Finance help needed!!! Major changes needed. Sell home???

**bjl584** · 03-04-2013, 11:27 AM

You need a major budget overhaul. The first things that I would cancel today would be:

The $400 pool membership
The $275 going out to eat
The $243 internet/cable/phone. (at least trim this back to a basic package)
The $195 cell phones. (again, trim this back to a basic package)

Selling the house may or may not help. I think that you are underwater on it, so if you sell you will have to come up with the difference, which may be significant.

Can you refinance the $25K balance CC? That would help.

Can your wife get a job? Even if it's part time it will help.

How much junk do you have around the house that you can sell to raise cash? I'm guessing a lot. Sell anything that you can.

That is a start as to what I would do first.

**startover40** · 03-04-2013, 11:37 AM

Just cancelled a few non essential services, like Sirius-XM, etc.

Mortgage and HELOC are $760K. I think 800 is reasonable if we sold and maybe more like 835 or so.

We are stuck with the pool membership till Aug of 14.

**bjl584** · 03-04-2013, 11:52 AM

Originally posted by startover40 View Post

We are stuck with the pool membership till Aug of 14.

Why are you stuck with it? I'd just stop paying. Even if there is a cancellation fee of a few hundred dollars you will end up saving $7200.

**startover40** · 03-04-2013, 12:13 PM

Quick immediate changes:
cancelled Sirius-XM and got $385 back to CC
Cancelled OnStar: $30/month
cell phone service changed to: $150/month ($30/mo savings)

Calling to cancel alarm service and will call Verizon to inquire about cutting the bill.

**startover40** · 03-04-2013, 01:31 PM

^^^ good advice, thanks.

Couple of things, indicative of our situation....we tend to go over board on everything. I think selling the current SUV (2010 Tahoe) is a good idea I'm not sure a smaller SUV will work. But this is all about making adjustments so we will make do. The Tahoe is paid for but it really is expensive to operate. Getting 27mpg vs our current 12ish would be so nice!

My wife may go back to work at some point, but not till our youngest goes to school. I've had 2 really good years (w2 of 206 and 262) put this past year hasn't been 200+ like we are used to. Shame on us!

I am the ultimate king of panic. Wife and I discussed things last night and this morning and she knows me.....sell the house asap!!! I know that's probably not the best idea right now.

**Goldy** · 03-04-2013, 01:58 PM

First of all, Breath. Second, I would recommend that you sign up for Mint.com as a way to easily track where you money goes and help you budget in the future.

You said that you could get 800-835 for the house if you sold so your not underwater which is good. I did a quick zillow refi check and found a company that seemed to be willing to loan 780k on a 800k loan @ 4% with $500 in closing fees. I wouldn't totally write off the ability to refi just yet. Have you checked to see what your house is valued at?

You have made good steps towards reducing your debt in the last 24 hrs but keep in mind that this is NOT going to be a quick fix. The pool membership really stands out as something to look into cutting even if it has a early termination fee.

**startover40** · 03-04-2013, 02:10 PM

As far as the refi goes, my neighbor just had an appraisal and found out it came back at 696K. I think that is really low but he didn't fight it since that was high enough for him to refi.

I think the LTV in addition to my other debt made it an absolute no to the refi. I hate that we pay our bills, are on time, never had any hiccup at all and we can't refi. Even called the owner of the loan about it and they laughed at me sighting the LTV and comps and how they would never expose themselves to that risk. I kind of chuckled back telling them they already hold the mortgage.

If I could come to the refi with no CC debt and just an auto loan that would help.

I agree, the pool/country club membership was a stupid move by us.

**witchkizzle** · 03-04-2013, 03:52 PM

It's a good thing you are taking a look at this now when times aren't as bad as they *can* be.

You are lucky to have caught this and I really hope you stick to a plan to fix it. You make a very good income and that puts you way ahead when trying to fix some financial mistakes you made.

Anyway, I just want to repeat what has been said already. Take a breath, calm down, and look at everything rationally going forward. Stick to a budget from now on, and be a good example for your kids on how to handle finances from now on.

I'm 26 and the best thing my dad ever taught me was how to handle incomes. My wife and I combined make in the neighborhood of 160k+ and we live in a $124,900 house that has a payment of $484 a month on a 96,000 mortgage. One credit card that gets paid in full monthly and one car note (that I HATE having and will be paying it off asap by paying $2,000 to $2,500 a month on the note).

I say all of this to basically agree that you are living beyond your means and I am happy you realized it before it is too late.

With your high income, you will be able to get out from all of this debt, but with that high income the hard part will be to never fall into that trap again. As a human with young kids, it will be your responsibility to train them to follow your well thought out example on handling finances from now on and it is one of the most important things you will ever teach them.

**startover40** · 03-04-2013, 05:22 PM

There will definitely need to be major changes going forward. This isn't the first time a CC has creeped up on us. We always manage to dig out of it mostly due to a large IRS refund. Even if we reel things in, wisely use the 65K we have and pay off the CC and the 401k loan deep down I feel like with a 5300 mortgage and a 400 HELOC how much can we really pay down, save and have some fun.

