Case Study
Posted by Gail | Filed under This & That
It’s amazing the number of people who are now focusing on their money. It is as if we are waking up from a dream. Some people have no clue where to even start. So to all the people who write to me: “I have my jars, how do I figure out what goes in them,” PLEASE, if you’re determined to now take control of your money and your life, you must also be willing to do some work. This site, and my new book, Debt Free Forever, have the tools you need to make DFF a reality. But there’s no magic. Unless you count the magic of all the people in this community who are willing to share their insights.
Here’s one for you to noodle:
I am a stay at home mom of an 18m old who apparently forgot she wasn’t making $60k a year any more…. our credit card debt combined is costing us $1250/month! Basically, 1.5 of my husbands checks goes to the mortgage and the other .5 goes to credit card debt. He picks up hockey reffing at night but that check goes to house hold things, utilities, groceries etc.
Our budget:
| Mortgage | 3rd | $1,154.49 |
| Mortgage | 18th | $1,154.49 |
| Car Payment | 3rd | $155.27 |
| Student Loan | 30/31st | $45.99 |
| Student Loan | 30/31st | $25.20 |
| Student Loan | 30/31st | $153.25 |
| Phone/Voip | 20th | $22 |
| Life Insurance | 3rd | $41 |
| Car/House Insurance | 28th | $180 |
| Satellite | $150.00 | |
| Electricity | $150.00 | |
| Cell | $200.00 | |
| Meagan M/C | $120.00 | |
| Drew M/C | $300.00 | |
| Meagan Visa | $705.00 | |
| Drew Visa | $100.00 | |
| Gas | $100.00 | |
| HBC Card | $45.00 | |
| Municipal Services | every 3 months | $119.00 |
| Internet | $37.30 | |
| Water | $175.00 | |
| Drew CC | $50.00 | |
| Groceries | $350.00 |
I did have a job that I did from home and earned the same as my mat leave so we weren’t hitting the jackpot, but we weren’t making any headway either – we were just making minimum payments and trying to keep the credit card interest from throwing us over our limit therefore making us pay even more!
I’ve now been laid off and am trying to find as many jobs as I can to stay home and still earn $2000 a month which in this economy (even in Calgary, AB Canada) hard! I’m to the point where I will be driving a school bus during the day so I can stay home with our daughter and will clerk at Safeway at night and we will just be bringing in the $2k we need. Lucky me, an already tired mom working even harder!
The problem is, how do we get rid of this debt and how can we manage? We’ve asked to remortgage and hide the debt there reducing our payments but we were denied due to market conditions, they say it will be too high based on our debt ratio to income.
Debt Repayment Plan:
| Credit Card Debt | Limit | Interest | Total | We Pay |
| Meagan Visa | $30,000.00 | 10% | $29,590.24 | $705.00 |
| Meagan Master Card | $6,000.00 | 12% | $5,788.21 | $120.00 |
| Drew Visa | $1,000.00 | 10% | $500.00 | $25.00 |
| Drew Master Card | $13,000.00 | 18% | $12,321.18 | $300.00 |
| Drew Visa | $8,000.00 | 12% | $7,923.11 | $100.00 |
| Drew | $2,500.00 | 28% | $2,120.18 | $45.00 |
| Drew Home Depot | $2,500.00 | 28% | $2,462.76 | $50.00 |
| $63,000.00 | $60,705.68 | $1,345.00 |
We don’t know what to do. We have already cut out ‘allowance’ to each other, my husband gets $200 every two weeks for gas and incidentals and I get $100 every two weeks because I don’t have to travel every day. Where and what else can we do to actually make higher payments then our minimum payments?
October 21, 2009 at 5:37 am
[...] this link: Case Study Posted in Home Insurance | Tags: 18m-old, home-mom, [...]
October 21, 2009 at 7:13 am
Meagan, depending on how long you have had your mortgage you may be able to reduce the payment and still stay within your amortization…a quick visit with your banker and she’ll be able to tell you…it may free up a bit of cash you can apply to your highest c/c debt to help pay that down a bit quicker…
October 21, 2009 at 7:16 am
Wow that Debt load is scarey. I’d be looking at cutting back. First the Mortgage doesn’t need acclerated payments. I’d look at going to a single payment per month. Cells for $200 a month? thats nuts. Time to cut back on that. $150 on Satelite services? ouch that has got to go. I know I’m cutting out alot fo life. In my opinion, it has to be done. learning to living on less sometimes means having less.
Both people have to take second jobs. they have to get out there and make more money and if that means getting a babysitter then so be it. She made $60,000 before deciding to stay at home. If she went back to work sure she’d have the daycare costs, but she’d bring in more then the daycare cost added on and she’d be able to make headway on this debt.
regards,
Jason
October 21, 2009 at 7:19 am
Congratulations on begining to build a plan to get yourselves out of debt! We also decided that I would be a stay at home mom and we knew that a lot of sacrifices would be invovled so we talked about just how far we were willing to go to make this work. The first thing I would do is cancel the satellite and cell phones. We are down to one cell only, on a pay-as-you go $11.30/mo plan. Assuming you cut your cell even to $50/mo, you’ve now got $300 more to put onto your most expensive debt.
Second, call up the credit cards and ask them to lower the interest rates. Tell them you are having difficulty paying and like Gail says, keep escalating the call until you get the rate lowered. I hate having to ask people for things, but for the 1/2 hour of discomfort, you can save thousands of dollars so it’s worth it.
Since you couldn’t refinance the mortgage, you could try asking for a line of credit. It would have a lower interest rate. Also, since you’ve been laid off you could apply for interest relief from student loans.
Good luck.
October 21, 2009 at 7:22 am
You aree going to hate me for saying this, but you have got to look at your housing costs. 2200/month for your mortgage, and I didn’t see Property Tax or Maintenance listed in your expenses (although I did see a Home Depot Credit Card on there, so you’re clearly spending it!) Nor did I see any form of “Entertainment” listed in your budget, but that’s a separate problem.
I think it’s no wonder the bank wouldn’t agree to a reconsolidation on your mortgage, considering the size of it [and associated expenses] right now!
For small things, I’d suggest taking a look at your Satellite bill and your Cell bill, but I’m pretty sure that wouldn’t just cover the basic spending areas you haven’t listed like Property Tax, Home Maintenance, and Entertainment.
October 21, 2009 at 7:40 am
This won’t be a welcomed comment, but with a debt load SO huge, the thing that makes sense to me is to sell your home and down-size, or rent.
If you are unwilling to even consider that, lose the satellite service and the cell phones, and look at ways of reducing your water bill.
October 21, 2009 at 7:43 am
another recommendation I have is to go to the bank that you got those Visa’s with…ask them to take the balances and flip them into a term loan over 3 years…lower interest and smaller payments and an end date…if the mastercards are from a financial institution do the same with them..also, check out an early renewal on your mortgage into a cash back mortgage…get your banker to explain this in detail to you backing it up with some credit worksheets to see if it truly is to your benefit…
October 21, 2009 at 7:45 am
Well the first things I’d do:
Cancel the satellite and get the cell phone on some sort of plan or cancel it all together.
