Hi All,

I am sure this topic has been hashed over a couple times but I would appreciate some specific advice. Here is the situation:

HHI ~95K

Assets
Own a home worth ~350K (conservative)
401K Balance ~180K

Debt
Mortgage + Home Equity loan ~100K
Credit card debt ~25K
Auto Loan ~10K

We have been living above our means for the past couple years and making up the difference with credit cards and scraping by paycheck to paycheck, paying minimums on everything. Part of the home equity loan was used to pay off previous credit card debt. Now with rising food / fuel (and a long commute) we are missing payments. The creditors are calling and some accounts are 30 and even 60 past due. Most of the credit card debt is on low interest introductory offers and we have been bouncing from offer to offer for a couple years. I know with our credit score getting hammered we are going to hit a wall with moving the credit card debt around. I think that we need to borrow from home equity (assuming we can get the loan) or 401K and get rid of the CC debt. Which option do you think is the lesser of two evils?

Thanks in advance!

First thing's first, cut up your credit cards and go to a cash only system until you can get your spending under control. Your mortgage is only 100k and you make 95k? You can't be paying much more than 600/ month for housing. Where's all your money going?

Get a budget first then worry about paying off your debt.

Ps... I would do a heloc if I were you and leave the 401(k) alone. But if you are just going to run the debt up on the cards again... it doesn't matter what you do.

Maybe I'm missing it, but you seem to have more than enough income to cover your mortgage (please provide more specifics... what type of loan, what rates, what's the current payment).

The rest of your budget would also be helpful, it doesn't seem to me that you should have any problems making ends meet. You should be getting around $6k month after taxes... even at $2k for your mortgage (assumes killer interest rate and property taxes), you'd have $4k. $2k in living expenses (assumes you eat a lot and have lots of kids) and that would still leave $2k per month to pay down the credit cards...

More info please!

I wouldnt mind to be in OPs financial situation assuming he and I have same age..ofcourse I have same wife and friends

Enuff said..OP You can very easily be in a extremely enviable financial situation should you decide to in one year!

I gave you red for waiting so long to decide to do anything about it. Second, I can't begin to understand how you could be in a financial problem based on what you told us. If you're really in that bad of shape right now you gave no where near enough information to help you at all.

If this really is all your dept then you have very serious issues and I would seek the help of a professional.

No surprise but I am not entirely sure where the money is going - here is what I tried to put together looking at one month of bank statements and from memory:

Take home pay 5,090 (after insurance, 6% 401K deduction, taxes, etc)

Mortgage + Insurance + Utilities 900
Home Equity Loan (15 year term) 609
Car Insurance (3 cars/drivers) 263
Car Payment 271
Cell Phone 45
TV + Internet 120
Land Line 50
CC Payments ~550
Medical Debt (forgot this) 200
Student Loan payment (forgot this) 150

Total Fixed 3158

Groceries (family of 4) 500
Fuel (HH commute 70 miles each way) 420
Household Goods (Wal-Mart stuff, pet supplies) 360
Dining out (what I can see, probably more in cash) 175
Misc discretionary spending 200
Cash (who knows where this went) 550

Total Variable 2205

Bottom line 5090 - 3158 - 2205 = -273

Looking at this it seems like it should be easy to get into good shape. Problem is that living this close to the edge and then the car breaks down (which happens often due to long commute), dog goes to the vet, roof starts leaking and holidays + vacation come around it all ends up on the credit cards.

bfreeman80 said:No surprise but I am not entirely sure where the money is going - here is what I tried to put together looking at one month of bank statements and from memory:

Take home pay 5,090 (after insurance, 6% 401K deduction, taxes, etc)

Mortgage + Insurance + Utilities 900
Home Equity Loan (15 year term) 609
Car Insurance (3 cars/drivers) 263
Car Payment 271
Cell Phone 45
TV + Internet 120
Land Line 50
CC Payments ~550
Medical Debt (forgot this) 200
Student Loan payment (forgot this) 150

Total Fixed 3158

Groceries (family of 4) 500
Fuel (HH commute 70 miles each way) 420
Household Goods (Wal-Mart stuff, pet supplies) 360 -- 0uch. Buy what you need. What do you mean by WalMart stuff?
Dining out (what I can see, probably more in cash) 175 - cut this completely
Misc discretionary spending 200 - You should come up with whats this misc
Cash (who knows where this went) 550 - Totally un acceptable

Total Variable 2205


Bottom line 5090 - 3158 - 2205 = -273

I can see a savings of 1000 right there!

You don't have kids so there should not be any huge necessary expenditures. Don't raid your 401(k) or get a HELOC because you and your spouse obviously have no financial discipline. (I mean that constructively, really.) If you take the easy way out via 401(k) or HELOC, you will just rack up credit card debt again because you haven't really "worked" to get out of debt. You don't want to find yourselves in a position where you cannot retire on time or you have to fear losing your house. Just work your butt off and pay off your loans by SAVING money and NOT spending money on things you can't afford.

Others have given you good suggestions. Here are some more:

Can you renegotiate your monthly payment on the medical debt?

Can you defer the student loan payments due to financial hardship? Probably not, due to your high income, but it's free to ask.

Can you carpool with anyone for that long commute? Is there a commuter bus or train you could take?

Edit: If your 401(k) employer match is low, stop contributing to it for a bit and send every cent to your CCS. Resume contributions when your CCS are paid off.

Also, you say 3 cars/drivers. That sounds to me like you have college coming up soon. Get your financial house in order, but fast!

bfreeman80 said:
<snip>

We have been living above our means for the past couple years

<snip>!

Stop spending money on crap you don't need.

Cost of food is way way way too high. Buy bulk grains and only buy produce/meat which is on sale. Use the grill alot. Live as lean as you can. Make it a challenge to see how little you can spend in a month while redirecting those funds to pay off the highest interest loans/cards. Carpool or stay home... Run errands on the way home from work, not after you get home. COUPONS, learn to love em. I could see someone carrying that debt load with half of your HHI. You could easily eliminate that CC debt within 1 year, maybe 6 months.

The successful way to lose weight is to learn how much you need and how to eat right, plus a little exercise. Put your wallet on a diet and weigh it daily. Itemize as much as possible every single day.

You will see your 'waist'(heterograph intended)soon enough.

~miser