| Financial Mess. Please help |
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JoeyD
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| Financial Mess. Please help |
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First post, I apologize if I am breaking any etiquette here, but I need some help.
Wife and I both have good jobs and earn about 170K combined.
After taxes, 401k, medical etc we bring home 115K per year or 9600 per month.
We have 307K on our mortgage at 5.65% ($3060 per month with prop tax and homeowners)
A 90k Home Equity at 6.9 % (898 per month)
A whopping 30 K in credit card debt that we have carried for a long time when we weren't earning as much money (I am embarrassed as I even typed that)
In our current situation with all of our bills (including non necessities like landscaping, cable TV etc) If we exclude credit card debt we would have $2050 per month left over. Right now we have nothing left over.
I am thinking of doing 1 of 2 things.
1. Refinance with Cash out combine home equity and credit card debt if possible)
2. Take the money from my 401k I have 140 in there. (Pay the penalties and taxes I understand those implications) Clear credit card debt and refinance. (I would pay back whatever I could to the 401K)
At the end of the month after bills are paid we would have enough money to live without charging, and contribute to savings
Selling the house is not really an option we would like to consider since we have 2 young children in school and there is nothing available in our price range. Our home has held it's value and is worth about $550 K
We could consider selling in 6 years when our kids go to regional middle/high school we would be able to find an affordable house in a neighboring community.
thanks in advance.
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Tue Jan 31, 2012 2:56 pm |
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littleroc02us
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Just a question "so after paying for your home, property taxes and insurance each month and an equity loan you have $5642 left?" So besides paying cc's each month where is all that money going? I need a more precise budget to help, you make a ton of money and there's got to be something missing.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Jan 31, 2012 4:03 pm |
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JoeyD
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Oil: $300.00
Child Care: $228.00
Dentist: $137.00
PSE&G: $200.00
Car: $363.00
Car Ins: $202.00
Phone/TV Internet: $120.00
Mobile Phone: $113.00
Water: $73.33
Other Car: $325.00
Equity: $898.00
Mortgage: $3,056.00
Gas: $250.00
Alarm Monitor: $33.00
Cleaning: $120.00
Dance: $65.00
Landscaper: $176.67
Umbrella Ins: $22.33
Medical: $33.33
Food/Groceries Misc: $852
Total 7568.33
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Tue Jan 31, 2012 4:12 pm |
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oldguy
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Location: arizona
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I would leave the 401k alone, it is already low for a family of your age/income, you need to build up your wealth, not tear it down.
You could refi, put an 80% loan on the house for $440,000, 4.5%, 30 years. The payment would be $2750/m ($2230 for the mortgage & $520 for the Tax & Ins). The $2750/m would replace the $4000/m that you now pay for home loans.
The cars are a big problem, your payments are $8250/yr. And the gas, ins, tags, maintenence, tires, batts, brakes, is another $8000/yr. So, $16,000/yr to haul yourselves around. It would help a lot to sell the cars and pay cash for affordable used cars unfortunately cars are the big status marker in the US so everyone gets new ones whether they can afford them or not.
Use you current $2050/m surplus plus the $1200/m savings from the refi and apply it to $30k cc loan - it will be paid off in about 10 months.
But generally, your budget isn't so far out of line for a couple earning $170,000 - do the refi, pay off the cards by 2013. And read 'The Millionaire Next Door', it explains why millionaires often drive ollder cars (both of our cars have well over 100,000 miles).
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Tue Jan 31, 2012 4:36 pm |
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JoeyD
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quote:
Originally posted by oldguy
I would leave the 401k alone, it is already low for a family of your age/income, you need to build up your wealth, not tear it down.
You could refi, put an 80% loan on the house for $440,000, 4.5%, 30 years. The payment would be $2750/m ($2230 for the mortgage & $520 for the Tax & Ins). The $2750/m would replace the $4000/m that you now pay for home loans.
