New to board

**S LeGras** · 09-28-2009, 06:46 PM

My name is Sharon and I'm in debt. I feel like I'm at an AA meeting. I bought an audio copy of Dave's book back in January or February. What he said made sense but I didn't get on board right away. I've been listening to his podcasts and he's been sinking into my brain. I bought the MTMM workbook during the summer. It sat on the coffee table for a few months until I started going through the exercises. To go back, last year we did a major renovation on our house - we had to move out for 2 months while the worst was going on. We ripped off the back of our house and rebuilt it. This was where the water, hydro sewer etc. was hooked up. We had started off planning on just doing a renovation but got talked into rebuilding - no regrets there. Our house was over 100 yrs old. There was no foundation, the basement leaked etc. Now everything is new, up to code and nice and dry. Anyways we now have a 65,000 LOC from the renovation. We still have some work to do - still need new flooring in two rooms, trim etc but that stuff can wait for now.

Next year at this time there is a good chance my husband will be let go from his job. His company is being bought out and they will have 100% this time next year. He doesn't think they will need or want two Operations managers. In some ways we are looking forward to this. He is on the road for at least 4 days a week right now. We are 47, turning 48 years old in December. I've been panicking thinking that we wouldn't be able to have this LOC paid off when we retire - 65,000 is a lot of money plus we have some credit card debt plus another LOC. I was thinking about remortgaging the house for 15 years with the LOC combined with our mortgage. When I sat down and actually ran the numbers we could be debt free except our mortgage in 3 yrs. Our mortage if we don't make any extra payments would be done in 5 yrs. Now this doesn't account for Christmases, birthdays, vacations, life etc. It also doesn't account for bonuses which both my husband and I get yearly or raises. Anyways, I'm thinking that there is no way we shouldn't be able to be debt free in five years when our mortgage is done. I can't believe I was going to pay interest for 15 years on something that I could pay off in less than 5 years.

Anyways, this is our first month on a budget. We are doing a modified DR. We are still contributing to our retirement and we are still putting money into our EF even though we have over 1000 in there. In the spring we will put debt repayment on hold for a few months to save up for a vehicle for my husband. He presently has a company vehicle which will be gone with the job. I'm so excited about buying a vehicle with cash.....

Sorry about the long novel. Just wanted to give you a bit of history. Hope to get to know you better and look forward to your advice.

Sharon

**Debbie-cat** · 09-28-2009, 07:09 PM

Hi and welcome from Minnesota!

**Greebo** · 09-29-2009, 08:54 AM

You might want to cut the retirement contributions down to matching amounts (if any) until you get the debt paid down. The CC interest rates at a minimum are going to be high enough that you may not get a net benefit even from the compound interest of investing, over the next 10 years or so.

If you can list out your debts, balances, minimum payments and interest rates, I can give you a better idea of what cutting off retirement investing in the short term will do.

**ilovechocolate** · 09-29-2009, 05:25 PM

Hi and welcome, Sharon! We're glad you've joined us at the Village.

**S LeGras** · 09-30-2009, 06:04 AM

Hi Greego and others,

Our debts are as follows:

Van loan 1719 - pay 414 per month it is due to be paid off in January so not touching it. Interst rate is 4%

My Visa is 5367 minimum payment was 142. Rate is going from 18.5 to 19.5 this month

Husband's Visa 6146 minimum payment was 145. Rate is going from 18.5 to 19.5 this month

LOC1 23694.67 mimum payment is 300.00. Rate is about 6.5

LOC2 - House renovations is 65352 minimum payment is also 300. The rate for that is lower about 5.25 per month

Our mortgage is 44055 payment is 771 and currently the interst rate is at 2.25% and is due to be paid off in 5 years 0 months.

Our loan and our mortgage are variable interest rates. We pay a fixed amount but the rate is Prime + a certain %. This has worked out for us. Any extra per month goes to principal. Our mortage was 25 yrs and is on track to be paid off in 14. Mind you we also put 6 months of principal on it one year with my husband's bonus which has helped tremendously. We also have the option of locking into a rate without penalty if interest rates start to take off. Our LOC's are also prime plus a certain percentage.

Our debt repayment shovel is about $2000 a month after the minimums are paid on the other credit card and LOC's. Oct. is being spent cleaning up some little debts and car and house ins. For Nov and Dec I'm budgeting 1000 so we can pay cash for Christmas and starting in with the first credit card. In March it should be paid off and the next one started.

Anyways, there is everything in a nutshell... let me know what you think.

I think we have a big enough shovel that we can still contribute to our RRSPs and continue to build up our EF which is currently at 1367.

**Greebo** · 09-30-2009, 09:03 AM

I just re-read your post and I missed the possible lay off - that changes my advice.

As long it's likely that hubby is going to be let go, the Baby Steps also go. Now if you're just worried about it and there's no supporting evidence, that's different - but you said they're being bought out - so the weather forecast is basically calling for a 50% chance of a class 5 tornado.

You don't harvest grain in a storm, you hunker down in the cellar.

