How would you dig out from this?

[sanguines]

So here's the deal. I'm 21, married, and in the military. I make OK money, around 36k a year. My wife works part time in retail and makes 8 bucks an hour. Now, here's the problem. When I bought my FZ, I was dumb as hell and took a big hit on the Ninja I traded in. So now, I owe 12.5k on my 1 year old 2007 FZ6, and of course it's on one of those terrible revolving motorcycle credit accounts :Flip:. The balance hasn't dropped at all over the course of this year (due to a sucky interest rate and the fact that $0 of my less-than-minimum-payments are applied to the capital). Obviously I can't sell the bike for the 5k or so it's worth and be left with 7k in debt, but then again, it's difficult to hang onto it too and have another insurance + fuel payment.

I also have a car, a 2007 Subaru Impreza with a 39 month lease for 36k miles. I've had it for a year and put 16k on it as I commute with it 3 days a week, 40 miles one-way. It's a terrible lease. I don't know how to get out from under it - I can't trade it in without sending my already exorbitant monthly payment through the roof, and I can't sell it for what it's worth because that's not enough to buy out the lease (it's 20k to buy it out now, or 11 at lease-end, but I won't make it mileage-wise and 10 cents a mile or whatever it is adds up very quickly to a lot of dough).

I live in Northern California, where the cost of living is high. I don't live near the base because it's ghetto. We are barely getting by (largely thanks to the strain of 2 vehicles [3 really, my wife has a paid-off car] and it's getting old. I don't know what else to do. We don't have good credit so it's hard to refinance anything (not that I think any bank would refi my bike with me owing so much..) and I need advice on how to dig out of this.

Any thoughts?

 

[thethendi]

$12.5k on a year old FZ6??? Yikes.

How much would you get for your paid off car? Also, is it possible to surrender the plates for one of the vehicles to save on insurance?

 

[sanguines]

I kid you not. I took a big hit on my trade, and after taxes and all that, yep.

 

[DefyInertia]

I don't know where to start.

I'll just say this, when you don't make much money and have bad credit, DON'T BUY MORE STUFF. You bought way more than a prudent person would and now you're stuck.

Do you need 3 vehicles? Can you get rid of that lease? When it comes down to it, you need to pay off all this stuff ASAP by getting rid of the lease if possible, selling the bike for as much as you can, saving your pennies and living smart, getting a raise, and basically doing everything else in your power to get ahead, or at least back to square one...right now you're way behind.

Ugh, I wish I had better avice for you. Getting ahead does not come easy but its worth it...sounds like you'll need to make some sacrifices over the next 3 to 5 years min.

One more question, did you know buying a FZ6 with a 12.5K loan was a bad idea when you did it? Consequences!

 

[wing8872]

If you own your own home, you might consider refinancing it. You could try selling her old car but it probably won't pull much money unless it's a fuel sipper, eg a honda accord. Other thing to consider is what would it cost to turn in the Subaru. They won't let you off the hook easily, but you might come out better taking the deal breaker punch. If you turn in the bike, it will hurt as you would still be on the hook for the rest of the money, and I'm pretty sure they'd want it paid off right away.

You could always file chapter 7 or maybe it's 11. I get the numbers mixed up. Anyways, one of those doesn't dismiss the debt but forces the lenders to restructure it under the supervision of the courts. The other cleans the slate of most debt but will make your life much more difficult than the other.
I'd talk to the lenders before I filed for bankruptcy. Most lenders want their money and not the stuff and will usually be willing to work with you.

You didn't state how you live. Do you eat out often or do you tend to eat at home but buy the more expensive foods or eat at home mostly and eat the cheap foods? How about those showers or your heating/cooling? Run any of those hard? Do you do any carpooling with others who live close and work the same hours as you?

 

[FZ1inNH]

Do you have a 401k you can loan against? I use that for debt once in a great while. The best part is, when you pay it back? The interest paid goes directly to you.

Regarding the mileage on the lease: Mileage is a gimmick! Never buy over the 12K minimum! The ONLY time the mileage counts is when you surrender the vehicle at the end of the lease. If you sell it outright, trade it in or buy out the vehicle at the end of the lease, the miles ONLY count toward value of the vehicle for the potential buyer. I've leased nearly all my vehicles and put way more miles on that the 12k it came with. I've NEVER paid a cent in "over-miles" fees.

You've got a rut to dig out of and there isn't an easy answer. You need to make larger-than minimum payments on the bike. Those special finance deals are meant to have you continually pay the interest and next to nothing on the principal to keep you in the red and those arses in the black.

