desperate help needed-suggestions appreciated

[ilovemk76]

I thought that this might help the OP to establish a workable budget. It can be a great help when you don't know how much you can afford to spend on specific budget items and what some of those planned expenses should be. I gave a copy to my daughter before she moved into her own place and she said that it really helped her decide what she could afford to spend on an apartment and on her car.

​

This is Gail Vaz-Oxlaide's breakdown. She calls the "other" Life.

This is exactly the percentages that I posted when referencing GVO.

 

[pocomom]

I think you have gotten some good advice so far. Here's what I have to add
1.With this amount of debt to income you really should run to seek some professional help.
2. I agree that you can cut your groceries, lose some expenses like cable, and cut back on the kids sports. I understand there is only so much identifying info you want to give out but you say the oldest is old enough to mow lawns, but not the younger one. It sounds like the oldest probably has a solid base in their sport. I know you are thinking no sport=no scholarship, but one, no scholarship is quaranteed right now, and two taking a break doesn't mean they won't get a scholarship- consider cross training at something free /cheap for a season or two. My kids are young but they compete at the junior olympic level in swimming. I spend about $200 total a month (for 3) in swim club fees and more when they do meets. I couldn't manage driving them this month on top of my work, dh out of town etc. so they haven't gone in 5 weeks. We started running, doing weights, just being active kids. They are excited and energized to go back now, I doubt it has hurt their swimming "careers" long term, but the stress relief and break for me was priceless. Your younger child, it really is probably too early to even say if they would be a scholarship contender, I'm assuming if they are not old enough to work/contribute we are talking pre-puberty. So much of athletic success has to do with kid's physical attributes at the time. Plus you never know when your kid changes their mind and want to do a different sport or nothing... you're putting alot of your whole families financial well being on the potential idea that your kids will continue to excel, will want to do the sport, and will be grow and develop at the right time, in the right way, and couldn't possibly manage to be successful any way without that large monthly payment every month.
3. After cutting the expenses everyone has mentioned, and adding in some part time income of some sort, it sounds like you will still be short based on current spending patterns ... part of that is due to how you budget- oil changes, christmas presents etc. are not emergencies. They have to be part of your plan. I think when people get in these situations they have a lot invested in saying there is nothing they can do, becuase it eases their own guilt. And from your first few posts I am getting that sense, like a cut of $80 here or there isn't worth it.... You really need to sit down and get honest about where the money is going. Get out your old statements. If 20k is from the business then 60K is from other day to day spending. You may not feel like you have luxuries but you are spending way over your means. New towels are not a need. No matter how ratty the old one were.If you absolutely had NO towels you could pick up a few at yard sales, thrift stores ... Making this work will take changing your whole view of wants and needs. I think long term you will have to make some major changes (like selling the house) to feel comfortable again. But in the short term, make the quick changes right away, move to a cash system, and get your kid's involved in finding solutions. If they are as passionate about their sports as you indicate they should be on board with helping you find solutions so they can continue in them, at least in the future.
4. In my first marriage, my dh had brought a lot of debt that he wasn't honest about. He choose at the time to just not pay things so there were charge offs and all sorts of stuff. The level of debt was not as high as you are mentioning but our income was MUCH less than what you have. We were paycheck to paycheck EVERY month. We wanted to buy a house which is when he came clean about the situation. He thought we would NEVER be able to buy one because we could never pay off all his debt. I got to work, put us on a strict budget, picked up extra income. At the time his highest debt had the highest interest rate. It felt insurmountable. So despite it not being the best financial decision I paid off the smallest debts first. It was important to me because we felt like we were making some progress right away, which gave us the drive to push ahead. It took us 2 years to be able to afford a home, with nothing left of the debt except an affordable and current student loan payment. I should also mention in this situation I took the lead, and despite being happy about the outcome, dh resented me telling him (i thought we were discussing and agreeing on it) what he could and couldn't spend. It was the first of many things that eventually lead to the end of our marriage. This is where some professional financial help would have really changed some things. Please make sure your dh and you are together on this and check in with him often. This is stressful enough, you don't want to be in a position where one of you is resenting the other too.

