Author Topic: Reader Case Study - $231k in debt and need help!  (Read 62023 times)

FrozenBits

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Re: Reader Case Study - $231k in debt and need help!
« Reply #100 on: January 26, 2017, 01:13:02 AM »
Posting to follow and support you!  You have gotten a lot of great advice so far.  You got this!

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Sapphire

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Re: Reader Case Study - $231k in debt and need help!
« Reply #101 on: January 26, 2017, 01:42:32 AM »
Wishing you all the best Dashh - you will get lots of support here. 
« Last Edit: January 27, 2017, 01:26:05 PM by Sapphire »

Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #102 on: January 26, 2017, 01:48:52 AM »
Look, you have a very good combined income so you can get out of it. I disagree with the advice re bankruptcy, that one should be the last resort, you are in a situation when you can pay off all this debt. Yes, it will take some time, but it is doable.

I hope you can sit down with your wife and decide on the next action. Facing the situation is the first step. It looks like you have a plan for cutting expenses and a budget.

Pick a debt and attack it next month.

horsepoor

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Re: Reader Case Study - $231k in debt and need help!
« Reply #103 on: January 26, 2017, 07:09:42 AM »

Pick a debt and attack it next month.

Wit electronic payment, you can attack it.today.  I find snowflake payments motivational.  Get a $5 mail in rebate?  Go put $5 on your target debt. Stayed $50 under on the grocery budget?  Put $50 on the debt. It's satisfying to see the balance drop frequently when you're getting started, and you won't have the cash sitting in your account as a temptation to spend.

microwaves

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Re: Reader Case Study - $231k in debt and need help!
« Reply #104 on: January 26, 2017, 09:19:14 AM »
From my perspective: You have an income problem at this point, not a spending problem. But before I talk about that, repeat this:

Quote
I will not donate other people's money

You're talking about tithing, saving for your kids' education and inheritance or whatever, and it all seems like a dream. What money are you saving? Your income isn't your money--it's the debtors' money. Getting a loan to give money to other people is not the same as giving your money to other people.

With that said, you need to learn more about protected assets in your state. Once you know that, you can either make a plan for bankruptcy or realize that it isn't an option. I would guess that bankruptcy is more palatable than the latter is, but unfortunately, the future is going to be bleak regardless.

This brings to mind the manager/CEO in Breaking Bad who owed so much money that a (relatively small) check wasn't actually going to fix his problems. You've reached the point where you don't have significant cuts you can make to your (estimated) budget: Selling your house doesn't help because you haven't built up equity in it yet; your car, while inefficient, is nearly paid off; you could sell your other car (your wife's car?) but ostensibly you'll still need a second car, so the realized gain isn't particularly high; your entertain and restaurant budgets are insignificant, as are the potential savings in your grocery bill.

That's your income problem. You will need thousands of dollars more per month than you're currently making, and that money can only be used to repay your loans. It cannot be used for any other purpose; otherwise, you'll have converted your income problem into a spending problem, which is surely how you got to this place to begin with. I don't have any ideas for ways to increase your income by that much per month or else I would already be doing that, and usually you have to spend money to make money. (I will not donate other people's money.)

Is your debt problem unique? Is it dire? Is it insurmountable? No. The good news: You can do this! The bad news as well as the reality: You're going to either declare bankruptcy or live in (spending) poverty for the next decade or so unless you stumble upon a buried treasure chest.

The reason I say that is because you simply don't have enough money to address your loans and you'll need to be committed to not spending anything extra for years and years. No vacations, no time off, no movies, etc. Assuming you want to pay your loans back, the order you should do that is:


Total      Monthly   
Amount   Rate   Payment   Comments
Loan #1   $4,676   35.90%   $177      7?
Loan #2   $4,278   27.98%   $194      6
CC #9   $1,000   26.24%   $41         3
CC #1   $2,588   25.99%   $28         4
CC #2   $2,279   24.99%   $72         5
CC #3   $7,997   24.49%   $198   
Loan #3   $882   20.00%   $284      1
CC #4   $8,447   15.49%   $231   
CC #5   $4,376   14.90%   $109   
Loan #4   $31,148   10.75%   $720   
Student loan #1   $49,036   6.88%   $368   
Auto loan #1   $25,868   4.09%   $515   Honda Pilot
Auto loan #2   $1,172   3.84%   $525   Nissan Frontier    2
Student loan #2   $4,066   3.63%   $86   
401K loan   $27,743   3.25%   $565   
Student loan #3   $2,508   2.75%   $108   
CC #6   $17,711   2.00%   $339   5-year pmt plan
CC #7   $2,032   0.00%   $78         7?
CC #8   $16,662   0.00%   $309   5-year pmt plan
IRS   $17,290      $240   Requesting 72 month pmt plan
Total:   $231,758      $5,187   



Ordinarily, you're supposed to pay debt based on the highest interest rates to lowest rates, but because you have an income problem instead of a spending problem, I'd aim at unlocking more money per month before reducing your $230k balance. This order will give you almost $1,400 more per month that you can use to repay your other loans with. Unfortunately, though, you won't have any money to spend while you're doing this, and I don't think your family will be thrilled at that prospect.

Do you think your wife could get a credit card if she applied? Or could you get another one? I'm curious to hear other people's thoughts on this, but why bother having the emergency fund at all here? If either of you could get another credit card during an emergency, what's the downside of using it instead of paying in cash? More debt? They're already down $230k. I'd definitely prioritize freeing up that $1,400/mo by immediately repaying those loans, but I'm positive lots of people would be uncomfortable spending the emergency fund on existing debt. It seems like you're already in an emergency, and my guess is that you've been utilizing this strategy already in order to collect that many credit cards.

I have no knowledge of IRS policies in this context, but I would get more information about that and then decide whether to focus on repaying that or the other loans with the $1,400 per month.

The bleak outlook here is that even with an extra $1,400/mo (from repaying those loans), that's only $16,800/yr, or $168,000/decade. Selling your house eliminates your mortgage payments, but then I'm guessing your rent payments won't be considerably smaller. I wish it were easier to make $230,000 quickly (and with 0% interest), but short of a windfall, you're looking at working a lot.

