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PubBurgers
PubBurgers Dork
9/9/09 10:58 a.m.

Like a lot of people do, my wife and I failed to heed everyone's advice and currently have about $15,000 in credit card debt. On top of this, i'm beginning to grow pretty weary of my current job, and only having a High School Diploma and a couple years of random college classes under my belt, my options are pretty limited. Lately we've grown tired of basically making no forward progress in life, especially now that we have a 4 month old child. We currently make about $2,000 a month between us and, as you can imagine, a lot of it goes to paying off debt.

We've decided to go another route. Rather than just collect a bunch of useless junk that seldom (if ever) gets used, we're going to live the way we want and hope to do it on very little money. So we've decided to sell of most of our possesions and really start pinching pennies so we can pay off our debt ASAP (it's been 3 weeks and we've already got $2,000) and start looking for the house in the country we've always wanted. We eventually want to go off the grid and grow at least some of our own food. There doesn't seem to be any reason that once everything is said and done we can't live on around $1,000 a month and both (happily) work less. With some careful budgeting it looks as though this should be doable in about two and a half years.

I plan on talking to a mortgage officer but wondered if you guys might have any insight first:

We're currently upside down on our mortgage (we owe $5-10K more than it's worth). Assuming the market hasn't rebounded when we move do we pay the difference or can that be rolled into another mortgage?

Our current loan is an FHA loan and required no down payment, do conventional loans have such an option? We are going to try to save for a down payment but if we find that perfect house and dont have the money saved yet we'd still like to be able to make the leap.

Any advice from someone who's been in a similar situation is most definitely welcome.

thanks all!

Jacques

Strizzo
Strizzo SuperDork
9/9/09 11:14 a.m.

if you haven't already, start following dave's plan. www.daveramsey.com his "baby steps" are a good, common sense, approach to getting out of debt.

that said, if it takes you two and a half years to get to where you want to be before you sell & move, hopefully the market will have rebounded by then. also, once that big chunk of your monthly income isn't going towards servicing that debt, you can start putting it as extra towards your mortgage. this along with the two years of payments and market rebound, and you might even come out a bit ahead when it comes time to sell.

good luck!

Dr. Hess
Dr. Hess SuperDork
9/9/09 11:18 a.m.

Move to Arkansas. Everyone will think you're a native.

They won't roll your upside down into your next mortgage, like the car loans do. You'll have to come up with the difference between what you owe and what the net check to your side is at closing. That you might be able to finance (oh boy) separately. 5-10 large upside down is almost nothing in today's economy. In a year or three, you will probably be at least even.

It is my understanding that all the "no money down" loans are a thing of the past. Uh, that was one of the reasons we got here. I think 10% down is the new minimum.

Best bet for you would be to get rid of that 15K credit card debt, save up some down payment money and by that time you probably won't be upside down on your house. Then start looking for what you want. Listen to Dave Ramsey's radio show and/or look at his site. Follow his baby steps. Starting is the hardest part, and it sounds like you have that done.

carguy123
carguy123 UltimaDork
9/9/09 11:21 a.m.

No you can still do 3% - 3.5%-5% down loans all day long.

No, you can't roll your upside downness into your next loan.

I'd think a mortgage would be the antithesis of going off the grid

jrw1621
jrw1621 HalfDork
9/9/09 11:30 a.m.

What you are talking about doing is basically the Dave Ramsey Plan. Pick up his book or visit his website or watch him on Fox Business Channel or listen to him on radio or watch him on Youtube. You are on the same track, he will help you clearly find your way.

His path is:

    1. $1,000 to start an Emergency Fund   
    2. Pay off all debt using the Debt Snowball   
    3. 3 to 6 months of expenses in savings   
    4. Invest 15% of household income into Roth IRAs and pre-tax retirement   
    5. College funding for children    
    6. Pay off home early    
    7. Build wealth and give!
  1. Invest in mutual funds and real estate

Step two, the debit snowball means to pay off the smallest bills first, thereby reducing the number of bills that you have to pay, and pay them all off quickly by cutting back on everything you can.

Web samples:
http://www.youtube.com/watch?v=UrQSfpgrw4c&feature=related
http://www.youtube.com/watch?v=Yb5bAh0J_Po&feature=related

PubBurgers
PubBurgers Dork
9/9/09 11:38 a.m.

It is but at our income it's not really feasible to pay off a house in one fell swoop.

I know a lot of people say this but im not real sure we can cut any more from our budget. We spend about $100 a month on groceries, our only "extravagant" bill is internet. We've pretty much stopped going out and im working on quitting smoking. The baby is breast fed and cloth diapered so he doesn't really cost anything. We plan on canceling cell phones and going VOIP once our contract is up.

