HELP!I'm pouring my heart out here, need advice!*Updated 6/12/07*

[DiznEeyore]

And if they pile the debt into their mortgage, the credit cards will suddenly be "empty" and available for charging again. The original poster knows that shopping is a problem, but I don't think she can say that she's licked that problem yet. Those empty accounts -- even one account -- would be a great temptation.

That's why I qualified my statement by saying the cards needed to be closed.

And again, if they don't refi and just keep those credit cards, as soon as they can't make those new higher payments, they're hosed anyway.

If the debt stays on the credit cards and some tragedy befalls the family (loss of job, sickness, unplanned triplets), the worst thing that can happen is that their credit is ruined. While that's bad, it's not nearly so bad as losing your house!

Why would you assume that if someone loses their job/sickness/unplanned expenses and can't make payments, their house will still somehow magically be there? If you can't make payments, you lose your house, just like you can lose everything else! Believe me, I'm watching it happen to people at our church. She's terminally ill, he barely works, and their house is being seized. Your house is NOT automatically safe!!

Why not do something beforehand to get payments set up in a manageable way??

 

[disneysteve]

Why would you assume that if someone loses their job/sickness/unplanned expenses and can't make payments, their house will still somehow magically be there? If you can't make payments, you lose your house, just like you can lose everything else! Your house is NOT authomatically safe!!

You're right, of course. I think what people mean is that you shouldn't increase the odds against you by adding unneccesary debt to your mortgage. If my income drops suddenly, maybe I can't make credit card or auto payments for a couple of months but I might have enough in savings to keep up the mortgage payments for a while. My credit might suffer and my car might get repo'ed, but I'd still have my house. The mortgage is the last payment I'd want to skip. However, if I've rolled essentially ALL of my debt into my mortgage and I can't make a payment (which would be more likely then), the house will be the first thing to go.

 

[DiznEeyore]

If my income drops suddenly, maybe I can't make credit card or auto payments for a couple of months but I might have enough in savings to keep up the mortgage payments for a while.

Ah! Those are the operative words: for a while. In the end, if things are truly that desperate, it's very likely that they would indeed lose their house. (Again, I'm watching this happen to an unfortunate couple at church.)

However, if someone refinanced much earlier and by doing that, were able to get a handle on their debt and build up savings because their monthly payments and interest were reduced, it wouldn't ever come to potentially losing the house.

What I'm saying is, there's no "never" or "always" when it comes to this type of thing. And trust me, I've been there. I don't know if all the financially secure-types giving advice on this board have.

 

[crisi]

Also, if you take out a home equity loan, you don't have the equity. If you have equity, either through appreciation in your home or because you've paid down the mortgage, you have something. Hopefully, last resort, you could put your house on the market and get out with cash.

tlb, you, me and Mrs. Pete - we will write a book on how to figure the real cost of being a SAHM or a WOHM - assuming that you don't spend $4 on coffee every day as a working mom and that you might buy $4 of Playdoh you wouldn't have bothered to by as a SAHM. And we will consider the long term implications of not putting 2% into a 401k with a match, not getting raises over time, and having to restart your career should you try and go back later. Drives me nuts, that one. You should follow your heart's calling, but if its worth it to run the numbers because your heart is divided - at least use good numbers!

 

[disneymom3]

Also, if you take out a home equity loan, you don't have the equity. If you have equity, either through appreciation in your home or because you've paid down the mortgage, you have something. Hopefully, last resort, you could put your house on the market and get out with cash.

tlb, you, me and Mrs. Pete - we will write a book on how to figure the real cost of being a SAHM or a WOHM - assuming that you don't spend $4 on coffee every day as a working mom and that you might buy $4 of Playdoh you wouldn't have bothered to by as a SAHM. And we will consider the long term implications of not putting 2% into a 401k with a match, not getting raises over time, and having to restart your career should you try and go back later. Drives me nuts, that one. You should follow your heart's calling, but if its worth it to run the numbers because your heart is divided - at least use good numbers!

