Financial Advice

[Jayray 0]

OK- Here is the thing.....I am 31 years old...have a $230,000 house...make $70,000 a year...and have less cash than I did in high school. I am way past the point of being too proud to admit that I suck with money....so here is what I am asking.Does anyone on here have any type of spreadsheet or approach to budgeting their money? Or know of a service or company that I could go to to help me layout how to get things right? I am currently sitting on about $50k in credit card debt.....and just flat broke....hence my other posts on here about making my measley $50 br on FT last....I am looking for serious responses here....I know that I don't post here much, but I like to think that I am a part of the FCP family, as I have been on here for a few years now.....and would appreciate any advice you guys have for me....Typically what I do is just keep an Excel spreadsheet that tracks what bills I have to pay with each paycheck, but I can't seem to find any way (other than counting on my next raise) to make any headway against my debt. My mortgage is a 115% equity loan...so no help there.....I can't get a consolidation loan because my income/debt is too low.....just kind of running out of options....Any serious advice is appreciated.....ThanksJayray

[jethrodull 0]

I'll give it a try - 1) You don't have a $230k house...you rent(from the bank), so find a cheaper place to rent, get some roommates to help pay the bills2) Cut up your credit cards...literally...cut em up or put one in the freezer in a block of ice...DON"T USE THEM ANYMORE3) Pay as much as you can to your cc debt, while giving up on CABLE TV, INTERNET ACCESS, CELLPHONE USE, STARBUCKS, and all that kinda crap4) Once you have your debt payed off....5) Remember how sucky it feels to have $50k in cc debt and don't do it again!!GLJ

[ajs510 122]

My father used to tell me to use an envelope system:1. Write down every single one of your monthly bills, including savings, entertainment budget, paying down debt money, anything you predictably spend money on monthly. 2. Buy a box of envelopes. 3. Write the name of each monthly expense down on one of the envelopes. 4. Take the amount of each monthly expense and divide by 4 (dividing the monthly expenses into weekly expenses). 5. Write that amount down on the envelope, and promise yourself that NO MATTER WHAT, that amount of money will be placed in the envelope every week and will not be touched until it's time to pay the bill at the end of the month. 6. Give yourself a weekly paycheck out of your weekly salary, and make an envelope for that as well. This is your money to just carry around and have for incidentals, anything you want to spend it on. If you're true to the system, it will never fail you. The money for the bills will always be there because you won't steal from the envelopes knowing full well that taking bill money will screw everything up. After a while, you won't need them anymore and you'll have your expenses well under control.*Edit* Another way you can accomplish the same goal is to have your weekly check split into separate parts of your bank account every time your check is directly deposited. It's more of a high-tech envelope system, but basically the same idea. The money's there at the end of the month, that's the important part.

[Dratj 0]

Simple. Figure out the minimum amount you need to survive. Put the rest into paying your credit card debt until it's paid off. Once in a while you can treat yourself but you will have to grind this out unless you want to be in debt forever. It might take you 2 to 3 years to pay if off but it will be worth it in the end. I'm curious, how did you rack up the debt anyways?

[Pot Odds RAC 23]

I'll give it a try - 1) You don't have a $230k house...you rent(from the bank), so find a cheaper place to rent, get some roommates to help pay the bills

Horrible advice, just plain horrible. Even in the current market buying a home is the ONLY investment that is a no brainer. Investment, tax breaks, stored non-liquid value, leveraging someone else's (the Bank's) $ for your investment... all contribute to make buying a house a GREAT use of your $ and Credit.

2) Cut up your credit cards...literally...cut em up or put one in the freezer in a block of ice...DON"T USE THEM ANYMORE

Great advice. Credit Cards ARE NOT a form of extra income. Quit using them as income instead of as a PAYMENT option.

3) Pay as much as you can to your cc debt, while giving up on CABLE TV, INTERNET ACCESS, CELLPHONE USE, STARBUCKS, and all that kinda crap

More great advice. You'd be amazed how many leaks you have in your spending habits. Try keeping track of EVERY CENT you spend. Also, take out a set amount each week, say $100 and limit the entire week's spending to that cash. Don't spend ANY other $. You'll find you become aware of your spending habits and actually save $ for the end of the week when you are forced to PHYSICALLY take $ out of your pocket.

4) Once you have your debt payed off....5) Remember how sucky it feels to have $50k in cc debt and don't do it again!!

Enough said.

[Mikey Ravioli 0]

There are services all of the place that will work with you to reduce your credit card debt. Google credit counseling and I'm sure you will find one in your area. Basically they contact each of your creditors and get your interest rate reduced. Some will reduce to zero and most will drop to under 10%. then you make a monthly payment to the counseling service and they distribute to your creditors.The real problem you have is you need to figure out a way to stop spending $1.25 for every dollar you make.

