How did we get here? And how to get out?
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| Mon, 01-17-2005 - 12:38pm |
Well I’ve never posted here before but after mulling it over and over to myself and with DH I guess I just need to vent everything that’s in my head. Sort of like an AA but for debt I guess.
Let me start with some basics. Including DH student loan, an MBNA loan, a Discover Card, and an Amex card we are about $35,000 in debt. Ouch it hurts saying that “out loud” and admitting it. And we moved into our 1st home back in June of last year. At the beginning of this year I sat down to do a budget for us to see where our money is going every month, etc.. And as it turns out we are NEGATIVE $193 in the hole every month. I don’t know why it never occurred to us that this might be this out of control because since we have reserve $ in checking it’s not like we’re in a negative balance at the end of the month. BUT when you take the credits minus the debits that’s what it adds up to. At some point if this continues WE WILL be negative as the reserves will eventually go dry up. For some stupid reason I guess we thought our budget was ok when we bought the home but after I did it again a few weeks ago and took into account gas, dry cleaning, prescription meds, things that aren’t credit debt, and bills that don’t come every month but still have to budgeted for every month, etc. the truth is we’re not bringing in enough every month to cover all the expenses. What depresses me more is that it’s not like we’ve gone crazy buying things for the new house since the move, it’s still pretty much unfurnished with the exception of a new armoire and tv. that are new since the move. And we’ll continue to stay that way because obviously right now we can not afford to incur new debt. I guess we’re stuck on a roundabout every month.
Ok just a bit more background. I guess I should mention that we are in our mid-20’s. and our goal is to start having a family in 4-5 yrs or so. At that time I want to become a stay at home mom and raise my children and we will be forced to live on DH’s income. At the rate we’re going that will never happen. If we were to be free of this debt, it would be possible for us to live off of DH’s income alone but with them it’s just not, especially considering with how we’re pretty much just paying the interest every month. I guess we’ll be paying off our loans into retirement :(
DH and I realize that if we want that to be our goal, and that we want to be in a certain financial place in 5 years something’s got to give now and we have to start working towards that goal today and quit being foolish in somehow thinking that in 5 yrs things will magically work themselves out.
Anyway, due to how good the housing market is in our area we know we have enough equity in the house that if we were to sell the house right now, we could cover ALL the debt and still have money left over to start over with no debt and being smarter in what we do. Which would probably mean moving into an apt. for a year or so while we sort ourselves out and purchasing another home with no debt at that time. If we could do that it would mean that we could start to live on DH’s income for our monthly needs and we could take my salary for the next 5 years and put it into savings or finally get my IRA going. DH and I are seriously considering it as a possibility for our problem but we don’t want to be foolish and jump from one bad mistake to another. We want to make sure that if we do this we do it smart and have a plan set up as opposed to continuing to live like foolish teenagers or until reality forces us to do something, God forbid bankruptcy.
Neither of us wants to hit 30 with mounds of debt, w/o a life ins. plan for me w/o an IRA in my name, w/ DH not contributing enough for his, paying off interest, etc. Although it will be a kind of embarrassing thing for us to sell our home (considering the year of building and not even having been in it for a year) and go back to apt. life in comparison to keeping up with the Jones’, I think in the long run it will be better for us if we do something now if it will mean being in control of our financial lives in the near future. You know I think it’s human nature in life to make it look like everything’s always “under control” even if it’s not. And DH and I don’t want to join the ranks of over stressed working parents with two jobs and with kids not being able to save for retirement or savings.
UGH! Sorry I think my vent has turned into ramblings, lol. I guess I’m just looking for clarity for myself/ourselves as to what we should do. You know we don’t have a problem with what our future goals are I guess it’s just hard taking that 1 st step to get there. And as it stands, if we stay in our current situation things eventually are going to get worse not better and I’ll have to find another job that pays more just to help make ends meet and nothing else. And I for the first time in my life actually LIKE where I’m working and don’t want to have to find something new unfortunately.
