The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: atourlimit111 on December 04, 2013, 03:47:05 AM
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My wife and I live in Salt Lake City, Utah. We are parents to a healthy wonderful 8 month old boy. Soon to be 9 months. Both of us work. I work full time and make $11 an hour but I get $213 taken out of my paycheck for medical, dental and vision insurance which covers my wife and I. Our son is currently on Medicaid. I work M-F and so does my wife. I watch our son during the day until his mom comes home so that way we get to spend quality time with our son and also save money not paying child care expenses.
My wife works part-time making $10.50 an hour. The owner told her she will be making $11 an hour after working there at least six months.
We filed for bankruptcy in 2009 and it got finalized in 2010. It was due mostly to medical bills. We couldn't keep up. We both have low credit scores and it was very surprising to us that we got approved for a car loan.
Here is our DEBTS and in no particular order:
1. Car loan (I wish we never got this but did not have a choice).
Monthly payment is $340.00 Interest: 14.4% Total amount to be paid off today: $12,295.52
2. My Capital One credit card: Monthly payment is $28.00. Interest: 19.80%
Balance is $734.47 out of $750.00
3. My wife's Capital One card: Monthly payment is $15.00 Interest: 22.90%
Balance $192.06 out of $200
4. Best Buy Mastercard (We can use it anywhere Mastecard is accepted not only at Best Buy)
Monthly payment is $15.00 Interest: 21.74%
Balance $290.39 out of $300.00
My Paypal Credit Card:
Monthly payment is $35.00 Interest is 26.99%
Balance $295.06 out of $300
My wife's Paypal credit card: Monthly payment $35.00 (We haven't started paying on this yet)
Interest is 26.99%
Balance $316.48 out of $500
First Premier Credit Card: Not sure on the monthly payment for this one because it's so new. We have to use this to pay our student loans on. Balance is at 0 right now and the interest rate is 36%
University of Utah hospital balance is $215 with a interest rate of 8.99%. They want $150 right now and the next payment after that it will probably be paid off.
The reason we have so many credit cards is because I was out of work for a long time. I finally found stable work and now we are trying to catch up. Side note: I really don't like temp agencies.
We owe my wife's grandparents $4,000. They helped us out tremendously when our 2008 Mazda Tribute needed a rebuilt transmission. The transmission shop charged us $2,996.00. My wife's grandparents put it on their credit card. They have been very good to us and said as long we can give something back they would appreciate it. Of course I would love to be able to pay them back very soon.
We owe my wife's mom $4,000. We had emergencies that came up that we couldn't afford. Our first born son passed away four days after he was born. We also are a fertility couple (not IVF) and paid a lot of money over the years to have our first born son Andre.
We were truly blessed to have Andre in that time span. Even though it was cut short. There isn't a day that goes by that we don't think of him. He ir our guardian angel now.
Both my wife and I are online students (with very reputable schools). I will start soon but two companies have been calling everyday to receive payment UHEAA and Sallie Mae. Once I start school again these payments will be deferred.
We pay $650 in Rent. Pay $55 a month for Internet. No cable. Just over the air tv. We have no gym memberships. Just a Costco membership.
Car insurance is $78 a month for two cars.
T-Mobile is average price of $150 a month. We have pay half of the family plan. We are still under contract with T-Mobile. We renewed before they rid of their contracts.
I can't give you a price of gasoline or maintenance for both of our cars. Our other car is a 1996 Ford Taurus. This car needs some work. I've been doing it myself to save money. The good thing the Ford Taurus is fully paid for. But the stuff I can't do I will get it fixed professionally.
We spend on average $150 every couple weeks on groceries. Our son is on WIC.
We do have $120 left in our savings account that my mother in law has been taking care of. At one point we did have $2,000 in it. But with my hard to find stable work history we had to dip into savings.
We are not sure on how to get out of this mess. I want to work a second part-time job over the weekend but want to do well in school too. My wife has also been contemplating getting a second part-time job.
We are not sure on on how we are supposed to pay our bills. We are already behind on a few of them. Also we have Christmas coming up and we are not sure on how we are going to pay for Christmas.
We both want to get rid of ALL our debts. But not sure where to start and what to pay.
We don't have a game plan. We are both at our wits ends. Just looking for good solid advice and not smart alec remarks. It does not help anyone.
Thank you for reading and seasons greetings.
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You seem to already know, that you are on the verge of bankruptcy, almost all credit cards are maxed out and you owe your family money.
Be prepared for some serious face punches, but you will get out of this mess. The last guy was homeless and still found his way back to a normal life :)
You need to cut your budget. I would start with to food bill, 150$ every couple of weeks might be a lot, depending how long a couple of weeks is. 150$ per month is good.
Drop the cell phone.
Trade the newish car for an cheaper one or drop it altogether if possible. How are your commutes?
Look into dropping Internet and getting it at the library.
A second job is a great idea!
You did not mention how much you take home at your current jobs per month. That's really important to know for further advice.
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The biggest bang for your buck I can see is the car loan. You say you did not have a choice - can you explain? Could you sell the car? Bike to work? If not bike, how about a used scooter? Getting rid of that car loan really does seem like your best chance.
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I totally agree. People convince themselves too easily that they NEED a second car when they could take public transportation, bike or have a scooter.
Would you rather have the "inconvenience" of public transportation and eliminate 12k of debt or do you prefer to keep on sinking?
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Congratulations on your healthy baby! You will get lots of great advice here, but my only contribution would be to defer school this year. Why are you going back when your finances are so unstable? I would put school off for 1 more year, spend time getting out of debt and building up my bank account a little.
As for Christmas, well the baby doesn't even know what Christmas is and will probably be just as happy with the boxes and wrapping paper! Think about what items you really need for the baby and ask well meaning relatives, who want to buy him presents, for what you really need. Your family sound like they understand your predicament, so I'm assuming they won't be expecting any gifts this year. If you feel like you must give gifts, then offer services, such as helping with yard work, 'valet' their car, cook / bake food, wash windows, whatever makes you feel like you are giving a gift to those who matter most to you.
For your wife, I'm sure she would appreciate breakfast in bed, a nice long, undisturbed bath, some time alone or with her friends. It doesn't have to be expensive to show your loved ones that you love them.
Good luck and I'm sure you will get great tips from the pro's here!
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We both want to get rid of ALL our debts. But not sure where to start and what to pay.
You need to pay off the cards with the highest interest rate first. Pick one of the ones with 26.99% interest and throw everything you can muster at that, whilst paying the minimum on the others. Then work your way down to the lower interest cards.
You said you have a card with 36% interest? Holy guacamole, I was so glad to see the balance was zero. This rate is financial suicide. Do NOT use this card at this rate. I didn't fully understand about how it was going to be used for your student loans, but you can't take credit at this rate, whatever its for , you can't afford it.
I would try to negotiate some patience from your family re their loans.. maybe just pay a small amount every month as a measure of good faith.
I fully support your notion of studying to better yourselves and hopeful get positions with a highly hourly rate. However I think you should consider deferring this until you have paid down your debt. You can't do everything, and I think an all out, "hair on fire" "your debt is an emergency" approach is needed. Both of you work as much as you can (keeping in mind you have a youngster to care for), and cut all expenses to the absolute bone and get that debt under control. The cut back to one job and go to school.
It is of concern that you were bankrupt in 2010 and now heading in that direction again. It sounds like you've been dealt a tricky hand of cards, but now you must show you can pull yourself up out of debt, even given difficult circumstances. This is essential for your self worth, but also your families future welfare.
Fully focus on getting rid of that debt. Question everything you spend. Read all the MMM posts and lots of forum posts...there are lots of frugal tips and tricks.
Good luck. You can do it. This forum will support you if you are prepared to put in the hard yards.
edit typo
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Do you have anything you can sell on craigslist? How about the baby stuff your kid grows out of? If you get more kids later on you can "rebuy" it on craigslist... At that point you will hopefully be able to buy it with money you saved for it and no debts. Right now its war on interest! Good luck!
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Second what others have said above -- your concept of Christmas has to change for this year and for the foreseeable future. Spend a quality day with your family over a nice at-home meal and be thankful for what you do have (and it sounds like having a healthy boy after losing an earlier child is a very big blessing to count), and forego the gifting and excessive decorations, including a tree if you have to.
Your income numbers are a bit nebulous -- how many hours does your wife work? How many do you work? A monthly income amount would be more helpful.
Also, why two cars? It sounds like you and your wife have complementary work schedules, so only one car should be needed for the work commute for both of you? First order of business should be dumping one of those. Save on maintenance and insurance. Use the proceeds to pay off whatever number of credit cards you can (starting with the highest interest rate card first).
Student loans -- you really need to look into forbearance. Sounds like you would easily meet requirements. Yes, interest will continue to accrue, but putting off those payments for a year will give you some breathing room to pay down those credit card debts with astronomical interest rates.
$150/month for a cell phone is ridiculous. Under contract or not, check the details of breaking that contract and what it will really cost you. The cost-benefit of breaking it may work in your favor if you can replace that contract with a lower-cost provider.
Call the hospital and ask to speak with someone about that bill. That is a paltry sum to them, but a princely sum to you at this juncture -- see if you can negotiate it down or have it forgiven entirely.
Drop the internet -- you cannot afford $55/month. Use your local library. Some day, when you are out of this mess, and maybe making more money, you can get the internet back.
