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Author: wildirishred Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308229  
Subject: In trouble! HELP! Date: 8/21/2001 12:39 PM
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Hello there board-

I need some advice, as I have amassed thousands in credit card debt/loans and I am not sure what I should do first.

Here's the financial picture:

CC #1 $6562 21.74%
CC #2 $5215 12.9%/19.9% (transferred balance/standard purchases)
HE loan $334/mo not sure %..tax deductable..1 year to go
Car loan $206/mo hubby just took this one out in May...long way to go

Savings Acct $6000
Credit Union Savings Acct $3700
Stocks/Mutual Funds $21000 (holding aol, nokia, walgreens, munder net net..don't laugh...net net seemed like a good idea at the time)
Husbands Pension fund $ doesn't matter..not going to touch it

There's my financial picture in a nutshell. Other bills are normal monthly bills but we are constantly $250 short a month since the car loan was taken out. No, hubby didn't look at our bills before he bought the car.

My husband has a stable job in the construction business, well, as stable as construction can be. I am a stay at home mom with two kids, ages 8 and 5. I could go back to work but there's the expense of day care, travel expenses, extra income taxed, etc.

Additionally, I am constantly getting credit card transfer forms in the mail. I am looking into these to get a lower rate/no annual fee. We have good credit because we have paid our bills on time forever but it's getting to the point now that we just will not be able to very soon!

I guess my options are these. What do you think?:
Should I sell off the stocks to dump at least one of the CC bills?

Consolidate the CC bills with a lower rate and just pay the minimum plus whatever we can afford?

Bite the bullet and go back to work even though every dime I make will go towards bills and child care?

Drain the Credit Union Account and pay off part of one CC bill? This account is reserved for Christmas presents/days off (if dh takes a day off he doesn't get paid for it).

BRrrrr...declare bankruptcy. Last option. Like I said, we have great credit rating but just got a bit too indulgent. Or stupid. Whatever. We haven't gotten to the point of collection agencies bothering us. We pay our bills, don't know for how much longer we can do it though.

Withdraw every dime we have everywhere and buy lotto tickets. Ok, just kidding...

Any ideas?

My first inclination is to get better CC rates, which I can easily do. Or pay one off with the stocks or savings accts and get a lower rate on the other one.

Yes, the CC's are cut up. We are working out of a cash system, probably for the last month. It's working out but we know we need to get out of the debt too.

I am terrified that if we drain the savings account(s) my husband will get laid off and that's it...we are on the street.

I will NOT ask for money from relatives either. :)

Please help me...we need help and are not sure where to turn.









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Author: Stockbuyer2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87475 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 12:59 PM
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wildirishred

You might try going to the Budget and Living Below Your Means boards to get some ideas. You might be able to find some useful ideas to help cut other expenses by enough to make up the car loan amount. You might also try to get a part-time job and trade out day care with another/other mothers (they keep yours while you work and you watch theirs some afternoons or weekends). You might also try to keep 1 or 2 kids about the same age as yours during the day. Could your husband take a part time job for a while?

Stockbuyer2

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Author: Kilbia Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87477 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 1:03 PM
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Should I sell off the stocks to dump at least one of the CC bills?

I am not familiar enough with any of the stocks in question to advise for or against this. Though you seem to be expressing regret over one of them...perhaps it's time to cut your losses and be rid of it?

Consolidate the CC bills with a lower rate and just pay the minimum plus whatever we can afford?

This is always a good strategy, no matter how much or little you owe. Spend enough time here, and you will no doubt hear the choeur celeste singing the praises of the snowball method. You might even check the archives for "snowball calculator" - I know the link has been posted at least once in the past six months. It can help give you a realistic idea of when things would be settled, and I find it a wonderful motivator. Even though the time frame is much longer than I would like, the fact that it can actually tell me where the end of the tunnel is brings me great comfort.

I am terrified that if we drain the savings account(s) my husband will get laid off and that's it...we are on the street.

And you're very smart to have savings set aside for just that sort of reason.

Since even draining both wouldn't wipe out the credit cards entirely, and it would put you in a precarious spot (not to mention at high risk of running the cards right back up), I don't think that's an option in and of itself. However, if you were to get a new card with a great balance transfer offer but only a $10k credit limit, and the issuing bank doesn't feel comfortable bumping that up to $12k so you can transfer all your existing balances to it, you could look into transferring $10k to that card and then tapping the savings to wipe out whatever remains on the high-interest cards.

I'm sure you haven't told us all the gory details, but from what I've seen, I think you're being a little premature in considering bankruptcy.