Well hopefully soon we’ll get this mess straightened out. I don’t think DH’s ulcers can take much more.
Thanks for putting up with my vent.

Hi,
Sounds like you're making really great first steps. You'll have this worked out in no time.
It sounds like selling might be the best thing, but then again, it might not. If you have worked out your expenses on a monthly basis, then you pretty much know where you stand. The first step, before you do anything else--even before putting the house on the market, because it might take some time to sell--is to figure out a way to get your budget in the black. No more debt! You may be surprised at the ways you can cut back in your budget to find that extra money. This is the best way to do it, if you can. You can probably cut your grocery bill significantly (check the boards for posts about groceries--most people can cut their grocery bill in half at least without changing their eating habits--I've posted a few times on this), and you may be surprised to see how much money you put in vending machines, coffee shops, etc. If you post your budget, I'm sure lots of people will have ideas for places you could cut back and maybe get your budget under control without getting a second job.
Once you are in the black on a monthly basis, the next step is to decide what to do for the future. I think your plans sound wonderful, and doable.
The big question is, if you sell the house, will you have trouble finding one again that is affordable when you're ready? If your real estate market is really that hot, is there a chance you will be completely priced out of the market when you decide you want to buy again? And might your current home be a great investment if you stay in it and continue to ride the market? Is it a good home for raising a family? Or would it allow you to sell in a few years and put you in a good position to buy the right home for your family?
If you answer yes to most of those questions, then you might want to look at ways to get out of debt without selling your home, and hang on to it as an investment in your future. One way to do that would be for one of you to get a second job. Since you don't have children, this could be completely doable. You don't have to look at it as a long-term thing. Just a temporary thing until you get back on track. I'm a stay-at-home mom but for a while with ds#1 I had a night job that I worked while dh stayed home with ds. It sucked. But it got us back on track so that after nine months I could quit and go back to my main job (sah) full-time, with our finances in order.
It's great that you're planning ahead so that when you have children you will already be on track. I think the plan to live on dh's income well before the children are born is a really, really good one. You can do that while living in the house if you choose--just send all of your paycheck to pay off debts.
The other disadvantage, as I see it, of selling your home to pay off your debts, is that the quick solutions often don't lead to lifestyle changes. It took having to do the years of grueling debt repayment work for us to completely amend our ways. You don't change habits overnight. It takes time and work. And you get better at the good habits the more you have to work at them. Having your debt "magically" disappear--even if it's because you sold your house--might not give you the same amount of practice.
Those are just my thoughts on the matter. It sounds like you guys are on the right track and making good decisions. Welcome to the board, and I'll look forward to hearing about your progress.
Blessings,
Heather
P.S. If you *do* decide to sell your home, don't be embarrassed! Just be matter-of-fact. "Because of the equity we had already built into our home, it made better financial sense for us to sell it and begin building a strong cash basis for our plan to start a family." Or whatever, but just make it clear in your mind and to friends and family that this was a sound financial decision you chose, and not a desperate measure. There's no embarrassment in that.
Hi and welcome!
Thanks for your reply Heather. Somtimes it nice to just have somebody "hear" you out KWIM?.
After looking over the budget a few weeks ago the only room to budge is in groceries (350-400 a month this includes our work lunches, dinners, everything) we don't do vending machines or cups of cofee from starbucks, we brown bag for the most part. And this comes out to about 7 pp a day for three meals each. I'm trying really hard to find a way to curb that and find shortcuts but that's about the average :(. I always hear of these ppl that say that with 3 kids the spend 250 or something a month and I wonder if they are eating saltines? lol, seriously though?
And the only other budge room is our drycleaning bill which is about 90 a month! YIKES!!!! DH has a professional job where it's a suit every day :( with the exception of doing his shirts (pants are dry clean only - and they go after so many uses) I could get a little there - which I HAVE done before.
