Hello! been wondering about paying down a loan

[rpatty]

I'm trying to look over the numbers, but I'm not entirely clear that I'm properly comparing income and outgo. Part of this is definitely clouded by the business details ... for instance, you list one weekly payroll, but a yearly income ... is the payroll included in your business breakdown?

 

It might help if we could see what your average, personal, take-home pay is. I realize it fluctuates a lot, but since your budget is monthly, we need a number to compare it to in order to see how things shape up.

 

If you made 120k pre-tax last year, that's probably something around $80k after taxes and self-employment taxes, maybe? Over twelve months that would be around $6500/month that you're bringing in. A rough scan of your budget looks like you're paying out about $4k/month, which should leave you some breathing room, though again I'm not clear if that accounts for payroll or not.

 

This year is a different, story, though. If your year-to-date pre-tax income is $22k in the hole, I guess it's not surprising that you're having trouble paying the loan ... because the truth is you're short money to cover anything. It sounded like there were jobs that went unaccounted-for, so I'm hoping that your business is at least in the black when all is tallied up. Based on your minimum expenses, though, you need to have at least $4k per month coming in after taxes, so probably you need almost $7k before taxes, or $84,000 business profits per year. If your business doesn't make that much, it's eventually going to be a losing proposition.

 

From where you are, I'd say there are bigger problems than the loan. The major things that can help would be to either increase income or decrease expenses, or both. Turning that operating loss into a profit should be first priority. But then as IDtheft said, your basic expenses are killing you, too. Last year was okay, but that looks like the only one of the past four where your personal income should have been enough to cover your personal costs. Whether it's easier to reduce business expenses or personal expenses or both is up to you, but it seems like spending some time there could make a huge difference.

 

The interest rates on all of your credit cards is rough, too. Thankfully the balances aren't too high. Not sure if the rate jacking is just coincidental, or if you have credit blips that caused it, but you might see if you can negotiate a lower rate or hardship rate, or if you have options to do low-rate balance transfers that'll lower some of your minimum payments and cut down on the interest drain.

[JeepChick]

OK, for the truck. I haven't checked bluebook lately but we aren't upside down. The truck is a work expense, it is an absolute necessity. Dh is a general contractor and he drives a Chevy duramax diesel. He had a lighter GM truck before, and it was just too wimpy for his job. He hauls around a lot of stuff.

 

For the Suburban, this isn't upside down either, and I'd be willing to drive something cheaper, but Dh disagrees. We have a large family, and a minivan is too small. Before this suburban we had a used suburban with a 15% interest rate. Our plan is to drive it, pay it off, and keep driving it until we can downsize when the kids are bigger. With our scores we can't finance anything so we will keep these two loans.

 

We can't move into anything smaller. that mortgage is for a 1650 sq. foot house, 4 bd/2 bath. like I said we have a large family. The value of the home is approx 405 to 415 and appreciation is projected to rise 15%. It is an excellent investment, one we will keep at all possible.

 

Last year, I received an inheritance, and the loans (AG and the 2nd mortgage) went to pay off some business bills. I'm pretty sure our accounting is not totally done yet. The P and L doesn't show the whole story.

 

Also in Dec. we sold a rental home

In January we depostied $9477 in gross receipts

In February we will deposit 18,265 if not more

We are in a contract for $64,620 will take approx 4 mos, and we started first of the year. There were already job delays.

 

In 2004 we had no payroll at all, so no payroll costs were included in that . Our accounts are seperate but we pay ourselves from the gross figure.

 

The rate jack was because of late payments, because obvioulsy in 2004 we didn't have as much income. We have managed to keep everything afloat, except for late pays. We had tax leins that are paid, we had judgments that were paid.

 

PS. sometimes we do little cash jobs. I'm pretty distracted right now so I'm not sure if I forgot anything.

[JeepChick]

2nd Mortgage $168.75 (15,000  I/O 13.5%, maturity date 7/7/06) <---OUCH

 

What does that mean? What happens on 7/7/06?

<{POST_SNAPBACK}>

Gingerly, the payment is intrest only. on 7/7/06 we will have to pay off the principal of 15,000 if we don't pay it before.

