Author Topic: Reader Case Study-NEED/Want to turn it around in 2014 Thanks for no face pops!  (Read 17583 times)

krenwren

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Hello all,
I am 56, married, three offspring, two on their own, the third inching out of the nest. I am currently working two jobs in my career to keep our heads above water and try to overcome years of what can only be described as perverse, anti-mustachian living.  Underwater mortgage,  two overpriced cars, unfettered spending on every whim, huge parent loans to finance private college, I could go on and on but my chest hurts just writing this.  I took the plunge this last few months and finally pulled my head out of my ass and had a good look at our spending.  I write this in the first person as I am the money person in the family with a reluctant spouse albiet one making progress. 
I have four goals:
Get out of debt
Sell our underwater house
Move to a warmer clime (rent versus own??)
Stop working so much

Here are the deets:
Income:
Average monthly last three month 13,000
This is take home from working weekly overtime in my primary job and from a once a week second job
I have 5% take out for retirement (4% match from my employer) I also have my health insurance taken out.

This is what I currently spend:Expenses:
mortgage 1900
taxes 500
house and car insurance 409
gas 100
electric 110
cable 138
water 50
oil 500
food/wine 1200
entertainment/travel 2300
clothes 200
yearly fees (EZ Pass, licenses, pet vaccinations etc.) 150
household expense 150 (paint, repair stuff, LED bulbs, new clothesline)
two car leases 840
our phones 40
daughter/son phone 110
CC #1 500
CC #2 400
School Loans 709

Assets: retirement savings 484465
NO Emergency funds or "buffer"

Liabilities:
Credit cards:28909
parent plus loans: 56000
mortgage: 218834  (7 more years on a 15 year note, listed as a liability as we are under about 25000)
The lease on two cars

Yes my hair should be on fire, to say I am trying sounds so LAME, trying is not winning!
How can I rid myself of the leases?  Where can I put approximately $2000 that I am sure I can "squeeze" out of this mess?  WWMMMD????

Thanks everyone for your thoughtful replies. 
My demographics:  We live in Connecticut, the winters are long, cold and miserable (not Maine or Alaska miserable but still lousy) We live in a city with high taxes and high risk for car insurance.  We will move as soon as we can sell the house.  I live a mile from work, no excuse not to ride in summer/spring/fall.  I could also walk.
 
The ridiculously expensive lease is the result of rolling high car debt into the lease, this one ends in 2 years.

My salary will be dropping to about 8800 monthly take home in January.  This represents the return of 6.5% for SS and my increase to 5% on my retirement.  It also reflects one week a month where I will only work three days (still a 40 hour work week).  It will cut the income, but I can't keep working these hours.  I am in excellent health but I sure am pooped.  Here's the budget we are aiming for:

Income average 8400 each month, I do have one child on health insurance, she's a free lance photographer, will leave her on til 26.
I would like to stash the income from my second job into an emergency fund.  This would average about $1000 a month.  I wonder if I should just save an EF then of about 5000 then dump the rest on debt???

Mortgage/taxes/insurance  1900/500 (includes old car taxes)/100
Car insurance 250 (USAA, live in an urban area that is high risk)
Gas 75 (ride to work at least once a week, cut back on clown car driving)
Stupid leases  VW CC at 575, VW Golf at 270
Phones 40 cut the umbilical cord of cell phones for kids
Food 500 (all cooking at home)
Dining out 200
Beer and wine 200
Electric less than 100 (LED, clothesline, I am already seeing a decrease of about 40)
Oil 500  (this is a cost average, thermostat at 66, lots of sweaters and slippers, a newer, efficient burner)
Water 50
Cable/internet 68 (baby steps)
Yearly stuff 150
Clothes 0 (ouch)
Travel/vacation 350
CC this is where extra will go
Parent Plus this will be the next payoff 706

This will leave an extra 2500 for credit debt.  I could pay off one of the leases early, not sure if this would be helpful versus paying off credit debt with average of 9% interest.  The house loan is at 4.2 so I will not work on that until the debt is paid off.  Then I want to sell it when I can (figure I can sell it for 180,000 in three years). 

We would then love to move south.  I want to rent, we are not "homey people".  I hate yard work, really just need the basics.  A condo would be perfect.

Thanks everyone!  I was a little nervous about a pow to the kisser!  I would love to rid myself of the CC, I feel like it's penance for some really bad decisions.  It still doesn't beat the years we drove a Ford Excursion at $700 a month.  That was a ridiculous monstrosity.  I think the credit cards, then the loan will be the way to go.  I still think I should save a little toward retirement then put the full court press on in my last five years.  Hopefully that won't still entail lots of OT.  Really at 60, I think it would be a little unseemly.

In response to the more recent posters, again thank you for your help. 

We can definitely ditch the going out,  we have been cooking like demons, baking bread, looking for thrifty ways to decrease our food costs.  With all our debt, it's foolish to even think about going out.

The wine habit is a bit much.  I personally love my black box Chardonnay and it will last a month.  We can cut back on the red wine to about $100 a month if we really are careful.  Wine is sooooo tasty!

My spouse is unfortunately disabled, he was hit by a car a couple of years ago and then broke his leg last year.  This year will hopefully be trauma free.  I am happy in my career and was always the main breadwinner.  With the kids out of the house, our expense are less so we can certainly get by without his income. 

Heat in CT is ridiculous,  I do have a programmable thermostat and drop the heat to 60 at night.  I work nights so need a little warmth when I sleep during the day!  We set it at 66 during the day.

Those stupid leases will be the albatross around our necks for the next two years.  I am going to look into paying off one early and turning it in.  We don't need two cars for sure. 

Travel is tricky.  It is an indulgence for sure.  My youngest is serving in the Army and I miss him so much.  We made two trips to see him last year and he will be returning from Afghanistan in January.  I really want to be on the tarmac when he steps off the plane!!! It is an "spendy" area that needs to be trimmed otherwise.   