Can you do work on the side for anything? Computers? Carpentry? Landscaping? Anything to offset and make big payments with?

 

[ThatsRicci]

Avoid chapter 11 at all costs... yeah your interest rates suck hard... and the lease isn't going to be easy to get out of. The quickest way for you to cut debt is to painfully ditch the bike. Refi the rest of the loan into a personal loan through your local credit union to the -highest- monthly payment you can 'comfortably' afford. This is all assuming you don't known your house, in which case talk to your credit union about what you can do to consolidate with that. Sell sell sell, shed the weight, shed the payments... You'll be happier with an affordable lifestyle than you will with all your gadgets and gizmos. Don't worry, life will turn around and you'll make more money as the days go by (i hope) and get a better bike in the future!

Maybe trade cars with your wife so you don't put all the miles on the lease vehicle.

buy a $100 bicycle ...

I sold my 06' 4runner two months ago after I upgraded to the fz6 and Haven't looked back. Getting rid of the highest-cost item on my balance sheet just made my life wonderful. I'll be debt free by the end of the year... and am stupidly excited.

:edit okok... no smacks to the face for recommending to ditch the bike... avoid that at all costs, but don't take chapter 11 if you must keep the bike.

 

[damnpoor]

Did you talk to the financial counsellor on base? You're not the first military guy to get into debt. Also, depending on branch of service, you may be able to get super low interest loans. I forget if you talk to the family center or the credit union or what but a 25K loan could pay off the cars and get rid of your high interest rates.

 

[nlheikki]

Here's a great video on Cars from Dave Ramsey........his site has good financial advice.

Drive Free. Retire Rich.

 

[CanadianFZ6]

Did you pay them to take your Ninja?... Even a brand new FZ6 is worth only around $6500 US out the door. How does a Sub $7000 US bike get to cost 12 grand?... Even with interest, still? I'll bite, can you show us the math? My friend, you were :spank:

 

[tom5796]

Plus 1 on a bunch of the ideas already posted. Not to be an ass, but its probably a good time to be really careful and don't have any children for a while. If you can get by with one car there are some lease trading options out there... leasetrader.com, swapalease.com. I got a car off swapalease once and I know a few people who have done the same. It might cost you $500 to transfer the lease to someone else but it could be worth a try. Maybe you could unload it and just get a beater if you need 2 cars.

 

[cp04]

I agree with trying to get rid of the leased vehicle, paying down the bike, and live more conservative. Or maybe a debt consolidation service. It is hard to be a married dude and in the military. I've seen plenty of my friends get in over their heads with bikes/cars/quads/credit cards/anything else you can think of. Good luck with it all.

 

[FZ1inNH]

In retrospect, asking about the 401k after re-reading that you're only 21 was a bad idea. Save that thought for older though.

Get a good rainsuit and park the lease at all costs. Save on gas! Money to use toward paying the principal on the bike.

Being in the military, it's not an easy option to work toward a raise as Nate suggested but he had great intentions!

 

[Rushiku]

Two words: Consolidation Loan.

Get your ass down to the bank on base and start begging.

Cut up your credit cards, you didn't mention them, but we know they're all maxed.

Yes, even the one for 'emergencies', there are no emergencies more urgent than the financial emergency you're already in.

Park the stupid expensive cage until it's time to return it.

Get raingear and do your 3 times a week commute on the bike.

Give up shopping as a hobby. Take your wife to the park or beach, stay the flip out of the mall. Spend some time watching your, no doubt ridiculously expensive, TV.

Before every purchase from now until you die, ask yourself "Do I need this, or do I want this?" If you can't honestly say you need it to live, don't flipping buy it! (eg: you need raingear, you want the most expensive raingear you can find because you think price indicates quality, it doesn't. Having such-and-such logo on it doesn't make you cool, it makes you a tool AND it's a pretty good indication the item was made by exploited children in some 3rd world cesspool...but that's another conversation)

There is no more 'afford' for you, you either have the extra cash in the bank for a non-essential purchase, or you don't, period.

Once you get your consolidation loan, pay it every month! Add $50 to every payment, every month, if you can (you can).

It will take you a long, long time (maybe three or four 'longs', or at least it will seem that way, given you're only 21) to pay it off, flipping tough - you spent the money and/or agreed to 'Oh, you're in the military? (mental fist pumping, yes, yes, yes!) Let me set you up with our special moron rate' "deals", you get to pay it back. (I too was in the military, I am more than familiar with the shady, sneaky, underhanded (to be nice), tactics used by those f*cks)

On the upside, when you get it paid off, it will have been so long since you f*cked up and you will have done such a great job of paying on the loan every month, your credit score will be through the roof, do not let this go to your head!

