Debt

[katesmom]

Ive been beating myself up over our finances. Ive always managed the money in our household & I feel that Ive done a decent job. Its rewarding to pay off a bill or watch those credit card balances get lower. Lately though, we havent been able to makes end meet. We dont have a lot of extras. In fact we dont have any. We pay for the necessities (shelter/utilities/car/daycare/gas) whats left goes for credit card bills. If I have any extra in the account, I feel this pressing need to pay extra on the credit cards because the interest rates are very high (I cant transfer balances to a lower interest card because of bad credit) Unfortunatly I have to work out of the home. I only bring home about 1/2 of my income per month after paying daycare, but we need that money to pay bills, so quitting isnt an option. (I wish it was)
My husband works too.

Debt has put a heavy load on our marriage. My hubby & I always talk about it & what to do with it? Im a little more drastic with my ideas (sell the house, find a better paying job, move somewhere cheaper) However my husband says that things will get better. Im glad he’s optimistic, but I dont see this happening anytime soon. Deep down I dont want to sell the house, but I dont want to live paycheck to paycheck either.

 

[vluvski]

Try www.crown.org

Especially www.crown.org/moneymap

They offer financial advice from a Christian perspective. It won’t be Catholic, but it seems sound from what I know.

 

[1ke]

kate(name removed by moderator):

Ive been beating myself up over our finances. Ive always managed the money in our household & I feel that Ive done a decent job. Its rewarding to pay off a bill or watch those credit card balances get lower. Lately though, we havent been able to makes end meet. We dont have a lot of extras. In fact we dont have any. We pay for the necessities (shelter/utilities/car/daycare/gas) whats left goes for credit card bills. If I have any extra in the account, I feel this pressing need to pay extra on the credit cards because the interest rates are very high (I cant transfer balances to a lower interest card because of bad credit) Unfortunatly I have to work out of the home. I only bring home about 1/2 of my income per month after paying daycare, but we need that money to pay bills, so quitting isnt an option. (I wish it was)
My husband works too.

Debt has put a heavy load on our marriage. My hubby & I always talk about it & what to do with it? Im a little more drastic with my ideas (sell the house, find a better paying job, move somewhere cheaper) However my husband says that things will get better. Im glad he’s optimistic, but I dont see this happening anytime soon. Deep down I dont want to sell the house, but I dont want to live paycheck to paycheck either.

Please look into credit counseling (and not the fly-by-night people, a reputable agency). They will help you create a budget, & will work to create a plan for repayment. The creditors will likely give concessions such as a reduced payment at lower interest, waiver of fees, and if you are delinquent they may bring your accounts current. Of course this is up to each individual creditor, but the counseling agency will work to get the concessions if possible.

I can recommend www.moneymanagement.org or you can go to www.nfcc.org and look up a reputable agency.

It won’t be easy, but it will be worth it in the long term, and if you are actively engaged in your program you will learn valuable skills and have peace of mind.

 

[katesmom]

vluvski:

Try www.crown.org

Especially www.crown.org/moneymap

They offer financial advice from a Christian perspective. It won’t be Catholic, but it seems sound from what I know.

The money map is pretty neat! Im going to give it a try! Thank!

1ke - Thanks for the links. Ive already visited www.moneymanagement. I considered their debt managment program, but I was told that Debt MP’s are the same as filing bankruptcy. I was hoping for peace of mind with this solution, but I feel it may be a decision I would regret.

Thank you both!

 

[DJgang]

I am assuming that you and your husband have seperate vehicles. If you have seperate vehicles, take your car payment, your gas money, take the child care all out of your check…don’t forget the little things that you may pick up at the “quick mart” on the way, back and forth and take meals that you might purchase already cooked or prepared…I bet you won’t have much left of your check after that…

Not saying this all pertains to your situation, but I had a friend take all the factors of just her working an out of the home job…she only brought home $100 a month! Worth it? She didn’t think so. She cut off the cable TV and going out to eat…there it was! She started staying home.

You are in my prayers!

 

[sparkle]

kate(name removed by moderator):

Ive been beating myself up over our finances. Ive always managed the money in our household & I feel that Ive done a decent job. Its rewarding to pay off a bill or watch those credit card balances get lower. Lately though, we havent been able to makes end meet. We dont have a lot of extras. In fact we dont have any. We pay for the necessities (shelter/utilities/car/daycare/gas) whats left goes for credit card bills. If I have any extra in the account, I feel this pressing need to pay extra on the credit cards because the interest rates are very high (I cant transfer balances to a lower interest card because of bad credit) Unfortunatly I have to work out of the home. I only bring home about 1/2 of my income per month after paying daycare, but we need that money to pay bills, so quitting isnt an option. (I wish it was)
My husband works too.