 

[robsmom]

You have received many great suggestions, so I will not repeat them. What I would repeat is that you really need to adjust your thinking and definitions of expenses. I think you definition of a need and a want is slightly off as is your description of emergency expenses.

Wants vs Needs: I think Elizabeth Warren's book "all your wealth" was very interesting and helpful on this subject. It has been around for a while so should be easy to get from the library! The book has a balanced life formula that says you should spend roughly 50% on needs, 30% on wants, and 20% on savings. One of the things that made a lot of sense to me was dividing needs and wants even in the same category. So examples, food is a need but some food products are a want. So if you spend 800 a month on food, it might be that 500 of that is needed and 300 is more expensive processed foods, better cuts of meat, brands, whatever. If the 300 fits in your wants budget and that is how you choose to spend the wants great. if not, it is not a need and would be cut out. A car is a need, a mid-range car is a want. etc. If you go through all of your expenses and think this way it helps to see where changes are needed.

Emergencies: It could my attention that you mentioned oil changes and tires in emergencies and that you list christmas, family visits etc as items not in your budget (not sure if you are calling them emergencies). I think that one mistake many people make is to leave too many things out of the budget and then get stressed when they come up. Car maintenance, gifts (birthday/christmas), home maintenance etc. are all facts of life and happen every year. When you sit down, you need to put these in items in your line by line budget. For example, I have a line item of $500 per month ($6K a year) for home maintenance and renovations. Sounds like a lot, but over the life of the house maybe 1/2 of that is needs and 1/2 is wants. Just some examples: New roof every 20 yrs at 10K would average out to $500 for each yr. New heater every 20 yrs at 5K would be another $250 per yr. Applicances, hot water heater are maybe another $250. At some point carpets and floors are replaced, walls need to be painted etc. Larger things aside, we spend money each yr on the little stuff that happens (last yr we had a plumbing clog, our heater wasn't working and we lost a tree in a storm and needed help removing it). You really need to have these type of things in the budget or your will always end up falling behind because you need to use the credit cards. On a side note, you need to factor the house maintenance into your analysis of renting vs owning because it does add up.

 

[mm1971]

A rental in this area for 3 bedroom (would need 3 bedrooms as we have two opposite sex children) would be about 1400-1800. So in reality that would save us nothing and we would be just dumping money into nothing. At least long term we will have a lot of equity in our home. We did think about renting and looked into it. There is a reason we need a house but if I write about that people might know who we are and dont want to divulge that.
Car payment is gone in 10 months so very happy about that. We would get nothing back to equal it or would have to start again with another payment over 4 years so do not want to go there. Cars are more expensive here too.

We are seriously considering dumping the sports too and if we do, yes, have that extra too but still can not make ends meet so was wondering if anyone had tried the consumer proposal or know anything about them.

Just looking at some idea if we shoudl consider the consumer proposal or if we shoudl just continue to live like this month after month...........which really is not boding well for anyone:-(

Thank you.

While I could provide my opinion (not sure of Canadian law) it would not solve your problem. With children involved and such a high debt load, I am going to suggest a professional credit attorney or agency to assist you in your resolution. I know here in the states they have free government programs to assist. I'm not sure if they have that in Canada or not. The reality is that we can all say "drop sports" and "drop the landline", but reality is that thousands of dollars in credit card bills (mostly interest payments with little going towards principal) a month will not be solved by cutting even the $520/month. I do agree that you need to cut everything possible, but you need professional guidance.

 

[bettymae1121]

Do you know how much equity is in your home if you sell it? If it's enough to clear all or even most of your debts, you could be better off in the long run even if rent is as high as your house payment. Without that $2500 monthly credit card minimum dragging you down, a house payment or apartment rental in the $1500-$2000 becomes a lot more doable. It's still over the 35% recommended amount (at least at the high end) but you should be able to get your heads above water if you control your spending in other areas.

IF you have enough equity to clear all or nearly all of your debts, I'd take a serious look at selling the house and moving to a lower COL area further away, renting, and just have a longer commute. I know it sucks but it's the easiest and fastest way out of this without having to go through BK.

 

[Marionnette]

This is Gail Vaz-Oxlaide's breakdown. She calls the "other" Life.