BigRed

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Re: Reader Case Study - $231k in debt and need help!
« Reply #105 on: January 26, 2017, 09:33:48 AM »

Is your debt problem unique? Is it dire? Is it insurmountable? No. The good news: You can do this! The bad news as well as the reality: You're going to either declare bankruptcy or live in (spending) poverty for the next decade or so unless you stumble upon a buried treasure chest.

The reason I say that is because you simply don't have enough money to address your loans and you'll need to be committed to not spending anything extra for years and years. No vacations, no time off, no movies, etc. Assuming you want to pay your loans back, the order you should do that is:


Total      Monthly   
Amount   Rate   Payment   Comments
Loan #1   $4,676   35.90%   $177      7?
Loan #2   $4,278   27.98%   $194      6
CC #9   $1,000   26.24%   $41         3
CC #1   $2,588   25.99%   $28         4
CC #2   $2,279   24.99%   $72         5
CC #3   $7,997   24.49%   $198   
Loan #3   $882   20.00%   $284      1
CC #4   $8,447   15.49%   $231   
CC #5   $4,376   14.90%   $109   
Loan #4   $31,148   10.75%   $720   
Student loan #1   $49,036   6.88%   $368   
Auto loan #1   $25,868   4.09%   $515   Honda Pilot
Auto loan #2   $1,172   3.84%   $525   Nissan Frontier    2
Student loan #2   $4,066   3.63%   $86   
401K loan   $27,743   3.25%   $565   
Student loan #3   $2,508   2.75%   $108   
CC #6   $17,711   2.00%   $339   5-year pmt plan
CC #7   $2,032   0.00%   $78         7?
CC #8   $16,662   0.00%   $309   5-year pmt plan
IRS   $17,290      $240   Requesting 72 month pmt plan
Total:   $231,758      $5,187   



Ordinarily, you're supposed to pay debt based on the highest interest rates to lowest rates, but because you have an income problem instead of a spending problem, I'd aim at unlocking more money per month before reducing your $230k balance. This order will give you almost $1,400 more per month that you can use to repay your other loans with. Unfortunately, though, you won't have any money to spend while you're doing this, and I don't think your family will be thrilled at that prospect.

Do you think your wife could get a credit card if she applied? Or could you get another one? I'm curious to hear other people's thoughts on this, but why bother having the emergency fund at all here? If either of you could get another credit card during an emergency, what's the downside of using it instead of paying in cash? More debt? They're already down $230k. I'd definitely prioritize freeing up that $1,400/mo by immediately repaying those loans, but I'm positive lots of people would be uncomfortable spending the emergency fund on existing debt. It seems like you're already in an emergency, and my guess is that you've been utilizing this strategy already in order to collect that many credit cards.

I have no knowledge of IRS policies in this context, but I would get more information about that and then decide whether to focus on repaying that or the other loans with the $1,400 per month.

The bleak outlook here is that even with an extra $1,400/mo (from repaying those loans), that's only $16,800/yr, or $168,000/decade. Selling your house eliminates your mortgage payments, but then I'm guessing your rent payments won't be considerably smaller. I wish it were easier to make $230,000 quickly (and with 0% interest), but short of a windfall, you're looking at working a lot.

This summary is too bleak, and I feel the need to correct it because it is likely to be demotivating.  dashh is paying $7100 in debt payments every month (this includes the $1400, since that's just moving one payment towards other debt).  Continuing at that rate, $230,000 is only 33 months.  Obviously, there's interest, but all of the 5 figure debt is 10% or less, so that shouldn't add more than another 1/3rd to the total.  If you can stick to your new budget, this debt is done in about 4 years.  And then, you'll have practice living at a savings rate of nearly 70%!!!  You'll be an instant super-mustachian at that point, plus the daycare will be done by then.  The sky is the limit.

rpr

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Re: Reader Case Study - $231k in debt and need help!
« Reply #106 on: January 26, 2017, 11:58:48 AM »
One other option before declaring bankruptcy is to schedule a consultation with a local non-profit Consumer Credit Counseling Service (CCCS) office. Make sure that you can walk in and talk to a real live person. There are similar online agencies but I would avoid those as I'm a little skeptical.

The CCCS consultation is free. This organization usually has agreements with many lenders and can work to drastically reduce the interest rate. In effect this is a consolidation type of loan with a Debt Management Plan. You make one payment to the CCCS and then they pay the creditors. There is usually a small monthly fee. The CCCS works to make sure that the debt is usually paid off in 3-5 years. The CCCS agent should also let you know about all possible options including bankruptcy if applicable.

The big downside of this --
All credit cards will be immediately closed as you continue to make the payments. Your credit score will be affected, maybe not as much as declaring bankruptcy. Eventually, your score will start rising. This may take a few years (3-5).

The CCCS route is not for everyone and may not be for you. If you do go to a CCCS consultation, ask lot of questions. Take your partner along if possible. Ask for all the paperwork.

IMO, if you are able to pay off your creditors in  3-5 years even with the high interest rates, it is likely better to do it yourself without going to CCCS or without declaring bankruptcy. But it does not hurt to talk to both a CCCS agent and a bankruptcy attorney. 

The above information is based on my individual experience after talking to a local CCCS agent a long time ago. It is possible policies have changed. But it doesn't hurt to ask. 

MandyM

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Re: Reader Case Study - $231k in debt and need help!
« Reply #107 on: January 26, 2017, 12:59:27 PM »
You've reached the point where you don't have significant cuts you can make to your (estimated) budget: Selling your house doesn't help because you haven't built up equity in it yet; your car, while inefficient, is nearly paid off; you could sell your other car (your wife's car?) but ostensibly you'll still need a second car, so the realized gain isn't particularly high; your entertain and restaurant budgets are insignificant, as are the potential savings in your grocery bill.

I disagree with the above. Its focused solely on large gains, which a short term solution. Sure it would be great if there was equity to tap into to make a big dent in the loans. But there are are a ton of other reasons to consider selling the house and the cars and also to trim budget line items. For one, a smaller house typically translates to smaller utility bills, taxes and insurance. Moving closer to work reduces commuting costs and time.