Part of me feels like if we sold this house and put the minimum down on a 600K house (3% ?) then the mortgage would be more manageable. It would probably still be about 4K but that's 1700 less than what I am paying now.

The list of expenses was only a good portion of them, add in the seasonal stuff like lawn cutting, spring mulch, weeding, medical bills (kids doc visits,wife visits, me being diabetic isn't cheap!) and other things and I feel like there are just way too many bills.

Just signed up to mint.com. Nice site and it going to take a long time entering all the accounts and info!!!

**Bingo** · 03-04-2013, 05:49 PM

Congratulations on joining this site, as you can see people here treat situations with sincerity and care. You and your family have every opportunity to learn from this episode and help others down the line too. Won't it be nice to say someday "our family was there and we dug out and you can too!"

It may sound too basic for some but reading how others have bailed themselves out helps me- including Dave Ramsey. i do not recommend buying into his marketplace, but his older books can help. After all, the last thing you should feel like is you need to "spend money to save money" - another reason not to spend 2000 on a new hybrid. Bad idea.

So the reason I recommend Ramsey or books like his is you and your family need to shift from pure spendaholic mind set to an intense "nothing is going to hold us back from paying this debt" mind set. I assume you can look forward to situations when your best friends are going to do something fun (200 dollar special dinners, weekends in the city, trips to Italy) your kids will beg to go places (camps, sports) and your wife will be so tired of wearing the same dress to a special event. You all need to be of one mind set and dedicated to stand against these head winds. You are keeping up with the Jones's now - on the surface, and telling your buddies you can't afford to go out to dinner or send the kids to camp summer what is NOT going to be easy.

But you are on the right track. There is no quick fix (like sell the house) because without a shift in the way the family thinks of money there is no getting rid of this major stressor. I will watch your progress with enthusiasm!

**startover40** · 03-04-2013, 06:00 PM

I'm not so sure spending $2000 for the hybrid is a bad idea. The current SUV is out of warranty and will need about $1000 in new tires and brakes in about 5 months. If we cut the fuel in half that will be recouped relatively quickly.

I completely agree that our attitude towards money needs to change. I've read a lot of finance books, including Millionaire Next Door, Ramsey books, listened to Suzie, and even read all of Jim Cramer's books, etc. Not to pick each one apart but it really boils down to living below your (our) means.

We really need to be smart about our next step and see what the best option is and how to use this 65K in cash we have. Emergency fund? Pay off both CC's and 401k loan? Pay off the two CC's and keep 15K in EF?

I cut my 401k to the minimum that the company will match.

**Growyourcash** · 03-04-2013, 07:06 PM

Time to move or make more money.

**Bingo** · 03-04-2013, 07:11 PM

Personally I would pay off the highest interest loans and the 401K loan for certain. Then hit the next highest interest loan with all ya got.

You are hardly alone. Since making our budget I watch it daily to make sure it is on track. It is replacing one habit (spending) with a new one (eliminating debt)

**kork13** · 03-04-2013, 07:31 PM

Just taking a VERY general "WAG" at your monthly expenses (guesstimating about $7.5k-$8k/mo?), you probably want to aim for at least $45k-$50k as a 6-month emergency fund. With that said, I'd recommend using some of your cash on hand (that $65k) and wiping out a fair chunk of your debt to increase your cash flow, reduce your monthly expenses, and just get you out from under the debt. So for now, perhaps keep just a 3-month EF ($25k) and build back up to 6 months over time.

If I were in your shoes, I'd take $25k and pay off the 13% interest credit card tomorrow, and the next day check with the HR office to see if paying the 401k loan off all at once would be an option. Then all of a sudden, you now have $40k LESS in debt, and an extra $550/mo in cash flow. Take that $550/mo, add it to your current $1200/mo, and press on with paying off the 0% credit card (you absolutely MUST make sure it's paid off before the 0% rate expires). Once you've done that, you'll have $1750/mo to allocate toward reducing your mortgage principle and/or the HELOC balance, rebuilding your emergency fund, and saving for the future.

And as others have said, it's at least worth investigating to see if you could refinance. Of course your current bank didn't want to consider it -- they've got you locked in on a large mortgage making them 5.75% interest. Why would they want you to refinance? Look around and see what's available. It might actually be worth getting the house appraised on your own to have some ammunition ahead of time. Try local banks & credit unions, and also check out some online options (such as Quicken loans, just as an example -- at least a few people around here have used them to refi).

Otherwise, just keep looking through your expenses and see where you can trim the fat. Over time, you'll get used to spending more reasonably within your means. At that point, you'll be able to really put your impressive income to work, and start saving/investing like crazy. Just keep pressing, you can do it. You're really in a good place financially, you just need to get a few issues under control first. Once you do that, you'll be set!

Finance help needed!!! Major changes needed. Sell home???