please ignore

[crisi]

I'm the one that brought up bankruptcy and I HATE it. Its a horrible thing. A way to dodge your obligations and should be a last resort. And for someone who just spends their way into it (as opposed to people who end up in bankruptcy due to illness or job loss) shameful.

But sometimes you don't have a choice. Or rather, you haven't made the choice to make the big changes in your life to avoid it early enough.

On the plus side, she will have to learn to live on a cash basis after bankruptcy, as there will be no credit available.

 

[ducklite]

I know, it is so crazy. Its all SUVs SUVs SUVS where I live. And, we have one too! DH gets a new vehicle every three years (work related, he is in sales and travels). To me, a car is just to get from point A to point B. I have owned three cars in my entire life and I am 40! One right out of college for 10 years, one for 7 years and now my current vehicle. Now, I want to trade it in and get a hybrid to cut fuel costs. Always trying to figure out ways to save. I guess it is my good midwestern upbrining...

I hear you on the SUV's. My next door neighbor has a H-2, an Escalade, and a Tracker for his daughter to drive. (He's a doctor, so the finances can handle it, but the damage to the environment is another thing)

I'll admit that we generally keep a car only about four years, but, we drive Saturns (and just bought a Prius), so they are generally around or under $20K each and get average 35mpg. The one I have now I got when my last car was only two years old, because of the zero interest financing deal it just made sense, my payment went down and was only going to be one year longer than the loan I had on the previous car that was two years older--hope that makes sense.

We do own three cars for two drivers right now, but that's because the older Saturn (going on five years) costs us under $300 a year to keep insured and maintained, and it's paid for and runs great, so for right now, we're holding on to it. Our son is thinking that maybe he'd like to learn to drive , and it will be a good car for him to learn on. We don't want him driving the Prius and I'm trading in the Ion for a Sky (yes, it's a mid-life crisis!) in the spring, and no WAY he's driving that!

Anne

 

[welovedis]

I'm trading in the Ion for a Sky (yes, it's a mid-life crisis!) in the spring,

Totally OT--I love the look of the Sky as well, Chili Pepper Red or Bluestone for me! At around 25K it is one good looking car.

 

[dvcgirl]

I'm the one that brought up bankruptcy and I HATE it. Its a horrible thing. A way to dodge your obligations and should be a last resort. And for someone who just spends their way into it (as opposed to people who end up in bankruptcy due to illness or job loss) shameful.

But sometimes you don't have a choice. Or rather, you haven't made the choice to make the big changes in your life to avoid it early enough.

On the plus side, she will have to learn to live on a cash basis after bankruptcy, as there will be no credit available.

Oh yeah, I'm not a fan of bankruptcy at all, unless it's for really crucial reasons...like medical bills. However, spending above your means because you simply want things, well, that's another story.

I live in Orlando and recently my DH and I were over at the Millenia Mall just walking around. We went walking past the Burberry store and I was telling my husband that they have a dog collar in there for over $100. He didn't belive me...so we went in and I showed him. You just have to laugh at prices in places like that. Scarves for $200, a coat for over $750.

We are very lucky, have a nice double income, no debt whatsoever, not even a mortgage. And we were thinking..."how much does one have to make in order to justify buying a $200 scarf?" And trust me when I tell you many people buying those things don't have the income to back it up. It amazes me.

 

[westjones]

Millionaire next Door (as I suggested earlier) is really good and I think I'll read it again .

That is a good book. Oprah did a show about it a couple of years ago. Those people are inspiring.

DJ

 

[Lisa loves Pooh]

I live in Orlando and recently my DH and I were over at the Millenia Mall just walking around. We went walking past the Burberry store and I was telling my husband that they have a dog collar in there for over $100.

Don't forget that Prada and friends make pet carriers too that cost more than I'll ever spend on a purse for myself.

 

[floridagirrl2]

Not to get too off-topic here, but a University of Texas study found that about half of all personal bankruptcies are due to medical bills (I'm a health care professional and an activist for universal health coverage, so I've read up on this a bit).