And yes, sacrifice that food bill at least for a few months. $300/month isn't a lot for two people (you said your son is on WIC). If you can even pare it down to $225/month, that $75/month savings can pay off the Capital One card in just 3 months. Get creative, and don't buy any processed crap.
You are in dire straits -- you must hunker down and adopt a wartime mentality. And you can do so knowing that it will only be temporary.
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I recommend you put off the expense of online school until you're in a better financial position. Don't dig yourself deeper into debt (even if it allows you to defer your existing student loans).
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Welcome to the forums,
It sounds like you are carrying around a great weight, it takes a great deal of courage to make changes, this is a great first step.
You need to provide us with a few extra details - your net monthly income as well as your student loan amounts. You have a crushing amount of debt for your income, but you haven't mentioned how much your student loans actually are and there interest rates. Putting them on a CC with such a high interest rate is absolutely insane - unless you are just planning to charge off as much as you can and then go bankrupt again? (I'm not up on American bankruptcy laws)
You need to sit down and pull all the info into one place and set a clear budget that does not involve using your credit cards for anything. They should be cut up, or put on ice.
Unfortunately you might have to take some really drastic measures, is there anyone you can live with for a few months? A couple of months worth of rent would pay off a couple of your cards.
There are some good (but hard!) suggestion here already, but you need to come to an understanding that you are in a very serious position. It sounds like you are at the point where taking even one day off work because you are sick is not an option.
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If you are Mormon, can you get help from the church? My impression has always been that Mormons stick pretty tight as a community and help each other out a lot. There is a strong frugality vibe in the Mormon community as well, so if you can find some experienced frugal folks to mentor you it might help in terms of reducing household expenses (especially food costs).
Even if you are not a member of the Church you can go to your local Bishop and request temporary help with food. The Church is willing and has the resources to help people with food orders. He will also be able to refer you to the Ward/Stake employment specialist. They should be able to help you find a second part time job. I would think there are many seasonal positions out there right now.
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You may not be eligible since your employer offers coverage, but it's possible you could get much cheaper health insurance on the Obamacare exchange. For a family of 3 making 33,000 a year in Salt Lake county with 2 35 year old parents you could get a high deductible policy for free. But you would need to be aware that the deductible is very high, so there would be a big out of pocket component if you had a hospitalization or something.
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The OP cannot file bankruptcy again for several years. The student loans are probably not bankruptable. Putting them on a credit card now is not a good idea, but I can see the point of that if the OP ends up filing again. Can they be put in forbearance or on some kind of income based repayment plan?
School is not the answer right now. When you can afford to cash flow school, that's when you can go back. Cutting everything out that can be cut is the best place to start. Negotiating with the hospital is a good idea, don't take the first "no" for an answer. There is someone in the payment department that deals with your situation and will have the authority to write this off.
Dave Ramsey works well for folks in the OP's situation. Check the Total Money Makeover out of the library and read it carefully. Throw every extra cent at the debt. It will take time, but you can work your way through this.
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I've been using the dave ramsey my total money makeover website to keep track of all my debts (over $120,000 worth on a small income) and it helps relive a lot of the stress by giving you a date at which you would pay off each debt if you put so much money on a given debt when. It's kind of confusing to figure out but I'd be happy to help you, just let me know if you want some help. Here's the free tool - https://www.mytotalmoneymakeover.com/index.cfm?event=debtsnowball
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Thank you all for the solid advice. Each and everyone of you.
It was very humbling to put all this information down on this forum. I get paid $654 net pay usually. My wife gets paid $800 a month at her job. I work 40 hours a week and she gets around 25-28 hours a week. I just find out that if I sign up for the wellness program through my company they will reduce my health insurance withdrawal by $46 dollars. I would like to look into the healthcare exchange with the new healthcare laws. I thought I didn't qualify because I work full time and my job offers health insurance.
Sadly school can't be delayed. If I didn't go to school Sallie Mae would be calling and would want a payment of $300-$600 a month and probably more. Sallie Mae would want money from my wife as well for her school loans. When I enroll into school I will have to pay my past due balance and have the rest deferred until I graduate. I do have some college credit though. I went to ITT Tech for a year. Not the greatest school by the way. The quality of education they portray is not really there. I owe a lot of money on student loans. $40,000.
We tried to refinance our car loan through our credit union. They said no because we owe more money than it's worth. We were a $1,500 away from it too. I should have NEVER believed the car dealership finance guy after he said "just refinance a year from now and make your payments on time you will get a better interest rate and a reduced monthly amount". Yeah not true!!! we can't sell this car because Capital One still owns it.
The reason we had to sign up for this stupid car loan was because the engine died in our old Mazda Protege. We almost paid off the car loan too. The repairs was a lot more than it was worth. We couldn't borrow a car from anyone either.
We can't get rid of T-Mobile because we have to finish the term of our contracts or pay $200 early termination fee and pay for our smartphones outright. I would love one day to sign up for Ting. Just like Mr. Money Mustache did. One day I will.
We can't drop the Internet at all either. We both depend on it for our schooling needs. I think the library only gives you an hour or two hour limit. I wish their were more Internet providers in my state. I only have Centurylink which provides DSL and Comcast. I wish Google Fiber would cover my city so both companies would be forced to compete.
A second part-time job does make the most sense to me. I just came up with a plan. I'm studying for a Bachelor's degree in Computer Science. I plan on researching and when I find a good website that will teach me computer programming (for free of course) I will use that knowledge to make money for my family.
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We can't get rid of T-Mobile because we have to finish the term of our contracts or pay $200 early termination fee and pay for our smartphones outright. I would love one day to sign up for Ting. Just like Mr. Money Mustache did. One day I will.
It is almost surely worth eating the $200 ETF. On Ting, you'd probably be paying $30-40 a month for the two of you. Less if you're light users. That pays the ETF off in 2 months. Also, Ting is running a promo where they'll give you a credit of 25% of your ETF.
I understand though that even scraping together the $200 won't be easy. Since your credit is already awful and you absolutely cannot be borrowing any more money anyway though, I would not be opposed to (temporarily) stiffing T-Mobile in order to make that change in your monthly budget.
It might change a bit though if you used their thing to upgrade before your 2-year cycle and owe them a loan on the phone in addition to the ETF.
Given the additional job details, you probably don't qualify for Obamacare, since your employer based insurance is not more than 9.5% of your household income.
Good luck out there man.
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School absolutely can be delayed. Putting off debt while racking up new ones is rarely going to be a sound strategy.
You guys are living WAY beyond your means. Two cars (one new(ish) totally upside down financed one), high speed internet, not one but TWO smartphones, and a bunch of maxed out credit cards.
If it were me, I'd swallow my pride and do these things in this order:
1) Move in with my parents, in-laws, or anywhere else that would take me (for free, or trade for chores). MONTHLY SAVINGS: $650
2) Default on the car loan and let Capital One repossess it. Your work schedules allow you to use one car, your credit is already fucked, and SLC is great for public transit. MONTHLY SAVINGS: $340
3) Take the savings from one month of no car note/rent and buyout your T-Mobile contract, including smartphones. Sell smartphones through gazelle.com or similar to recoup most of that cost. Get $10 plan through Ting or Republic. MONTHLY SAVINGS: $140
4) Negotiate with student loans, explaining your income and debt situation, and arrange a repayment plan you can handle. They want to work with you, because if you don't pay everyone loses. You need to get both your and your wife's payment totals to be 3-400 a month.
5) Take your take home pay (if I understood you correctly it's ~2k/month), minus expenses (~400/month [food, insurance, transportation]), and start SLAMMING IT against your debts, working down from the credit cards with the highest expenses to those with the lowest. You have ~$1800 in CC debt, which means in month 2 it'll all be gone. At that point you can start building an emergency fund, paying back family (slowly, I'd hope, after explaining your situation to them and asking for their patience and whether you can work it off a bit), and start to really feel more positive about your situation.
6) In your free time, you either need to be doing seasonal work, or learning a trade (your idea to work on computer skills online for free is an excellent one -- costs you nothing and can quickly get you marketable skills that'll help you up your earning power).
7) Hug your wife and son, because with ONE YEAR of living like this you'll have your debts under control enough to consider looking for a place to live on your own again.
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A second part-time job does make the most sense to me. I just came up with a plan. I'm studying for a Bachelor's degree in Computer Science. I plan on researching and when I find a good website that will teach me computer programming (for free of course) I will use that knowledge to make money for my family.
Check out this article if you haven't seen it yet:
http://www.mrmoneymustache.com/2013/02/07/interview-with-a-ceo-ridiculous-student-loans-vs-the-future-of-education/
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I completely agree with JT.
Make sure you don't go down the non-mustachian path of solely fousing on increased income.
Decreased spending is way more powerful in your situation!
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Firstly, to the OP, I deeply sympathize with your situation. It sounds like a tough pickle! But, luckily I think you've received some good advance, and with some hard work and determination I think you'll be able to pull out of it.
A second part-time job does make the most sense to me. I just came up with a plan. I'm studying for a Bachelor's degree in Computer Science. I plan on researching and when I find a good website that will teach me computer programming (for free of course) I will use that knowledge to make money for my family.