For groceries and restaurant line items, I'd say the money savings is only half of the point. Bad habits are what dug this hole and good habits are what will get him - and keep him - out. Mindless spending needs to be reigned in on a day by day, dollar by dollar basis. And maybe at the end of it you spend about the same as you did last month, but there is value in the examination of each purchase beyond the money. "Do I really need to spend this money" should become the default thought that rolls through your head.
"Freedom lies in being bold." -Robert Frost

Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #108 on: January 26, 2017, 04:28:48 PM »
It is not all doom and gloom. I disagree with the previous poster that getting rid of the house won't solve the problem. It will ease up the burden.op has so little equity in the house that he will be better off getting rid of it and renting, because keeping the mcmansion is costing him over 2k a month just in mortgage. Plus taxes, insurance, cleaners, security, lawncare, maintenance and repairs .....it is a giant money pit they can't afford. He will probably end up with 0 after selling it, but it will free up cash. If you can find a decent rental closer to work for under 2k a month, you are good. Ideally, you should pay way less than that. Have a look at the rentals closer to your wife's or your workplace to get a realistic picture. Also, have a chat with local realtor to see how much your house will sell for and how quickly.

Same with the cars. How much can you sell the pilot for? Can you get enough to buy an econobox with cash? 2 of them? (might be dreaming here). The wife will have go give up driving that giant carpayment. I guess they are underwater with that car.

Is there anything you can sell asap to pay off those high interest loans? Bikes, electronics, jewellery, collectibles?

If losing face and social status is a problem, just ignore the joneses. You can't afford this lifestyle. Maybe style yourself as a reborn environmentalist, telling them that you are embracing minimalism, simplifying your life becase this consumerism is stressing you out and is bad for the planet. Being a tree hugging greenie sounds better than broke.

If the wife is not on board yet (and why not), do your research first and show her the numbers. If you have a solid plan and a timeline, you should be able to persuade her to slash and burn. Especially if you tell her that you should be able to turn your lives around in about 3 years. It is not that long to go without manicures, and with your incomes you will be able to build wealth and enjoy a comfortable lifestyle once this debt is gone.

Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #109 on: January 26, 2017, 04:39:22 PM »
Oops, sorry, i mixed up the cars. Definitely, sell them both, and whatever cash you are getting, this is your car budget. If you need to split it 80/20 to make the wife happy, so be it. But hopefully she will be reasonable. Btw i spent 7k on an old toyota 8 years ago, it is still going strong. 😀 have at least 3 years left in it.

MrsPete

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Re: Reader Case Study - $231k in debt and need help!
« Reply #110 on: January 26, 2017, 06:48:52 PM »
We are drowning in debt and have to begin digging out.  Obviously our primary goal is to get stable and begin paying down the debt.  I have a lot of mixed feelings right now – extreme embarrassment and shame, fear and a little bit of empowerment. 
Look at it this way:  One of you is working JUST to pay off your consumer debt.  A full time job's take-home pay gone to cover yesterday's luxuries /mistakes.  That's a big face punch ... but worse, you're still spending at the rate that got you into this situation! 

Things to consider:

- Sell the house and move to something smaller.  You say it's slightly below median, but 2900 sf is a big house, and almost 2k is a huge mortgage.  You say it's a great neighborhood, good schools, etc. ... but you're driving an insane distance to work in order to live in this place.  Realistically, you're trading family life to live in this great spot.  How does that make sense? 

- Yes, you are over-carred.  Between payments, maintenance, insurance, it's a huge cost.  You say the two of you work in the same city (but different schedules).  Look into getting on the same schedule, even if it means a pay cut.  Ditching one car would save you BIG BUCKS.

- If your wife JUST gives up the hair/nails, that could turn into roughly 34,000 for the 2-year old's college account.  And that's just ONE change.  Okay, it wouldn't really be that much because she's not going to go from $1200/year to 0 ... but she could slash it significantly to cuts at a $10-15/walk-in place and spend maybe $100-150/year, and that would go a long, long way towards college.

- Don't spend a single minute thinking about your credit score; instead, think about financial stability.  They aren't the same thing.  Your credit score is all about being able to borrow -- you can never borrow your way out of this.

- Your commute time has to be cutting into your family time.  Look into jobs closer to home; at the moment you need to work as much as possible, but once this is behind you, your quality of life will increase too. 

- You do realize that 100% financing is a mistake, and the credit union who offered it to you is not your friend, right?  However, if they're willing to lend, lend, lend, why not get a personal loan from them and use it to pay off the credit cards?  The benefit is that the credit card interest is insane, and a personal loan would have to be a lower rate.  Of course, if you do this, you must cancel the credit cards.   

- Your wife wants to drive a van or SUV.  Here's the question:  Would she rather drive a van right now and be like everyone else, or would she prefer to one day be able to pay for the kids' college and retire? 

- This is not an income problem.  You're earning 2Xs as much as my husband and I, yet we are debt-free, own two properties, are in the two-comma club, and have paid for one kid's college /are halfway through the second kids' college.  Your income is PLENTY ... it's your spending /your lifestyle that's inflated; however, this is a choice.

« Last Edit: January 26, 2017, 06:50:47 PM by MrsPete »

Pizzabrewer

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Re: Reader Case Study - $231k in debt and need help!
« Reply #111 on: January 27, 2017, 02:20:09 PM »


- Your commute time has to be cutting into your family time.  Look into jobs closer to home;   


This.

What is often lost in the here-and-now financial aspects of these discussions is the human/family cost.  You don't want to move closer to work because of school/friends/church/etc.  Yet you are both spending hours in the car each day while someone else raises your children.  Take it from someone who is chronologically much further along than you, time with your children is fleeting and priceless.

Move somewhere within 10-15 minutes (at most) of your jobs.  Time with your children is the worst thing to squander.

Mikila

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Re: Reader Case Study - $231k in debt and need help!
« Reply #112 on: January 29, 2017, 01:18:34 PM »
Others have given great advice.  I just have thing to add:  If I owed that much money, I would not trust myself with credit cards. 
Do yourself a favor and cut them all up.  Use cash and debit/ prepaid cards only. 

