NBR: Credit card debt & leased vehicles — The Bump
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NBR: Credit card debt & leased vehicles

How in the world do you ever get rid of CC debt if the income isn't going up and the expenses have been cut as much as possible? DH suggested getting a personal loan pay off the balances then just have the one payment which would be much less than the minimum due each month for the credit cards and at a much lower rate. On the surface this sounds like a great idea, but is it? Obviously we would have to hide our ccs and under no circumstances use them for this to work. What about debt consolidation? I have heard mixed things about that in regards to how it affects your credit score.

I'm sure this should be a post on the MM board but why not start here!

What am I missing? Any other suggesstions?

Ok, question #2. One of our cars is leased and the payment is much more than we can really handle now. But you can't trade in or sell the car unless you pay off the balance of the lease, is that right?

TIA Smile

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Re: NBR: Credit card debt &amp;amp; leased vehicles

  • When you say expenses have been cut as much as possible, have you cut out cable?  Home internet?  Cut back on cell phones to minimums?  Really stretched to see what is the minimum?  There are obviously some things required by work, etc, but cutting also involves moving out of the comfort zone.

     For the CC debt... is it spread out among all sorts of cards or just on one?  Is it a possibility that a balance transfer to a 0% card would save money in the end (after transfer fees) so you could start snowballing it?  Check out Dave Ramsey, a ton of girls on MM recommend reading his books.

    I'd exhaust other resources before doing debt consolidation; there are several girls on MM though who have used very reputable companies with great success.

    Another option, if you're comfortable, is to post a budget... I'm going to make an assumption that you have one since you mentioned cutting back expenses.

    What are your retirement savings looking like?  Savings for DC's college?  E-fund?  These are the things that are the first questions on MM when evaluating how to help someone cut back.

    I don't know a single thing about leases, I'm not any help there.  But I would suggest getting that under control ASAP if possible.  

    Baby Charchie born 12/22/2011
  • I think MM will tell you to not get the personal loan because you're just replacing debt with debt and not really erasing any debt.  I personally have mixed feelings on this.  On the one hand, yes you're replacing debt with debt but at a lower interest rate which will help you pay off faster with less interest.  On the other hand you're replacing unsecured debt (credit cards) with secured debt (personal loan).  It's really something you're going to have to weigh.  I don't believe in tying any consumer debt to my mortgage loan at all so I wouldn't secure the personal loan with that and I wouldn't get a HELOC for CCs.

     Have you truly, truly cut expenses as much as you can?  Get rid of cable and internet.  Both of you take your lunches to work.  Drive as little as you can.  Turn the thermostat down a degree or two.

    You can actually sell the leased vehicle privately and use that money to pay off the loan.  However, you probably won't get what you owe and will end up still having to pay additional money.

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  • Charch, I knew you would reply to a money question!!

    We have been using Blair's budget for a few months and revisit it quite often to "work the numbers". We aren't contributing to retirement or future savings. The biggest problem has been DH's off and on and unreliable job not paying enough or as often as it needs to so we would end up charging things like groceries. We even sold our house and moved into a rental to help cut back on housing expenses. The rent payment lowered our monthly expense by about $700 a huge help, but still not enough. Daycare is helping us out a little on a scholarship. Internet I need at home for work when I do need to work from home. Cell phones are now being paid by work and we don't have a home phone. Our biggest problem area is groceries. DH loves to cook and is really into eating healthy and buying fresh produce. We have started planning our weekly meals better and work the ad papers for specials.

    I just don't know what else we can cut. I don't want a quick fix, I really need something that we can stick with and maintain. It will take a lot of self control - more for DH I think!

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  • LOL it's like a game for me.  I'm slightly strange.  But then again I'm still trying to pay off my stupid CC mistakes and all of my SL debt, so I'm constantly looking for little things to help and try to forward on the advice I've been given.

    No future savings... BUT.  What about an e-fund?  You have to break the cycle of staying in debt.  Even a little bit at a time helps.  Most recommend (and I think this stems from DR) $1k in an e-fund while paying off debt.  This allows you to break the cycle of debt with paying w/ cash on hand.

    Now; I know DH's job is off and on... can you budget based on your income alone?  I know it's a craptacular job market, but is there anything that either one of you can pick up on the side to help out?  Is there any opportunity for him to get into a different job?