We were living pretty bare bones before but now that we've decided to hunker down we've really clamped down on spending. We're planning a no spend month next month and would like to try for them every 3 months after that (no buying gas, smokes, groceries, fast food, nothing).

We're starting with the highest rate card first and rolling from there.

jrw1621
jrw1621 HalfDork
9/9/09 12:03 p.m.
PubBurgers wrote: It is but at our income it's not really feasible to pay off a house in one fell swoop.

Paying off the house is step #6. It could take years to get to that step, but that is okay.

  1. trim back, which you are doing. Cut till it hurts.
  2. set aside some emergency money (this will keep you from using any more credit cards.)
  3. pay down bills

I agree with your idea of paying down big interest first. Another theory is the Ramsey way which is based around small successes. You may be paying on 6 credit cards now while you attack the highest interest. If you can eliminate 4 of those quickly you will feel like you are winning and with only two left, you could potentially only get hit with 2 late charges (not 6 late charges). Either way, pick a system and pay them down.

For Cell Phone in the Dayton Area, consider going to a Pre-paid, Unlimited offer like those from Boost Mobile, Cricket or i-Wireless and eliminate your house phone. These services will/should more than meet your needs at $50 and eliminate your home phone. The major advantage with these services is that if you can not afford it that month, it will not work that month (no collection call or negative credit reporting for late payments.) Since the services are unlimited, using it as a house phone is more feasible than using a limited minute type plan. Since they are pre-paid, no surprise charges.

Grtechguy
Grtechguy SuperDork
9/9/09 12:03 p.m.

Thread from the past

http://www.grassrootsmotorsports.com/forum/off-topic-discussion/going-off-the-grid/8235/page1/

slefain
slefain Dork
9/9/09 12:14 p.m.

Financial ideas aside, going off grid could be done a few ways:

Solar hot water heater: http://www.builditsolar.com/Projects/WaterHeating/water_heating.htm#Batch

Next I would look into a wood stove. My father-in-law used to heat their house with a wood stove in the basement.

PubBurgers
PubBurgers Dork
9/9/09 12:14 p.m.

As for phones, we just have cells, no home phone. We pay $75 a month and are stuck in contract for another 15 months

I remember that thread from when it was posted, cool stuff.

thanks for the advice!

Jacques

jrw1621
jrw1621 HalfDork
9/9/09 12:17 p.m.

What cell phone company? Some are easier to get out of than others.

alfadriver
alfadriver HalfDork
9/9/09 12:31 p.m.

Since you are talking about growing your own food, you may want to look into starting right now.

While moving to the country side with that small home seems like a great idea, I have a funny feeling that it's going to take a while to do it.

So, in the mean time, check two things- your local ag outlet- should be a state sponsored office that may be run by the state college that has the state ag school (for instance, here in MI, that would be MSU). They will be able to do 2 things- first, and foremost- tell you what grows in your area, by season. Second, for a nominal fee, should be able to do a soil analysis to point you in the right direction.

Start a compost pile- especially with the plant/bread food scraps, with the grass clippings, etc etc.

Anyway, depending on where you live, you could squeeze in a crop for early winter, or at least get started on food for spring.

Another thing you two should look into is canning. Go to the local "recycler"- be it a Salvation Army, Good will, Recycle (city), etc- find all the canning hardware you can get- jars, lids, pots, etc etc etc. Even right now, you can get food in bulk that is seasonal (say Tomatos) and make tons of stuff that will save $$ as winter goes along. And it will probably taste better and be better for you.

Even if you move in 6 months, it will be good practice to understand what is involved with growing a good portion of your food. Much of it is using what is fresh and in season vs. what's at the grocery. And much will be learning to preserve it.

Over the long haul, at your new home, you should even be able to grow your own spirits- well, at least wine. It will take 3 years to first yield, but grapes can be pretty easy to grow (again, the local ag extension office should be able to tell you what is good to grow in the area).

Anyway, that's a second leg to your overall goal.

Eric

PubBurgers
PubBurgers Dork
9/9/09 12:48 p.m.

Wife already grows food on our .15 acre lot (well not this year, thought we'd take a break having a newborn and all), no canning yet but she's considered it. We've also got a compost bin out back.

We both grew up in the country, we only moved in town about 5 years ago.

As for phones we currently have T-Mobile.

poopshovel
poopshovel SuperDork
9/9/09 12:51 p.m.

FWIW, I've heard some financial gurus saying "Screw paying off the CC's right now." Seriously. The logic is that you FIRST need a safety net to pay for your mortgage, keep you and your family from starving, etc. The CC companies can't take your house...but the mortgage company can. Make sure that you can pay your mortgage.

