Debt Advice Desperately Needed....Please!

[wall*e2008]

The truth is, anybody could be in your shoes if both workers lost their jobs. Anybody who thinks otherwise is kidding themselves. Eventually, if you are unemployed long enough, you run out of money, and you start living on credit.

Actually not everybody will do this. DH and I have both been unemployed at the same time and had $0 in CC debt even after one of us ran our of UCI. The fact is that you need enough in an emergency fund to keep you a float so that you do not sink into horrible debt, but have time to sell the car, home etc. that you no longer can afford. DH and I both know that if the situation got too dire that the home has to go on the market. We have enough money to sustain us so that it can be sold and we can lower our expenses by moving into a very small apartment. This is also why we never refied our home to take out money. We know that that extra money will either be ours after the sale or will allow us to lower the price to a level that the house will sell very quickly. We both work but we also setup our lives to be able to live on only one income. The other income paid for our WDW vacations, 401Ks, extra savings, paying off the cars etc. I am so thankful that we saw the light early in our marriage.

 

[Chicago526]

Hey Friskykitten, I just wanted to wish you all the best! You have been really graceful with some less-than-helpful posts.

The truth is, anybody could be in your shoes if both workers lost their jobs. Anybody who thinks otherwise is kidding themselves. Eventually, if you are unemployed long enough, you run out of money, and you start living on credit.

Another newsflash for folks: People went on vacations even in the Great Depression!

Now, they were different kids of vacations, but my dad specifically told me tales about piling into the car and heading for relative's houses so they could journey to the 1933 Chicago World's Fair. They were farmers with no money, but they were smart enough to realize that all fun didn't go out the window, even in the Great Depression.

The horror! How dare they waste gas money! They could have spent that gas money on food, and that time would have been better spent looking for work!

OP, I think you're doing great. Better late to the party then never showing up at all. A lot of posters would have cut and run by now, but you've stuck it out.

I don't think you did much different than many people in the US. You didn't make the best financial decisions, but you weren't totally being irresponsible either. You charged expenses with the idea that you'd quickly be able to pay it off, and spent too much on "wants" instead of "needs". Most of us do or have done the exact same thing in our own lives. The difference is that the music stopped just when you had no chair benneth you to catch your fall.

And how many of us could survive a double lay off in the same week for more than a few months? Not many. DH and I could handle a 50% reduction in income for quite a while, but any more than that we'd be in trouble very fast, and I think 90% of us on this thread would be as well. A job loss is survivable, two in the same week is a disaster for just about anyone.

 

[jodifla]

Actually not everybody will do this. DH and I have both been unemployed at the same time and had $0 in CC debt even after one of us ran our of UCI. The fact is that you need enough in an emergency fund to keep you a float so that you do not sink into horrible debt, but have time to sell the car, home etc. that you no longer can afford. DH and I both know that if the situation got too dire that the home has to go on the market. We have enough money to sustain us so that it can be sold and we can lower our expenses by moving into a very small apartment. This is also why we never refied our home to take out money. We know that that extra money will either be ours after the sale or will allow us to lower the price to a level that the house will sell very quickly. We both work but we also setup our lives to be able to live on only one income. The other income paid for our WDW vacations, 401Ks, extra savings, paying off the cars etc. I am so thankful that we saw the light early in our marriage.

Again, in this economy, it's not a safe assumption you can sell your home. There are homes in my neighborhood that have been on sale for YEARS! Literally.

We have a solid emergency fund - probably close to a year. But EVENTUALLY, it would run out. Our cars are almost 15 years old. So NO fancy car to sell. We have a boat...it's 32 years old....so it really won't bring in much there, either.

I'm glad you feel your situation is different. But in most parts of the country, selling your house really isn't much of an option right now.

 

[wall*e2008]

Again, in this economy, it's not a safe assumption you can sell your home. There are homes in my neighborhood that have been on sale for YEARS! Literally.

We have a solid emergency fund - probably close to a year. But EVENTUALLY, it would run out. Our cars are almost 15 years old. So NO fancy car to sell. We have a boat...it's 32 years old....so it really won't bring in much there, either.

I'm glad you feel your situation is different. But in most parts of the country, selling your house really isn't much of an option right now.

Where I live houses still do sell they just take longer. I do not live in Detroit or Southern FL so that would certainly be different. The point I was making is that I could sell if I priced the house low enough. If I kept borrowing from my equity, that would not be an option. Also I know what goes up at a quick rate will also come down quickly. Our area went up 8-10% a year when other areas were going up at 200% a year. I count myself lucky that I am not in MI, CA, or FL right now.

 

[Debbie Jean]

Again, in this economy, it's not a safe assumption you can sell your home. There are homes in my neighborhood that have been on sale for YEARS! Literally.

We have a solid emergency fund - probably close to a year. But EVENTUALLY, it would run out. Our cars are almost 15 years old. So NO fancy car to sell. We have a boat...it's 32 years old....so it really won't bring in much there, either.

I'm glad you feel your situation is different. But in most parts of the country, selling your house really isn't much of an option right now.

I totally agree

Add an accident or catastrophic illness to the mix and see how much faster it can all be wiped out

We plan as best we can but so much in life simply happens... there but for the grace of God...

