Living on a Budget, Saving Money/Drowning In Debt


Hi Tim, Here's my situation...I'm going to be 65 and my wife is 63. We both are employed full time, she makes $81,000/year and I make $62,000/year. Our mortgage balance is $117,000(paid off in 2028) and our Equity Credit Line balance is $106,000. Our current credit card debt is $24,711. We are co-signers on two auto loans for our adult  kids. One has a balance of$7,634 and the other is $7,607, so add $15,241 to the debt pile. Add a consolidation loan with a $400/month payment and a balance of $6,721. Add them all up and it equals.....$269,673!! Our home is worth around $290,000. We both contribute to our 401K...mine is around $7,600 and my wife's is around $4,500. We have a very modest portfolio at around $212,000.

I should mention that 2 of our 3 grown children are self sufficient but our 31 year has a mental disorder called Borderline Personality Disorder coupled with intense anxiety so we've chosen to support him. I averaged out our income and expenses from May through August of 2015. Income equals $7,864/month and expenses equals $8,015....not good guy!

We're not blaming anyone for the mess we're in. It's all on us. It's called "living beyond your means." As I approach my 65th birthday, my denial of our circumstances has turned into, "this shit is real!" We're now in the process of calling the credit card companies to negociate lower interest rates and simply cutting down expenses. Our interest rate is 3.00% on the mortgage and 3.25% on the credit line. The credit cards vary from 16% to 29%(isn't that almost extortion?!)

We've thought about selling our house to pay off all of our debts and renting a two bedroom apartment. Doing this would eliminate $3,111 in monthly payments BUT we would need to pay rent on an apartment to the tune of around $1,500/month. We live in Fairfield County Connecticut which is very expensive.

Here's my question, do you think that selling the house at this stage of the game is a good move? Do you have any other valuable advice for us. How about bankruptcy? Thank you for your consideration and I look forward to your reply.

Thank you for the question.  My goal here is to give you some options to choose from that best fits you and your situation which you have to determine.  First take a breath, it seems like it has to be done today, but it doesn't, you have time!(I have to tell myself this often)  Also if you guys are beating yourself up take a break from that, we do it all of our lives and you are probably way ahead on beating your self up.  Remember, dumb or lazy people dont make the kind of money you do, so you have done alot of things right. If you are human and you have had money, you have done something stupid with it!  I have done enough dumb things to last a life time!!  Before I get to the home answer read this...

First I want you to get into your mind that you may need to work a few years longer than you wanted to at first. You have a good shovel (you income) to help you dig your way out.  You and your wife need to sit down and get a good game plan together and take it day by day working on your plan.  I have a good feeling just reading what you have said that you two started out strong, three children ago, and you will finish strong, and you will leave a great example/legacy for your children and grandchildren to go by!

Now, bankruptcy, unless you are getting ready to lose your home, or start getting things taken away from you under court order, I do not recommend it. You can ruin your credit and work through this without paying a lawyer several thousands of dollars to do it for your!  Here are the urgent things that can be garnished without going to court, IRS debt, Student loans.  Anything dealing with the FEDs can be taken without notice when they want. The IRS is the first to get paid if you owe them.  With that in mind here we go.

1. It looks like you know your income and outgo. Most people dont that I have worked with. On your budget you want to pay the most important first, food, clothing(if needed), shelter, transportation (to get to work not a BMW), and utilities (water, electricity, heat). These are the walls to protect you. If you have these taken care of you can make through the day. Dont miss a house payment for a credit card payment. They will wait.  They cannot garnish money unless they take you to court and win. They lie, threat and manipulate to get money. Hence the high interest rates! If you run out of money before the month is out, they dont get paid until you have the money.
2. Your first goal, if you dont have it is to get a mini emergency fund of at least 1000.00, maybe 1500-2000 since you help your son.  Use this instead of credit if a legitimate emergency arrives such as repairs, trip to the ER etc.  
3. After you have finished step 2 During your budget process list all of your debts, smallest to largest(not including the mortgage). Pay the minimum on all but the smallest debt and throw everything you have at it. Try go get some extra income for a bit, sell everything you would not go out and buy right now if you had the money and throw it at the debt. Make your kids think there will be nothing left for them in the will! During this process, keep out some money to give to your church, a charity etc.  This helps us keep our mind a little off our ourselves. This step will take you a while to do, depending on how much you can throw at your debt.  Sorry to say all of that to get to the house question!

YOUR HOME. Would you go out and buy it right now if you lived somewhere else. Where do you want to retire at? Do you want to move to a warmer place, go to the country or live right in the city by everything? If you want to move when you retire sell it. If you want to downsize when you retire sell it. This maybe the home you raised your family in and it has sentimental value to you and your wife.  Hear your wife in this she may be more attached than you. All of the great memories are in you, your wife and your children not the house. If I were in your shoes I would lean toward the sell, use the equity to get out of debt. But that is not my house and I am 45 years old. If you buckle down how fast can you pay off all of your non mortgage debt by living on rice and beans and selling every thing you dont need? If 2 years or less I would consider keeping the house. Also ask yourselves how would it feel to owe no money after selling the house, with a little money extra left over from the sell?  You could then save 3000.00 a month to a fully funded emergency fund and put away for retirement. I worked with someone in a similar situation as you, they sold their home, and could not decide on buying a more expensive one or smaller less expensive one that needed some updating. They Kept the money and bought the less expensive one and are happy.  You have no wrong decision here, just which do you want to do?  Knock out all the consumer debt and keep the house and when the consumer debt is finished work on the house. Or Sell it pay off everything, buy again, less expensive, save as much as you can till you retire. Which ever decision you make get mad at it, kill it, dont go back in debt if at all possible. Remember you got here one step at a time and you will get out one step at a time. Borrower is slave to the lender. I hope this helps.  

Living on a Budget, Saving Money

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Tim West


Budgeting, credit, collections, basic insurance and investing. Small business budgeting basic will and estate planning.


Financial coach since 2009. Help coach people in personal and small business financces.

Head of financial ministries at Grace Fellowship of Augusta,Dave Ramsey Certified financial counselor and 20 years of doing it my self.

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