We’d Like to Cut Up Our Credit Cards and Start Over. – Terry

“Dear Steve,

I have $38000 in credit card debt, an $18000 2nd mortgage, a $134000 mortgage and a $520 per month car payment. My wife and I bring home $85,000/year. We pay our bills on time each month but have difficulty saving with life’s unexpected expenses, ie older vehicle repairs, medical expenses, etc.

I would like to cut up credit cards, refinance and save about $1,000\month in payments. This cash would be saved to bifold up an emergency fund for the unexpected expenses.

The housing crash has not helped the value on my 20 year old home. What can I do?


Dear Terry,

I feel your pain.

A debt consolidation loan or a refinance sure feels like it will be a great tool to wrap this all up and help make financial sense of a pressing situation.

And it just might. Be the bigger point to ponder is if you’ve been slipping down the same path for a while and just repeating the same actions over and over.

I’m curious if the credit card debt and maybe the second mortgage are the result of using borrowed money to make ends meet and the real issue isn’t lowering payments but closely considering the life changes that need to be made to bring your life within your income.

Take a look at The Budget Reality of Digging Out of Debt and you’ll see why the tough part isn’t just lowering obligations back to even but making those deeper cuts to let you dig out of the hole.

needySo can refinancing do that? Yes, it can. But it is only as effective as you can be to make as sure as possible you avoid slipping negative again.

This might just be the teachable moment and your best chance to live a life of less financial stress and worry moving forward. Or it might just be another financial mistake you wish you had not made.

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I know all that still leaves you wobbling in the middle as to what to do but the most important area to spend time considering is what changes you are willing to make to change the future and it your future is more important you and if how important.

It might just be that you’ve reached that moment, as many of us have at one time where the rat race and the constant treadmill of debt has just become so exhausting that you want off.

In that case it might just be the time to go big or go home. If you want to radically alter your financial future what about making big changes to get yourselves back to being positive each month, learning from the situation, and creating an entirely new future.

In that case, if you have little equity in your property maybe it makes more logical and mathematical sense to contemplate a huge change and live way within your income.

Think about this, would you be better off if you had no more credit card debt and maybe drove a car you could afford to pay cash for?

That would get you back to being positive each month and having a better chance of maximizing your opportunity to invest for the future and your retirement, which is coming, unless of course you fall over and die from a debt stress heart attack.

So what is more important here, reorganizing to get by or taking more radical action to change the future for the better?

Please post your responses and follow-up messages to me on this in the comments section below.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Damon Day - Pro Debt Coach

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