Based on friends/aquaintances experiences, I would guess a lot of other bankruptcies are the result of divorce.

For people who have just overspent for a lifestyle they can't afford, I agree that bankruptcy is a poor option. Given the o.p.'s unwillingness to cut spending or get a second job, and inability to meet monthly financial obligations without borrowing more money, bankruptcy may be inevitable.

 

[Lisa loves Pooh]

Peaceful girl--I am genuinely interested...are you taking any of this advice to heart now?

 

[wide awake]

I suggested an adjustable rate mortgage quite a few pages back, and I still think it is the way to go. There are new ones where your payment is stable for 5 years, then starts adjusting. You're not building any equity unless your home appreciates, but at least you can get a handle on bills...I've checked into it, mainly because I know we won't be in our house for more than two or three years...I could cut my payment from $2200 to $800, and use the extra $1400 to invest. I can see why the OP doesn't want to get a second job...she has a young child. I quit work when my son was born...it was a financial hit, but time with DS has always been more important than building wealth. I would get a second job only if I couldn't afford a safe, nice place to live, health expenses, or groceries. Yes, I know the OP said she didn't have money for groceries, but it sounds like there is enough income if the OP makes some changes. I don't like bankruptcy...unless it is for medical reasons or divorce. At least the OP admits she has a problem...but making the necessary changes is a hard thing...sort of like dieting...we all know that to lose weight you need to exercise more or eat less...but how many actually do it ?

 

[fkj2]

Security gland, I like that! You know, to me, no matter how much I save, I'm always a little worried with only one of us working. You know, what if dh gets sick, laid off, etc. And my Dad's death really opened my eyes to the fact that Medicare and supplemental insurance for senior citizens just isn't enough when someone is terminally ill . It's really sad, especially when my parents worked most of their lives, always paid their bills, etc. Anyway, this has made me realize that I need to go back to work to prepare for retirement and the expenses of old age. I don't ever want to put my children through the stress of coming up with money to care for me when I am old.
You know, as I watered my grass in my middle income neighborhood, I noticed something. Lots of Cadilac Escalades and Lincoln Navigators were parked on my very average street. When I was a kid, only rich people drove Cadilacs and Lincolns. Now, in a middle class neighborhood, the street is full of them. Can these people really afford that car, or are they over their heads in debt?
Thanks for this thread! I've learned a lot!

Sorry to read of your loss, but let me take this opportunity to mention Hospice. It no longer is merely the organization associated with folks dying of cancer but also includes other diseases of a terminal nature. They're covering my mom who is in the later stages of stroke-related dementia and Hospice paying many of her bills. I still have to buy personal products (diaper creme, diapers, etc.) but through her Medicare benefit (and I'm assuming most insurances have a Hospice benefit), they're covering the expense of her oxygen, bed, most medicines, etc. I understand they also provide some services for those terminally ill in nursing facilities. It may be worth investigating for those of you with the need.

 

[CarolA]

We are very lucky, have a nice double income, no debt whatsoever, not even a mortgage. And we were thinking..."how much does one have to make in order to justify buying a $200 scarf?" And trust me when I tell you many people buying those things don't have the income to back it up. It amazes me.

Umm... I have a $200 scarf LOL! However, I did pay cash for it. (Bought it at the Hermes store in Paris! It was my big splurge and every time I put it on it makes me very happy! I realize that it is stupid, but we all do stupid things from time to time.

One other thing I noted was concern about keeping up the Jones's. I think that sometimes the DIS boards fuel that. Folks read about other people's Disney trips and want to go again. Plus some of us are in a position to go a lot. (Of course, I cheat... I went to Disney Sunday, MOnday night and Tuesday evening. My company had me down there on business. They paid for the plane, car, most meals and most of the hotel. Not a bad deal. I have an AP since my Dad lives in the area and I need to bribe myself to go visit him. )

I have read some of the posts on bankruptcy and wanted to point out that Congress changed the bankruptcy laws this year.