SO - first things first - as long as hubby's job is at risk, you start building the cellar. Stop all retirement contributions, pay only minimum payments, and stockpile SIX MONTHS of expenses in the bank in savings or money market - or short term CD's for some of it. This is in case the storm clouds materialize.

Then, and only then - or when the weatherman says "all clear", you drop that savings onto debt like a bomb.

Now totalling up your debts, minus the mortgage, with a $2,000 a month snowball you are looking at FOUR YEARS to get rid of that debt. That's the total non mortgage debt / 2000 / 12 months. So - how much is getting put into retirement each month? How much sooner could you have the debt paid off if you don't contribute to retirement? If it cuts the time to be out of all but house debt in half, it's worth considering.

I forgot to ask - does your husband get any matching?

**S LeGras** · 10-01-2009, 05:54 AM

Hubby should get 14 months or so of severance pay if he gets let go next year. He's management and the unwritten rule is 2 months for every year. We'll have to discuss it this weekend when he's home. Legally they would only have to give him 2 week per year which is a different story. Right now we have 50 a week going into savings but I think we'll have to bump it up and do less debt reduction....

**Greebo** · 10-01-2009, 05:59 AM

Yeah - remember, you cannot take "should" to the bank. In a year, *if* he's laid off, and *if* he gets more than a year's worth of severance pay, and then WHEN he finds another job asap, you can take that 14 months income and slaughter the debt.

But right now if there's a 50% chance of rain, don't buy a swimming suit, ya know?

**kita** · 10-01-2009, 10:16 AM

I would plan on the 14 weeks on severance pay and then try to have a match for that. 28 weeks of income which would be available if he lost his job. Since you have a fairly large shovel, it should last you longer than six months.
Also, consider locking in that mortgage interest rate. I doubt it will be much lower and if it goes up while he is unemployed it may be difficult to refinance or whatever. And you are waiting for them to start going up before you lock it in? Doesn't that mean it would be higher?

**sleepyjim** · 10-02-2009, 05:45 AM

Originally Posted by Greebo

SO - first things first - as long as hubby's job is at risk, Stop all retirement contributions, pay only minimum payments, and stockpile SIX MONTHS of expenses in the bank in savings or money market - or short term CD's for some of it. This is in case the storm clouds materialize.

Then, and only then - or when the weatherman says "all clear", you drop that savings onto debt like a bomb.

This is a perfect plan! Only thing I would change is not to use any CD's......

My thinking is, no sense in putting in retirement if there is a chance of losing the job. I also would not count on ANY severance, that way your getting ready for the worst case and anything you get from the company is gravy....

6 mos living expenses is a must and as above, if no lay off, big chunk of debt gets wiped out.

BUDGET is a must....

Jim

**sleepyjim** · 10-02-2009, 05:46 AM

Also, welcome to the board!

Jim

**kita** · 10-03-2009, 06:23 PM

Since you have a possible end date and that date a fair amount in the future I would have a list of goals to have by that date:

Six months of living expenses
The two credit cards paid off

Is that doable? Remember your truck will drop off mid-way, leaving you with fewer expenses and a bigger shovel. "Back of the envelope" figuring here leaves you with about $15,000 in a year. Could you live on that for six months? Remember no credit cards and truck paid off.
Only you can decide what the goals are and in what order. I think though that everyone here will say ...you have to know the goals, have a plan to get there, and both of you willing to work the plan. It's that easy. Not really, it is hard and Murphy is annoying, but you have to have those things.

**larabelle** · 10-04-2009, 08:16 AM

Welcome Sharon!!!
Looks like you have recieved lots of good advice from others and I have nothing new to add.

**S LeGras** · 10-07-2009, 05:49 AM

Thanks for all the advice and the warm welcome. I'm on version D of our budget for October. It seems like everytime I open the mail there is another nasty surprise. We got a notice last week that since we did the renovation last year our taxes have gone up by 800 dollars, payable in October and November. For some reason the minimum on our one LOC was about 500 higher than expected this month. The bill says we're not in arears so I don't really understand. Anyways, I was in a bit of a funk but I sat down yesterday and redid the budget again so that everything is covered. No using the LOC - Yeah for me!! That's how I would have handled that extra tax bill before. I've also discovered the envelope system. So far I love it. 2 days left to payday and I have cash left plus there is money in the debit account that my husband hasn't touched - he's on the road so I deposit a certain amount of money in a debit card account for him every week. I was worried that I would be dipping into the envelopes set up to collect money for things used ocasionally like clothes, dogs, birthdays etc. but I haven't even used all of my grocery money or misc. Any money left in grocery or misc. envelopes at the end of the week I'm going to put in my Christmas envelope.

Feeling optimistic again....

**missmanny** · 10-08-2009, 12:54 AM

I'm glad you are feeling more optimistic.
Its a long hard road to travel, but I promise you that getting out of debt and feeling in control of yourself and you money is worth every moment.

I wouldn't rely too much on what the unwritten "rule" is at you husbands work. It may bethat the new company will honor that and it may be that they won't care, please make surethat you keep current with all of your bills but sock away a nice little emergency fund so that no matter what happens you will be ok. If hubby does get a massive severance and finds a job quickly then it can all go on the debt then.

Good luck with every thing.