This is exactly the percentages that I posted when referencing GVO.

Yes, those numbers are eerily similar. I guess it's because they actually work! Sometimes it helps to have a visual representation instead of just numbers. It's been my experience that people who are not good with budgeting often shut down when you throw numbers at them. But it you can show them a chart, they "get it".

Oprah's Debt Diet also gets a little more specific. Notice that she includes repairs and utilities as a part of her "housing" category. And her transportation costs also includes parking, insurance and maintenance. For me, transportation has to include annual registration and inspection fees because PA requires it. The "Oprah" budget clearly defines clothing as a "living expense" and not the "emergency" that the OP considers it to be. In fact, much of what the OP listed as "emergencies" in her first post, should be budgeted line items.

Based on the take home income that the OP gave ($5400/month), she should be budgeting the following for her monthly expenses:

• Housing: $1890
• Transportation: $810
• Other Living: $1350
• Savings: $540
• Debt: $810

Her problem is that she is exceeding the dollar amount in each of those categories with the exception of Savings. As has been pointed out many times in this thread, she is living way beyond her means. She can make excuses for how much more expensive things are in Canada but it doesn't change the fact that she cannot afford to live this lifestyle. She can blame her debt on a failed business, but it only accounts for 1/4 of her total indebtedness. The rest is from using one line of credit to pay another. Eventually, as the OP has learned, it catches up with you.

Based on the numbers that the OP gave in her first post, her spending looks like this (I added $1 for "saving" just so that it would be represented on the chart):

​

Note that the amount that she is "spending" each month is more than $7700 and does not include maintenance for the car or house, clothing for the kids or adults, nor any entertainment beyond the internet and cable. If she were to totally ignore her debt, she would still be spending $5200/month without taking those normal budget items into consideration.

 

[bdcp]

This requires professional help, period. I've read the original post several times. One thing that gets me is that OP lumps oil changes into "emergencies". Really? Oil changes are a regular scheduled maintenance item, not an emergency. If you can't afford to change the oil, you can't afford to own the car. We always say we don't buy a car unless we can afford to still put gas in it at $5/gallon (or more). I say sell the house (you said you have equity), use equity to pay off debt and then rent, you'll be able to afford that and so what if the kids share a room or one of them has to live in a room that isn't typically a bedroom. We have friends having their first baby and the baby's room is the dining room with a curtain because they can't afford to move. Siblings have shared rooms for generations, even opposite sex siblings. We have always bought homes on DH's salary alone. My salary has always been extra for emergencies, vacations, etc. We lived in townhouses that needed updating with a very small yard when our kids were young and they survived. We are all too spoiled. Sell/trade in the car for a cheaper one. 30K is not an expensive car in the states either. 30K won't buy you a mercedes or bmw unless you buy used, so that argument is interesting to me. You can however find models large enough for a family for under 20K used. OP, you need to make some decisions, hard decisions. Your expense for your "athletic" kids should be the first thing to go. There are ways for kids to participate in sports that do not cost over $500/month. If they're that good, they will be noticed and there are usually scholarship programs for gifted athletes.

It is all about wants and needs. I'm not sure why you need a house. I can't imagine any situation where a house is required over an apt.

I'm also guessing part of your debt is from vacations, including WDW. I have to ask, do you have any vacations currently scheduled?

 

[ilovemk76]

Yes, those numbers are eerily similar. I guess it's because they actually work! Sometimes it helps to have a visual representation instead of just numbers. It's been my experience that people who are not good with budgeting often shut down when you throw numbers at them. But it you can show them a chart, they "get it".

Oprah's Debt Diet also gets a little more specific. Notice that she includes repairs and utilities as a part of her "housing" category. And her transportation costs also includes parking, insurance and maintenance. For me, transportation has to include annual registration and inspection fees because PA requires it. The "Oprah" budget clearly defines clothing as a "living expense" and not the "emergency" that the OP considers it to be. In fact, much of what the OP listed as "emergencies" in her first post, should be budgeted line items.

