Slowly Going Back Into Debt (Update/Trigger Warning #420)

[TheOtherMe]

Hugs Shane. 

I have put myself on a "needs" only budget for this year.  No I am not in the kind of debt as Shane but I have no reason like Shane's.  My debt came from wants and fun, not needs. 

I have one concert planned this year and the ticket is paid for.  The hotel is being paid for on points.  Out of pocket will be gas and food.

I did get my federal tax refund and paid off two credit cards.  That made me feel better.

I am changing insurance companies for all of my insurances.  Will save me about $225 per year but the coverage on auto and homeowners is higher.  Plan to do that next week after credit card billing cycle ends.

[andi9899]

My 2017 resolution is to get finances in order. I'm shopping everything I own so that I can save as much as possible to pay off debt. I want to be as close to debt free by the time I turn 40 as I possibly can. I have a couple of years yet, so we'll see how far I get.

[snapdragon]

Good wishes on everything Shane!

[NastyWoman]

Feb 1, 2017 12:36:21 GMT -5 imawino said:

Feb 1, 2017 7:41:33 GMT -5 Shooby said:

 I would sell my house and live in a one bedroom studio apt before i would amass that much debt!

Would you also get rid of internet and all your posting devices??

[Shooby]

Feb 2, 2017 20:34:09 GMT -5 NastyWoman said:

Feb 1, 2017 12:36:21 GMT -5 imawino said:

Would you also get rid of internet and all your posting devices??

Not sure what you are asking or if you are being snarky. I am being serious. I HATE debt. My home is paid off. The best advice i got was from my dad who told me that when i get a credit card that i should pay it off in full at the end of every month and that if i can't, to stop using it. As a result i have paid my cc off in full every month for my entire life.

I think there are times to go into debt. Student loans for example. However, my son is a freshman and he is going to live at home for 2 years and go to the branch campus. That saves a lot of money. Did the same with my older son who completed his degree. It's all about choices. So, what you want and what you need are 2 different thing.
   It's all about the numbers.  They either work or they don't.  You can either spend less or make more money.  The combination of the 2 usually works the best.  Sometimes you can't make more money so then have to cut expenses.  And, sometimes you may need to take a drastic step to get to a better place in the long run.  Doesn't mean you have to live bare bones forever but just until you get your financial house in order.

[flamingo]

Hating debt is good in theory, but sometimes life throws you a curve. You either go with it or crash and burn. And I'd much rather go with it, in the short term, and take on debt than just throw my hands up and declare that it, I'm done, I'm going the most drastic route possible, all to save some CC interest. 

Money is important, but it isn't everything. And if the best way to get through a short term crisis is to throw money at it, to get it resolved in the best way possible and to ensure the best outcome for your family, then that's what you do. My stress level and sanity are worth quite a lot of money to me. It's might not be fun, and I might not want to be in debt, but to help my family and myself, I'd be willing to do it. 

Yes, debt is all about the numbers. But there are situations in life where it's just not possible to spend less/make more. And it sounds like OP has a plan in place to get her financial house back in order once she resolves the current situation. If I were in her position, I'm not sure I could come here and be so clear minded and have such a great plan of attack to take care of all of the debt being accumulated. It's more likely that I'd be crying in my beer and throwing up my hands saying, wow so much debt, I'll never get out, let's go on a shopping spree to make me feel better. And then stressing about that.   

[NomoreDramaQ1015]

The op said her lawyer advised them to not sell the house at this time.

Sure they could ignore the advice and it would make the short term situation better.

But the consequences of not taking the legal advice may be far more costly over the long run.

Sometimes you have to make a crappy choice to keep sinking for now to ensure a better future later

I know board advice would be for us to have pulled Abby out of daycare as soon as I lost my job.

Problem was I could not find a daycare without a waiting list. I could not tailor my job search to get hired in exactly eight months when they had an opening.

I don't have a lot of family to be free daycare. We needed childcare in place when I got a job.

So we kept paying to keep her spot. I got a new job in four months. We would not have found new daycare that fast.

I would have loved to keep that $630 a month. If I had been unemployed longer then daycare would have been up for chopping.

But it was the right short term decision to protect my ability to go back to work asap.

Staying in the house makes sense for Shane now based on their legal situation. She also said selling the house is on the table once it's safe to do so.

[andi9899]

Shoo by just had to make sure she let everyone know that she's far superior as usual. There was nothing in her post that the OP didn't already know. Again, nothing constructive. Just her babbling about herself again while standing on a soap box. Just ignore it.

[NomoreDramaQ1015]

Oh I know. I just wanted to say I get it.

It was really hard to go against advice and my instincts about money and look at things stratigecially when I lost my job.

