I think I'll come on over here and roll out my sleeping bag for a bit (its nearly midnight, I should be in bed resting for a busy homeschool week ahead... but I've got finances on the brain.)
I posted a thread about halting retirement contributions that twisted and turned into something much bigger. I know have many questions about how best to approach the debt.
I have 5K in credit cards at 0%
14K in DHs student loans at 3.75% $150/month payments
22K in a HELOC from our adoption (2.75%) $380/month payments
62K home mortgage 5.95% $776/mnth (350 of which goes to taxes and insurance)
and a complicated but vague debt scenario with my parents who purchased a home for us on short sale recently. We rent from them but need to eventually buy.
We have $3750 a month in income, and I am working now additionally for 4K thru July and will be seeking more work come summer. These figures are supplemental and don't even go thru the budget, they will go straight to debt. With the new changes in adoption tax credit, we are anticipating a hefty 2011 return. Maybe 9-10K. After sinking funds and expenses and debt payments, we have about $150 left in the budget. I still need to squeeze in a clothing fund and gardening supplies, and have nothing for home/property repairs/upkeep yet.
We have 2K in an EF and a good start to a budget that is still developing. I use the envelope system for many things, and have sinking funds for xmas, fuel, garden supplies, etc.
My plan is to pay off the CC immediately with the tax return, and jury is still out on whether I pay the HELOC or SL next. Ramsey would say SL due to the balance, but it has little risk associated with it so I don't know. I honestly have no clue how the snowball would be different in each scenario. My tired brain can;t wrap itself around that.
I got nervous today while working on the budget as I took away a savings amount ($250/month) and assigned it and more to sinking funds mentioned above. I felt like I was making backward progress. I have to keep in mind that what I am trying to do is live debt free, and that credit cards and home equity lines of credit are not open for business anymore, so I have to stash the money away this way, right?
1) I'm seriously considering an extra mortgage payment annually (in fact, it is included in my budget as of today). Its my highest interest rate and I just like the idea of feeling I'm getting ahead. Is this ill advised at this step?
2) DH, me and kids all get savings contributions monthly. Amounts to $135 and gets paid to personal accounts. We've been doing this for years and we like it. Should I cease while I pay off debt? (Dh and I use this to buy gifts at xmas/bdays, pay for trips or clothes, shoes or equipment if needed. We have no other budget categories for such things). The kids just accumulates and we hope they will have something somewhat substantial when they are teens. (no college savings at this point).
3) DR suggests to take the 1K in excess in my EF and apply to debt. Dh and I feel more comfortable having 2K. Thoughts?
Ugh. Will I ever get ahead? What now? I honestly am learning and thinking about so much here. Thank you! I can;t believe that for 15 years of marriage we have been living beyond our means. I am *so* done with that!
More questions to come, I'm sure. :-)