In regards to this statement, let me say that you do NOT need a degree of any nature to get a good job programming. You can learn for free, and get started in your spare time doing freelance work. Don't pay for an "education", they'll not teach you much of anything you'd actually need nor do real world employers really care about programming degrees... they care about self motivated, smart, people... you sound like you fit this bill!
Checkout:
http://rubykoans.com
http://www.khanacademy.org/cs/browse-programs
http://www.codecademy.com
Just to name 3!
2) Default on the car loan and let Capital One repossess it. Your work schedules allow you to use one car, your credit is already fucked, and SLC is great for public transit. MONTHLY SAVINGS: $340
Not to nit-pik, but this is HORRIBLE advice. If he's upside down on the loan, then Cap One will NOT be able to auction off his car for what he owes... he'll end up without a car, and still OWEING the difference to Cap One... but, this time without the luxury of a monthly payment plan. Their debt collectors will want cash.
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2) Default on the car loan and let Capital One repossess it. Your work schedules allow you to use one car, your credit is already fucked, and SLC is great for public transit. MONTHLY SAVINGS: $340
Not to nit-pik, but this is HORRIBLE advice. If he's upside down on the loan, then Cap One will NOT be able to auction off his car for what he owes... he'll end up without a car, and still OWEING the difference to Cap One... but, this time without the luxury of a monthly payment plan. Their debt collectors will want cash.
You're entitled to your opinion, of course. You're just wrong. If you read, you see that he's upside down by about 1500 bucks. If debt collectors do want to come after him for the difference, he'll be able to negotiate a settlement for a fraction, and by the time that all takes place (following my plan) he'll be in a position to pay them off. Who cares if they want cash? I want a solid gold handgun like Nic Cage in Face/Off. Life's full of disappointments.
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You're entitled to your opinion, of course. You're just wrong. If you read, you see that he's upside down by about 1500 bucks.
My bad, you are correct. I missed where he said he was only $1,500 inside down. I still don't think intentionally defaulting is the correct answer, but your suggestion does seem to hold water. My apologies.
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You're entitled to your opinion, of course. You're just wrong. If you read, you see that he's upside down by about 1500 bucks.
My bad, you are correct. I missed where he said he was only $1,500 inside down. I still don't think intentionally defaulting is the correct answer, but your suggestion does seem to hold water. My apologies.
There are rare instances where I'd actually recommend defaulting on a loan. This just happens to be one of them. 99/100 there's a better way, which I think we're in agreement on.
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Sadly school can't be delayed. If I didn't go to school Sallie Mae would be calling and would want a payment of $300-$600 a month and probably more. Sallie Mae would want money from my wife as well for her school loans.
You almost definitely qualify for Income Based Repayments which would be little to none on your income with a small child. It does not make ANY sense to get into much more debt just to avoid making your current monthly payments. Ask about this before you do anything else....as in RIGHT NOW :)
This. Federal student loans have some of the most flexible options for forbearance and repayment. They want to see that money. I'm going to assume you've both already used your 3 years of forebearance (this is not deferment and does not require any justification other than, I don't want to/can't pay at this time; if you haven't please do this first). If so, I second the motion of looking into income based repayment. I put rough numbers based on what you've told us into the federal loan sites pay-as-you-earn calculator and your combined payment would be well under $50 on that plan. The website is here http://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn/calculator (http://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn/calculator).
Your really broad estimates (300 to 600 is a huge range), and references to possible calls makes me think you haven't talked to anyone at your loan servicers recently. My husband used to work at a large servicer of student loans, manning the phone/help lines. They literally have office buildings full of people to answer your questions, and they should be able to help you figure out the best option for you and know what you are eligible for, that is their job. They do not want to see you default. Please call, it cannot hurt you, and may provide some really helpful information.
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Everyone has already covered the basics.
I'm really sorry to hear of the loss of your first son. That is absolutely heartbreaking. Congrats on your eight month old little guy.
Christmas this year = no presents. Your son will not ever know the difference. If you want a photo of him opening a gift, take one of something that he got from a grandparent. Four years down the road no one will remember what he got. I promise. Even $25 saved right now is a huge deal for you guys. You and your wife can go a year without gifting anything to each other, and I bet that family members will understand and appreciate that you're not able to participate in gifts this year.
I agree that The Total Money Makeover sounds like a great fit for you guys. I have an extra copy, and will gladly send it your way if you'd like. It's a super fast, easy read, and will help TONS.
Listen to the folks here, even if their words sting. Make yourself accountable to keep coming back day after day, and be part of the community. Don't be like me and bury your head in the sand. That does no one any good, and two years from now you will be SO GLAD that you faced this head on. This is a really encouraging group of folks, and even if their advice feels harsh at first, they really do want the best for you.
I think that both you and your wife should consider taking the Spring semester off, and both work second jobs. Sell the Playstation or TV or whatever valuables you have. Sell the car, and if you really insist on having a second, get a beater for cheap. Really consider this a crisis, and gather as much money as you can ASAP.
Best wishes to you, and congratulations on putting it all out there. Take care.
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I totally agree with everything Norrie just said. Just wanted to add:
Is there any space to rent out in your house/apt? Or a parking spot even? Or a garage or just storage? Try to think of something creative to add a little more cash flow.
Have you read MMM's articles on 50 high paying jobs that don't require a degree? Those might give some ideas of how to bring in extra income as well. House sitting, walking dogs (you could take your son with you), stuff like that.
What about utilities? Any way to cut down? Can you stop using the dryer or raise the temperature on the fridge? Keep the heat lower and wear more clothes?
Again, this is a great community so please be encouraged by all the smart recommendations everyone has. We all just recently watched/helped a homeless guy get back into the job market. So much debt has been eliminated thanks to the wise insight of the Mustachians! Stick with it, it will literally pay off!
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"Sadly school can't be delayed. If I didn't go to school Sallie Mae would be calling and would want a payment of $300-$600 a month and probably more. Sallie Mae would want money from my wife as well for her school loans. When I enroll into school I will have to pay my past due balance and have the rest deferred until I graduate. I do have some college credit though. I went to ITT Tech for a year. Not the greatest school by the way. The quality of education they portray is not really there. I owe a lot of money on student loans. $40,000."
**Something doesn't add up with this. You say that you have "some college credit", but you have $40k in student loans? Did you rack up those student loans in that single year at ITT Tech?
First thing is you and your wife have to own this. In your posts there seems to be a lot of wishing, wanting other companies so there is competition for prices, and mostly vague details. I've been in your situation, and when I was in your situation I didn't have a clue about how money worked. You've been in this situation before having declared bankrupcy, and now a couple short years later you're back in the same situation with credit cards (albeit not a ton of debt). I'm really not trying to be mean here, but you HAVE to take ownership of your situation. If there was competition for internet providers in your area you'd still be in the same situation.
Cut up the credit cards. If you're anything like my wife and I were, you make the minimum payment and then just run the balance back up to the limit. They HAVE to go. Leave one not cut up for now but if you can't NOT use it, cut it up.
Call the place where you have your student loans. They can't take money you don't have. If you're not paying cash for school at this point (which it doesn't sound like you are), you're just making it worse. Put school on hold for now.
Make a way to get out of the cellphone bill. I know you want to be on Ting, but consider going without a phone. Smartphones are a luxury you can't afford. Cut internet also.
LEARN as much as you can about finances. Read everything you can. Mr Money Mustache has great stuff but don't stop there. Bogleheads.org, Dave Ramsey, etc are great resources - AND FREE. You have to understand WHY you are taking the steps you need to take, not just taking them because some people on a message board told you to.
My wife and I were in a VERY similar situation to yours 3-4 years ago. When we sat down for the first time and figured things out we were going in the hole $600-900 per month, getting calls constantly from credit cards we weren't capable of paying, had the gas company out to mark the curb where the gas would be shut off, etc... Yes, we shut off cell phones, cable, internet, sold a car - everything extra at that point. Remember this feeling though and vow never to return to it.
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We can't get rid of T-Mobile because we have to finish the term of our contracts or pay $200 early termination fee and pay for our smartphones outright. I would love one day to sign up for Ting. Just like Mr. Money Mustache did. One day I will.
We can't drop the Internet at all either. We both depend on it for our schooling needs. I think the library only gives you an hour or two hour limit. I wish their were more Internet providers in my state. I only have Centurylink which provides DSL and Comcast. I wish Google Fiber would cover my city so both companies would be forced to compete.
You can and you should buy out of your T-Mobile contract, and switch to Airvoice, Platinumtel or Spot Mobile... even if you have to do it one handset at a time, you should be able to easily halve that cell phone bill with no effort. If you keep your usage down low enough to switch to PAYG instead of a monthly plan, you could probably get your total bill well under $40/month. You're in debt emergency mode, abandon any and all data usage that isn't used to save money on texting, minimize texting, and make mobile voice communications count. You do that, you can probably get both phones under $15 a month combined through P'tel. As far as going to Ting, it's only going to make things even more expensive and complicated because they're a Sprint MVNO, which uses CDMA handsets (Sprint branded only, at that)... which means selling your T-Mobile handsets, buying replacement Sprint handsets and then switching. The GSM end of the MVNO spectrum has better deals anyway - get your handsets carrier unlocked and shop the GSM end.
Better still, if you're not adverse to selling your smartphones anyway... buy out the contracts, get the handsets carrier unlocked, sell them off to help subsidize the buy-out, and buy ultra-cheap feature phones instead (no more than $25 each) and still go with one of the GSM MVNOs I mentioned above. That'll take care of any data pit issues short term, and once you're shovelled out completely and can justify it, then revisit the idea of higher-end phones again.