You know what they say, the first step to getting out of  a hole is to stop digging.

Laura33

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Re: Reader Case Study - $231k in debt and need help!
« Reply #113 on: January 29, 2017, 08:29:38 PM »
Thanks again to everyone for your comments and advice.  I am going to have a talk with my wife this weekend on all of this and we will see how it goes.

On a positive note, I did some market research on our home and it looks like we may have a little equity.  The market has been pretty hot in our area and I think we could get $330k - $335k for our home (we owe $302k).  Not a lot of equity, but may end up with something at closing given that I will use a flat fee MLS listing and basically sell it myself to save on commissions. 

I will post an update after our conversation.

Good luck with both.  And thanks for the earlier post.  FWIW, I think you just did what so many other people do -- you make a good salary, and so it seems like you "should" be able to have the nice house, and nice cars, and nice lifestyle, and all that.  And then you think about whether you can afford it based on whether someone will loan you money for it, and whether the payment fits into your monthly budget.  And before you know it -- and without even thinking about it, you're just doing life as you always thought it should be -- boom, you're stretched to the max.  So then you look for quick fix ideas to make more money and can't figure out why you're always so tight, and  doesn't work. And now you're in deeper and there doesn't seem to be a way our.

The reality is that no one can have everything.  Look at what you want:

Big house with yard in neighborhood with good schools
Two nice cars
Nice vacations
Nice lifestyle - eating out, manicures, etc.
Early retirement

Now pick one.  If you're really making a lot, maybe pick two.  That's reality.  For everyone, not just you.  But that's not what you see on TV -- that's not what you hear at the neighborhood barbecue.  No, what you see is Joe driving home a new truck; what you hear is Sue is talking about their big vacation.  You don't see that Joe saved for 10 years, and Sue doesn't brag about the 18% interest she is paying to cover that trip. Unless you happened to luck out and get parents who really taught you how to budget and all about compound interest, you have to figure it out on your own.  And that's hard, and most people learn it the hard way.

You really are not alone (my dumb-ass brother right out of college bought a brand-new SUV, promptly wrecked it, and replaced it with an even bigger truck).  But you can get there, and it does get better.  But you also have to fight your own way back, slowly and surely.  It's the need for immediate gratification that got you here, and the best way to unlearn that habit is (unfortunately) to feel the pain, month by month, as you whack at it bit by bit.  So please don't declare bankruptcy -- that is just another quick fix, and you'll likely find yourself right back here in 5 years.  Commit to doing the work -- no more buying anything on credit, no more "no down, easy monthly payments."  Eat what you kill, flip the usurious payday lenders the bird, prove to yourself you can do this.  I know you can.
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ysette9

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Re: Reader Case Study - $231k in debt and need help!
« Reply #114 on: January 30, 2017, 09:24:20 AM »
Posting to follow. I am looking forward to hearing how the weekend conversation went. My fingers are crossed!
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pachnik

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Re: Reader Case Study - $231k in debt and need help!
« Reply #115 on: January 30, 2017, 09:29:19 AM »
Posting to follow. I am looking forward to hearing how the weekend conversation went. My fingers are crossed!

+1.  I really hope it went okay.  :)   

Poundwise

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Re: Reader Case Study - $231k in debt and need help!
« Reply #116 on: January 30, 2017, 10:43:33 AM »
Posting to follow. I am looking forward to hearing how the weekend conversation went. My fingers are crossed!

+1.  I really hope it went okay.  :)

Me too!  Even if your wife isn't on board, though, you can still go on ahead by replacing your car with something cheaper, and making whatever cuts you can by taking on more cooking, yard work, etc.  Once you've put some more skin in the game, you'll be much better placed to make requests.

nereo

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Re: Reader Case Study - $231k in debt and need help!
« Reply #117 on: February 01, 2017, 08:54:41 AM »
sounds like you are making great progress dashh.

Re; moving. It goes without saying that your wife needs to be completely on board, and it sounds like she's already very tired of the soul-crushing commute she's endured for the last 10 years.  Remember that these lifestyle changes are not solely about paying off your mountain of debt - they should also be about improving the quality of life.

As counter-intuative as it first seems to our consumer culture, choosing a smaller home closer to work will INCREASE your QOL.
We did this about 6 years ago to eliminate crazy commutes and get back all that lost time.  It was an abrupt transition but one of the best we ever did.

"Do not confuse complexity with superiority"

Poundwise

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Re: Reader Case Study - $231k in debt and need help!
« Reply #118 on: February 01, 2017, 09:54:38 AM »
Glad to hear you had that talk!  Yes, moving kids out of a school and a bigger house at this age is difficult but better now than later, when your son is a teen.  My kids still are friends with children from our old neighborhood, and actually it is a good thing to have more than one circle of friends.  When you are having a problem with one set of friends, it's comforting to have another set to turn to.

PJ

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Re: Reader Case Study - $231k in debt and need help!
« Reply #119 on: February 01, 2017, 09:57:58 AM »
dashh, it's natural to be concerned about how a move will affect your son.  But children do move all the time, for both positive and negative reasons, and for the most part, they cope.  With careful consideration to things like the time of year, how you'll help him maintain contact with friends, what facilities are in the new location (like parks, and libraries and public swimming pools), and knowing that your commute will be much shorter and you'll have the time to do more with him, then a move doesn't have to be a negative thing in his life.  And depending on how you include him in the process, you'll also be teaching him how to make good financial decisions, which will have a major impact on his future life.  The attitude to take is not "we have to do this to escape financial ruin" but "we're choosing to do this so we can have a better life now and in the future."

And hey, having parents who are less stressed because the burden of debt has been lifted from them?  That's priceless.
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Re: Reader Case Study - $231k in debt and need help!
« Reply #120 on: February 01, 2017, 10:38:09 AM »
Probably the best thing you can do for your kid is to get in a situation where you and your wife are happy. If you guys are stressed out about money all the time it will be perceived by kids.
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GetSmart

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Re: Reader Case Study - $231k in debt and need help!
« Reply #121 on: February 01, 2017, 11:41:17 AM »
Regardless of all other emotions and attachments - is the area where you work a decent place to live ?  Perhaps driving around to see what's available near the work place in terms of neighborhoods, amenities, etc. would generate a different mindset.  You could do it in a 'fun - adventure - just for kicks - theoretical' kind of way.

