Save or reduce debt?

[Anonymous]

My husband has been unemployed for six months and his skills are in areas that are hit hardest by the economy.   He is also almost 60 years old so the prospect of employment have me concerned for lots of reasons.   We have $30,000 in credit card debt which I've actually reduced from a high of $39,000 from a year ago.    We have three kids in college and although they have taken out a lot of loans, we have helped them substantially and still do -- i.e., we pay their car insurance, cell phones, give them money for necessities (i.e., gas, food, text books).

There is a strong possibility I may receive close to $9,000 in about a month that is a repayment of a business loan . . . if I can trust my business partner to return it to me.   He is rather shady so I am holding my breathe and kicking myself for getting into the business deal I did with him.   But, legally he owes it to me as of August 5th.   Money I paid him for a deposit that is now supposed to be returned to me.

If it is returned, should I use the whole sum to further reduce our credit card debt?   Should I bank it in the event my husband still does not have a job by December when his unemployment checks run out?

[Anonymous]

That is a lot of CC debt.  I wish your hubby good luck on finding a job ASAP. 

I think if it were me I would put that money in the bank, because as everyone here knows the CC could cut your limit at any moment for no reason at all.  This is just my thought on the matter, what I think I would do.

Is it possible that your kids could get at the very least part time jobs so they could take care of their own expenses?  I realize cell phones may be needed so you can stay in touch, but have you  cut those bills to the min., no text messaging, lowest possible plan available, because most cell phones offer unlimited calling (or at least att does) between family lines.  Make sure that no one is making any calls that use excessive mins. 

As for food, are they eating out?  They need to be sure they are eating as cheaply as possible.  Plus if they got jobs in fast food (not the best food I know) places they would probably get to eat free or at least at a reduced rate. 

I know you didnt ask for all this and I truely wish you the best of luck in whatever you decide to do.  Vicki

[Anonymous]

The cc debt occurred because we are a lower income family and what do you do when the transmission blows on your car and you have no savings?    and sports killed us when the kids were in high school, plus medical debt.   We really do live very simply and looking at this huge cc debit when it did not come from buying stuff, eating out or going on vacations -- none of that -- it was one crisis after another, mostly car problems and then helping the kids with some college expenses, and we put groceries and gasoline on the cards, especially when gas hit $4.00/gallon and my husband's work was an hour drive one way.    We spent a fortune on gasoline.

Anyway, yes, I've trimmed everything and yes, my kids all have part time jobs.   They have al worked since they were 14 (McDonalds) and as they have grown, gone on to other part time jobs.    However, when in school, the focus is their classes.    One is a bio-chem major, lots of science classes that are hard so although she works, just enough to pay for minor expenses.    My oldest daughter is completely self-supporting now but also just moved back home.    My son, is also in college and taking alot of math classes that he finds difficult and when he works, his grades come down.   He still works, but really just on the weekends, during the week he is focused on classes and studying.   They are good kids.

We have four phones on the lowest plan with Verizon, 700 min./month and yes, we watch who we call.   We do have unlimited text because it cuts down on mins. when we need to communicate to someone not on Verizon.   For a family of three right now, my grocery bill is $50/week so I make it stretch and I know how and where to shop.   Plus we have a garden.

I do not recall the last time we ate out, it has been years.   My big treat is Taco Bell where I can get one item for 99 cents or less and I take a glass of water with me.   Or Burger King's junior whopper for 99 cents and again, water from home.   I do one of those maybe once every other week.   No add on's, no fries, nothing,   I get thru the drive thru on $1.07.

I do appreciate your comments and am putting one mark in the "put in savings" column.   

But I am still not sure about using it to pay off some of the debt.    I have two cards that are less than $1,000 now and getting two cards paid off would just mentally and emotionally feel so good.    But then, that money could also give us an additional 6 weeks of living expenses -- mortgage, utilities, food, etc. if he isn't employed by year's end.

Again, thank you for your reply.

[Scamp]

I vote for putting it into savings as well, right now.  CC debt can be re-tackled later, when hubby has a job again.  For now, bank that $9K if you get it.

Good for you on the very sensible, economical habits - not many are that together, these days!  Hang in there.

[haulingthescoreup]

I'd say that in these times, savings outweigh paying off the cards. And I'm one of those zero-credit-card-debt fanatics, but with one of you out of work, you have to be able to ride out some months if you were to lose your job as well.

At the same time, I can see wanting to pay off those two cards. Are they useful cards? --i.e. bank cards that are worth preserving in tough times? --or store cards that are only good for shopping at that store? If your CC's start taking action against you, wanting faster pay-downs and all, it would be good to have a few cards preserved.

So I guess a big mark in the "savings" column, and a little mark in the "pay down CC's" column.

[Anonymous]

No store cards.    I've never paid late, have always paid more than the minimum and my highest interest is 12.24%, one is just 3.9%, others are around 7%.    I am not over due on any bills.    We are on a cash only basis now, we no longer charge and if I do not have money for gas, I put in the tank whatever I can to get me through a day or two until I have more money.   I have a home business that is minimal investment and has a high return.   Weight loss and everyone wants to lose weight so it is easy and I am using the money to pay off the cards which is how I can pay more than the minimum's.    But once his unemployment checks cease, that is going to make life very difficult.

And yes, despite always paying before the due date and more than the minimums, the cc companies are making life miserable with changing my due date from one month to the next ( I have had one card move three times on the due date and am now paying 12 days earlier than the previous due date from March -- I used to pay on the 21st of each month for years, now it is due the 9th of each month, who knows when it will be due next month.   If I weren't so careful with my bills when they come in, I could have missed that they moved the date up on me and calling did nothing.   And yes, I've had my limits lowered as well even though I ceased using the cards and am paying them down, they still lowered my limits.

I started a home business to take advantage of the tax deductions, my cell phone, my internet, lots of other deductions on bills I was paying anyway.     I went to a financial advisor recently through our church - services were free - and he was blown away by my record keeping system and ways I save money.   I have also found that depending who you speak to at your cable company, they each give you different pricing.   It took me two hours (most of it on hold waiting for someone) but each time I called back and told them about our unemployment situation and we would have to stop our service, each offered me a different plan -- same EXACT service, just different amounts.   So I kept calling and finally number 3, gave me my lowest price - $51/month for t.v. and internet and I have more than basic channels.  Took me two hours but saved me $48/month!    Interestingly, their "retnetion department" gave me the highest price.   I have also found a resource to get free pet food which is also saving us a tidy sum.

Looks like three marks in the savings column but again, the thought of eliminating at least two monthly payments . . . . but I see the wisdom of banking it.   I just so want to be rid of the cards.

[haulingthescoreup]

Well, that's why I was gently tilting toward using $2K of the $9K for those two cards. It could be very useful to have two paid-off cards in good standing, tucked away for (another) rainy day.

I hope your business partner does the honorable thing!

[Anonymous]

Yes, I am hoping he will pay me as well.   Unfortunately, I've learned some hard lessons about business partners.   I was naive and very trusting.    And this was a different business, not the weight loss btw.        

[haulingthescoreup]

I wish you all the best. I don't have a tenth of the guts needed to start and run my own business. I'm just another white-collar clock puncher, I'm afraid.

[gpeach]

This is a bit off your topic but you said you shop for 50 a week for family of 3. Could you message me some of your "secrets"? I really need to cut back there.