting and priceless.

Move somewhere within 10-15 minutes (at most) of your jobs.  Time with your children is the worst thing to squander.

dashh

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Re: Reader Case Study - $231k in debt and need help!
« Reply #130 on: January 27, 2017, 07:10:45 PM »
Thanks again to everyone for your comments and advice.  I am going to have a talk with my wife this weekend on all of this and we will see how it goes.

On a positive note, I did some market research on our home and it looks like we may have a little equity.  The market has been pretty hot in our area and I think we could get $330k - $335k for our home (we owe $302k).  Not a lot of equity, but may end up with something at closing given that I will use a flat fee MLS listing and basically sell it myself to save on commissions. 

I will post an update after our conversation.

Mikila

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Re: Reader Case Study - $231k in debt and need help!
« Reply #131 on: January 29, 2017, 01:18:34 PM »
Others have given great advice.  I just have thing to add:  If I owed that much money, I would not trust myself with credit cards. 
Do yourself a favor and cut them all up.  Use cash and debit/ prepaid cards only. 

You know what they say, the first step to getting out of  a hole is to stop digging.

Laura33

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Re: Reader Case Study - $231k in debt and need help!
« Reply #132 on: January 29, 2017, 08:29:38 PM »
Thanks again to everyone for your comments and advice.  I am going to have a talk with my wife this weekend on all of this and we will see how it goes.

On a positive note, I did some market research on our home and it looks like we may have a little equity.  The market has been pretty hot in our area and I think we could get $330k - $335k for our home (we owe $302k).  Not a lot of equity, but may end up with something at closing given that I will use a flat fee MLS listing and basically sell it myself to save on commissions. 

I will post an update after our conversation.

Good luck with both.  And thanks for the earlier post.  FWIW, I think you just did what so many other people do -- you make a good salary, and so it seems like you "should" be able to have the nice house, and nice cars, and nice lifestyle, and all that.  And then you think about whether you can afford it based on whether someone will loan you money for it, and whether the payment fits into your monthly budget.  And before you know it -- and without even thinking about it, you're just doing life as you always thought it should be -- boom, you're stretched to the max.  So then you look for quick fix ideas to make more money and can't figure out why you're always so tight, and  doesn't work. And now you're in deeper and there doesn't seem to be a way our.

The reality is that no one can have everything.  Look at what you want:

Big house with yard in neighborhood with good schools
Two nice cars
Nice vacations
Nice lifestyle - eating out, manicures, etc.
Early retirement

Now pick one.  If you're really making a lot, maybe pick two.  That's reality.  For everyone, not just you.  But that's not what you see on TV -- that's not what you hear at the neighborhood barbecue.  No, what you see is Joe driving home a new truck; what you hear is Sue is talking about their big vacation.  You don't see that Joe saved for 10 years, and Sue doesn't brag about the 18% interest she is paying to cover that trip. Unless you happened to luck out and get parents who really taught you how to budget and all about compound interest, you have to figure it out on your own.  And that's hard, and most people learn it the hard way.

You really are not alone (my dumb-ass brother right out of college bought a brand-new SUV, promptly wrecked it, and replaced it with an even bigger truck).  But you can get there, and it does get better.  But you also have to fight your own way back, slowly and surely.  It's the need for immediate gratification that got you here, and the best way to unlearn that habit is (unfortunately) to feel the pain, month by month, as you whack at it bit by bit.  So please don't declare bankruptcy -- that is just another quick fix, and you'll likely find yourself right back here in 5 years.  Commit to doing the work -- no more buying anything on credit, no more "no down, easy monthly payments."  Eat what you kill, flip the usurious payday lenders the bird, prove to yourself you can do this.  I know you can.
Laugh while you can, monkey-boy

ysette9

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Re: Reader Case Study - $231k in debt and need help!
« Reply #133 on: January 30, 2017, 09:24:20 AM »
Posting to follow. I am looking forward to hearing how the weekend conversation went. My fingers are crossed!
"It'll be great!"

pachnik

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Re: Reader Case Study - $231k in debt and need help!
« Reply #134 on: January 30, 2017, 09:29:19 AM »
Posting to follow. I am looking forward to hearing how the weekend conversation went. My fingers are crossed!

+1.  I really hope it went okay.  :)   

Poundwise

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Re: Reader Case Study - $231k in debt and need help!
« Reply #135 on: January 30, 2017, 10:43:33 AM »
Posting to follow. I am looking forward to hearing how the weekend conversation went. My fingers are crossed!

+1.  I really hope it went okay.  :)

Me too!  Even if your wife isn't on board, though, you can still go on ahead by replacing your car with something cheaper, and making whatever cuts you can by taking on more cooking, yard work, etc.  Once you've put some more skin in the game, you'll be much better placed to make requests.

dashh

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Re: Reader Case Study - $231k in debt and need help!
« Reply #136 on: February 01, 2017, 08:49:21 AM »
I wanted to give everyone an update on the conversation I had with my wife on our financial situation.  We finally talked through things last night.  I think overall it went well, but it was a very tough talk to have.  I basically laid out a proposed plan to jump start us to financial freedom/retirement which included selling our cars and selling the house to downsize and rent for a few years.  I realize it was a lot for her to take in and process.  I truly believe that these changes will benefit us greatly beyond just the financial aspects but that is hard for her to process just yet.   