Unfortunatly, our cell phone, DSL, satellite, for now are on can't break contracts :( I know dumb move but they're there as part of the monthly totals. They aren't out of control (it's not as if we've got HBO - we've got the most basic channels) and as for the cell phone our plan is not over the top either. But we've found out that if we make ANY changes to the plan we're locked in for another 2 yrs. So we've decided best to ride them out and in Feb dump them.
All the other bills are "regular" bills .Lights, water, sewage, home assoc. fees. (oh god I haven't even included THAT in my budget:( ) cars, etc.
Ugh. I just don't know.
DH is in a line of work that does not allow him to have a second job. Which would mean it would be on me to get one. As it is I get home from work at 6:30 or so. So I thought if I had to go there it might just be better to try to find a higher paying job as opposed to working two jobs and feeling like a dead horse?
I guess DH and I have just realized that although, YES the house is a good investment,right now it's just not one we can afford at the moment. Now adding in assoc. fees (which I'd previously forgotten) we'd be in the red way over 193 a month. :( I guess at this point being priced out of the market for a while is a chance we're willing to take, as that's better than bankruptcy down the line.
Both of us are aware that selling the home will NOT be a quick fix. In essence it's putting a band aid on the situation we know if we do that and become debt free we WILL need to completely change everything to stay that way. And live differently. I guess the only difference this time is that we BOTH want to have a family in 5 yrs and are willing to do what we have to to make it happen with our working like dogs. And it feels like we're soooo in the red that even if we could find that extra 200 bucks a month we'd STILL only be paying the interest every month and scraping by exactly, and at that rate we would NOT be debt free until retirement age. :(
I don't know matbe we're fools? I guess it seems like a way to start over even if it means taking 3 steps backwards and having to save for a new home instead of just jumping into it naively like we did this time? I wish I had a road map for us. And as mentioned DH has ulcers (partly due to stress the dr. thinks) and I guess he's afraid of making a wrong move and adding more stress. BUT at some point fear or not, we'll have to decide on something.
We aren't going to be rash and are still thinking things out, I guess I'm just overwhelmed.
Thanks for your thoughts and I'll make sure to ask DH some of the same questions you asked me to help us both continue to sort this out.
:)
ratha_ivy...seriously how do you do it?!?!?!? 100 a MONTH on groceries for 2 adults and 1 baby! What are you purchasing? I seriously don't know how you do it? Can you do mine for a while? Holy cow 100 a month that's what I spend for about 10 days of food or so. Are you having to bring like 300 coupons to the store?
I just can't wrap my head around that : ) that's great! Please share more of your secrets so I can become a grocery pro like you:) I like your suggestion of seeing what's on sale and buying AROUND that. I'd never even thought of that.
As for the job thing...I'm still going to look for something higher paying versus working 16 hour days, but I'll probably look for both if we DO stay in the home.
I think we both though realize that WITHOUT having children right now we are in a good position where if we did want sell the home (which due to being a new construction area are selling in about a weeks time, average) and get the equity we could start over much easier than if we DID have kids right now. We won't always be able to say "ok let's start over" forever so I guess we both just wonder if it's a decision we should make while we have the opportunity and NOT the baggage?
You both have been so nice hearing me out and giving me your thoughts, they are appreciated! I'll continue to post and see where this goes. Just talking about it makes me feel better.
Thanks.
I don't have any advice for you but man I wish I did! I was reading your posts just really wanting to help somehow. But I will say one thing - you two sound like you're going to be able to do this. All along you've said how you AND DH and talking about things and figuring it out together. That is so important. The communication will really help. So many people don't have good communication in their marriages and that's what brings them down.
Good luck to you and please, stick around!
