Author Topic: This may be one of the worst debt situations I've ever seen  (Read 5376 times)

Daisyedwards800

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eljefe-speaks

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Re: This may be one of the worst debt situations I've ever seen
« Reply #1 on: October 29, 2019, 11:00:35 AM »
My concern began at the top line with the mortgage. That is a lot of house on that income.

Kris

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Re: This may be one of the worst debt situations I've ever seen
« Reply #2 on: October 29, 2019, 11:03:04 AM »
This post made me so anxious. The debt itself, and the spending levels, but also the complete head-in-the-sand attitude. She wants "help" but she's basically not willing to do much beyond cosmetic changes. And her "goal" is to pay off the debt in 2-3 years. Oy.

Daisyedwards800

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Re: This may be one of the worst debt situations I've ever seen
« Reply #3 on: October 29, 2019, 11:22:49 AM »
Me too, Kris.  Alone, a home worth $300k isn't totally out of their range, but they only put 5% down, so their mortgage must be quite large.  Add into it no retirement savings (less than $10k she said) and it's just a big mistake.

2sk22

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Re: This may be one of the worst debt situations I've ever seen
« Reply #4 on: October 30, 2019, 09:49:42 AM »
The amount listed as "Mortgage" probably also includes property taxes, which can be fairly high in some areas in the northeast. But yes, the debt amounts are frightening.

TVRodriguez

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Re: This may be one of the worst debt situations I've ever seen
« Reply #5 on: October 30, 2019, 10:09:34 AM »
Really, the worst?  I don't think it's really unsalvageable at all.  That size mortgage for the northeast is not bad. 

The regular expenses listed in the OP come to $9,526.

$4,953 in mortgage and other household regular expenses
$4,573 in car loans, student loans, personal loans

The regular income listed was $9,200.  This is a shortfall of $326/month.  She will have to cut more than that, obviously, to start building up savings, but an aggressive debt paydown plan can be the kick in the pants that they need to get there, too.  The total non-mortgage-debt is $169,434.  On their income, it is definitely possible to get ahead of this, especially if they are willing to do what they can to increase their income, which they seem to be willing to do.

How is this the worst ever?  Yes, there's work to do, but in the update, she's already listed ways that she is going about reducing many of the regular expenses, from cell phones and cable to daycare, and she is also considering selling the house.  Personally, I'd look into selling the more expensive car, too.  I am actually impressed by the quick response and adjustments she is willing to make.

Admittedly, I only read the OP, not any of the responses or follow ups other than the update listed in the OP itself.

dandarc

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Re: This may be one of the worst debt situations I've ever seen
« Reply #6 on: October 30, 2019, 11:12:12 AM »
I mean, yeah should be in-range of fixable with discipline, but the shortfall is probably more than $326 / month. I doubt the $850 "Other" category is 100% correct. May need to reduce by $1,000 or more per month just to get to even on cash-flow.

bostonjim

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Re: This may be one of the worst debt situations I've ever seen
« Reply #7 on: October 30, 2019, 11:52:07 AM »
The mortgage seems like the only reasonable part of the monthly expenses (from my northeastern frame of reference)  We were paying about 2700 (with taxes/insurance) before I decided to refi to a 15 year that made it jump up to about 3600/month - and I only make little more than they do combined (although my wife going back to work made the decision easier)  But we have no other debt.  Plus, when you consider that renting in a HCOL area like ours would probably set you back at least that a month for a family sized apartment, keeping the house is a no-brainer.


TVRodriguez

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Re: This may be one of the worst debt situations I've ever seen
« Reply #8 on: October 30, 2019, 01:26:12 PM »
I guess watching that show "Til Debt Do Us Part" has showed me that almost any situation is salvageable.  There were people on there overspending by $6,000 or more each month, and the host managed to whip them into budgets that had them paying off all debt in 2-3 years.