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Re: Reader Case Study - $231k in debt and need help!
« Reply #122 on: February 01, 2017, 11:46:24 AM »
Thanks for the comments. 

In terms of the house and moving - one big issue is that my wife is very emotionally attached to our home.  I can just see it as a house and a financial burden but that is harder for her to see given her attachment.  I understand where she is coming from and it will be something we have to work through together.
That's understandable.
Don't feel like it's imperative that you move today.  Let the idea settle for a few weeks - no doubt your wife will think about it during her 2 hour commutes.  Maybe in a month or two you both can look at some places closer to work (either rentals or homes), again just to see what's out there.  Only move when both of you firmly agree that it is a good idea (and even then there will be some attachment). It might be six months, or even a year from now. 

If you haven't this article yet on the True Cost of Commuting, check it out.
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horsepoor

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Re: Reader Case Study - $231k in debt and need help!
« Reply #123 on: February 01, 2017, 12:06:07 PM »
Regardless of all other emotions and attachments - is the area where you work a decent place to live ?  Perhaps driving around to see what's available near the work place in terms of neighborhoods, amenities, etc. would generate a different mindset.  You could do it in a 'fun - adventure - just for kicks - theoretical' kind of way.

Yes, this.  Also, test the commute from your hypothetical new home.  When we moved from 30 minutes to 8 minutes away from work, it was amazing.  During escrow, I would just pop by the new house and think:  Wow, this is my new commute!  Then I'd imagine all the time we both just bought back.  BTW, even though I never had as long of a commute as you, I found way more time to lead a healthy lifestyle and lost a ton of weight after moving closer to work.  You'll have way more time to provide support to your son as well, which should help him make the transition.

Well done on having the talk.  Keep us posted as you move forward!

galliver

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Re: Reader Case Study - $231k in debt and need help!
« Reply #124 on: February 01, 2017, 01:12:23 PM »
If I recall correctly, your older kid was in elementary school? More than likely, a move will not hurt him/her, if they're a fairly average kid, socially. My parents moved...4 different times while one or more of us kids was in school (but 2 of us only moved twice, youngest sister 3x during school years). I think my youngest sister and I would agree moving between 2nd and 3rd grade was no problem; they mix up classes each year anyway so all the kids were making new friends. My other sister moved when she was 10 and had a bit more trouble with it. She's very introverted and had a best friend she was really close to that we moved away from. Even so, by high school and college she was fine. It's harder to move in high school as curricula (esp between states!) and grading systems don't always line up. And that's where your grades actually matter! So, frame it as an adventure, don't move till summer, and take care of it now when they're adaptable and family-centric rather than when the kid is older and has more connections and more at stake. :)

Laura33

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Re: Reader Case Study - $231k in debt and need help!
« Reply #125 on: February 01, 2017, 03:59:33 PM »
Thanks for the comments. 

In terms of the house and moving - one big issue is that my wife is very emotionally attached to our home.  I can just see it as a house and a financial burden but that is harder for her to see given her attachment.  I understand where she is coming from and it will be something we have to work through together.

I totally get this -- I am like your wife, you are dragging me out of my house feet first.  One question:  does she know how bad your situation is?  I'm not sure how much she has known/participated along the way vs. coming home one day to "hey honey, we're way over our heads and I already figured out that the solution is to move." 

I ask because usually the best way to convince someone is to let them choose it themselves.  If you haven't already, sit down with the debts, what you have been spending to maintain your current nice lifestyle, and a couple of proposed options.  You can walk her through how long it would take to pay off the debts on a "normal" repayment plan, so she can see that basically means working full-time forever.  Then you can walk her through your "sell and move closer" option, to show how much more quickly that gets you there, and how that will enable you to focus on other things you value (RE, maybe going part-time at some point, etc. -- pick some things that she really cares about that selling the house will allow you to work toward).  And then you can work with her to develop another option of the "if we stay put" variety -- that's always an option, but it means really significant tradeoffs, like selling both cars and becoming a one-car family in an econobox, cutting total food budget to maybe $400/mo. (or less), less desirable childcare, zero extras for X years, etc.  That helps demonstrate the real "cost" of keeping the house, and so gives her the ability to decide on her own that, as much as she loves this house, it is really not worth that degree of tradeoffs.  And that kind of buy-in is the only way any of this actually works long-term anyway.

But I am very impressed with both of you so far -- you for facing up to this and diving in so whole-heartedly, and your DW for being so receptive to such a major upheaval in your lives for the greater good.  Please keep us posted!   
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Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #126 on: February 01, 2017, 08:51:02 PM »
Congratulations on having the talk.

Hope the wife is ready to move on quickly, as currently you are just threading water. Run the numbers again. Together. Show her that you can fix this in about 3 years or less. It is not that long. And then you will be free.

Find a few nice rentals closer to work. Have a look. Check out the local schools.

With that commute, your house is just a very expensive bedroom and storage space, you have only a few hours a day to be emptionally attached to. You could spend those 2 hours you currently spend commuting with your children instead. How does that sound?

Bee21

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Re: Reader Case Study - $231k in debt and need help!
« Reply #127 on: February 02, 2017, 12:47:14 AM »
You are doing well. Glad you came up with some new areas you can optimise. What are you planning to do with these savings?

Wife will come around. She might take a while, but she has to. If you keep focusing on sorting this out, you will be able to motivate her.

Let us know how you go. You might want to start a journal to document your journey.. It is good to see people taking advice and making progress.


Vindicated

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Re: Reader Case Study - $231k in debt and need help!
« Reply #128 on: February 02, 2017, 12:40:17 PM »
Keep it up, Dashh!

I'm posting to follow your journey.

I'd like to second the idea of a debt drawing.  I am doing one as well.  It's meditative and motivating!

