Author Topic: 40K in Debt ... No Home... What to do with 10-15 K from insurance settlement?  (Read 2180 times)

BirdD

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I have gained a lot of value from the MMM forum and website.  Much Love.
This is hard to write... but here goes:

Age : 42yr/single/female
Income : Variable  - $13K - 15K

Savings = 0
Housing = House Sitting (to save $ and earn a bit too), no actual residence.

Annual Expenses =
           Food -    $3K - $4K (have bonafide dietary issues that won't allow me to eat standard MMM rice and beans, but I do eat simply)
           School - $2K
           Gas & Auto Insurance - $3K
           Misc - $500
           Debt Payments - $5.5K (have not been able to pay minimum lately, this # should be much higher)
           TOTAL = $14K - $15K

I've been in cc Debt for 10 years.  Living minimally to change this status the last 2. 

Just started a business 2 years ago.  So, in addition to having multiple jobs, I am also juggling a start-up (which is beginning to do well... bringing in 3x more than it's spending at the moment).

Wearing so many hats, as well as moving around every few weeks from house to house, working way more than I play (as is to be expected with a start-up) has been taking a toll mentally & emotionally.

In the next few months I'll be getting a settlement from an insurance claim (car accident) that will amount to $10k-15K. 

Would you....
1.  Go through debt consolidation and have the debt paid off ASAP.
2.  Put all of the insurance $ toward the debt as it stands now... no consolidation.
3.  Buy an acre and put a small trailer/yurt up to live in (taking the stress of no home off my plate) about 30 min outside of town.  Paying outright for both, no mortgage, but having nothing left over afterward.
4.  Some other course of action??

I'm trying my best to make wise decisions going forward, especially with this extra money coming my way right now.

Your advice and guidance would be most appreciated.
~ Humbly!





Paul der Krake

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We need more numbers.

How many creditors do you have?
What's the interest rate?
What type of consolidation are you thinking of?

marielle

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Your gas and car insurance seems HIGH. Like you must be driving 30k+ miles a year, or a gas guzzler, or you must have a new car with insane insurance coverage.

Heroes821

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Your gas and car insurance seems HIGH. Like you must be driving 30k+ miles a year, or a gas guzzler, or you must have a new car with insane insurance coverage.

My wife's full coverage on her car with a loan (yeah I'm working on it) is around $1k every six months. So 3k with minimum full coverage and gas for a year isn't that insane.

Jakejake

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Can you give some more details on your startup? (Hours you put into it, hourly rate you are earning after several years of working on it)

I'm asking because I know someone who sank about a decade into a startup, and at the end it was making a small net profit. The reality that she finally had to come to terms though with was that even with its "profits" - for the amount of hours she put into it she would have better off getting even a minimum wage job. And she wasn't in a situation where she could afford the luxury of earning less than minimum wage.

I'm hinting that at $13-15k income, you aren't earning enough to support yourself (even if you buy a trailer outright). So something drastically has to change. If the reason you aren't earning more is that you're devoting too much time to a startup to get a traditional job, you might need to evaluate whether that has to be put on hold til you are out of crisis mode.

If on the other hand you're earning more through the startup than you could working for someone else, then it might make sense to carry on.

As far as your direct question goes, once you buy the acre of land, what would be the annual cost of property taxes, water, utilities, yard maintenance, and additional commute expense from living 30 minutes away from town? And how many hours a week would be spent mowing a yard or commuting - and would those hours be better spent earning money at either a job or your startup?  I'm not saying it's a bad choice, just saying the way you posed the question sounds like you are seeing it as a one time expense, and I'd like to see the recurring costs figured into the equation.

plog

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I'd spend some of that money on a mirror.  Time to face some cold hard realities about your life and decide what you want to do with it. Look into it and ask yourself these questions:

1. Why are you spending money on education?  Is this an investment in yourself (which will lead to marketable skills) or a hobby (Feminist Rights in Indigenous Cultures Studies)?

2. How long can you live without paying rent?  Being the 'house-sitting' friend is going to wear thin.  And its not a long-term solution even if you have kind friends.

3.  What will your startup make in 2 years?  Don't guess, don't extrapolate from a napkin.  Show me spreadsheets and business documents where you have a plan and it is being executed. 

4.  How did you accumulate 40k of debt and why are you sure that you will no longer be accumulating any debt?  Was this student loans?  Or was this just $100 a month to get through the month over the course of 10 years?

I would sit on that new money until you can answer all those questions, have a plan and live that plan for 1 year.  The story you posted gave me the sense that you are the type of person who is big on plans, but poor on execution.  Set a plan this time and live it for a year.  Then you will know how to spend this money.
« Last Edit: January 04, 2017, 08:46:43 AM by plog »

marielle

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Your gas and car insurance seems HIGH. Like you must be driving 30k+ miles a year, or a gas guzzler, or you must have a new car with insane insurance coverage.

My wife's full coverage on her car with a loan (yeah I'm working on it) is around $1k every six months. So 3k with minimum full coverage and gas for a year isn't that insane.

Someone who makes $15k a year should not be paying $2k in insurance. So I hope that isn't the case for OP. That's insane. That's enough to buy two crappy cars every year, or one mediocre used car. Mine is like...$150 every 6 months.

lbmustache

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Your gas and car insurance seems HIGH. Like you must be driving 30k+ miles a year, or a gas guzzler, or you must have a new car with insane insurance coverage.

My wife's full coverage on her car with a loan (yeah I'm working on it) is around $1k every six months. So 3k with minimum full coverage and gas for a year isn't that insane.

That still sounds crazy high unless you drive an insane # of miles a year, are very young, have accidents on your record, live in a very expensive-to-insure area (like NYC), and/or you're driving something sporty and/or German - these cars have higher insurance rates compared to your average Camry, etc. I have full coverage on a new Honda with a loan and I pay about $2k a year. Because I have two at fault accidents on my record.

My brother is 22 and also drives a brand new Honda, and he pays $80/month.

honeybbq

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I would think #1 you need a solution to being essentially homeless. Find someone looking for a house mate and at least get a room with a place to sleep that is yours. I would not buy an acre or live in a yurt outside town at this point with the information you have.


Heroes821

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Your gas and car insurance seems HIGH. Like you must be driving 30k+ miles a year, or a gas guzzler, or you must have a new car with insane insurance coverage.

My wife's full coverage on her car with a loan (yeah I'm working on it) is around $1k every six months. So 3k with minimum full coverage and gas for a year isn't that insane.

That still sounds crazy high unless you drive an insane # of miles a year, are very young, have accidents on your record, live in a very expensive-to-insure area (like NYC), and/or you're driving something sporty and/or German - these cars have higher insurance rates compared to your average Camry, etc. I have full coverage on a new Honda with a loan and I pay about $2k a year. Because I have two at fault accidents on my record.

My brother is 22 and also drives a brand new Honda, and he pays $80/month.

Definitely it's a lot of money, I just can see where the numbers were coming from.  In my case, 2011 mini-van she has several speeding tickets/violations but no accidents and this is with a $500 deductible AND after being added to my policies that now give a multi-car discount and multi-line discounts. Car has around 80,000 miles on it. Owned for less than 1 year by her. State Farm. 

USAA was charging $400 more a year before we changed this to my state farm policies. Also we're under 30.

Not trying to hijack the thread, but if the OP does not have a car payment, I would strongly recommend liability only which should be significantly reduce those costs.