Author Topic: Any hope...ever?  (Read 7122 times)

siscraven89

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Any hope...ever?
« on: January 21, 2013, 08:21:35 PM »
I am a 54 yr old woman who for various bad situations culminating with the loss of my husband of 31 years finds herself trying to climb out of an almost hopeless hole.
I have a 22 year old home, 360K mortgage balance @ 3.2% variable rate – market value 350K-375K
Income of $91K for 2012

Monthly:
Net income      $4,610
Mortgage Pmt         $1,968
Tax, Dues, Ins           760
Other expenses        1,820
Student Loans ave 6.5%     1,958

My only assets are a car valued about 10K, everything else I own valued about 10K, and I’ve already sold any gold I could find.  I do have about 10K in my 401K.  I have been surviving by keeping the student loans (parent plus loans) on forbearance which is nearly used up.  I know I need to get rid of the house but try to sell, deed in lieu, foreclosure, which is best?  It needs a lot of maintenance that we have not been able to provide.  I just don’t see a way of getting to a point of ever paying off the student loans and putting dime one into retirement for myself.
Any thoughts would be greatly appreciated.

James

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Re: Any hope...ever?
« Reply #1 on: January 21, 2013, 08:36:06 PM »
What is the balance of your student loans?

First, you need to get rid of the house.  If the house isn't on the market, you should be figuring out how to get it on the market tomorrow.

Also first, you need to not spend $1,820 each month.  You can't afford that.  Start canceling thing tomorrow.  I don't know what it's going toward, but you need to stop everything that you can possibly stop spending.  Make a list and we can help you.

Second, sell the car.  You can't afford it.  Buy something for a few thousand and drive it until you can afford something better.  It's not worth paying $6.5% interest to keep that money locked up in your car.

Don't fear foreclosure.  What is the worst that can happen?  Maybe you pay more for your rental because your credit is shot?  You can live with that.  I don't know what choice is best for you at this point, but you need to make a lot of changes quickly in order to get thing set up for recovery.  But think of how much better you will feel after the changes!  I feel for you and it might be rough for a while, but if you make some really hard choices right now, and set yourself up on a better path, you can absolutely make things better with a wonderful income of $91k per year!

Another Reader

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Re: Any hope...ever?
« Reply #2 on: January 21, 2013, 09:08:25 PM »
At 54, you are going to start over. 

The first thing to do is to start the process of disposing of the house.  It does not matter what you sell it for in that range, you are going to do a short sale.  Contact a few short sale agents that have listed and closed a lot of short sales in your area to see what you will have to do to get rid of this albatross.  Once the house is settled, you are going to find yourself an extremely cheap living situation - studio apartment, room in a house, whatever it takes to minimize your housing expense. 

Second, at $91k, you are grossing $7,583 a month, but netting $4,610.  With your current housing situation, this makes no sense.  Where are the $2,900 in payroll deductions going every month?  Can some of these be adjusted or eliminated?

Third, you say you lost your husband.  This change in your life needs more explanation.  Did he pass away, or was there a divorce?  What financial problems accrued because of this change?  If he died, was there no insurance? 

Fourth, before you get rid of the car, what do you use it for?  Are you driving a 50 mile round trip commute and taking clients out, or do you only drive it to the grocery store on weekends?  Do you owe money on it?

Fifth, if you list the monthly expenses that comprise the $1,820, you will get a lot of suggestions on how to cut those.  Do you have a budget?

Sixth, more detail is needed on the student loans.  If I understand you correctly, you are currently not paying the $1,958, but will have to start soon.  Is that correct?  Are these your loans or are they loans for your children?  If they are your children's loans, can the children help pay them?  What are the balances?

If you are willing, put this information together and post it.  The folks that participate in this forum will give you a lot of suggestions to help you clean this mess up anf move forward with your life.

Jamesqf

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Re: Any hope...ever?
« Reply #3 on: January 22, 2013, 11:19:36 AM »
Just a thought: Instead of selling the house, could you rent out rooms to cover a large part of the expenses?

onehappypanda

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Re: Any hope...ever?
« Reply #4 on: January 22, 2013, 11:50:21 AM »
Kind of a second to what others said but: you list over $1800/month in various expenses that aren't explained.

Do you have any idea where that money is actually going? Is it budgeted?

