Panicing and ready for a heart attack

iVillage Member
Registered: 04-11-2009
Panicing and ready for a heart attack
18
Wed, 09-16-2009 - 10:59am

Sorry if this seems overly panicing but right now I am.


Checking- -$209


Savings $-0


We are in the process of refinancing on our balloon mortgage. DH wants us to cash out to pay off $30k on HELOC and $13k on his cards. New mortgage payment $1,666


If we didn't have that, our balance on our mortgage would be $172k. Trying to get quotes on a rate and payment. But then we would have to still pay the $30k HELOC, his $13k cards and my $14k cards.


We have an 8 mo old son. My husband gives me $300 a week for bills but $260 is for the sitter. I pay all other bills from my check--mortgage, groceries, baby food, utilities, etc. I am left with zero within 3 days.


I consulted debt consolidation and they said because I earn a lot and our debt isn't "that bad" I"m not qualified. I'm also not qualified to file bankrupcy.


My husband refuses to get a second job because he feels it won't be worth the minimum wage. Me getting a second job puts me in a higher tax bracket (I'm already in a high one).


My parents and best friend say divorce him thinking that will solve everything. But I consulted a lawyer and this is what would happen:


I would have to split the house 50/50 and move into an apt. Apts are almost same as our mortgage ($900). I rather own something than give it away.


Profits from selling would probably be $10k between us if that. I have $14k in debt.


I would have to split time from seeing my son.


Since he makes so little and I earn way more, he would only have to give 20% support and he probably couldn't make that. I would only get $175 a week. I get $300 now. Plus he could go after my $25k in a 401k and claim I would have to support him!


In short, divorce is not a financially prudent option.


I just don't know what to do. I was thinking of telling my parents the bind we're in but they know most of it and just think forcing him to get a second job would be the answer. You can't force anyone to do anything. Plus he would quit in a matter of months. I was thinking of asking them for the $30 loan and pay them back rather than increasing our mortgage (auto payments to them). But they feel that the $30k was to pay off HIS cards and a little of mine, why should they pay off his debt. I agree.


I just feel like we are a fine hair close to being homeless and I just don't know what to do. If I lost my job, we WOULD be homeless. My husband just doesn't get it. He feels his business will 'save us' all. He has no benefits, he rides on mine.


I don't know what to do. We have 10 days to decide on the refi--cash out or not.

Pages

iVillage Member
Registered: 10-01-2008
Wed, 09-16-2009 - 3:21pm

Hi,

Norma


"Patience is the best remedy for every trouble"- Plautus


iVillage Member
Registered: 07-02-2008
Wed, 09-16-2009 - 3:52pm

Hugs to you.

The divorce topic in your post seemed to come out of the blue when I was reading it. Do you WANT to divorce your DH? Are you have more problems other than financial? (you don't have to answer this question on the board - just one to ask yourself and think over.)

He IS working it seems. Why is he only giving you a portion of his pay and not the whole thing for you to tally and divvy up as needed ? Perhaps thats what needs to happen. You take the money - spend it and divide it and see what's left from there.

We re-fi'ed and it saved us $130 / month. We had $28K in c/c debt and have paid it off thru hard work and budgeting. It sucks and its hard. BUT, it was our debt and I'm proud we paid most of it off (only $1,600 left!!) because I felt like I charged stuff so I had to be the one to pay it back.

If your DH isn't on board with a 2nd job (like you said - you can't force him to go get one) then start cutting household things. Cancel cable, cell phones....let him SEE that you two are in a bad financial bind. Maybe then he'll "get it".

iVillage Member
Registered: 11-14-2008
Wed, 09-16-2009 - 3:53pm

The experts say to never take equity out of your home and pay off credit card debt with it. Lots of times the credit cards climb up slowly again and then you are stuck with less equity in your home and the same credit card debt.

I am divorced. Please take money out of this decision for a little while. Divorce cannot be considered with money factors alone. I know it has merit as I was married to an over spender who thought he knew everything but please consider other attributes of the marriage before taking this BIG step.

Good luck and post back. Others here know more about the refi.


iVillage Member
Registered: 08-04-2008
Wed, 09-16-2009 - 5:21pm

(((((( HUGGGSS)))))))


Seems like you have a lot going on and the team "heart attack" bothers me right now because my mom had one on Labor Day and is still in the hospital, so let's calm down and look at one thing at a time.


First I have been where you are now - I had a baby with a husband who did not want to work or pursue an education, today he is my Ex Husband and he has been jobless for 13 months, this is his 16th job loss.




iVillage Member
Registered: 12-04-2006
Thu, 09-17-2009 - 6:14am

I would strongly recommend against refinancing to pay off the CCs. Refinancing doesn't solve the problem and for most people just increases their debt because the cards are used again.

I would recommend looking at what can be reduced around the house. Can you get cheaper deals for phone, internet, cable, cellphones, etc? Is there stuff you can do without while paying down debt?

