No. of Recommendations: 2
I have been a "free" Fool for many months without reading any of the boards. I have now joined and am enjoying reading the many posting by people in my situation - a "birds of a feather"-type thing I guess.

Here's my situation:

Van - $7071 owed @ 10.9%
Car - $6659 owed @ 9.24%
CC - $505 owed @ 9.9%
CC - $6010 owed @ 0%
Target - $149 owed @ 21%
Wells Fargo - $2573 owed @ 12.5%
Debit Cushion - $1400 owed @ 12.5%
Previous Consolidation Loan - $6244 @ 12.75%

The total is about $30,600 with yearly interest @ $2950. That's the bad debt. Here's the "good" debt:

Educational Loan (wife) - $2277 @ 0%
Educational Loan (self) - $30,100 @ 5.25% (just refinanced and consolidated)
Greenpoint Credit (mortgage) - $29,220 @ 6.7% variable.

Total of "good" debt is ~ $61,619 for a grand total of debt at $92,230.

Now, the good debt is just that - something I can have that will, theoretically, increase in value (i.e. education, mortgage, etc.). The bad debt is the subject of my email. Would it be wise to try and consolidate most of this? Now, the van *should* be paid of in June or July of 2003. This depends on my income tax return. That will free up almost $400 to put on another loan. My plan is to pay of the highest interest rates first and then lump that "freed" money onto the next loan - no problem, but if I got a consolidation loan, it would be one payment with, potentially, lower interest.

Any Foolish thoughts on this?

Thanks,
Joel
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No. of Recommendations: 8
Now, the good debt is just that - something I can have that will, theoretically, increase in value (i.e. education, mortgage, etc.).

Whether the student loan debt is good or bad is up to you and your career choice. The mortgage in your case is not what I would consider good because it is a variable rate and a relatively high one compared to current rates. The worst thing about it in today's market is that is can only go up!

The bad debt is the subject of my email. Would it be wise to try and consolidate most of this?

No. And here's the reason:

Previous Consolidation Loan - $6244 @ 12.75%

Every hear that phrase "Fool me once shame on you. Fool me twice shame on me"? Even if you did not have that previous loan, I would be concerned about you running up debt after the consolidation. That's what about four out of five people who consolidate do--and you've already been one of the four already.

I see many things in your situation that proves that the one thing that could help you more than any debt consolidation loan is a monthly budget that you stick too. I would be glad to elaborate more if you are interested.

Fred

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Fred,

Please, elaborate away. That's what I'm here for.

You *are* correct, I have to *stick* to my budget - I'm still working through it in my "Get Out of Debt" seminar worksheets.

Joel
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No. of Recommendations: 3
You *are* correct, I have to *stick* to my budget - I'm still working through it in my "Get Out of Debt" seminar worksheets.

jbblack,

Happy New Year! What an appropriate time to be reconsidering your financial situation.

You mention "sticking" to your budget. It's a common phrase that can carry varying nuances. I have no idea what nuances it might carry for you.

One suggestion I can offer is that if you're looking at a budget as a rule you impose on yourself that must be "stuck" to, your spending plan isn't working for you. Instead, you're trying to adapt to it.

If you look at a budget as a tool to help you accomplish a task, that more positive spin (and implied greater control and personal responsibility) may help get you through the more difficult choices. Such perspective allows one to look at choices instead of some sort of imposed requirements.

I want the stubble off my face; I choose to apply a razor.

I want to clean up my financial situation; I choose to apply a spending plan.

A budget's a great tool, driven by one's desires and choices. You're the one in charge. Your budget cares little about how you choose to use it.

Good luck,

Bruce

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The budget is pretty simple. Sit down with every piece of paper that you have that records your expenses and do your budget based on that.

It's pretty typical for someone to do this and say "Jeepers (yes, some people still say "jeepers")! I spent this much on (fill-in the blank)." That's actually the response you want, because then it's easy to figure where to adapt your spending.

By doing a budget you are actually spending your money before the month begins instead of doing as you see necessary as the month goes on. Your budget allows you to spend based on one decision--to get out of debt. When you don't use a budget, your spending is based on multiple more impulsed decisions that can fragment your overall focus.