Next you need to get on the phone to the CC companies that you have and see about intrest reductions. If you can get the interest rates down it will make your payments go further. Like Gail says keep asking until you get to someone who can reduce them.
Your mortgage payments are high. Someone suggested talking to your bank and I agree.
Have you thought about doing home daycare? That would allow you to be with your child and make money. Plus with a home business you can write off part of your household expenses on your taxes.
October 21, 2009 at 8:00 am
You also should make a Christmas budget or you could make your problem worse, say $200 cash in an envelope to cover everything: gifts, dinners out, decorations. When the cash is gone that’s it.
Insulate your water pipes. Hot water pipe insulation costs $0.17 per 3 foot length (well, it does out here anyway) and will save you a few bucks.
October 21, 2009 at 8:15 am
Just a few suggestions as everyone else has made some awesome ones. Look into a DVD rental service (zip.ca), they have a monthly plan where you can spend less than 20 bucks a month for unlimited rentals, then reduce your satellite bill to the minimum. I have a friend that actually doesn’t even have satellite or cable and only uses the service to rent TV series and movies. No late fees with them either. 20 bucks a month is awesome and you get to rent movies all month!
I’d also look at bundling your sat, internet, cell and phone all onto the same plan if you can. You’re currently spending close to 400 bucks for something that can cost closer to 175.
You husband is spending 400 bucks a month on gas and incidentals? Calgary has a public transit. Look into it. Between the two of you, spending 600 bucks on gas etc is insane. We have a budget of 120 a month for gas. We often have money left over that we throw into our costco fund. I run my own business and the husband works, we are constantly on the go. Do you own vehicles that are gas guzzlers? Where is that money going??
A line of credit that is secured on your mortgage can give you a really low rate (like 6%), that will greatly reduce your cost of borrowing on those cards.
October 21, 2009 at 8:20 am
a) cut up all the credit cards and don’t get new ones
b) pay off the smallest balances first, and once paid off, put that payment towards the one with the next smallest balance. And so on and so forth. In the meantime, make minimum payments on the rest. Once each card is paid off, cancel it.
This worked for us 15 years ago, when we had too much credit card debt.
Also – I hate to say it, but if you are driving a bus and working at Safeway, you are not a stay at home mom. You may want to consider a full time job that pays better, so you can be home with your family at night at least. It is hard on a marriage if you never see your spouse.
Good luck!
October 21, 2009 at 8:44 am
I agree with Colleen, it might be time to sell or look for a job that brings in more than your minimum 2000 and ask family (if you have any in the area) to take care of your child.
I’m glad you found this blog so all the helpful hints and motivation are half the battle
October 21, 2009 at 8:45 am
Also the cell phones…they really aren’t usually a necessity. If they are for work, then the company should pay for it.
October 21, 2009 at 9:11 am
I believe it looks like you are doing a pretty good job so far for the most part.
I would cut out cell and satellite services or decide btwn home phone or cell more important? internet or cable more important? those look like decisions you might have to make.
I would also start calling high cc int% cards companies and ask to reduce as much as you can or look into balance transfers to lowest int card….and definitely start the snowball method…small cc amounts first then roll payments into larger ones…you will see a difference and appreciate it quickly as you see results faster of all the hard work your family is doing and sacrificing to get this debt gonzo. Start a visual aid chart/spreadsheet so that you can track on a monthly basis and know whether this is working for you and re-evaluate on a monthly basis after tracking payments and expensives. Or a big family chart on a wall so you can all see what you are doing…I believe visual and tangible makes a difference when setting this goal and making it a reality.
When my husband and I met we had combined $70 but now we have gotten it down to $40…it takes work and effort for awhile to change, but worth it for sure and it becomes easier after awhile when you have seen progress. GOOD LUCK!!!!!:)
October 21, 2009 at 9:11 am
cell? gone.
sattelite? gone.
sorry.
depending on the size of your house, perhaps you could take on a border? is there anything you can sell that you aren’t using?
October 21, 2009 at 9:12 am
As Gail would advocate, cut, cut, cut your variable spending and/or make more money. You’ll never get out of debt only paying the minimum balances – that’s how these credit card companies make oodles and oodles of money. Totally agree with previous posters, cell, cable (satellite) and gas are way too high . . . look into bundling some of those services and carpool with co-workers, get rid of second vehicle or use transit (consider these options, if possible). Pay off the highest interest credit card debt first, next lowest, etc. etc. Lastly, cash only – lose the credit and debit cards. Track your spending with the ‘jars’ or whatever system will work for you. Good luck!
October 21, 2009 at 9:19 am
Def it can be hard to cut back on things that you are so used to having but it can be done and the savings can def help.
We have not paid for cable since 2001. Other than the 2 years that it ws included in our rent, we have used the rabbit ears ever since. People can’t get over it but we own a house and have a tv but rabbit ears for our four channels. I also watch shows online like TDDUP on Slice.
We do have each a cell but it’s pay as you go – normally under $10 a month each. We def are mindful about using it and text when we can (cheaper most of the time).
We haven’t owned a car since 2003. I know not everyone has good access to transit, but try to see if it works. It was hard for us to move from Toronto to Halifax but we’ve made it work. Extra bonus is getting in that extra bit of walking.
And it means being resourceful. Just this past month, union negotiations at my work weren’t going to well. It looked like a strike was inevitable. I needed to buy a new winter coat (old one is way too big now) but I didn’t want to spend $200 or whatever on it. For about 10 days I kept watching Kijiji and luckily nabbed a full Columbia parka-style winter jacket for $30! I put in some time but the savings were probably $150+ and the jacket looks like new.
We’re not out of the woods for contract negotiations, so Christmas presents are going to be things like jars of homemade salsa (tomatoes from our garden), a compilation of recipes and so on.
Also, if you are intent on keeping your home, have you considered renting out a room? Sometimes you can find good situations for both parties. We have a friend who is in med school – she comes up to the city for rotations. I’ve even seen ads on places like Kijiji for people who just need a place only on weekends or only a few nights a week. Every little bit counts…
October 21, 2009 at 9:21 am
Oh boy. What a pickle. There are some great suggestions given here:
Use you local library to rent movies, borrow books and CD’s. it’s free – and you only have to remember to take them back on time. No rental fees required.
1) Reduce your cell and satellite bills – you’re in a mess and these are luxuries you can’t afford right now.
2) Talk to the bank about doing one payment a month and not accelerating your mortgage until you are out of the consumer debt.
OR find a more reasonable place to live
3) Find a way to either reduce those credit cards or consolidate their balances into one monthly payment, through the bank is probably best – they pay off the balances, you cut up the cards, and pay them back for that. This should work to alleviate at least a few of your cards.
