Alright, so I'm depressed. Really really depressed. Just had a really terrible conversation with my wife about our money situation. Let me summarize briefly.

My wife and I make good salaries. We have a nice, if aging, house. Our kids eat well and have a lot of toys. But our bills are killing us. We have recently reached a point where our monthly salary no longer completely covers our expenditures, meaning staggering some bills late, and picking them up in the next go around. Of course this catches up with you, as it has in spades the last few months. What used to work is no longer working.

We started out seven years ago in great shape. Got a hefty inheritence from my aunt, put the down payment on the house, bought a few things but we never went crazy. We quickly gained money in the Internet stock market. Lost it the next year (about 10 grand). Took out a couple of loans to shore things up. Things are still okay but would soon take a turn.

So in 2001, we have a child. I take up baseball card collecting of all things because it was a hot market then. I do well at first and then start running up the credit cards. The whole point for this was to make a lump sum of cash to prevent what is happening now from happening. Best intentions terrible results.

We still had enough money for my wife to take a year off with our first child, which is what I wanted more than anything in the world. At least I thought we had enough. But things fell off the track quickly. So things get worse and we borrow and borrow. To stay ahead and then to stay even. I have any number of legitimate but ultimately failed schemes to make money. Things get worse.

We struggle through until last year where we re-finance the house. Made 20,000 from that but lost all of our equity. Though the 20,000 would get us through for awhile. We bled through it in 9 months. My wife had a a difficult prgnancy, I got appendicitis, etc., the money up and disappeared.

So we re-financed the car, borrowed more money and here we are. Hopelessly in debt. Many stupid decisions but all with good intentions. Now keep in mind that with all this borrowing, all this scheming, we have no bells and whistles whatsoever. We have a 8 year old TV, two old cars, no new clothes in forever. We don't eat out much, we don't see movies, we don't really do anything. I have this laptop I write on but it was on sale and bought on Best Buy Credit. So I don't know what frills we can cut out because we have very few.

My wife said some hard things. I know she is just frustrated but I feel like I have let her down big time. I have fears of what this could lead to, an irreparable rift. I'm just really down right now.It seems hopeless now and Christmas looks like it is going to be rough. My wife says she is not buying me anything and I shouldn't buy her anything. This makes me miserable. Going out to the mall is excrutiating now, seeing people with armloads of bags and knowing that past decisions will make us hard to get anything except for our baby girls, which of course is the most important thing.

So, I ask for this. Any suggestions? What should we do?

What can be said? It's such a difficult situation. You might need to start calling your creditors and make payment arrangements. Is a consolidation loan feasible? And if it is, do you have the discipline to get one and not run up more debt? Pay it off ASAP?

Money is a funny thing. It's magic in that it can disappear in an instant.

I wish you all the best. It's a tight spot you're in to be sure.

Prince has a song: "money don't matter tonight" but you have to expect that from a miserly person with plunty of doughnuts in his pockets.

My wife and I are doing real well without your troubles because we choose not to have the kids. So let me just say maybe you should think about selling one or both off. Now that the taistless joke is out of the way, here's the good advice.

Keep open lines of communication with you wife and let her know what's going on expecting her input.

First off, get a second morgage or home loan, if you can, and pay off all credit cards, and cut up all but one. You SHOULDN"T USE CREDIT CARDS, execpt for the right reasons, and in that case you only need one. Credit card debt is the worst kind. It is a large hole where you money leaks out on a month basis.

Now would be a great time to refinance your home. The rates are still low and the market is slowing. I might sudgest you move to a smaller place, but people get so attached to homes.

Make a plan. Lay down some rules. Make a Budget and stick to it. My wife and I use budgets when we want to save money. You would be suprized how much money is pissed away monthly.

consolidate your debts. Draw up a budget - write down every single expenditure you make and expect to make in the coming year - inlcude everything you can think of, including birthday presents. Think of other ways to make money. Can you take a second job for a while? Change jobs? - my brother-in-law does night shift at a mail sorting house for good pay, while also running am e-bay business from home. What are your wife's skills? Is there anything she can do from home while she looks after the kids (I do freelance graphic design with all 3 kids at home - I have done 20 hours per week some months without needing help minding the kids). Can you sell stuff? Buy things you need second hand - kids clothes especially.
This is how we stay on top.

1. Don't panic
2. Don't consolidate!
3. Create an action plan


1. Don't Panic I know it's depressing to have money worries and I think most of us have been there too at some point in our lives. Sit down with your wife and agree to review the current situation without apportioning blame or regrets. This is something you can work through together and it may even bring you closer. Talk.

2. Don't consolidate unless you can get a deal which is lower than your current interest rates. Consolidation may make things easier by giving you just one payment to handle but if you're paying more in interest it will take you longer to clear your debts.

Also, I think you need to be in control of your finances - not only is it very rewarding to see results as you pay off each debt eventually but also there is less temptation to go out and do the same thing again because you're working so hard to do it all yourself.

Finally, another reason I don't think you should consolidate is that the temptation is to pay off the consolidation loan over a longer period; ideally you should be aiming to clear your debts as soon as possible so that you're not wasting money on interest payments for evermore.

3. The Action Plan
First, make a list of all of your current outgoings, listing any associated interest charges in percentage terms. This will give you an idea of which debts should be paid off first. Always pay off the debts with the higher interest charges first and pay nominal fees to the others until you've cleared the one with the highest charge. When you've cleared the first debt completely, pay extra to the company that is charging you the next highest interest and so on. The idea is that you want to pay as little interest each month as possible. Always carry over the money you had budgeted to spend on the first debt to the next one down on the list, so that you add it to the nominal amount you were paying. (i.e. don't spend it on other things).