I agree with the others as well, you do not need to be taking on more debt with school. There are other options to reduce/defer your student loans, take advantage of the income based repayment options and start knocking them out after the credit cards are taken care of. As a fellow in the IT industry, trust me when I tell you that papers behind your name don't mean much in tech because computer science degrees these days are the geek equivalent to the beautician degree. I know folks with a bachelor's in CS who couldn't code their way out of a wet paper sack. You want more pay? Be excellent at your job once you get your foot in the door and make yourself transparent in your workings (document everything) and indispensable. The bar is set pretty low by our colleagues, take advantage of it.
If you still insist on doing online degrees and won't disconnect the internet, just like with the cell phone advice, check out the first seven posts in the Communications Superguide (https://forum.mrmoneymustache.com/share-your-badassity/communications-tech-isps-voip-cell/). You can get that price lower.
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I think these are all really good points so far. And congrats on posting here, I think you have already made the most important step! It sounds to me like you are overwhelmed a bit, so I'd like to point out that your situation is not THAT bad. I think your biggest problem are those credit cards because of the HUGE interest rates. But the good part is that the balance is actually quite small....$1,800 approximately. Of course this is $1,800 you don't have, so it feels like a super big amount, but it's still very managable if you take some of the steps that have been suggested. I don't know much about student loans, hence I won't attempt to comment, but since the balance is 40k, you can't do much about it at the moment anyways...of course you shouldn't add to the balance at this point. Selling your car is a good idea I think, as is the idea of moving in with someone for free for a limited amount of time. Do you have any friends or family who could be of help? Also, just to throw it out there, those interest rates on the CCs are eating you alive....I know you have already borrowed money from family, but do you have any friends or other family who could lend you $1,800 to pay that off and give you a 0% interest rate and then pay them back over the next 24 months while you get your life back together? I have lent a good friend of mine who was in a very similiar situation to you around $2k and he is paying me back very gradually. It helped him out a lot and wasn't a big amount for me and definitely it helped him psychologically a lot as well as he didn't have to worry about that burden anymore and could focus on the rest of his financial and life situation.
Lastly, I am not sure if I am reading this correctly, but if I do, then it seems you said that your wife gets paid over $100 more than you a month even though she works 25-28 hours and you work 40 hours. If this is correct, then wouldn't it make sense for your wife to work 40 hours and you to work fewer hours so that you could increase your monthly combined income? Or if you have family nearby who can watch your son during the day, maybe you could both work full time at least for 6 months or so?
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I want to echo the people who have advised you not to go back to school. Going back because you don't have the means to start repaying the loans is just pushing the problem farther down the road. As another commenter suggested, call and explain the situation to the loan people. I guarantee they have had callers in the same situation. I guarantee they will have suggestions as to how to make it manageable. Running up further debt just to postpone this debt will cause greater problems, not get you out from under problems.
I am also suspicious of the programs you've enrolled in. There are a ton of online scam educators out there. Are your programs from a public university, for example the University of [State name]? There are very few reputable online private universities. Of course they will all tell you they're reputable. But employers know different, and some of them can actually hurt your chances when employers see those sames on your resumé.
Whether or not you're chosen a reputable program, college would be costing double at this point -- the amount you pay, plus the amount you use because you can't spend that time working for money. Put that off till later.
I commend you for coming here and being brave enough to ask for advice. I'm confident you can work your way out of this situation.
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Congratulations on making the first step and asking for advice. And a BIG congratulations on your healthy young son!! :-)
Listen to the advice above, everyone really knows what they're talking about, and they all mean well even if it comes across as harsh sometimes.
Cut up the credit cards, see if you can move in with someone- even if its just until the credit cards are paid off, it'll make a big difference. Talk to your student loan provider. Seek social welfare assistance, can you get any accommodation benefits, food stamps, a grant from Red Cross? Leave the study until your credit cards are paid off, and you have a good emergency fund available. Christmas- sounds like you have extensive family- can you spend the day with them? Make home made cards, and no presents. Your family will understand and your son won't remember. Reduce your spending as much as possible- every dollar counts!! Can you earn any more money walking dogs, getting a paper round anything?
You can do this, you just have to ask the right people for assistance and COMMIT to getting debt free. Good luck!
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Here is what Ive noticed in the OPs posts: the "have-to"s that arent really HAVE TOs.
the OP did NOT have to buy a new car. even if the old car broke down irreparably, no one held a gun to the OPs head and mad him buy a car for 13K or whatever the amount was.
there are ALMOST ALWAYS options. could have bought a used car. could have bought a scooter. could have used public transportation. could have moved closer to job and biked or walked.
it sounds like the OP has not really truly examined each problem and checked out the options. Have to go back to school. Have to stay with Tmobile. Have to have Christmas.
Most responders have offered many options for each issue, credit card, student loans, rent, presents, phones, etc.
Now the OP has to do the work of calling the lenders, doing the online calculators, etc. and the legwork of making this work.
Not sure how you figured the value of your car with the loan, but you can take it to carmax and see what they offer. You could try to sell it on craigslist and see if you can get what you owe on it.
Make a very detailed list of everything you spend money on and devote some time and energy on each line item and reduce each expense to its minimum.
Without knowing EXACTLY what the REAL options are, it is easy to bamboozle yourself into bad choices like car loans, student loans, etc.
I agree that the OP and spouse must take Ownership and vow to get out of this and not return.
Getting some wins under your belt will help build some momentum and positivity.
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Congratulations on posting your situation here. Taking ownership is a great first step. There is great advice here so I won't repeat it, but I will second the notion that you need to change some of your thinking. Question all of your assumptions, the 'have tos' probably aren't, hoping for competition doesn't help.
But really, call Sallie Mae, call the hospital, call T Mobile. Put a little bit of effort and you'll be surprised. The 'that is the way it is' is also an assumption that you should question.
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First time poster here – discovered MMM last spring and have been a devoted reader ever since. Finally jumping into the discussion, so hi everyone!
THE GOOD:
-you have a wife you love and a beautiful healthy baby
-you’re renting in a low-cost city and thus don’t have any home-related debts
-you and your wife both have steady jobs
-you have family members who have generously helped you out in your times of need
-you’ve eliminated childcare expenses by arranging your and your wife’s work schedules accordingly
-you’ve avoided money drains like cable and have kept most expenses at a reasonably low level
-you own one fully paid off, serviceable car
-you are young, healthy, and have your whole lives ahead of you
THE BAD:
-you’ve had to go through some terrible experiences in the past, including losing your first child, having fertility struggles, and going through extended unemployment in a bad economy.
-it also must be said that you’ve made some poor choices and have not yet taken full ownership of them (Tmobile smart phones, $40k in “student debts” without a degree, credit cards) (FACE PUNCHING COMMENCE HERE)
-you and your wife don’t have very high earning potential at your present skill/education level
First, heartfelt condolences for the loss of your first child. No one should have to go through that.
Second, congrats on taking the all important first step of coming here and seeking help. YOU CAN DO THIS!! No, it won’t be easy, but it also won’t be nearly as hard as some of the life struggles you’ve already had to go through. You seem (understandably) a bit overwhelmed by your situation, and some of the commenters’ suggestions, which to you may seem impossible right now. News flash: they’re not impossible, and your situation isn’t even all that bad. With some fairly modest changes (even letting you stay in your current apartment, and keeping your internet!), you can get on top of this mess and start down the path to financial security (and then independence). I don’t purport to be an expert on any of this, so other more experienced commenters will probably be able to improve on some of this, but I thought you might appreciate step-by-step instructions for things you can do RIGHT NOW to begin the process of getting back on your feet. And apologies for the repetition with prior posts, many of which cover these topics. Here goes:
1. Withdraw from online courses. While I understand your motivation here (to avoid going into repayment on the student loans), all the commenters are right on this one: taking on additional debt right now (not to mention the drain on your time and energy) makes matters worse, not better. Withdraw both you and your wife from all online education programs immediately, or as soon as the online institutions will allow you. Even holding off on this for one year will put your family on much better financial footing, as you’ll see below.
2. Cancel cell phone plan and switch to low cost prepaid plan. Call Tmobile and explain that you simply can’t afford to continue with the plan and request that they cancel your contract and waive the cancellation fees. It may be painful, but if necessary bring up the loss of your first child and related medical bills/debts. Ask to talk to a manager if all this falls on deaf ears. Regarding the smart phones, ask if they will waive the cost if you return both phones to Tmobile, or try to negotiate a lower cost than sticker value. Again, emphasize the unforeseen medical, family, and unemployment ordeals and resulting personal hardship. Even if none of this works, go through with cancelling and accept the charges. At the staggering cost of $150/month for the remainder of the term, it will be worth it in the long run. If they make you pay for the smart phones, do so and sell them online to make back at least part of the cost. Obtain cheap or free entry level cell phones (not smart phones) online or friends/family members ASAP, and sign up for a low-cost prepaid plan (see MMM’s posts on this) for about $10 each. Reduce cell phone usage to bare minimum necessary.
