January 2011 Get Out of Debt Thread - Page 3 - Mothering Forums
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Frugality & Finances > January 2011 Get Out of Debt Thread
_ktg_'s Avatar _ktg_ 09:00 AM 01-13-2011

Ok gals I am in a decision pickle and I need some sage advice from folks looking at it from an objective perspective.  DH & I have recieved a wonderful offer from our friends moving out of the country.  They own a 2007 prius (26k miles pristine condition!) and had been trying to sell it at 17k.  They have offered to do a contract with us (2k down,$275/mo. for a total cost of 15,2000) 

 

We are currently a 1 car household (1992 suburu legacy wagon) and found out late last year - it has a leaky head gasket.  We did a temporary fix (some of the sealant) and I believe it has done the trick but time will tell.

 

So the dilemia - DH & I goal for this year - paying off our CC (10k) and really walking the line of not sinking into our "sink funds" for the year to pay it off only 1k in emergency, along with all of our tax return & current saving account.

 

In working the numbers (including getting quotes from auto insurance) here's the rundown for us:

 

2k - downpayment

1k - in taxes, fees and registration costs

$275/mon

$40 increase to our car insurance

$16 deduction in our homeowners insurance (still a +$25 difference)

 

Overall this reduces our snowball payments to $600/mon vs. $900/mon, but we are getting a more reliable car which will require regular maintence* (I will talk to DH to see how much that is).  So would you do it?



lavatea's Avatar lavatea 09:25 AM 01-13-2011
_ktg_ - Have you considered the amount of gas you will save by having two cars? We're a one car household, and we often have to do extra driving to get DH one place when we (kids and I) might be going another. Then again, I suppose this might not apply to you, but in our case it would save a little bit of gas - and a whole lot of frustration.
chely7425's Avatar chely7425 10:29 AM 01-13-2011

ktg - I would probably go for it... It sounds like you would be getting a good deal on reliable car with good gas mileage. How far does your DH drive for work? Also, like the PP said would you save gas with 2 cars? We are currently a 1 car family and are planning to buy a second car in about a year (when DH gets back from deployment) because if I need the car during the day I have to take him to work, run an errand, go home, go back out to pick him up, etc.

 

AFM... I paid off another CC today!  We are down to 9900 in CC debt (yes, still a horribly huge amount) but I am paying off another 1000 next month and then ALL of it with taxes, which should also be next month.  I do have a car question... we currently have a 2010 Jeep Liberty which I love.  But we have 3 kids under 3 so carseats are interesting in it given the limited space.  We are hoping to refinance in a few months, since we will have no CC debt and good credit scores.  We are hoping to keep this vehicle for as long as we can safely restrain all of our children in it, but I have my doubts about how well that is going to work once the oldest needs a booster (in about 3 years).  We have 5 years left on the loan.  Should we refi with a 5 year loan (lowering the payment by 50-75 dollars, still paying it off around the same time) or refi with a 6 year loan (lowering the payment around 100-125 dollars) but adding a year to the repayment time.  This will be our only debt besides my student loans but our budget is very tight so I am wondering if the extra breathing room might be good...


MyTwoAs's Avatar MyTwoAs 11:53 AM 01-13-2011

 

Agatha_Ann - Thanks for explaining, I'm a bit of a tax nerd so I'm always intrigued by super large refunds (or super large amounts owed heh)

 

Eirual - Yay, congrats!  I remember that being disgusted with stuff feeling and I tell you, that was our own little debt snowball tipping point.  That is THE perfect attitude to hammer the rest of this out.

 

_ktg_ - Honestly, I wouldn't buy the car.  If I needed a second vehicle I'd find one that is much less expensive to a) own and b) repair.  Speaking as a hybrid owner myself .  ;)  As far as less expensive, the monthly payment on that is fine but it is still a $17k car and it would reduce your monthly snowball drastically (IMO).