 

[Kickapoo Joie Juice]

Good question. Our statements still come to us under the Wachovia name but they were bought out by Wells Fargo. It took two months to arrange the extension so I believe it was Wells Fargo by then. I couldn't tell you when the buy out happened. Our mortgage has been through at least four mortgage companies over the life of the loan so far.


Its862--wake up call recieved, thank you!

Kickapoo Joie Juice--I am deferring to your expertise on this one! It does make more sense than closing the accounts too quickly. I had to have a quiet conversation with myself on freezing or closing as I didn't want to tempt myself into using them again. The freezer is working overtime today.

Ok, if you're gonna freeze your credit cards, let me give you a quick tip. If you panic and try to thaw them out by putting them in the microwave, don't do it-it will fry both the microwave and your card! Don't ask me how I know

 

[friskykitten]

Ok, if you're gonna freeze your credit cards, let me give you a quick tip. If you panic and try to thaw them out by putting them in the microwave, don't do it-it will fry both the microwave and your card! Don't ask me how I know

Are you serious? I haven't had a laugh that good in a long time!

I really needed it too! Your silly friend's (who accidentally did that) secret is safe with me! Good to know!

 

[Chicago526]

Oh, I do have a piece of practical advice, I forgot to put it in my previous post.

Others have suggested raising the deductibles on your insurance policies for car and home. I'd be careful with that as far as your auto policy is concerned. If you raise your auto deductible sky high and then you get into an accident, you just made a bad debt and cash flow crunch even worse. Carefully compare what you save in monthly premiums over what it will cost you if you get into an accident, it may not be worth the savings.

 

[Lucky4me]

Ok, if you're gonna freeze your credit cards, let me give you a quick tip. If you panic and try to thaw them out by putting them in the microwave, don't do it-it will fry both the microwave and your card! Don't ask me how I know

You could leave the accounts open and still cut up the cards.
It will take longer to use the credit, but that's a good thing.
A frozen credit card takes five minutes to thaw and don't ask me how I know this either. :lol

 

[wall*e2008]

Ok, if you're gonna freeze your credit cards, let me give you a quick tip. If you panic and try to thaw them out by putting them in the microwave, don't do it-it will fry both the microwave and your card! Don't ask me how I know

I have always wondered how a CC did in a microwave. Now I know!

 

[Kickapoo Joie Juice]

You could leave the accounts open and still cut up the cards.
It will take longer to use the credit, but that's a good thing.
A frozen credit card takes five minutes to thaw and don't ask me how I know this either. :lol

Yeah, my original advice was to cut them up but leave the accounts open to protect your credit rating.

I don't have any experience with how credit cards do in boiling water

 

[wall*e2008]

Yeah, my original advice was to cut them up but leave the accounts open to protect your credit rating.

I don't have any experience with how credit cards do in boiling water

This is turning into a peeps thread.

 

[JoiseyMom]

It's summer how about defrosting them on the grill??

 

[Debbie Jean]

A frozen credit card takes five minutes to thaw and don't ask me how I know this either. :lol

You can lessen that time considerably if you put CC under a dish towel and run a warm iron over it

Don't ask me how I know that, either!

 

[Dancemom03]

Dancemom03--Thank you for the paypal suggestion. I didn't know you could get your cash that quickly after receiving it.

At times PP has been my splurge enabler b/c you can withdraw the cash with lightning speed if you have a PP debit card but it could be lifesaver if you plan to sell your possesions and need the cash fast.

I can think of one instance in particular a few years back that demonstrates just how fast it is - I took DD8 to see Disney on Ice in Baltimore but misread the time and arrived more than an hour late so had to buy new tickets at the box office for the next show instead of the one we'd already paid for. I'd taken a limited amount of money to discourage me from being too indulgent when it came to the high priced snacks/souvies at the show figuring if I didn't have more than $80 with me, I wouldn't be tempted to say yes to everything she asked for.

Problem is, after the second set of tickets, that left me with like $11 (not even enough for a silly snowball cup & soda during the show) and we had three hours to kill at the inner harbor before the next show. I don't carry credit cards with me after paying them off years ago but always have my PP debit in my wallet so I called my friend halfway across the country in WI and asked her to PP me some money until I got home. I was literally standing at the ATM machine in Harborplace on my cell when she said "okay, done" and I inserted my card. Less than 30 seconds later the ATM spit out $100 and saved our afternoon. When I got home late that evening, I sent her PP funds right back of course with my undying gratitude. (teehee...see Di - I haven't forgotten those "little things" )

Anyway, it's also a terrific way for friends/family to send you money in an emergency without the hassle of Western Union or waiting on banks.

 

[C.Ann]

Well, I say take the good advice and *constructive* criticism.....toss the rest.

----------------

Agreed.. Anything that doesn't bash the poster unnecessarily - or demand more information than is necessary or relevant - is a good thing..
The other stuff? Not so much..

I'll give her a big for coming here and posting this without using an "alias" like many do.. Either way, there's going to be some bashing going on, so why not use your original user name? If you need help, info, whatever - just ask for it..