Crisi--I want to read that book when it's done! I actually have been a SAHM for the last 9 years with odd jobs here and there, but I did it because that was where my heart was. I did look at numbers, but I was in the daycare field myself and they are sadly underpaid. The numbers were pretty convincing with no benefits, no 401K, no nothing, but even if they hadn't been, we would have found a way to make it work because my staying at home was the goal in and of itself. I sometimes wonder (and this is not a slam, remember, I am an SAHM too, folks) if some SAHMs use the financial angle you talk about to justify their need to stay home. Sad that anyone thinks they have to justify their choices, really.

 

[DiznEeyore]

Also, if you take out a home equity loan, you don't have the equity. If you have equity, either through appreciation in your home or because you've paid down the mortgage, you have something. Hopefully, last resort, you could put your house on the market and get out with cash.

True. Or you could be like my neighbors across the street (and several other families we know) who've ended up with their houses on the market for a year or more. Why not do something proactive by restructuring their debt so that they can hopefully avoid the whole scenario? (Large corporations do it all the time, LOL!)

 

[macs4us]

Just thought I would add a few things. These aren't from a book or a system (although they are probably in many), but just what worked for me personally.

1. Try to make your minimum payment what your credit card company requires as the minimum plus the monthly interest, so you are not paying interest on your interest. Take any other extra and pay down the debt with the highest interest.

2. Call your credit card issuers and try to get a lower interest rate. It doesn't hurt to try!!!

3. DO NOT CLOSE ANY ACCOUNTS!!! You will damage your FICO, and you don't want to do that. That FICO will help you get a lower interest rate on loans and credit cards in the future. Freeze the cards in ziplocs, cut them up, whatever works for you - just don't close those accounts!!!

4. Don't go cold turkey. If you do, you are more likely to fall off the wagon. Find a way to do a few things, and do them cheaper, so you don't feel deprived. I know it sounds silly, but I love to get bargains, so sometimes I buy the stuff and just return it. It satisfies my "craving" when I get it, and doesn't hurt my wallet...

I personally don't carry a lot of cash (nor do I let my husband) because it disappears and is harder to track with Quicken. I also wouldn't leave the house without a credit card - I would leave without a cell phone. If my husband is at work (over an hour away) and I get stranded, I will need the credit card not the cell phone. But, that is our situation, and everyone is different.

Just hang in there. There are a lot of people in the same boat!!! Oh - I would take your already planned and paid vacations. Just be smart about your spending there and have fun!!!

 

[crisi]

True. Or you could be like my neighbors across the street (and several other families we know) who've ended up with their houses on the market for a year or more. Why not do something proactive by restructuring their debt so that they can hopefully avoid the whole scenario? (Large corporations do it all the time, LOL!)

Everything sells at the right price. They are listing for too much and have gotten too greedy - either because they want more than their homes are worth, or because they need to be because they have no equity.

 

[barbarabini]

1. Review your bills.

A. Take a look at insurance, car and home-- do you have low deductibles?
If you have some savings raise the deductibles to 1000, 1500 or more. Ours are 2500 and it significantly reduces premiums. Are you really going to make a claim for under 2000? probably not. (saves about 1500/yr)

B. Credit Card interest rates. Call and request reductions, or consolidate to a lower interest -- without a balance transfer fee. Then automate payments directly out of your bank account. This should drastically cut your interest charges and place more towards paying off the balance.

C. Phone bills - get basic services and use your cell if you need to.
Or get rid of cell service alltogether. (save about 200 yr)

D. Cable -basic or family service - no premium service. (saves about 400 yr)
?
E. Why such a high mortgage payment on 168000? Is it a 15yr mortgage , what is the rate? Mine is only 1378 on 227000. Review mortgage and PMI insurance

2. INCOME

A. Declutter your house - Sell it on ebay. All that stuff you bought and don't use, sell it and put it into a paypal account and pay you credit cards bills. Esp those baby things.
B. Can you get a higher paying job? Your paying for daycare already so maximize those working hours.
C. Any internet time can be spent looking for coupons, deals filling out surveys for money ect.

3. Economic Style -
A. Automate bills and savings...that way you stay on budget.
B. Use coupons...for everything.
C. Watch your investments.

 

[disneysteve]

What I'm saying is, there's no "never" or "always" when it comes to this type of thing. And trust me, I've been there. I don't know if all the financially secure-types giving advice on this board have.