Based on the take home income that the OP gave ($5400/month), she should be budgeting the following for her monthly expenses:

• Housing: $1890
• Transportation: $810
• Other Living: $1350
• Savings: $540
• Debt: $810

Her problem is that she is exceeding the dollar amount in each of those categories with the exception of Savings. As has been pointed out many times in this thread, she is living way beyond her means. She can make excuses for how much more expensive things are in Canada but it doesn't change the fact that she cannot afford to live this lifestyle. She can blame her debt on a failed business, but it only accounts for 1/4 of her total indebtedness. The rest is from using one line of credit to pay another. Eventually, as the OP has learned, it catches up with you.

Based on the numbers that the OP gave in her first post, her spending looks like this (I added $1 for "saving" just so that it would be represented on the chart):

​

Note that the amount that she is "spending" each month is more than $7700 and does not include maintenance for the car or house, clothing for the kids or adults, nor any entertainment beyond the internet and cable. If she were to totally ignore her debt, she would still be spending $5200/month without taking those normal budget items into consideration.

Bold - This is what GVO does too. If you were too look at my numbers, you would see that I included more than just mortgage in the housing.

What her show, Til Debt Do Us Part. It is a good watch, but we are not getting the newer shows.

 

[kuhltiffany]

Hugs! Sounds like you've got a lot going on. I only have a few suggestions. We recently switched/bundled our cable/phone/internet with another company and slashed our bill in half, so you might want to shop around for those. We use PC banking, so we don't pay any fees and also get points which I use to offset grocery costs. I sell whatever the kids grow out of on Kijiji or a Facebook local 24 hour auction site, it's quick and easy money.

We were in debt a few years ago, I started putting any extra money we had on the lowest debt (gifts, tax returns, GST rebate, money from selling items, etc.). It adds up over time. I stopped using credit and switched to cash so I wasn't spending money we didn't have...

 

[bdcp]

Hugs! Sounds like you've got a lot going on. I only have a few suggestions. We recently switched/bundled our cable/phone/internet with another company and slashed our bill in half, so you might want to shop around for those. We use PC banking, so we don't pay any fees and also get points which I use to offset grocery costs. I sell whatever the kids grow out of on Kijiji or a Facebook local 24 hour auction site, it's quick and easy money.

We were in debt a few years ago, I started putting any extra money we had on the lowest debt (gifts, tax returns, GST rebate, money from selling items, etc.). It adds up over time. I stopped using credit and switched to cash so I wasn't spending money we didn't have...

OP is in too much debt for minor changes to have any impact at all. They need way too much cash to make the monthly minimum payments, which is why they need to do something far more drastic, such as selling the house. A couple hundred a month will make no dent for them.

 

[Shelly F - Ohio]

YIKES you spend $520 a month or just under $7,000 a year for kids to play sports.

You said you want to move well don't forget you will have to come up with closing cost which could range $3,000 to $4000. Plus the cost of the move itself - boxes, truck to move and any fixing up of the new place such as painting, cleaning, & repairs.

 

[tinker&belle]

......

 

[pocomom]

OP is in too much debt for minor changes to have any impact at all. They need way too much cash to make the monthly minimum payments, which is why they need to do something far more drastic, such as selling the house. A couple hundred a month will make no dent for them.

Honestly, while I see your point, it is this kind of thinking that got op in this situtation... that all these small things don't add up and they do. YES op will have to make BIG changes, but also the small changes too.
Let's say she sells the house, the equity is enough to wipe out or nearly wipe out their debt, they find a place a few hundred cheaper a month.... and then continue on as they have been doing...they'll end right back up here again. They overspend their income by a HUGE amount and it is not just housing. Her thinking and lifestyle will have to change completely, including the little things. So I wouldn't knock the little suggestions, op should consider doing it all...

 

[blondietink]

I agree. Once OP and her family get out of this mess somehow, even if by bankruptcy, they are going to have to change their lifestyle drastically in order to not have the same thing happen again in a few years. They will need to follow a budget and stick to a savings plan. If that means no vacations, so be it. If that means no sports for the kids, so be it. If the kids are so gifted in sports, they will be able to get scholarships. An education is more important in the long run than playing in sports.