Often we skip over daily expenses that seem "little" compared to a mortgage or debt payments but they accumulate into big expenses- here, almost as much as any of your other bills. If you can cut that in half (and most people if they were honest could cut their spending in half), it would give you some major wiggle room while you figure out other big changes like what you want to do with the house.

People here can give you good ideas to cut back on spending but not until they (and you) know where that money is really, truly going. So start tracking all those little expenses asap.

nofool

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Re: Any hope...ever?
« Reply #5 on: January 22, 2013, 12:03:42 PM »
Agreed, we need more detailed information in order to help you.

But to answer your question, yes. There is hope. There is always hope. :)

Catbert

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Re: Any hope...ever?
« Reply #6 on: January 22, 2013, 12:22:29 PM »
I second the "get a roommate" (or two or three) recommendation. 

Togoshiman

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Re: Any hope...ever?
« Reply #7 on: January 22, 2013, 12:41:37 PM »
First of all, very sorry to hear the pain and fear in your post.  You're among friends here, OP and you will get a lot of advice (perhaps in the form of face punches, get ready).  With that high income, you do have some great options.  As folks have said, post your net worth and your monthly budget with as much detail as you can.  Sign up to Mint.com right now.  Spend this weekend reading every MMM post from day one to present.  And work with the folks here to get ideas and feedback.

If you've come this far, you're on the right track.  You're just going to find creative ways to get your spending way, way (WAY) under your income, and you'll apply the balance to your debts.  You'll sell anything superfluous and go without, substitute or get a cheaper version (e.g. house to bachelor apt, car to bike and walking, etc).  While counter-intuitive, you WON'T feel poor - you'll very quickly feel much richer because, while living more cheaply, you will be able to easily afford your new life.  Those debts will be erased very quickly if you go all-in on these changes and then, when you apply the net to savings, you will be out of that hole and well on your way.


Togoshiman

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Re: Any hope...ever?
« Reply #8 on: January 22, 2013, 12:43:37 PM »
Just an aside, when I see Americans with student loans in the neighbourhood of 6.5% it just blows my mind.  As a Canadian, I paid 1% over prime for undergrad and 1% under prime for law school, neither of which accrued while I was in school itself.  Even then, I found the loans difficult to pay back.  I really sympathize with the extortionate rates some folks are saddled with.

DebtDerp

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Re: Any hope...ever?
« Reply #9 on: January 22, 2013, 01:51:51 PM »
Just an aside, when I see Americans with student loans in the neighbourhood of 6.5% it just blows my mind.  As a Canadian, I paid 1% over prime for undergrad and 1% under prime for law school, neither of which accrued while I was in school itself.  Even then, I found the loans difficult to pay back.  I really sympathize with the extortionate rates some folks are saddled with.

6.5% is a good rate! I've got one at 9.5% with capitalized interest after three years! Plus I know quite a few people in the 7.8% - 8.5% range. I can only dream of 1% but I'm guessing that's taxpayer subsidized.

iamlindoro

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Re: Any hope...ever?
« Reply #10 on: January 22, 2013, 01:52:57 PM »
Indeed, I had a small loan at 12% that I just managed to pay off.  The rest of my loans are at 3-4%, so I'm prioritizing those way lower than investments.

Togoshiman

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Re: Any hope...ever?
« Reply #11 on: January 22, 2013, 02:01:27 PM »

6.5% is a good rate! I've got one at 9.5% with capitalized interest after three years! Plus I know quite a few people in the 7.8% - 8.5% range. I can only dream of 1% but I'm guessing that's taxpayer subsidized.

Well, 1% over prime, so more like 3.5%, and funded directly from the government.  The second was a line of credit deal worked out between the grad school and a major bank.  While I don't know why/how they offered such a good rate, I suspect it was something like, 'you get all this business guaranteed plus upper middle-class customers for life (most likely) if you offer a good rate.'

Not to hijack the thread, but why doesn't competition amongst financial institutions in the US drive down the loan rates?  Is that the true cost of delinquencies?  Anyway, if you pay 9.5% now, I cannot imagine what the 1970s must have been like.

iamlindoro

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Re: Any hope...ever?
« Reply #12 on: January 22, 2013, 02:06:01 PM »
Rates now are fantastic-- but many/most of us consolidate after leaving school to "lock in" the rate and to zip all the small loans up into a single bill (10 years ago when I got out of school it was unfathomable that they would fall further).  Obviously everyone's situation is different, there are variable rate loans, etc., but I think my experience is fairly common.  Those rates which I consolidated are at the low rate, the high rate one was a private loan to pay for a continuing education class (not my smartest move).

zug

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Re: Any hope...ever?
« Reply #13 on: January 22, 2013, 02:33:42 PM »
siscraven89: I see a lot of hope for you, and pretty fast. With income at nearly double the median, you're actually in a pretty good position to get your net worth turned around in a short amount of time. You also have some assets you can downgrade on to save some cash.