What city/state do you live in, or are planning to move to?  Sorry if I missed this somewhere before.
My MMM Journal: https://forum.mrmoneymustache.com/journals/my-almost-perfect-life-experience/

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Re: Reader Case Study - $231k in debt and need help!
« Reply #129 on: February 08, 2017, 09:51:04 PM »
Great to look back at your first post and see where you've followed up on some of the things you identified right at the beginning.  It's only been a couple of weeks, and you're making your way right through that list! 

Good for you, and keep up the good work.
'To be human you must bear witness to justice. Justice is what love looks like in public." 
Dr. Cornel West

Vindicated

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Re: Reader Case Study - $231k in debt and need help!
« Reply #130 on: February 09, 2017, 06:17:02 AM »
Baby steps...I believe I am going to start a journal to share more of our journey.  I think it would help me to stay on track and we can use all the support we can get!

I'll keep an eye out for your journal!  Keep trimming that fat!
My MMM Journal: https://forum.mrmoneymustache.com/journals/my-almost-perfect-life-experience/

"Remember that sometimes not getting what you want is a wonderful stroke of luck.” - Dalai Lama

jessicat

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Re: Reader Case Study - $231k in debt and need help!
« Reply #131 on: February 09, 2017, 06:36:48 AM »
I am excited for you and your wife.  You guys can do this and you are changing the way you view money.  You are choosing happiness.  You will love the way it feels when all of your debt is gone.

ysette9

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Re: Reader Case Study - $231k in debt and need help!
« Reply #132 on: February 09, 2017, 06:43:55 AM »
You're making good steps. Congrats! Keep it up and keep posting so we can cheer you on.
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Re: Reader Case Study - $231k in debt and need help!
« Reply #133 on: February 09, 2017, 08:52:34 AM »
Posting to follow.  I'm inspired by your determination to not give up and tackle a very scary pile of debt.  It will be a long haul but in accordance with the principles of Mustachianism, simplifying your lifestyle and living more frugally should actually make you happier, healthier, and wealthier.  Good luck!

kkenn

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Re: Reader Case Study - $231k in debt and need help!
« Reply #134 on: February 09, 2017, 10:23:28 AM »
Good luck Dashh! Rooting for you from California! You can do this :) 

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Re: Reader Case Study - $231k in debt and need help!
« Reply #135 on: February 09, 2017, 08:09:22 PM »
Posting to follow.  I'm inspired by your determination to not give up and tackle a very scary pile of debt.  It will be a long haul but in accordance with the principles of Mustachianism, simplifying your lifestyle and living more frugally should actually make you happier, healthier, and wealthier.  Good luck!

+1 - you seem to have the right attitude about this! :)
"Not wanting something is as good as possessing it." ~Donald Horban

nereo

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Re: Reader Case Study - $231k in debt and need help!
« Reply #136 on: February 16, 2017, 12:58:48 PM »
Quote
If anyone here has been able to change your habits regarding soda/junk food/fast food I would really appreciate any tips.

Awesome update! 
Regarding avoiding junk food/fast food, I first had to realize that I wound up eating junk food because I was hungry, and it was fast, and it was simple.
My solution early on was better planning and having a small arsenal of ready-to-heat meals.  It's often about the same amount of work to prepare 4 lasagnas and freeze 3 then it is just to make one.  There's a whole list of things that can be prepped ahead and then frozen (you've already found frozen pizzas).  Most of the time our ready-to-cook meals take less time plate-to-table than if we ordered takeout.  We'll spend 2 or 3 sundays per month bulk-prepping meals.

We also always make enough for to take for lunch, eliminating the need/desire to buy lunches at work.

Regarding soda - just don't buy it.  I drink seltzer water + lime/lemon most of the time (yes, I have a sodastream), or plain old water.
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homestead neohio

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Re: Reader Case Study - $231k in debt and need help!
« Reply #137 on: February 16, 2017, 01:18:37 PM »
If anyone here has been able to change your habits regarding soda/junk food/fast food I would really appreciate any tips.
...
Anyway I know I am not helping things with my wife if I flip flop on this and she is just going to be confused and frustrated (and much less likely to want to sell and move). 

Great update, dashh. 

For my family it was easy to change diets after realizing how terrible the industrial food complex is.  This happened slowly over time through reading (try "Salt, Sugar, Fat") and watching entertaining and disturbing documentaries ("Fast Food Nation").  There are lots of others.

If you can do your flip-flopping on this thread, we can help you think through this stuff without exposing the DW to the confusion/frustration.  Or let her see that this is hard for you, too, but so important you still go through with it.  You certainly haven't squandered any opportunities, you are just doubting some major decisions before pulling the trigger.  Doubt away, re-think, but ultimately make the best decisions for future you, instead of falling for smoke and mirrors and re-re-re-mortgaging your future.


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Re: Reader Case Study - $231k in debt and need help!
« Reply #138 on: February 16, 2017, 01:22:15 PM »
http://forum.mrmoneymustache.com/ask-a-mustachian/help-me-regain-my-health/msg1405572/#msg1405572

This thread has lots of good info on improving dietary habits.

Great work on cutting your budget down.  You're going  to see results so quickly as those crazier interest rate debts get knocked out, and you gain momentum!

pachnik

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Re: Reader Case Study - $231k in debt and need help!
« Reply #139 on: February 16, 2017, 01:23:06 PM »
Re:  soda.

In my 20's I used to drink a litre of diet Pepsi per day.  I stopped by switching to club soda for a little while, then to mineral water and then to plain tap water.   I never went back to drinking pop or soda.  It is really bad for you - stains your teeth, can create cavities, and IIRC, there is a chemical in it that leaches calcium from your bones.  So just bad stuff all around.

Good luck!!!!   

Also, planning really helps me stay away from junk food.  One thing I always do is keep some almonds/trail mix in a container in my desk at work.  If my lunch isn't enough or i get hungry, then I just eat that rather than buy a snack from a coffee shop or corner store.   