Thanks again for all your input!  I have been cruising around the forums and have found some great information for saving money!
« Last Edit: October 30, 2013, 10:28:58 PM by krenwren »

Melody

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Re: Reader Case Study- NEED/Want to turn it around in 2014
« Reply #1 on: October 28, 2013, 07:13:21 AM »
Hey, your post is a little confusing as to which expenses are monthly and which are yearly... unless your entertainment/travel budget is 2,300 monthly???? If so that's low hanging fruit right there. Cut this to $500 a month to allow for entertainment and basic holidays. This would still give you $3k a year for a nice holiday and $50/wk for entertainment.

Also is the $13k before or after tax?

Things I would cut:
Cable TV - free up your spare time for something more fun (or more useful).
House and car insurance seem very high - get some quotes. If your kids are on your insurance get them off there unless they are willing to pay the extra.
Gas/Electric/Oil - $710 a month seems crazy... you haven't posted your location so hard to know exactly what it should be, but this would almost eat a full time US wage for many (lower income) Americans so there must be a way to cut this back. 16 Celsius in winter should be fine, even 10 will keep your pipes from freezing which is really the aim of the game.
Food/wine - again seems high but how many people are living in your house? Could try buying wine online buy the case? Could try a farmers market? More cooking from scratch?
Clothes - cut to zero (underwear only) for the next 12 months until you are on top of things
Phones - if kids live on campus they wont need phones - smart phones on wifi and skype/heytell should do it. They can buy prepaid credit with their own money to use for emergencies when not on campus.
Car lease - I don't know anything about these, but agree they need to go.

With your income all is not lost - you can pay off everything including the house in under 5 years...As you're willing to sell the house, this should be done even faster. You're only underwater by $25k - should be able to get back to even in about 4 months :)

Good luck!

randymarsh

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Re: Reader Case Study- NEED/Want to turn it around in 2014
« Reply #2 on: October 28, 2013, 07:17:13 AM »
Pay off the credit cards ASAP. The Parent PLUS loan(s) can be deferred for up to 6 months past the student graduating, which would free up some cash to pay down the likely higher CC debt.

Food/wine is high.
Cancel cable.
Cut clothes for a few months. I'm sure you have plenty to wear at this point.

Dee18

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Re: Reader Case Study- NEED/Want to turn it around in 2014
« Reply #3 on: October 28, 2013, 07:55:23 AM »
Cut out the kid phones.  My 16year old is totally responsible for hers; your kids are old enough to pay their own (and I note theirs cost more than yours). Cut up your credit cards, except one for emergencies.  Do not take on more debt, not even for education of your third child.  Read the leases and follow the instructions for getting out of them.  How on earth do you spend that much on food a month? Cut that drastically.  Do not do not eat out until the cc debt is gone.  The good news is, you can easily reduce your expenses a lot immediately. 

destron

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Re: Reader Case Study- NEED/Want to turn it around in 2014
« Reply #4 on: October 28, 2013, 09:13:00 AM »
I feel for your situation because I look at my own father's spending -- he and his wife make 3 times my income and save less (not that my income is a slouch).

There are a few areas I see immediately (and I'm sure you do too) that are really hurting you, and your underwater mortgage isn't one of them. If I sound kind of mean, it is only because I am in so much shock at your finances and it is said with love.

1. Cars

Two overpriced cars cost you more than just the cost of the car. $840 for the lease, probably $300 of your $400 for insurance, $100 for gas. I'm sure there are other incidentals. Let's call it $1300/month just to drive. I would never take a lease on a vehicle and I don't know what it would cost you to get out of a lease, but this is killing you. If you had a reasonable used car, not only would the car cost less, but your insurance would be much less as well. Your butt won't know the difference after the first couple weeks. I just don't know what to say, though, because you are stuck in a contractual hell. The solution is to figure out what it would cost you to get out of at least one of these leases and drop down to public transportation until you can figure out how to drive for less than a fortune.

2. Food / Wine

$1200? For two people? That's $600 per person. I don't know how I would spend that much unless I was going out to pricey restaurants 3-4 times per week. And wine -- you have WAY too much debt to be drinking anything better than the occasional $7-10 bottle. You really need to break this down more -- groceries / dining out / coffee / alcohol. (In fact, you really need to break down all of your expenses a little bit better). I would shoot for a beginning goal of halving your food and wine expenses. It is possible to go lower than that, but half is realistic to start.

3. Entertainment / Travel

I honestly have a hard time believing that you spend this much money (on average, presumably) on entertainment and travel when you have close to $30k in CC debt and an underwater mortgage. I spent 6 weeks in Japan in 2010 for about $3000. There is no comment I can make other than this category should be $200/month max right now unless you want to never retire. You need to break it down more, but I suspect you have a hefty entertainment budget and go on regular, very expensive trips that require you to fly somewhere and stay in a hotel. There is absolutely no way you should be doing that at age 56 with as much debt as you have.

The two positive things I see are that you are making the decision to change your life and you have a pretty good start on your nest egg. However, unless you reduce your expenses drastically, that nest egg will not be close to enough.

As for the little stuff, you need to make difficult decisions:

Clothes? Minimize your expenses. You have negative money right now, you can't afford $200/month

TV? I would recommend dropping cable entirely and just using netflix / over the air channels, but you certainly can't afford the premium package you currently have.

Daughter / son phones? You cannot afford to pay for your adult children's data plan phones. Perhaps you can float the youngest one still living at home's voice and text only plan? Check out the huge thread somewhere around here about all the alternative cell phone services you can get for less than $35/month.

Oil? I guess you are in the northeast but it might be time to turn down the thermostat and put on a sweater -- try and get this cost down to $300 or less if you can.