[JeepChick]

We have 3 employees.

 

We don't often use the cards, we've been carrying most of that balance for while.

 

I had the Chase card paid down to 5200 and the Orchard down to below 50%

 

Also, we PIF the CAP ONE and Dh uses this for feul and small business expenses.

Edited February 10, 2005 by JeepChick

[JeepChick]

well, I've been thinking.....as long as we can keep the income up

 

 

If we can pay off the cards, pay off the loan

Keep the cars, Keep the house

in 6 months to a year....Our scores will better, our derogs will be older, and then we can

 

Either refinance or sell

and move somewhere cheaper.

 

that was our plan with Idaho, but obviously we couldn't pull it off.

 

I also think that if we could eventually save 6000 we could have our monthly budget money paid in advance, and then each month we pay it back...Because sometimes we don't get paid on time.

Edited February 10, 2005 by JeepChick

[stevenwe]

wow , you have alot of large bills

 

i agree with the prev post , you hae to downgrade you cars , buy a used car for 4k , at least for the next 2 yrs or so

 

that should be your fist big step

 

call each credit card and ask if they can lower the rate .

balance trnasfer high interest debt into low interest debt

 

Pay off those credit cards fast

 

you gotta really slow down with alot of your spending

 

I dont want to recommend selling your house even though your mtg payment is high , i understand a home is very personal . Keep the house but make that your goal to really be cheap with your money .

 

small cars will save alot of gas

[TxQuiltGirl]

wow , you have alot of large bills

 

i agree with the prev post , you hae to downgrade you cars , buy a used car for 4k , at least for the next 2 yrs or so

 

that should be your fist big step

 

call each credit card and ask if they can lower the rate .

balance trnasfer high interest debt into low interest debt

 

Pay off those credit cards fast

 

you gotta really slow down with alot of your spending

 

I dont want to recommend selling your house even though your mtg payment is high , i understand a home is very personal . Keep the house but make that your goal to really be cheap with your money .

 

small cars will save alot of gas

<{POST_SNAPBACK}>

 

 

I'm not really sure what ya'll aren't seeing that she's saying. She can NOT get a smaller car because she has a large family. It's not that difficult to understand, really.

 

It's easy to be a Monday morning quarterback and look at someone else's finances and tell them what they are doing wrong, but the fact of the matter is, most people who want to improve their financial picture are already aware of where the money is going, that is if they are serious about it.

 

I don't think the problem here is that they don't know where the money is going. I think it's more a case of being self-employed (and it sounds like that might be a recent development) without having enough cash reserves to cover slow months.

 

Telling someone "you have to cut back on spending" without a full accounting what where their money is going is not at all helpful. JeepChick never said that they have no idea where the money is going. She seems to have a good idea of the bills and obligations they have.

 

This is what I would suggest ... I'm sure you've already found ways to cut back on groceries and the like. You may want to consider taking on a part time job if that's feasible to get a little money ahead, or maybe if you have things in the house you no longer need and/or use, sell them on eBay or something.

 

You've hit a rough patch and I'm not sure how this conversation evolved from "should I pay my loan down" to "you're sinking fast" but the truth of the matter is, if you can in any way get a little extra money coming in to help pay down your debt, you will probably be ok. It's going to be VERY tight, but I think you can squeeze through if you're determined enough.

 

How old are your children? Can you consider taking a job at their school or something to help put some money into the family budget, if you're not already working? I just think you need to build up some cash reserve and work on paying down your cc debt. I can totally understand wanting to have cars that are able to handle the size of the family you have, and something that is reliable.

[rpatty]

Just to be clear, it's not necessary to get a *smaller* car if you want a *cheaper* car. In this case the passenger car is fairly new, and especially since it's not upside-down, it would be possible to sell it and buy an older, used vehicle that's still large enough. Even if it takes a smallish loan to make up the difference, it's still trading a large debt for a smaller debt, with the effect that it'll make a pretty large difference to the monthly budget. If cashflow is an issue, particularly in being erratic, a smaller minimum monthly payment can be important. Not saying it's the only possible solution, just saying it's an option.