And I wanna know the $100/ month thing too! LOL
I'm dying to hear about the $100/month too!! In the meantime, here is a link to my post from a couple weeks ago about how we feed our four on $200/month:
http://messageboards.ivillage.com/n/mb/message.asp?webtag=iv-mlsupport&msg=12521.1
No, it's not outrageous. We actually eat quite well, and the children are not deprived. We even have yummmy treats sometimes (actually, I'm sitting at the kitchen table as I type this because I just finished a small bowl of chocolate ice cream--purchased at Aldi, of course, because it is the cheapest in town! LOL). We also live in a relatively expensive part of the country, according to stats--Charlotte, NC. It's not as bad as New York or L.A. (where is??), but it's in the upper percentile, so it's not like we're just lucky.
I'm especially interested to contrast the $100/month grocery plan with mine because it sounds like it is a coupon-based method, where I use literally no coupons (except if I happen to see one that brings an item below the lowest price I could get otherwise--and this does not happen very often). So it will be fun to have both methods posted together for comparison, and maybe everyone can find something they can use.
For only two people, you could readily eek an additional $150 out of your grocery budget. You could perhaps even get the entire $200 you need to make your budget work.
I'm not saying this is *necessarily* the best choice, but you should consider it and run the numbers either way--at least, I would. Use money management software or even just a simple spreadsheet (like Excel) and work out how long it will take you to be out of debt both ways, and alongside that, run an estimate on the equity you would have in your home at the end of the four-five years, as well as the savings you would have if you were not living in the house. This will give you a better idea of which direction makes the most sense financially. It kind of sounds, though, as if you and dh are pretty ready to give up the house and move on. If that's the case, it might be the best choice just for psychological reasons.
I forgot to add to my original post, though, that you are unlikely to get as low an interest rate on your mortgage in four or five years as you probably have right now. Just another thing to add to your scenarios.
On other matters--I've never tried them, but I've heard of dry cleaning solutions that you use in your dryer, that are supposedly much cheaper than professional cleaning but work just as well. It might be worth checking out. Since neither of us has to wear suits, we manage just fine making a point not to buy dry clean only clothes (with a few exceptions in dh's wardrobe).
As for a second job, perhaps you could find something just one or two nights a week? I used to wait tables, and they're usually pretty flexible with schedules, and the money can be quite good. There are lots of similar type jobs available--retail, and night reception, etc. If you could find something very different from your regular job, it might even seem like a bit of a break to you. Meanwhile, you could sock money away until you had the debt down to a more manageable level.
Those are just a few more thoughts I had. Also, if you could get your spending under the budget number, you could think about starting a small home business--selling on ebay, sewing, whatever.
Anyway, it's good just to know you have options. Weigh them all and then decide what makes the most sense to you.
I'm glad we can be here to listen. This is a terrific board, and I know you're gonna love it. I also know you are going to work out a plan that will be great for you. I'll look forward to that post in four years that says, "We did it! And baby #1's the way! And I get to stay home! And we have no debt! And a wonderful home!" LOL You will get there.
Blessings,
Heather
P.S. We almost never eat saltines. LOL In fact--homemade bread is yummier, more nutritious, and cheaper. And not that hard to master. But that's not all we eat either! Last night--homemade pizza, which I also had for breakfast (my fav breakfast lol), meatloaf (leftover) for lunch, salads on the side most of the time, chocolate ice cream for dessert. Ds just had a banana and is asking for a bowl of ice cream too. Just a snap shot. Mexican chicken soup for dinner tonight. :)
I didn't think it was possible to cut the grocery bill and quite frakly dh scoffed at the idea of cutting our food budget because we NEED food!!
I make my own broth, too, only I just started a new method. Instead of cooking up a chicken for the broth (though I *do* use the broth when I am cooking chicken), I save the bones out of any meat we happen to cook. I also save all the trimmings from vegetables--the skins and ends from onions, the tops from celery, etc. I keep it all in a big container in the freezer so it stays good. When the container is full, I dump it into a stock pot, cover with water, and boil with herbs, salt, and pepper, until the water runs brown. Then I strain it through a collander and pour into ice cube trays. Once frozen, I put the ice-cube-sized blocks of frozen broth into baggies and put back in the freezer. It is easy to take out any size portion for whatever recipe I need it.