4) When looking at options to go back to work, you should look for better paying options than the Safeway and bus driving. If you have to work nights because you don’t want to pay the daycare costs then look for something that will net you the money you need. Some companies pay a premium for evening shift workers – perhaps see if Safeway will hire you on as part of their night crew. Though you are not a stay at home mom in either situation, perhaps finding something clerical that pays better with ammendable hours will help you. Try a car dealership, or put your resume in at city hall for temporary workers positions – they often have options for you to work from 9-3 or 7-2 or others. Perhaps also speak to some of your friends about what they do and if they are looking to fill a void for a while.
5) or take up an at-home business. Somethign that will get you the money you need and allow YOu to make your own hours – Avon, Mary Kay, Alouette, and a variety of other companies are always taking on new consultants and their structures are set up to help you make the money you need.
6) You will both have to contribute to the change in money behaviour. though your husband’s balances are lower, look at the overall behaviours that has gone into getting you where you are and make that change an ongoing work-in-progress.
7) You will have to do everything you can to get yourself out of this mess – so lots of extras will need to be put on hold while you do this – use Gail’s pages and be brutal with your cuts. Also – perhaps you should think about your possessions and sell off a few of the items you got with the intent in using them but have not done so in years – that’s money wasting your time. Have a ski-doo you don’t use – sell it, have baby stuff that is past the age of your child – sell it, have clothes you don’t wear and are fairly up to date – consign them, have jewellery you don’t wear, sell it, music collections you don’t really listen too? Sell those too! It’s time to relieve yourself of the possessions you thought you needed to get you back some cash so you can pay back the mistakes.
9) Swap with friends for things you’d like to see
10) Stay out of Home Depot, HBC, and any other store at all cost!
You have made a great first step. The next several will be difficult but will be necessary. No pain no Gain works well here. Best of luck on your trip back from debt!
October 21, 2009 at 9:37 am
As everyone said, take out the satellite and cells. These are perks not neccessities. Satellite is way overpriced in my opinion. So many shows can be watched anytime on the internet that it doesn’t really matter if you have cable or not.
Housing. I see that you are still paying student loans? Do you have debt from that? (It wasn’t listed). Again in my honest opinion if I still had a large sum of student loans to pay, I have no business in having a mortgage/housing costs that high. Also, the home depot card. People (well some) have this idea that their housing needs to be all pretty and good looking and constantly renovate. Unless something is broken or in dire need of being fixed, there should be no renovating if you are that much in debt. If you bought a fixer-uper well then your mortgage/income should have been a bit more in line to compensate that.
Also since squirt is 18m old, I strongly suggest that you go back to work. Again, if you are that much in debt and quite frankly cannot afford to live on one paycheck then you should be a dual-income family.
good luck!
October 21, 2009 at 9:40 am
first of all, I can just imagine how you feel – I’ve been in almost the same boat, maybe not the same numbers, but definitely the feeling like you’re drowning. YOU CAN DO THIS!!! The easiest things to do are quite obviously, cut out satellite and cell (at least cut down to bare min – no display etc) – student loans – ask for interest relief or interest only (i did the latter and what a difference-and EASY!) And check out if they may do something similar with those gross mortgage payments. And what about taking other children in to care for? You are not spending any money on gas, you can claim tons of stuff in your home…and you are home…and i would get creative with the credit cards…see if you can do a small balance transfer onto one of the lower interest rate cards or something, but make sure you make your min payments!!!! been there-and after 6 consecutive months of payments they automatically lowered the interest from 21.99 to 14.99 (i tried to call several times and asked for managers to lower the rate and they would NOT).
Make showers shorter, turn off lights, make meals that last a few days, do you really need the internet?? (that could also be cut out even just for a few months..).
I would set up payments to come out automatically, so you don’t forget (or spend the money on other…), shortly after each payday. Make your budget and be tough on yourself, and you’ll get through! And it will feel great.
GOOD LUCK!
October 21, 2009 at 9:43 am
Meagan, you have heard some suggestions from previous posters: cutting back on cell phones, cancelling satellite, paying off the lowest balance first, then applying that to the next one, STOP using your cards & pay. There are some holes in your financials that I saw: no maint/tax fund for your home, Student Loans aren’t in your “debt” summary – they are still debt and should be treated as such. Actually if you aren’t using the education they paid for to bring in money, they are consumer debt for you.
I think you also need to be honest with yourself. I agree with Anita and working 2 part time jobs means you are a full time working outside of the house mom. Is there a reason that you are unable to continue in your original line of work? $60000 is good pay – $30 an hour is ejough to cover daycare costs for one child and still bring home a decent paycheque. I would seriously look into returning to work for 1 year. Take away your costs to work (daycare, gas, clothing – minimal use 2nd hand shops or swap clothes with the same size/shape as you) and apply EVERYTHING to your debt load for this year. This is a one year commitment to your family. After this year you will be able to look into your finances, I believe you will have at least $30000 paid off by then, the numbers will be more manageable without such a squeeze. No insult to SAHM, but this is actually something that my family has had to do in the past. It was a tough year, they don’t stay little for long, but we were planning on having more children in the future so paying minimum payments wouldn’t get us out of that whole & get rid of the stress. I actually extended my 12 months to 15 months after we looked at the numbers at 11 months. After that, I did quit my ft job to open my home daycare, which I operated successfully for 5 years. That is another career choice that takes a big commitment from you and your hubby. Your 18m little one will still only be 2.5 when you are “done”with working ft, you will be able to enjoy staying at home and still be able to pay your bills & get yourselves out of debt.
Good luck.
October 21, 2009 at 9:44 am
Congrats on looking at the reality you face. Current life style would be hard to maintain even without the credit card debt given income. Time to be brutally honest with yourselves as to why you’re in that hole. Everyone has given great suggestion on how to get out. Pain and fear can be good motivators – use them – take charge of them and use them to make the necessary steps which you identify. Each step will help you feel empowered to make the next. Wishing you all the best!
October 21, 2009 at 9:54 am
Something else you may want to consider is contacting the holder’s of your student loans. There are often programs such as interest forgiveness that you could look into. You may be able to request that payments be put on hold until you can get yourself some breathing room.
The worst they’ll say? No – but give it a try!
October 21, 2009 at 10:02 am
I couldn’t resist and entered this info into a spreadsheet. The big thing that cought me is that 2 of the loans are non-amortizing (the ones at 28%) meaning at the current payment amount they will never be paid off. They both need to be increased by at least $10 a month to have the possibibility of being paid off (in 26 years mind you).
The writer also says that debt repayment is costing her $1250 a month, this should acutally be $2700 so a bit of a difference but the amount should be $4575 (to pay if off in 3 yrs). In order for that to be 15% of their salary they need to be making about $30K a month!! or $365K a year so even with her back at her old salary none of the info she gives implies her husband is making over $300K per year.
Assuming she and her husband could make $100K a year she would have to negotiate her loan rates down to an average of -5%, which I don’t see happening.
This is sadly a time for house sale and bankruptcy.
October 21, 2009 at 10:10 am
Better hand off the kid to grandma or grandpa for some fee daysitting
Take them out for a meal once and a while.
Get out and bring in a second income!!
You can’t afford to stay at home let alone have anymore kids with that mess.
And thats what it is a mess.
Failing that bankruptcy isn’t an unmentionable option either.