The last thing is your mortgage. You are underwater, yes. It would help you I think if you moved to a cheap part of the country and were able to get something for significantly less, but at $2400/month with $13,000/month income I would hate for you to get sidetracked and think that this is the source of your financial woes. Your spending is what is causing the biggest problem. It doesn't seem like you are that far underwater at this point and it may be better to stick it out. Cut the expenses laid out above and use that money to pay off the CC debt immediately. Figure out your car situation (and I highly recommend investigating biking!). Max out your 401k payments for both you and your spouse after paying off the CC. Then look at the rest of your debts -- student loans go in order of highest interest rate to lowest. Start saving more cash in a brokerage account. You will be happier when you are spending less and you start to poke your head out from underwater. It is shown time and again that spending money and having stuff isn't what makes humans happy!

bugbaby

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Re: Reader Case Study- NEED/Want to turn it around in 2014
« Reply #5 on: October 29, 2013, 06:28:27 PM »
First off, I commend you for taking time to finally evaluate the picture, and your decision to take the bull by the horn.

I would categorize your major issue into 2 main groups.

1. Home/Environment - a)A spendy spouse (and old you) not fully on board. b)Social pressures for expensive entertainment, status symbol cars, brand name pricey stuff etc etc

-- I believe if these could change the rest would fall in place so much more smoothly. I'm sure you've read /reading MMM blog by now. You are a very intelligent person or you wouldn't be commanding the high income you do.  You don't really need to be told how or to cut costs, budget, save, invest etc. It's the above factors that may have pushed and driven you all these years. 
-- What if a major medical emergency or job loss suddenly came about, that could potentially wipe you out? All of a sudden that fancy club/car/necklace just lost its shine real quick.
--Could you consider taking up different activities with different friends who have a more Mustachian, minimalistic, holistic life outlook? Or new nature-focused family vacations? You'll be amazed how much fun is out there for so little.

2. Major fixed expenses outlined by above posters
--Car : there's no way you can't get out of that lease and get a nice used care - see the MMM post about vehicles.
--Energy: Most New England areas have gas heat. There's a 30% tax rebate on energy-star heaters. Have a professional evaluate your house energy efficiency: insulation, roof, door window, sectioning the house etc
--Debt -Hair on fire!! HELLO!
--Home: I agree with above posters, this just isn't your major problem at all. 200s is a perfectly reasonable house value for your income level - unless there are major maintenance looming disasters.

I think the rest are details you can easily learn on the forums and MMM Blog.

Best wishes

theSchmett

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Re: Reader Case Study- NEED/Want to turn it around in 2014
« Reply #6 on: October 29, 2013, 06:54:44 PM »
A little sunshine from me: If you can get cable/internet down to $68/month including taxes, that's not bad.

I pay $50/month for FIOS internet, and then what must be about $30/month for Hulu, Netflix, Skype (minimal) and Spotify.

Also, your take home is pretty good so you've got something to work with.

Also sounds like you've put 3 kids through school and while lots of mustachians think that's a waste of money, and sure maybe the schools were expensive, its a worthwhile thing to do. Its not automatically a waste.

Good on you for sorting this out.

Advice? Get away from that Volkswagen CC! No idea how I never leased car (yeah so not helpful sorry).

Also, work the credit card balance transfers. If you've got good credit, make it work for you. You don't have to cut up your cards unless you really lack self control. Find a balance transfer and stop paying interest on what must be some pretty large cc bills. Does it make sense to pay off one much faster? Whip up a spreadsheet and check the math.

FINALLY - I know very little about retirement plans and taxes and all, but you've got quiite a sum built up for retirement. Its worth doing the math - or asking a financial advisor if there is a way you can access at least some of this money and even if you take a penalty it might be worthwhile to knock out some of the higher interest debt.

4alpacas

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Since you posted an updated budget, I thought I would comment on it instead of your current spending. 

Mortgage/taxes/insurance  1900/500 (includes old car taxes)/100
Car insurance 250
Gas 75
Stupid leases  VW CC at 575, VW Golf at 270  Can you contact the dealership to see how much it would cost to get out of the lease?  I don't have any experience with leases, but it might be smart to pay a little bit to free yourself from the lease (even if you have to buy a less expensive car as a replacement)
Phones 40
Food 500 
Dining out 200  I know this is a big step, but I would recommend avoiding eating out altogether.  When I cut my food budget, I found that it was easier to not spend any money in restaurants.  It's a rough adjustment period.
Beer and wine 200 How much are you drinking?  Is there a way to decrease the cost?  Blackbox wine?  Buying in bulk?  Mixed drinks?
Electric less than 100
Oil 500  This seems really high!  I'm from a VERY cold state, and I don't know if I've seen something like this.  Is it every month?  Is there are a way to close off rooms that you don't use?  When I lived in an apartment with a leaky sliding glass door, we used some sort of plastic that insulated and allowed light through. 
Water 50
Cable/internet 68 (baby steps)
Yearly stuff 150
Clothes 0
Travel/vacation 350 This is $4200/year.  Could you think about making your vacation less expensive?  AirBNB?  Closer locations?  Possibly driving.
CC this is where extra will go
Parent Plus this will be the next payoff 706

MountainFlower

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Hi,

You don't mention any income from your spouse.  Can she get a job?  I'm sure it's tough to reduce cable and heating costs if she's home all day.  It's also difficult to reduce other recreational shopping/entertainment costs if that's what she does for fun.   A job would probably save you a lot of money, even if it ultimately doesn't bring home much do to high tax bracket.

Good luck sorting it out.  Those leases are tough.  You just need to run the numbers to decide what to do. 


ZiziPB

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Quote
Oil 500  This seems really high!  I'm from a VERY cold state, and I don't know if I've seen something like this.  Is it every month?  Is there are a way to close off rooms that you don't use?  When I lived in an apartment with a leaky sliding glass door, we used some sort of plastic that insulated and allowed light through. 

That seems a bit high, but not outrageously so.  I live in CT also and my prior house had oil heat and hot water heater.  The average annual oil consumption was close to 1400 gallons.  Not sure what the current prices are for oil but at $4 per gallon it's $5,600 annually.  One disclaimer though, the house was around 3,800 sq ft.  Suffice it to say, I am super happy now in my energy efficient, gas heated condo of 1,600 sq ft ;-)

To the OP, do you have a programmable thermostat?  Set it 60 at night and when not at home.

