Buried Beyond Belief!

[czubmeister]

I just spoke to my wife about the grocery shopping and we agreed that no money would be spent until we go over the list together and only then would items be purchased.

The biggest thing that happened is that I had $75,000 left on my credit line and Wells Fargo came along and whacked it. I admit that I don't deserve and shouldn't live off the home equity but that put me into panic mode when that happened... not to mention a bathroom re-model that I didn't need to do 5 months ago for my son's bathroom.

I have two projects that I'm working really hard on right now that should come through.

Should I liquidate the 15,000 I have in IRA's to get by for a few months while I'm working out my job situation? I haven't discounted the fact that I should move.. but that is making me nautious at the moment.

[arthurb999]

What city, state do you live in.


What does your wife do for work?


How old are your kids and how many still live with you?


Long Term

I really think your best bet is to get a full time job for someone else in the IT field with benefits.
Sell your house and rent.
Sell the 04 lexus and expense milage through your business.

Short Term

Maybe negotiate with your credit card companies or a credit counseling service. (I have no experience with this).
Eliminate all waste in the expense side…. Dining out, etc.
Energy audit, 1K/month in utilities is a lot… I live in New England and have a 2500 sq foot house and it;’s not even close to that.

[disneysteve]

Should I liquidate the 15,000 I have in IRA's to get by for a few months while I'm working out my job situation? I haven't discounted the fact that I should move.. but that is making me nautious at the moment.

My gut answer is no, but is it a Roth or a traditional IRA? If it is a Roth, you can withdraw your contributions (but not any earnings) penalty-free and that might be indicated here. If it is a traditional IRA and you will have to pay taxes and penalty, it probably isn't worth it.

The problem, though, is that until you have corrected the spending problem and living beyond your means, cashing out the IRA is just putting a band-aid on a gunshot wound. The patient is still going to die.

I still don't see how you can fix having an $800,000 mortgage on your income. Even if you cut out all the waste in your spending, you can't afford your home.

[czubmeister]

I live 20 min outside of Los Angeles.


What does your wife do for work?
She is a mommy and me teacher. She meets with little infants and
their mothers. They meet in a group setting. Trouble is that she works at 3 different places and only stays a couple of hours at each place on different days of the week


How old are your kids and how many still live with you?
My daughter is coming home from University of Arizona because she hated it. She'll probably end up going to community college and will be living back at home. She wants to go to Fashion Institute of Design in Los Angles but that costs bucks too.

Long Term

I really think your best bet is to get a full time job for someone else in the IT field with benefits.
With my credit card payments and expenses, even if I made 100,000 per year, I wouldn't be able to make my nut.

Sell your house and rent.
-Ouch.. We've been here 14 years and got it exactly how we want it. Too bad I can't afford it.

Sell the 04 lexus and expense milage through your business.
* Looking into this right now.
Short Term

Maybe negotiate with your credit card companies or a credit counseling service. (I have no experience with this).
Eliminate all waste in the expense side…. Dining out, etc.
Energy audit, 1K/month in utilities is a lot… I live in New England and have a 2500 sq foot house and it;’s not even close to that.

It was a hot summer. Water and Power bills every two months and the highest it got this summer was 1,100.00. Since I work out of the house, I have file servers and other computers running 24/7.

[arthurb999]

Simply put, you have 2 options.

Make more or spend less.

i'd hate to see anyone sell/lose their family home so I hope you can come up with some way to make more money Could your wife handle some of the business while you look for new clients or get another job?

Your bank might be willing to take a write down on the mortgage and rework your loan. Are the loans "exotic" mortgages... or are they 30 yr fixed.

[jIM_Ohio]

I live 20 min outside of Los Angeles.

What does your wife do for work?

She is a mommy and me teacher. She meets with little infants and
their mothers. They meet in a group setting. Trouble is that she works at 3 different places and only stays a couple of hours at each place on different days of the week

How old are your kids and how many still live with you?

My daughter is coming home from University of Arizona because she hated it. She'll probably end up going to community college and will be living back at home. She wants to go to Fashion Institute of Design in Los Angles but that costs bucks too.

Long Term

I really think your best bet is to get a full time job for someone else in the IT field with benefits.

With my credit card payments and expenses, even if I made 100,000 per year, I wouldn't be able to make my nut.

Sell your house and rent.

-Ouch.. We've been here 14 years and got it exactly how we want it. Too bad I can't afford it.

Sell the 04 lexus and expense milage through your business.
* Looking into this right now.
Short Term

Maybe negotiate with your credit card companies or a credit counseling service. (I have no experience with this).
Eliminate all waste in the expense side…. Dining out, etc.
Energy audit, 1K/month in utilities is a lot… I live in New England and have a 2500 sq foot house and it;’s not even close to that.

It was a hot summer. Water and Power bills every two months and the highest it got this summer was 1,100.00. Since I work out of the house, I have file servers and other computers running 24/7.

Your responses sound like excuses more than solutions. See the items I highlighted above- the tone I am reading the responses in suggests you need to really re-think your whole situation.

For example- there are probably some deductions your wife could take on schedule A if she earned money doing what she is doing. Even if she made $1 I could write off lots of her travel expenses as job related (for example).

If not, wife needs to get a job. Any reponse other than yes is an excuse to justify bad financial behavior.

100k is better than 84k and gets you into the black if you work an IT job. Again you need to look at the bills and make some big decisions. Selling a 14k car is not going to fix a $30,000 annual shortfall or a $150k cc balance. You need to rethink the solutions to your problem.

Just because you have lived in house for 14 years does not mean you deserve a 15th. You made bad decision after bad decision to get into this hole. You need to stop digging as step 1, then realize if you stay in the house, you are just digging the whole deeper and delaying the problem's eventual demise or solution.

