Next Steps

A nickel ain’t worth a dime anymore.

Yogi Berra

I should make the clarification that this is not advise on what to do, this is simply a diary of what I have done, and I am continuing to do. We will see if it works out, but I am sure I am mistaken in some of the financial things I have chosen to do. This is an emergency and one that I no longer want to hide from. I want to take control and be a good steward. The best news is, despite my finances I feel like I am beginning to heal spiritually and finding more value in life.

The next big step was to tackle the consolidation loan and my credit card. I have a spending problem, because I did not have enough income for my outgoing expenses. Now that I was in the positive, it was still not enough to stop use of the credit card. By now I owe $18,000 (now $450 a month) on the credit card along with $24,000 consolidation loan.

Since we knew the house appraisal for the re-finance we decided to use the rest of the equity in the form of a 2nd mortgage to be done with these two debts. 2nd mortgages are risky, in that if you default you can lose your home, but they also offer a far better interest rate than I am getting with the credit card and consolidation loans. Because this will put us at 95% of our home value, the bank was willing to give us a 10-year 6.5% interest rate. This amounts to a $530 payment, however the interest was above 10% for each of those loans and it clears those two big debts, so now my monthly savings is $721 a month. In addition, it also gave a few thousand dollars that we used to pay-off the 2nd vehicle. (note: We did succumb to temptation and repurchased television with an internet package, further our oldest boy got his driver’s license which means increased insurance, so that offset some of the new monthly and the $721 number includes all of this.

Simplification was the message I was receiving, and this meant that I now only have to worry about a few debts that can all be on auto-pay. The current numbers are shown below:

Mortgage: $ 1433

2nd Mortgage: $530

Utilities: $300 (can be higher or lower, this is an average.)

Internet: $100

Student Loan: $100

Insurance: $200

Cell Phone: $100

Tithing – $528

Offerings – $40

401K – $50

Total ($3,381 from $3,574 or +$193 from the previous post.)

It was now time to budget, so I would not need to use the credit card anymore. My plan is to put my credit card limit to $5,000 (currently $20,000) and use it for everything, so I can get the points and then pay it off each month. I want the limit down in case I am not disciplined enough to do this, and it gets out of hand. $5,000 is much better than $20,000 and I cannot get into that kind of trouble again. My other thought is to use $150 a month extra to pay on the 2nd mortgage each month, so it goes by faster. I should only need $500 a month for food and gasoline and we have some savings now in case we have something come up. Not sure if this is going to work, but that is my plan.

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