3. Negotiate payment schedule/plan with student loan providers. Call Sallie Mae and any other student loan providers and explain your financial situation (new baby at home, remaining medical bills and loans from prior medical issues and loss of first child, previous unemployment, both parents now working but unable to make enough money to meet student loan payment, etc.). Ask if they will defer repayment for a year (or 6 mos, or 3 mos…whatever you can get) while you get back on your feet. Many loans have hardship provisions that allow the loan providers to defer repayment or accept much less than the monthly payment otherwise required. Take advantage of this option.
4. Address $12k car loan/become a 1-car family. I’m no expert on how car loans work, but the expensive car/$12k car loan has got to go. It seems like a first step is contacting the lender/dealership to explain that you can’t afford the car anymore and will have to default if you can’t work something out. Though it might be unpleasant, defaulting and repossession may be the best option, with the expectation that (as pointed out by others) if/when the car company goes after you for the difference in value, you’ll be able to negotiate a payment you can afford (and in any event, you’ll have bought yourself at least several months to a year of time, during which you will have significantly improved your financial situation – keep reading).
5. Sell extra possessions for cash. Go through your home and identify anything you own that is not absolutely necessary. Playstation was suggested by someone else. DVD player? Computers? Furniture items? Christmas decorations (these are popular Craigslist items this time of year!)? Coats/clothes/outgrown baby items? Post stuff for sale on Craigslist (read this first: http://www.mrmoneymustache.com/2011/08/11/get-rich-with-craigslist/) and/or hold a garage sale or find local consignment or thrift shops that might buy these items from you. Every $5 or $10 counts (http://www.mrmoneymustache.com/2011/08/01/a-millionaire-is-made-ten-bucks-at-a-time/).
6. Increase income. Advertise your services on church or community bulletin boars and/or Craigslist. Whether it’s babysitting, mechanic work, computer tutorials, helping people move, helping elderly folks with household chores/grocery shopping/driving to appointments, doing yard work/odd jobs, even house cleaning – swallow your pride and take whatever extra work you can get for cash. Your wife should see if she can add a few more hours of work to her schedule each week (to the extent your child care schedule can handle that), and if not, should figure out a way to earn just a little bit more money each month through the above suggestions (or perhaps she has other skills to employ).
7. Ask for help from family/friends/church/community. If you’re part of a church (or possibly even if not, per others’ comments), ask someone there for help. Whether it’s in the form of food/meals, free babysitting while you and your wife try to pick up some extra hours of work every week, part-time employment from parishioners who need help with odd jobs, someone lending you their car when you need a second car for errands, etc., every little bit helps.
8. Skip Christmas gifts/expenses this year. (Duh.) Explain to family and friends that you’re working hard to pay down debts and won’t be doing presents this year (opt out of any family gift exchanges, secret santa exchanges, etc.), and instead would just like to celebrate the holidays by spending time together, playing games, baking goodies, etc. As everyone has pointed out, your infant son won’t know the difference, and the family members to whom you owe money will probably appreciate that you’re buckling down financially. Suggest that you and your wife exchange cards only, or give each other coupons for your services (like free massage, DVD date night, 1 month of bathroom cleaning duty, etc.). Recommended MMM posts on this: http://www.mrmoneymustache.com/2011/08/03/mrs-money-mustache-receives-many-gifts-for-her-birthday/, http://www.mrmoneymustache.com/2013/11/28/8740/.
9. Liquidate savings account. Take the $120 in your savings account and close the account if any fees are involved (which very well may be the case since many banks charge fees if account balances are below a minimum amount, like $500). You’ll return to savings (and investing) after you address your blazing Debt Emergency.
10. Cut out all extras. Embrace this next chapter in your life as a challenge and accept that it will require sacrifices, but in the end will give you and your family your life back and hope for your future. No holiday cards (send out an email instead). No road trips or vacations, and minimize driving in your day to day life. Definitely no new electronics, home furnishings, or clothes. No eating out, skiing, movies, professional sporting events or other activities that cost money. No Netflix or iTunes. Schedule game nights and free outdoor activities instead, and enjoy what time you do have together doing fun, free things as a family. Follow all MMM’s advice about grocery shopping on a budget, biking more, reducing your electric bill by turning down your thermostat and hanging clothes to dry, etc.
11. Use all leftover money each month to pay off loans as quickly as possible. Based on the info you’ve provided, by my calculations your family earns about $2,500 gross (before taxes, health insurance, etc.) per month. Assuming you adopt MMM-like behavior even only in moderate amounts, you should be able to get your expenses down from what I calculate as over $1,600 (not counting loan payments) to about $1,400, leaving about $900 in excess money per month (I admit I may be missing some expenses, but it seems you covered the key ones in your posts; chances are any left out categories are non-essential and can be cut or seriously reduced). First off, take the $120 from your savings account and use it RIGHT NOW to partially pay off the U. of Utah hospital bill.
-MONTH 1: After just one month of even low levels of badassity (including at least some of the above cost-savings measures), you should have AT LEAST $1,000 (over $900 of income left after paying non-debt expenses, plus over $200 of cost savings from reducing expenses, not to mention the possibility of several hundred MORE dollars a month from increased income through a few hours of additional work each week). Conservatively assuming you only have $1,000 available after the first month (to account for possibly having to pay Tmobile something, or being slow to make the recommended changes, or additional expenses you haven’t provided to us), do the following: (1) pay off the remaining hospital bill (about $100) just to get that one off the books (2) pay off your wife’s paypal credit card in full (which will be about $400 by that point); (3) pay off your paypal credit card in full (about $375 by then); and (4) make the minimum payments on all the other credit cards (totaling less than $100). So after Month 1 alone, you’ll get a much needed emotional boost from crossing THREE debts off your list entirely. (Do not pay anything toward the car loan.)
-MONTH 2: again conservatively assuming $1,000 available after covering basic expenses, do this: (1) pay off your Best Buy Mastercard in full (about $355 by then); (2) pay off your wife’s Capital One card in full (about $240 by then); and pay off $500 of your Capital One card (of the approximately $1,060 that will be owed at that point). Again, do not pay anything on the car loan.
-MONTH 3: again assuming $1,000 available (but you can probably do much better if you follow MMM’s advice): (1) pay off the remaining balance on your Capitol One card in full (should be about $700 by then). ALL CREDIT CARDS THUS CAN BE PAID OFF IN 3 MONTHS OR LESS!
This is just a start, and then you’ll have to tackle the $40k+ in student loans and the family loans (here’s to hoping your family members are understanding and willing to push repayment back for a little while!), but it’s amazing what you can accomplish in only a few months if you follow the wisdom on MMM and this forum. DON’T BE PARALYZED BY FEAR/UNCERTAINTY. Undertake at least some of these measures as soon as you can and you’ll be well on your way to a much better life. Next thing you know, you and your wife will be plotting your early retirement like many others on here ;) Good luck, and don’t forget to report back on your progress/ victories/ hiccups along the way! Though folks can be a bit brutal with their honesty on here, remember everyone’s trying to help and we’re all rooting for you. You can do this!
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There are some incredibly helpful posts here! CloserToFree's post right above mine hit it all.
So I don't have anything new to contribute at this moment, but please, please, please, PLEASE do NOT continue with your online degrees. You cannot afford them and online degrees aren't very reputable right now, regardless of where they come from (and ESPECIALLY if it says "online" on the actual degree, as many will). But the most important reason is that YOU CANNOT AFFORD THEM.
Your second post makes me think that you aren't really serious about making lifestyle changes, and you're going to need lots of those to make any progress.
edited typo--whoopsie
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I'm so sorry about your loss and your fertility struggles. IVF mom here, so though our journeys have been different I can perhaps relate to some of the emotions involved in struggling to grow a family.
Please add me to the group saying you don't need that second car. I'm a lot less anti-car than true Mustachians, and I don't know enough about your circumstances to know -- maybe with a little one at home and two shifts of work and not knowing where you live or work (length of commutes and such) you really do need two cars (though probably not. But maybe.). But you don't need a car that costs $12K (or more). Sell it and buy an old Toyota (if anything). (Not the Mustachian, I don't think he's for sale -- there's someone on these boards who posts using that handle. But a car!).
Find the money to get rid of your T-Mobile contracts, and do. It's not hard to do the math and see that paying a bit to get out of those contracts will save money in the very near future.
Don't go back to school now, for the reasons others have mentioned.
In the very short run, could you or your wife pick up some extra holiday work (at a retailer or UPS, for example)? It would be short-term, but even a few extra bucks could help, and it being short-term makes things like nutty shifts more tolerable.
When you write ...
Also we have Christmas coming up and we are not sure on how we are going to pay for Christmas.
... um, what does Christmas cost? That's a serious question, there may be norms or expectations in your family that you feel obliged to meet, or you may want to travel to be with family, which isn't crazy. But forego buying presents for your immediate family (including your son -- as others have said, Christmas holds no expectations for him at this age), and don't do any decorating that involves expenditures (like buying a tree).
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You have gotten a lot of great suggestions. I understand if you're feeling overwhelmed. How about everyday you have to post two things you did that day to either to increase your income or decrease your spending. we will be here to cheer you on and give advice. At the end of december you could post a new budget with the changes.
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Both my wife and I are online students (with very reputable schools). I will start soon but two companies have been calling everyday to receive payment UHEAA and Sallie Mae.