I only bring this up because when I see things like your debit card being charged up, Target being owed and a previous debt consolidation loan, it looks like you use your CC's for everyday expenses. Stop that.

While getting out of debt, you should not be using CC's at all, and in your case, I would not use the debit either.

I know what you're thinking, much easier said than done. Right? That's why you need to only pay the minimums on your cards (maybe kill off the 3 digit or less balances) and establish an emergency fund (e-fund) of at least $1,000. No, it won't take care of huge emergencies like a new sewer line or major hospitalization, but it will keep you from yanking out that card when you need a new fuel filter in your car or when the water heater pees all over the floor.

That's a long post and I don't like long posts, so if anyone else would like to chime in on something I missed feel welcome. Any questions?

Fred
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No. of Recommendations: 2
Van - $7071 owed @ 10.9%
Car - $6659 owed @ 9.24%
CC - $505 owed @ 9.9%
CC - $6010 owed @ 0%
Target - $149 owed @ 21%
Wells Fargo - $2573 owed @ 12.5%
Debit Cushion - $1400 owed @ 12.5%
Previous Consolidation Loan - $6244 @ 12.75%


If you think you will have enough of a refund to pay off your van by June of 2003, I would suggest paying things off in this order instead:

Target
Wells Fargo
Debit cushion
CC#1 505 (yes, I know it has a lower rate, but it is a smaller balance-one less bill to pay).

That's $4627.00. Are you really expecting that big of a refund??? Change your withholdings so you don't get a huge refund next year-your payroll dept can help with this. You need the monthly cash flow increase more than Uncle Sam.

(I used to work with a guy who tuned his taxes so finely, he would up owing $10.00 to the feds; he got $10.00 back from the state. I was in awe!)

Establish an emergency fund of at least $1,000.00. Depending on your individual circumstances, you may need more. (How stable is your job? Got kids? You may need more!)

How long is CC#2 at 0%? What is the limit on cc#1? You may be able to shift this balance between the two at a lower rate until paid off...

What are the chances of refinancing that mortgage? No, I don't mean refinancing cash out, no matter what the mortgage broker tells you. If you can lower your monthly payment it will give you more $$ to throw at the other debts. Paying off a bunch of piddly small stuff will help with your debt-to-income ratio, in case that is an issue.

Be sure to include in your budget a certain amount to your emergency fund, even if it is only $10 a month. You need to establish the habit of savings.

How much are your minimums for the cars? Do you really need a van? (Especially if you don't have kids) you may want to consider selling and buying a cheaper vehicle. Be careful here, tho-the market for used vehicles is severely depressed right now. It's just something to think about.

That's all I can think of right now. If you post a few more details I'm sure we can give you lots of other advice. :)

Happy New Year!

cathy.mn
did you know basic insurance on a 1998 Chevy Metro is $130 for 6 months? How much are you paying for your car and van?
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Fred, et al.

I would appreciate a look see on our major debt repayment and see if you all think it can be improved, IOW, paid down faster or in a better way.

We are teachers at an international school. We are on a 12 mo. salary plan. We work from Aug.-June. We pay living expenses in the US in the summer.

________________________________________________________

Consolidation Loan (D.M.A.) negotiated interest rates for each cc

$88,000 debt
2,200/mo. x 57 mos. (8/00-3/05)

Paid to date 30 mos.

________________________________________________________
We proved to be one of the 4 out 5 who rebuild debt:

Consolidation Loan from our Provident Fund. Principal continues to accumulate interest (variable at about 5% average)

$75,000 loan ($10,000 into travel & living expenses for summer 03)
2,000/mo x 60 mos. (out of salary check) money is in Thai Baht

Paid to date 3 mos.

_______________________________________________________

Outstanding cc debt
Bank of Asia Visa $5,800 at 8%


_______________________________________________________

Living Expenses:

Housing/ Part of S & B Package = $0000.00
Allowance to DD 240.00
Food, Water,Household 400.00
Personal Thai Charity 500.00


_______________________________________________________

Net Monthly Salary $5,500 x 12 mos. (after 2nd loan is taken out)

All money after 1st debt consolidation is in Thai baht and converted to today's rate of 43 baht to the $.