 

It sounds like the bigger issue at this point might just to get the numbers calculated out a little better. (I realize the numbers might be completely clear elsewhere, and just not handy while you're typing online.) But it's hard to give advice without really understanding the picture.

 

Being able to build up a reserve of $6k to use in case payments come in late from work sounds like an excellent idea, and you definitely want to replenish it each time you have to use any of it. This should not only cut down on worry about making payments, but hopefully would eventually prevent late fees and help correct some of the rate jacking.

[JeepChick]

rpatty: we can't qualify for diddly right now, I hope you realize this. We don't fit in a minivan. I could sell the suburban, but then what would I buy for the maybe 4K we would have left..

 

that we fit and can haul our groceries

that is safe

and has good gas mileage.

 

My suburban is both, and I don't drive very much.

 

I have one child not yet in school until school year after next, and school hours are 8 to 2.

 

I also have some things I can Ebay, I'm more than willing to help add income, but my DH says that my time would be better spent making sure things are running smoothly so he can be more productive. He can make way more money than I can, if I can help him I will. Its fairly easy to spend a $100, and a little harder to save it, but we are going to try.

 

I suggested that we switch his cap-1 gas card to a debit card on a sepertae account, and we start stashing away a few bens each time we get a draw.

 

And keeping an eye on the payroll costs is very helpful as we can know to save enough to get us through on payroll, providing the customer pays promptly and providing the estimated time for the work stays on track.

Edited February 10, 2005 by JeepChick

[madflower]

You need two budgets, one for your business and one for your personal. And you need to keep all of this separate. This money should not be interetwined like it is. IE you need separate accounts for business and personal use. It makes the accounting much simpler.

 

You should be able to take out a larger, home equity loan when that comes due so don't really worry about that. You can keep paying the minimum interest only payments on that.

 

You need to figure out your budget. Start this way. Take your lowest monthly income and use that number and make your budget include all costs. You need to know what you are spending. Add up everything you are paying for your bills and hopefully you are paying some extra somewhere. Label this "investments" on your budget.

 

Then order your credit by interest rate, although since you are probably getting charged extra for being over the limit on the one card, that will probably be your first card to at least until it gets under the limit.

 

Then send out all the minimum payments to every credit bill except the one you labeled as #1 send the rest of the "investments" to that account. Just keep doing that right on down the line.

 

IF/WHEN you get extra money ie more monthly income then your budget indicates. Then just add that money to your "investments" line. When you get card #1 paid off then do the same thing without changing your "investments" line. Also when you have paid off everything, start saving that money.

 

Also start at 0 for every month. everything that is leftover in your budget, send to your "investments".

However you are going to want to have about 500 dollars left in your checking account to cover budget overages. No one can set up a perfect budget not the first time at least.

 

The budget aspect is important, just because this way you can see where you are actually spending your money on food, gas, electric, insurance, etc. And then you individually look at every item and see where you can cut stuff. Maybe you can, maybe you can't. I _always_ use the highest numbers for utilities, food, etc for my actual budget numbers. This way i typically have leftover money.

 

I had to do like 3 things, first i changed my car insurance.. and got rid of the extra stuff and raised my deductibles and actually switched insurance companies (shop around) sometimes you can "umbrella" insurance rates with your house so you aren't duoble paying for the same coverage too. I also quit eating out, and don't buy frozen dinner type of meals, it doesn't take that long to make stuff and you have leftovers to freeze for quick meals. I also cut my energy bills by lowering the thermostat and keeping all unnecessary lights, tv, computers off. Which means you have to get the kids on board with this also. I will warn you, most of this stuff comes out 5-10 bucks at a time, not in large chunks.

Also shopping during "sale" times of the year and buying canned food in bulk on sale will help too.

water or kool-aid instead of soda helps, etc, etc. So take some time to pre-plan also.

 

I don't know if you can cut expenses somewhere or not but this is at least the basic plan to get you going. Make it workable though. You do get some resistance when you cut the thermostat down 5 degrees, or make your kids buy clothes off the sales rack, etc.

 

If they are old enough, I would definately explain to them what is going on. It is a good lesson for them to be a part of.