“Dear Steve,
My parents have some financial difficulties and I am not sure how to advise them regarding how to get out of debt and stop spending so much from their retirement account. I am living with them but I have credit card debt of about $15,000.
We need to know next step overall- if we should move. and if so to a rental or buy something.
Also what we can do about the timeshare…
We live in a home that is estimated at $520,000 in a neighborhood where property taxes are about $9000 a year.
First they have a mortagage and a loan against it.
The mortgage has a balance of $274,000 and they pay $1500 a month towards it.
The loan has a balance $190,000 and they pay just the interest which is $435.00 a month.
They also have various credit card debt which totals $40,000 and they pay about $1600 each month towards it.
My father does all our bills and he uses his 2 American Express cards which he pays in full each month. Monthy totals on the American Express cards are approximately $5000. Other expense total about $2200 a month. There are also medical bills because various illnesses. (My mother is sick with an autoimmune disease.) Medical bills range from $200 to $1000 a month.
On top of this they are paying for 2 timeshares which they have tried with no avail to sell. They have a balance remaining of $23,000 each. Annual fees combined are $2800 a year and they pay $832 a month on these.
Should they try to refinance these or perhaps even default?
Monthly income from social security $2500 combined and my father has a consulting gig for which he gets paid $2500 a month. They are pulling out about $7000 from their investments but they only have about 300,000 left.
We want to sell this house and find something smaller where we can all live and I can eventually take over payments. Or I would like them to be able to live there for a while and I can live elsewhere until they need assistance.
Please advise what you think the best next course of action is.
Nora”
Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.
Dear Nora,
Thank you for contacting me.
I’ve saw and stared at the screen for a while, contemplating your situation. I keep coming back to the same conclusion and I think the answer lies in a tangential area outside of directly dealing with the debt first.
If we want to change the outcome we need to change the equation. So knowing that I need to first ask you and your family to sit down and answer these two questions for me.
- Are you prepared to put everything on the table and make whatever changes it takes to live within your income?
- Do you feel draining the retirement account is a smart thing to do?
Let me know and we’ll take it from there.
Please post your responses and follow-up messages to me on this in the comments section below.