We'd be digging out of a much bigger hole if we'd gone with my knee jerk response.

[shanendoah]

I get that people on this board are going to be against debt. If I remember correctly (from reading the articles LONG before I joined), the Women In Red were started as a group dedicated to getting out of debt and staying out of debt. So that makes sense to me. And I certainly don't LIKE going back into debt.
For the last 7 years, we have paid off the credit cards, in full, every month. The fact that I currently can't bugs the hell out of me.

BUT this situation is a situation worth going into debt for. When I very first posted about this last summer, I think I told someone, this is a situation worth going bankrupt for. This situation is about my family's future, in so very many ways. And so I hate the expense. I hate that C can't work right now. I hate the fact that my budget isn't balancing. But every penny is worth it. This is a fight that is worth the $55-60k in debt we're likely to end up in, and more. If I have to lose everything material to win this fight, I will.

But, again, while I came to that conclusion a while ago, that it is all worth it, that doesn't mean I like it. That doesn't mean it is stress free. And often it feels like one of the strategies being used against us is to try and destroy us financially (again, we've had to hire 3 different lawyers because of how this case is split up). So I come here to vent. I come here for support. (Friends in RL are hugely supportive of this, but they get less of the financial detail than you folks do.) And I come here for ideas. I may not be able to use some of these ideas now, but at least I'll know about them, and have them in the back of my mind for the future.

I do appreciate the ideas. I do sometimes feel like "she who must not be named" because I have to shoot them down for now. But I am still glad to have them. So if you think of something, please share. It may not be helpful to me right now, but it might be helpful to me in the future, and it might very well be helpful to someone else reading this, who doesn't feel as comfortable posting about their situation as I do. So keep it coming. You ladies (and gents) are the best.

And flamingo - I did kind of go on a spree for 7 months of 2016. I just threw up my hands and said if I can't control X, why bother controlling anything. But (sadly) that didn't decrease my stress. It increased it, because I'm a bit of a planner/control freak. So, controlling what I can control is one of the strategies my therapist and I have identified to help me control my traumatic stress, depression, and anxiety.

[zibazinski]

[taz157]

Feb 3, 2017 12:31:30 GMT -5 zibazinski said:

Yeah that. ((((Hugs)))) Shane.

[seriousthistime]

Feb 3, 2017 8:13:27 GMT -5 Shooby said:

Feb 2, 2017 20:34:09 GMT -5 NastyWoman said:

Not sure what you are asking or if you are being snarky. I am being serious. I HATE debt. My home is paid off. The best advice i got was from my dad who told me that when i get a credit card that i should pay it off in full at the end of every month and that if i can't, to stop using it. As a result i have paid my cc off in full every month for my entire life.

I think there are times to go into debt. Student loans for example. However, my son is a freshman and he is going to live at home for 2 years and go to the branch campus. That saves a lot of money. Did the same with my older son who completed his degree. It's all about choices. So, what you want and what you need are 2 different thing.
   It's all about the numbers.  They either work or they don't.  You can either spend less or make more money.  The combination of the 2 usually works the best.  Sometimes you can't make more money so then have to cut expenses.  And, sometimes you may need to take a drastic step to get to a better place in the long run.  Doesn't mean you have to live bare bones forever but just until you get your financial house in order.

Having a house paid for is all well and good, but I am willing to bet you live in an area where a paid off house is possible for people to achieve in their middle-age years, not because they are so wise with money but because the cost of housing is so cheap. I seem to recall in another thread that you said you had to go to the ER to get IV fluids because doctors don't do that sort of thing in the office (which they do, maybe not where you are), there's no urgent care close to you, and doctors' offices close at the end of the business day.  Something tells me you're not near a metropolitan area or even close to a midsize city.  What would you do if your child got sick, had to be ambulanced or airlifted to a hospital in a big city at an enormous cost to you, and the treatment needed at that facility was not affordable?   Would you go into debt or go bankrupt to save your child's life?  

When I was considering jobs at various locations around the country, there were some locations I could have been placed where a reasonable house could be had for under $70k.  The salary was lower, but I could have lived like a queen had I accepted one of those locations just because the COL was so low.  I would have a paid off house too.  

Shanendoah lives in a VHCOLA.  I bet she has a multitude of choices about where to receive her healthcare, and urgent care centers to choose from.  If she needs medical care for a loved one, she won't need to fret about where to go even if it is after hours.  Living in a place like that costs real money.  

Everyone's situation is different.  "High horse" is apt. 

[CCL]

Feb 1, 2017 19:44:31 GMT -5 TheOtherMe said:

Hugs Shane. 

