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I am a long-time Fool (10+ years), lurker mostly, but need the help/expertise of the MF community. Sorry for the long post, but I really need the collective wisdom of this Board and I want to give as much information as possible.

We are now approaching 50k in credit card debt. I feel so stressed/depressed/angry that we have gotten ourselves in this situation that it has affected my outlook on life, put stress on our marriage, and is generally consuming me. I am 50 this year and never thought I’d be where I am now. But I didn’t come here for pity and wouldn’t expect it from folks on this Board anyway.

I am a professional with a decent job, my DW works also, my DD is a freshman in college, and my DS is 13. How did we get so far in debt? Basically, we have lived beyond our means, and made some poor decisions. This debt has built up over the course of about four years. Big ticket items adding to it: (1) Vacations. Almost every year we have flow out West (we live in the Northeast) to visit my elderly MIL. They have been expensive trips and it has all gone on the credit cards. We also have generally taken a summer vacation to the beach. Also on the credit cards. (2) We have had several expensive repairs on our older car (10+ years). It’s all gone on the credit cards. (3) Our cat and dog have had health emergencies. Also expensive. Also on the credit cards. (4) Finally, generally living beyond our means – overdoing it at Christmas, using the cards to buy stuff we can’t afford at the moment, and then not paying off the CC balances.

Unfortunately, the pattern has been the same for the past 8-9 years. We have spent beyond our means by about +/- 10k a year. Once the debt gets really uncomfortable 30k – 40k we “do something”. The past two times we “took advantage” of the rapidly increasing value of our house and did two cash out refinances of our mortgage. (I am sure this will raise the ire of many on this board). Paid off the cards, felt better, then fell back into poor habits.

Our backs are up against the wall. Before I throw all the ugly numbers at you, let me say what we are doing:

• All the credit cards have been stashed away, with one left for real emergencies.
• I have organized, caught up on filing, and can put my hands on everything financial.
• I am finally looking very closely at where all the money is going. This month (September) we are tracking every penny.
• Started paring back spending, low hanging fruit – magazine subscriptions, Netflix, etc.
• Read all that I can find on this Board.
• Started selling off some items to try to generate more cash.

Here’s the “budget” which I have been using for several years, which now a bit more educated I realize is no budget at all. The final “household” amount was the “not exceed target” for our weekly/monthly spending. But that was as far as the “budget” went and we often exceeded the “target”. The numbers for the “expenses” are averages based on one year. I have money automatically transferred to a bill paying CU account to pay the “expenses”, same for the mortgage & taxes, car payment and the meager savings. Nowhere in the budget is money to pay down credit cards balances, nor have we spelled out any detail in the “household” amount..

Monthly Yearly % Yearly
Total Income $8,933.60 $107,203.20
Taxes $20,887.62
Retirement $3,557.84
Health insurance $3,398.72
Total deductions $2,320.35 $27,844.18
Income after deductions $6,613.25 $79,359.02

Mortgage $1,335.10 $16,021.20
Property Taxes $449.42 $5,393.07
Total $1,784.52 $21,414.27 27%

Garbage $36.50 $438.00
Oil $400.00 $4,800.00
Electric $130.00 $1,560.00
Phones - Cell $100.00 $1,200.00
Phone - Landline $80.43 $965.16
Insurance - Home $60.44 $725.28
Insurance - Life $33.37 $400.44
Insurance - Auto $136.07 $1,632.80
Cable & Internet $107.70 $1,292.40
Newspaper $16.75 $201.00
Water $55.96 $671.52
Total $1,157.22 $13,886.60 17%

Car Payment
Total $433.09 $5,197.08 7%

Emergency Savings
Total $216.66 $2,600.00 3%

Total $3,021.76 $36,261.07 46%

Some comments. The retirement line is a mandatory contribution to my defined benefit pension plan. I can “retire” with full benefits in 9 years. The oil is not a typo. We heat house and water with oil and live in the Northeast. We belong to a co-op and the 4+k is our estimated oil consumption for a year. We have a plan where the price is capped, but we will pay no more than the cap but get the going rate if that is less. So far it looks like we will come in well under this amount, as oil has come down and we will be consuming less with DD at college. They will adjust the amount in January. But for now we are stuck with $400 a month.

OK, now to the debt:

Credit Card Rate Limit August-08 Min. Pay

B of A - WP 16.99% $50,000.00 $79.00 $15.00
B of A -M/C 16.24% $8,000.00 $1,224.15 $28.00
B of A -Visa 15.99% $8,500.00 $5,771.54 $131.00
Fool Visa 10.99% $9,600.00 $7,545.72 $149.00
Amex 5.99 %$9,000.00 $5,273.54 $108.00
Chase 4.96% $9,000.00 $8,513.27 $170.00
Citi 4.50% $24,500.00 $8,281.24 $124.00
ATT Universal l3.99% $10,000.00 $5,200.09 $78.00
HSBC 2.99 %$7,500.00 $7,264.24 $92.00

Total $49,152.79 $895.00

Chase Auto 5.99% $20,518.69 $433.09

I have been paying the minimum with money with our now almost depleted “emergency fund” (about $4,000 left). Once that’s gone I am not sure what we will do. I have been the king of balance transfers and all the cards with low rates will hold that low rate until balance is paid off.


457 Plan $23,413
IRA $11,234
Roth IRA $9,052
401K $10,224
SEP IRA $37,195
Vanguard (taxable) $4,000
Checking/Credit Union $3,000

Total $98,118

Finally, I have gone back a couple months and tried my best to figure out where the “household” money has gone.

Household Expenses June July August

Food/Household/Personal Supplies $2,041.38 $1,393.90 $1,822.08
Restaurant/Take Out $113.42 $306.08 $196.60
School Lunches $25.00

Doctor $0.00 $45.00 $45.00
Dentist $185.00 $185.00 $185.00
Prescriptions $78.18 $78.53 $104.51

Clothes $174.23 $734.81 $206.13
Gifts $1,033.20 $0.00 $0.00

Pet Care $27.00 $218.02 $75.28

Donations $50.00 $40.00 $70.00

Gas $471.29 $551.96 $497.79
Auto Repair & Maintenance $0.00 $0.00 $54.51

Hair cuts/personal care $60.00 $141.95 $20.00

Entertainment $53.87 $90.51 $90.00

House & Garden/Maintenance/Repair $504.42 $101.78 $166.74

Cash/unaccounted $200.00 $80.00 $210.00

Other/Misc/Stuff can't categorize $66.66 $0.00 $163.23
Camp Fees/Sports Fees $100.00 $195.00 $200.00

Vacation/Travel $305.63 $0.00 $1,538.80

Total $5,464.28 $4,162.54 $5,670.67

See any problems?

A few comments. The dentist line is paying for DS’s braces and will be done early ’09. The huge gift amount in June was a laptop for my college-bound daughter. The huge “clothes” in July was probably gifts as we had two birthdays in July. September should be a better comparison month as I am tracking everything and will be able to do a better job categorizing.

Well there it is. I have bared all. Basically I know we need to establish a budget and stick to it. Any feedback on this would be appreciated (what’s a reasonable amount for a family of three, with teenager)? Second, I need to figure out how to meet at least my monthly obligations for our debt without drawing from the emergency fund (or retirement assets). And what strategies might we use to tame this monster (e.g., debt consolidation through my CU?). I’m desperate and need a “plan” to cling to. Any and all comments welcome. Thank you in advance.
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