IMHO, if there's one thing we should all learn from the tanked economy, it's patience. Heard some interesting stats on Clark Howard the other day:

Clark Howard said: Barron's reports that the debt level of the average American household stayed steady at 60% of personal income for decades, all the way through 1985. But today, Americans carry a debt-to-income ratio of 130%. Slicing the same data another way, Barron's estimates that Americans used to carry debt equal to 20% of the nation's output of goods and services. Today, that figure is 100% -- five times the level of debt relative to the size of the economy. Interestingly, the amount of monthly spending used to service debt is not up dramatically because of lower interest rates. Even so, it's still a 40% larger monthly "carry" (that is, what it takes just to service the debt) than a few short years ago. The tie-in between people going bankrupt and the debt levels that exist in their lives is so concrete. Clark despises debt because it puts you in a weakened position. Of course, some debt is the result of people getting hit with catastrophic illness or divorce. Mostly, however, it sneaks up on you with a little bit here and a little bit there to create a huge problem. Let's face it, life is messy and you need financial breathing room. Think about that the next time you buy something you don't have the cash for. The consequences can be ugly. --------------------------------------------------------------------------------

...I thought that was interesting, and berkeleying frightening. I think we as a people have gotten so used to carrying so much debt that no one really thought about it. We certainly got sucked into the "BUY A HOUSE NOW" thing, but I'm actually happy that we did. Some of the other stuff caught up to us, though.

We bought a lot of stuff that we didn't NEED over the years, but still considered ourselves pretty frugal, because we didn't have CC debt, car payments, fancy electronics, cell phones, etc. Those days are over. 99% of my toys are gone...at least the ones that cost over $1k, and I can't tell you the last time we went out to dinner, went to an auto-x, etc. Hell, aside from a new pair of shoes (the holes were so bad in the others that if I walked on damp concrete, my feet would be soaking wet all day,) I haven't bought a single clothing item this year.

Sorry, back on topic. Personally, I'd save up some emergency cash before rushing out and buying ANOTHER home. Get your finances in order so that you don't have to go the FHA route. I'm assuming you're paying PMI, which is worthless, and probably costing you $1,200 or more a year.

PATIENCE GRASSHOPPER! Anything worth anything is worth waiting and suffering for.

Dr. Hess
Dr. Hess SuperDork
9/9/09 12:52 p.m.

Just a side note: while I usually agree with Dave's advise, I tend to look at some things a little differently. First and foremost, dump the credit cards. Pay them off, and while high-interest first is the long-term best solution, Dave's smallest to largest, rolling what you were paying on the small to the next one is probably the most gratifying. Etiher way, get rid of them. Have an emergency fund in place, build the emergency fund up to where it will cover you if you take an employment hit and Obamaemployment runs out. Minimize expenses. Now, here's where I diverge from Dave. I look at "reposessable debt" versus "non-reposessable debt." The Camry was reposessable. It got paid off. The house is reposessable. It's next on my list before my student loans and is the last reposessable debt I have. They can't reposess my education (in this state, yet) so that's on the bottom. When the house is paid off, which is also at a higher interest rate than the student loans, then I can look at the student loans. But, if I lost my job tomorrow (and my work just fired 40% of the US/Canadian employees and shipped all that work to India,) those student loans go into forebearance. Very worst case, I don't pay them at all and they send me nasty letters. The house still needs a mortgage payment or men with guns show up and escort you off the property. So, it gets paid off next. Dave has the house last.

You're actually doing pretty well, Jacques. You have the right philosophy. You're on the right path. It seems like your spouse is onboard, which can be 90% of the battle. If you keep this up for 2 years, I bet you will be able to have that credit card debt gone, be right side up on your existing house and have some money for a down payment on what you want.

Edit: Yeah, poopshovel, I agree that emergency fund is first and foremost, before nailing down the CC's.

poopshovel
poopshovel SuperDork
9/9/09 1:01 p.m.

^^^what the doc. said. I dig the "repossessable" and "non-repossessable" thing.

Dr. Hess
Dr. Hess SuperDork
9/9/09 1:06 p.m.

I tend to look at it more "hardball" than Dave does. Of course, Dave can't be giving out total hardball hints and tips on the radio or he'd get shut down. I already have seen references blaming him and Clark for our current economic colapse because "people like them were telling the rest not to go buy stuff and to pay off their debt instead, and (shock) people started doing that, bringing on the economic colapse."

PubBurgers
PubBurgers Dork
9/9/09 1:07 p.m.

Ok, baby's asleep so i can use both hands for typing now.

We currently have 4 credit cards with balances on them, we'll be paying them in this order; Card A has a 29.99% interest rate (missed a payment when they switched to paperless billing on the sly) and owe about $2000, Card B has $1000, Card C $3500, and Card D $8500.

