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If your taxes on the property will double - DITCH THE PROPERTY NOW, don't refinance. Move to a less expensive situation, even if it means renting or leasing. By continuing to be responsible for that property without expectation of your financial situation improving, you are just wandering blithely into a bankruptcy situation.
Cars - You talk of a $4500 car, vs. wanting to take out a $30K car loan (plus whatever interest over the life of the loan). I have a hard time even getting my head around that type of thinking. Cars are a depreciable and cash flow expense, not an investment. Total cost per year is the figure to watch. Get a reasonably new car and you will be paying much more taxes and insurance. A $5,000 car that needs $5000 in repairs to get through the next year means at the end of that year you have spent $5,000 and have a $4,000 car (depreciation). A $30K car will depreciate about $5,000 in that same year. You end expense is the same $5K + the new car payments, the increase in insurance costs, and taxes. AND you still have no guarantee that the $30K car won't need work. Me, I'd look for another car for about $5K or $6K and sell the clunker. Total cost over the years works out to a $2K expense this year on cars.
Travel and expense accounts. Is it possible to average the expenses per trip, come up with a figure, ask for a stipend of that amount and then use cheaper motels, airfares, and so on? That amounts to extra income. A couple of my jobs required a fair amount of traveling. I used my (older car) took the mileage allowance and put the extra in the bank.
Credit cards. Tricky situation. CC debt is not secured debt, and I would not want to convert it into any sort of secured debt, nor use cash reserves to pay it down. What you MIGHT try is threatening to pay off a card completely (with money available to do that showing) THEN say that you might pay off a different card instead IF the interest could be lowered. It might be a shot in the dark, but you have nothing to lose.
Ongoing expenses - look for the biggies first.
Second job, even if part time.
Not property tax will double. Income tax, tax on our health insurance benefits, expiration of the tax rollback or whatever it ws called. I cannot remember what all else, there are a plethora of additional taxes popping up for 2013. A lot of them are releated to the health care plan. If nothing is changed and it really means our tax burden will double, we are done. I am just hoping either it is wrong, or it will get changed.
Selling my car for $500 and buying another car the same age and just as worn will not get me anywhere.
Last week, my car was a $4500 (maybe $5000) car. Last year, I could have gotten $6500 for it, maybe more. This week, it is a $500 car or maybe $1500. Any $5000 car I can buy is no less likely to end up the same (probably more likely since my car only has 111,000 miles and most $5000 cars will have more than that). I can get a $5000 car and next year or the year after another $5000 and then $7000 (prices will go up) and so on, or I can get one newish car and drive it for 17 years like my last one. A newer car will have far fewer problems than an older car (and a warranty for a while), plus I can ensure it is meticulously matained. Regardless of brand, marketing claims, hype or urban legend, any car over 150,000 miles is going to start having regular problems. Since I do not sell cars, I drive them until they die, depreciatoin is not an issue for me. A $30,000 car will depreciate $30,000 in 15 - 20 years. A $5,000 car will depreciate $5,000 in about 2-3 years if it does not have a major failure during that time and go to the junkyard first. Either one depreciates $2000 a year or so on average. Of course I have to factor in the possibility of losing or not getting a client because i am driving a crummy car. That would cost me lets say $15,000 a year in income. My car was ok to drive for work things until about two years ago. Althoguh old it was perfect, beautiful and working on becoming classic. However as it began developing more and more problems faster than I could keep up with, it became a park around the corner car (exhaust leak no one can find, hole in the upholstry, coolant leak no one can find, but everyone can smell, a dent/scrape, some more rock and bug chips onthe hood, another 30,000 miles of wear (or more). . . ) I am really a couple of years past due on replacing it with a newish car. Anther clunker just puts e right back where I am as far as the car thing goes - only worse, unless it is also a classic to be.
The problem with a $5,000 clunker is one repair does not end the decay and ongoing repair needs. Fix the transmission and the engine goes. Put in a new head gasket and the rings fail. Even if all of the drive train is fixed and holds up, you are going to need shocks/struts, brake rotors and or calipers, catalitic converters, tie rod ends, U-joints, starter, alternater, radiator, window motor or crank mechanism, blower motor, water pump, belts . . . . something- probably a compbination of many of those things. That is the thing with old cars, all the parts are worn so any part may go at any time. They are cheaper than new, but not by a lot. With my car I have no payments, but I have undoubtedly put $5000 in repairs into it in the past five years, probably more.
$5000 buys a clunker. I was sticker shocked when i recently tried to help my daughter buy a used car for $6000. She was looking at cars with 120,000 - 150,000 miles on them and you have no idea whether they were abused or maintained properly. She decided to buy a new car if she can (we will find out tongiht).