Debt has put a heavy load on our marriage. My hubby & I always talk about it & what to do with it? Im a little more drastic with my ideas (sell the house, find a better paying job, move somewhere cheaper) However my husband says that things will get better. Im glad he’s optimistic, but I dont see this happening anytime soon. Deep down I dont want to sell the house, but I dont want to live paycheck to paycheck either.

I say let H worry about it!! Consumer Credit Counseling is a place that can help.

 

[lifeisbeautiful]

kate(name removed by moderator):

Ive been beating myself up over our finances. Ive always managed the money in our household & I feel that Ive done a decent job. Its rewarding to pay off a bill or watch those credit card balances get lower. Lately though, we havent been able to makes end meet. We dont have a lot of extras. In fact we dont have any. We pay for the necessities (shelter/utilities/car/daycare/gas) whats left goes for credit card bills. If I have any extra in the account, I feel this pressing need to pay extra on the credit cards because the interest rates are very high (I cant transfer balances to a lower interest card because of bad credit) Unfortunatly I have to work out of the home. I only bring home about 1/2 of my income per month after paying daycare, but we need that money to pay bills, so quitting isnt an option. (I wish it was)
My husband works too.

Debt has put a heavy load on our marriage. My hubby & I always talk about it & what to do with it? Im a little more drastic with my ideas (sell the house, find a better paying job, move somewhere cheaper) However my husband says that things will get better. Im glad he’s optimistic, but I dont see this happening anytime soon. Deep down I dont want to sell the house, but I dont want to live paycheck to paycheck either.

Since you mentioned selling the house, it sounds like you own. How about a home equity line? The interest is usually considerably lower than many credit cards (it varies by bank, and it won’t be a steady number I think, but I think it may be around 7% now, not sure though), that way you can pay down the balance rather than just paying the interest every month. That way you can keep your house and get out of the hole.

 

[mercygate]

Selling a house is usually about the worst thing you can do. It is the one asset that generally can be relied on to appreciate – and it gives you a place to live. Pouring cash down a rent-hole is gruesome.

 

[wabrams]

kate(name removed by moderator),

You would be better off filing for bankruptcy than getting into credit couseling. I see credit reports everyday and the ones in credit couseling have more damaged credit than those who are in or just out of bankruptcy.

 

[1ke]

kate(name removed by moderator):

The money map is pretty neat! Im going to give it a try! Thank!

1ke - Thanks for the links. Ive already visited www.moneymanagement. I considered their debt managment program, but I was told that Debt MP’s are the same as filing bankruptcy. I was hoping for peace of mind with this solution, but I feel it may be a decision I would regret.

Thank you both!

I completely disagree. Credit counseling is NOT equivalent to filing bankruptcy. Reputable credit companies do not view it equivalent. Also, a notation of credit counseling is only on your file while you are in the program. And, Fair-Isaacs has stated that credit counseling has not bearing on your FICO score.

Bankruptcy is not paying back your debt, it’s a cop out except in the most extreme circumstances.

Credit counseling is paying it back in full and getting help from the creditors to do it. If you do not make timely payments then yes your credit can be damaged. But, you are already struggling with your debt. Worry about rebuilding your credit as a long-term goal. You should be focused on finding the help you need to get these debts paid off.

Honestly, what’s your alterative? Not paying? Bankruptcy? Trying to tough it out alone?

 

[katesmom]

DJgang:

I am assuming that you and your husband have seperate vehicles. If you have seperate vehicles, take your car payment, your gas money, take the child care all out of your check…don’t forget the little things that you may pick up at the “quick mart” on the way, back and forth and take meals that you might purchase already cooked or prepared…I bet you won’t have much left of your check after that…

Not saying this all pertains to your situation, but I had a friend take all the factors of just her working an out of the home job…she only brought home $100 a month! Worth it? She didn’t think so. She cut off the cable TV and going out to eat…there it was! She started staying home.

You are in my prayers!

I did what you recommended:

Income minus (daycare - minus car payment - minus gas - minus eating out for lunch) Equal about $150.00 left over each month. No that is not a whole lot, but try to tell my hubby this. He’ll say every little bit helps…Something to ponder on I guess.

 

[puzzleannie]

crown.org financial ministries is excellent advice from a bible perspective, Catholic Exchange also has links to financial planning catholicexchange.com with advice on money management and getting out of debt. having been there in spades my advice is to cut up the credit cards, saving one in a locked place for emergencies, or for travel (which should be budgeted for and the trip paid off promptly).

Start paying all your extra money on the card with the smallest balance, when it is paid off, cancel it. Then apply that money to the next account and so on.

Transfer all your credit cards to one with the lowest interest, and cancel the rest. Put all extra money to pay the cards off. Whatever you do, don’t get a home equity loan, pay off your bills, then proceed to rack up more bills and credit cards.