As to other expenses, see if you can somehow get out of the more expensive car lease.  If you live 1 mile from work, I don't see why you need to ever drive to work.  Just walk.

theSchmett

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Yes the vacation line does seem high, I didn't notice that.

FWIW - one of the best vacations I've had was last summer, staycationing at home.

I did very little housework, I ate out for almost every meal, and I did fun local stuff. I do live in a fun local area (5 miles from the Atlantic on the Jersey Shore) but still, enjoying whats close that I never had time to on a daily basis was wonderful. I went fishing for the first time, took my first surfing lesson, took long bike rides.

I'm sure between my wife and I we spent under $500 that week.

CommonCents

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You can leave the free lance photographer on your health insurance, but ask her to contribute to it. 

$500/month seems high even for oil heat.  (Wow, this is encouraging me NOT to buy a big home.)  Can you close off rooms not in use (such as kids rooms or guest bedroom)?  Have you looked into plastic wrapping your windows for the winter?  It's a lifesaver up here in Boston.  We're in a condo so we can't adjust our heat, so we are forced to figure out how to warm up the place.  We also use a space heater just in the bedroom, which is much colder than elsewhere, for about 20 minutes before bed, just to take the chill off.  A hard core mustachian would avoid even that use, but I never claimed to be such.

Food for 3 people is an improvement, but still could be cut.  You asy all cooking is at home but then have a dining out line.  Can you explain?  Regarding dining out, try eating out for lunches not dinners, choosing slightly cheaper locations, using deal sites (be careful, this can actually have you spending more), only dining out once a month on a special date night, and NEVER buying alcohol while out.  Aim for one date with a $50 limit next month.  That's two $17 meals with $3 drinks, a 20% tip and 5% in tax.

Beer and wine.  You are spending more than $3 each day per person on alcoholic beverages (I'm counting just you and your husband, not any kiddos, who if above age should be chipping in).

jess

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You have high income and lots of unnecessary expenses. Call your cable company right now and cancel. Its so easy! Hulu and Netflix are now your go-to screen entertainment. Can you and your husband share entrees when you go out? Cook at home a bit more? Have one glass of wine instead of two?

Also, as lots of others said, cut the cord on your kid's cell phones and insurance. Even your daughter who is self-employed. She can pay you for her portion of health insurance.

Get out of the car leases if at all possible.

Paying for your kid's college education is noble, but they are also able to take out loans to go to school. You don't have to do it for them. Think about how guilty they must feel that you have done this for them. Let them own this part of their lives and don't burden them the guilt! ;)


krenwren

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Here are my replies to my helpful responders:

I swear on my "monument to ill considered spending" I will:
No line item for dining out, don't need to, don't want to!

The loans are a done deal, two done w/college, third will have the GI Bill once god-willing he is home from that sandy hell hole.

My new "third job" will be figuring out how to end at least one lease early.

I am inching toward the cable addiction.  Hubs is at home and bored, loves sports, blahablalalblahhh

We have a relatively new burner and new windows, thermostat at 66, hope to see a savings.  Did not turn up thermostat until 10/29-- an new record.

my bi-weekly insurance payment is $97.00.  I will split by 3 and send bill to daughter.  Will transition her account to her own name.  Will intro her to Republic Wireless

Will be impressed with self if electric stays low with all my efforts.

No clothes in 2014 (will wear, not buy)

Loving my pressure cooker, all meals at home, all lunches, leftovers!

I think that's the bulk of it--I am working on the wine, no really sipping my blackbox Chard as we speak!

4alpacas

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Great job so far!  Good luck with the changes!  I know it's a rough transition.  My budget is still a work in progress.

mm1970

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Good job - getting started is hard!

I find myself losing steam sometimes (like now, when I've had bronchitis with a full time job and two little kids).

Here are some things that have helped me:
1.  Wine.  I've stopped drinking except on special occasions.  Which is once a week at most.  I enjoy it more now.
2.  Travel.  I've stopped traveling (frankly, it's no fun with a toddler), and instead have been trying to enjoy more "staycations" (I live in Coastal Southern California, so this isn't much of a hardship).

MrsPete

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I have four goals:
Get out of debt
Sell our underwater house
Move to a warmer clime (rent versus own??)
Stop working so much



I don't believe you're going to be able to accomplish all these in the short-term -- not while you're trying to make up for years of mistakes.  However, you can work towards them.

Getting out of debt needs to be #1 goal.  I live in the South, and, yes, the warmer climate is wonderful!  However, our wages are also considerably lower; as a result, you're not likely to move here, cut back on hours and still be able to pay off large debts.  Instead, focus on working MORE now . . . with the goal of moving to the warmer climate once you've paid off the debt. 

How to pay off the debts?  Only three ways exist:
1.  Earn more money; for example, take on a part-time job.
2.  Spend less money; people have given you excellent feedback on this already.
3.  Combine 1 & 2.  Since your hair is clearly on fire, this is your best option. 

I can't make any comments on the house.  Real estate is location-specific. 

I do have one comment on the kids' education.  You've already borrowed for Child #1 and Child #2.  Yes, it would've been wiser to limit your contribution or to steer them away from expensive private schools, but it is done.  Even though you're already in trouble financially, I would not personally tell Child #3 that you won't help him.  Not after you did so much for the first two . . . but this is the only thing in your budget I wouldn't slash.  I don't mean you should do as much or go so far into debt, but treating one child differently from the others in terms of money is never a good idea.  Tread lightly.  You could easily alienate the youngest or cause a rift between siblings by treating them differently.

Villanelle

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Did I miss the reason your husband isn't working?  Can he not even find a side hustle, a seasonal retail gig, or anything?

Also, I would definitely look into ditching one or both of the leases. 

chasesfish

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I also am baffled by the beer/wine costs.  My wife and I drink the really good, expensive beer and we spend $40 per month.   1-2 craft beers once or twice a week.