 

chely7425 - Dave's answer would be to sell the car if things are tight.  I'm not Dave though (plus I'm a car nut).  However, I wouldn't refinance it for longer than your current term.  You may want to check with the bank because years ago we refinanced a vehicle and we had to bring cash to the table to account for the difference in value of the vehicle and what we owed (new car depreciation).  At that time, the credit union would not let us roll negative equity in.  So if you need to refinance it, I'd do it at 5 years but make sure you aren't out of pocket for the difference.  Congrats on the CC payoff - that is great news!!


Pogo0685's Avatar Pogo0685 12:56 PM 01-13-2011

Well we got my taxes done, they said we could do them yesterday because we don't do itemized deductions, then they were going to sit on a server somewhere and be sent in as soon as the IRS opened up its servers. BUT as we were doing them they discovered that we have to use a 5405 form (I think that's the form at least) and it wont be ready until the 24th on H & R blocks computer systems and the IRS wont accept them until the end of February. I don't really care though because all of the money is already planned for and only $55 will be spent. We are getting $4,055 back so we decided to put $200 in my sons savings account, in case he needs shoes or clothes or something later in the year, $400 will go in each of our personal accounts, but that will be the only money we get this year so anything we need like shoes, clothes, or anything we want needs to come from this money. $3,000 is going right to savings bringing our emergency fund up to $4,000. And the last $55 will buy us a nice dinner. I feel good about the way we decided to spend the money, the last 2 years (we got nowhere near this amount of money) but we spend it on stupid stuff like brand new phones that we did not need and eating out, I feel really good that this year its going for a good cause.


_ktg_'s Avatar _ktg_ 01:02 PM 01-13-2011

Thank you for the replies so far.  As for being a 1 car household, we have been stretched thin by this because of where we live i.e. suburbia. I am the WOHM, and DH is the SAHD. He does all of the driving currently between me to work (until the summers when I will bike or walk as its about 5mi each way) and DS1 to school.   Please note busing is not an option (it would take over an hour and 2 major transfer and the cost of bus fare is more than driving daily).  The suburu is a manual, so while I'm trying to learn to drive our current vehicle its been tough (time & patience wise) and it would provide an option to allow both of us to drive a car easily and not make every trip to get something a family trip or an extra one for DH. 

 

If we do buy this car - it will be the main car for our family and the suburu will sit in our driveway 90% of the time.  It truly would only be driven most likely 2x a month for DH to go to D&D meet-ups.  Previously I was left without a car those nights, which is not terrible but not great if something happened.  We have had a 2 car household up until last year and used both quite a bit and our budget for gas is still based on a 2-car household, we have actually not saved any money in terms of gas by reducing down to a 1-car house, so that is an area I am concerned about greatly as I would like to reduce our monthly gas budget if possible.   

 

It has been in our plans to get a hybrid car for a long time, but again our debt reduction is necessary too.  I think for both of us where can we strike a balance in this effort.


chely7425's Avatar chely7425 01:52 PM 01-13-2011


 

Quote:
chely7425 - Dave's answer would be to sell the car if things are tight.  I'm not Dave though (plus I'm a car nut).  However, I wouldn't refinance it for longer than your current term.  You may want to check with the bank because years ago we refinanced a vehicle and we had to bring cash to the table to account for the difference in value of the vehicle and what we owed (new car depreciation).  At that time, the credit union would not let us roll negative equity in.  So if you need to refinance it, I'd do it at 5 years but make sure you aren't out of pocket for the difference.  Congrats on the CC payoff - that is great news!!


I know he would say sell... but that isn't an option for several reasons.  First, we are upside down, not by a ton but still.  Second, we looked into it... and to get a lower payment for the type of vehicle we need our payments would be almost the same but with a car 5 years older.  So... that makes no sense.  We are currently stationed in the middle of nowhere Louisiana so having a reliable car is a must as we drive a lot :)  I will check into whether we need to bring cash to the table or not, I believe we can refi it without putting any down because it still counts as a new car by USAA standards.  Things aren't tight as in "we can't pay our bills" they are just tight in the "we can't go out to eat on a whim and need to plan for big events" kind of a way :)  I think I will call them and ask some questions about the refi just so I know what their policies are.  The other issue is that we are facing a possible over sea duty station and GMAC/Ally (whom we currently have our car loan with) will not allow us to take the vehicle out of the US while they hold the loan.  USAA will which is another incentive to refi!


eirual's Avatar eirual 08:55 PM 01-14-2011

I bought an un-budgetted $4 coffee today bag.gif

(...and liked it).