Here is my thought-
you work IT for 100k
your wife gets a job for around 30k
your kid gets a job and you charge around 1k/month rent.

Get yourself out of this hole.

Step 1- stop making hole deeper
step 2- balance the monthly budget
step 3- apply all extra monies to cc balance
step 4- set aside money for financial independance

Don't touch the IRAs- the tax penalties will dig the hole deeper (you might go into debt with IRS to get 15k for a 130k problem).

Until you can balance the monthly budget in your house selling the car or cashing out the IRA just delays the problem 2-3 months.

Balance your budget by cutting ALL expenses. No more AC. No more cable. Turn off PC when not using it (unless this makes money 24/7).

Once budget is balanced you need to unbalance it (in your favor) by setting aside 20% to break out of the financial situation. Might be 2% this year, 2 more % next year until you build up to 20... but hopefully you see this as a permanent solution to your problem.

You did not mention anything about your 2007 tax return- do you itemize, and how large was your refund?

[tripods68]

I would not cancel your Term Insurance. That's actually pretty cheap at your current age.

Have you consider Bankruptcy or Short Sale? It seems your situation is DIRE enough to explore these options. At least talk to your financial advisor or bankruptcy attorney how these will benefit you. Althought your credit may suffer for many years. It would allow you to have a new life, less stress.

[Christophercarl]

I would recommend not trying to find ways to increase your income, but finding ways to reduce your expenses and change the way that you live your life. Even if you get out of this you're going to have to make drastic changes to your lifestyle. Cut out what isn't necessary and find other, cheaper things to entertain yourself with. You may have to sell that car or move out of that house I hate to say. You clearly can't sustain the way you've been living so make some changes rather than fighting to earn more income, although you should definitely try to find ways to do this as well.

Hope it all works out. Keep us posted!

[czubmeister]

I have an accountant. I got a small refund back. My business year closed at 11/01/2008 and I owe $3,800 for payroll deposits which I can't pay.

I appreciate all your guys help. I'm just kind of shell shocked at the moment... not to say I diidn't see this coming. My heart is skipping beats all over the place but I'm trying to keep cool in front of the family. I just need to stay focused. I will consult a bankrupcy attorney and see what they have to say. I can't loose this house.

[Tree0164]

Wow- first of deep breathe- you need to let your wife know of all the financial issues going on.

Do the bare bones budget- no eating out, get rid of all cable tvs, extra phone lines etc. It sounds like you are trying to make some improvements there. Just buckle down

Your house what can you sell that is in inside are there toys, electronics that you can put in ebay etc. The house may have to go.

Good luck and take a deep breathe. Pick up Dave Ramsey's book at the library if you get a chance.

[disneysteve]

I'm trying to keep cool in front of the family.

I will consult a bankrupcy attorney and see what they have to say. I can't loose this house.

I think keeping cool in front of the family is a mistake. We're talking about other adults who are involved in the expenses and debt problem, not little kids who are naive and innocent. Forget trying to keep cool. You need to call a family meeting and sit down with everyone and review the numbers. Show them how much income is coming in and how much debt has piled up. Explain where all the debt came from. Show the monthly budget and focus on how there is far more going out than coming in and discuss together what can be done to correct the situation.

Without having run all the numbers, I don't get the impression that bankruptcy is needed here. However, I think "I can't lose this house" really needs to be looked at in great detail. You owe $800,000 on the house and earn just $84,000 currently. In comparison, when we bought our house, our combined income was $85,000, same as yours. We paid $142,000 for our house. In my book, to support an 800K mortgage, you'd need to earn over $200,000/year, and that's if you have no other debt (car loan, credit cards). Add those in and the required income climbs even higher.

I hate to keep focusing on this point, but you cannot afford your house. I'm afraid that the longer you try and hang on, the deeper the hole you are digging. Go meet with a bankruptcy attorney and see what he says. I'd be very curious to hear what he has to say.

Keep us posted.

[czubmeister]

I just called a bankruptcy attorney and left a message. I'm sure I'll talk to them tomorrow and see what they said. These guys were recommended by my neighbor across the street and have been in business for a long time so at least I don't think I'll get ripped off.

I am thinking about the house... just takes awhile to digest. I'm a sales guy my hope is that over the next few weeks I can bring in some additional income.

Thanks for all your comments.

[SnoopyCool]

I'm sorry you're facing this. I'm new to the savings world, so I don't have anything to add. However, do you celebrate Christmas and Hanukkah, too? I just noticed that you mentioned something of your daughter's Bat Mitzvah and also Christmas in an early post. That has to be expensive!

[asmom]

Hi,

Your wife needs to get another job. If she got something full-time with benefits, not only would she bring in more money but you could get health and life insurance much cheaper. And do you really need a million dollars of insurance?

If you are footing the bill for your daughter's anything, stop. She can live with you but she should get a job and contribute something to the household. That "dream truck" will be a lot less attractive once she has to work and pay her own way.

The power bill is insane. So is your food bill, honestly.

Liquidating your IRAs won't help. It is only a temporary reprieve.

You have an emotional attachment to your house so you're not willing to sell it and realistically you probably couldn't anyway. So you must reduce outflow and increase income. You have to look at everything.

[maat55]

I think you should read a few books. You know how to make money, you just need to learn how to manage it. I highly recommend these books:

The Millionaire Next Door by Stanley/Danko
The Automatic Millionaire by David Bach
The Total Money Makeover by Dave Ramsey

Once you know you are moving in the right direction, you will find contentment. I would rather have less stuff for a while then have debt and stress. Living below your means does not mean you will have less, but you will gain peace.