[jethrodull 0]

POR - we don't actually disagree on #1...as I said, he doesn't "own" the home he is "renting" from the bank....either he can't afford the house on his own (therefor, get a cheaper one) or he should find some roomates to help pay for it (OPM).... I didn't say he shouldn't be "buying" a house...my poor choice of words...J

[Jayray 0]

Simple. Figure out the minimum amount you need to survive. Put the rest into paying your credit card debt until it's paid off. Once in a while you can treat yourself but you will have to grind this out unless you want to be in debt forever. It might take you 2 to 3 years to pay if off but it will be worth it in the end. I'm curious, how did you rack up the debt anyways?

Dratj,Thanks for the advice....I know that I just need to crack down...go to absolute minimum requirements....but here is some more detail...I am married with two kids....drop ~$900/month on childcare....and struggle with the compromise of providing a decent lifestyle for my family and being financially responsible. (ie. no internet, phone, cable, etc....). Most of the debt we built up just after we got married...and to be honest..haven't used cc's much since....that is going on 6+ years ago...problem is....I keep re-financing to try to get out of it....or to skip that one months mortgage payment...and end up racking another 2-3k up in closing costs......seems like I am in a downward spiral....I just need to make it stop....Jayray

[psujohn 0]

You HAVE to pay down that CC debt. As others have said the cards need to be put away. You can try going to one of those free debt consolidation companies who'll negotiate a better rate with the cards but you can do it yourself. Just call them up and tell them that you can't afford your current rate and want to negotiate a payment plan that you can handle.Work a budget that puts as much as possible toward paying the CC debt. This will mean sacrifice. Cable, cell phone, eating out should probably go. Do allow yourself a modest entertainment budget that you can spend on what you like the best. If you don't you'll end up not following the budget.Your housing is likely more than you can afford but selling will most likely cost you money at this point. Seriously consider a roommate if possible who can pay rent and share utilities. I'm not a fan of bankruptcy. It's pretty much like a gambler welching on a debt in my mind so I personally would avoid it if at all possible. Depending on your work situation you might also want to consider a part time job if you can get one that doesn't affect/interfere with your day job.

[akoff 0]

"1) You don't have a $230k house...you rent(from the bank), so find a cheaper place to rent, get some roommates to help pay the bills"he can't afford to get out...the markets in most places have softened. if you are running 115% on the mortgage it is going to cost you money to sell....if your on time with that make sure you stay that way.From what you have written you are way beyond any help you are going to get on a poker site. You a pro for this one. Talk to an accountant for advice on who you really need to talk to.

[FCP Bob 1,312]

Others have already said this but track every single penny that you or your family spend. It will really open your eyes when you see all those Starbucks etc add up and will show where you can economize.You haven't mentioned if your wife works but I assume so since you mentioned the $900 per month child care costs. Have an accountant do an analysis of your financial situation with her working and with her not working and staying home with your kids so that you save the $900 per month. There are a lot of expenses involved in working from the transportation to the job, wardrobe, lunches etc that can be saved as well as some possible tax advantages with her not working. I've had friends before who were better off financially when one of the couple stayed home as opposed to working.

[Vandees 0]

Tough situation, but all too common these days. First, before looking at a credit consolidation company, try calling the CC"s yourself. Tell them you're contemplating a possible CC and see what they can do for you. At the LEAST they should eliminate late charges and drop your interest rate. At the LEAST. Next, track EVERY penny you spent for a month. Literally. I did this and couldnt believe how much I wasted on pops and candy bars here and there, a fast food meal a few times a month, etc. It adds up. Phone, paper, cable, etc all need to be cut out if you're serious about it.Second PT job? Giving plasma, delivering papers? These may sound lame, but for the time involved you can make a couple hundred a month fairly easily.When you decide to do it, COMMIT 100%. Finances are something you can't half a$$.Good luck to you.

[Northie 0]

I find you can seriously save money just by cutting down on the incidentals you don't think of at the time. IE: Starbucks, Fastfood, impulse items at the gas station, etc.