Many have already pointed out, going to school to avoid paying on current loans will only worsen your situation. If you are getting collection calls, you should know your rights when dealing with collection agencies. Of course, you'll still need to re-pay your debt but you can limit communication with them. Most importantly, don't take on new expenses/debt by going to school to avoid getting calls or having to repay now.
http://www.consumer.ftc.gov/articles/0149-debt-collection
http://www.consumerfinance.gov/askcfpb/1405/how-can-i-stop-debt-collectors-contacting-me.html
I hope that you'll come back and update. Good luck!
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Massive face punch coming your way. Not because I want to but because based on your situation my gut feeling tells me only an enormous face punch might be able to turn you around.
I agree with what has been said here before. You two have been living WAY above your means and need to come to a screeching halt right now. Not next week, not tomorrow - immediately. The new car was a massively STUPID decision. Get rid of it, there's been some hints on how to achieve that with minimal financial punishment here. Get rid of your $150 T-Mobile plan - you are in no way in a situation that would justify the possession and use of two new smart phones - deal with it. Personally, I'm not a big fan of moving back in with my parents, mostly because as much as I do love them I would probably start looking into buying cheap used rusty chainsaws after a couple of weeks. If you think you can handle it - do it right now.
The bottom line is you've already declared bancruptcy once before and you're on the best way to experience it all over again. And again. And again.
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on student loans, there is DEFERMENT and FORBEARANCE:
Deferment - is when they postpone payments while you are at school
and
Forbearance - is when you are in financial hardship and cannot afford to make payments, they postpone it up to a year.
you might want to ask for Forbearance since you definitely will qualify, and will be a huge relief even for just a year.
Tmobile now have scrapped the contracts. call them and they will switch you to the new plan, all you have to do is pay $30 to change it. $30 is so worth it knowing that you are not stuck with them for the next 2 years.
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I totally agree. People convince themselves too easily that they NEED a second car when they could take public transportation, bike or have a scooter.
Would you rather have the "inconvenience" of public transportation and eliminate 12k of debt or do you prefer to keep on sinking?
UTA Pass and ditch the car. yes, I know exactly how much of a pain it is to get all the way across the valley on UTA especially early the morning (or on a Sunday). Do it. or have one person drop the other off at work.
Food - NPS Store. 1600 Empire Rd (Redwood Rd at 17th south) seconds/about to expire. Amazing deals. Check everything closely before you buy but great savings.
Utah Food coop. I miss this place. (www.utahcoop.org) I was checking prices for a while and they consistently run 30-40% BELOW walmart. They accept SNAP benefits, etc. Really good food!
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Thanks for sharing your story. You are seriously not in bad shape if you can make just a couple key changes. Your debt burden is small, and you're young. You can fix this easily before it gets worse. If I were in your situation, I would (1) put a pause on the schooling, and (2) change apartments so at least one of you can walk to work and you can be a one-car family.
Regarding (1): taking on more student loan debt because you can't afford your existing student loan debt is just about the most irrational thing I've ever read on this forum. Seriously, dude, you gotta let go of the idea that more debt is going to solve your problems. Debt *is* the problem. Once you kill your debt, you will be on your way to financial security in no time.
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Just wanted to throw in a point that may or may not have been made already. I'm not sure what field you are in, but it may make sense to look around for another field that may work out better for you in the long run. I mention this because I work in a manufacturing-associated job.... it is hard to get on day shift when you start (which may actually work out better for you, since you and your wife split child-care duties), but my company offers the option for quite a bit of overtime work (time and a half to double time) also offers tuition reimbursement credits. If you don't have the option for these sorts of benefits where you are now, it may make sense to look around for a career/job/field that is better aligned with your long-term interests. If you can get started at a company that offers good benefits, even if it's not your dream job, you may be able to work your way up and take classes and then eventually get into something more aligned with your interests.
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Thanks for sharing your story. You are seriously not in bad shape if you can make just a couple key changes. Your debt burden is small, and you're young.
I'm going to respectfully disagree. The key changes they need to make are big lifestyle changes. One car, zero frivolous spending, and cutting out school. So far, it doesn't sound like OP is on board with those.
Their debt burden is huge relative to income and expenses. 12K car + 40K student + 8K family + 2K credit cards = 62K. The interest rates are insane.
They are in bad shape and this isn't going to be fixed overnight or even in 3 months. I"m all for encouragement, but no one should sugarcoat their situation.
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Agreed. There's no magic bullet, and a lot of hard work ahead if they want to avoid another bankruptcy.
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Agreed. There's no magic bullet, and a lot of hard work ahead if they want to avoid another bankruptcy.
Even worse, it's very difficult to discharge student loans through bankruptcy. The OP should research this very carefully. Most of this debt is owed to family or student loans--bankruptcy won't help.
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You've had some fantastic financial advice on here and I can't really add to it as I'm a beginner myself. I couldn't read though and not say that I'm so sorry for the loss of your first beautiful boy, I can't imagine any pain greater.
I understand that you'd like to make baby's first Christmas special for your gorgeous eight month old (we have one of those too, lots of fun!) How about something simple like making a Christmas ornament with his name on it and then buying or making one small toy for him to enjoy? I'm sure your friends and family would understand if you asked to skip the gifts for them this year and just spent some time together instead. I LOVE Christmas but we're being incredibly frugal this year so that we don't start the new year with a financial hangover. It sounds cheesy I know, but the festive period really is about spending time with the people you love, the rest is just trimming.
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So much solid advice here, and I won't bother repeating it.
Something that I don't think has been mentioned is WIC. See if you qualify. That would help offset much of your food costs. For a family of 3 in Utah, the qualifying income level is no more than $36,131 per year (gross). So depending on exactly how many hours your wife works, it seems like you are at least close to qualifying. Definitely worth looking into.
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The kid already is on WIC, see first post.
Anyone else got the feeling that we lost the OP?
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Anyone else got the feeling that we lost the OP?
Yup.
LOL too much good advice?
Atourlimit - we'd love to hear back from you.
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Anyone else got the feeling that we lost the OP?
Yup.
LOL too much good advice?
Atourlimit - we'd love to hear back from you.
Yes, please! I hope we didn't scare you away D: Posters here can get a little excited sometimes when there's a pretty clear-cut path to better financial efficiency (and that's one of the reasons I adore this community).
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Anyone else got the feeling that we lost the OP?
Maybe he awesomely cut his internet access and is excitedly drafting his progress report on paper while he waits for the library to open!
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Haha,
It's like the movie "what about Bob?'. Us in the community being Bill Murray and the OP being Dreyfuss :-)
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I'm back!!!!
Nope still have Internet access at my house. I love "What about Bob"!. It's a great movie.
My wife and I buckled down with us going out to eat. We paid off a credit card!! Woohoo!! It was the Capital One at $192 dollars. We are also finally caught up with our bills.
I got rear ended twice at drive through at Dairy Queen. By the way it was a gift card that we completely forgot about. We found that Dairy Queen gift card and I went to get the food while my wife stayed home with our son.
Anyways, long story short. We exchanged information, police came, found the other driver at fault. I talked to her insurance, went to a body shop, mostly scratches on my bumper and for some reason I think it might be loose but not sure. I never have tried to wiggle it before this happened.
The good news is I will be getting a check for $740 from the other's driver insurance company!! WOOHOO!!! It will be in my name too. The estimator told me I can do what I want with it.
But I'm not sure how I should use it. I'm looking for some good ideas.
As you know my wife and I have two vehicles. 2008 Mazda Tribute and a 1996 Ford Taurus, The Ford needs a new windshield. The cheapest I found was for $130 before taxes. I already have been pulled over for it. But the police officer just gave me a warning. Also the Mazda needs an oil change and I will be buying a $30 part for the heat in the car. The heat only works at the highest fan speed.
Since all of our bills are caught up. We plan on using my next paycheck to pay off our Best Buy credit card. We owe $300 dollars. My wife wants to pay off the smallest Paypal balance.
Just looking for some good solid advice on what to do with the $740 we will be getting. I wanted to ask everyone here before I get the check.
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The $740 should be viewed as an unexpected windfall. I would use it to pay down the debts with the highest interest.
If the heat only works on the highest fan speed, so be it....if its freezing well you have heat. If it gets too hot, then turn it on and off. Doesn't need to be fixed with your debt emergency.
The oil change and the windscreen I would consider part of routine expenses...try to pay for them out of your regular budget. Just put the $740 against the debt and pretend you never got it. If you start thinking about how you could spend it, you'll come up with plenty of "essential" ideas and it'll be gone before you know it.
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You mentioned that your wife's mother manages your emergency fund, and that you have $120 left in it, but that you had $2,000 in there at one point. I would put the $740 windfall back in to that emergency fund, so that you can build up a $1,000 mini-emergency fund, like Dave Ramsey recommends.
You have a lot of good advice here. Keep us posted on your progress!
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First of all, my congratulations on your healthy baby, and my deepest condolences for the hardships you've gone through. What a heartbreak.
Now, allow me to be direct: I'm very curious about how you are taking advice here. Did you call your lender to get your student loans put in forbearance or on an income-based payment plan? Did you cancel your and your wife's school enrollment for next year? I cannot encourage you enough to do at least this, of all of the great and indispensable advice that has been given here.
I also hope you're cutting/cancelling your cards as you're paying them off, since it sounds like you do have way too many of them, with ridiculous rates. Start with the scammy First Premier, that rate is bloody murder! Glad to hear you paid one off since last time, though--well done.