Just a few things

Passed: A "means test" would determine whether a debtor could file Chapter 7 bankruptcy. Anyone with an income below the median income for families of the debtor’s size in their state would be exempt from the means test. For those debtors above the median income, a presumption of abuse on the part of the debtor, which the debtor has the burden of disproving.

In applying the means test, the average income over the past 6 months is used, regardless of present actual income. Mortgage and car payments, and the amount necessary to pay back taxes and past due support, are subtracted. Private and public school expenses for children are limited to $1500 per child per year. If, after deducting those amounts and the living expenses provided in the IRS’s national collection standards, the debtor could pay at least $6000 to unsecured creditors over 5 years, the debtor’s only option would be Chapter 13 bankruptcy. (Chapter 13 does not forgive as many debts)

Passed: Debtors must obtain approved credit counseling before they can file bankruptcy. Unfiled tax returns must be filed within weeks of the commencement of the case

All in all, it is harder to get all your debts discharged via bankruptcy now.

 

[fkj2]

I'm the one that brought up bankruptcy and I HATE it. Its a horrible thing. A way to dodge your obligations and should be a last resort. And for someone who just spends their way into it (as opposed to people who end up in bankruptcy due to illness or job loss) shameful.

But sometimes you don't have a choice. Or rather, you haven't made the choice to make the big changes in your life to avoid it early enough.

On the plus side, she will have to learn to live on a cash basis after bankruptcy, as there will be no credit available.

While bankruptcy isn't advisable (or admirable) it's really tough to receive mixed messages. Credit solicitation is everywhere. The government can't stay within its budget. And, since I'm originally from an old steel town and that's where manufacturing seems to have had its first big job loss, the steel mills, the airlines, Enron, WorldCom, the government bailout of Chrysler years ago, and now GM and Ford seem to be bordering on the edge of bankruptcy.

And Congress passes new laws to limit declaring bankruptcy. How can you tell people on one hand not to dig themselves into so much debt that missing a two-week pay is painful, while our economy is 2/3 consumer spending and all these companies and the government can't control their spending? Oh, and have you taken out that home equity line of credit? Let us show you how easy it can be!

Back to the OP, I too would give up the private school at this point, until you get things more under control. And from an earlier post I wrote (and in which I evidently wasn't clear) I didn't mean that you were paying for lawn care, housecleaning, etc.; I meant could you exchange those services for receiving dental care, auto repair, tutoring, those kinds of things?

 

[crisi]

I suggested an adjustable rate mortgage quite a few pages back, and I still think it is the way to go. There are new ones where your payment is stable for 5 years, then starts adjusting. You're not building any equity unless your home appreciates, but at least you can get a handle on bills...I've checked into it, mainly because I know we won't be in our house for more than two or three years...I could cut my payment from $2200 to $800, and use the extra $1400 to invest. [\QUOTE]

For you, an adjustable rate mortgage makes sense. You won't be there long enough for it to adjust. We have one too - ours was seven years and bumped, but ours will be paid off before the adjusting period kicks in.

However, adjustable rate mortgages can be very scary. Say you get one today (just saw a Ditech sign 4.5%, 5 year adjustable). Make sure there is a cap on it - if interest rates are 15% five years from now, your house payment could be unaffordable without a cap. Even with the cap, make sure that you can afford the maximum housepayment. Many people don't have their real income keeping up with inflation, and a bump in interest could make for a really tight spot years from now.

When I bought my first house, I felt really lucky that I qualified for a special first time homeowners rate of 9.5%! Granted that was almost twenty years ago now, but unless you have a crystal ball, its hard to say where interest rates will be five years from now.