I agree completely. There is never a one-size-fits-all solution as everybody's circumstances are unique. There are rules of thumb to use as a guideline, but there are exceptions to every rule.

 

[deadhedjen]

Well, it wasn't my intention to start a sub thread with my mentioning that I chose to stay at home for a few years with my kids. And yes, I made my decision not only by looking at the paycheck. My apologies to the OP for distracting from her original plea for help with her debt.

Jennifer.

 

[DiznEeyore]

Everything sells at the right price. They are listing for too much and have gotten too greedy - either because they want more than their homes are worth, or because they need to be because they have no equity.

I just really don't know how to reply to this. Are you realtor? Are you familiar with the housing market in metro Detroit?? If not, then I think I can safely say you don't know what you're talking about. There are other things that affect the sale of a house besides the sellers being "too greedy".

Their asking price is extremely fair. Sometimes the market is just not where it needs to be.

 

[Lyn5]

Everything sells at the right price. They are listing for too much and have gotten too greedy - either because they want more than their homes are worth, or because they need to be because they have no equity.

I have to agree on this. An immediate family member of mine put her place up for sale, much higher than I thought it was worth. But, she wanted to get what she could to build a new place in the perfect spot. So, I kept my mouth shut, it was her choice. After almost a year on the market followed by potential buyers saying the same things I had said would bring down the price (lack of view, no room for a pool, too small, etc.) she finally sold...at what I thought would be her asking price in the beginning which I also thought was a fair and very reasonable amount.. almost 3 times what she put in 10 years ago. It was a very stressful time and since she bought her new lot on a HEL, the time was approaching where the one year promo-rate would end and the higher interest would up her payments. The bank mananger to told her directly she had to make choices and sell something, she couldn't afford both....which is about the same time she asked me for money, in a joking sort of way. I smiled and said no, I am saving to see Mickey Mouse .

 

[MrsPete]

Why would you assume that if someone loses their job/sickness/unplanned expenses and can't make payments, their house will still somehow magically be there? If you can't make payments, you lose your house, just like you can lose everything else! Believe me, I'm watching it happen to people at our church. She's terminally ill, he barely works, and their house is being seized. Your house is NOT automatically safe!!

An illustration:

Couple #1 refinances the house and credit cards into one large bill.
Couple #2 has a mortgage plus credit card bills. Their total debt is the same as that of the first couple, but they write several checks each month.

Both couples suffer a loss of some type, and they can no longer make the payments.

Couple #1 is able to pay part of the bill, but they can't make the whole thing; they're in danger of losing their house.
Couple #2 is able to scrape together the same amount, which they use to pay the mortgage. They have to let the credit card bills go, which is bad, of course, but they're not in danger of losing the house -- at least not immediately.

Why not do something beforehand to get payments set up in a manageable way??

Of course this is the right thing to do!

 

[dvcgirl]

I just really don't know how to reply to this. Are you realtor? Are you familiar with the housing market in metro Detroit?? If not, then I think I can safely say you don't know what you're talking about. There are other things that affect the sale of a house besides the sellers being "too greedy".

Their asking price is extremely fair. Sometimes the market is just not where it needs to be.

Well, the market is, well, what the market value is. Market value is the price at which an informed seller agrees to sell a home to an informed buyer. If there are no informed buyers out there lining up to make offers on this property...chances are....it's overpriced.

If the OP has had her house on the market for a year, and it hasn't sold, I don't know a single realtor who will tell them that it isn't overpriced. Now, first of all, rural Ohio isn't exactly on fire with respect to the real estate market right now, and the OP also mentioned that two industrial plants/factories have closed down recently. They may have to take a loss on their property.

"Sometimes the market is just not where it needs to be". What does that mean?