Also, debt consolidation can help by giving you one payment, but since you have been told that you are not eligible, I suggest coming up with a plan for reducing the debt. Make a list of all your debts with current balance, current interest rate and minimum payments on each debt. Decide which order you would like to target the debts in - some people work smallest balance to largest for the satisfaction of seeing the number of debts reduced (often it feels more achievable to be working on smaller balances); other people will work highest interest to lowest interest since from a purely financial perspective you will pay less interest this way.
Once you have decided which way you want to target your debts, then pay only the minimum on all the debts except for the one you are targeting - one that one pay the minimum plus whatever extra you can (there's a link at the top of the board on snowflaking). Once that debt is paid off roll the minimum payment for that debt onto your payment for the next one. It will take time but it is possible. Also if you haven't already, stop using the cards as this definitely helps when paying them down.

If you need help figuring out where you can make cuts to the household budget, post the numbers on here. Many of the ladies are really good at picking up where we may not have thought to reduce.

I would also recommend speaking with your husband about the situation - while he isn't willing to get a second job, is it possible that he can give you more towards the bills?

Lyn

bpeblink.gif picture by beautifulmandaPhotobucket


Lyn

iVillage Member
Registered: 05-14-2008
Thu, 09-17-2009 - 7:09am

Not a lot to add on the financial front (other than to second, third, and fourth what everyone said about not taking money out of your equity during the refi to pay down unsecured debt) but I did want to say hang in there.

iVillage Member
Registered: 04-11-2009
Thu, 09-17-2009 - 10:24am

The only way we can pay of the HELOC (which is secured debt) is to pay it off with a cash out mortgage. By doing so we are paying approx $200 more in a mortgage but the HELOC is spread out and will be paid off. So I totally get the unsecured to secured but we already have secured debt so it's a moot point. I think it's the only way we can take care of this. Currently I'm paying $200 on the HELOC for a minimum payment because I can't pay anything else. It hasn't budged in 7 years.


I agree I need help with figuring this out. I've done list of bills after list of bills and it just shows too much going out and not enough in. But when I discuss my salary my mom is like "I can't believe you can't save with that salary"? I mean my husband gives me $300 a week ($260 give or take goes to sitter) so at least that is covered. BUT this week he didn't get paid! So we had to cut her hours, meaning my husband is working from home which puts his paycheck behind.


Before our son, we were doing ok. Not amazing but ok. At least I could put $600 aside and get things taken care of with bills or some savings but this sitter is what's eating up our money but we have no choice.


Where do I find some sort of professional helpt to get me on a budget plan? I asked my Fidelity investor and he was all about "well just save for a rainy day then bills". Not the best advice/solution offering. :\

iVillage Member
Registered: 04-11-2009
Thu, 09-17-2009 - 10:27am
Beepsmomx2--how did you do it? I have $13k in card debt.
iVillage Member
Registered: 03-27-2005
Thu, 09-17-2009 - 11:22am

I know what it's like to be paycheck to paycheck. Dh and I live that way may weeks. Right now I have $81 in my checking so I know you feel there. Thankfully I do have savings (We never touch it unless it's a real emergency) and a sinking funds account to cover the big stuff that comes up every year.

We may live paycheck to paycheck but our only debt is our mortgage. There are no credit cards, student loans have long ago been paid in full, we own our cars outright, we have 4 months of living expenses set aside as an emergency fund, we have 15 % of our income going into retirement, we tithe 10% of our income and are working one month ahead in bills. What that means is that at the end of September I will be able to pay all of the bills for the month of October, the November 1st mortgage payment and I will have cash in hand for the grocery and gasoline budget for the entire month of October. Money from October's paychecks will be set aside to pay November's bills.

It took a long time to get to this point and it's not an easy journey but it can be done.

First step is to get current. If you are behind in a bill, get caught up.

Second is to set a realistic budget for your family that has getting debt free as a goal.

Third thing is to do whatever it takes to save $1000 as quickly as you can. Sell things, take an extra shift, babysit on weekends... whatever you need to do. This money will be your baby emergency fund. It won't cover the big stuff but when those little things do arise you won't have to pull out a credit card to pay for it. Also consider at this stage cutting up your credit cards. Don't cancel them but if you have debt due to unnecessary spending it's a good idea to cut off access to them.

Then you need to establish a zero based budget. Ever dollar has a purpose. Starting a debt snowball for your credit cards. Start by paying all you can over the minimum on one card. (pay minimums on everything else). Once that card is paid off move onto the next card, adding that dollar amount you paid on card one each month to what you pay on card two. So if you had a min payment of $50 on card 1 and Card 2 and card 3. You have an extra $25 each month to pay towards debt. Card 1 gets $75 per month (min + $25) and card 2 gets $50 min. and card 3 is set the $50 min. Once card 1 is paid off you now add the $75 you were sending to card 1 to the card 2 payment. Card 2 (min + $75) card 3 is still sent the $50 min. When card 2 is paid off you shift that dollar amount to card 3. So now card 3 is sent the $50 min. + $125... You keep doing this and before you know it your debt will disappear.

