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Also- you mention the home equity and rate but nothing else. Is your home monthly payment (mortgage, taxes, insurance, utilities) less than 1/3rd of your take home pay? If so, keep it. If more then you need to get a roommate or figure something else out like selling the house because you own too much.
Yeah that’s kind of my thought. I could rent out my downstairs with private entrance for roughly $1000 a month and minimal impact to my life.
Make. A. Budget. Cut up your cards. Sell the car. Get a beater. Do the debt snowball. Tackle the short term debt. Look up Dave Ramsey / financial peace university. Try and find some way to make more money via a weekend job if possible.
You’re living beyond your means for now.
You can’t keep both the house and car.
My choice would be downgrade the car to something worth around 10k
You might need to save up a few thousand, as you’re probably upside down on that loan.
But if you don’t do that, your only other option is to raise income. You said it might be possible to get a room-mate perhaps take a part time job.
Do these things in this order -
1 make a budget each month and stick to it
2 Get a much cheaper car
3 Pay down the credit cards
4 get more income if possible
1. What is your monthly take home pay (with the correct tax withholding taken out first) and what are your monthly necessary expenses? Gotta start there. Start saving more and putting more towards your debt. 2. Cut out extravagancies to keep your savings high and 3. Pay down the highest interest expense first and 4. At $115k/year you can’t afford that car, my friend. Can you sell that car with the $43k loan and get something cheaper without a loan? If so, do that immediately. You need to jump in and tackle this issue before it gets worse (and it will get worse without aggressive payoff).
I net $6900 monthly after normal withholdings and my portion of health/ dental. Car is absolutely a need. I got screwed because my perfect 10 year old paid off car was totaled by a texting teenager in 2021. Car is worth $38K. I don’t want to get rid of it if I can help it as I drive about 20K miles a year and it’s a Toyota Highlander with the V6 that should last me another 5-7years. I totally see your points and am actively working to fix this.
Agree with everyone else that the car needs to go and that your housing is too much on current income so roommate/renting is a great option. Normally I’d say pay off high interest debt first but with tax debt the IRS comes first. They can garnish wages etc which will really mess you up in an emergency so I think you should prioritize the 10k you owe them. You can call and negotiate a payment plan but once you do pay it asap!
I was in massive debt myself and you’re not going to like my solution; however, it got me back on track.
I sold my home and used the proceeds to get a clean slate and start over.
Granted, I was paying 4.5% interest on my mortgage instead of 2.5%, but it got me out of my mess.
Other suggestions I would make would be to see if there’s a more reasonably priced vehicle that you can buy, and sell your current vehicle, stop using your cards, track your expenses and see what can be cut, eat at home exclusively, and plan more nights in with your friends instead of going out.
Another suggestion I would have would be to call your credit card company and see if they would be willing to cut your interest rate a little to help you pay this off and also try to negotiate with the IRS to get a more practical payment plan.
That’s all I can think of. Trust me, when I sold my first home, it crushed me, which is why I have been vigilant to make sure that I remain out of debt going forward.
Again thank you so very much. Given me some good things to think about. And no judgement from me. We should not attach any shame and judgment to money or making difficult choices we have to make to better our situations.
Something a little more practical that won’t require a complete reset:
1. Home equity loan to pay off IRS/CC debt. Your credit score sucks but the rate should be much, much better than CC rates, get you right with Uncle Sam, and it’ll stop the interest trap. Shop around for the best rate, never take the first offer.
2. Create monthly budget that clearly outlines all your bills and expenses. A single man should be able to live off $100 ‘free spend’ weekly, if you’re spending $1000+/month there’s something wrong. Paying off home equity loan is priority 1-2 and 3.
3. Keep your now $0 balance CCs active, do NOT cut them unless they have an annual fee. Use them for recurring expenses: one for cell phone, internet, gym membership, etc. They need to stay active to rebuild your credit as 80% of your credit score depends on you having access to credit lines. Closing CCs is counterproductive unless you are one of those that literally can’t control themselves around a CC. They are a powerful financial tool for those who are disciplined.
4. Once your credit score improves, refinance your auto loan and apply for a 0% balance transfer CC (some of your existing CCs may offer this if they’ve been at $0/minimal balance for a while). Use balance transfers to accelerate HE loan payoff little chunks at a time. I’d start with $5k increments as it should be reasonably easy to payoff within a 12-mo period. Rinse and repeat.
5. Renegotiate terms. Haven’t called your internet/cellphone provider in a while? Hit them up and tell them you’re leaving. An adult has no business with T-Mobile/Verizon, hop over to Cricket or one of the other resellers (Boost, Metro, etc) and pay sub $50 unlimited. Look for new insurance quotes on home and auto. Chances are you’ve been getting fleeced for a long time. Look for a new gym with a lower subscription/special sign up offer.
6. Cut the fat. Grown adults do not need a Prime membership. Limit subscriptions to 1 max. Don’t fall for the Amazon, Spotify, Netflix, (digital in-game currency), monthly online gaming trap. There’s always free versions for a lot of these and you can live life largely the same without.
7. Unnecessary expenses. If Amazon/UPS/Fdx drops off more than 1 time a month, you’re spending too much. Asides from the random home/car repair material for DIY, you have no business buying random stuff online. Don’t be disingenuous with yourself.
8. Get a raise aka change jobs. It will make everything easier. Enough said.
A lot of the advice from anons here is extreme, Ramsey one size fits all, burn it all down. Not necessary for someone single who has a home and 6 figure income. You are in a much better place to turn things around than most (guysreallythinkitsoktolivelikethis.jpg)
Appreciate the practical perspective here. Thank you for taking the time.