    Is the WAH part negotiable w/ work so they'll pay a portion of the internet costs?  What about cable?  That's an easy expense to cut, especially with so many shows online now :)

    Groceries... where do you shop?  Do you use coupons?  I know a ton of them are for processed foods, but they can help for some of the basics.  Fresh produce... do you grow any?  In NC you can grow things basically year round... buckin can help with that if you're able to plant a garden in your rental.

    Meal planning is huge.  It's the simple, little stuff that makes a difference.  If you use 1/2 an onion in one meal, the other half needs to go in another.  We cut our grocery bill significantly when we started meal planning about a year ago.

    Here's the thing though.  You have to allow yourself a little fun money or allow a meal out a month.. something you guys enjoy.  If not, the budget will feel like a ball and chains and you're going to be more apt to break it and go out of control.

    Cut up the CCs, freeze them, do whatever... keep one for dire emergencies.  It's a hard thing to do, but it's one giant step toward getting free of the debt.

    But honestly; post your budget on MM.  The girls there are fabulous, I've learned a ton from being on that board.  They'll go through and they're pretty honest.  They'll catch things that you won't see and they'll come up with ways to cut.   The biggest thing though is especially now, a ton of them are facing hard times, so they *know* what it's like to be stuck and struggle.  One word of caution though; you have to go in with an open mind. 

    Also; you HAVE to be on the same page as DH.  You're in this together :)

    Baby Charchie born 12/22/2011
  • I second charch's advice to post your budget on MM. (Sometimes people post their budgets and then shoot down every suggestion people have- if you disagree with people's suggestions, it might be better to keep that to yourself so you don't start getting flamed.)

    I don't know much about leasing cars, but if you could somehow terminate the lease early (even if you had to pay a penalty) it could still be better in the long run if you ended up paying more money over the long run. Then you could buy the least expensive car that you could to last for the amount of time that you'd be in major debt pay-off mode.

    If you truly feel like you are as minimized as you can be on your expenses, you'll have to find a way to increase your income a little bit. Is there any possibility of either of you getting a second job on the evenings or weekends? I know that it would suck to be able to spend less time together, but it might be well worth it if you could pay down your debt more quickly.

    Another suggestion about groceries (in addition to meal planning, which really helps to save money): try having vegetarian dishes every few days, they are frequently less expensive than meals containing meat. For example, you could make fritattas that have eggs, fresh veggies, etc. and that would have protein and would be cheaper than meat.

    GL!

  • Thanks for the suggestions! When we move to KY in May/June for DH's new job our money situation will change a lot. It is just so overwhelming that we have been dealing with his job situation for almost a year now and we have made so many mistakes with our money when we did have a good cash flow that we got over our heads when DH's job didn't work out and his income dropped to zero for a few motnhs. I really don't want to carry all this debt to KY with us! I want to be able to enjoy the move and have a cushion just in case I have a hard time finding a job there. Money issues are so hard on a marraige!
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  • We are going to get Dave Ramsey's kit on Financial Peace.  We pretty much live paycheck to paycheck now without kids even being in the picture.  I desperately need a new car but that can't even happen with our credit cards right now.  Dave Ramsey has a good method I think.  You can see some of his stuff at www.daveramsey.com  Good luck!
  • Good luck!!  Money issues suck, don't they?  It's amazing how things can be fine one day and then you're hit with something unexpected, especially when it comes to jobs. 

    Also... start looking for a job early.  I don't know what field you're in, but a few days back (Monday maybe?) there was a post on MM about finding headhunters/recruiters in another state.  Let me see if I can dig it up...

    Baby Charchie born 12/22/2011
  • nevermind, it wasn't helpful at all :(
    Baby Charchie born 12/22/2011
  • I don't have any advice for you that you don't already know.  I just wanted to say I feel your pain (even though DH has a steady job) and it really sucks.  We haven't cut back to bare bones minimum, but I guess we probably should.  We aren't saving anything right now either, and really have more debt than we can handle.  But like you said, when the income's not going up, and the expenses are more (daycare, groceries, etc), what do you do? 

    I really hope you guys get a nice fresh new start in KY and things get better.  We talk about starting fresh again too, but I think at this point it's not really possible.

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