Where Do I Even Start?

[poohstixx]

I need some advice on what to do! We have a ton of money going out which leaves us with little for food, gas, etc. and we're quckly falling behind! Not to mention we often get slapped with overdraft fees in our account, because we struggle to keep track of what's going out, timing with bills, etc.

At the beginning of this year we had two credit cards with high interest and high minimum payments, so we contacted Take Charge America and are using them to help pay that debt off. The good news about this is we have not used ANY credit since that time.

We also had our student loans deferred for one-year, but that time is now up and will have to start paying on them again.

We are way upside down on our vehicle loans, we could maybe get $8,000-$9,000 for each of them, but that leaves close to $10,000 left over.

We have also debated selling our home and renting or buying something for a lower monthly cost, but with the poor market (and our home equity loan) we are also upside down on this and would have about a $20,000 difference if we could sell for top dollar.

Our Debt:
Debt Total Owed Min Pmt Interest
Mortgage $144,714.97 $1,246.97 5.875%
Home Equity Loan $38,766.17 $463.25 10.66%
Car #1 $14,054.99 $415.00 8.84%
Car #2 $11,300.30 $265.00 8.39%
Student Loan #1 $38,192.57 $230.00 3.62%
Student Loan #2 $16,649.01 $131.00 3.62%
TCA $20,100.00 $515.82 2%
TOTAL DEBT $283,778.01 $3267.04

Our Monthly Expenses:
Item Monthly Cost
Utilities $185
Water $65
Phone/Internet $80
Mobile Phone $100
Direct TV $54
Insurance (all) $225
Storage $45
Child Care $600
TOTAL $1354

TOTAL MONTLHY INCOME (TAKE-HOME) = $5,200
TOTAL MONTHLY EXPENSES (not incl. food, gas, etc.) = $4621.04
LEFT OVER AMOUNT EACH MONTH FOR food, house items, misc. = $578.96

I have tried to set up a budget, but get extremely frustrated when I know I need to budget for food, household items, clothing, car/home repairs, gifts, pet expenses, school expenses, etc. and have a very small amount of money per month to do that with. I don't know how to prioritize these things. AND, if I'm supposed to set money aside for clothing, repairs, etc. and can't, what do I do when those expenses come up and it's either use money for that or to cover all the bills??

We have a 6-year old, 3-year old. My mother stays with us during the week and takes care of our kids (she goes home on the weekends), so basically we have a 5-person household (keep in mind grocery expenses, household items).

We have $0 in savings. My husband has started a small photography business and we're starting to gain some small income from this (I would like to put this toward a $1,000 emergency fund for the time being).

We have made EXTREMELY poor choices with our money from the beginning...that is even an understatement! We want to turn this around, but we are so overwhelmed, we don't even know how/where to start! I am open to/desperate for any feedback or suggestions! Please, be kind!

[buildmybudget]

Well first off, are you paying your mother the $600/mth for child care? Perhaps she can give you a break if she doesn't need the income so that you can gain some breathing room. I think it might be difficult, but you need to cancel whatever cable you have and one of your phones. Then clear out your storage unit by having a garage sale and close the storage unit. This is just the tip of the iceburg, but I think you can get through this as long as you build and stick to a solid plan.

[KTP]

pretty much everything that buildmybudget suggested. Add one item to your monthly budget though.

1) prophylactics

Three is a perfectly fine number, if a bit above the national average. Any more than that is going to be a burden, not only on you, but on society.

[bjl584]

The first thing that jumps out at me is your home equity loan has a very high interest rate. You shouldn't be paying much over prime with interest rates being as low as they are. I would look into refinancing. Also, I would sell pretty much everything that you own that isn't a necessity to raise funds to pay off debt. Then I would cut out all of the nonessentials like the Direct TV, internet, etc. After that you are probably going to have to pick up part time work to increase your salary.

[poohstixx]

pretty much everything that buildmybudget suggested. Add one item to your monthly budget though.

1) prophylactics

Three is a perfectly fine number, if a bit above the national average. Any more than that is going to be a burden, not only on you, but on society.

Not nice KTP. I am asking for suggestions regarding personal finance, not your personal opinion on family planning.

[DayByDay]

Not to mention we often get slapped with overdraft fees in our account, because we struggle to keep track of what's going out, timing with bills, etc.

This one baffles me. Someone in your household is college educated. Why is it such a struggle to keep track? Log in your debit card receipts each night. Check your accounts online often and keep your account balanced. Don't write checks for money you don't have.

[KTP]

It wasn't intended to be mean. It was a serious suggestion to help your future situation.

Kids impact finances. A lot of people don't seem to realize that.

But I think if you trim a few things like the cell phones, cable, storage, and perhaps get the student loans deferred again if possible you can manage to pay off the cars and get back to stable ground.

[disneysteve]

I agree with the others that there is some fat to cut from your spending: cell phones, direct tv, storage unit. I'm also wondering about that $600 child care bill if your mom watches the kids all week.

Certainly, the bigger problem is all the debt. I'd seriously look into selling one or both cars and replacing them with something cheaper, even if you lose money in the process. That will require that you have some savings to cover the shortfall on the loan, though.

The interest rate on the HEL jumped out at me, too. Why so high? Can you refinance? What is your credit score like?

What was the cause for the HEL?

I'd also be looking to sell everything that isn't nailed down to raise money for debt repayment. I'd also be looking to boost income any way possible" second jobs for sure.

ETA: What is TCA, by the way?

[poohstixx]

TCA stands for Take Charge America.

Thanks everyone for your feedback! It is very helpful and GREATLY appreciated!

[poohstixx]

Can you refinance a home equity loan too?

[bjl584]

Can you refinance a home equity loan too?

Yep. You can refinance almost any loan, however it isn't always a good thing to do. Refinancing loans on depreciating assets like cars isn't a good idea, but since your home equity loan is attached to your home, and since you are having financial trouble, I think that it would be a good course of action for you.

[tripods68]

short sale....start the process now and be done with it.


Just my two cents.

[poohstixx]

Are you serious about the short sale? We've looked into it, but I don't know that we would qualify for a hardship. Plus, you can go through all the work...get an offer and have the bank decline. Anyone elses thoughts on this??

[bjl584]

I wouldn't short sale. I would go the more traditional route if you are serious about selling your home.

[tripods68]

I'm assuming your up-side-down in your mortgage. If not, REFI is the best way.

If so, the banks looks at your debt/income ratio. If the ratio is greater than 50% plus, your bank should listen. Given the alternative by simply "walk away", short sale, or bankruptcy. I agree its a long process but short sale is your better option IMO. Take it for what it is...