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Re: Reader Case Study - $231k in debt and need help!
« Reply #140 on: February 16, 2017, 01:34:56 PM »
Congrats on making progress with the budget!  I still say sell the truck and use the money to buy a cheaper car or two that will replace one or both of your vehicles.  If I were you I would just take it one step at a time and focus on replacing your truck for now and freeing up some cash.  You can figure out the wife's vehicle when the time comes.  Progress is made one small step at a time.  You got this!

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Re: Reader Case Study - $231k in debt and need help!
« Reply #141 on: February 16, 2017, 01:45:21 PM »
Congrats for starting to turn things around dashh. Keep it up and stay motivated and you'll be out of this hole before you know it!

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Re: Reader Case Study - $231k in debt and need help!
« Reply #142 on: February 16, 2017, 02:15:48 PM »
Sounds like good progress. When you sell the truck and buy a more mustache-friendly vehicle for yourself, could you pay the remaining extra funds against your wife's Pilot? Then the equity would be there for when she's ready to sell (or at least it would be paid off more quickly). Having the cash tied up in the Pilot would give you less flexibility to jump on good deal on a different vehicle if it came available, but if you think she's going to take a long time to make this move, it could be a reasonable compromise and keep the funds allocated where you want them. Or maybe the monthly payment could be lowered by paying a lump sum?
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galliver

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Re: Reader Case Study - $231k in debt and need help!
« Reply #143 on: February 16, 2017, 02:17:28 PM »
If anyone here has been able to change your habits regarding soda/junk food/fast food I would really appreciate any tips.

The simplest (and I'm not saying easiest) way is to not buy it. Not bring it in your home in the first place. Growing up, with rare exceptions, we'd only have chips and soda at parties (sometimes picnics/barbeques). They weren't an everyday snack. Having that attitude made it easier to instill a similar rule for myself as an adult (after developing some less-than-stellar habits in college, heh). Point is, 100% prohibition probably won't work, but treating these things as truly rare indulgences rather than something you pick up weekly will drastically decrease consumption. Up to you what your rules are. I do like having some food groups reserved for parties/gatherings.

For sodas, I personally am not a huge fan of fizzy and/or extremely artificial flavors, but I do like a flavored/sweetened beverage now and then...however, I limit myself to one on normal days (i.e. non-celebrations/gatherings) whether it's a glass of juice or ginger beer, beer or cider, glass of wine, etc and I don't always have that. Bf and I might split a bottle of wine on weekend... Other things I like to do are homemade iced tea or lemonade (I add far less sugar than is in the packaged stuff), flavored water (add cucumber, herbs like basil or mint, citrus, berries, etc and just sit it in the fridge a few hours up to a few days...feels very fancy IMO), or flavored fizzy water like LaCroix. The last is not cheaper than soda, but if you like it less, even as it fulfills your desire for bubbles you'll likely consume less and less of it. Finally, I do drink black tea in basically unlimited quantities whenever I want, as well as water of course.

Re: your 2) and 3)....it's ultimately up to you what your priorities are. People here will likely try to convince you to sell your house/car/etc but the real question is: what do you want more: to be out of debt sooner or to have these things? And if your answer is "the latter and I'm willing to cut the rest of the budget and scrimp for 5 years"...there's not a lot of point in convincing you otherwise, I think.

The Happy Philosopher

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Re: Reader Case Study - $231k in debt and need help!
« Reply #144 on: February 16, 2017, 02:28:11 PM »
Hello all,

I wanted to post an update regarding our progress and also to just share some of things I have been going through:

1)    Monthly Budget:  The monthly budget cuts have gone really well with us shaving around $1K/month.  We are tracking all of our expenditures with YNAB and things are going pretty good.  I am really happy that we were able to cancel all of the Y early/after care which is saving us $277/mo!  The bus is working out great for our son.  We still need to tighten up our grocery/eating out as I had not factored in my wife’s café at work.  She usually eats lunch there (at a discount) and sometimes brings home meals for dinner.  We also still have money budgeted ($100) for eating out, but need to bring it down even more.  That is one of my issues that I have to lead on.  I did take the tip that someone posted about buying cheaper frozen pizzas to have on hand.  Sometimes we get home and are spend and just order pizza but instead I told my wife we could just cook the frozen pizzas for much less cost.  Another area I can help with is with my soda/junk food problem.  Not only does it cost us money at the grocery store, but it is terrible for my health.  Not to mention my oldest son has already been influenced by my setting a very bad example about eating and drinking junk.  I feel really bad about it and must make some changes.  If anyone here has been able to change your habits regarding soda/junk food/fast food I would really appreciate any tips.

2)   Autos:   So I was supposed to get my truck ready to sell last weekend.  My wife was out of town with the kids which gave me a chance to clean it up and take pictures to post on CL.  I found myself avoiding it and ended up cleaning the entire garage and house instead.  My internal dialogue went something like this, “I worked hard for many years to get this truck paid off and I deserve to keep it,” and “this truck has been very helpful in my house flipping business and I am going to need it in the future,” and “what if I buy a lemon and have to spend more money to fix it?”  I think there is a bit of truth in all of these but the bottom line is I have equity in that truck that can help me get out of debt!  My entitled mindset really kicked in and I started to rationalize keeping it.  I told my wife I changed my mind and she came up with her own rationalizations to not sell it as well.  But then she said something that made me think – she said now I know how she was emotionally tied to our house since I was emotionally tied to my truck.  That made me think and it just felt wrong to not sell it.  What message is that sending to her?  I am supposed to be leading this and committing to it.  The past few days I have thought more about it and I know I need to sell it.  I think part of me is also hung up on the fact that my wife does not want to sell her Pilot.  My plan was to use $5k of the $13k or so I can get for my truck to buy me a car and then use the rest to buy her something else.   That way we can sell the Pilot and get rid of $25k of debt and a $515/mo payment.  So I don’t want to sell my truck and use the money to pay off other debt because then I will not have the money to buy her another car if we can ever agree on selling it.  I am open to suggestions here.  I know I just need to start with selling the truck (which I still plan to do) but should I pay off some debt or hold the money for another car?

