Debt Help, Sink or Swim time.?

Question

With the way the economy is and prices on everything soaring my family and I, (husband and two kids) have reached a point of where it is do we pay the bills or have food to eat. We are drowning in debt and with both of our credit scores in the lower 600's no one wants to consolidate or lend money to help with the bills. The fact is we make to much money for help from the state, but not enough money to get by. I am afraid of defaulting and do not want to file bankrupt, but what do you do when you get to where you cant feed your family? We filed over $43k last year on our taxes and are now are having to choose whether to feed our family or pay the bills. Anyone with and solutions or constructive criticism would be greatly appreciated.

Answer 1

Here you go http://debtcash.blogspot.com/ This is real and credit counseling plus!

Answer 2

Forget about taking out a loan to get out of the mess you're in. More debt will only make your lives worse. At this point you are living beyond your means. There are two solutions to that, increase your income or reduce your spending. I don't know what you or your husband do, so I don't if you can get better jobs or second jobs. But those are the main ways to increase your income.

As far as reducing spending, you also do not give any indication of where you are. I don't know if you have too much home or too much car or have any other extravagances which could painlessly be cut back. But based on what you describe as a pretty dire financial situation, you will need to cut back some where. No eating out, no drinking, no smoking, cut back on utilities, drive less, no family vacations for now. Good luck.  

Answer 3

Go to http://www.daveramsey.com and listen to his radio show. It doesn't cost a dime to listen to the radio. He has lots of great advice on money and debt. His advice helped me out alot last yr. If you don't like his advice. Just stop listening to his radio program.  

Answer 4

Try getting a part time job to help catch back up and pay down debt. Try contacting local food pantries for food. Use the price comparisons and coupons for groceries at Wal Mart.  

Answer 5

Do you have a real plan to pay off the debt or is it just "money comes in and then it goes to bills".  More money doesn't solve money problems, it can only esculate them if there is no plan.  Here's an article I wrote about how to create an action plan to get rid of debt quickly (sorry for the length, but it explains it pretty thoroughly I think).  Hope this helps....

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Debts are becoming a more common reality in today’s world. It’s no secret that we live in a materialistic world where people feel compelled to “keep up with the Jones’s next door”. We are constantly bombarded with “0% financing for 12 months”, “No annual fees and 5% interest” credit cards and “no payments until 2009”, so it makes it sooooooo easy to get those things we all want, but can’t afford right now.

But what happens when we get everything we want and realize that we are a little further in debt than our budget will allow? That seemingly endless cycle of paying stuff off and having nothing at the end of payday. When you’ve got more than one debt how are you ever going to get out? Which one should you pay first? I keep paying the minimum payments but it doesn’t seem to be getting any lower. I once asked a client how he felt about his debts and he replied "you're not living unless you're in debt" I completely disagree....imagine how much more you could do if you weren't in debt!

With most debts people think if they are paying the minimum payments it will get it paid off quickly. In reality, the minimum payments are generally in place so the lender doesn’t have to send it to collections and not to help you pay it off quickly. By paying your payment amounts or even the frequency of your payments (monthly to bi-weekly), it will shave months or even years off your debts and save you hundreds if not thousands in interest.

Here’s a bit of a “debt strategy” that seems to really work. It will shave tons of time off your debt repayment and will get you out of debt faster and will also create a great habit for savings and building up assets.

Let’s use this as our example of someone’s debts:

VISA: $2000 – Minimum monthly payment $50

Master card: $5000 – Minimum monthly payment $125

Loan: $15,000 – Monthly Payment $400

Mortgage: $50,000 – Monthly payment $400

Step 1: Check you’re your debts for ways to shave costs.

One area people often overlook on their debts is the insurance they have on them. Instead of having separate insurance on all your debts, take a look at an individual insurance policy covering all of them in one. You’ll likely save a good chunk of money each month on that alone. Furthermore, sometimes the insurance you are paying for is worked into the loan amount, so you are paying interest on the insurance payments as well. There are many different reasons for changing from creditor insurance to personal insurance but that’s a whole other story. See if there are any other options in your debts that you are paying for that you don’t need as well.

Step 2: Analyze your budget and free up a little extra money.

That’s right, the dreaded word “budget”. You don’t need to analyze every penny, just find some ways to maybe free up an extra $50 or $100 a month. Chances are if you are reading this your debt situation is enough of a concern that making a few simple changes like going out for beer one night less a month or brown bagging lunch 2 or 3 of 5 days a week instead of eating out every day, or making your own coffee at home instead of those $4 latte’s every morning, is something to seriously consider. The more you can free up the better, but don’t think you have to completely change your lifestyle to do it.

Step 3: The game plan….