 


BunnySlippers's Avatar BunnySlippers 08:06 AM 01-15-2011


Quote:
Originally Posted by eirual View Post

I bought an un-budgetted $4 coffee today bag.gif

(...and liked it).

 



*TskTsk*shake.gif

 

Oh wait- I bought a $2.80 coffee today and didnt budget....horrors.gif

 

 

KTG- That is $15000! How about buying a $2000 dollar car since you already have that, and save yourself $13000!


Michelle-H's Avatar Michelle-H 11:17 AM 01-18-2011

I need to be in on this.  No major debt here, other than our mortgage.  So, I would say we are ready to start increasing contributions to a retirement plan (currently at 8%) and saving regularly for kids college.  However, for some reason, we really struggle with staying within our grocery budget!  Any tips on how to do that with eating mostly organic, and using only pastured meats?


Michelle-H's Avatar Michelle-H 11:22 AM 01-18-2011

I need to be in on this.  No major debt here, other than our mortgage.  So, I would say we are ready to start increasing contributions to a retirement plan (currently at 8%) and saving regularly for kids college.  However, for some reason, we really struggle with staying within our grocery budget!  Any tips on how to do that with eating mostly organic, and using only pastured meats?


Deir's Avatar Deir 05:00 PM 01-18-2011

Michelle H-

We just bought a 1/4 of beef ( all butchered) for 5.00 a lb. I thought that was pretty good. Do you have farm source?


mtm's Avatar mtm 10:25 AM 01-19-2011


Quote:
Originally Posted by Michelle-H View Post

I need to be in on this.  No major debt here, other than our mortgage.  So, I would say we are ready to start increasing contributions to a retirement plan (currently at 8%) and saving regularly for kids college.  However, for some reason, we really struggle with staying within our grocery budget!  Any tips on how to do that with eating mostly organic, and using only pastured meats?



menu plan if you don't already. Don't shop more than you absolutely have to. Stockpile when you find the oh so rare sale. 


Michelle-H's Avatar Michelle-H 10:51 AM 01-19-2011


Quote:
Originally Posted by mtm View Post



Quote:
Originally Posted by Michelle-H View Post

I need to be in on this.  No major debt here, other than our mortgage.  So, I would say we are ready to start increasing contributions to a retirement plan (currently at 8%) and saving regularly for kids college.  However, for some reason, we really struggle with staying within our grocery budget!  Any tips on how to do that with eating mostly organic, and using only pastured meats?



menu plan if you don't already. Don't shop more than you absolutely have to. Stockpile when you find the oh so rare sale. 



We do have a good farm source for beef.  In looking at reciepts, I think the big issue is those store trips for just one thing...  DH usually makes those, and can spend $20 on a trip for that one bottle of ketchup we needed.  And I could certainly do better w/ menu planning!  I do OK--but not great.  Hence the last minute, expensive store trips!


Motivated Mama's Avatar Motivated Mama 04:32 PM 01-19-2011
I've been doing well with the budget. We're current on everything now. Unfortunately, we need more oil for heat again. I still think we'll be able to manage without getting late on anything. I applied for a second job yesterday. It would be full-time and I would keep my weekend job as well. After paying for childcare, taxes, and gas to get there, it wouldn't be a whole lot, but it would be more than we are making now. Maybe an extra $800-$1000/month. I have three under school-aged children, so childcare would be costly. It would be in my field too, public health, and I should be able to complete my masters if I get the job as well. So, I'd be happy either way. I would miss the time that I have at home with the kids though.
BrandyStiltner's Avatar BrandyStiltner 05:57 AM 01-20-2011

If you are needing to get rid of a newer auto and you are upside down... Look up private value of selling it on KBB.com then if it is high enough sell it.  If not then pay down principal even if it is with an extra $10 a month towards the principal.  Every little bit helps.


