Need Financial Advice (long). Please help!! (credit card debt, student loan, debt, payment)

[leavingcali]

Okay...I just had a very rude awakening regarding my finances. I have been in denial for a long time. Anyway, I have a lot of credit card debt, no savings, student loans that are coming due, and discovered that we are living way beyond our means. We're talking -500 or so a month. So, where do we start? Do we work on paying off the credit card debt first, then saving money, or do we do a little bit of both at a time? What are some good ways to cut spending? We've started tracking everything we spend money on. Do we do this for a year to get an average of how much money we need to live on per month?

I am also going to get a second part-time job (I can't quit the low-paying, but great experience, job at the university because the semester has already begun, and doing so would kill my chances of getting the career I want). However, I can substitute teach for $100 a day for 2-3 days per week.

Here's another question--we want to be able to move out of the state in a year. We bought a condo 3 years ago. Our 1st mortgage is an ARM that comes up for readjustment in 2009. We want to sell, but the housing market is so bad in our area right now that we would lose most, if not all, of our $30k downpayment. Do we go ahead and sell so we can live somewhere a lot cheaper (such as an apartment), and so we can move in a year, or do we hope that the market looks better next year and try to sell then? What about the ARM?

Thank you so much for your responses. I know a lot of you out there have made your mistakes, learned from them, and are in a position to help others.

[shellytc]

Keep the condo for now. 2009 is a ways off and there a things you may be able to do in the meantime.

Take all the extra money and pay off the credit cards. Do not use the credit cards. Put them in a tupperware bowl, and fill it water and put it in your freezer. Can't get to them. Use only debit card..if you don't have it, you can't get it!!

Look at your cards and see who has the largest percentage, and that is the one you pay off first. While you are making a dent in that one, pay the minimum or a little over the minimum.

If the market picks up in Spring for you area, consider selling, and putting your cash into your debt and starting over... But that is pretty extreme.

If you are really in trouble, you can go visit a consumer credit counseling office around you. You should not have to pay for the service.... but you do have to follow their rules.

Shelly

[GreenMachine]

Originally Posted by leavingcali

Okay...I just had a very rude awakening regarding my finances. I have been in denial for a long time. Anyway, I have a lot of credit card debt, no savings, student loans that are coming due, and discovered that we are living way beyond our means. We're talking -500 or so a month. So, where do we start? Do we work on paying off the credit card debt first, then saving money, or do we do a little bit of both at a time? What are some good ways to cut spending? We've started tracking everything we spend money on. Do we do this for a year to get an average of how much money we need to live on per month?

I am also going to get a second part-time job (I can't quit the low-paying, but great experience, job at the university because the semester has already begun, and doing so would kill my chances of getting the career I want). However, I can substitute teach for $100 a day for 2-3 days per week.

Here's another question--we want to be able to move out of the state in a year. We bought a condo 3 years ago. Our 1st mortgage is an ARM that comes up for readjustment in 2009. We want to sell, but the housing market is so bad in our area right now that we would lose most, if not all, of our $30k downpayment. Do we go ahead and sell so we can live somewhere a lot cheaper (such as an apartment), and so we can move in a year, or do we hope that the market looks better next year and try to sell then? What about the ARM?

Thank you so much for your responses. I know a lot of you out there have made your mistakes, learned from them, and are in a position to help others.

You can start by tracking every penny you spend. Write it down on an Excel spreadsheet. Also buy a 12-month folder and put your receipts into it. Writing down your spendings makes you AWARE of how you are spending your money. When we write things down we are less likely to go into denial. It also allows you to begin working on a budget and to see where you spend the most money.

greenie

[leavingcali]

Thank you both for your replies so far. We just started tracking our spending.


As far as the condo is concerned, we have some painting, de-cluttering, etc. that we need to do before we list it, so hopefully when it is ready the market will have picked up--if not, we can reconsider if we should sell then, or hold off some more.

Do the credit counseling centers affect your credit? Someone told me that they reduce your credit score. Our credit is still very good for us right now (i think).

[mommabear2]

Originally Posted by leavingcali

Okay...I just had a very rude awakening regarding my finances. I have been in denial for a long time. Anyway, I have a lot of credit card debt, no savings, student loans that are coming due, and discovered that we are living way beyond our means. We're talking -500 or so a month. So, where do we start? Do we work on paying off the credit card debt first, then saving money, or do we do a little bit of both at a time? What are some good ways to cut spending? We've started tracking everything we spend money on. Do we do this for a year to get an average of how much money we need to live on per month?

I am also going to get a second part-time job (I can't quit the low-paying, but great experience, job at the university because the semester has already begun, and doing so would kill my chances of getting the career I want). However, I can substitute teach for $100 a day for 2-3 days per week.

Here's another question--we want to be able to move out of the state in a year. We bought a condo 3 years ago. Our 1st mortgage is an ARM that comes up for readjustment in 2009. We want to sell, but the housing market is so bad in our area right now that we would lose most, if not all, of our $30k downpayment. Do we go ahead and sell so we can live somewhere a lot cheaper (such as an apartment), and so we can move in a year, or do we hope that the market looks better next year and try to sell then? What about the ARM?