 

[bdcp]

Honestly, while I see your point, it is this kind of thinking that got op in this situtation... that all these small things don't add up and they do. YES op will have to make BIG changes, but also the small changes too.
Let's say she sells the house, the equity is enough to wipe out or nearly wipe out their debt, they find a place a few hundred cheaper a month.... and then continue on as they have been doing...they'll end right back up here again. They overspend their income by a HUGE amount and it is not just housing. Her thinking and lifestyle will have to change completely, including the little things. So I wouldn't knock the little suggestions, op should consider doing it all...

Did you read what her minimum payments were? I didn't say not to do those small things, but you made it sound like she could fix all her problems by bundling her cable/phone, etc.

I also posted previously that spending what they do on a car and sports has to change, especially when OP sees oil changes as emergencies.

 

[pocomom]

Did you read what her minimum payments were? I didn't say not to do those small things, but you made it sound like she could fix all her problems by bundling her cable/phone, etc.

I also posted previously that spending what they do on a car and sports has to change, especially when OP sees oil changes as emergencies.

Think you are confused or didn't read my post - I was simply defending those that posted "smaller" savings ideas. I think op will need all ideas, and your post discounted a few hundreds of dollars of savings as not making a dent. I think op is going to need ALL those ideas that save a hundred here or there, plus additional income, plus MAJOR changes. My Post said to RUN and get professional help. This is clearly a serious situation.

 

[bdcp]

Think you are confused or didn't read my post - I was simply defending those that posted "smaller" savings ideas. I think op will need all ideas, and your post discounted a few hundreds of dollars of savings as not making a dent. I think op is going to need ALL those ideas that save a hundred here or there, plus additional income, plus MAJOR changes. My Post said to RUN and get professional help. This is clearly a serious situation.

Read my other posts on this thread please. I discounted nothing. I also said op needs professional help.

I would still love to know what possibly the reason is for requiring a house over an apt. Unless someone has a menagerie or multiple large pets, which if financials are that big a mess, they need to give them up.

 

[tohardtolose]

Well an update.................not too good.

1) All the small ideas are going to help! Please continue if anyone else has any other ideas.
2) We talked to the debt company. Not good. We would not consider bankruptcy but we would not qualify anyhow as we have too much equity between RRSp's and house....that was irrelevant to us but just in case any of you were thinking of that. We also don't qualify for a consumer proposal because we have too much equity. So basically we would have to pay 100% of what we owe back with the consumer proposal and there is a 1500 fee off the top plus interest is around 10%. She advised we can not do this as we have too much equity again and our monthly payments would be very similar to what we pay now anyhow and our credit rating would crash.
3) Our house.............no official appraisal yet but talked to mortgage person. Basically if we sold, and they think we would get about 60-70000 out but then we have to pay real estate and lawyers plus penalty on the mortgage which is large!...........so basically we would nto be able to buy anything for less as there is a new law that passed through after we bought this that you must have 20% down. So here, even to buy a cheap townhouse the very cheapest you would find would be around 275,000 if lucky and after we paid all the stuff we would not have that down payment and would still have full debt...........so that is not an option. We have researched places to rent and honestly there is nothing for less than 1500+ utilities a month..........but if we do that, we do not have enough to pay off all the debt or even half of it and our monthly budget would only change by about 300-400 less a month 9if we did luck out and find that place for that price) and we basically lose 35-45K on real estate, lawyers, penalties.........is it worth it to throw that away and have nothing? We can't justify that at this point.

So basically we have set ourselves up on debt management. I have attempted to call one credit card company to lower our interest/cancel card and they basically told us the 19% on this one card is the preferred rate and there is no way to lower it. Does anyone know how to do this to get lower rates? The majority of the debt rate is 8.5% (55,000 of it anyhow). Another 15,000 is 15% and the rest is 19-20%. I was hoping to get that remainder of it down below 10% so we could get rid of it and slowly snowball down but not having any luck.

We have cancelled the cable, dumped most of the sports, and making a real effort to cut our gas and groceries (envelope method so we can only spend what we budget but time will tell if we can manage this over next few months.

thank you everyone and thank you again for all the suggestions.

 

[pigletto]

You absolutely do not need a 20% downpayment. However, if you don"t have the 20% down you will pay mortgage insurance. It's explained here (Canadian Mortgage and Housing Corp).
http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_002.cfm