Talking about selling our house and cars was very overwhelming, but I emphasized that we have to decide what is more important to us.  We are making a huge trade off to have those things and really need to make some big changes to get out of debt, be financially independent and be able to ever retire.

The house is probably the biggest issue for her, but I believe she is coming around to the idea of moving especially if it means being closer to work.  She has made that daily 2-hour commute for almost 10 years and a break from that is appealing to her.  However, the trade-off is leaving the area we are in and changing schools for my son so we are struggling with that. 

I will post more as we begin to nail down a plan and action steps.  Thanks again to everyone for the support and advice!

nereo

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Re: Reader Case Study - $231k in debt and need help!
« Reply #137 on: February 01, 2017, 08:54:41 AM »
sounds like you are making great progress dashh.

Re; moving. It goes without saying that your wife needs to be completely on board, and it sounds like she's already very tired of the soul-crushing commute she's endured for the last 10 years.  Remember that these lifestyle changes are not solely about paying off your mountain of debt - they should also be about improving the quality of life.

As counter-intuative as it first seems to our consumer culture, choosing a smaller home closer to work will INCREASE your QOL.
We did this about 6 years ago to eliminate crazy commutes and get back all that lost time.  It was an abrupt transition but one of the best we ever did.

"Do not confuse complexity with superiority"

Poundwise

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Re: Reader Case Study - $231k in debt and need help!
« Reply #138 on: February 01, 2017, 09:54:38 AM »
Glad to hear you had that talk!  Yes, moving kids out of a school and a bigger house at this age is difficult but better now than later, when your son is a teen.  My kids still are friends with children from our old neighborhood, and actually it is a good thing to have more than one circle of friends.  When you are having a problem with one set of friends, it's comforting to have another set to turn to.

PJ

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Re: Reader Case Study - $231k in debt and need help!
« Reply #139 on: February 01, 2017, 09:57:58 AM »
dashh, it's natural to be concerned about how a move will affect your son.  But children do move all the time, for both positive and negative reasons, and for the most part, they cope.  With careful consideration to things like the time of year, how you'll help him maintain contact with friends, what facilities are in the new location (like parks, and libraries and public swimming pools), and knowing that your commute will be much shorter and you'll have the time to do more with him, then a move doesn't have to be a negative thing in his life.  And depending on how you include him in the process, you'll also be teaching him how to make good financial decisions, which will have a major impact on his future life.  The attitude to take is not "we have to do this to escape financial ruin" but "we're choosing to do this so we can have a better life now and in the future."

And hey, having parents who are less stressed because the burden of debt has been lifted from them?  That's priceless.
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frugaldoc

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Re: Reader Case Study - $231k in debt and need help!
« Reply #140 on: February 01, 2017, 10:38:09 AM »
Probably the best thing you can do for your kid is to get in a situation where you and your wife are happy. If you guys are stressed out about money all the time it will be perceived by kids.
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dashh

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Re: Reader Case Study - $231k in debt and need help!
« Reply #141 on: February 01, 2017, 11:24:33 AM »
Thanks for the comments. 

In terms of the house and moving - one big issue is that my wife is very emotionally attached to our home.  I can just see it as a house and a financial burden but that is harder for her to see given her attachment.  I understand where she is coming from and it will be something we have to work through together.


GetSmart

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Re: Reader Case Study - $231k in debt and need help!
« Reply #142 on: February 01, 2017, 11:41:17 AM »
Regardless of all other emotions and attachments - is the area where you work a decent place to live ?  Perhaps driving around to see what's available near the work place in terms of neighborhoods, amenities, etc. would generate a different mindset.  You could do it in a 'fun - adventure - just for kicks - theoretical' kind of way.

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Re: Reader Case Study - $231k in debt and need help!
« Reply #143 on: February 01, 2017, 11:46:24 AM »
Thanks for the comments. 

In terms of the house and moving - one big issue is that my wife is very emotionally attached to our home.  I can just see it as a house and a financial burden but that is harder for her to see given her attachment.  I understand where she is coming from and it will be something we have to work through together.
That's understandable.
Don't feel like it's imperative that you move today.  Let the idea settle for a few weeks - no doubt your wife will think about it during her 2 hour commutes.  Maybe in a month or two you both can look at some places closer to work (either rentals or homes), again just to see what's out there.  Only move when both of you firmly agree that it is a good idea (and even then there will be some attachment). It might be six months, or even a year from now. 

If you haven't this article yet on the True Cost of Commuting, check it out.
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horsepoor

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Re: Reader Case Study - $231k in debt and need help!
« Reply #144 on: February 01, 2017, 12:06:07 PM »
Regardless of all other emotions and attachments - is the area where you work a decent place to live ?  Perhaps driving around to see what's available near the work place in terms of neighborhoods, amenities, etc. would generate a different mindset.  You could do it in a 'fun - adventure - just for kicks - theoretical' kind of way.