[erac22 0]

So I assume your credit is lousy? I know I always get offers for 12 month interest free credit cards, where i can bounce balances to that card for a small fee and then just leave it there without paying interest. After a year, I'll just get offered another one and do it again. Obviously, under this system, you'd want to pay down the debt as you go. I have no credit, just a pile of money sitting in my bank account, so these offers might be geared only toward peolple like me who they're trying to get hooked on plastic. Of course, paying off one credit card with another isn't ideal, but it's certainly better than filing for bankruptcy. Another option:I know you said you have a mortgage, but do you also have a home equity line of credit? If not, you may want to consider paying off your high interest credit card loans with a lower interest Home Equity Line. Problem here, as before, is if your credit is bad, you'll have a tough time geting a HEL, especially right now as there's a pretty severe credit crunch, spreads are widening, people are defaulting all over the place.The other thing you need to be cognisant of is that you're losing even more money by not being invested in equities/bonds/any other asset classes. Debt is twofold, not only are you paying debt service, but you're losing the return you would have gotten on the money you're using to pay down your debt rather than investing it. Especially since you have kids, your goal should be securing your and their future, not present consumption. Remember that by deferring present consumption, someone will essentially pay you to wait to spend. Try to change your mentality from being the spender (borrower) to being the saver (lender). Long post, but I hope it's helpful in some way.Oh, and one more thing, don't sell your house unless you absolutely have to. Yes, you technically are "renting" it from the bank, but at the same time, you're gaining equity in an investment, and receiving imputed rent benefits from it.

[mtdesmoines 3]

You HAVE to pay down that CC debt. As others have said the cards need to be put away. You can try going to one of those free debt consolidation companies who'll negotiate a better rate with the cards but you can do it yourself. Just call them up and tell them that you can't afford your current rate and want to negotiate a payment plan that you can handle.Work a budget that puts as much as possible toward paying the CC debt. This will mean sacrifice. Cable, cell phone, eating out should probably go. Do allow yourself a modest entertainment budget that you can spend on what you like the best. If you don't you'll end up not following the budget.Your housing is likely more than you can afford but selling will most likely cost you money at this point. Seriously consider a roommate if possible who can pay rent and share utilities. I'm not a fan of bankruptcy. It's pretty much like a gambler welching on a debt in my mind so I personally would avoid it if at all possible. Depending on your work situation you might also want to consider a part time job if you can get one that doesn't affect/interfere with your day job.

Random thoughts for the OP. I do very well, and I look around and see people younger than me with jobs not as good who seem to have more, spend more and I wonder how they do it. Your experience is a warning for all the younger people who read this site.If you are going to go the debt consolidation company route, DO shop around ... some are privately-help for-profit houses and don't have your best interests in mind. None of this works if you AND your wife don't BOTH commit. I don't know about "roommates" with a family at home. Bankruptcy may not be pretty, but you are in SO deep, I don't know how you get out without help. No one who gets a paycheck should have over $1,000 on a credit card.

[Jayray 0]

I appreciate all of the advice/perspective. This should definitely be a warning for the younger guys on here....credit cards will take you over very quickly if you let them....so stay away....Are there any accountants in the group? I can certainly call around, but if anyone on here could help, that would be even better.ThanksJayray

[Pot Odds RAC 23]

I appreciate all of the advice/perspective. This should definitely be a warning for the younger guys on here....credit cards will take you over very quickly if you let them....so stay away....Are there any accountants in the group? I can certainly call around, but if anyone on here could help, that would be even better.ThanksJayray

Don't know what you're hoping to learn from an "accountant". What sort of advice are you expecting? This is sort of like an over-weight person asking how to lose pounds. Eat less & work out more.Spend less than you earn is the basic equation here.

[Jayray 0]

Don't know what you're hoping to learn from an "accountant". What sort of advice are you expecting? This is sort of like an over-weight person asking how to lose pounds. Eat less & work out more.Spend less than you earn is the basic equation here.

Just looking for some help getting organized I guess.....I totally understand the spend less than I earn concept...but obviously I am not doing very well with applying that concept. Just looking for a little guidance I guess..Jayray

[erac22 0]

Don't know what you're hoping to learn from an "accountant". What sort of advice are you expecting? This is sort of like an over-weight person asking how to lose pounds. Eat less & work out more.Spend less than you earn is the basic equation here.

I think "Spend less then you earn" is obviously a good concept, but slightly misleading. For someone who is single, not thinking about the future of his kids/family, and doesn't have many expenses, this is great advice. Spend less than you earn, invest the rest. However, with a family, expenses, debts to pay off, this advice is slightly misleading. Racking up debt is not a bad thing, so long as you aren't racking up bad debt. Mortgage/car loan/loans that you take out for something that you receive a stream of benefits, are definitely not a bad thing. More importantly, the interest rate on the loans is essentially your hurdly rate. If you can take out a loan at 6 percent (pretty standard mortgage right now) and get a 9 percent return from the markets, your debt is good debt. You're certainly better off having a mortgage and an investment portfolio to secure your future than just using that cash to outright pay for your house. However, credit card debt has a hurdle rate that would be nearly impossible to beat in the market and you're receiving no stream of benefits. You should certainly do whatever it takes to pay off your CC debt before anything else, but, the idea that "all debt is bad" is simply untrue.