Also on the upside, you now know the consequences of ignoring that voice in your head that said "Don't do this, stupid, you cannot afford it" - listen next time and walk away.

Once you have the current problem under control, look at what's left over. Ah, no, I didn't say spend it. I said look at it. Now, what do you want? what does your wife want? You each get one thing, split the money and (here's the catch) set it aside. Yep, I said it, save the money. Keep putting money into each of your 'I want' accounts until the day comes that you have enough money to walk in, point, say "I want that" and then slap the cash down - end of transaction.

I have walked in your shoes, and there is, believe me, no better feeling than doing what I just described, other than sending off your last payment for the consolidation loan, that is.

 

[VEGASRIDER]

What do you do when you get in a hole, dig deeper so you can get out. Opps, sorry, this wasn't a gambling question.

Seriously though, assuming you have no kids and you are married, and taking all of the advice from the members about military loans, ditching a car or two, etc, also take advantage of dual income. Your wife needs to work full time with better pay.

She can do much better than $8.00 an hour. Heck, starting hourly rate for a bank teller here in Vegas goes for $12hr. You live around any casino's? They pay very well with great benefits, which includes meals, at least they do here in Vegas. The pit dealers here in Vegas who work in the high end casinos, such as the Wynn make $90,000 a year. That's with no college education, or even a high school degree for that matter. But it's tough to get into those casinos. Poker dealers do okay, as they get to keep their money rather pooling the tips.

Bottom line........your wife needs to make more money. This will speed things up, otherwise it will be very difficult to bail out alone.

One last thing......good luck, it ain't easy. Most of us have been there or are in similar situations right at this moment! Hang in there dude. We know the feeling, at least I do.

 

[rvbiker]

Go to a credit union, the one on base if you have one, tell them you want to consolidate your bills. You will need to gather up anything you can use for collateral and you’ll probably need a few co-signers(parents and or inlaws, friends). The one thing you got going for you is you have a steady job! Good Luck!!!

 

[OZXJR]

+1 on the bill consolidation, I had to do that many years ago but not for as much as you have,worked well but took 2 1/2 years to get back even.

 

[sportrider]

Get a good rainsuit and park the lease at all costs. Save on gas! Money to use toward paying the principal on the bike.

+1
forget you own a car, ride the bike it will pay for itself

 

[DefyInertia]

One last thing......good luck, it ain't easy. Most of us have been there or are in similar situations right at this moment! Hang in there dude.

Yeah, hang in there dude. Don't let it get you down, just come up with a real plan to beat it and start working toward that goal TODAY.

Being in the military, it's not an easy option to work toward a raise as Nate suggested but he had great intentions!

Word, I can't opine on that but there is money to be had...unless he's working 60+ already, there is money out there just waiting to be had. Easier said than done but what isn't.

I sold my 06' 4runner two months ago after I upgraded to the fz6 and Haven't looked back. Getting rid of the highest-cost item on my balance sheet just made my life wonderful. I'll be debt free by the end of the year... and am stupidly excited.

Do you really keep a balance sheet?

 

[Data]

You said (I quote) "I was dumb as hell and took a big hit on the Ninja"

The positive way to look at this is to consider that you have paid some tuition to learn about personal finances. There is lots of good advice in this thread. Many of us have been in this mess, including me. You can get out of this - it won't be easy, it will be difficult - but you can do it - and bankruptcy is not a good idea, especially at your age.

Get the book "Rich Dad, Poor Dad" (at the library, don't buy it) and read it.

Consider: The stupid man doesn't learn from his mistakes, the smart man does learn from his mistakes, and the wise man learns from the mistakes of others.

It sounds like you are moving into the "smart" stage and you can begin thinking about moving into the "wise" stage.

The advice to buy only those things you absolutely need, and get out of debt, is very good. Increasing income will speed up your results. That is easier said than done, but it needs to be done.

I once read that "those who don't understand compound interest are doomed to pay it, and those who do, collect it". After I got out of my own financial hole, that thought has helped to keep me out.

The advice to seek help from a financial counsellor on the base is very good and you may find that there are many resources to help you, once you seek them out. When you get control of your financial situation and start to build wealth, your life will be immeasurably improved, and perhaps someday you can look at this mess as one of the best things that happened to you because it set you on the path to financial wisdom.

Getting out of this jam will not be easy- but it will be easier than staying in it.

You asked, and bravo for asking!