Hope you have a dental plan.
October 21, 2009 at 10:23 am
Losing debt is like losing weight. Calories in have to be less than calories out. Income in has to be higher than out-go. You qualified for your mortgage based on two incomes, and you’ll never convince the bank to lower mortgage payments because you want to stay home. At least you’ve got quite a few options:
Reduce your out-go:
1. Somehow our ancestors managed to survive before the invention of the cell phone and satellite. Ditch them. For entertainment, try renting DVDs from the library, going for walks, etc. There is a whole world of free entertainment out there.
2. Consolidate your credit cards, or at least lower the interest rates. 28% at Home Depot is insane.
3. It isn’t clear how many cars you have, but if you’ve got two, sell one. Less insurance, less gas, an infusion of cash. Cars are another thing our ancestors managed to survive without, and if you walk or ride your bike places, you’ll also get the benefit of better health! It also makes it a lot harder to get to the store and buy things you don’t need!
Increase your income:
1. Unless your husband can get a much better job, you may just have to admit you can’t stay home. You’ve got student loans, so you probably have a decent education. Take advantage of it. Daycare around here is about $50/day, so as long as you’re making more than minimum wage, you’ll be coming out ahead. Also, women who choose to leave the workforce NEVER catch up to their sister’s in income. Even if you go back to work once your kids start school, you’ll always make less money than the same woman who went back to work at the end of her leave. Also, don’t forget that you qualify for EI based on the number of hours you work. If you want to have another child (and take another mat leave), you’ve got to start racking up those hours. More and more workplaces are flexible about hours, allow working from home, etc. Take advantage of that.
2. Especially if you live close to a college, you can rent out space in your home. It may be uncomfortable, but if staying at home is that important to you, you may need to make the sacrifice.
3. Someone else mentioned taking in other people’s kids. Another great idea if you want to stay home. Weigh the benefits and downfalls (tax write-off vs. EI)
Any combination of these options will help your situation. It is up to you how to determine which is the best for your family and meeting your goals.
October 21, 2009 at 10:31 am
Is there equity in the house? I would consider selling the house and renting. Housing costs would be much cheaper and you would not have to worry about the maintenance and extra costs associated with owning.
Any equity that is freed up from the sale should be used to reduce/elimate your debt. Cut back on satellite and cell phones and see if you qualify for any type of ‘interest relief’ on your student loans.
Drive a bus. Take that job as a cashier at the grocery store. You will need the income to pay your living expenses and pay off your debt. It sucks, since you already have a full-time job as a mom, but is necessary. You will still get to spend days with your daughter and will be saving child care expenses.
Whatever high-interest debt is left after you sell the house and use the equity to paydown debt , should be restructured onto lower-interest credit cards.
Make sure you and your husband have wills and powers of attorney (for both property and health) in place.
You need some emergency savings – even a small amount – so you won’t be tempted to turn to credit when something comes up. Even if it is just $100/month, find it and put it aside.
If there is no equity in the home or limited equity in the home, you may need to consider consumer proposal (if they do that in your province) or bankruptcy.
Good Luck! My heart goes out to you!
October 21, 2009 at 10:40 am
I think you need to make a more realistic budget – I didn’t see any kid money there in your budget. We have a three year old, and we’ve learned that we have to have a line in the budget for him or we wind up just putting money back on the credit card. Figure out how much you need for one year – birthday, snow suit, shoes and clothes likely every couple of months (they grow fast!), etc. Take into consideration how much you can buy second hand or trade with another family. Divide the number by 12 and set that amount aside in a jar every month – it may accumulate quite a bit but remember that you’re saving up for more expensive months, so don’t empty out the jar every month!
Your groceries seem seriously underbudget. We spend $500 a month (in Calgary) for the three of us. Is personal care and diapers included in the $350 you’re spending? You might want to take a look at this category to make sure it actually reflects the amount you’re spending. Keep in mind that your grocery budget will grow with your kid (and the number of kids you have).
I’ve learned the importance of a realistic budget – one that includes money for seasonal/yearly expenses, emergencies, repair/maintenance and a very modest entertainment amount. This means that the debt we pay off each month is ACTUALLY paid off, and not put back on when we forget that we have to do things like buy snowsuits and we haven’t planned for it. Budgeting for planned spending is the number one thing I’ve learned from Gail; it’s made us feel rich while we’re paying off our debt. It’s a great feeling to be able to go shopping for our planned items, with the money already in hand! Thanks Gail.
October 21, 2009 at 11:24 am
Hmm. I think you need to get serious, fast. There is alot of people that have been in situations like yours. But small changes are not going to work here. Your going to have to make some BIG changes fast.
My suggestions:
1. Cut up the credit cards now.
2. Call the credit cards and beg, escalate, beg and escalate until they reduce the interest rate or else you never get this paid off.
3. Sell your house. $2308.98 a month for a mortgage is VERY high. You could buy a duplex in Calgary right now and your pymts would be $1400-1600.00 Thats an extra 700$ in your pocket (to use toward debt).
4. Cancel the cellphones and the satelite.
5. Do you have two cars? Sell one of them and take transit. Sell which ever one is guzzling the most gas.
6. Go back to work or stay home and start a daycare.
7. Start tracking every penny you spend.
You taken the first step but with a debt load that huge your next steps are going to need to be huge ones and several of them. Just cutting your cellphones and satelite are not going to cut it. Hopefully you have equity in your house even if its a couple grand. Sell it, downscale.
October 21, 2009 at 11:27 am
A) Consolidate debt to line of credit at modest 8% interest rate. Cut up all credit cards and get ready to save.
b)Ditch internet and cell phone. Get satellite and telephone bill bundle through B*ll and with unlimited long distance for $135 taxes incl. a month. Offer your phone for free online if the person takes over your contract.
c)Mortgage is 44% of you income? Sell it or cut back somewhere else.
It sounds like to me that you aren’t working..guess what..get a job….even a modest $8/hr x 37.5 hrs/week x 4 weeks = approx. $900 / mth after tax. Add that to the $5200 your husband makes (based on the percentages she gave). Your household net is approx. $6100 / mth.
After all the essentials listed taken into consideration, left over is approximately 2500 if you got that $8/hr job. Taking $1900 of that and applying to your LOC over a 3 yr period and you will be debt free.
Take $100 of that and put into savings..that’s $3600 over the same period.
What’s left over = $390 per month for everything else.
October 21, 2009 at 11:35 am
Wow, I don’t know what I can add to the great advice given.
There is no way you can make on your current income without huge changes. You will end up losing your home if things aren’t done.
Sell anything and everything you can. Including cars, extra strollers, clothes, whatever it takes. Calgary must have a good transit system. If you are a sahm, you really don’t need a car, you can walk or take the bus.
See if you can ease off the interest anyway possible. Even if you have to get a new cc, with a low interest rate(do not use, except for balance transfers)
Cut any and all extra spending, whether it’s to buy store brand food, or turning off lights.
The biggest thing is your mortgage. It’s too high and it’s got to be lowered or you need to rent part of your home out.