BrandyStiltner's Avatar BrandyStiltner 06:10 AM 01-20-2011

Here is where we are at on our budget.  And my goals.  Sort of:)

 

Back story first.  My husband was laid off in August of 08 and went back to school.  Now has a good job, but it is temporary so no 401K.  I am carrying the insurance, but not sure how long it is going to last b/c I am on disability after a car wreck that has left me not able to work full time at that job.

 

We have no cc debt- I do use a credit card that gives cash back and I pay it off every month and that is how we afford to take a vacation every other year.

We just paid off our 1 auto!!! Made last payment the other day:) Less than 42 months on a 75 month loan- exciting.

We have our emergency fund.

 

DEBT

I still owe around 8,000 to school loans- that are worthless b/c I would have to go back to school to use my degree to its potential.  I pay extra $40/month on this.

 

Owe 24,000 on house.

 

That is all... I know that doesn't seem like much to most, but to us it looms.  Especially those student loans that I can't earn back what I have put in...  Can't wait to pay that off.  I plan on taking tax return if any and putting it on the house principal.  The interest is 3% higher than my student loans.

 

What really kills us is the fact groceries and gas are so high.  We live 70 miles 1 way to husbands job.  Looking at moving, but houses are crazy around where he works.


chely7425's Avatar chely7425 11:21 AM 01-20-2011

I am anxiously awaiting our W2 (should be available the 24th) so I can file our taxes... if we get back the amount I think we will, then we will be able to pay off ALL our CC debt, and put 1K in savings and buy a few small things we have been needing!  Over the next 3 months I need to save another 2K also so that we have the money we need for the move back to Louisiana in June.  Once our credit report shows all the CC debt paid we are going to refi our car because DH's credit score is 150 points higher than when we bought it and we hate our loan company.. So, that is kind of all we have going on over here!  Can't wait to have things more under control and have just the car and student loanS!


rissierae's Avatar rissierae 11:24 AM 01-20-2011

Oh thank you for posting this!  My church offers Dave Ramsey's course, but charges $100 for it.  And they don't really give you any clue as to what the course involves other than starting a path to become "debt free."  I've always wondered if I should take it, just because I'm into budgeting and saving money, but wondered how different it would be from what I'm already doing.  Since we're already doing the majority of things on this list, I know now that it probably wouldn't do me much good to spend the $100 and take it.thumb.gif


Motivated Mama's Avatar Motivated Mama 11:31 AM 01-20-2011
That's kind of silly - pay $100 to get out of debt. That's a pretty poor start, wouldn'tcha say? smile.gif
eirual's Avatar eirual 02:02 PM 01-20-2011

Silly indeed...but more of a worthwhile investment then say, a handbag or fancy daily coffee you absolutely must have. I've never taken the course, just gotten his book Total Money Makeover out from the library.

 

On a side note,

 

I've been listening to DR on the local christian radio station....I must say, I much prefer reading his books than listening to him speak!


laohaire's Avatar laohaire 02:02 PM 01-20-2011

Save your $100 and get Dave's book from the library :)

 

I think the $100 would be well worth it for people who aren't sure they really care about getting out of debt but are interested in at least learning about it. And those people would probably be more of Dave's target audience anyway - people who have plenty of money, but just spend it all. $100 for such a person would be chump change and well worth some motivation.


eirual's Avatar eirual 02:12 PM 01-20-2011

Oh, news on the job front....DH has been working with a friend for a song and a dance since moving home, but he starts a new job Monday (just to tide him over 'til he'll start college in September). He's not thrilled about the work itself, but it's better pay, closer to home (like walking distance close), and longer term than what he's doing now (work with friend is only for a couple more weeks). 

 

We did the math and his job alone can rid of our debts and cover our savings in the next 6 months...so, I'm hoping he can put on his happy face and decide to make the best of an otherwise monotonous job and enjoy all the good things about it. ...I'd like to fast forward a few months just so we can be DONE with our debts!!!!