 

[dvcgirl]

I suggested an adjustable rate mortgage quite a few pages back, and I still think it is the way to go. There are new ones where your payment is stable for 5 years, then starts adjusting. You're not building any equity unless your home appreciates, but at least you can get a handle on bills...I've checked into it, mainly because I know we won't be in our house for more than two or three years...I could cut my payment from $2200 to $800, and use the extra $1400 to invest. I can see why the OP doesn't want to get a second job...she has a young child. I quit work when my son was born...it was a financial hit, but time with DS has always been more important than building wealth. I would get a second job only if I couldn't afford a safe, nice place to live, health expenses, or groceries. Yes, I know the OP said she didn't have money for groceries, but it sounds like there is enough income if the OP makes some changes. I don't like bankruptcy...unless it is for medical reasons or divorce. At least the OP admits she has a problem...but making the necessary changes is a hard thing...sort of like dieting...we all know that to lose weight you need to exercise more or eat less...but how many actually do it ?

5 year adjustable mortgages aren't a new thing. 5/1 ARMs have been around for ever...there are also 3/1 ARMS and even one year adjustable mortgages. But wide awake, your numbers sound like you are talking about an "interest only" mortgage....because of the huge drop in monthly payment. Be very, very careful of those puppies....you pay only interest for the first five years (or whatever the period is), nothing towards your principle. So after five years, you owe exactly the same amount on your home....it's a bet that your home will continue to appreciate at the current insane rate. Very risky game.

Assuming you have a conforming 30 year mortgage at a rate from the past few years, well I think your numbers may be off...unless you already have a *very* high interest rate, which I'm guessing you don't or you would have already refinanced. So I'm confused I guess...lol!

As for the OP taking out an adjustable mortgage...I personally think it's a bad idea until the OP learns to run her home and life on a budget within their means. Otherwise, they'll get a great rate on an ARM, their payments will drop initially and there will be more cash (not necessarily a good thing here), and then when they adjust...payments will go up very quickly because mortgage rates aren't going to hold at this level forever.

 

[westjones]

One other thing I noted was concern about keeping up the Jones's. I think that sometimes the DIS boards fuel that. Folks read about other people's Disney trips and want to go again.

This is true. I know when I read other people's trip reports and especially when I see their beautiful pictures it makes me want to go.

DJ

 

[Mainers]

The list below is copied directly from my excel-based annual budget. Your list will be different, but if you are on a tight budget you need to have a list with an annual $$ amount next to each item. Then you subtract the total from your salary and there needs to be a result that is greater than $0...if not, then something has to change!
This is not rocket science, it is basic subtraction. The financial motto in our house is "It has to come from somewhere". Good Luck!

401 (k)
Allowances
Car Fund
Car Insurance
Car Loan
Clothing
Copays
Dependent Care Reimbursement Acct.
Diapers
Electric
Federal Taxes
Gas
Gifts
Giving
Groceries
Hair Cuts
Medical Reimbursement Acct.
Medical/Dental Insurance Premiums
Medicare
Mortgage
Oil
Rainy Day Fund
Savings
Social Security
State Taxes
Term Life
Time Warner
Vacation
Walking Around Money
Water/Sewer

 

[ElizaB39]

Diapers??!!! LOL! The adult or baby kind?

What is Time Warner?

TIA

 

[Mainers]

Diapers??!!! LOL! The adult or baby kind?

What is Time Warner?

TIA

We have two little boys...diapers were once a large line item ($750/year). Time Warner is our cable/internet/phone company.

I know that I am over the top with my budget, but it really works for our single-income family (my wife works as a stay-at-home mom...no income).

 

[imsayin]

but let me take this opportunity to mention Hospice. It no longer is merely the organization associated with folks dying of cancer but also includes other diseases of a terminal nature. They're covering my mom who is in the later stages of stroke-related dementia and Hospice paying many of her bills

I agree with this. Last year we went through terminal illness & death of my father & my MIL. Both had medicare & supplemental health insurance. Both ended with hospice care. Neither of them had any substantial medical bills to pay during their illness or after their deaths.

 

[DVCconvert]

I know that I am over the top with my budget

You are not over the top -- you're dead on right!

People have to know where their money is going, exactly to be able to control/redirect it. Well done!