Good luck
October 21, 2009 at 11:52 am
The basics are food, shelter, soul.
“1.5 of my husband’s checks goes to the mortgage”
Sell house, find cheaper living accommodations (30% of take-home MAXIMUM). ok, unless you can find another STABLE contributer to the household costs.
With proceeds from sale of house, pay off the consumer debt. The rest of the equity goes towards the EF (hopefully, there is equity left).
Write a balanced budget based on your current income. Follow and revisit the budget regularly. Remember the basics.
It is bad if the total debt is greater than the combined yearly income. What are the rules about declaring bankruptcy?
October 21, 2009 at 11:56 am
Hey EVERYONE!!
Hi have a QUESTION FOR ALL OF YOU! Its not related to this current topic.
We currently have $52000.00 in our savings account and its only earning $23.57 a month in interest!
We also have RSP’s that we contribute to every payday that are more risky.
I am wondering does anyone have any suggestions as to what we should do with our money so it earns a higher interest. I want something fairly risk free as this is our security money and we will be using $22000 of it in the next year.
The 52 g’s are currently in RBC High Interest Savings Account which they say is earning .75% but I don’t even think its earning that wimpy amount.
Any suggestions?
October 21, 2009 at 12:06 pm
Are these numbers accurate? If you haven’t included categories involving your child (diapers etc), I’d track expenses for a couple of months to make sure that your numbers reflect reality accurately.
Then I have to agree with what others have said: I don’t know if you those 0% interest rate credit cards still exist, or if you’d qualify, but a balance transfer from those 28% cards to at least your lowest interest rate cards (10%) is in order. Some of the balances are small — pay those off first to get a feeling of accomplishment. Cut the cell and satellite. And you need to make more money — although it sounds like you’re looking for work that allows you to spend as much time with your child as possible, to replace the one that laid you off, it’s time to look for something full-time that will allow you to pay this debt off within 3 years (if 1.5, or one-and-a-half times, your husband’s income is going to debt repayment, you’re still sinking).
Or sell the house or declare bankruptcy. Drastic measures, that might feel like failure, but true success comes from dealing with reality, not maintaining the image of what we think our lives ’should’ be like at all costs. If you and your husband call pull together to get yourselves out of this hole, you’ll set up an amazing foundation for your marriage and your kid(s) that can take you through the rest of what life throws at you! Good luck!
October 21, 2009 at 12:13 pm
Megan..
First big hug to you – that is a terribly stressful situaton and one that can feel hopeless.. I have been in your shoes and it’s a tough road -when you come out the other side it’s an amazing feeling so hang in there…
Since refiancing isn’t an option I would have to agree it’s time to sell..it’s truly heartbreaking to have to sell your house but at least you have a house to sell . When the economy started to tank last year and no one was sure where we would wind up I was scared- my husband is an electrician in Calgary and I had visions of the work completely drying up and us not being able to pay our mortage and having to sell the house.. it literally made me sick to my stomach to think that we would have to sell – until I realized that if we had to sell I still made enough that we could still provide shelter for our family. I thought about all those people out there who if they lost their jobs and couldn’t pay their rent there wasn’t the option to downsize .. downsizing meant moving to a shelter..now that’s heartbreaking..
take a step back and look at the big picture – owning your own house isn’t the only way to make a home with your family..
October 21, 2009 at 12:57 pm
The other thing I noticed is that you are pretty close to your limit on your cc’s and giving them big payments…I wouldn’t be surprised if your putting more on the credit after paying the bill and therefore being charged a $25 fee or higher for being over the limit every month! Stop that! We used to have this happen to us and it was a small step in the right direction to never let it happen again
October 21, 2009 at 12:59 pm
Lynn – if you want something risk free you’re going to have to settle for a low rate right now – just the way the market is. You can get a great high interest savings account with ING Direct (currently 1.05%) or Van City if you don’t care for online banking (I think 1%). There are other online banks out there that will give you an even better rate – this website is dedicated to tracking and reviewing rates on all the high interest savigns accounts: http://www.highinterestsavings.ca/
The other risk free option is GIC’s. But the rates are crap right now, often lower than savings accounts, so it up to you if that’s something you’d like to do.
Of course, if you’re interested in longer term and riskier investments there are a host of other options out there.
October 21, 2009 at 1:06 pm
Drastic measures time.
1) I think the house is killing you. I’d sell it and rent a cheaper place if I were you. While you’re at it you can sell lots of the stuff you’ve got filling the house to make some extra cash to throw at the debt.
2) “Money is more mental than math.” Make sure that you’ve got your priorities in line so that you can set yourself up for success when you make changes. Usually, money doesn’t solve money problems without a change in mental perspective about how you spend your money. The comment “hide the debt in there” with regards to refinancing your morgage is a little scary to me. The debt isn’t hidden – it’s right in front of you in black and white on your morgage papers.
3) Are you tracking your spending? Maybe you just didn’t share the details with us, but generic notes of Visa and MC payments (not even total charges, mind you) aren’t going to cut it. You need to be completely aware of your spending so that you can find places to cut down. Track every single item. And stop using your credit cards.
4) $150 on satelite and $200 on cell phones? Plus a home phone? NO. Get the heck out of those contracts as soon as you can (if you have a good plan you may be able to sell it to someone) and cut that spending. Those are luxuries you can’t afford, unfortunately.
I’m so sorry to hear about your situation and hope you have a ton of success getting out of it. Best of luck!
October 21, 2009 at 1:10 pm
Oh, and when you sell and rent get a place closer to where your husband works – $400 on gas is a LOT! Plus if you rent an appartment or town house your heating and electirc bill will plumet. Single family homes are extremely inefficient.
October 21, 2009 at 1:58 pm
Meagan and Drew I’m sending cyber hugs as you get ’started’. And ’started’ you are by taking the blinders off and admitting you have a problem with your finances.
Meagan I’m sorry you have been laid off. Economic times are tough all over. The suggestions here are very helpful. It is a caring community.
I’m wondering where you live how the housing market is? Are homes selling? If the answer is yes, I’d have to agree that you are house poor and should put home ownership on the back burner till you are better situated financially.
If you were making $60,000. per year you must have expertise in some area. Do everything you can to find something in a similar line of work. Sorry, but, I agree that you should get a full time job just so you can sleep at night. Children are adaptable and baby will be fine.
Do you have family support or close friends that could babysit? Could you get a job afternoon/evening so your child would have Mommy or Daddy for most of the day?
We’ve talked here before about the way to pay off credit cards. Because you are so overwhelmed, I’d suggest paying off the smallest amount first, then the largest – back and forth, just so you have some feeling of accomplishment.
Follow the bank visit/credit card cut up – call to lower interest/getting rid of sat. and cell that have already been suggested.
Best of luck! I know you can do this!
October 21, 2009 at 3:17 pm
A lot of people have mentioned selling your house – not the best idea, considering how expensive it is to sell a house! If you work out the money, you might be able to rent out your house for a couple of years and rent a small apartment near your work. Sometimes this can make a huge difference and actually provide some income. (Be sure to set aside money for tax time.) Example: rent out your house for $1500/mth, find a rental apartment for $750 – and watch your utility bill drop.