She's gotten some great advice here - seems to be on track with it - so that is definitely a good thing!

 

[wall*e2008]

She's gotten some great advice here - seems to be on track with it - so that is definitely a good thing!

Yes it is!

 

[crisi]

I'm topping this post from the OP because I think many people are missing it. It clarifies a bit more about her circumstances, many of which some seem to be ignored or exaggerated.

I agree with the poster who said the OP has become the poster-girl for our economy and the majority of people. I think the OP is brave to post here and I do wish you the best OP.

And regarding your #10, you are so not a 'loser' as unfortunately many are in the same situation as you are. And there are likely many that post here too, although they'd never admit it!

Don't fool yourself - and friskykitten - don't fool yourself either. I'm not trying to be demoralizing, but your income - your husband's salary plus your unemployment - is enough to cover your mortgage and your car payment - and leave $200 a month - then its gone - at least according to your earlier post. And you haven't paid car insurance, utilities, groceries. The only reason you aren't behind yet is because your mortgage company gave you a three month grace period - which substantially (unless your mortgage is very small) changed your cash flow.

You'll have to start dipping into savings to make ends meet, or change your cash flow pretty significantly - and that will probably involve selling some assets to get rid of some of the liabilities - which I know you have already started. And unless your tax returns have been substantial, I'm guessing that savings account isn't going to be sufficient for more than a few months - then the situation becomes truly dire.

No one is going to force you into bankruptcy tomorrow, or kick you out of your house next week, but without a change in circumstances in the near future, one of these is likely to happen - and both are possible if the circumstances continue long enough. There just isn't enough income to cover your expenses, and eventually the savings account will be spent. This isn't unique to you or your decisions - as Jodi points out very few of us can last forever with no income - and most of us can't last long on a small one. And if a major expense hits - a health issue or something of that nature - all the savings savers set aside can disappear quickly. We like to believe that if we save and are responsible that we can't be wiped out - but really what we save for is to gain a cushion of time. And the reason we avoid debt is to keep our obligations as small as possible in case of a catastrophe - which buys us more time. If we've been successful, and don't have bad luck - we can buy ourselves enough time to retire comfortably - and maybe even early. If we've been really successful, we might even leave a few dollars behind for our kids.

The more corner cutting you do now - the longer that savings will last and the more you can change your cash flow, the better your chances for being able to climb out of the crater at the end without permanent damage. But I'm not sure you'll ever have your former life - I don't know that your husband will ever make the salary he used to. I hope that I'm wrong - that your husband ends up in an even better job and a job offer comes your way that pays you more than you made before.

I'm not trying to be discouraging, but it seems to me that you've had a lot of denial going on. Its good to have a positive attitude and believe that a job offer is right around the corner, but its also good to balance that with a healthy dose of cautiousness.

 

[wall*e2008]

Don't fool yourself - and friskykitten - don't fool yourself either. I'm not trying to be demoralizing, but your income - your husband's salary plus your unemployment - is enough to cover your mortgage and your car payment - and leave $200 a month - then its gone - at least according to your earlier post. And you haven't paid car insurance, utilities, groceries. The only reason you aren't behind yet is because your mortgage company gave you a three month grace period - which substantially (unless your mortgage is very small) changed your cash flow.

You'll have to start dipping into savings to make ends meet, or change your cash flow pretty significantly - and that will probably involve selling some assets to get rid of some of the liabilities - which I know you have already started. And unless your tax returns have been substantial, I'm guessing that savings account isn't going to be sufficient for more than a few months - then the situation becomes truly dire.

No one is going to force you into bankruptcy tomorrow, or kick you out of your house next week, but without a change in circumstances in the near future, one of these is likely to happen - and both are possible if the circumstances continue long enough. There just isn't enough income to cover your expenses, and eventually the savings account will be spent.

The more corner cutting you do now - the longer that savings will last and the more you can change your cash flow, the better your chances for being able to climb out of the crater at the end without permanent damage. But I'm not sure you'll ever have your former life - I don't know that your husband will ever make the salary he used to. I hope that I'm wrong - that your husband ends up in an even better job and a job offer comes your way that pays you more than you made before.

I'm not trying to be discouraging, but it seems to me that you've had a lot of denial going on. Its good to have a positive attitude and believe that a job offer is right around the corner, but its also good to balance that with a healthy dose of cautiousness.

The bolded just reminded me that you need to look at your DH W4 and see if you are taking too much out in taxes. With your family size and the huge percentage your mortgage takes of your income you probably have a very low tax burden. Unemployment is also taxable, so keep that in mind when you calculate your DH's W4 numbers.

 

[friskykitten]

Crisi--A very healthy dose of cautiousness is needed now. Optimisim also, but not to be used as a crutch to justify spending money on anything other than neccessities. It is amazing how quickly the denial has turned into acceptance over last week. There is too much reality staring me in the face to go back to denial. Your reminder is appreciated.

wall*e2008--We used to have large refunds in the $5-6000 range. We have changed our allowances on the W-4's to lower that refund and live off of the net pay instead. No use letting the government use my money interest free if we need it to live on. Our tax bracket this year will should be lower too.