The cars are a big problem, your payments are $8250/yr. And the gas, ins, tags, maintenence, tires, batts, brakes, is another $8000/yr. So, $16,000/yr to haul yourselves around. It would help a lot to sell the cars and pay cash for affordable used cars unfortunately cars are the big status marker in the US so everyone gets new ones whether they can afford them or not.
Use you current $2050/m surplus plus the $1200/m savings from the refi and apply it to $30k cc loan - it will be paid off in about 10 months.
But generally, your budget isn't so far out of line for a couple earning $170,000 - do the refi, pay off the cards by 2013. And read 'The Millionaire Next Door', it explains why millionaires often drive ollder cars (both of our cars have well over 100,000 miles).
I see your point on the cars, but there is not an additional 8000 per year on maintenance and I included insurance costs. One is leased the other is a 2010 so minimal maintenance costs. We had one car payment in 2010 and it was great but my used car caught fire.
So when you say get a CC loan, is that a special loan?
As far as the refinance goes, I am wondering if we would get approved for the loan with this mountain of debt.
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Tue Jan 31, 2012 4:59 pm |
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eastmn
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I'd cut back elsewhere and knock the credit card out in huge chunks. Either that or the refi, but that may prove difficult.
How much is being lost to interest charges (loan sharks)?
For the record:
More than half of Americans -- 54 percent -- said that in the past 12 months, they always paid their credit cards in full. 75% of cardholders age 60 or older always pay cards in full every month.
http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php
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Tue Jan 31, 2012 5:16 pm |
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JoeyD
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quote:
Originally posted by eastmn
I'd cut back elsewhere and knock the credit card out in huge chunks. Either that or the refi, but that may prove difficult.
How much is being lost to interest charges (loan sharks)?
Boatloads of interesst. Don't have the number handy at the moment and makes me sick to look at it.
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Tue Jan 31, 2012 5:19 pm |
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eastmn
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I've seen cases where people successfully negotiate a rate reduction to around 12% on credit cards. Typical, you ask them to match a supposed offer from elsewhere. They don't always bend easily, takes effort, and you can google for many "howtos". My credit union card is 6.5%.
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Last edited by eastmn on Tue Jan 31, 2012 6:00 pm; edited 1 time in total |
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Tue Jan 31, 2012 5:45 pm |
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oldguy
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quote:
I see your point on the cars, but there is not an additional 8000 per year on maintenance and I included insurance costs. One is leased the other is a 2010 so minimal maintenance costs. We had one car payment in 2010 and it was great but my used car caught fire.
So when you say get a CC loan, is that a special loan?
Joey - no, I said "pay off your CC loan".
Three common ways to own cars -
1. Lease - this is the most expensive, you use the top 4 years of a car's normal life - and you pay dearly for the 'new car' feel - cost of ownership is about $5000/yr.
2. Buy new and keep for 12 yrs - the cost of ownership (depreciation) is about $2000/yr.
3. Buy used cars (lease returns) and keep 10 yrs. The cost of ownership is about $1000/yr.
The maintenance costs for all 3 is the same - the wear items - tires, batts, brakes - cost the same for a new car as for a car with 200,000 miles. Same with oil changes, washes, etc. The cost of repairs goes up with age, modern cars seldom need repairs for the first 120,000 miles, between 120k and 200k they may need $1000/yr.
At any rate - millionaires often drive older cars, there is a reason for that, the $2500/yr savings grows to $500,000 over a 30 yr period (we usually put close to 200,000 miles on ours).
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Tue Jan 31, 2012 5:46 pm |
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JoeyD
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quote:
Originally posted by oldguy
quote:
I see your point on the cars, but there is not an additional 8000 per year on maintenance and I included insurance costs. One is leased the other is a 2010 so minimal maintenance costs. We had one car payment in 2010 and it was great but my used car caught fire.
So when you say get a CC loan, is that a special loan?
Joey - no, I said "pay off your CC loan".