October 21, 2009 at 3:35 pm
I hate to be the bearer of bad news, but you MUST sell your home. That is the only way out of this deep debt hole.
You also need to cut your cellphones and satellite and also, $600 a month on gas and incidentals? Ridiculous. You need to cut waaaaaaay way back on that.
October 21, 2009 at 4:04 pm
Meagan,
I am also a stay-at-home Mom in Calgary, and I know how expensive this city can be. You’ve gotten many good suggestions, here; I haven’t read them all so forgive me if I am repeating myself. Others has suggested many ways to reduce or restructure your debt. I have a suggestion for how to increase income. Are you anywhere near a school? I would look into doing before-and-after care, as I understand the going rates in Calgary to be $25-35/day. Take in 4 kids, and you’ve got $500-700/week, or $2000 to $2800 a month. And it leaves most of your day free (i.e., the school day, 9:00am-3:00pm). You may also be able to make extra income from this on those days parents find so challenging, like PD days or school holidays. You could also consider opening your home for part-time childcare, or drop-in, working around your schedule. I find there is no shortage of folks looking for childcare in this city, and those not requiring a fulltime spot have a particularly hard time finding it. HTH.
October 21, 2009 at 4:07 pm
Lynn: Look into segregated funds. Pretty close to the MER and growth rate of a mutual fund, and 75% of the principal is guaranteed – that means you get your growth, and your security too.
October 21, 2009 at 4:22 pm
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October 21, 2009 at 5:13 pm
That is an insane amount of money to spend on before and after school care in Calgary. In Ottawa it’s still between 12.50 and 17.50 a day. That’s the price you would pay for kindergarden or full day.
October 21, 2009 at 5:14 pm
In response to the comment that selling your house is expensive.
If the cost of selling your home is an issue do it privately or threw Comfree or Property Guys.
You will still have to pay lawyer fees but they are less than when you are buying a home.
I sold my home on Kijiji and it only cost me $700 in lawyer fees. I got the form you fill out for the real estate sale off the MLS website.
Just a thought.
October 21, 2009 at 5:39 pm
Erin, everything in Calgary is crazy expensive. I think the rate is cheaper for monthly rates, but you can make quite a bit doing part-time / drop-in care. At least $10/hour. Full day daycare here averages $750-$1000/month.
October 21, 2009 at 6:24 pm
Sell the house and rent. House prices are high right now, so use your profit to pay off your debts and start over. Cut up the cards, cancel the cell phone and satelite service. If you want to stay at home, you can’t have it all.
October 21, 2009 at 6:34 pm
Meagan,
I would think twice before selling and renting. Calgary is a place where housing costs are probably going to be higher than Gail’s 35% total–the average house price here (September 2009) is about 394K according to the Canadian Real Estate Association, compared to a national average of about 331K. One local source of Calgary prices had the average house price much higher for September 2009, at 459K, with a year-to-date selling price average $437K. I’d look at trimming other areas of your budget first. Just thought I’d throw those stats out there as I know from personal experience that some folks assume house prices across the prairie cities are similar, and hence that your costs are crazy high. But no, this is nowhere near Winnipeg (209K), Regina (242K), or Saskatoon (279K). Even Edmonton (324K) is considerably lower.
You may want to consider refinancing your mortgage, though, if that would lower your monthly costs.
October 21, 2009 at 6:46 pm
@Lynn – how about a one year term deposit. You’ll make more than you will in your savings account but probably not heaps more.
As for Megan, yeah, as everyone else has said, cell phones and satellite must go or be severely cut back. I sit beside a home phone working from a home office so my cell phone is at the lowest possible plan I could find. Approx $18/mo + a texting add on. With taxes and silly fees it comes out to about $40/mo with no added evening plan.
As for satellite, if you are paying for an internet connection you would be surprised what you can find online to watch that’s far more entertaining and informative. I haven’t had cable since 1994 and don’t miss it one bit. I did get a few channels with rabbit ears but now don’t even own a tv. It’s amazing how peaceful my house is without it. I also read a boatload more books because of it.
October 21, 2009 at 6:48 pm
The first thing you need to do is add up all your debt. I did it twice because I didn’t believe that the first total could be correct.
If you sell the house and car you might be able to pay off the balance, but you are still going to have to work *really* hard at it.
October 21, 2009 at 7:13 pm
I’m going to agree with many comments above that drastic times call for drastic measures.
All the best – I hope you’re able to look back on your achievements in a few years and be proud of working hard to dig yourself out of this situation.
My two cents on one part of it- When it comes to “extras” in my life, my cell phone and the internet would be last to go, (not including the necessities like food, and housing obviously). It’s hard to look for a job without a phone/internet. I can imagine being availible by cell phone would bring you peace of mind when you’re away from your baby. You can definitely swich to cheaper packages for your phone (ask them if you can get a corporate rate, or do pay as you go) and a “light” internet package is often good enough for most thing you’d be doing. Oviously those changes alone won’t work, but just wanted to comment.
October 21, 2009 at 7:33 pm
Meagan,
What I would do is lower your cell phone, cancel your satellite, ask to skip a payment on all other cc’s and pay off that darn home depot cc and cut it up, there is no need to have that sitting there charging you 28% interest, keep minimum payments on all lower interest debt until you pay off the other 28% cc and the mastercard. It’s killing you. ask for interest relief on your student loan. I would start small with the least but most expensive debts, and seriously, your going to need to get rid of the cc’s “but what about if I need to rent a hotel room or a car?” you ask?…umm… you can’t afford to! and won’t be able to again if you don’t get these puppies paid. Once you get your cc’s paid off you can get a secured line of credit at a way lower rate.
October 21, 2009 at 8:15 pm
I also live in Calgary and find your budget way out of whack. Not everything is ultra expensive in this city. You have to look. BUT, first you have to want to change. Why are you paying $175 a month for water??? Call 311 and ask for a water meter installed. It doesn’t cost you anything and is mandatory if you are re-selling your home. We have two teenaged daughters and don’t pay anywhere NEAR that much a month for our water bill. While you may not be able to refinance your mortgage, you are able to renegotiate the payment terms. If you are on accelerated payments (weekly or bi-weekly) change it to monthly. You will totally feel like you have MORE money. We did that and we are able to save a bundle every month. Cut out your satellite. Calgary does have an awesome transit system. Although I drive to work every day I don’t spend more than $30 a week on fuel. What does your husband to that he needs $400 a month for fuel? Or is he using that for incidentals that you have supposedly “cut out” of your budget. Why can’t he take the bus to work? What are you buying for $350 a month in groceries??? Two adults and an 18 month old? How much scratch cooking do you do? Or bulk cooking? Take in a border. Go back to work until your debt is paid off. You will sleep better at night and your child will be happier because you are happier because you have your debt under control and a plan to pay it off. Be real with your numbers. What is your every three months “Municipal Services” for? I have never heard of that and I work for the municpality!!!