Between selling stuff and next years tax return we should be able to pay off all but the $8500 card. By that point, we'll be able to dedicate about $500 a month towards paying the card. Once that's paid off, we can save for down payments/evening out the current mortgage. We should be able to pay off the cards in about a year and a half if we really hammer away and tighten down.

When it comes to moving, once we get in a house (we're looking at eastern Ohio, Appalachia style) we plan to start pretty normal. We want about 10 acres, house needs to have well water and a fireplace(s) minimum. I'd like to use the fireplace to at least supplement the gas/oil/etc heat. Ideally it would have a small stream so we could eventually use it for small scale hydro power but no stream doesnt break the deal. Our budget cap should be around $100K, but we should be able to find something around the amount of our current $75K loan.

If we buy another house in the $75K range we should be able to whittle our monthly budget down to $1000-$1400. That would allow us to make large payments on the house and ideally own it outright within 10-15 years. We'd also like to generate at least most of our own electricity at some point.

I know it's a lot of ifs and whens but the more i look at it the more doable it seems.

PubBurgers
PubBurgers Dork
9/9/09 1:15 p.m.

We do have a small emergency fund saved up, it isn't much, but we're thrifty and could make it last, we add $150 a month to said fund, it's come in handy.

My employment situation, while crappy, is rock solid. I don't have to worry about the place going under or getting fired/downsized. I work at an independent game store that seems to be doing pretty good. Aside from the job being tedious i dont have a lot to worry about.

The wife cuts coupons, which saves a TON and leads to a lot of free food. We also have food storage upstairs, which could probably last us around a month if needed.

If nothing else im amazed at the amount of money we've been able to cut out of a budget that i once considered pretty well managed.

enjoy,

Jacques

dyintorace
dyintorace Dork
9/9/09 1:21 p.m.
PubBurgers wrote: We currently have 4 credit cards with balances on them, we'll be paying them in this order; Card A has a 29.99% interest rate (missed a payment when they switched to paperless billing on the sly) and owe about $2000, Card B has $1000, Card C $3500, and Card D $8500. Between selling stuff and next years tax return we should be able to pay off all but the $8500 card.

Since the interest rate on the card is sky high, have you looked at any of the peer to peer loan websites? Something like www.prosper.com? I don't have any direct experience, but you might garner a much kinder interest rate.

keethrax
keethrax HalfDork
9/9/09 1:21 p.m.
Dr. Hess wrote: Edit: Yeah, poopshovel, I agree that emergency fund is first and foremost, before nailing down the CC's.

As long as you're realistic about what is/isn't an emergency (that last bit is important...), I think I'll be the dissenting voice here.

Let's say a $3k emergency fund:

Scenario one: No emergency crops up. Clearly I was better off in this case because I'm clear of the CC debt/interest that much faster.

Scenario two: An $3k emergency occurs

Either way, I now have an empty emergency fund. Either because I just drained it, of because I never filled it in the first place. But if had used the $3k to pay off the card instead of explicitly setting it up as an emergency fund, I've saved the interest on $3k in the meantime.

I'm not sure I see what you gain with an explicit fund, provided you are disciplined about what constitutes an emergency. If you aren't, then obviously not having the fund is just an invitation to rack up the card(s) again and I take it all back.

PubBurgers
PubBurgers Dork
9/9/09 1:28 p.m.

I'd look into other options for the 30% card but we've already got $1500 of the $2000 we need to pay it off, and it's possible i'll have the last $500 by the end of the week. Luckily i had a few toys i didn't use that i've been selling to get the ball rolling.

Dr. Hess
Dr. Hess SuperDork
9/9/09 1:29 p.m.

You're comparing no fund and no emergency with 3K fund and an emergency. You're missing a couple of options. No fund with 3K emergency and 3K fund with no emergency. Then there's cost of not having a fund. The math/probability starts to get tricky in the analysis, but you are always better off having the 3K fund, even if you just drained it.

The cards you cut up, never allowing yourself to fall into that trap again.

dyintorace
dyintorace Dork
9/9/09 1:32 p.m.
PubBurgers wrote: I'd look into other options for the 30% card but we've already got $1500 of the $2000 we need to pay it off, and it's possible i'll have the last $500 by the end of the week. Luckily i had a few toys i didn't use that i've been selling to get the ball rolling.

Good for you! I just wanted to throw another option out there. 30% is usury.

andrave
andrave Reader
9/9/09 1:54 p.m.

if you want to move in the country put your intentions on craigslist or get in touch with faith based efforts and ag people in the area you want to move to. I live in the country and lots of people are willing to lend a hand (or rather, a home) if you don't mind living modestly and helping them work their land.

It sounds old fashioned but it still exists..

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