I have put myself on a "needs" only budget for this year.  No I am not in the kind of debt as Shane but I have no reason like Shane's.  My debt came from wants and fun, not needs. 

I have one concert planned this year and the ticket is paid for.  The hotel is being paid for on points.  Out of pocket will be gas and food.

I did get my federal tax refund and paid off two credit cards.  That made me feel better.

I am changing insurance companies for all of my insurances.  Will save me about $225 per year but the coverage on auto and homeowners is higher.  Plan to do that next week after credit card billing cycle ends.

Good for you for paying off those credit cards instead of spending that tax refund!

[TheOtherMe]

When the state refund arrives, it is going to savings.

Smartest move I made in the last 12 months was to get  Medicare Part B.  I been hospitalized twice and will have no co-pays.  Also most likely looking at surgery with no co-pay.

[stillmovingforward]

Shane:

Sometimes life throws you curves.  I think you are doing a good job in spite of everything.  I am too familiar with your area and know how the housing situation there/here is.  I hate debt too.  But I remember going into debt like that once........I had a child born while we were ineligible for medical coverage.  She ended up in a NICU to the tune of hundreds of thousands of $s.  And years of therapy afterwards when preexisting conditions were a reason to deny coverage.  We were told to sell the house we own but it would cost more to rent somewhere and we weren't eligible for subsidized housing (didn't make enough!). So we kept the house, sold everything we could, paid what we could, I lied when I had to so she could get medical help, and we moved forward. It sucks, it happens, just keep chugging on.  It will end.

[shanendoah]

And naturally, this will be the first year in forever that we owe taxes. Less than $500 (best guess, I was doing a quick look), and obviously have until April to figure it out. But still.

[zibazinski]

Crap. 🙁

[shanendoah]

Closer look, paying attention to what our actual deductions are going to be, puts us at $150-200 that we'll owe. We currently have around $160 in liquid cash in the Prosper fund, so we'll probably pull that out and use it, come April.

[TheHaitian]

Breathe.... this too shall pass!!!

[shanendoah]

And because I can't leave well enough alone, I noticed today that our credit union has a no origination fee home refinance program going on. While we have a great interest rate on our fixed rate mortgage, we are no longer planning on being in this home 30 years. So I looked at ARMs. At the current interest rate being offered, a 5/5ARM, even with rolling the current HELOC balance into the total, it looks like we'd save $7500 in interest over the next 5 years, and also our payments (between mortgage and HELOC) would go down about $400/month.

$400/month would make a huge difference in our budget right now. Something to talk to C about.

[shanendoah]

I filled out the application for the re-fi. I'll need some documents from my home computer to upload, and while I printed my W2 for last year, I forgot to save the .pdf, and have to request a new copy, so I should have that tomorrow.

We applied for a 5/1 ARM that will have an 3.801%APR, and financed the closing costs. It tells me what the new monthly principal and interest payment will be, and I roll in the taxes and insurance costs (at what I'm paying now), and see that the new payment will only be about $225 less than our current mortgage payment. And I start to wonder how my math could have been so wrong, given that I thought we'd save around $400/month. That's not quite as good a deal, but still, we could use all the savings we can get.

And seriously, it wasn't until I came back here and read yesterday's post, where I mentioned our payments between mortgage and HELOC would go down, that I remembered oh yeah, it's not just that the mortgage monthly payment will be less, it's that we won't be making the $220 HELOC monthly payment either. So yes, savings of $400-450/month.

[Works4me]

Feb 14, 2017 15:30:58 GMT -5 shanendoah said:

I filled out the application for the re-fi. I'll need some documents from my home computer to upload, and while I printed my W2 for last year, I forgot to save the .pdf, and have to request a new copy, so I should have that tomorrow.

We applied for a 5/1 ARM that will have an 3.801%APR, and financed the closing costs. It tells me what the new monthly principal and interest payment will be, and I roll in the taxes and insurance costs (at what I'm paying now), and see that the new payment will only be about $225 less than our current mortgage payment. And I start to wonder how my math could have been so wrong, given that I thought we'd save around $400/month. That's not quite as good a deal, but still, we could use all the savings we can get.

And seriously, it wasn't until I came back here and read yesterday's post, where I mentioned our payments between mortgage and HELOC would go down, that I remembered oh yeah, it's not just that the mortgage monthly payment will be less, it's that we won't be making the $220 HELOC monthly payment either. So yes, savings of $400-450/month.

I am amazed at your ability to execute something like this in the middle of everything else that is going on - kudos!

[suesinfl]

I am amazed at how you are going through everything with a clear head. Thank you for sharing your story and what you are doing to get through this situation. Your calmness and thinking out side of the box is really helpful to me in realizing that just because the world feels like it is crashing down around me, there are things to think about to solve the issues. Thank you.