- Kilbia

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Author: tanaquil Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87479 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 1:07 PM
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I would sell the stocks ASAP... they might be down right now but 21K is a LOT of money that you could be using to pay off your debts. If I'm not misunderstanding, that would wipe out all the credit cards & the HE loan and leave some over to spare. Unless you typed an extra 0 by mistake??? I don't know why you haven't done this already. Wiping out the HE loan alone would give you more than enough to cover the car payment.

Since you're a one income family and you're worried about a potential layoff, keep just enough in savings to cover the amount of time you think it would take your husband to find a new job. Also, if you paid off the ccs, at least you would have those as a backup in case of dire emergency.

You could get a lower rate on one or the other credit card, but it just doesn't make sense to pay interest at all while you have savings in reserve (ie above the amount you need to sleep soundly at night, whatever that is). Once you get rid of the interest-charging debts, you can take another look at your budget and see if you're really living within your means month to month.

Good luck, hope this helps!!

Tanaquil

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Author: buckzimmer Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87482 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 1:09 PM
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If you think you are in trouble, I think there are loads of people who would love to switch places with you.

The basic question is would you borrow money from a credit card to put into your savings? That is essentially what you are currently doing--only worse--you've got single stocks in the mix.

So you have over $21K in stocks and another $9.7K in savings--and you dare use the "b-word"?

It's very simple. First, you prioritize your debts to be paid: cc's, then HEL, then car. Second, sell all single stocks. Do you still have debt? Then sell the mutual funds with the worst track records. Do you still have debt? Then, use the $6K savings account or the rest of the mutual fund. Do you still have debt? If you are, then that must be some car.

<<Other bills are normal monthly bills but we are constantly $250 short a month since the car loan was taken out. >>

That means you were $44 in the hole before you even bought the car. If you follow the above plan the -$250 could easily shift to +$250 and with better budgeting, you could probably improve on that.

<<I am terrified that if we drain the savings account(s) my husband will get laid off and that's it...we are on the street.>>

So terrified that you would rather be paying ridiculous APR rates? That's a certainty, while the layoff is a big "if." You should have a strong modest sized E-fund after paying the debt AND it will be much easier to build it when you are not paying interest.

Also, when your finished, ditch the cards, and enjoy being debt free.

Fred





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Author: wildirishred Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87505 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 2:02 PM
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So terrified that you would rather be paying ridiculous APR rates? That's a certainty, while the layoff is a big "if." >>

They *were* good rates, they recently went up when we were late with our payments a couple of months ago. I didn't notice it until this month. I've had other things to contend with around here and now I'm playing catch-up.

The layoff is an if, but not a big one. It's a very possible thing to happen, in fact it did a few times. Unfortunately, when he gets laid off, so is everyone else in his trade and he ends up "in back of the books". Last laid off, last called into a shop. If people get too scared of the 6-o'clock-news-sensationalized downspiraling economy, new construction/rehabbing gets put to the side until it gets better. Been there before.

It does occur to me that there are others in financial scenarios worse than ours. Does this apply to my household wanting to get out of debt? No.

I *know* I could take those stocks and throw the $$ to the CC's. I guess I was looking for someone to back up my decision. Or give me an alternative.

Maybe I did overdo it when I used the B word. This is the first time that I am actually scared of what has happened to our finances in the past couple of years.

Let's just say that if we don't stop what we are doing and take a different path NOW, in a short time we will end up using the B word.

You have given some great advice to us and put it into perspective, thank you :)





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Author: JnJfools Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87516 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 2:23 PM
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The one credit card with 22% interest needs to be BT's to a card with 5-10% interest. That alone, with your current principal, will bring your monthly payments way down.

You may want to take half of your stocks/mutual fund $$ and pay most of your unsecured debt off.

You do have a good amount of money in your efund, so this should work.

JnJfools

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Author: jpo123 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87522 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 2:35 PM
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Should I sell off the stocks to dump at least one of the CC bills?

Well, it comes down to this: Do you expect your stocks to anually rise more than you pay interest in the CCs (be honest to yourself). Historically stocks rose around 10% anually.
Just now we are in the aftermath of a big speculative bubble. A lot of very smart people (like W.E.B) think that for the next few years stocks will have trouble to beat bonds (around 5% anually).

Guess what I would advise you.

Regards
Joerg

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Author: bfontes Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87528 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 2:47 PM
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Please help me...we need help and are not sure where to turn.

Did I miss something or do you have a seriously positive net worth? What exactly is your trouble?

BRrrrr...declare bankruptcy.

Bankruptcy? What? You could be out of debt tomorrow. The judge would throw you out of the hearing on your butt.