I guess I want to know if we are digging ourselves into a deeper hole or that we are on the right course as massively painful as it is.
Thanks for input...please be gentle. I bruise easily :)

Happy New Year...all sound fiscal years for everyone.

Thanks very much.
NN



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So you owe $88,000 plus $75,000?? Is that right? You pay (2200+2000) per month on these two loans and your net monthly is $5500 after the second loan? 5500-2200=3300 you should have left, right? Where is your budget? If housing is paid for except during the summer, where is all your money going??

Are you saving anything for retirement?

You say $10,000 of the $75,000 went for living and travel expenses for summer of 03. How much for each? Where did the rest go, and can you put any of it back???

What is the Thai charity?

How old is DD, and why does she need an allowancce of 240 a month?

You say you work Aug-June. July off, I take it?

There aren't many specifics to go on here. My jaw dropped when I saw those loan numbers. I know, many people have more, but...YEOUCH!

If you want to post some more specific numbers (I'm looking for your budget, actually) the other posters will give you some great advice.

My first suggestion would be...pay off the Bank of Visa with part of the $75,000, and put the rest back!!!

cathy.mn
don't mean to be rude, but....where IS your money going??
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Thank you for your observations. I was really asking a macro questions in terms of debt consolidation. I don't need help in the other area.

But thanks, anyway. I appreciate your time in writing back.

NN
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I was really asking a macro questions in terms of debt consolidation. I don't need help in the other area.

You can't do one without the other...the only way to get rid of debt is to find more money to throw at it, and the only way to do that is to examine all the other stuff.

But thanks, anyway. I appreciate your time in writing back.
You're welcome...sorry you didn't find it useful.

cathy.mn
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Thank you for your observations. I was really asking a macro questions in terms of debt consolidation.

The down-side of consolidating date is the spending that goes along with it. I think you might reevaluate the areas in which you say you need no help.

For example, I've never seen someone who is in debt so much giving so much to charity. You are basically borrowing money for the charity and taking care of the interest yourself. You can help yourself and the charity better by getting out of debt and getting all interest out of the picture.

The only macro piece of advice I can give you about debt consolidation is that you can pay ahead of schedule if you really want to.

Fred
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For example, I've never seen someone who is in debt so much giving so much to charity. You are basically borrowing money for the charity and taking care of the interest yourself. You can help yourself and the charity better by getting out of debt and getting all interest out of the picture.

While this may seem the logical way to go, please be advised that there are people that feel tithing to their church (charity) is the #1 important thing in their lives - regardless of their debt levels. With that said, people who tithe consistently and regularly are generally financially responsible (whether they were in the past or not is not the current position).

The catalyst for DH and I getting financially responsible was fulfilling our personal belief in tithing. We began and continued regardless of our debt amount - then worked through our debt amount getting our financial house in order.

Perhaps you should consider looking at other areas in helping people get their financial house in order.

Even Jerrold Mundis* highly suggested giving to a charity as a regular line item in ones budget - regardless of the amount of debt one has.

C.

*author of: How to Get Out of Debt, Stay Out of Debt & Live Prosperously
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Thank you...the numbers I gave are very much the sum of our spending. The "charity" is actually taking care of a person who situation which is money that cannot be taken away.

I gave the bulk of our spending. Because we are expats and move back and forth in the course of a year, the tracking or budgeting of money for the entire year (we come to the US twice a year) is very complex, but we are getting it flushed out slowly. I completely understand that we need to operate from a budget, one that brings out all ways to save more to throw at the debt.

Thank you for writing. We will work to throw more money at it and keep throwing it till the darn thing is dead and gone!

Regards,
NN
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Now, the good debt is just that - something I can have that will, theoretically, increase in value (i.e. education, mortgage, etc.). The bad debt is the subject of my email. Would it be wise to try and consolidate most of this? Now, the van *should* be paid of in June or July of 2003. This depends on my income tax return. That will free up almost $400 to put on another loan. My plan is to pay of the highest interest rates first and then lump that "freed" money onto the next loan - no problem, but if I got a consolidation loan, it would be one payment with, potentially, lower interest.

Any Foolish thoughts on this?