Pay for Christmas gifts on layaway and pick the stuff up before Thanksgiving, be very strict in budget for this. Bear in mind that shipping often costs more than the gift, token gift cards from retailers are just welcome.

 

[masondoggy]

Stay away from credit counseling companies!

 

[masondoggy]

Stay far away from credit counseling companies!!!

First of all, it IS as damaging to your credit report as bankruptcy, except you don’t get any relief from the debt that’s choking you. “consumer credit counseling” remarks on your credit report are BAD. Don’t do it! If your really struggling so much to pay your bills, do not feel guilty about filing bankruptcy. People like you are what the bankruptcy laws are intended for, and it doesn’t make you any less of a person for doing it. If you truly are struggling and can’t pay all of your credit card bills each month, and have no time to work an extra job to pay them, then consider bankruptcy before credit counseling.

Secondly, there isn’t anything credit counseling companies can do for you that you can’t do for yourself. You can call all of your creditors yourself and negotiate with them. Often times they have hardship programs for people who are struggling where they may reduce interest rates, take off fees, etc. Call up and ask. Have your credit cards already been charged-off? If they have, then you can save a chunk of money and call them yourself and offer a settlement (and also negotiate a deletion from your credit report or negative remarks changed to positive). Often times they will accept it.

Keep in mind that there are many, many people that have had their credit reports trashed by being in credit counseling. Often times these companies don’t pay all the bills on their due dates (they have their own method of deciding who gets paid and how much, and when) and people end up with a string of lates on their reports. So their credit ends up worse than when they started. You may think your finding a “reputable” company and then end up getting burned.

BTW, if your interested in improving your credit, DO NOT close credit card accounts. especially older accounts. That will KILL your credit score. You can hide the card where you don’t have easy access to it, pay it off and the age of the account (and the credit limit that isn’t used up) will help improve your score. FICO likes to see revolving accounts with low balances (not just installment accounts) and it can really hurt you to close those accounts.

 

[MooCowSteph]

masondoggy:

Stay far away from credit counseling companies!!!

First of all, it IS as damaging to your credit report as bankruptcy, except you don’t get any relief from the debt that’s choking you. “consumer credit counseling” remarks on your credit report are BAD. Don’t do it!

Secondly, there isn’t anything credit counseling companies can do for you that you can’t do for yourself. You can call all of your creditors yourself and negotiate with them. Often times they have hardship programs for people who are struggling where they may reduce interest rates, take off fees, etc. Call up and ask. Have your credit cards already been charged-off? If they have, then you can save a chunk of money and call them yourself and offer a settlement (and also negotiate a deletion from your credit report or negative remarks changed to positive). Often times they will accept it.

All very true.

BTW, if your interested in improving your credit, DO NOT close credit card accounts. especially older accounts. That will KILL your credit score. You can hide the card where you don’t have easy access to it, pay it off and the age of the account (and the credit limit that isn’t used up) will help improve your score. FICO likes to see revolving accounts with low balances (not just installment accounts) and it can really hurt you to close those accounts.

Again, this is very true. If you have a lot of available credit, say equal to the amount you make in a year, it’s a good idea to close some of the newer accounts. But keep the older ones open! They will help you to repair your credit, which will help you save money in the long run by doing things like refinancing your mortgage or getting a better loan on a car. Just cut up the cards

Also, I would not recommend you take out a home equity loan. That kind of thing makes me very nervous. Say your husband were injured and unable to work. You could lose your house if the mortgage payment is too high to make bacause of the added balance. If he were unable to work and you could scrape together the mortgage payments, but not make the credit card bills, the worst that will happen is your credit gets worse.

Here’s a good, short article. fool.com/60second/debt.htm

 

[MamaGeek]

I don’t know much about credit counseling or bankruptcy filing, but I do know some about family budgeting.

Do you track your expenses? I suggest starting out by listing categories and how much you spend in each one on a weekly and monthly basis. Some things to track:

housing
housing maintenance
basic utilities (water, electric…)
luxury utilities (cable,internet…)
basic groceries (food, basic pharmacy, cleaning…)
luxury groceries (snacks, prepared foods…)
clothing
fuel
insurance (home, vehicle, life, not health)
vehicle maintenance
gifts (birthdays, etc.)
entertainment (movies, rentals, amusements…)
dining out (include lunch)
health care (insurance, copays, pharmacy…)