Yes, this.  Also, test the commute from your hypothetical new home.  When we moved from 30 minutes to 8 minutes away from work, it was amazing.  During escrow, I would just pop by the new house and think:  Wow, this is my new commute!  Then I'd imagine all the time we both just bought back.  BTW, even though I never had as long of a commute as you, I found way more time to lead a healthy lifestyle and lost a ton of weight after moving closer to work.  You'll have way more time to provide support to your son as well, which should help him make the transition.

Well done on having the talk.  Keep us posted as you move forward!

galliver

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Re: Reader Case Study - $231k in debt and need help!
« Reply #145 on: February 01, 2017, 01:12:23 PM »
If I recall correctly, your older kid was in elementary school? More than likely, a move will not hurt him/her, if they're a fairly average kid, socially. My parents moved...4 different times while one or more of us kids was in school (but 2 of us only moved twice, youngest sister 3x during school years). I think my youngest sister and I would agree moving between 2nd and 3rd grade was no problem; they mix up classes each year anyway so all the kids were making new friends. My other sister moved when she was 10 and had a bit more trouble with it. She's very introverted and had a best friend she was really close to that we moved away from. Even so, by high school and college she was fine. It's harder to move in high school as curricula (esp between states!) and grading systems don't always line up. And that's where your grades actually matter! So, frame it as an adventure, don't move till summer, and take care of it now when they're adaptable and family-centric rather than when the kid is older and has more connections and more at stake. :)

Laura33

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Re: Reader Case Study - $231k in debt and need help!
« Reply #146 on: February 01, 2017, 03:59:33 PM »
Thanks for the comments. 

In terms of the house and moving - one big issue is that my wife is very emotionally attached to our home.  I can just see it as a house and a financial burden but that is harder for her to see given her attachment.  I understand where she is coming from and it will be something we have to work through together.

I totally get this -- I am like your wife, you are dragging me out of my house feet first.  One question:  does she know how bad your situation is?  I'm not sure how much she has known/participated along the way vs. coming home one day to "hey honey, we're way over our heads and I already figured out that the solution is to move." 

I ask because usually the best way to convince someone is to let them choose it themselves.  If you haven't already, sit down with the debts, what you have been spending to maintain your current nice lifestyle, and a couple of proposed options.  You can walk her through how long it would take to pay off the debts on a "normal" repayment plan, so she can see that basically means working full-time forever.  Then you can walk her through your "sell and move closer" option, to show how much more quickly that gets you there, and how that will enable you to focus on other things you value (RE, maybe going part-time at some point, etc. -- pick some things that she really cares about that selling the house will allow you to work toward).  And then you can work with her to develop another option of the "if we stay put" variety -- that's always an option, but it means really significant tradeoffs, like selling both cars and becoming a one-car family in an econobox, cutting total food budget to maybe $400/mo. (or less), less desirable childcare, zero extras for X years, etc.  That helps demonstrate the real "cost" of keeping the house, and so gives her the ability to decide on her own that, as much as she loves this house, it is really not worth that degree of tradeoffs.  And that kind of buy-in is the only way any of this actually works long-term anyway.

But I am very impressed with both of you so far -- you for facing up to this and diving in so whole-heartedly, and your DW for being so receptive to such a major upheaval in your lives for the greater good.  Please keep us posted!   
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Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #147 on: February 01, 2017, 08:51:02 PM »
Congratulations on having the talk.

Hope the wife is ready to move on quickly, as currently you are just threading water. Run the numbers again. Together. Show her that you can fix this in about 3 years or less. It is not that long. And then you will be free.

Find a few nice rentals closer to work. Have a look. Check out the local schools.

With that commute, your house is just a very expensive bedroom and storage space, you have only a few hours a day to be emptionally attached to. You could spend those 2 hours you currently spend commuting with your children instead. How does that sound?

dashh

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Re: Reader Case Study - $231k in debt and need help!
« Reply #148 on: February 01, 2017, 09:13:45 PM »
Thanks again for all of the excellent comments!

The DW and I had a rough chat tonight at first but then regrouped and things are going well.  We even made two easy changes that will save us monthly:

- Requested change in payment plan on student loan saving $107/mo! (tried for forebearance but did not qualify)
- Signed our son up for riding the bus which will eliminate the Y early/after care saving $277/mo and canceled Y membership saving $65/mo!  (my wife is adjusting her schedule so she can be home when he gets home in the afteroon).  We also will save gas we we were using for drop off/pickup daily!

I also had a phone interview that went well and will be going into the office for a second interview on Monday.  The job would be 12 miles from my wife's and in the area we would be looking to eventually rent in (once the DW comes around :) 

Some real progress today!
« Last Edit: February 01, 2017, 09:34:53 PM by dashh »

Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #149 on: February 02, 2017, 12:47:14 AM »
You are doing well. Glad you came up with some new areas you can optimise. What are you planning to do with these savings?

Wife will come around. She might take a while, but she has to. If you keep focusing on sorting this out, you will be able to motivate her.

Let us know how you go. You might want to start a journal to document your journey.. It is good to see people taking advice and making progress.