Call the Leasing company (vw finance?) and ask them for a buyout quote on your lease, then go take the car to carmax and see what they'll offer you.  That will tell you if you're really upside down.

How are the children's careers going?  Are they able to pay the parent plus loans on your behalf? 
« Last Edit: November 03, 2013, 06:11:57 PM by chasesfish »

expatartist

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@Chasesfish

Quote
My spouse is unfortunately disabled, he was hit by a car a couple of years ago and then broke his leg last year.  This year will hopefully be trauma free.

krenwren

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@Chasesfish

Quote
My spouse is unfortunately disabled, he was hit by a car a couple of years ago and then broke his leg last year.  This year will hopefully be trauma free.

Thanks @expatartist for clarifying!  Could he get some kind of work, probably, but I believe that cost cutting will be the most expedient way to clean up our mess.

Also as far as educating the youngest, he will hopefully all set with the GI bill for his college needs.  While we love our children equally, they are all quite different and had different needs in terms of their education. 

Yes the booze budget must be slashed, we drink more that one or two beers per week for sure but it's the red wine that we really need to give up. 


1.  Earn more money; for example, take on a part-time job.
2.  Spend less money; people have given you excellent feedback on this already.
3.  Combine 1 & 2.  Since your hair is clearly on fire, this is your best option. 

I already have two jobs, I CAN'T possibly work anymore.  I average about 60 a week sometimes more. High stress, very rewarding, really I can't do more.
Cost cutting is the only way out. 

Will definitely be speaking to VW Credit about a buyout.  May need to cover the difference with selling but would still be ahead in the long run.

rocksinmyhead

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How are the children's careers going?  Are they able to pay the parent plus loans on your behalf?

I was going to ask this too. Even if they could help a little... My parents took these out for me too, but I fortunately got a good job out of school (plus I just have lower expenses than them... they have a mortgage, and my younger sister is still in college so they help her out with stuff, etc.) and it was pretty easy to set up me autopaying on their student loan account.

destron

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I just wanted to pop in again and post that your updated budget looks like a great step in the right direction for fixing your finances. You said it correctly that you have a spending problem, not an income problem. I would stick to what you are shooting for right now rather than looking for too much more to trim. If you over-optimize, you might fall off the wagon. Just the cut to your entertainment and food budgets should allow you to pay off those credit cards in 8-10 months. Best of luck!

krenwren

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Thanks @destron, I feel the changes I am looking at will allow me to payoff the credit debt next year.  I paid off $2500 just this much without too much pain!


@oscarmom--Both kids are paying off their guaranteed student loans.  They are both doing well but I am still making 4x more than either of them.  The loans were parent plus loans.  It was my decision so my responsibility to handle them.  Now if either of them start making serious coin, it will be a different story!  And there is always lotto JK JK!!!!

MrsPete

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I already have two jobs, I CAN'T possibly work anymore.  I average about 60 a week sometimes more. High stress, very rewarding, really I can't do more.
Cost cutting is the only way out. 
Understood, but you're covering expenses (past and present) for five adults . . . and you seem to be the primary breadwinner.  YOU don't have to be the one doing the extra work.  Nothing but sympathy for your husband's medical issues, but is he capable of doing something part-time or something "extra" like selling items on ebay? 

krenwren

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I already have two jobs, I CAN'T possibly work anymore.  I average about 60 a week sometimes more. High stress, very rewarding, really I can't do more.
Cost cutting is the only way out. 
Understood, but you're covering expenses (past and present) for five adults . . . and you seem to be the primary breadwinner.  YOU don't have to be the one doing the extra work.  Nothing but sympathy for your husband's medical issues, but is he capable of doing something part-time or something "extra" like selling items on ebay?

This is going to sound horrible but the negligible amount to be had by selling on EBAY won't really put a dent in anything. We do sell stuff we don't need on EBAY and craigslist but again not enough to make a difference.  When one hour of overtime equals a hefty payday, the time and effort just don't seem worth it.  Hubs could go back to work but when we look at the costs--again I'd rather have him home manning the home front.   It's a reversal for sure.   

Villanelle

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If your husband is injured and unable to work, is he collecting disability?  If not, would he qualify?

As for ebay, I understand your logic that an hour of overtime makes more than an hour spent on ebay.  But your husband doesn't have at job at which to get overtime, so he had plenty of time to sell on ebay.  And if you'd rather have him home "manning the home front" then that's all the more reason to find a way to get at least a small income stream to come him from the time he spends manning things.

Also, while I understand that it's nice having him home to run things, you've got a financial situation you claim to want to change.  If you want to change it, maybe that means giving up having a Stay-at-home dad in the mix for a couple years, until you've righted the ship. 

You say that cost cutting would be the most expedient way to clean up your mess.  It seems to me that cost cutting *and* having a second income would be more expedient.  If that income is temporary until your debt is paid off, it gives you all the more reason (and means) to destroy that debt.

I'd love to have a maid, cook, and personal assistant.  But those things are not in line with my financial goals.  If/when he can work, I'm not sure having a stay at home dad (or husband, since your kids are nearly out of the nest) is a move you can really justify right now.  And if he truly can not work because of his medical condition, look into disability.

If however the two of you insist on continuing with having him home, then it seems like you could completely ditch one of your fleet of vehicles.  If having him home is that important, then sacrifice a car in order to fund that choice.  He can drive you to work one day a week to keep the car for any non-biking errands (once the leg is healed), or you can try to find a way to ride share or something else once a week or twice a month. Of you can work out a schedule with the kids, since you are picking up much of the auto (and other) expenses, that once a week one of them needs to make a car available to dad for 4 hours. 