 

[MrsPete]

Also, if you take out a home equity loan, you don't have the equity. If you have equity, either through appreciation in your home or because you've paid down the mortgage, you have something. Hopefully, last resort, you could put your house on the market and get out with cash

I really don't think people "get" what they're doing when they get home equity loans -- if they did, no one would ever get them! Of course, I also don't understand why people go to those "payday loan" services and pay 50% interest either. There's even a place in my town where you can rent tires! I was trying to figure out who'd ever want to rent tires, then a friend explained to me that it's a rent to own place -- one of those places for people who can't afford to buy $400 worth of tires, so they end up paying $25/week for two years.

tlb, you, me and Mrs. Pete - we will write a book on how to figure the real cost of being a SAHM or a WOHM - assuming that you don't spend $4 on coffee every day as a working mom and that you might buy $4 of Playdoh you wouldn't have bothered to by as a SAHM. And we will consider the long term implications of not putting 2% into a 401k with a match, not getting raises over time, and having to restart your career should you try and go back later. Drives me nuts, that one. You should follow your heart's calling, but if its worth it to run the numbers because your heart is divided - at least use good numbers!

Sure, I'll go in on that book! I really think the answer isn't as simple as "How much money can I bring home / save this week?" For generations women have been ill-prepared for retirement, and the failure to look ahead has been a large part of this. Staying home may well be the right choice for many women; as I said earlier, if my circumstances had been a little different, I might've made that choice too. But from a financial viewpoint, it's not as simple as those Parenting magazines would have us think.

 

[PrincessKitty]

I just really don't know how to reply to this. Are you realtor? Are you familiar with the housing market in metro Detroit?? If not, then I think I can safely say you don't know what you're talking about. There are other things that affect the sale of a house besides the sellers being "too greedy".

Their asking price is extremely fair. Sometimes the market is just not where it needs to be.

Gotta agree with Crisi on this one. As any realtor will tell you, the market value of a property is what a willing buyer will pay a willing seller. The OP is a willing seller and can't find a willing buyer. By definition, that means the house is priced too high, considering the amount of time the house has been on the market.

 

[MrsPete]

What I'm saying is, there's no "never" or "always" when it comes to this type of thing. And trust me, I've been there. I don't know if all the financially secure-types giving advice on this board have.

I agree that there are few "nevers" and "alwayses" in the financial world, largely because our circumstances and priorities are different.

I'm financially secure today, but I certainly was not born with a silver spoon in my mouth. I just realized early that I didn't want to STAY where I was, so I made good choices from a young age.

 

[OceanAnnie]

"Sometimes the market is just not where it needs to be". What does that mean?

I don't know if this is what she meant, but I'll jump in with my POV. Our house was on the market for about 4-5 months. Our realtor wanted us to go down on the price. Our opinion --- it was a fair price. So we held it. We sold it for the price we wanted.

Sometimes it's not the price of the house, it's the demand in general. I'd rather rent a house and wait for the demand to change than sell it at a loss.

 

[dvcgirl]

Ah! Those are the operative words: for a while. In the end, if things are truly that desperate, it's very likely that they would indeed lose their house. (Again, I'm watching this happen to an unfortunate couple at church.)

However, if someone refinanced much earlier and by doing that, were able to get a handle on their debt and build up savings because their monthly payments and interest were reduced, it wouldn't ever come to potentially losing the house.

What I'm saying is, there's no "never" or "always" when it comes to this type of thing. And trust me, I've been there. I don't know if all the financially secure-types giving advice on this board have.

Yes, perhaps some of us haven't been there. No offense meant, but if I'm close to the point where I am in deep financial trouble, I'm more likely to take advice from someone who has avoided the scenario altogher than someone who has been there. Seriously, I have friends and family members who have nearly filed for bankruptcy and some who had to go that route. I wouldn't send anyone their way for financial planning

I hear what you're saying...there's no "always" or "never" in any situation. However, it's generally not a good idea to lump unsecured debt in with your mortgage payment. Especially if the person in debt hasn't really proven to herself that she can stop using her credit cards. That's a disaster waiting to happen. They have the means to pay off those CC without the home equity loan. And living where they do, in an area with very, very low real estate appreciation, well, another disaster waiting to happen. Some areas of Ohio have actually *depreciated* in the last year while other areas of the country have seen remarkable gains. The highest in the first quarter of 2005 was Columbus Ohio, and they saw a 1.7% appreciation. Other areas in Ohio saw a 2.5% loss.

And so if the OP and her family lump in that CC debt with that home mortgage....they'd better be prepared to stay for awhile....a long while. Or be prepared to take a loss, which I don't think that they will be able to handle.