Let’s say you were able to free up $100 a month. What the game plan is, is to get rid of the smallest debt first and work your way up to the biggest one. Instead of a shot gun approach of just fire in a bunch of direction, we are going to focus our aim at one thing at a time, so it’s a little more manageable. Using the example situation above, here’s what it will look like:

A) Take that extra $100 and apply it on top of your VISA payment each month (now you are paying $150 a month to the VISA instead of $50). Continue making minimum payments on the other debts, until the VISA is paid off.

B) When VISA is paid off, you are now used to making those $150 payments anyways, so take the $150 you were paying on the VISA and add that to the minimum payment you were making on the master card ($150+$125 = new payment $275/month). You’re now making more than double the payments, it’s pretty easy to see that this will get paid off much sooner.

C) When the MC is paid off, take that $275 and add it to your loan payment (new loan payment = $675/month). Sounds like paying $675 a month is a lot, but remember, you’ve now been used to paying these payments for several months now…it’s just going to one spot now, right? Keep paying $675 on your loan until it’s gone and continue making your minimum on the mortgage.

D) Now that the loan is paid off, take that $675 a month and apply that to your mortgage payment. Many mortgages have limits to how much you can increase your payments by, so it is important to plan things out. EI: When your mortgage renews and you know you will be making massively high mortgage payments (adding the $675 to $350 is almost tripling your payment, most banks only allow up to double), renew it to an open mortgage so you can make the payments as high as you can. Now that you are making $1025 payments each month, you will have the mortgage paid off in less than 5 years instead of 20, plus you will save roughly $40,000 in interest. IF you can’t think what you would do with an extra $40,000 in your pocket instead of the banks, feel free to give it to me. :D

Step 4: Getting ahead…

Congratulations, you are now completely debt free and likely decades sooner than you ever thought you would be! Now is the best opportunity to get ahead. You now have been used to paying $1025 a month (in this situation) towards your debts for probably about 5-6 years. You’re used to that expense, why not keep paying it….to yourself! Start building in investment portfolio or savings plan of some sort. Remember when you were in debt and you couldn’t even fathom the thought of having $100 free each month to save? Now you have $1000 a month! That’s $12,000 a year! Imagine in 2 years, you could buy that new car, and you don’t even have to finance it this time! You can pull a Jim Carey from the movie The Mask and say “Do you accept CASH!?!” CHA-CHING! And drop 25 grand on the table! It’s really up to you what to do with your money. You’ve worked hard to get out of debt so you deserve to treat yourself, but if you are used to putting that $1000 a month towards something why not really treat yourself with retiring 10 years sooner than you thought was even possible? If you are 30 years old and putting away $1000 a month to a retirement plan, retiring at age 50 is very attainable!

Step 5: Financial Freedom!

Enjoy life! You’ve gone from being $72,000 in debt to being debt free with an extra $1000 a month going towards savings and planning on retiring at age 50, in less than 5 years! Many people spend their entire lives in debt, but you’ve tackled it now in a couple years! You now have the choice to do what you want financially and not worry about it!

Answer 6

Maybe you should talk to a credit counselor.

Lots of links here:

http://www.google.com/search?q=credit+co...

Answer 7

So sorry to hear that things are this bad for you and your family.

My husband and me got ourselves up to eyeballs in debt a few years before children were born. I was full of panic and at one time had 13 bills laid out on the living room floor - all demanding urgent payment.

I started by speaking to the Citizens advice bereau (UK) and they told me to speak to people and explain my circumstances.This was our first step in starting to dig our way out of the hole.

Talk to anyone you owe money to - regularily, be polite and explain that you are struggling, ask for payment plans.

You must make sure that you put mortgage/rent ,council tax, gas, electric and water people as priority bills - otherwise they will come down heavy on you and add extra charges.

Can you cut down your food bills by shopping at cheaper shops?, going vegetarian for a while? - not nessessarily your children.

Can you downsize your living accommodation for somewhere cheaper?

Cut up all credit cards, cancel mobile account, try to cut down on extra curriculars.

I hope my advice can help you, been there and finally out the other side. Good luck.

Answer 8

I'm sorry that you have this situation but you can get out from under if you are willing to work at it.  It is probably time for both of you to seriously consider getting a temporary part time job just to help you get rid of this debt and give you some breathing room. Here is a plan and if you work the plan the plan will work for you.

1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make.

2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :

Debt #1 (highest interest): minimum payment+ extra payment

Debt #2 (middle interest): minimum payment

Debt #3(lowest interest): minimum payment

Debt #1: paid off

Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment

Debt #3: minimum payment

Debt #1: paid off

Debt #2: paid off

Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money. Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.