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Looking for some Financial help.

By MrTelek - 14 May 2010 35

Were we were:  both of us on good incomes and supporting our debts without any issues.

Were we are: Had a beautiful baby girl, another one on the way, wife’s income has gone down by a factor of more than 2.

The result: Aside from the mortgage, we have $155K worth of debt we can no longer service. Specifically our joint loan to the tune of $42K.

We have a house with $70K in equity. I have freed up money buy 2 means so far. a) paying only interest on the mortgage and b) refinancing the car. This gives us about $350 per month extra but wont kick in until mid to late july. The payment on the $42k was $950 per month.  Once my tax return comes in, I will claim the tax free threshold and free up another $400 per month. The missus has freed up $300 per month by finding a better deal on childcare.

What we need: A way to keep the house and pay our debts and be able to live.

Any ideas or offers would be most appreciated.

Regards,   John.

What’s Your opinion?


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35 Responses to
Looking for some Financial help.
georgesgenitals 1:31 pm 14 May 10

OK – how much is your home loan costing per month? What is the estimated current value of the house? It may be possible to get your bank to either capitalise interest for a short period, or draw on some of your equity in order to reduce other debts.

Fundamentally, you need to know exactly what your incoming and outgoing cash flows are. One way or another, you have to get the incoming higher than the outgoing. So sit down with a pen and paper and write it all down. You might be surprised what you can cut out.

MrTelek 12:55 pm 14 May 10

Coffin RX2, I cant work a night job, conflicts with my obligations to my full time employer. I have a part time job but only under the condition that I can leave for however long at any time. I fix radio controlled cars. 🙂 and Longshanks, we shop at aldi or coles or woolies chasing the specials and the cheaper options. I have also given up the grog totally and noticed the benefits financially and health wise. I no longer race rc cars and have whittled my hobbies down to only one which is that of amateur radio.

cheers,
John

MrTelek 12:48 pm 14 May 10

The gist of the problem is that we were living in our means because my wife had a very good job. We were paying our loans and debts and had cash to spare. The problem arose when a) her employer pushed her out of her job purely because he did not like her. b) We had some issues with bub no1 and that put a kink in things. Now, while she has a job, it’s only one third of her previous income.

We dont go out, we rarely have takeaway, I have a car but it comes out of my package ( The issue with a cheap car was that we didn’t have the funds to run it, at least with the lease, we have reliable transport and don’t have to worry about coughing up cash )

I have refinanced the car, refinanced the mortgage and am looking to roll some of our smaller loans into the mortgage. Done the ebaying and the garage sales, and I have a second job. So It’s not like were not making an effort.

The thought of selling the house has come up but that would only take about $60K off our debt. At the rate the property value is going up, I could wipe the whole debt in about 4-6 years if I can hang onto the house.

Thanks,
John

fgzk 12:09 pm 14 May 10

Sell the kids and the wife. They both cost lots a money to keep. Keep the big screen TV. It has a remote control with an off button.

Really what where you thinking. Maybe you should sell the TV.

housebound 11:56 am 14 May 10

Options that worked for us, but some may just be re-arranging deck chairs at this stage:

1. Do a budget and stick to it.

2. Don’t buy anything that isn’t needed – ie essential to staying alive. Sell anything you don’t really need.

3. Solve the car problem – do the maths on what works best (depreciation only costs money if you sell the car, and an old car can cost a fortune to run). Cycle to work if you can, even if you keep the car.

4. Economise around the home – it means cheaper cuts of meat, learn to like lentils and chickpeas, put in a vege garden, make your own bread from flour (not bread mix), use home-made cleaning products rather than expensive commerical ones.

5. Shop at Aldis through the week and the vegetable markets at Belconnen or Fyshwick on Sunday afternoon when prices are drastically reduced (and buy only veges in season). Shop at St Vinnies etc for clothes (really good for baby girl clothes)

6. Make all your food and make all your outings picnics that you can take your own food to. Your real friends will go along with it.

7. Approach someone who can negotiate with the lenders for you. The Salvos are supposed to be very good and have helped a few of our friends. Another group, Christians Against Poverty, will also advocate for you with the lenders.