I also save the water off of canned and cooked veggies, for the same purpose. It is tasty, and every batch of broth is unique and yummy.
I also have a "leftover soup" bucket in the freezer. This is where we put small portions of leftovers we know we're not likely to finish--a dab of spinach, a small portion of chicken, a handful of peas, a bit of sauer kraut, whatever. When it gets full, once again--into a stock pot, cover with water (or broth if I have a bunch to use up), herbs, salt, and pepper. This is nearly always quite delicious, always at least palatable, and unique every single time. This yields about one meal every two weeks, and it's very nearly free. Served with homemade bread it is quite hearty.
We also re-use items that others might dispose of--plastic bags, for instance, especially the zip-lock type. Unless it had raw meat or greasy food in it, we simply rinse with warm soapy water, then pure water, then set on the counter to dry (inside out so the inside gets very dry). We use no paper products--we use rags instead of paper towels, cloth instead of paper napkins, etc. The exception is toilet paper, though I've heard of people who use cloth for even this... a little farther than I'm willing to go! LOL
Once a week we have smorgasbord night--all the leftovers come out of the fridge and go up on the counter. Everyone chooses what they want and heats a plate in the microwave. Sometimes something will lend itself to a little "leftover magic"--where we take bits of leftovers and rejuvenate them by adding cheese, wrapping in a tortilla, or baking them in a unique way with new ingredients. Between this and leftover soup, we essentially get three free meals every two weeks. And we still generally have enough leftovers for dh's brown bagging and mine and my two ds's lunches and snacks (supplemented by apples (in winter), bananas, or sale fruits (in summer), homemade bread, and the occasional treat of ice cream, raisins, nuts, etc.)
Those are just a few tips we use on a regular basis that add up to significant savings and a nutritious lifestyle for us.
Gotta run,
Heather
You ladies just amaze me! I've NEVER been received on a board so well! You know I started this day so down in the dumps about our situation but now I'm so pumped about whatever we will end up deciding because I know we can do it!
It won't be easy and I'm sure there will be days when I'll be ready to scream but I know that in the long run it will be worth it. And what will make it even more sweet is the fact that DH and I will have done it TOGETHER!.
DH and I are both Christians so it helps that in times of need we have our faith to fall back on but knowing that we can take charge together is refreshing.
I too look forward to the day when I can say WE DID IT! AND WE'RE HAVING A BABY AND WE'RE SO EXCITED BECAUSE WE PLANNED CORRECTLY AND NOW I CAN BE A STAY AT HOME MOM LIKE WE ALWAYS WANTED! LOL. :)
Thanks for the words of encourgement and the listening ears, they mean more than you know.
Now the next step is for us to take some time and careful consideration so we can FINALLY just start with WHATEVER plan we choose.
Thanks again, and looking forward to posting more.
Hi-I know I'm jumping in a couple of days after everyone else...
I don't think that your situation is hopeless-I think it's the opposite! I saw that another poster recommended a couple of books for you. I second the Dave Ramsey one "The Total Money Makeover." (Also, I'd add "Financial Peace Revisited"). It's a guy that many of us on the board 'follow'. He lays things out in baby steps, and one of the first things that he tells people, both in his books and on the radio, is to sell everything that is not nailed down to help you get out of debt. Sounds like you all are willing to sell the house, so that would be a good start! Also, maybe one of you could get a part-time job for a few months to help you get ahead of the game. I am not at home so I don't have the baby steps handy, but he also advocates a 3-6 month emergency fund, along with life insurance and retirement savings--one of the first things, though, is to make a realistic budget. 'when you tell your money where to go, you won't wonder where it went'
I think that you will be able to become debt-free quickly because you're both working together and are willing to make changes!
Welcome here!
Lisa