Three common ways to own cars -
1. Lease - this is the most expensive, you use the top 4 years of a car's normal life - and you pay dearly for the 'new car' feel - cost of ownership is about $5000/yr.
2. Buy new and keep for 12 yrs - the cost of ownership (depreciation) is about $2000/yr.
3. Buy used cars (lease returns) and keep 10 yrs. The cost of ownership is about $1000/yr.
The maintenance costs for all 3 is the same - the wear items - tires, batts, brakes - cost the same for a new car as for a car with 200,000 miles. Same with oil changes, washes, etc. The cost of repairs goes up with age, modern cars seldom need repairs for the first 120,000 miles, between 120k and 200k they may need $1000/yr.
At any rate - millionaires often drive older cars, there is a reason for that, the $2500/yr savings grows to $500,000 over a 30 yr period (we usually put close to 200,000 miles on ours).
thanks.
And I hope I don't sound like a guy asking for help, but not listening.
We have leased a few times and the only maintenance we have ever paid was oil, tires, and brakes once (wife is a stop and go driver). The car is typically covered bumper to bumper for the entire lease.
But I know you are right, at least one of the car payments must go, and then I could reduce my insurance to not have full comprehensive and that would save me a few $$
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Tue Jan 31, 2012 5:58 pm |
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oldguy
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quote:
The car is typically covered bumper to bumper for the entire lease.
Sounds good to people who don't think about it - but of course you pay for that coverage in your lease fee.
Similarly, extended warranties are another high profit item - people feel comfy about having coverage to 100,000 or 150,000 miles. But it is way cheaper to pay for your own repairs. The underwriter has to pay for your repairs, plus marketing (a big item), plus administration, pulus profit (and ext warranties are a high profit item).
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Tue Jan 31, 2012 10:00 pm |
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littleroc02us
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Sorry it took so long for me to reply, busy day at work. Thanks for sending an approximate budget. I don't see cc's in the budget, what is that expense each month? From what I can tell so far you make $9600 a month and your expenses are $7563, leaving $2037 in extra cash flow. (except not sure about cc's)
What does oil mean as an expense? As for your cars your wasting $688 in car expenses. If you were to invest $688 a month for 35 years making 10% on returns you would have over 2.4 million. Hope you enjoy the cars because that is a lot of wasted money. Get rid of the cleaning and landscaping fees which will return $296 in your pocket a month. Why is your food bill at $852, is that a lot of eating out each month. I have a family of 3 and ours is only $400 a month. Start cutting expenses as I've suggest and you'll have possibly around 3k a month to use for paying down debt.
Hope this helps and send me more info about the questions I've asked thanks.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Jan 31, 2012 10:31 pm |
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JoeyD
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quote:
Originally posted by littleroc02us
Sorry it took so long for me to reply, busy day at work. Thanks for sending an approximate budget. I don't see cc's in the budget, what is that expense each month? From what I can tell so far you make $9600 a month and your expenses are $7563, leaving $2037 in extra cash flow. (except not sure about cc's)
What does oil mean as an expense? As for your cars your wasting $688 in car expenses. If you were to invest $688 a month for 35 years making 10% on returns you would have over 2.4 million. Hope you enjoy the cars because that is a lot of wasted money. Get rid of the cleaning and landscaping fees which will return $296 in your pocket a month. Why is your food bill at $852, is that a lot of eating out each month. I have a family of 3 and ours is only $400 a month. Start cutting expenses as I've suggest and you'll have possibly around 3k a month to use for paying down debt.
Hope this helps and send me more info about the questions I've asked thanks.
The Oil is my heating bill. The CC debt eats up the remaining $$ we have essentially leaving us with no money.
That was food and misc expenses.. Groceries are about 600 Family of 4. 2 kids in school. Other things factored in that number were sports for the kids, birthday parties etc.
I need cars, I understand I don't need new ones, but in the short term there will be a car expense. So it's not like I can make that 688 go completely away.
The one car will be paid off in a year and the other is a lease.
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Tue Jan 31, 2012 10:51 pm |
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