Finally, while you are making more than your kids, asking the graduates to start chipping in an additional $100 a month isn't going to break them.  It's going to start weening them and launching them into adult responsibility. 

chasesfish

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Karen - you asked us for help, the seem to argue that every solution is impossible.  You're near retirement and carrying a five figure credit card balance, a pile of student loans for your kids, and a hearty mortgage, all with no emergency savings.  You need to decide if you're serious or not:

Cable:  cancel it immediately.  Is this worth carrying a credit card balance for?
Booze:  stop drinking it, ask yourself if it's worth charging this box of wine to a credit card
Cars:  get rid of one and talk about the lease buyout.  1 person working = the need for 1 reliable car.  If your husband insists on a second car, car, then get a $500 - $1000 beater
Parent loans:  go tell your kids they need to start paying these, your husband isn't working anymore!!
Sell shit on eBay.  Maybe if you cancel cable, your husband will have more time to do this

This situation is like your house being on fire, you need to get the hell out and get a firehose, not stand there and throw small cups of water at a giant flame.

chasesfish

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One thing to add to my last post if I didn't make it clear enough:  As long as your carrying that credit card balance, you should look at every single dollar you send out and ask yourself "is this worth going in debt to charge to a credit card?"

Your expenses should be limited to basic food, shelter, and transportation to and from work until you get this house fire under control.

krenwren

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If your husband is injured and unable to work, is he collecting disability?  If not, would he qualify?
Finally, while you are making more than your kids, asking the graduates to start chipping in an additional $100 a month isn't going to break them.  It's going to start weening them and launching them into adult responsibility.

All my children are on their own, earning their own livings.  Except for the cell phone wean, they don't get any support from us.  Why on earth would I ask them to "pay for the sins" of their parents.  Ridiculous.
Karen - you asked us for help, the seem to argue that every solution is impossible.  You're near retirement and carrying a five figure credit card balance, a pile of student loans for your kids, and a hearty mortgage, all with no emergency savings.  You need to decide if you're serious or not:
Agreed, we are in a mess.  I disagree that I am arguing that every solution is impossible.

I think the only two areas where I am resisting is the subject of an  income stream from my husband and having my children bail us out. Certainly any extra income would be helpful, I think it would be a
phyrrhic victory however.  I have paid off almost $4000 in debt in the last two months by cutting costs and working overtime.  We don't have $4000 dollars of shit lying around to sell.

The credit cards are not being used for any reason.  I could try and rationalize their use for frequent flyer miles or cash back, but for now, they represent temptation so into the back of drawer they go.  Starting in the new year, our EF will be the priority along with the credit card debt.  We aren't going into more debt, we are eradicating it.

Easy to say get rid of two car leases, you can't just roll in and tell them to take them back, I would need to come up with the loan difference.  Could I, probably over time but I have to decide where my priority is and right now I have chose the credit debt and building an EF. 

We didn't get into this mess overnight, it took years of stupid financial decisions to get here.  I don't expect to turn it around overnight either.  In order for change to take place, the changes must be sustainable and somewhat reasonable.  I think cutting the cable bill in half on the way to getting rid of it, cutting our booze consumption to reasonable levels, ditching our cell phones, not eating out and not entertaining are all very positive steps toward financial solvency.





 

babysteps

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Easy to say get rid of two car leases, you can't just roll in and tell them to take them back, I would need to come up with the loan difference.  Could I, probably over time but I have to decide where my priority is and right now I have chose the credit debt and building an EF. 

When we dealt with our own self-induced financial crisis a few years ago, we stopped leasing 2 cars. 

One we found a dealer about 5 hours away that wanted the car and bought out our lease - no cost or gain to us (except driving there with two cars and coming back with one - but could combine with a family visit so not so bad).

A friend had mixed success finding an individual to buy out her lease several years ago - it might be worth checking out the online exchanges where folks buy/sell (or whatever the right terms are - assign/assume?) leases.  Worst case someone could assume your lease for less than 100% of payments but at least you will be less-bad off.

Or you could make plans to exit the leases soon but not right away - say, turn in one vehicle as soon as you can afford to 'make up the difference' and, after the CCs are paid off, turn in the other one as soon as you can.  Run the numbers, see what makes sense to you.

Our other lease was 'underwater' by a lot (fancy sports car - I told you this was self-induced) - we turned the car in and they filed for a judgment against us.  Hurt our credit but we weren't going to be using credit any time soon so it made sense to us and our cash flow at the time (before we found MMM...).  We have settled the judgment since.  I realize this isn't really a "good" thing, but it isn't impossible either - just bad & painful.  You'll have to decide what level of extreme measures your crisis calls for.  If you have credit cards with anyone, or other debt with the lease financing company, such a move could well lead to all such debt being called or at least any open lines of credit being cancelled.

Best of luck.  It was painful for us but SOOO worthwhile

Exflyboy

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Wow.... The rest of us are talking about we don't have cable, run $10 a month cell phone plans and drive cars that cost $350 outright (at least mine did and I drive an average 140 miles a day!) etc.

Seriously this is a little hard to read...(OK minor face pop there).

Having said that if you can't drastically cut your spending then you have a serious shop-a-holic addiction and probably need therapy.

Personally I would cut my spending to the bone so I could sit inside and look at the 4 walls of the my underwater house and reflect on what I have done to myself.

Having said that..
1) get out of those car leases.
2) Pay off CC ASAP
3) Do not pay anything does not continue to put a roof over your head and cheap food in your belly. This means NO eating out whatsoever until all your debt is paid off
4) Wine and beer?.. Are you serious?

Your in a world of hurt and its going to get drastically worse.

Don't even talk about baby steps.... Go cold turkey and climb out of the hole. You can easily do this but a substantial change in life style will be required.

Better to do it now than have the debt collectors show up.

Good luck

Exflyboy

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Oh I pay $31 for DSL internet... Feel free to call them and negotiate and $10 cell plan.

Cable has to go.

Travel/vacations..... Cancel all of that... This is an emergency!!!!

As an idea I have roughly the same income you do (little bit more because of our rental). Started paying off the mortgage in '97 with zero assets.

Planning to retire next April!

You CAN do this!!

Get into the mindset of every bill you have ask why would your life be that much worse if you didn't have it?.... If I don't buy that bottle of wine would I be any less happy?

I gurantee you will be a lot MORE happy when you have no debts!