3)   House:  Where do I begin – we had agreed to pretty much put this on hold and look at options depending on where I land on the job front.  However, this weekend while deciding I didn’t want to sell the truck I also did a complete 180 on the house too.  It is like my old mindset just kicked in and said “screw it we are staying and I am not selling my truck…we deserve all of this and will just make the budget changes and take 5 years to pay this all off.”  A big part of that mindset is my job/career.  I have always resisted accounting/finance for some reason and when I got into real estate flipping thought that was what I wanted to do.  I really enjoy it and it is great but I just cannot make that much money at it right now.  So a part of me is saying to suck it up, get a job in finance that I can tolerate and will help us get out of debt faster and move forward.  The other part is saying keep the house and try to get a job closer to home (which will not pay as much IF I can find one) and still pursue this real estate dream.  The problem is the real estate stuff is part of the reason we are in this mess.  I need to keep it as a side hustle and just get a job that can get us out of this hole.  And that job will most likely be closer to my wife’s work which puts us back where we started with the commutes.  So it would make sense for the house to go too and we move closer.  Anyway I know I am not helping things with my wife if I flip flop on this and she is just going to be confused and frustrated (and much less likely to want to sell and move). 

So we have made progress on the budget cuts but not so much on the things that will really speed up the process for us financially and in terms of quality of life.  I think once I looked at the snowball calculator and saw that we could keep the house and cars and still be debt free in around 5 years it really messed with my head and mindset.  I am just struggling with this back and forth in my head.   

This ended up being longer than I had planned so thanks for reading and for any advice as always!
Tons of good stuff here. The finance stuff is easy and simple, the psychology stuff is hard and complex. You just gotta keep working through this stuff until you settle on a plan that will make you happy. I  would suggest continuing to push into the uncomfortable and see where it takes you. For me that is how I grew and changes my mindset. Keep writing, I get the feeling putting your thoughts out here is helpful to you.
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Poundwise

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Re: Reader Case Study - $231k in debt and need help!
« Reply #145 on: February 16, 2017, 03:57:19 PM »
Quote
I know I just need to start with selling the truck (which I still plan to do) but should I pay off some debt or hold the money for another car?

I'd use that money to pay off your highest interest debt.  It may take your wife some time to get to the point where she wants to sell off something, and during that time your debt will still be accumulating at high rates.

PJ

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Re: Reader Case Study - $231k in debt and need help!
« Reply #146 on: February 16, 2017, 05:53:03 PM »
Hey, just wanted to say that your self-awareness when it comes to your own thought process, and how your feelings about all these changes affect your wife's attitude, and all the stuff you talked about in your post - this is awesome!  Not awesome that you're wrestling with internal resistance, but awesome how aware of it you are.  That kind of insight can be slow and hard to come by, and some people never achieve it - they see their problems as created by society, or themselves as unluckier than others, etc.

You've got lots of decisions to make, but I'm pretty confident that you're going to be able to do what you need to do - which may include 100% of what's been suggested by people here, or only 75%, or some other number.  It's all about how fast or slow you want to go, what's right for you and for your family.

Please, keep posting.  After a seeing a couple of heartbreakingly desperate case study threads implode recently, without the people seeming to really be able to grasp the lifeline that's being offered, it's great to hear/read some positive news.
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wenchsenior

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Re: Reader Case Study - $231k in debt and need help!
« Reply #147 on: February 16, 2017, 06:41:17 PM »
Most people on here will give you great suggestions, and I don't have time to do that, but it is SO EXCITING to see you really starting this process and actively engaging with the psychology of change. It's particularly gratifying given the lack of apparent progress in some of the other threads with terrible debt situations.

Remember, this is a  process of recognizing where your psychological 'traps' and bad habits are, and then focusing on them and figuring out how to defuse the traps and build better habits. You have to go through the process to make it stick, and it isn't always fun. We've been doing it for about 8 years really aggressively, and we still occasionally slip a bit. Just keep swimming/get back on the horse/pick your metaphor. 

Same with your diet. Pick one thing first, and concentrate on that. So maybe figure out how to eat out less by focusing on that for a month, then move onto the soda/junk food thing. Or the other way round, whatever. 

After you've got a few financial and health habits under control, you can stop thinking about those and concentrate on the next.  The trick is to make the new habits stick once you turn your attention to items further down on the list. Just plod along, stay focused, and pick the low hanging fruit first to make habit building easier.

Good luck! I'm excited for you!

Laura33

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Re: Reader Case Study - $231k in debt and need help!
« Reply #148 on: February 16, 2017, 07:49:00 PM »
Hey, just wanted to say that your self-awareness when it comes to your own thought process, and how your feelings about all these changes affect your wife's attitude, and all the stuff you talked about in your post - this is awesome!  Not awesome that you're wrestling with internal resistance, but awesome how aware of it you are.  That kind of insight can be slow and hard to come by, and some people never achieve it - they see their problems as created by society, or themselves as unluckier than others, etc.

You've got lots of decisions to make, but I'm pretty confident that you're going to be able to do what you need to do - which may include 100% of what's been suggested by people here, or only 75%, or some other number.  It's all about how fast or slow you want to go, what's right for you and for your family.

Please, keep posting.  After a seeing a couple of heartbreakingly desperate case study threads implode recently, without the people seeming to really be able to grasp the lifeline that's being offered, it's great to hear/read some positive news.

I second everything here.  Your self-awareness and willingness to challenge your own way of thinking is the best evidence that you will find your way through this.  Just remember:  it is your role to lead your family.  That means you make the uncomfortable, hard steps first.  It is totally natural to think, "well, if she doesn't want to, why should I do without?"  But your changes may inspire your wife to follow suit when she sees that you are still happy even with a "lesser" vehicle.  And even if it doesn't -- dude, have you looked at your interest rates lately?  :-). How good will it feel to send that extra cash off to one of those ridiculous rate loans/cards and not pay usury every month??  Do whatever you need to do to keep your eyes on the prize.  Talk/vent/kvetch/worry here, so you can go off and do great things at home.
Laugh while you can, monkey-boy

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Re: Reader Case Study - $231k in debt and need help!
« Reply #149 on: February 17, 2017, 07:30:58 AM »
+1 to those who have suggested equity from your vehicle sale goes to killing high interest debt, not tied up as equity in something else you may decide to sell.