In serious financial trouble and need advice on next steps...

**Radiance** · 09-15-2009, 07:48 AM

Allan,

Don't panic! You are in the right place, the people here will provide you with sound advise. Since I know them, you might get some lectures about finances, so be open, take what you need, leave the rest.

Some advise from a newbie who has made great progress

Paying your credit card debt should not be your first priority if you think you are about to loose your job and certainly not from your 401k!
If you do go bankrupcy, let's just say, they can not touch your 401k anyway.

First step, if not done already, is getting you on a budget and determine what are your bare minimum expenses, barebones

**olga1311** · 09-15-2009, 09:25 AM

Alan,

Radiance is right. Paying your credit card debt is not your priority right now. Get on a very tight written budget, where every dollar has a name and purpose and strictly adhere to this. Your most important task right now is to pile up as much cash as you possibly can. It means no shopping trips for the kids, no restaurants (unless somebody is working there as an extra job). A completely Spartan lifestyle where no money is spent other then on absolute neccessities. Do not , please, take monies out of your 401K. This your only retirement money and you will need for the retirement purposes.
If you can swing it, pay minimum payment on credit card but I would probably not even do that.
Also, what helped me when I was in similar situation is to prioritize my expenses and list them from the most important one to least important (Dave Ramsey's teaching) - i.e. your most important expenses are home,food,utilities etc. down the list.
Also, start looking for a job if didn't start yet. Maybe your wife can try to get something else as well or babysit few nights a week.
Good Luck!

**minnie1928** · 09-15-2009, 09:46 AM

Alan,
First off, don't assume that this is the end of your finances. This could just be the wake up call that was long overdue. I would begin working up a fresh resume and start applying at other jobs now. Then you need to have a sit down talk with your family...including the kids. Your 14 yr old is old enough to get involved in this too, let him/her learn something so that he can plan his finances better in the future. You need to determine what are your family's needs vs. wants. The needs must come first...so, that may mean canceling cable tv, pizza night, whatever. You need to evaluate how you're spending your money today, including how you spend money on utilities. You can save a lot of money by unplugging things when not in use, line drying laundry instead of using the dryer, etc. I'm assuming that you will get unemployment so use that + your wife's income as a basis for a budget. You may end up not having enough to pay your CC payment(s), and that will have to be ok until you get a job. Your first priority is providing for your family (food, shelter).

I also recommend taking a look at Dave Ramsey's book Total Money Makeover. Get it from the library (don't pay for it). It outlines a very easy to follow plan for prioritizing your finances.

Good luck and keep posting. There are lots of people with lots of great advice on here. We can offer ideas and support.

**KTP** · 10-28-2009, 03:21 PM

I agree to not touch your 401k. It is one of the few things protected by bankruptcy. You will be needing it in 12 years also.

Guys, if he really thinks he might lose his job next month and has 40k cc debt and 0 equity, could this actually be a real case for bankruptcy and a new start? I can't think that good credit is worth trying to struggle to pay a mortgage and 40k cc debt on 20,000/yr while he looks for another job.

**wincrasher** · 10-28-2009, 07:03 PM

Take it one step at a time. Bankruptcy is a giant step that is truly a last resort after other measures are tried.

The advice is good. Stockpile money and slash expenses. Look for new work and ask the wife to take additional work if that is an option. Call your CC company and see if they will work with you - some may give you a deferment or reduced payment if you are unemployed. If they won't work with you, then screw 'em and put them on the bottom of your priority list.

If you get behind, the damage to your credit can be repaired alot quicker than going the bankruptcy route. Cross that bridge when you come to it. Many folks try to hang on until every last dime is expended, and then go bankrupt. Your 401k is protected in every state. In some states, your home is also protected. Get some education on the rules for your state at the library.

Good luck to you!

**sammythesm** · 10-29-2009, 07:13 AM

Initial reaction:

1. Don't touch your 401k. Bankruptcy before cashing out a 401k.

2. Decide what your NEEDS are, and see to those first. You need food, clothing and shelter. You might need a phone and internet to apply for a job and keep a job. Everything else is just optional.

If the 24 year old doesn't have a job, now is the time for him/her to get one and start supporting him/herself. Even the 14 year old can help out. I had a paper route starting when I was 12. I rarely asked my parents for money.

3. Start looking now for a new job. Don't wait until you lose your current job to start the hunt.

4. Take advantage of unemployment, COBRA insurance, etc if you do become unemployed. These programs will keep your family afloat.

5. Consider downsizing your home. Depending on its size, you might be better off

**lovcom** · 10-29-2009, 09:46 AM

Alan,

1. Find out of your employer will provide severence package, and if so see how much it is.

2. Get your monthly nut down to or below what your state will pay you for unemployment benefits, and find out how much it will be, and for how long you'll get the benefit.

3. If the severence is small then start looking for a job NOW! Better to leave on your terms, your time table then theirs, AND you're more likely to get hired if you already have a job.

4. Get your resume in order

5. Get your list of references in order.

6. Often employers look at credit so keep it good so you're chances of getting hired are better.

7. Don't dispair. Looking for a job is a full time job.

8. Network, make calls around to ALL people you know in the business.

9. Live an auster life, so cancel the cable TV, memberships, eating out...you need to get in desparate mode today, and NOW.

10. Stop the behavior that got you into this financial mess.

Good luck and keep us posted...we all pulling for you!!!

**bjl584** · 10-29-2009, 12:10 PM

Can you get more detailed about your budget and your financial situation? Do you have a mortgage? A car payment? Etc.? What are the loan balances, payment amounts, and interest rates? What do you pay for utilities, cable, groceries, etc. per month. List everything that you can think of. It will make it easier for everyone to analize your situation and give you advice. It's already been said, but I would also advise against cashing out the 401K. What is the situation with your children? Do they both live with you and your wife? Is the 24 yr old working? The more detail that you can provide the better.

**snafu** · 10-30-2009, 04:35 AM

a few more suggestions...

Learn what services are offered at your library. They have free internet. Join the courses to improve your resume and interview skills. List your skill sets and think outside the box as to what other occupations, these could fit. Wife will need to do the same. have others look at your lists for suggestions. Join a networking group and get in touch with everyone you can think of past/present/relatives, friends, work acquaintances as more jobs are found and filled by contacts than any other method.

With $40,000. CC debt, have a big tag sale to generate cash. Put up a poster sized paper in the private area of your home, like the hall between bedrooms and have the family all make suggestions for reducing expenses. Read Amy Dacyczy's Books/Gazette on reducing expenditures and use as many as practical for your circumstances. Chart bills so that everyone has a visiual of the problem and gets onboard to help with the Ramsey solution to debt.

In serious financial trouble and need advice on next steps...