[shanendoah]

Works4me - Thank you. But it is really part of the strategy I identified with my therapist about controlling what I can control. For me, that means going back to micromanaging our finances - which I did when C and I were first moved up here and through the purchase of our second house (we were in our first only about 18 months), took some time off from micromanaging our finances, but then needed to micromanage MIL's, then C got laid off and I spent another few years counting every penny. It had really only been in the last 3 years or so that I'd really been able to relax on finances. At least in this sense, it's something I know, I am comfortable with, and it really does help me feel better about the rest of life.
So yeah, refinancing the house is actually a coping mechanism.

One of the jokes among our friends is that I need to take up drinking, or smoking (tobacco or marijuana), so that I can have a vice to lose myself in.

[shanendoah]

suesinfl - So one of the things that works really well for me, which was recommended by the intake therapist (before I was assigned my therapist), is to schedule time to break down. My main coping mechanism for everything is just to put one foot in front of the other and keep moving. As a recent analysis that was done says, I am incredibly self-reliant. But, things still get too big. The therapist thought I needed to schedule time (this was at the beginning of this process) to let myself be angry/sad/afraid/etc and not worry about how those emotions affected other people. And doing that, she felt, would prevent me from having an unscheduled breakdown that would have an even bigger impact.
I have gotten very good at recognizing when I am reaching a tipping point, and do my best to schedule a day off, or even just get home after work some evenings and tell people - I need to breakdown tonight. I need to yell, to cry, to lie in bed and stare at the ceiling, and people do not (and, in fact, should not) try to fix it. Let me spend a few hours just feeling everything and letting it out.
This process is hugely helpful to me, and it totally appeals to my control freak nature, as I get to control when I'm out of control.

Also, I'm 8 months into this, and I let quite a few things go out of control, especially in the first 6 months. It didn't help me feel better. So now, I'm focusing on the things that do help me feel better.

[Peace77]

Does the refi mortgage have a cap? Hopefully it does.

Does it allow negative amortization ? Hopefully not.

Best wishes.

[shanendoah]

Feb 14, 2017 19:19:05 GMT -5 Peace77 said:

Does the refi mortgage have a cap? Hopefully it does.

Does it allow negative amortization ? Hopefully not.

Best wishes.

Yes. It has a cap. The interest rate cannot change more than 2% in a single change period, and has a cap of 5% increase over the life of the loan.

Negative amortization is not an issue, as this is not an interest only loan. Our payments will be full PITI every month. It's just that after the first 5 years, the interest rate could change every year. 

We decided to refinance with an ARM because it will save us money in the short term (about $440/month) and, given our current situation, we fully expect to sell the house we're now in in the next couple of years, possibly as soon as this summer. If things change drastically, and we don't sell, well, I have 5 years of lower mortgage payments to look at, and by that time, I could easily see us refinancing to a 15 or 20 year mortgage.

[NomoreDramaQ1015]

I didn't get rid of cable but I did switch companies and at least for the next two years we'll be saving $100 a month.   In that time frame I can keep working on convincing DH to switch to streaming.  I can baby step him thru it before the bill shoots up again.

Then my mom is watching Abby now so that will save us $258 a month.

So $358 a month back in our pockets.   That is a good start.

[raeoflyte]

Feb 15, 2017 15:01:13 GMT -5 shanendoah said:

Feb 14, 2017 19:19:05 GMT -5 Peace77 said:

Does the refi mortgage have a cap? Hopefully it does.

Does it allow negative amortization ? Hopefully not.

Best wishes.

Yes. It has a cap. The interest rate cannot change more than 2% in a single change period, and has a cap of 5% increase over the life of the loan.

Negative amortization is not an issue, as this is not an interest only loan. Our payments will be full PITI every month. It's just that after the first 5 years, the interest rate could change every year. 

We decided to refinance with an ARM because it will save us money in the short term (about $440/month) and, given our current situation, we fully expect to sell the house we're now in in the next couple of years, possibly as soon as this summer. If things change drastically, and we don't sell, well, I have 5 years of lower mortgage payments to look at, and by that time, I could easily see us refinancing to a 15 or 20 year mortgage.

If you're going to sell/refi as soon as this summer, as an employee of a lender I have to ask that you ask your lender how many payments need to be made before the lender is hit with an early payoff fee.  This isn't a fee that would be passed on to you, and you certainly don't have to do this, but I've been on the receiving end of those penalties and they can be a lot more than just paying back income made.  

It's usually somewhere from 3-6 payments, so not a ton and may not apply at all, but figured I'd throw that out there.