1. Get rid of the $10,000 car, replace with $3,000 high gas-mileage car, put that $7,000 into buying yourself some time to get other things in order. That's nearly 2 months pay right there!

2. Start taking steps to get rid of the house. Nobody can help you on which way to go with the house without knowing your state, in some states you can walk away from a foreclosure and in some states you can be sued for the balance. For what it's worth, mine ended up foreclosing in 2010 and it has not turned out to be the end of the world.

3. I bet we can help you cut the "other expenses" category in half, and maybe the taxes/due/insurance category too. Post what you're paying for what in detail.

Last, don't worry. Honestly I'm in a worse financial strait than you are right now in some ways but MMM has helped me get plans rolling to get out of the situation, which makes all the difference in the world. I feel secure knowing that things are only going to get better from here on out.

DebtDerp

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Re: Any hope...ever?
« Reply #14 on: January 22, 2013, 07:38:44 PM »
Well, 1% over prime, so more like 3.5%, and funded directly from the government.  The second was a line of credit deal worked out between the grad school and a major bank.  While I don't know why/how they offered such a good rate, I suspect it was something like, 'you get all this business guaranteed plus upper middle-class customers for life (most likely) if you offer a good rate.'

Not to hijack the thread, but why doesn't competition amongst financial institutions in the US drive down the loan rates?  Is that the true cost of delinquencies?  Anyway, if you pay 9.5% now, I cannot imagine what the 1970s must have been like.

Default rates have been growing quite steadily in the past few years (up to 13.4% last year). For comparison Mortgage Default rates are around 1.5% (and are also backed by an asset). The Federal Government has largely taken over the student loan market and provides most loans today. Most undergrads utilize the Stafford Loan which this year is at 6.8% or 3.8% if you qualify for need based aid. Everyone in college can qualify for a Stafford Loan, meaning it is very easy to get. Defaults have gone up however the interest rate is set by congress.

I was a sophomore in College when the financial crisis hit and most private banks shuttered their private student loan programs or made them very difficult to get. Most college students need a cosigner in order to qualify for a loan so it will also depend on the credit of your cosigners. Right now Wells Fargo is offering fixed rates from 6.69% to 11.34%.

Overall I think the rates are pretty competitive compared to other loans that aren't secured. And the one thing Student Loans have going for them is that they cannot be discharged in bankruptcy (even private loans). Also, the father of a friend of mine went to law school in the '70s and had a loan at 16%!


happy

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Re: Any hope...ever?
« Reply #15 on: January 23, 2013, 01:56:14 AM »
Hang on a minute, this may not be hopeless at all.

Firstly I agree with AR, where are the payroll deductions going?. If you lived in highly taxed Australia you would have 70k net per year to live off, so in US you must have more than that net after tax. I agree can you cancel some of these.

Hypothetically, If you have 70k net to live off,  you've got 23 k on mortgage, 23k on student loans leaving 24k to live off, which should be possible for a single person. Do you have any dependents? Currently according to the information you haven given, your expenses are 30k a year....this should be able to be reduced.

I assume the mortgage is for 15 years, since the repayment is quite hefty for the low interest rate. If you have no retirement savings which you seem to imply (is this correct?) then you definitely need to sell the house. If you do (what are the large payroll deductions if not retirement savings?),  then what you do depends on how much you have.

Sell the house, live off 20k a year and direct the other 50 odd to the student loans and retirement savings. We don't know how much the student loans are, so can't calculate any more

You're not going to retire early, but you're not on the streets yet.   
Apart from the immediate concerns with paying down debt, the MOST important thing is to learn to live happily on a small income, since frugality is going to be your new friend.

Go girl! You can do it:)   

arebelspy

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Re: Any hope...ever?
« Reply #16 on: January 23, 2013, 07:37:48 AM »
We can probably stop replying until the OP gives some indication that they've come back to read the replies on this thread and supplies the extra information.  :)
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