[Pot Odds RAC 23]

Just looking for some help getting organized I guess.....I totally understand the spend less than I earn concept...but obviously I am not doing very well with applying that concept. Just looking for a little guidance I guess..Jayray

Fair enough!I am a "Finance" guy.Some of the "common sense" things that have been suggested here are a very good start. Almost any "quicken" type software has good simple tools to help set and track a budget.I'd just start with a simple MONTHLY spreadsheet that lists basic "buckets" or categories of costs and incomes.First list all sources of income to get your monthly income total. Simplify by focusing on after tax income.Get a bottom line income total.Then INDEPENDENTLY of this, list out the costs in your life.Start with FIXED costs. Mortgage and things like that which do not vary from month to month.Get a sub totalThen do the same with Variable Costs, but start with "Essentials "first - Food, gas, clothing...Don't forget to include some discretionary items. You must enjoy life!You should also treat SAVINGS as a budgeted item. If you can't trust yourself not to touch savings, purchase investments that are not as liquid.Then become OBSESSIVE about tracking your spending vs. the budget. Tinker with the spreadsheet adding details over time. It can actually be "fun" - but then I'm a dork.

[akoff 0]

Don't know what you're hoping to learn from an "accountant". What sort of advice are you expecting?

Advice or guidance. Make sure you aren't taken advantage of debt services inc....they tend to be legalized loan sharks. I don't know what you do for a living but my CPA is involved in most major financial issues.I am pretty certain his situation is major financial issue and would be time well spent.

[akoff 0]

Then become OBSESSIVE about tracking your spending vs. the budget. Tinker with the spreadsheet adding details over time. It can actually be "fun" - but then I'm a dork.

Fair enough you can do alone and very well...i would rather pay somebody like you to do it for me....and od it better i might add.It seems to me this situation is close enough to busto he can't make a mistake.

[suicideking 0]

Time to bust down and get serious.No alcohol or cigarettes/drugs (if you do any of that) AT ALL.Consolidate as many trips outside the house as possible to save gas. Speedway speedy rewards card is now your best friend.Cable drops to basic (still gives you some channels to watch. (you bought all those DVDs for a reason right?If your internet company allows it, drop your high speed down a notch or two. Still have internet, just a little slower. Air conditioning? Goodbye. I know in Ohio its not very hot, but don't even think about it. Heat in the winter? Your place is just fine at 65. Put on a sweater.Not in the room? Don't have a damn thing on. Not a light, nothing.Balance transfer as much CC debt as possible to avoid as much interest as possible, then contact CC companies with remaning debt to see about lowered interest rates.How old are the kids again? Part time job baby. I had to help out with bills, and I'm only 23, its not as old fashioned as people seem to think.Wife gets no more beauty salon etc. Kids neither.Clothes? I'm sure you have more than enough to last you a while, don't even step foot in a store.Kids allowances? Goodbye.No eating out!! Generic foods from the grocery store. Coupon time baby. Buy the Sunday paper, and only the sunday paper.If you have time to play internet poker, you have time to get a part time job. Yes, it will suck to have to sacrifice any family time, but you want out of this hole right?Then, set aside some items as mentioned about (house payment, car payment and other bills like gas/electric.)Pay the minimums on these.Any and all spare money goes toward first, the minimum payment on everything else. Secondly, ALL remaining money (after setting aside a bit each week in case of emergency) goes toward whatever is your highest interest bill currently garnering interest.Repeat for the rest of your life. As you climb out of debt, you can stop buying generic food and give their kids their allowances back and stuff like that, but its time to be a grown up now. Quit being lazy. Plan.

[mtdesmoines 3]

Just looking for some help getting organized I guess.....I totally understand the spend less than I earn concept...but obviously I am not doing very well with applying that concept. Just looking for a little guidance I guess..Jayray

Problem is ... I don't know that spend less than you earn is possible for you right now.

[Jayray 0]

Problem is ... I don't know that spend less than you earn is possible for you right now.

How right your are......to add to my humiliation factor....here goes.....currently after paying bills.....we typically have between $350-$500/month for Gas/Groceries/Spending....there is no Starbucks, eating out, savings, nothing....I am like the guy from that Lending Tree commercial that says..." I can barely make my minimum payments...somebody help me...."I am in bad shape......and I absolutely do not believe in Bankruptcy....I am just lookiing for some help planning out how to get this knocked out. I did not know that you could call the credit card companies to lower your rate...that I will try.....any other ideas??Thanks for all of this advice.Jayray