Well, in general consolidation is okay but there's not a whole lot to it. Really all you've done is to move the debt from one place to another and *maybe* saved some interest. If you save 2% interest on your ~$30,000 of debt then you've saved about $600/year or $50/month. That's fine and good and $50 is $50, but really you can save even more interest by getting an extra job and/or selling those vehicles to get rid of the payments. That's what will get you out faster.

Leviathan
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Because we are expats and move back and forth in the course of a year, the tracking or budgeting of money for the entire year (we come to the US twice a year) is very complex, but we are getting it flushed out slowly.

Can you start by getting yourself a laptop with Quicken/MSMoney installed on it???

Good luck.

Daisy4125
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I found it after all...

I can't really give you any magic answer except for attempting to snowball the debt, i.e. pay the minimum payments on all but the smallest and throw everything at that smallest debt (which looks like the Bank of Asia visa). When it's paid off, take that money and add it to the next smallest balance and so on and so on.

As others have said, that's a lot of charity money. Still, I don't argue with donating to charities, even if a person is in debt because if you believe that's the right thing to do, then you gotta do it no matter what I say.

Otherwise, I would just say that you need a budget (which has got to be harder for you thanks to currency conversions) that just gives you a spending plan each month.

Other than that, looks like you are on the right track to me.

Leviathan
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Thanks Daisy...I went looking for it and could only find it for PC and Windows. I only have Macs, hmmmm, at school I have a Dell/could work there afterhours.

Again, thanks.
Liz
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Thanks Leviathan.

I think that we should not have consolidated and done the snowball. We were doing that but it was spread around and we are overseas. Dealing with three bank accounts and two currencies, was difficult. The appeal of a reduced interest rate, to 0% in most cases, and auto pay out of the US checking account drew us in to the plan. Getting US bills overseas and getting checks back was always a hassle. Banking online was a real Godsend when the banks offered it; we started with banking by phone.

I have to find out after we have some sense of where every baht and nickel is going, if we can put more into the loans as they are now.

Again, thanks.
Liz
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Hi,

Ok, this is my understanding of your situation:

You've two consolidations loans, one of which you've had for a while, and one which is fairly new on which you are paying $4,200 a month and you have a CC at $5,800.

You travel from Asia to the US and back every year and your debt includes some pre-paid expenses for next summer.

Your local living expenses are roughly $1,140 a month and your pay is $5,500 a month.

Wow, it sounds like you are living on the edge, huh?

$4,200 + visa payment + $1,140 = $5,340 + visa payment. A little room for manouvering MAYBE, but not much.

It looks like your first consolidation loan has about two more years to run, and then you will have $2,000 more a month to put toward debt repayment (that will be a happy day, I'm guessing!). Is there anyway that you can reduce expenses, for instance, perhaps curtailing the US summer visits for at least one of the years, and save some of the travel and living costs? If the upcoming summer is costing you $10,000, maybe that's just too much to spend every year.

One thing I would definitely say, is to put the Visa away. You are standing pretty close to the edge and you don't want to topple over it.

foolwizard


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Gulp...you are good with the math! We travel back twice a year and we have to come back this summer for college visits. Today, I've working on creative ways to see schools and family on the east coast and get back to CA where we live. Looks like we'll be driving cross country and mooching off family whenever possible (not something we've been able to do in the last 12 years). That cuts the summer cost in half.

After that, travel will be streamlined considerably. We've saved for college (to a greater extent) so we have to knock off that first loan fast so we can help with expenses if financial aid or loans doesn't cover everything.

Thanks so much foolwizard. I needed a third person to see it...your vision is great. Yes, I'm getting a bit old for this living on the edge thing we have done all our lives.

We have 15% employer contribution which we match at 15% so that is as good as we can do now until debt is paid and baby is on her own.

You're good folk FW. I feel less kerfuffled!

Liz
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I think that we should not have consolidated and done the snowball.

Don't fret it. Just pretend like you just "woke up" in the situation this morning. Living in the past doesn't work (believe me because I'm the poster boy for that). Just try and remember that you made the best decision you could at the time with the information you had available. Given to do it over again, you'd still make the same decision because you had the same information.

Leviathan
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