Should I file bankruptcy? -- $40k+ cc debt

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

Hmmm. There is $1400/month left unaccounted for based on what you've listed here.  Agree, found this as well.

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This is because you asked for a really specific list; not for a breakdown by category of all expenses. There is certainly unlisted spending, but I doubt it is because the OP was avoiding listing it. I've seen that happen before too, but the benefit of the doubt is needed based on the earlier phrasing.

I do agree with your breakdown earlier, and imagine that none of the other spending is on necessities. 

[flippy1234]

I guess I forgot to add any spending on eating out, coffee, plus with kids there's always extra stuff that comes up. School supplies, school clothes, $600 in band fees last month for my older daughter. etc. I was just listing out all my bills that are due. 

[Anonymous]

No worries, that's why a 3-6 month lookback is so powerful. I personally do a year, but that can be pretty overwhelming if you don't keep the books as you go. Eventually you get to a place where the only surprises are true accidents; I hit another car, my kid broke their leg, etc. If you get a great budget in place, you know what you'll be paying for your kids extra curriculars, the water heater going out after 15 years isn't a suprise since you saved for a replacement, and the maintenance on your cars is all planned for.

Sincerely, I think you guys are capable of pulling through this, but you'll know better once you make a budget. If you put one together and find that you just can't keep up, then you need to consider bankruptcy. Give a conceptual budget a real shot first, though!

Best of luck to you.

[flippy1234]

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@Anonymous wrote:

No worries, that's why a 3-6 month lookback is so powerful. I personally do a year, but that can be pretty overwhelming if you don't keep the books as you go. Eventually you get to a place where the only surprises are true accidents; I hit another car, my kid broke their leg, etc. If you get a great budget in place, you know what you'll be paying for your kids extra curriculars, the water heater going out after 15 years isn't a suprise since you saved for a replacement, and the maintenance on your cars is all planned for.

Sincerely, I think you guys are capable of pulling through this, but you'll know better once you make a budget. If you put one together and find that you just can't keep up, then you need to consider bankruptcy. Give a conceptual budget a real shot first, though!

Best of luck to you.

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Thanks

[Anonymous]

It really just comes down to making choices.

If the kids are going to be in expensive activities and you want to be able to give them that, maybe a new house and new cars don't fit in the picture. 

If everyone loves the house, then some of the activities have to go by the wayside to afford it.

Some good friends of mine come to mind. They have 3 kids that are mostly grown now, but were involved in tons of sports/activities. That was very important to them, but required them driving beater cars to be able to afford. They had always lived at the beach and moved into town when they had their 3rd child for a nice sized house. Decided the beach was more important and moved back there and into a small rental. 

As you work out your budget and find where every $ is going, look over that list and start prioritizing. Keep what is most important to you and be ready to let some things go (knowing that what you're letting go is what is allowing you to keep what you've prioritized.)

[Anonymous]

Well said Steelers.

This is the exact process my wife and I used when we kept a budget. Everything is about making the choices you are most satisfied with. We decided that more money allocated to travel was worth more to us than a bigger house, a new car, or a second car. No regrets.

[Anonymous]

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@flippy1234 wrote:

Its worse than I thought. sigh.

1. List every single bill you have and amount (from both of you)

2. Every single credit card, monthly payment, balance and credit line (from both of you)

3. Take home money every month (from both of you)

4. Student loan balances and monthly payments (from both of you)

5. Car loans, balances and monthly payment (from both of you)

6. Other loans (from both of you)

7. Groceries spent (from both of you)

8. Gas spent (from both of you)

Take home pay

Me - $6,292.00  (currently putting 8% of my income into 401k (company puts another 6% on top of that)

Husband - $2000

social security - $640 (this is going away in 3 years)

Bills

Electric - $120-$220

Gas - $30-$60

Water - $160

Cell Phones - $250

Internet/TV - $150

Crossfit - $135

Roller derby - $50

HOA - $46

Mortgage - $2300

Car Insurance - $355

Car Loans

Car - $385 (owe ~$11k)

Truck - $650 (owe ~$40k, its newish)

Groceries - $1000

Gas - $250-$350

Student Loans

$22k & $60k — both currently deferred and not making payments.

IRS - $100

CCs - payments and balance

$52.00 $2,000.00

$90.00 $1,376.13

$25.00 $752.36

$64.00 $1,389.64

$65.00 $1,907.35

$296.00 $7,425.48

$46.00 $1,925.19

$108.00 $4,384.67

$147.00 $6,573.41

$114.00 $6,881.91

$117.00 $5,102.56

$140.00 $5,311.68

$131.00 $4,328.00

$117.00 $1,776.57

$61.00 $1,941.94

$23.00 $572.05

TOTAL Min - $1,300

Balance - $46,233

This obviously doesn't take into account things like clothes for the kids, random school/band fees for the kids etc. Theres always something coming up. 

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As others have pointed out, there is well over $1000 available in your budget to attack the debt with. You just need to hunker down, cut out ALL unaccounted spending, and use the snowball method to attack those bills. I would also suggest stopping your 401K contributions until you have everything under control - thats another $700 a month you can use towards this. With that plus budgetary cuts you could have 2k a month on this no problem.

There is no reason you can't have all the CC debt paid off in less than 2 years.

[Anonymous]

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@Anonymous wrote:

 I would also suggest stopping your 401K contributions until you have everything under control - thats another $700 a month you can use towards this.

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I agree with everything except this. I would keep contributing what I needed to to hit the company match. I.e. if the company matches 1:1 on the first 6% and nothing after, I would hit that consistently. That is a 100% rate of return, and not something I would forgo if even remotely possible. Even if it is 6:8, the rate of return is still very high at 75%. In this case, there is plenty of money sloshing around in the budget to make things work without forgoing other financial opportunity.

EDIT: Actually, both rates of return will be slightly higher than I suggested with the marginal value of tax deferred. I'm not up to the challenge of estimating what the rate of return would be for an average state at the noted income, but a 1:1 salary match is a >100% rate of return, something that can only be found with extreme risk or through these matching programs.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

 I would also suggest stopping your 401K contributions until you have everything under control - thats another $700 a month you can use towards this.

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I agree with everything except this. I would keep contributing what I needed to to hit the company match. I.e. if the company matches 1:1 on the first 6% and nothing after, I would hit that consistently. That is a 100% rate of return, and not something I would forgo if even remotely possible. Even if it is 6:8, the rate of return is still very high at 75%. In this case, there is plenty of money sloshing around in the budget to make things work without forgoing other financial opportunity.

EDIT: Actually, both rates of return will be slightly higher than I suggested with the marginal value of tax deferred. I'm not up to the challenge of estimating what the rate of return would be for an average state at the noted income, but a 1:1 salary match is a >100% rate of return, something that can only be found with extreme risk or through these matching programs.

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I know some disagree as its leaving money on the table. Thats somewhat countered by less interest on the debt that you will be paying down faster. Obviously thats going to be much less, but that 700 a month alone will pay off several of those card bances within just 6 months - seeing those payments go away can be a huge incentive and motivational factor.

[flippy1234]

My company matches 100% of 5% (and then an auto 1% on top of that), I don't want to leave that 5% on the table, but I think I will stop the other 3% for now and use that for debt.