If you can use the companies who are charging less interest to consolidate the other companies, do so. Basically the idea is to get as much of your debt as possible transferred to the company who will charge you the least amount of interest as that way you'll clear it faster.

Second, ask yourself if there's any way any of the monthly payments you make can be reduced. (This is where my plan may not translate so well across the Atlantic, but here goes):

Utility charges - can you change supplier to give you a cheaper charge/unit?
Telephone - are there any suppliers who will offer you the service cheaper?
Cell phones - do you really need them? ... etc.

Look at every cost in this way and write up a list of what you're currently spending and against each item write what you believe is a realistic amount to reduce to. It has to be realistic; there's no point budgeting $100/month for food if it's impossible to do. Don't just think about cutting "frills" - at this stage you need to think about cutting costs any which way you can. Also, stop buying things on credit, even if what you buy is the deal of the Century! Right now you need to have the mindset that if you can't afford to pay cash, you can't afford it period.

Third, find a way of managing your monthly expenditure so that you are not tempted to deviate from your plan. One way might be to have two bank accounts - one for all the direct debits/standing order payments that automatically leave your account each month and another for cash only, so that you transfer an amount to the second account for anything you need cash for.

Fourth, you need to find a way of generating more income. Could you make a profit by selling your baseball cards now? Could you take in a lodger? Is there anything you have which might generate some money in the short term? Could one of you get a second job? You can't continue in a situation where your monthly income does not cover your expenditure. Staggering payments will not help you on this as you are not dealing with the actual problem; your current income does not support you.

Fifth, don't consider getting into any more investment schemes in the short term. Ultimately, the amount you're paying in interest to those to whom you owe money is likely to be significantly more than the return you can get on any short-term investment. Pay off your debts first.

Sixth, budget a set amount each month for you and your wife to have a meal or something else that will give you both pleasure. From what you write, it may take some time to pay off your debts and you need to have a little fun along the way. Christmas need not be so bad - have you considered making one another presents, or writing one another poems/exchanging massages/doing chores for one another? If you get creative you may actually have a fantastic Christmas that takes you away from all the commercialism and brings you more in terms of joy and appreciation. Don't look at it in terms of things you can't do this year; look at the things you do have.

x

Reincarnate said:

Nothinbutjoy said:

Thanks for your feedback...really appreciate it. Our creditors appear to be a bunch of heartless pricks unfortunately. We're going to look into a consolidation loan over the break.

Thanks again.

MickG said:

LOL about selling the kids. But no, they are everything to me so not an option

Good advice all. The credit cards are maxed so cutting them up should cause no hardship.

We have already refinanced once and probably for too much so it might be hard for another company to take us on. We have tried but have been turned down a couple of time.

Probably need to look into second mortgage but not as familliar with the concept as with refinancing.

charlottegelin said:

Good advice. We are going to look into selling Avon over the holiday break so if anybody is interested in some makeup. My wife is a school teacher and also works as a youth director at church so she is doing her part and then some. I used to sell b-ball cards over Ebay (once sold a card I paid 100 for 500) but we don't have a lot of stuff to sell.

Great suggestions though and we'll look into everything.

I'm sorry to hear about your siutation. Money troubles do truly suck!
I'll just make a few suggestions, but they're probably ones yo've already heard.
1; I never use credit cards. I use this idealogy: If you can't pay for it with cash or a check, then you can't afford it.
2. By all means, try to stay connected to your wife. I watched my parents fight over money issues and it wasn't pretty. And if you do, try not to do it in front of the kids.
3. How old is your child? Old enough to understand that Christmas will be light this year for financial reasons?
4. I like to think of this statement when I'm depressed. I'm not highly religious but there is a bible passage that I like: "This too shall pass."
5. And last, try not to be depressed. Think about it like this: Will worrying about it, freeting about it, getting angry or upset change it? No, it won't, so don't waste precious energy on those emotions.

I hope things get better soon.

Reincarnate said:

Thank you for taking the time for this. I am going to print this out as well as the other advice and see what happens. I really appreciate you mapping this all out.

The Number One thing you need focus on is getting that credit card debt into a more stable loan. Cut the cards up and close the accounts when you moved the debt.

Credit card debt can generate a monthly loss of some 200+ dollars going to intrest only, and the debt never even gets paid off if you stick to the minimum payments.

Credit Card Co's get you to go into debt with them and then they keep raising the APR. I know I have seen it done too many times.

GottaLetitgo said:

You're very welcome. If you want to bounce any ideas off someone, feel free to orgnote.

MickG said:

That's true, although it's important to find out exactly what each card is costing in terms of APR before you can make a decision on which ones to pay off first. The interest rate will usually appear on the statement but if it doesn't, call the credit card company and ask them.

Some credit cards in Britain offer 0% for a fixed term for balance transfers. If you have this type of offer available in the US, take it. See if you can bounce the total debt from one card to another, taking advantage of low interest rates and cutting up the new card when it arrives so that you're not tempted to ever use it.

Alternatively, if you can't get more credit or a better rate, then please consider paying off the most expensive card first (i.e. not the one with the highest balance, but the one that has the highest APR) and only paying minimum payments to the others until the first one is paid off, then working your way down the list as I suggested in my first post. This will save you money at the end of the day, despite the fact that you're only paying the minimum repayment for the other cards initially.