Frank

CommonCents

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If your husband is injured and unable to work, is he collecting disability?  If not, would he qualify?
Finally, while you are making more than your kids, asking the graduates to start chipping in an additional $100 a month isn't going to break them.  It's going to start weening them and launching them into adult responsibility.

All my children are on their own, earning their own livings.  Except for the cell phone wean, they don't get any support from us.  Why on earth would I ask them to "pay for the sins" of their parents.  Ridiculous.

Agreed, but I think people meant asking the kids to help with their college loans (not just a "gimme cash" ask).  It's hard to shove it on them after you've already promised them and they relied upon it, but it doesn't mean you can't ask.  Say that you had not realized you had so many other financial commitments/disability etc, and the amount you've paid for their college is $X - can they see room in their budget to take over any of the remaining loans for *their* own college tuition?

I agree you're making great positive steps forward.  People here are maxmizers, they don't mean to imply you haven't improved your situation.

MountainFlower

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I can't get on board with asking the kids to take over the loans.  As OP says, that was entirely their (the parents') decision. 

Also, No one has mentioned that these folks have a network of around 375K.   I totally agree with the cost-cutting measures that have been suggested to get rid of the debt, but how can you ask your kids to take over loans they didn't choose to take out when you have a net worth of 375K?   That's just not really fair.  I think that you'll be out of debt quickly.  I suspect that as you begin to cut down, you'll find more and more ways to cut more.  Your husband will recover and find ways to contribute.  You can do this. 

I would love to hear updates. 



krenwren

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Finally some news I can use! thanks @babysteps for your concrete ideas for ditching the leases.  I don't know if I am ready to just ditch one, I think the ramifications would be too drastic for me.  And thanks too @MountainFlower for your input.

Keep the punches rolling!  I need a swift for sure, will keep me grounded and focused.
There is a common theme about "centering my mind" when looking at decisions that don't necessarily put me in debt but don't get me out either.  This will be revolutionary for both of us.  We rationalize everyday about little purchases that really add up.  My latest mantra is "do you want to get the heck out of debt or do we really need that _________ (fill in blank with meaningless trinkets)".  As we chunk away at the debt and see real traction, it gets easier to answer "no!" 

Maximisers is right! LOL Just not there yet.
And I just put up 10 items on ebay.

chasesfish

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Congrats on eBay.

If you can get this on track, you have a good chance to have a nice retirement with your savings, as another poster pointed out, there's a nice chunk in your iras.

Do you get a pension in your job?

Have you been able to contact the finance companies and get a lease buyout number?

MilStachian

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Karen,
I grew up in CT, so I know what you mean about heating/cooling bills, property taxes, etc.  You wouldn't happen to live in Simsbury, would you?

Regarding the leased cars; if you can't find someone to buy the lease, I would go to my local bank and get a personal loan to cover the difference after trading it in.  I'd rather pay a monthly payment on a $5000 loan at a lower interest rate than keep sinking money into a leased car.  Spend a few thousand to buy a car for you, and buy your husband a $500 beater.

Critical to all this is making sure your husband is on board and recognizing how goofed up your situation is.  He needs to get pumped up about getting out of debt too.  And seriously, ditch the wine/beer until this fire is put out.

the fixer

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I'm currently a self-employed stay-at-home-husband. Even on the days I don't earn a dime from self employment, I can still do things around the house with my surplus of time that save money. Your husband, even if he can't work and even if he's not on disability, is a huge asset to you if you can get him to be productive.

Have him cook all the meals, learn simple couponing tricks (http://www.grocerycouponguide.com/articles/lazy-couponing-introduction-how-to-coupon-for-the-rest-of-us/), repair stuff that would otherwise need replacing, etc. You get a benefit by him doing anything that saves money, even if it's not everything possible, so start by helping him find ways to be productive that he enjoys. Getting him on board with your plan may need to come first; he should understand that both of your retirements are at risk if you can't get this under control, and on the flip side you'll be set for life if you can.

krenwren

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@chasesfish: You are ruthless!! On Monday I will call VW Credit and get the buyout on the CC. My pension is a cash value payout (that represents approximately 60% of my networth currently. I have saved the rest in my own investments.  And I am still thinking I'll get SS to help with my retirement.
  And @MilStachian I was thinking the same thing regarding a personal loan to get out of the lease.  You figure right, loan versus albatross, no contest!

@fixer: my hubs is a writer, dreamer, creative soul. He's difficult to wrangle into reality.  I didn't marry him for his earning potential.  I am happily married for 27 years so it works for us.  He does the cleaning, cooking and learning how to bake bread!  He'll do anything I ask. 

Kristin

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I highly recommend that you and your family go on a short-term spending freeze (maybe 1-2 weeks) to see how much money you can possibly save.  Cut absolutely everything out that is unnecessary.
Sometimes I do this just for fun to see just how little I can live off of for 1 week.  You will surprise yourself, and it is a great motivator to find new ways to save money.  For example, go through your pantry and freezer and see how much of it you can use up before going to the grocery store.  Drive your cars as little as possible by planning your errands appropriately. 
Meal planning is critical.  Don't plan your meals ahead of time, but try to see what is on sale at the store for the week and plan your meals around that. 
Congrats on taking the plunge and best of luck!

the fixer

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@fixer: my hubs is a writer, dreamer, creative soul. He's difficult to wrangle into reality.  I didn't marry him for his earning potential.  I am happily married for 27 years so it works for us.  He does the cleaning, cooking and learning how to bake bread!  He'll do anything I ask.

That actually sounds like a fine arrangement. Baking bread is an excellent example of productive use of time, since a homemade loaf can cost less than store-bought (depending on how cheaply you can get the ingredients).

I don't know how but I was starting to get the impression from earlier in the thread that he was just sitting around watching sports all day and spending your money... now it sounds like you're getting things under control and he's contributing where he can. That's great.

mm1970

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@chasesfish: You are ruthless!! On Monday I will call VW Credit and get the buyout on the CC. My pension is a cash value payout (that represents approximately 60% of my networth currently. I have saved the rest in my own investments.  And I am still thinking I'll get SS to help with my retirement.
  And @MilStachian I was thinking the same thing regarding a personal loan to get out of the lease.  You figure right, loan versus albatross, no contest!