8. Contrary to what others have said, take a second job _only_ if you have to. Realise just how exhausted it will make you if you do it for too long, and it isn’t good for your family life.

9. And here’s the hardest one – consider selling the house and moving to something smaller, but take stamp duty into account, and the cost of transport etc if it forces you to the outer suburbs where cycling/busing is more of a challenge.

10. You will get through this, but it isn’t going to be easy. As long as you keep your family healthy and in one piece you’ll end up with something to show for it all.

Hells_Bells74 11:01 am 14 May 10

Certainly if it’s the bubs main source of nutrition, I wouldn’t recommend watering down already homigenised and pasturised milk that has no vitamins/minerals added (sorry, sp?).

Stick with breast/formula even when you’re poor as a miser, I reckon.

Might have been different in carnation milk and straight out of the cow milk days.

CoffinRX2 10:53 am 14 May 10

Moles, only problem with your suggestion is that banks have seriously tightened lending criteria at the moment, and with only 70k equity in their place, thats not going to help them at all with most banks requiring minimum 90% LVR (and then factor in the LMI premiums etc) and if they financed the house when his wife was working, the servicability now wouldnt stack up.

My advice, sell the car, work a part time night job?

And this is coming from someone on a single income, about avg canberra wage servicing a nearly 500k loan on a house. … things can be done just have to make sacrifices

Genie 10:45 am 14 May 10

Someone already suggestion consolidating your loans so I’ll skip over that…

Alot more information is needed to help you save cash. Best way is too write down every single cent you spend for a whole week to an entire month. Eg/ $4 for coffee, $x for lunch, $x for parking.. blah blah blah. Work out where all your money is going and cut back
(Eg/ my old boss would buy up to 5 t/away coffees a day. In one week she would spend $100-150ish just on coffee, so she found an alternative, had no store bought coffee for a week and bought a fancy coffee maker for work at about $100)

If you have credit cards maxed out, do a balance transfer, Citibank have some good ones out at the moment with less than 2% interest paid on the transfer amount. (I’d recommend the Clear Platinum one at 0% for 6 months).

Carpool, share the costs of petrol/parking or bus it to wherever you work. $23ish for a 10 ride bus pass compared to $50ish for parking and even more for petrol makes sense to me.

Have a garage sale or sell EVERYTHING on Ebay/Allclassifieds. Most people don’t use up to 50% of items in there home.
-If you have a large DVD collection, head to Woden Trash n Treasue one Sunday and sell them off at $5-$10 a pop. You’ll probably come home with none left over. (Esp if you sell them under $10. A carpark I think is only $8??)

Second job !!!! No harm in doing nightfill or weekend work for some extra cash.

Budget budget budget… have every cent spent, before you even get paid. BILLS FIRST! Don’t buy anything new until you can afford it – including food! I once told a friend who was a tad broke to not buy any food for a week and eat everything in the cupboard/fridge/freezer. The only exception was buying bread/milk/meat/fruit and vege

Saving with a baby:
-used cloth not disposable nappies
-breast feed if you can over formula, or water down fresh milk
-blend veges and freeze over buying jars of baby food
-pick up cheap baby clothes and toys at garage sales, vinnies/salvos

Post a bit more info and so more accurate advise can be given

johnny_the_knife 10:19 am 14 May 10

I’d reccomend you give Larissa at National Financial Fitness a call – the teaches financial literacy, and helps people in your situation all the time.

http://www.financialfitness.com.au/

Or phone 1300 937 669.

Mothy 10:17 am 14 May 10

Good on you for putting your hand up and saying you’re in trouble. A lot of people won’t do that until they’ve passed a point of no return.

Your next step should be making an appointment with a Financial Counselor. See here for a breakdown of what they do.

Canberra based Counselors are;

CANBERRA
Care Inc. Financial Counselling Service
PO Box 763, Civic Square, ACT, 2608
6257 1788
6257 1452

DICKSON
Salvation Army Moneycare Canberra
4 Hawdon Place, Dickson, ACT, 2602
PO Box 1038, Dickson, ACT, 2602
6247 3635
6257 2791

When asking to shift to interest only, did you ask the bank if you can refinance the home, consolidating the other debts into the home loan, to simple down repayments? Helps if all other debts are with the same institution though not essential.