October 21, 2009 at 8:23 pm
I think Risa has a great idea regarding day care, full time or before and after school. Also a boarder or to rent out a portion of your home (ie. basement) are good ideas to increase income. Personally, if it is more costly to sell and rent then stay where you are. With the increase of income and the cutbacks that everyone has recommended that will be a great start. Try to reduce the interest on the cards and/or speak to the bank like Sparky recommended. Listen to Gail, read the site and push up your sleeves to get working. You can do it! All the best
October 21, 2009 at 8:50 pm
Wow, almost $61k on credit cards. Ouch, that hurts.
I have one option that might help: I notice that your VOIP ($22), satellite ($150) and internet ($37.30) add up to $209.30. Last year I switched from Shaw cable to Telus for everything – home phone (with call display and call waiting), high speed internet and TV including a video recorder. When I’m watching TV and people phone, the number appears on the TV so I can decide whether or not I want to get off my butt. I’ve got an insane number of channels – something like 200. My last bill, including a movie rental was $116 or a little more than half what you’re paying. If you went for fewer channels and fewer phone features you should be easily able to save $125 per month. I know Telus is a hated name in Alberta but it is an option that could save you some money.
I’d also examine your cell phone: $200/month is huge. My wife has a pay-as-you-go plan and she make a point of using her cell as little as possible relying on the home phone or e-mail instead. As a result, she has a phone that costs $10.50 per month.
October 21, 2009 at 8:52 pm
Risa: Full time home daycare in Ottawa is about 35-45 per day in regular neighbourhood’s, but in more expensive neighbourhoods it’s between 45-65. It works out to about the same in both cities.
I’m just glad that we didn’t go for a huge mortage because we can now afford to live comfortably in our little house with only one income. Anything can change at any time and people need to start planning for change. Life isn’t always going to be the predictable world we hope it to be.
October 21, 2009 at 9:22 pm
Fuel, satellite, and high interest debt. Agree with a lot of posters that you need to cut the fat out.
October 21, 2009 at 9:44 pm
If this were my financial picture, these are the things I would consider changing:
- decrease mortgage cost by temporarily extending the amortization back to 25 years
- returning to monthly payments rather than twice a month – save $192/month
- really consider selling the house to purchase a cheaper home or rental unit
- bundle my home phone/internet/cable which would save $50/month
- cancel satellite service – save $150/month
- cancel cell phones – save $200/month
- make a “gas” budget and stick to it rather than losing track of the true gas cost by bundling the cost into “incidental expenses”
- cut out those “incidental” expenses that you both have – could save you $50-100/month or more
Total savings: at least $650/month which could be diverted to debt reduction or divided up to cover essential needs.
October 21, 2009 at 10:06 pm
Erin,
I too am glad we didn’t go for “as much house as we could afford” (according to the bank), which is allowing us to have one parent stay home. But I have the part-time care plan in my back pocket just in case; once my boys get old enough to be left on their own for a few hours, I’d go back to doing math tutoring ($30-40/hour). We live walking distance to two elementary schools, and have several others within a 5 minute drive. And through various connections among my friends I know lots of Mom’s who need once-in-a-while care. Calgary has a LOT of people who moved here, which means grandparents may not be nearby to help out, so childcare is in particularly short supply. Even stay-at-home Moms sometimes need childcare. In my experience, most would prefer not to have to take their toddler along to doctor appointments (”Look at the wall while Mommy has her special pap test done, dear!”), while getting dental work, or while getting their hair cut, to say nothing of just the odd afternoon off for much-needed Mommy-recharging time.
October 21, 2009 at 10:13 pm
1. Mortgage: Eliminate your accelerated payment. You’re better off doubling up your payment. Check out https://www.rbcroyalbank.com/cgi-bin/mortgage/mpc/start.cgi/results to play with the numbers, but you should only accelerate after maxing out your double-up, otherwise your wasting money and adding stress.
2. Car: Your car payments seen pretty decent, it might be worth trading down if you can.
3. Student Loans: You might qualify for interest relief, contact your lender and see if they can give you a break.
4. Phone: Depending on what you’re doing Primus might be cheaper. Shaw has a basic phone service too that you can bundle in, I pay $65 for high speed and basic phone, we don’t do enough long distance each month to justify a higher plan, and our cordless phone has a built in answering machine. Besides, if you’re on the phone and someone NEEDS to leave a message, they’ll call your cell, or call back.
5. Insurance: Is all your insurance bundled with the same carrier? I’ve found TD to be very cheap, not to mention they also have a discount if you work for the health region or are a UofC Alumni. (you can cheat and say you are, they don’t check.)
6. Satellite: Too expensive, bundle into your Shaw bill, Go with a Telus package, or if you’re with Bell, threaten to cancel. We got 40% off for 12months because I told them I could go to Shaw for $65/month, and I still had time left in my contract. But I was also willing to pay the $200 penalty to save the money I the long run.
7. Cell Phone: That’s pretty expensive. If you’re doing long distance on your cell, you might want to investigate Primus Talk Broadband, where you can Dial in and use your voip LD plan, it’s called Remote Phone. Alternatively, if your with Rogers, they have an Insiders plan which is $18.month and offers evening and weekends starting at 5pm. Call your provider and ask them to re-evaluate your plan, I do it every year.
8. Electricity, are you with Enmax? You should be, they’re the cheapest in Alberta, and you can go on and off contract at any time. You can change it once a month if you want to. If you go on electric contract with Enmax and get your gas off contract, you’ll be spending the most effiecently. The ½ cent increase you’ll pay every KWH will be greatly offset by the 12/month in Enmax Rewards you get back, which will pay your recycling and garbage fees.
9. Water: That’s insane, you either need to be metered or you have a leak (or both). According to Enmax the average Calgarian uses 7cubic meters of water/month and the average household uses 750kwh of power, if your numbers are higher than this, investigate as to why.
10. Internet: Bundle this with your home phone/tv provider, you’ll save money. Shaw will give you the quickest most reliable service.
11. Groceries: This is the only sane number you have. Good on ya, but it looks a little low given you have Kids.
12. Credit Cards: KILL THEM. If you get consolidation offers, take use of them. Especially if you have a line of credit. And remember, when you went to the bank and said your debt ratio was too high, if you have a LOC, they consider it maxed out even if it’s not. It might be worth moving student and credit card debt on to your LOC, then bundling that into your mortgage. Then burn the plastic.
13. Jobs: There is plenty out there if you keep an active eye. Don’t forget the government job boards, they’re getting better quality positions all the time. And don’t’ be afraid to market your services, you could offer day home services, or a laundry service in your neighborhood, that would keep you in your house and out of Safeway. Think of all the stuff you do every day and ask yourself if someone would pay to have that done, then print off some flyers and put them up around your area. Calgarians are very busy, personal services are easy to sell here, retail jobs suck in this market.
And please, do your family a favour, do not touch your credit cards. You don’t need them, it’s an addiction.
October 21, 2009 at 10:18 pm
14. Ditch the allowance. You’ve alread had your fun, that’s why your so in debt. There should not be any exepense that’s unplanned from here on out.