Now, with this $740, if I were you I would:
- pay off both Paypal credit cards (your highest rates): that should take about $600, depending on how much you've paid on them since last time. Then I would cancel both cards.
I would put the remaining money towards the windshield if and only if you cannot find it in your regular budget. You can find the $$ for an oil change, however, no excuses on that. Look for coupons, these are around all the time.
If, as happy suggested, you CAN find the money in your normal budget, then I would put that money towards the BestBuy card, NOT towards your emergency fund. If you run into trouble, you can use the card again, and you're in no worse a position than if you had never tried to pay down your debt.
But please, also be so nice as to answer all the people who have made such an effort to advise with your overall situation rather than just the immediate little windfall...
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I agree: the $740 goes to the Paypal credit cards. Their interest rate is 26.99%! If you fix your heater with that money, you are in effect paying 26.99% on that heater cost. That's not just a hair-on-fire interest rate, it's a whole-body-on-fire-about-to-be-reduced-to-ashes interest rate. Until you've paid off all those high-interest credit cards, everything else comes second -- heaters, windshields, emergency fund. Otherwise those interest rates are eating you alive. Those debts will go on and on and on unless you throw everything you have at them. Sell unneeded stuff around the house, do everything you can, kill those debts.
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First of all, my congratulations on your healthy baby, and my deepest condolences for the hardships you've gone through. What a heartbreak.
Now, allow me to be direct: I'm very curious about how you are taking advice here. Did you call your lender to get your student loans put in forbearance or on an income-based payment plan? Did you cancel your and your wife's school enrollment for next year? I cannot encourage you enough to do at least this, of all of the great and indispensable advice that has been given here.
I also hope you're cutting/cancelling your cards as you're paying them off, since it sounds like you do have way too many of them, with ridiculous rates. Start with the scammy First Premier, that rate is bloody murder! Glad to hear you paid one off since last time, though--well done.
I really agree with this whole post, including the condolences and congrats.
But especially the First Premier card. Even if never used, the fees to keep it open are robbery. Please pay any fees owed and close this card. (Once closed, definitely keep checking to make sure they didn't somehow "keep charging" fees. This company sucks.)
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Hello fellow Utahn! Just thought I'd pop in with my .02. Lots of good advice, and I'm glad you are considering it. Once upon a time we were broke college students. DH and I met and married in college. I had my first child right after graduation and the second 20 months later (side note advice-contraception!-Just because you've had trouble conceiving doesn't mean it will always be so). I understand a lot of the worry about things. Lucky for us, smart phones and internet hadn't been invented yet- so our needs were just the basics. We got through it and so can you, if you don't let your past decide your future. As I look back, I can see we had a couple things in our favor. Supportive family (not financially, but we knew we could move in the basement if times were hard. And though we weren't completely financially savvy, I guarded our credit like it was our most valuable possession.
Some things that stood out to me:
-Internet. I have Centurylink 12mbps (their fastest) and home basic phone and pay $50/mo. I would call and see if you can negotiate a lower rate, or get a slower speed. (Or as others have stated, quit it all together. If you're not in school right now, it can't be looked at as a need.)
-Housing. I agree it would be great to move in with family temporarily. If that's not possible, look into other options. For example, see if you could trade housing for caring for an elderly person in their home and driving them to doctor appointments. There is a huge need for this kind of help.
-School. I am a huge believer in education. But these days, you have to be smart about it. Online colleges (even Western Governors) are expensive and are often seen as lower quality. If you do want to finish your education, check out SLCC. They have extremely cheap tuition rates and offer evening/weekend/and yes, online courses. Talk to a counselor and find out exactly what you need so that you don't waste time and money. Apply for Federal Grants. We qualified our last year of school for these and they paid for tuition +. Don't take on new debt. Only take the classes you can afford.
-Cell phones- agree with previous posters. Pay the penalty and remove yourself from bondage.
-Job- Have you considered summer sales? If you are not shy and clean cut, get a summer job selling pest control or security systems in the southern states. (I'd go for pest control-easy sell). You could make more than you do in a year. Yes, separations are not ideal. But it is temporary to take care of your family.
Be open to moving away from your town or state. When we had a young family, my DH applied for a job in the midwest. It doubled our income and moved us to a lower COL area. We missed family, but we grew closer as a couple and a little family unit. Most Utahns wouldn't leave Utah for anything. Be open to opportunity.
-Have a master plan. What kind of career do you eventually want? How will you get there? Is there an "optimized" way? The ability to see the big picture is something that I believe separates the perpetually poor from the temporarily poor.
-Become thrift store shoppers and (weather permitting) yard sale shoppers. Check KSL.com, facebook yard sale sites, and freecycle for used baby items. It's insane how much people spend on their baby's clothing and furniture. Buy things you and your wife need there too. I have shopped at Goodwill (my personal favorite) for new IKEA dishes, clothing, books, etc.
-If you're an inactive mormon, consider getting active. The Bishop can help you get on your feet. If you're of another faith, seek help from your leader. It often takes a village...
Good luck!
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i'm getting the feeling that you somehow no longer feel the heat of the fire with your sudden windfall but that your longterm attitudes really haven't changed. No talk of selling cars-only fixing cars, and fixing problems that really don't exist like heaters that don't work perfectly. "Since our bills are all caught up"? If I had credit cards with crazy high interest rates I would never think"my bills are all caught up" You have the money for the required minimums, but you still haven't paid your bills from months ago which is why your ccard balances are maxed. I'm sure we define caught up very differently.
After our 20 k savings a year dh and I have close what you and your wife bring home and we don't think we can "afford" a 13,000 car note in our budget, (even though we woul pay only about 240 a month because we have a great credit score) and would never consider any cell phone other than a single burner we share for 7 bucks a month etc etc etc
You can either try to provide a stable secure home for your family-free of evictions, repos, bankruptcies and chaos in the future, or you can focus your worry on how to pay for Christmas next week. Your choice
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I'm sorry if I'm committing a faux pas, but another resource to check out is Michelle Singletary who writes the Color of Money column for the Washington Post. She has a weekly live chat where she answers lots of various questions about personal finances, and may even answer your question if you write in. She specializes in low-income families with high debt, and for decades has helped people in similar situations as yours. She was my financial advice guru before I graduated to ERE and Mr Money Mustache, and may be a good place for you to start.
Just a note, a lot of people on this website seem to be adamantly opposed to the "payoff your smallest balance credit card first" technique, and instead insist on the more mathematically sound advice of paying off the highest interest rate cards/loans first. But as you've seen already, you get a huge psychological boost by getting rid of a balance. You might want to continue with that path, getting rid of the small balances first to give yourself a sense of accomplishment, then use your confidence to tackle the larger problems.
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Everyone here says the same thing: pay off your debts from highest interest rate to lowest. They're right, but you need some techniques to show you how to do it.
1) Seek charity. Put aside any feelings of shame and go get food stamps. Get charity from your church. Go to food pantries. You are the people who all of these programs are intended for.
2) Get rid of the car. Visit creditboards.com and see if they can find a way to help you ditch the car without paying the difference between the value and what you owe.
3) Visit creditboards and see if they can find a way to reduce your CC debt.
4) Put an ad up on prosper; see if you can borrow at 10% to immediately pay off your 15%+ debt.
5) As you pay off the credit cards, cut them up. Once you have paid off a few, go to your local credit union and explain tour situation; show your track record of paying off your high interest cards and tell them that you need a low interest card to hold for emergencies. Show them your dedication and you may find someone more able to help.
6) Put off going back to school. I suspect that part of the reason for wanting to go to school now might be the pain of working all day and then coming back to sleepless nights and projectile pooping. Unfortunately, you both need to keep working - even pick up a side shift manning registers for the holidays.
7) Grandma and great-grandma represent free day care. Use them. Never pay for daycare, you cant afford it.
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Any possibility you can move in with your parents or the inlaws for a few months? That is $650/mth and you can really start to stabilize some of that debt.
Either than repeating what others have said here... you need to find work with higher pay. See MMM post about 50k jobs. I'm not a huge believer expensive degrees for jobs beyond HS diploma/community college unless you are going for something professional (Engineer, Dr, Lawyer, Teacher, etc), or for just personal knowledge gain that is a different matter. I'm not speaking out of my ass as well... I think I've done fairly well for just graduating HS only.
For your current living expenses... a good start would be around 45k salary, or about $21/hr. That would allow some wiggle room and some savings. Again look at MMM post of 50k jobs (2 parts).
Take care a good luck!
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Wow really good advice. I just want to say big thank you to each and everyone that has responded to my post. I have read each one sometimes more than once and took notes on a lot of them.
I will give more details on our current financial situation. The $650 we pay every month for this house. It's the house my mother in law owns. So she has been very flexible in the past when we had to split rent or even skip a month of rent. But she told us she wants to move back in two years. So we plan on getting better financially before those two years are up. We still owe a lot of money on car loan too.
We can't have the car repo'd. When we move into a new apartment they will run our credit. Having a bankruptcy and a repo of your vehicle. Pretty much guarantees we won't be living in those apartments. I'm still researching on what to do with the car loan though. My wife and I both agreed that our next car will NOT have a loan attached to it. If I could go back in time. I would slap my younger self from not getting the car loan. But I'm not sure if we had a choice or not. The engine in the car was not fixable even from a master mechanic. We only had $200 in our bank account at that time. We were surprised we got approved for a car loan too from Capital One Auto Finance.