M0les 10:01 am 14 May 10

I would talk to your bank/lender about consolidating as much debt as you can under a single lower-interest loan. This usually means putting it under a home loan/mortgage.

If you have any relatively liquid investments (Like savings-accounts, shares, term-deposits, _not_ super), etc., you should seriously consider liquidating them and putting the cash into your debts.

See if your lender can set-up an “offset account”, which is a current account (Where you might have wages paid and pay bills / buy things from) which pays no interest but counts against your debt interest calculations instead. E.g. a $100k loan with a $25k offset means you have $25k “ready cash”, and only pay interest on $75k.

If you still have too much debt, have a look at selling-off illiquid assets (Second car? Big-screen TV? Art collection?). This is usually lots of effort for not a whole lot of gain (Have you seen the prices of secondhand cars nowadays?!). It _may_ be possible to draw-down from your superannuation if this gets you just that little bit extra you need, but you’re almost certainly better-off leaving this where it is (The tax implications are fairly bad).

If it’s a case of bridging the gap until your effective income increases (i.e. mid-late July), the lender may be able to set-up a “repayment holiday” till then.

It’s a bit hard to give specific advice without knowing how many debt parcels, what size and what interest you’re paying. Certainly eliminating the highest-interest debts first is the obvious best path.

E.g. if your “joint loan” ($42k) is high interest, you might be able to draw on your home equity ($70K) to eliminate it.

Still under water? Maybe Centrelink (Social Security) can help (That’s what they’re there for)

If you do all this and you still have more interest outgoing than income, you may have to consider moving into a cheaper house or location.

Hope that helps!

Hank 9:57 am 14 May 10

there (sorry typo)

Hank 9:56 am 14 May 10

I agree with CoffinRX2 sell the car! Buy an older one in the mean time.
Stat selling some items in the house you don’t use, it’s a great way to make some quick cash.
Maybe get a second job, I know I work during the day and some nights, and it helps pay the extra bills.
And finally budget, have the mentality of if I don’t need it don’t buy it.

I whish you all the best with this, light is at the end you just have to sacrifice your current lifestyle to get their.

longshanks 9:55 am 14 May 10

The key phrase in your post is “be able to live”. How do you define “living”?

There’s lots of ways to save money – it all depends on how much you are willing to change your current lifestyle. For example (and I realise that some of these might not apply to your particular situation):
– stop smoking (if you smoke)
– drink less alcohol
– take leftovers to work instead of buying lunch
– less takeaway/restaurant meals
– don’t buy premium products e.g. fine wines/food
– try to use the car less (difficult in Canberra, I know, but even a small reduction can make a difference)
– make a list of all the stuff in your house which you no longer use/need. Sell some stuff on ebay or allclassifieds.com.au.
– Downgrade: do you really need that 50 inch plasma/$60K car/gym membership/etc.
– Think before you buy: do you really need a new pair of shoes/a new bike/a new dishwasher/a new set of golf clubs/a new phone/a new laptop/etc.

To be brutally honest, the fact that you have $155K in debt in addition to your mortgage suggests that you’ve been living outside your means for some time (although there may be other factors involved which you haven’t mentioned). Once you’ve dealt with the short term issue, you really need to engage in some serious long term thinking about your finances.

My wife and I have three kids, and one income ($80K per year). That’s a choice we’ve made, and we work around it. We haven’t bought a house – and we don’t have any personal debt whatsoever. We put aside a bit each year (we’d like to buy a house one day), and we eat well (always buy fresh produce) and we live comfortably – but we never spend money which we don’t have.

CoffinRX2 9:38 am 14 May 10

SHouldnt you have thought of this kind of situation before you launched so far into debt?

Why refinance the car? … why not sell it off, as its obvioulsy a depreciating asset you have that is under finance, and buy a cheaper daily driver?

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