debt denial

[wish]

I've been living under a rock. My dh has been trying to tell me how much debt we are in and i'm finally starting to "hear" him. I really like to just pretend it's not a problem, and be optimistic that it will be all taken care of. Now reality has hit and I am shell shocked! I don't know where to start.

I hate to do it but here are the numbers...total debt $45,000 $27,000 cc debt, the rest is the car, ugh.

I'm feeling like we need to strip down to the bare miniumum. Get rid of cable, internet on my phone, gym membership. I posted a few days ago about possibly getting a new car to get out from under our big payments ($475/mo, we owe $19000 car only worth about $12,200).

We have been living beyond our means, obviously. We also pay $800/mo for preschool, this will improve in the fall when dd1 starts K. I just don't know what else to do. Our snowball calcultor says it will take us 5 years to pay it off. Also, dh is on board, but doesn't think we need such drastic changes. He thinks we are better off staying with the car, that it is the least of our financial problems.

I'm rambling, any ideas, big or small appreciated!

[MyTwoAs]

Join the Getting out of Debt thread, you'll get a lot of good ideas and of course support there. The hardest part is looking at the figures and really understanding and accepting where you are at. That is the first step to making a change, though. Some people go gung ho and cut all non-essentials (cable, etc) and others just cut back (keep basic cable but drop movie channels, eat out 1x/wk instead of 3x/wk, etc).

We're paying off our mountain of debt using the snowball method and we're doing lowest balance to highest balance. We've paid off 13% of our consumer debt since we started this plan earlier this year. At this rate we'll have paid off everything by the end of next summer. However, now that we are focusing on paying this down, it seems like "new" money is coming our way. My husband's commission is significantly larger than expected, he received an out-of-the blue bonus for helping a co-worker, and I've landed a few new writing opportunities. So when you look at that 5 year figure, that is if nothing else changes. However, chances are income will go up and new snowflakes (unexpected money) will find their way to you. That $800/mo preschool payment will go a long way - you just need to make sure that you take that full amount and apply it towards debt.

I know that in your other thread someone suggested either taking out a personal loan for the difference in your car value or finding a way to save up the difference to sell it and then buy a car for cash. That will definitely free up some money. If your husband isn't on board with the idea now then maybe he will be in a few months. In the interim, get on a written budget and track where all your income goes - it is a tremendous help IMO.

Again, please consider joining the Getting out of Debt thread in this forum, a great resource. Most of the people follow Dave Ramsey's "My Total Money Makeover" plan - either strictly or loosely, but it isn't just for those that follow his ideas and is for anyone that wants to get out of debt.

[EFmom]

Congratulations on taking some positive steps! Pat yourself on the back for that. It has got to be hard to do.

A few random ideas:

I would take a very hard look at any recurring monthly expenses to see what can go. I'm not so sure about the car, given your situation, so I'd focus on looking at where else you can save.

If the preschool isn't also child care for the child so that one of you can be gainfully employed, I'd drop that yesterday.

I would get rid of cable and any high end cell phone plans. We use prepaid cell phones for communication only, and we're careful about it. We spend less than $200/year for it for two of us.

If your gym membership isn't a contract and you can get out of it and find some other, cheaper way to exercise, I'd do that.

How much do you spend on groceries and eating out?

Do you pay for garbage collection? Could you go to the dump yourself for less? For us that was a $600/year savings.

Do you use your public library? Ours supplies a big percentage of our entertainment needs for nothing.

[wish]

As far as preschool, the $800/mo is for both girls to go two full days a week, and we both work full time so this does cover daycare for us. Other days they go to a sitters house which for both of them is $60 a day, which is really good around here.

I called about getting interenet off my phone and they said it's a requirement for my phone (blackberry) , but if I can locate an old phone I can use that and get rid of the extra charge every month ($30).

Im month to month on the gym, so that's going! I've got videos I can do at home.

We have totally cut out eat out, we know that it's just a total waste of money right now. We would rather put that money toward groceries and make a couple of meals instead of one.

I had never thought about the garbage stuff. I'm going to look more into that! Thanks for the great ideas, and I feel better that at least I'm on the right path now. Gotta start somewhere I guess!

[JTA Mom]

Your car is worth more than 12,200. That's what the dealer quoted you, and dealers are notorious for low balling it. They need to make some money on reselling it.

If you want out from under the car, start researching how much your car goes for, both on dealer lots and on craigslist/places people sell their cars. This will give you a much better idea of how much it's worth.


As for pre-school, do you really need it? You're paying 200 a week for 2 days. If you use the daycare, it would only be 120 a week, saving you $320 to add to your snowball in a month.


Ami