I turn 33 years old next April. I'm not getting any younger and I really want to go to school. My end goal is to be a computer programmer making $60,000 and above. Most help wanted ads I have seen requires both a degree and experience. Sadly I have nobody I can network with. Plus I don't have any experience doing any computer programming at the moment. I will be checking out MMM section on getting jobs that others have mentioned.
Thank you all again for the heartfelt messages regarding our first born son Andre. He would have turned two years old on November the 4th this year. Since losing Andre we have both become very paranoid parents plus the awful stories you hear on the news regarding child care workers. Yeah we don't plan on taking our son there until he's at least able to talk.
We have hardly any relatives that can watch our son for us. They live too far away from us and the ones that live close are too busy and my wife's grandparents are getting a bit old to watch our son.
But we do have a really good neighbor that we can trust. She is a stay at home mom and has five kids. She doesn't need to work. Her husband is a Actuary.
Plus both my wife and I don't want to miss our son's first words or his first walk. We missed that with Andre and we don't want to miss this a second time.
As I write this we have $100 in our bank account. We will be getting the car insurance check either tomorrow or Tuesday. My wife and I were discussing what to do with the check. My wife will be getting paid $200 on Friday the 20th. Yesterday I got pulled over and got a fix it ticket for my windshield. Later that day I paid the $130 out of paycheck to pay for it.
Our two cars need some work though. I have a slow air leak in my front right tire. I am hoping either Costco or Discount Tires will repair my tire for free or for a very low fee. The Mazda Tribute needs a new oil change and a new fuel filter. I can replace the fuel filter myself to save money. My Ford Taurus needs a new oil pan gasket. The gasket costs $20. But I will have to pay for new oil too. The cheapest rate from a mechanic is $125 to replace it on my Ford Taurus that includes the oil change. I can do this myself though but it will take me a longer time to do it.
Whew! With that said should I still pay off the highest interest credit cards first or do something else with the $740 my wife and I will be getting.
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About getting experience for a job-my younger brother got in trouble with the law for some "international wholesale agricultural trade"- In his late 30's did 2 year community college -got his experience by doing all computer work for free for a non profit (the rehab he ended up in) and worked nights as a nightwatchmen. He got turned down from a few jobs after the background check turned up a felony, Glowing recommendation from his teachers, the non profit, plus a guy who was a year ahead of him helped with first job. started low 40k and two years later is already low 50's. If you have any transferable credits this could be you in 18 months. If you don't have any credits that transfer to a brick and mortar community college you are probably wasting you time with the online degree.
BTW he is in Colorado-he would be an entrepenuer instead of a criminal today!
It is troubling that you see the best/only way out of the car loan as a repo!. Also troubling that you are still making excuses about the loan in the first place. If you got a car loan for the Mazda Tribute I am sure you could have also gotten a loan on a much cheaper car as well. How much could you get if you sell it? If you and your wife never overlap work schedules why do you insist on two cars?
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My end goal is to be a computer programmer making $60,000 and above. Most help wanted ads I have seen requires both a degree and experience. Sadly I have nobody I can network with. Plus I don't have any experience doing any computer programming at the moment.
Computer programing is a field where employers care less about degrees then proven skills - however it is also a field with stiff competition and you have to be that much better or have a piece of paper behind you - it is also all about networking.
There are TONS of websites and online communities that offer free or very cheap programming training that comes with built in network opportunities. Have you looked into any of these? There is also a lot of grunt work in programming. Have you looked into it enough to be sure that is what you want to do?
Your cars are quite literally eating you alive, I would not spend another cent on them until you figure out how to get down to one car. Having any car is a luxury, and you aren't in a position where you can afford to be a two car family. You mention your living situation is temporary - In two years you will have to have money for a deposit, moving expenses and so on. You NEED to build a secure future for your son NOW.
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Why in the fuck are you (a) driving both cars still, when you've never answered any of the questions about why you can't do what thousands of people in your area do and take public transit when one car isn't enough, and (b) driving the one that has the busted windshield? Do you not understand that your laziness (that's the only way I can think to describe someone who refuses to take public transit when they drastically need to and it's easily accessible) cost you money that you need and don't have?
You aren't even showing lip service to making any useful changes. You haven't answered any of the people who suggested you move in with relatives until your debt is under control, you claim you 'need' school, and you 'can't get rid of the car note'. You don't need to worry about a repo on your credit, because you're headed for another bankruptcy. I can only assume that you still do not grasp the severity of your situation.
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On the Dave Ramsey TMM forums in the "Money Talks" section, there is a very lengthy thread started by a policeman. He was making $43k a year with two children (one with special needs) and well into six figures of debt. Like you, he started out with many excuses why he "couldn't possibly" do this or that or make serious changes to his lifestyle. Eventually, though, he woke up and took radical action to begin pulling his family out of the mess they were in. I would suggest reading that thread for inspiration to just how much is possible when you really, truly want to start making changes to your life.
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I had to delurk for this one. My condolences on the loss of your son.
Face-punching commences: I agree with nearly everything that has been said here, so I won't repeat any of what has been said already. Besides, it seems like it would fall on deaf ears. What really stuck in my craw about your last post is your sentence about your neighbor and how the wife "doesn't have to work. Her husband is an actuary." That statement makes it seem like the only reason she doesn't have to work is that her husband is an actuary. You understand that her husband could be head programmer at Apple making millions a year but only with a budget and living below their means would she be able to stay home with her kids, right? The salary largely does not matter. Certainly you have been dealt a bad hand, but you are three years out from a bankruptcy and headed there again with very little awareness, or so it would seem from your posts.
There seems to be a ton of magical thinking (you consider it a windfall that someone rear-ended you, if only you had a degree then you would be making 60k and all of your money issues would go away) but no recognition of the central theme of this site: it doesn't matter what you make, it is how you manage your money that makes you rich.
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Good news everyone. Through selling stuff around the house and my wife and I going to work early. We paid off four credit cards.
The elephant in the room is the car loan. I just called up the local credit union to know the value of our vehicle. We are worse off than I imagined. The blue book value of our vehicle is $5,000 at the low end and $8,000 at the high end. We still owe a bit less than $12,000.
Our car loan is through Capital One Auto Finance and it's not possible to refinance through them. They won't allow it. I called up a week ago.
Both my wife and I want to get rid of it. But we are not sure what to do at this point.
Oh by the way. I am in the process of looking for a second job on the weekends.
What should I do with this stupid car loan?
I will NEVER get a car loan again.
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Hey, congrats on paying off the cards. You're heading in the right direction. :)
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Congrats on paying off those credit cards. Now cut them up. Seriously. Truly. If you still have them, you will use them. Don't stick them in the freezer, don't give them to a relative for safe-keeping, cut them up. Call the credit card companies and close those accounts.
I say this as someone who has been in your situation. There is always going to be some urgent need for extra cash, and having them available not only prevents you from finding other, healthier ways of resolving your money needs, it lands you in hot water yet again. The short term win is not worth the long-term danger.
P.S. - Have I mentioned yet that you should cut up those cards?
;-)
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Through selling stuff around the house and my wife and I going to work early. We paid off four credit cards.
Way to go, atourlimit111! Great progress, and great openness too!
Can't help with car loan advice - I know nothing about such things. Just wanted to say "welcome back", great progress, and great reporting! The car loan thing is definitely crappy, but one day you'll be in great financial shape and simply posting the car loan on the "dumbest thing" thread alongside the dumb things all the rest of us have done :) One way or another, you'll get that piece sorted out. Making this mistake early is going to reap you lots of gains in future, because of the whole range of mistakes you *won't* make in future as a direct result. That's the good thing about something like this hurting. Onward and upward!
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Is it possible for you and your wife to go completely without cars and just use public transportation? Sell both cars and take the money made from the Ford and pay down the remaining balance left on the Mazda. It's not the best choice and it will be painful and at times inconvenient, but deal with it as a lesson learned. This would eliminate car payments, insurance, repairs and gas from your budget. The vehicles seem to be causing the most stress to your budget.
You and your wife need a serious game plan for the next two years, because according to your posts you will need new housing in two years which will mean deposits and other moving costs. It's time for drastic measures.
You can do this!
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Well, thank god for your guardian angel and so sorry to hear of your losses and tribulations.
Not a whole lot to contribute here.
I agree with all that said to postpone your on-line education. Get rid of one of the vehicles. Talk to T-Mobile and see if they won't waive the cancellation fee based on your circumstances, on to something else. Sprint totally waived my cancellation charges several years ago and turned me on to Boost - their subsidiary then -when I called and said I was laid off and couldn't afford their charges any longer. (Have since cancelled and live without a cell phone as I'm now retired and don't need one).
If you truly don't want to cancel internet . . . get rid of the cell phones and sign up for VoipO as a home phone @ $8/month. Keep one cell phone for when one of you is on the road. Read IP's posts, go shopping. You'll save at least $100/month. (Yeah IP! Totally appreciate you!)
I didn't notice cable tv in the list of expenses but if you're keeping the internet . . . cancel that cable NOW as well.
For whomever posted the idea of you listing 2 things per day that you've done to improve your circumstances - hell yeah! Keeps you accountable as to the seriousness of your intentions and you will get encouragement.
I have the Dave Ramsey books I could send as well if you wanted.