By doing it this way you are establishing good habits that not only you can live by but also ones your son will learn by.

Once you are debt free besides your mortgage you can focus on getting your savings up. It should sit between 3 and 6 months worth of living expenses.

Then you can get your 401K contributions up. They should sit around 15% of your income. From there you would start a college fund for your son and the next step after that would be for you to start paying down your mortgage faster.

Refinancing a balloon mortgage to a fixed rate is a good idea. However,experts say that putting any unsecured debt into the mortgage is bad. Two major reasons: 1.If you default on a credit card they can't take your house. You get in too deep on the mortgage and they will take your house. 2. You are swapping out one debt for another. Without taking action and changing spending/saving habits most people end up racking up the debt on the credit card again. Getting themselves further in debt. You may consider rolling in the HELOC as that is secured by your home already. Just remember that borrowing against your home like that is not a good option. Whenever you take out a HELOC you are risking your home.

Here is where I see a major problem. My husband and I have been together for 22 years this October. I can tell you right now that in a marriage there are no His bills and My bills. They are the family bills and every financial decision each of us makes effects the entire family. Doesn't matter if the debt was incurred prior to the marriage or not, or if it was for his stuff or not. This is your family's future, your child's future being effected by the financial choices made today. You have to work together to solve them.

Dh needs to give you all of his paycheck, not just $300 each week. You figure out how much is needed for gasoline allowance, pack him coffee and a lunch each day (save on eating out and wasted money)and figure out a fair amount to give each week for blow money (money spent on whatever you want). My dh takes $20 per month for blow money... occasionally taking our son out for coffee or just tucking it away for later. His needs are met, and he's outgrown the desire to give into the "shiny factor". That's we call buying something just because it's new and exciting and looks neat.

Look where your budget is leaking.

How much are you paying for food and personal care items? Are there a lot of convenience and prepackaged foods? Cook more from scratch and use raw ingredients, eliminate the junk food and shop loss leaders and store brands. To get an idea. I cook all meals from scratch, dh and ds take lunch to work and I work from home so all three meals for each of us comes out of my budget. Food budget for groceries, paper products, cleaning products and personal care totals $75 for a family of three adults. I know this would be more for diapers and such but it's a rough figure.

Eating out? Entertainment? Do you have a plan. Planned events to attend and save up for. Dinners out that are a real treat and special and not just a ritual habit. You will find that by planning what you do and when you do it. Saving up for it and marking it on the calendar makes these events all the more special and meaningful.

Cable and broadband internet? Are you paying for more than you need? I pay $42 total per month for both services... I don't get all the channels but we are ok with that and find we spend more time talking, playing cards, listening to music, reading and enjoying each other's company when there isn't 200 channels to surf through.

Cell phone plans? Do you really need texting and web browsing on your phone? Do you really need cell phones? A land line with long distance and a couple of pay as you go phones for emergency use is all most people actually need. Consider paring down to what you actually need to get by, not what you want for convenience.

Baby stuff. You son doesn't need to wear Baby Gap, Gymboree or any of those major clothing brands. His clothes need to fit and be in good repair but he doesn't care if you paid $10 for a pair of overalls of if you paid $30. Shop consignment shops for major brands second hand and keep the supplies, toys and clothing to just what he actually needs. It's easy to get caught up in purchasing too much for little ones. My ds is going to be 16 in October. He loves his major brands like Hollister. I pay an average of $7-$14 per item at consignment shops compared to the $30 clearance prices at the mall store. I save a lot and he gets the brands he wants. When he was younger and brands didn't matter I simply bought things used and from stores like Walmart.

Gift giving. Keep it simple and meaningful.

I hope some of this helps.

As for the divorce talk. Divorce is a very serious thing that will effect you and your child for the rest of your lives. Do not enter into it lightly. Financial difficulties need to be worked through. If you have reasons beyond this for divorce (substance abuse, infidelity, domestic violence) then by all means look into it. If it's just because you are not on the same page financially, you should reconsider. There will always be something you don't agree on entirely and you have to work through those moments. You both have to stop thinking of ourselves as individuals and start thinking of yourself as a family.

stacy

iVillage Member
Registered: 08-04-2008
Thu, 09-17-2009 - 1:31pm

Where do I find some sort of professional helpt to get me on a budget plan? I asked my Fidelity investor and he was all about "well just save for a rainy day then bills". Not the best advice/solution offering. :\


Your Fidelity guy does not make money by helping with a budget, therefore they won't bother.


If you want a spreadsheet to help you, and someone to look at it with you, email me at marketingvirgo at yahoo dot com.




Pages