 

Also, I just realized I get paid sooner than I thought (woohoo....we are so dead broke right now). The kicker is I've been working lots, but won't get paid for that 'til the end of NEXT month....fine, but I'm impatient....


lucky_mia's Avatar lucky_mia 07:22 PM 01-20-2011
How do you start when you can't even get to the pre steps? I can't even get caught up on basic bills. I'm not even sure how much we owe or on what. How do I begin when I am so far behind.
BrandyStiltner's Avatar BrandyStiltner 07:34 PM 01-20-2011

@lucky_mia   You have to start some where.  This is how I started- not sure how others did it...

I started by building a budget.

Fixed expenses- these are things you can't change every month.  Rent or house payment, phone, water, garbage, etc.

Variable expenses- these are things that change... Electric, groceries, gas, etc.

 

The variable expenses I found were easiest to guess by taking a 4 month tally of receipts and then dividing that out into months.  Then I went and got my credit report- you can get one free through each of the 3 major credit reporting companies 1 time per year.  This told me how much I still owed on my house, student loans, etc.  Then I started planning how I could pay that down.


lucky_mia's Avatar lucky_mia 09:48 PM 01-20-2011
Tomorrow I will take a step, any step and post it here. Maybe that will get me going.
eirual's Avatar eirual 10:27 PM 01-20-2011

 

Quote:

Originally Posted by lucky_mia View Post
Tomorrow I will take a step, any step and post it here. Maybe that will get me going.

 

thumb.gif

 

I think half the battle is just taking your head out of the sand, knowing where you stand, and getting it all organized so you can figure out what you need to do next. While ignorance may be bliss, knowledge is definitely power. Seeing just how much debt we had (we always thought we weren't that bad, but adding it up and working with the figures- yikes!)....that's what motivated us to change our ways.

 


Once you know where you stand, one of two things can happen: 1) you can create a budget and realize how much money is just floating away once you have a clear picture or 2) you can create a budget and realize the figures just aren't going to work, in which case something has to change; income has to go up, or spending has to go down (and that's the point where you may have some tough choices to make, but it will all be so worth it!).

 

It's amazing how much the chaos of finances filters into other areas of your life without even realizing it. Taking control of them just makes everything else in your life clearer too...I never realized just how much finances were actually stressing me out until I started paying attention to them and coming up with financial goals. Things just got simpler after that.

 

Good Luck!


BrandyStiltner's Avatar BrandyStiltner 10:52 AM 01-21-2011

@lucky_mia   Great even a little step is a step in the right direction.  A journey of 1000 miles starts with a single step... GOOD LUCK:)


rissierae's Avatar rissierae 11:36 AM 01-21-2011
  1. Quote:
    That's kind of silly - pay $100 to get out of debt. That's a pretty poor start, wouldn'tcha say? smile.gif

    Yeah, me and dh's thoughts exactly.  And the church was going to give "scholarships" to people who wanted to take it, but couldn't afford it.  But the program advised against that, suggesting that the people who couldn't afford it should come up with the money by selling something, or taking on another job etc.  I feel pretty confident about being able to pay down our debt, without gaining more. 

 

lucky_mia-  I know it probably seems overwhelming to know where to start, but one thing that helped me was changing the way I looked at it.  I told myself, I don't want my money controlling me, I want to control my money!  Now, however much I have, I tell IT where to go.  Every time money comes in, I sit down, look at the budget, the bills, and so forth and make a plan for where the money will go.  Good luck to you!thumb.gif


lucky_mia's Avatar lucky_mia 03:25 PM 01-21-2011
I did it. I took a step. I organized "the box". The one with all the bills and unopened mail. It was a huge task but I was able to file away tons and now at least I can find my bills. My next step is to go through those so I only have one copy each bill. I know for instance that I have many copies of the same medical bill but I have to look closely at the dates of service. From there I can figure out how much debt we have.

Thanks for the encouragement everyone. I think checking in regularly will keep me on track.

 


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