Thank you so much for your responses. I know a lot of you out there have made your mistakes, learned from them, and are in a position to help others.

You sound like you dug yourself deep. So, I would start by seeing if you can cut your expenses... and I mean CUT. No eating out, use coupons - be aggressive on this. Stop buying crap... no Starbucks, new clothes, not even a pack of gum. Do you have a car? See if you can cut your auto insurance and/or go without the car and take public transportation.


I don't know if selling your condo will mean you'll find a place just as cheap (because of the mortgage interest tax deduction). Can you afford to move out of the place (refinance 1st) and then rent the place out? You might be able to keep your condo (and the 30K) by having someone else pay the mortgage if the rental market will allow it until the market allows you to sell.


Just my two cents...

[christina0001]

ditto most of the above. I wouldn't go to credit counseling except as a last resort as it will hurt your credit. Cut your spending to the minimum. No new clothes, no eating out, no nothing. Definitely no charging. I would create a budget, save a little bit each month (you really need savings in case of an emergency), but I would put as much money as possible towards debt. I agree that 2009 is a ways off yet, worry about reducing/eliminating your debt for now. Getting a second job is a great idea.

Here's an article I like in regard to paying off debt; this website has other articles with advice as well:
The Debt Snowball - How to Eliminate Debt and Manage Debt Without Breaking the Bank

Best of luck!

[NewToCA]

First, list all of your monthly expenditures. Second, prioritize these expenditures, starting with the mortgage as #1 and work your way down. See what falls within your income, and eliminate everything below that line.

I agree with the advice to hold on to the condo for a couple more years. The real estate issue may resolve by then.

[yellowsnow]

You got some good advice. If you follow it, you can most likely dig yourselves out. Feel good about taking control now. Some people don't hear the alarm till they're 55. If you stop spending, that can become a habit too. Comanies spent billions of dollars trying to convince you that you had to have everything now. It's time to throw away that mindset.

Best of luck!

[Rita Mordio]

If I was in this situation, I would do what everyone here has stated in some way.

Make a document/folder/whatever it is you need to track all of your spending. Prioritize the bills first. Before doing ANYTHING else with your money, pay the basics: Mortgage, Electric, Water, etc. DOCUMENT everything - how much you have before the bills, what the bills are and how much, and what you have after.

I like the idea of freezing your credit cards. Literally. Don't use them anymore! Personally, I got two credit cards (with small limits) to get my credit going. When I decided to pay them off, I set aside $20 to each one everytime I got paid. Automatically. The cards, themselves, are shredded up into tiny bits and were put into 5 different dumpsters (it was fun!!!). A year later, one has been shut down (huzzah!) and the other has about a $100 balance. Now, from the sounds of it, your credit cards... are a bit more.. but the same concept applies. Set aside a set amount of money that will go to each one each month. It will take time, but the balances will slowly go down.

NOW that the bills are taken care of, instead of going grocery shopping and getting whatever, make a meal plan for your family (trust me!!) and try to base it off of what you ALREADY have in your pantry/fridge/freezer. Then, figure out what you NEED grocery-wise and make a list. When going grocery shopping, stick to the list, but allow everyone ONE ITEM that they can get "extra." Before picking your place to go, look at ads. Get coupons.

Yes, this sounds extreme, but if you are seriously spending way over your limits now, you need to make extreme changes.

Now, your bills are paid and you have groceries. Look at your vehicle's usage. Try changing your habits per driving. Walk/Bike/Etc more and use the vehicle less.

Now that we've looked at things that are going on (no matter what) see how much is left. Prioritize this "extra" money towards your debts.. and less on the "latest and greatest."

You can always find extra money by reducing your cellphone plan (and using it less!) or by reducing the cable (take away movie channels). It sounds harsh... but it can help you in the long run to get caught up.

As for your condo. Don't sell. Keep the dern thing, especially if you like it. It's September of 2007. You have a year and some change to get prepared. Look at your current interest rate vice what they are in the market. Look at mortgage calculators online to try and get an estimate.

Thing is, you're getting equity on your place. That's great. If you need to, refinance with a flat-rate mortgage (rates are pretty good right now). Hopefully you owe less than the condo is worth. If so, you can refinance for more than you owe.. and use the extra money to pay off ALL of your credit cards (and maybe your vehicle if you have a payment for that).

It adds money to the amount you pay to the mortgage company, but then you don't have to dole out money for the credit cards (or vehicle).

I do wish you luck in this and hope that some of my advice will be able to assist you. Yes, I'm not that "wise in the world" because of my age... but I've done all too much looking at jobs and checked them out during the summers.. and financial advisor was one of them :P

[TimtheGuy]

Originally Posted by leavingcali

Thank you both for your replies so far. We just started tracking our spending.


As far as the condo is concerned, we have some painting, de-cluttering, etc. that we need to do before we list it, so hopefully when it is ready the market will have picked up--if not, we can reconsider if we should sell then, or hold off some more.

Do the credit counseling centers affect your credit? Someone told me that they reduce your credit score. Our credit is still very good for us right now (i think).

It certainly sounds like you can get on track on your own...DO NOT USE CREDIT COUNSELING!