It’s tough, you have two choices, keep on the train tracks to ruin, or make some sacrifices and grow up. It’s harsh, but it’s true. Defer gratification and you’ll get out of this mess and stay out.
October 21, 2009 at 10:22 pm
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October 21, 2009 at 11:17 pm
I’d think twice about the advice to sell the house and rent. As a landlord in Calgary, I’m currently renting out a 500 square feet apartment for $1300/month.
And I see too many assumptions being made in the comments, e.g. (1) they have equity in the house and (2) going from semi-monthly to monthly payments would reduce their total monthly mortgage payment amount.
Also, there are too many unanswered questions to provide meaningful advice. For instance:
1 – What is their current net income? I’m assuming $60k per year from this comment: “our credit card debt combined is costing us $1250/month! Basically, 1.5 of my husbands checks goes to the mortgage and the other .5 goes to credit card debt.” And if it is $60k net, that’s about $90k gross. That is plenty for a family of three, even in Calgary.
2 – What are the terms of the mortgage? Interest rate? Amortization? Remaining principal? Will they be whacked with a big-ass early termination fee if they break it?
3 – Do they have any decent equity in the house to make selling it worthwhile after the realtor, legal, and bank fees?
4 – Do they have non-registered investments that can be liquidated and applied towards the debt? Many people have employer savings plans that they contribute to but forget about because they don’t check the account regularly.
For now, I can only suggest (be warned that I’m rather harsh):
1 – Take a weed whacker to those expenses because they are insane. Calgary is not as expensive as some people are claiming; my step-father managed to raise a family of six while working as a glorified janitor.
2 – While I love credit cards because they simplify my life, this couple cannot be trusted with them and need to cancel them and go to a cash system. If the money’s not there, they can’t spend it and dig themselves deeper in debt. Also, don’t credit card companies charge interest on all new purchases the moment they are posted if there is an outstanding balance?
3 – Forget paying-the-smallest-debt-first-to-give-you-a-psychological-boost method. With some debt at 28% (seriously?!? why would anyone agree to this?!?), I’d go with paying off the highest-interest debt first and paying the minimum on everything else. Once the first one is paid off, then you move onto the next one and so on.
4 – Google Liz Weston.
October 21, 2009 at 11:18 pm
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October 21, 2009 at 11:27 pm
Well……I would have to say the credit card debt is going to……..I will not say. Either you win the lottery or come into a nice little inheritance. As Gail would say you folks are in big ” doo doo ” .
Either you go out & make the money you use to make or sell the house. That is…..you have to get rid of the mortgage payments & find a place to rent for 1/2 the amount. Maybe you have a bit of equity in your home so once it is sold you can pay down some of that crazy credit dept: 1st. Home depot @ 28 %. OUCH. The banks are not so friendly when it comes to cleaning up our messes anymore. The future isn’t as bright as it once was ( well it was all a facade ). The good news is you have each other. Sell the house, cut some silly costs ie. Satellite @ 150.00 per month. Get down to the basics & get back to reality. You will be FINE.
October 22, 2009 at 3:10 am
Best I can tell based on the foggy information on Drew’s income you are currently in the hole over $600 per month. This situation is so tight you will have to make huge cuts. First if you have 2 cars sell at least one and pay off the car loan. This will also cut your car insurance, maintance and gas. If your home and jobs are near public transit you should get rid of both cars and save even more. If public transit is an option then vehicles are a luxury. If you do keep a car raise your deductables and if possible keep the vehicle with the best mileage. The next item you should look at is your student loans. You didn’t indicate the interest rates on these, so if they are lower rates than you credit cards then you should pay the absolute minimum. My student loans have interest only options for hardships, look into this but don’t defer if possible as you don’t want to increase the balance. If the $350.00 is for groceries only you should cut back considerably. Shop the adds. MSNs Women in Red forum has one specifically for saving money on groceries (I believe there is now one specifically for Canadian residents). Otherwise that should include all personal toiletries and diapers for the family. The Satelite has to go. You can’t afford it and there are plenty of ways to get your television fix for free if you keep your internet which you do need for a job search and the VOIP. Your cell phones should be prepaid. If Drew uses it for work then his employer should pay for it. At this point no one should have an allowance. If one of you must drive for work then you should only be paying out for gas. Is there an option for car pooling? This would cut down on the cost of gas and remember you could ask a little extra for the wear and tear of the vehicle. Next cut up every credit card but one and freeze it. Then sell anything that is not required to live. This includes books, dvds, cds, electronics, gaming system, clothing, furniture, old clothing still in good condition, childrens toys. Any required clothing purchases should be made at yard sales or thrift shops if you don’t know anybody to trade with. Take that money and start paying down the 28% APR cards. Then use the snowball system to work you way down the credit cards. Basically you pay the minimum on everything but the highest interest card.
I still don’t feel you have enough money due to the number categories missing from your budget.
Emergency Fund
Taxes
Retirement
Long Term Savings
Home Maintenance
Vehicle Maintenance
Entertainment
One option if your home is worth enough is to sell it and rent in a location with great public transit at a much lower monthly cost (bring it into the right range for your income). The other option is to make more money. You could watch kids in your home as others have mentioned or get more hours at the grocery store or start hunting for a job similar to the one you had before you went on mat leave. I assume if you were making that much money you have a marketable skill. Look outside the box for a new job. If you can use a skill from home to earn money. If you have time to spend watching television you have time to earn more money. You need to find free ways to entertain yourself. Good Luck!
October 22, 2009 at 4:28 pm
In addition to all of the above, let it be known to friends and family that you’re making major changes to allow for you to spend the most time possible with your baby. If you aren’t comfortable letting everyone know the full extent of the situation then leave it at that. Let them know you are opting out of Christmas gift exchanges, events held in restaurants, etc. You’ll likely find that if those close to you know you’re make major efforts to cut costs they first of all won’t inadvertently sabotage your efforts, but you’ll probably find that they’ll pass on kids clothing and toys, suggest potlucks instead of costly get togethers, etc. Admitting you need to make some major alterations in lifestyle isn’t admitting failure, just that you now have a different family situation and it’s more important than “stuff” and debt.
October 23, 2009 at 2:03 pm
Well the first two things I can see immediately is your Satelite and Cell Phone bills.
You should cancel your satelite completely. That will give you another $150.00 per month to put towards debt re-payment.
You also need to lower your cell phone bills. $200.00 (depending on what and how you use them – ie. does your husband use it for work, or are they only emergency phones). My husband is a cell phone consultant (www.wirelessadvocates.ca), he works everyday with people to lower their cell phone bills. $200.00 is high. I am sure you could save half. Which gives you another $100.00 for debt re-payment.
You could also consider this…
No allowance. Or lower allowance, maybe $50 every two weeks.
Have you considered taking in a few kids for daycare. Its a great way to make money while still staying at home with your kids. Its what my mom did. She stayed home running a daycare for my entire child hood, and I loved it, always someone to play with. And you can easily make $500 to $600 per child.