Aunt Petunia

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Re: This may be one of the worst debt situations I've ever seen
« Reply #9 on: October 30, 2019, 01:34:39 PM »
They sound like good candidates for Dave Ramsey. We don't have enough information to say whether they should keep or sell their house, but I'm guessing the mortgage includes PMI in addition to the taxes and insurance. She is making a good start with reducing the phone plans, cable, and groceries.

honeybbq

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Re: This may be one of the worst debt situations I've ever seen
« Reply #10 on: October 30, 2019, 03:12:23 PM »
They really aren't in that bad of shape at all.

Do you reddit at all? There's a ton of personal finance subreddits that are just a gold mine if you are wanting to see some seriously bad debt situations.
(There's also FIRE reddits, too)

I just read one about a 22 yr old with 200k in private student loan debt from undergrad (no income based repayment) making 20 bucks an hour wondering what to do...
« Last Edit: November 01, 2019, 11:42:38 AM by honeybbq »

Daisyedwards800

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Re: This may be one of the worst debt situations I've ever seen
« Reply #11 on: October 30, 2019, 04:53:51 PM »
They really aren't in that bad of shape at all.

Do you reddit at all? There's a ton of personal finance subreddits that are just a gold mine if you are wanting to see some seriously bad debt situations.
(There's also FIRE reddits, too)

I just read one about a 22 yr old with 20k in private student loan debt from undergrad (no income based repayment) making 20 bucks an hour wondering what to do...

I think Iíve shielded myself completely.

I graduated owing $75,000 making less than $20 an hour and did fine.  My payments were $525 a month.  I didnít ever do IBR.  His payments are likely under $200 a month

The_Big_H

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Re: This may be one of the worst debt situations I've ever seen
« Reply #12 on: October 30, 2019, 09:16:50 PM »
My concern began at the top line with the mortgage. That is a lot of house on that income.

My concern with house ownership when in debt is "unexpected maintenance".  Houses have enough "expected" repair bills that the only time you should be caught "unexpecting" something is a year when you have NONE!
Although rent can increase, you KNOW for THAT WHOLE YEAR of your lease that is what you will pay for housing. 
Also, making minimum payments on a 30 year mortgage, plus high taxes, home insurance in escrow... you are basically paying interest and bills, maybe 20% actual to actual principal.  Throwing just as much money away 'owning' as 'renting'.

ALso, $200 for electric, is that their ONLY power source?  What about heating bill.  They only have electric heat? in the NE? and they can heat the house for no more than $300/mo for 6 cold months on average (figuring $100/mo in 6 mos of summer).  Something seems off there... are they burning a ton of wood?

one person works = ONE CAR period.  Another fine example of why renting must be done, you can rent in so many areas and move as needed to keep the commute down.  They should be renting w/in walking of work or daycare.  Rent a small place, 2 bdrm MAX.

honeybbq

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Re: This may be one of the worst debt situations I've ever seen
« Reply #13 on: November 01, 2019, 11:42:57 AM »
They really aren't in that bad of shape at all.

Do you reddit at all? There's a ton of personal finance subreddits that are just a gold mine if you are wanting to see some seriously bad debt situations.
(There's also FIRE reddits, too)

I just read one about a 22 yr old with 20k in private student loan debt from undergrad (no income based repayment) making 20 bucks an hour wondering what to do...

I think Iíve shielded myself completely.

I graduated owing $75,000 making less than $20 an hour and did fine.  My payments were $525 a month.  I didnít ever do IBR.  His payments are likely under $200 a month

Sorry I dropped a 0... it was 200k!

dandarc

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Re: This may be one of the worst debt situations I've ever seen
« Reply #14 on: November 01, 2019, 11:59:36 AM »
Oh . . . yeah $200K in debt while making $40K is not so great. If the interest rate isn't super high, still might be do-able over a long enough time-frame (10 years maybe?), although you'd probably have to paying $1,000 a month or more to be making decent progress, and when you're bringing home about $3,000 a month that stings big time.

Really though, "get a better paying job" is the answer there. If they spent $200K getting a degree that doesn't have better prospects than what they're already doing, well, I guess they're in this for the long haul.

MoneyQuirk

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Re: This may be one of the worst debt situations I've ever seen
« Reply #15 on: December 02, 2019, 02:34:29 PM »
It looks like they're making plenty of money, they just need to allocate it better :/.