Sell the new car and buy a used one, even if you can't sell it for what you owe on it. Pay off the rest of your debts using current assets except MAYBE the HEL if the rate is low. Take the money you were using for payments, plus more, and build your efund back up quickly.

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Author: morgaine1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87531 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 2:57 PM
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You didn't mention expenses. How much are you spending on *stuff*? Eating out, entertainment-got a cell phone? How much do you spend on groceries?

I agree, hubby's car should go. Unless he is planning to get another job to cover the payment.

I bet you could make more *saving by living below your means* than working. Check it out-there is a LBYM board, and tons of books at your local library.

Regarding BT-if you were late on payments a few months ago, you may not qualify for any.

P.S. Start thinking about Christmas now. How much do you normally spend? Whatever it was-cut it. You can't afford it. Start getting the family used to it now, so it won't be such a shock in December.

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Author: BobMuir Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87549 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 3:35 PM
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I agree, sell off the stocks NOW and be out of debt TODAY! It makes NO sense to be investing money for a possible average gain of 8-12% while paying over 18% in CC debt!

If, after selling all the stocks, you still owe on the car, then take the payments that you HAD been paying toward the CCs and HEL, and start paying everything on the car until it's paid. You can keep the car that way.

Once you're completely out of debt, then boost up the emergency funds until you feel completely comfortable. Max out all the retirement vehicles for both you and your husband. Then start paying down the house, or investing Foolishly.

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Author: Starrry One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87552 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 3:46 PM
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You added up your cc/loan balances saw a big number, one that you may have never seen before, and freaked. Fortunately, you have more than a few options, none that include bankruptcy ;)

Transfer your CC's to a lower % card, look for one that has no transfer fees, low % rate, and no annual fee. Pay it off monthly and CUT UP THE CARDS.

or

Sell off 1/2 of stocks. Pay off CC's. If there is a remainder of a balance, if there is there shouldn't be much, take it out of your savings account.

or

Sell of 1/2 of the stocks, pay off CC's, then pay off monthly using your better interest rate card.

or

Sell all of your stocks, pay off cc's AND HE loan. Possibly put new car loan into a HE loan and get tax advantages (if you desire/can).

Personally, I'd rather sell the stocks and pay off CC's and HE Loan. It's a direct advantage because you know that you won't be paying the bank/losing money. In this market, who really knows what the tech stocks will do on a day to day basis? You know you will essentially make money if you stop paying the banks.

The fewer monthly bills you have the better.

Bottom line, cut up those cards and enjoy your debt free life!!!




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Author: uwalum Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87592 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 5:24 PM
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If it were me, I would:

1. Sell the stocks and pay off cc and HEL
2. Quit charging or borrowing
3. Look into selling new car and buying used for much less.
4. Reduce expenses. Get rid of the things that you are paying for every month (cable, newspaper, cell phone?). Increase deductibles, don't eat out, etc.etc. I've posted those ideas and others many times.
5. Start to save. If your dh is in construction and you don't work, you should save for the possibility of no work for x number of months.
6. Don't look at going back to work with the kids so young and having to pay so much in childcare. Make money by reducing your consumption and needs at home. De-clutter and sell.
7. Live on less than you make.

L

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Author: lessob Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87644 of 308229
Subject: Re: In trouble! HELP! Date: 8/21/2001 11:44 PM
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Can I just comment on the Wildness of the boards recently?

-lessob

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Author: Mangard Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87803 of 308229
Subject: Re: In trouble! HELP! Date: 8/22/2001 4:36 PM
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Definitely, IMHO, apply for the lower balance transfer rates which will drastically reduce your monthly minimums.

You should be at least at $0 if not in the black each month when your interest rates drop with the balance transfer. Also, look into selling stuff on half.com, e-bay, garage sale, bake sale, delivering papers in your neighborhood, etc.. This isn't really too much debt to handle and I think with a part-time job or little miscellaneous jobs you could snowball this debt away very easily. seriously, I thought you wree in WAY over your head with your title-this sounds manageable with a little organization. If his constructiuon work is 9-5 maybe you could work at a local bookstore or diner part-time in the evenings until the debt is paid off.

best of luck,
Mangard

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Author: whipped One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 88197 of 308229
Subject: Re: In trouble! HELP! Date: 8/24/2001 2:45 AM
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IMHO if I didn't do anything else I would at least 1/stop using cc's 2/look into balance transfers & lower interest rates 3/LBYM 4/attempt snowball payts and see if those steps alone would significantly alleviate your financial position before I proceed to the more drastic steps already mentioned. You seem to have already thought this out well & with the advice from the other posters you seem like you'll have it under control in no time. Good luck.

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