My firm will not play with travel expenses. I turn in the reciepts and they pay what is on the reciept. No reciept, no pay. Plus I still need a credit card to rent a car. A credit card that you pay off each month with your expense check is not a problem. Our problem is the interest on massive debt on credit and other revolving accounts we incurred a few years ago, and our mortgage interst rate being too high. If we elimiante those three problems, we will be in great shape.
Second job for me is not an option. I work 70-100 hours a week at times. Other times only 50-60. Plus if I took a second job, I would lose my first. I am not allowed to compete with my firm. Not to mention there are just not that many people who do what I do in our area. I can actually make more by getting more owrk and working more hours. The problem is getting more work. Taking a second job would not help if i had no work anyway. My wife is actually looking at taking a second job at meijers. However she might make an additional $3000 a year. (Maybe $2000 after taxes). Not a huge help with a $30,000 a year interest problem. Then there is the problem of our youngest son being left home alone or with only his siblings. It is bad enough that he is alone some days when she works in the evening instead of morning.
Hve you looked at 0% credit cards? If you can get one, you can transfer the balance to one of those. Or -- if you can transfer the balance to your lower rate card that might help, too.
I dealt with Quicken Loans years ago -- and we decided to tell them to take a leap. The appraiser they sent out handed me three business cards. One for appraising, one of bartending and one for DJ-ing. The appraisal was STUPIDLY low, because he was an idiot. And the rates were much higher.
I'd go to a small local bank for a house loan... the fewer branches the better. Chances are good they keep and service the loans.
You are right on used cars -- right now they are REALLY high.
You've done an excellent job in explaining why what has worked for me won't work for you. In doing so, you have eliminated a possible way that your situation can be made a little better. I've no horse in the race, and no problem with your determination that such is the case. I strongly disagree with your assessment of cars, but am not willing to push the issue any more than I would try to convert your religion.
What I DO see, and I think you see as well, is that saying the course you are on will end in disaster even more certainly than anything I suggested. With the dollar amounts involved, it might be cheaper all around for the company you work for to get a company car for you.
Taxes related to the health care plan? I sense that someone has been spinning a yarn to you. Talk with a CPA.
My greater point is that in such situations, embracing new strategies is usually the ONLY way out. To do so involves risk, and it involves change that can be uncomfortable. I once had to move out of an area to find work only about four months after I had purchased a house. I've had to make other moves taking only what I could fit in a subcompact car. If I had been unable to conceptualize that as a strategy and go with it, I would have been homeless and jobless.
I'll cut-n-paste from on of my other posts in a different CD forum explaining our move to north Alabama:
There is also a rather complex ethical issue I entertain that is partly satisfied with this lifestyle. A small part of that issue is that when I work, I want to work for the good of myself and my wife first, then the good of the people who pay me to work, then the general good of the area and country. I do NOT want to put labor into projects I see as hurting others or hurting the basic system of fairness and laws. The percentages are important to me. What I have found in other areas was that I was working very hard, and long hours, only to pay city and county tax payments, homeowner insurance payments, auto insurance payments, Federal and state taxes, water, and all sorts of enforced costs which held extremely limited benefit in the categories I listed. By living here, I get to better allocate my labor - and NOT support those who would attempt to rip me off, or use my money to support the idiotic behaviors of others (in driving carelessly, building houses that fall down, get into stupid wars, etc.) I voted with my feet for a return to traditional U.S. values. Not everyone can do that, but the more of us who do abandon high tax states and areas for those with fiscal responsibility, and shun the expensive ghettos for inexpensive rural America, the better off the country will be as a whole.
I do wish you the best in whatever decisions you make.
Hve you looked at 0% credit cards? If you can get one, you can transfer the balance to one of those. Or -- if you can transfer the balance to your lower rate card that might help, too.
I dealt with Quicken Loans years ago -- and we decided to tell them to take a leap. The appraiser they sent out handed me three business cards. One for appraising, one of bartending and one for DJ-ing. The appraisal was STUPIDLY low, because he was an idiot. And the rates were much higher.
I'd go to a small local bank for a house loan... the fewer branches the better. Chances are good they keep and service the loans.
You are right on used cars -- right now they are REALLY high.
Thank you.
We did the 0% balance transfer thing. Then after a year, they jacked it up to 29.9%
Quicken is making me nuts because the guy iseither insane, high or incredibly dumb or with a mental disorder. They do not seem interested in giving us a different person. However I have not found anyone who matches their rates.
Did you get your loan from a small local bank?
Our existing loan came from one. It was a construction loan. That is why the interest is so high. Then before they could convert it to a regular loan, they went out of business and our lender was the FDIC, then the FDIC sold our loan to some super Pr*cks and we had lots of problems, now we have a 15 year loan but still at 7% interest and with a $100,000 penalty for missing payments. That is the loan we need ot get out of by refinancing. I really wanted to get a loan from a credit union, but they were at 6% on a 15 year loan. A 15 year loan does ntowork. We need to decrease our payments, not increase them. With decresed morgage payments we can pay down credit cards. After getting rid of the credit card debt, then we can focus on paying off the mortgage faster. However to get that lower interest rate mortgage, we have to pay down credit cards, which we cannot accomplish becuase the interest rate is so hig. All we pay is interest. It is a vicious circle.
Yes -- we got our loan with a small bank. I worked for years for two small banks -- both of them bought out by larger banks, but I could see in both cases that's where they were heading. If they could have stayed under the original management, they would still be here today, but people age and retire, and business philosophies change.
One was dismantled piece by piece until what was left was the unprofitable part and closed (a practice that was very common in the 90's) and one was managed into being taken over.... and is still there and successful, just not under the name I worked at.
So yeah -- I now bank at a small bank, too. Local banks help the locals.
Since you're obviously a taxpayer, and we taxpayers have funded these federal efforts to prevent foreclosures and get people refinanced at better rates, maybe you could see if the big-O administration can help you:
Maybe they're just set up to help people who don't pay taxes, who knows? (Wouldn't that just make a lot of sense?) But since you've been paying for it, may as well see if they'll help you.
The only other things I could throw in is this:
--If you have adult children living at home (it sounds like your daughter is, at least) you need to charge them board. It's good for them, and essential for you. Even if they are in college, they can work. I worked full-time or part time all through college and grad school, and I was always enrolled in school full-time. It can be done--and I'm not b.s.ing here--it builds character.
--Squeeze every drop of life out of the current car you have. When you finally have to get a new one, get a used one and pay cash up-front. I disagree that $5000 will only buy a clunker, but that's your opinion and you're sticking to it to your detriment.
--Forget the boat thing. Really? I know you love your son and he likes rowing, but you can't even consider buying him a boat right now. Let him get a job in retail or food service and buy his own boat (again...character).
--Cut your living expenses even more. I know, you said you already did, but there's always more to cut. The people in "Frugal living" actually have a lot of good ideas. Without realizing it, you're probably overspending on groceries and household supplies. Stop buying clothes, wear the ones you have. Even buying the clothes at Target or a thrift shop is not necessary--your family already has plenty of clothes, right? You mentioned your suits--do you really need new suits? Most men can wear the same couple of suits for years. Make a rule--no clothing purchases for a year. Including shoes.
For now, you are disguising your financial situation and still appearing to be comfortable middle class: Attorney, relatively new suits, kids in college, business trips, etc. But it's all a fragile facade that can easily collapse if you don't tighten the belt even more and learn to live cheaply.
Also, I had a negative experience with Quicken with whom I re-financed last year. I would find another lender ASAP. They have a very young, very aggressive, very ill-informed staff. They pressure you to rush on things, and they rush on things and make errors. They lose things you've already sent them and insist that you never sent them. Even if you find the saved e-mail with attachments proving you sent the documents, they will insist that they never got it and there must have been something wrong with your computer or with their IT system.
I have really great credit (if I do say so myself) and a pretty low amount on my mortgage, steady income, and zero debt except for the mortgage, and even though they advertized "3.something interest" rates, and told me lower rates verbally, I ended up with a 4.75% rate. They blah-blah-blahed me, but I knew two other people at the time with worse credit, higher debt, and underwater houses who re-fied at the same time with other lenders and got under 4% with no points. I ended up paying a point & a half which I didn't know (they had another name for this "fee") and still had 4.75. The Quicken people lied about things, just to speed things along, and left out an important piece of my closing documents that I had to fix later, by finding the documents myself and going to anothe notary. I made several very polite comments and complaints (throughout the process and afterward) with Quicken and they ignored me. Oh, and in the middle of my re-fi, with only half my questions answered, the guy assigned to me quit his job, and I had to start all over with a new person, and her answers to my questions did not agree with what the first guy had said. I would NEVER use Quicken again. I hate even writing the check to them every month.
1. Sell the house and rent something cheaper. Use some of the equity to pay off a CC or two?
2. Home equity loan to pay off some or all of the CC debt?
I feel you on the credit card debt, it's amazing how it can grow like a wildfire. I'm currently working on paying mine down, one month at a time.
My dad was an attorney and had to write Chase on behalf of my dead aunt's estate telling them he was only going to pay them $10,000 of the $20,000 debt she had. They accepted it. Worth a try, what's the worst they could say?
Taxes related to the health care plan? I sense that someone has been spinning a yarn to you. Talk with a CPA.
.
It was our CPA who told us our taxes will nearly double next year. (Actually the CPA provided by work, not "our" CPA). He explained the reasons, some of it was taxes related to obama care, some was the Bush tax cuts going away, some was new taxes of various types.
Economists are predicting a new recession starting in early 2013 partly becuase of the impact of the tax hits scheduled for that year. Our accountant believes regardless of who wins, some of the taxes will probably be repealed or postponed. I hope so.
We have tried a lot of things. We have done the common sense things. Where I am lost is where to go now, or really which order to do things in.
The car issue does not matter, since I will not risk the house to buy a car. If my daughter buys a car, I can drive our spare truck that she is driving now as long as it lasts. Then, worst case, I could drive one of my son's cars (he bought two for $500 each, both are running - for now). However I am nto going to get away with driving a $500 car for long. I can get to the end of the year with what we have. Beyond that is quesiotnable. Plus we need some relief before the new taxes come into play. Even if some of it is realed, there will definitely be some increases. Plus expenses (gasoline utilities, groceries) are climbing like mad. Have you seen the price of bacon lately?
Where I am trying ti figure things out is should we consolidate our credit cards or will that hurt our credit rating? Should we just go ahead with the re-fi at 5% or wait until we can try to get it at 4% or a bit lower? THe calculations necessary to figure out what the cost of getting a 5% mortgage now vs. a 4% mortgage in as much as a year vs. what we willpat in credit card interst during that year because we are not able to pay off the credit cards as fast while the mortgage is still high I do not even know how to begin figuring that out or even who to go to for help.
Since you're obviously a taxpayer, and we taxpayers have funded these federal efforts to prevent foreclosures and get people refinanced at better rates, maybe you could see if the big-O administration can help you:
Maybe they're just set up to help people who don't pay taxes, who knows? (Wouldn't that just make a lot of sense?) But since you've been paying for it, may as well see if they'll help you.
The only other things I could throw in is this:
--If you have adult children living at home (it sounds like your daughter is, at least) you need to charge them board. It's good for them, and essential for you. Even if they are in college, they can work. I worked full-time or part time all through college and grad school, and I was always enrolled in school full-time. It can be done--and I'm not b.s.ing here--it builds character.
--Squeeze every drop of life out of the current car you have. When you finally have to get a new one, get a used one and pay cash up-front. I disagree that $5000 will only buy a clunker, but that's your opinion and you're sticking to it to your detriment.
--Forget the boat thing. Really? I know you love your son and he likes rowing, but you can't even consider buying him a boat right now. Let him get a job in retail or food service and buy his own boat (again...character).
--Cut your living expenses even more. I know, you said you already did, but there's always more to cut. The people in "Frugal living" actually have a lot of good ideas. Without realizing it, you're probably overspending on groceries and household supplies. Stop buying clothes, wear the ones you have. Even buying the clothes at Target or a thrift shop is not necessary--your family already has plenty of clothes, right? You mentioned your suits--do you really need new suits? Most men can wear the same couple of suits for years. Make a rule--no clothing purchases for a year. Including shoes.
For now, you are disguising your financial situation and still appearing to be comfortable middle class: Attorney, relatively new suits, kids in college, business trips, etc. But it's all a fragile facade that can easily collapse if you don't tighten the belt even more and learn to live cheaply.
Also, I had a negative experience with Quicken with whom I re-financed last year. I would find another lender ASAP. They have a very young, very aggressive, very ill-informed staff. They pressure you to rush on things, and they rush on things and make errors. They lose things you've already sent them and insist that you never sent them. Even if you find the saved e-mail with attachments proving you sent the documents, they will insist that they never got it and there must have been something wrong with your computer or with their IT system.
I have really great credit (if I do say so myself) and a pretty low amount on my mortgage, steady income, and zero debt except for the mortgage, and even though they advertized "3.something interest" rates, and told me lower rates verbally, I ended up with a 4.75% rate. They blah-blah-blahed me, but I knew two other people at the time with worse credit, higher debt, and underwater houses who re-fied at the same time with other lenders and got under 4% with no points. I ended up paying a point & a half which I didn't know (they had another name for this "fee") and still had 4.75. The Quicken people lied about things, just to speed things along, and left out an important piece of my closing documents that I had to fix later, by finding the documents myself and going to anothe notary. I made several very polite comments and complaints (throughout the process and afterward) with Quicken and they ignored me. Oh, and in the middle of my re-fi, with only half my questions answered, the guy assigned to me quit his job, and I had to start all over with a new person, and her answers to my questions did not agree with what the first guy had said. I would NEVER use Quicken again. I hate even writing the check to them every month.
Thanks for the heds up on quicken. I can see those kinds of things happening with them.
Actually. some of my suits are 15 -20 years old. Some have decayed to the point where I have to throw them away. I need to have at least 4 for trials, realistically more. I do not know how many I have, I try to buy a couple each year in january when they have the big sales (Buy one get two free; or buy one get one free). Other than suits underwear and socks, I do not buy clothing for myslef. People giv eit to me, mostlyThere still are some things we can cut as you said. However those things generate tens, or hundreds of dollars, not tens of thousands. Still we continue to do more and more of those frugal living things as costs keep going up and income does not. However there are few cuts or frugal living things we can do that will save even enough to addres the increase in utiltieis gasoline insurance and groceries. the other thing few of those frugal living types seem to realize is many of the cost saving ideas end up costing more in the long term.
Anyway, cutting costs in tiny smidgens may be of some help, but does not answer the quesiotns. Which path is the most financially viable? I am stillhoping some financial type will come along and make a suggestion, or someone knows what kind of professional can figure that out.
It was our CPA who told us our taxes will nearly double next year. (Actually the CPA provided by work, not "our" CPA). He explained the reasons, some of it was taxes related to obama care, some was the Bush tax cuts going away, some was new taxes of various types.
Economists are predicting a new recession starting in early 2013 partly becuase of the impact of the tax hits scheduled for that year. Our accountant believes regardless of who wins, some of the taxes will probably be repealed or postponed. I hope so.
We have tried a lot of things. We have done the common sense things. Where I am lost is where to go now, or really which order to do things in.
The car issue does not matter, since I will not risk the house to buy a car. If my daughter buys a car, I can drive our spare truck that she is driving now as long as it lasts. Then, worst case, I could drive one of my son's cars (he bought two for $500 each, both are running - for now). However I am nto going to get away with driving a $500 car for long. I can get to the end of the year with what we have. Beyond that is quesiotnable. Plus we need some relief before the new taxes come into play. Even if some of it is realed, there will definitely be some increases. Plus expenses (gasoline utilities, groceries) are climbing like mad. Have you seen the price of bacon lately?
Where I am trying ti figure things out is should we consolidate our credit cards or will that hurt our credit rating? Should we just go ahead with the re-fi at 5% or wait until we can try to get it at 4% or a bit lower? THe calculations necessary to figure out what the cost of getting a 5% mortgage now vs. a 4% mortgage in as much as a year vs. what we willpat in credit card interst during that year because we are not able to pay off the credit cards as fast while the mortgage is still high I do not even know how to begin figuring that out or even who to go to for help.
I strongly urge your getting a second opinion from a different CPA, as well as evaluation of your situation. There is a tremendous amount of fear-mongering that occurs prior to any election, but Congress (for some strange reason... ) doesn't like to increase taxes on people in their tax bracket. A CPA would be most likely to assist you in reducing a tax burden anyway. FWIW, we live on less than you are paying in interest and I have a CPA.
I would say to heck with the credit rating, but so many other things are dependent on that these days - insurance rates, security clearances, etc.
Expenses - I'm expecting a HUGE jump in gas prices if anything goes sour in the middle east, and we are coming to decision/action time on Iran. (Do you find it curious how Syria and Iran are in a mutual defense pact and Syria has been using up weapons and being made weaker by rebels, just as Israel is threatening attacks on Iran?...) We eliminated our water and sewer bills by moving, electricity here is much more stable in cost than other areas of the country, and I know how to outshop 99% of the people in the country to reduce costs. Bacon is high? Now is the time around here that hams go on sale for about $1/lb. Buy ham and slice it. Save and render the fat to replace bacon fat. Boil out the bone for stock.
If things really go south, the value of the dollar on the world market could fall substantially. Fixed costs like a mortgage could either be a blessing (if your wages skyrocket with inflation), or a curse (if things fall apart enough that you are out of work, and the mortgage burden is not just limited to repossession of the house in a default).
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) doesn't like to increase taxes on people in their tax bracket. A CPA would be most likely to assist you in reducing a tax burden anyway. FWIW, we live on less than you are paying in interest and I have a CPA.