@fixer: my hubs is a writer, dreamer, creative soul. He's difficult to wrangle into reality.  I didn't marry him for his earning potential.  I am happily married for 27 years so it works for us.  He does the cleaning, cooking and learning how to bake bread!  He'll do anything I ask.

That doesn't mean he cannot earn money.  I have a friend who is very hard working, engineer, practical.  Her husband is the dreamer.  He's the bread baker also. 

He was instrumental in starting the local group of the "Time Bank" (bartering time instead of money).  Builds community AND saves a lot of money if you know how to use it.  I bet there are a lot of things he could do to earn money (or save money via bartering and fixing things) that I cannot even really fathom.  (Because I'm an engineer.)  Although in my pre-kid days, I did make a little side cash making and selling baby afghans.

I have a friend who works for a law firm.  She makes money on the side cooking.  On Fridays she has "grilling day" in the summer and "soup day" in the winter, where she makes a big pot of something and charges a few bucks a person.  And on a regular basis she cooks and prepares lunches for her boss and her sister in law.  It's all about finding what others are willing to pay for.

footenote

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@chasesfish: You are ruthless!! On Monday I will call VW Credit and get the buyout on the CC. My pension is a cash value payout (that represents approximately 60% of my networth currently. I have saved the rest in my own investments.  And I am still thinking I'll get SS to help with my retirement.
  And @MilStachian I was thinking the same thing regarding a personal loan to get out of the lease.  You figure right, loan versus albatross, no contest!

@fixer: my hubs is a writer, dreamer, creative soul. He's difficult to wrangle into reality.  I didn't marry him for his earning potential.  I am happily married for 27 years so it works for us.  He does the cleaning, cooking and learning how to bake bread!  He'll do anything I ask.
I am very close to you in age and was pleasantly surprised at how much Social Security will contribute. When you are in the mood for a tedious task, download the detailed SS calculator. Have your earnings history handy. (If you don't have that easily at-hand, request a lifetime earning summary from SS in advance.)

Summary: for us, SS will start covering 38% of expenses in just 8 years and will cover our entire annual expenses starting in 15 years. This shrinks the time period we need to fund down to 7 years of full-expenses and 8 years of partial-expenses.

krenwren

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@footenote: I was surprised too about what SS will pay out.  I am confidant by the time I collect I will have ingrained all the mustachian principles need to live on that plus my retirement savings. 

For all that who are thinking about ways my husband can make some $$$,we are not ruling out him going back to work at some point, just not now while he is in recovery mode.  He needs one more surgery and recovery from that and he will get back into some situation, either a work from home deal or substitute teaching or writing or something!  He is not without skills, just not in a physical place right now to reenter the workplace. 


krenwren

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Holy crap, I just ran my year to date report on my "old debt" category and found I have paid off $13006.05 in old CC and personal debt.  That's without starting my new budget.  2014 here I come!!!!!

MrsPete

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This is going to sound horrible but the negligible amount to be had by selling on EBAY won't really put a dent in anything. We do sell stuff we don't need on EBAY and craigslist but again not enough to make a difference.  When one hour of overtime equals a hefty payday, the time and effort just don't seem worth it.  Hubs could go back to work but when we look at the costs--again I'd rather have him home manning the home front.   It's a reversal for sure.
It sounds horrible because it IS horrible.  I understand that selling a few things on ebay (or some other small job that he might be able to manage physically right now) will bring in only a couple dollars . . . but you're in a pretty awful place, and those couple dollars are dollars you don't have at this moment.  Since he's home all day, this is something that could fit into his schedule while managing the house.   

The reality is that you're falling for a rookie mistake:  You're saying ___ isn't worth my time because it won't solve my whole problem in one fell swoop.  You're thinking that small steps aren't worthwhile.  When your hair is on fire, you don't say, "No thank you.  That shot glass of water won't put out the fire.  I'll wait for a bigger glass."  No, you grab the small amount of water, even knowing that it isn't the total answer. 

You say that cost cutting would be the most expedient way to clean up your mess.  It seems to me that cost cutting *and* having a second income would be more expedient.  If that income is temporary until your debt is paid off, it gives you all the more reason (and means) to destroy that debt.
And you're dead right.


I have paid off almost $4000 in debt in the last two months by cutting costs and working overtime.  We don't have $4000 dollars of shit lying around to sell.
Paying off $4000 in debt is wonderful!  Keep up that good work. 

I also don't have $4000 worth of items I could sell lying around, but I betcha I could find $400 worth of stuff I'd never even miss.  As admirable as $4000 worth of pay-off was last month, wouldn't you be better off if it had been $4400? 

chasesfish

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And I just put up 10 items on ebay.

You said I was ruthless, I wanted to let you know I looked harder and found some useless stuff I could sell on Ebay too.  How'd your sales go?

krenwren

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It sounds horrible because it IS horrible.  I understand that selling a few things on ebay (or some other small job that he might be able to manage physically right now) will bring in only a couple dollars . . . but you're in a pretty awful place, and those couple dollars are dollars you don't have at this moment. 
[/quote]

Will have a second look.  I don't agree though that a thimble of spit is better than nothing, it is nothing. When we embrace EBAY, it will be more for shining a light on our free spending habits.  I like making chunky payments, not snowflaking.  I vow for 2014 to take one bill and start spitting at it. 
 

 Also @chasefish, I need to come up with about $15000 to get rid of one of the leases.  This will be my "hair on fire" goal for 2014 in addition to the last two CC.

krenwren

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@chasefish  I sold a pair of Frye boots for $90.  I am waiting on some clothing items and china to sell.  If everything ends up selling, I'll be about $200 bucks closer to debt free!  I have two phones to post, another $75 at least.  DH is in charge of packing and shipping, my bane!