Moffo34
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Joined: 27 Jan 2012
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| Need to start saving |
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Hi I.m 36 years old and married with two young kids. My wife and I our getting by paying are bills and debt. We our unable to put a enough savings however. The big reason is two huge debt that we have. First is a personal loan that we took out to help get our new house fixed up four years ago. At first the interested rate was 8% which was high but doable. Over the last 4 years the rate has jumped up to 14%. the plan was to have the debt payed off in 6 years, now it looks like another 4-5 years. We pay about one third of our money income to this debt alone. The end result is about 6000 a year in interest charges to the bank. I have called the bank numerous times about the rate and got no where.
One solution that I have at this points is a old 401k from my wife's last job. After taxes there is enough to pay off the debt. The 401k has t earned anything in the last 3 years as there is no money being being added to it. I hear never to cash in your 401k, but the end results if not is paying out of pocket the value of the 401k in interested to the bank over the the next 5 years.
If we where able to free up that money also, we can then in turn start putting money away for our children future and our retirement. We do also have IRA's and other 401k's that we our currentlly putting money into.
Advice, should we cash out the old 401k to get out of this terrible loan
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Fri Jan 27, 2012 1:50 pm |
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oldguy
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We'll probably need more info before we can give you advice.
Are you saying that you borrowed $40,000 to fix up the new house?
List your debts - amounts, interest rates, minimum payments.
Do you have any car loans?
Before we suggest cashing out the 401k, maybe we can see some better ways to raise some money. Eg, the new HARP Plan.
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Fri Jan 27, 2012 3:35 pm |
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littleroc02us
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So you took a risk on a variable rate loan and life happened? That's too bad, but this is a good example of what happens when you take on high risk loans.  So what can you do to fix this issue? Like Old Guy stated, looking at your budget may help us give you some ideas.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Fri Jan 27, 2012 3:49 pm |
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Moffo34
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Joined: 27 Jan 2012
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| More info |
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Right now we take in 5100 a month
Mortgage is 2000 taxes tied in, interested rate is 6%
Loan payment is 1200 with 440 going towards interest minimum payment is 900
Second mortgage is 200 with 22000 left on it, and 200 is the min
Cable, utilities is 600
daycare is 300
IRA contributes is 200 ( 100 each in two different one's for my daughters)
Gas and food totals around 350-400
Any extra money is put aside for car insurance, car breaks down, heater breaks Ect.
I lost my job for a couple months but just got employed again but making much less. The above mention is what where taking home with my new job
Last edited by Moffo34 on Fri Jan 27, 2012 7:57 pm; edited 1 time in total |
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Fri Jan 27, 2012 4:47 pm |
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oldguy
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If I understand, you are paying $3400/m for the house, plus utilities? Ie, $41,000 per year? That's over 67% of income going to shelter. Is this really something that you, as a family, want to do over the next 10 or 20 years? $400,000 per decade for housing is a heavy burden - is there a way to move into housing that willl be more in line with earnings? Say $1500 per month?
Your other expenses seem 'normal', no excesses, just the housing seems extreme.
The recently instituted TARP 3 doesn't have a LTV requirement, very few constraints, it allows you to roll all 'house' debt into a single 30 yr loan at the going rate, maybe 4.5% - if you can get into that program, your 14% loan will be rolled into the single 4.5%.
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Fri Jan 27, 2012 8:49 pm |
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johna
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I'm confused as to why you took out a personal loan to pay for home improvements. Are you upside down in you mortgage? If you have some equity and really want to stay in your home, you may want to look into a home equity loan to pay off that personal loan. I agree that 67% of your income toward shelter is way too high!
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Tue Jan 31, 2012 4:37 pm |
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Adk109
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I think if you concern with financial advisor then you will be able to take proper decision for this situation.
There are many options available for money saving solutions. For future investment or saving people should keep track of their spending money and expenditure so that they would be able to manage their personal finance. If we want to save money for future then we should keep some part of our income for saving.
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Wed Feb 22, 2012 11:36 am |
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fast
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| Re: More info |
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quote:
Originally posted by coaster
quote:
Originally posted by Moffo34
..... but making much less
Sorry to hear that, but please clarify whether the income stated above is current in this new job.
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This is the website for the program oldguy mentioned above:
http://www.makinghomeaffordable.gov/Pages/default.aspx
After reading everything he's said about three times, I'm pretty confident that he and his wife collectively net $5,100 per month.
If I'm mistaken, Moffo34, let us know.
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Wed Feb 22, 2012 11:42 pm |
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cbhattarai
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First thing is that help your wife for paying the debt, And after that try to save and make a proper financial plan. If you have a bad record or a bad credit report then you loss a lot's of banking opportunities that is beneficial for you
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Thu Feb 23, 2012 11:32 am |
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MrNewEngland
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Location: The QC
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| Re: More info |
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quote:
Originally posted by Moffo34
IRA contributes is 200 ( 100 each in two different one's for my daughters)
I realize that this is going to get off track (and I apologize to the OP) but I have a question. Mods feel free to make another thread if you see fit.
Can you do this? I thought you had to have some level of income before making contributions to an IRA. I think it's great but I didn't realize that was an option. I thought the only savings plan you could use for a child was the 529 plan.
Little help?
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Thu Feb 23, 2012 2:33 pm |
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oldguy
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quote:
The 401k has t earned anything in the last 3 years as there is no money being being added to it.
I don't know what you have tha 401k invested in - but I recently looked up the generic market (SP500 Index). From Feb 2009 to current it has returned 19%/yr, that is a 68% gain in 3 years. IMO you should research that investment and move tit o a more practical fund (within the 401k plan).
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Thu Feb 23, 2012 4:00 pm |
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