I’m sure you can think of more than this, as well. Just getting an idea of where your money goes can help you start saving. Look at the money sinks in the list and think of ways to cut back:

housing - can you refinance your mortgage?
housing maintenance - is your house very old, and always having problems? might it be more economical in the long run to move to a newer place? do you do your own repairs?
basic utilities - do you turn off lights when not in rooms? do you try to do laundry with as big loads as possible to avoid using much water/elect.? could you wash dishes by hand instead of using the dishwasher?
luxury utilities - can you cut back or eliminate any of these?
basic groceries - do you cut coupons, look for deals, shop cheap (Walmart)
luxury groceries - can you cut back on these, cook more from scratch?
clothing - try thrift shops, hand-me-downs, etc.
fuel - can you carpool?
insurance - shop around for good rates
vehicle maintenance - can you do any repairs yourselves? is car costing more than it’s worth?
gifts (birthdays, etc.) - can you make any handmade gifts? can you shop well in advance of Christmas? can you look for deals?
entertainment - consider what you can live without
dining out - are you willing to stop dining out? do you bring bag lunches to work?
health care - not sure what to suggest for this one

Thinking about your budget in categories of spending really helps to manage where your money goes. It’s hard to keep up the tracking process this way, but stick to it, and you’d be amazed at how much control of your own money you can assert. There are software programs to help you do this, too.

 

[wabrams]

1ke:

I completely disagree. Credit counseling is NOT equivalent to filing bankruptcy. Reputable credit companies do not view it equivalent.

You’re incorrect: most, if not all, credit companies treat it as a bankruptcy.

1ke:

Also, a notation of credit counseling is only on your file while you are in the program. And, Fair-Isaacs has stated that credit counseling has not bearing on your FICO score.

The Experian Fair Issac scoring isn’t affected, but the Equifax Beacon score and the Transunion Fico is.

1ke:

Bankruptcy is not paying back your debt, it’s a cop out except in the most extreme circumstances.

No, a Chapter 7 is not paying back your debt, and is for a large amount of debt you cannont feasibly get out of. A Chapter 13 BK is a repayment plan.

1ke:

Credit counseling is paying it back in full and getting help from the creditors to do it. If you do not make timely payments then yes your credit can be damaged. But, you are already struggling with your debt. Worry about rebuilding your credit as a long-term goal. You should be focused on finding the help you need to get these debts paid off.

Credit counseling is about the credit counseling company getting paid first, then paying your creditors second. Chapter 13 Bankruptcy is negotiating with your creditors, through the courts, to get a settlement and a time frame to pay it all back.

1ke:

Honestly, what’s your alterative? Not paying? Bankruptcy? Trying to tough it out alone?

A little harsh, don’t you think?

 

[wabrams]

puzzleannie:

Start paying all your extra money on the card with the smallest balance, when it is paid off, cancel it. Then apply that money to the next account and so on.

You’ve got that backwards: you pay off the cards with the highest balance, regardless of the rate, becuase if you don’t you’ll pay more interest than a smaller one with a higher interest rate.

puzzleannie:

Transfer all your credit cards to one with the lowest interest, and cancel the rest. Put all extra money to pay the cards off.

Don’t cancel the cards, it’ll kill your credit. Put it on one card then leave the other ones open. It will look like you’ve got a lot of credit you’re not using, versus having 1 card that is maxed out and no available credit.

puzzleannie:

Whatever you do, don’t get a home equity loan, pay off your bills, then proceed to rack up more bills and credit cards.

A home equity loan can be a good thing: you immediately get rid of the credit card debt plus you get a tax right off. If you’ve got enough equity you might want to just refinance the first mortgage.

 

[Jabronie]

Here’s Dave Ramsey’s first 2 Baby-steps to financial peace: (www.daveramsey.com)

1. Immediately stop using credit cards. Have a “plasticitmy” and cut up every single one. Then sell and save until you have a $1000 emergency fund. That way you can use money from it instead of credit cards. If you have to take money from the emergency fund, then pay back the money asap.
2. Pay off all debt except the house. Start with the LOWEST balance (not interest rate) He calls this the “debt snowball” Make a list of all your debt, and make minimums to everything but the lowest. As you pay one off, apply its payments to the next. CANCEL the cards once they’re paid off. Don’t worry about your “credit rating”. It’s not important once you start doing things the right way.

---

Check out his page for the “Debt Myths” (daveramsey.com/)

Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly.
Truth: You should pay off the smallest debt first to create the greatest momentum in your debt reduction.

The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20 percent head knowledge and 80 percent behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.

 

[wabrams]

Jabronie:

Check out his page for the “Debt Myths” (daveramsey.com/)

Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly.
Truth: You should pay off the smallest debt first to create the greatest momentum in your debt reduction.

The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20 percent head knowledge and 80 percent behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.

It’s a more psychological thing than it is money saving. You feel better becuase you’ve gotten some debts paid off and now you have a morale booster to pay the big ones off. I’m 50/50 on Dave Ramsey: some things he says make perfect sense, while others are completely off the wall with nothing to back them up. Hard to say when the advise is coming from somebody who has filed for bankruptcy twice.

If you want to play with some numbers about the cost of credit cards, check out these sites:

bankrate.com/brm/cgi-bin/apr.asp

cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp