I am 37 y/o from NW Indiana and need financial advice

[pb4uski]

He said we would get a personal line of credit not a heloc. .....

You might be worrying for nothing. With all the debt that you have and your income he probably couldn't get a personal line of credit to do it anyway.

Would he agree to meet with a debt counselor?

 

[jazz4cash]

I’ve immersed myself into the world of Velocity banking. Every video I’ve watched is so flawed it is very difficult for me to sit through. Lots of red flags there. If you do a side by side comparison I can’t see how it would come out ahead unless you make crude assumptions like they do in the videos.

As bad as it is I dont see much harm in it if you don’t pay for one of the VB gurus. There is real risk of making the situation worse because you don’t follow the plan, take additional debt, etc.

All the VB examples include situations with positive cash flow and I’m not sure that fits OPs situation. It would be a pretty easy fatal flaw to create cash flow with additional debt.

I think it may be better for OP to support DHs plan since he seems convinced. It’s not worth straining the relationship. Maybe negotiate support with an agreement of no additional debt (big screen tv) until goal ‘x’ is achieved. Good Luck.

 

[dirtbiker]

So I'm a married 37 y/o woman with a 9 yr old step son and a 1 yr old son. After baby was born we decided that I needed to stay home. (I only brought in 700-900/mo extra). Well it's been a year and it's great however DH has decided that he wants to try Velocity banking. His brother turned him to it and that is all I hear about.

DH is a 33 y/o working in the trades as a union Ironworker. He keeps telling me that he doesn't want to bust his butt and have nothing to show for it. We need a new car for me with the baby and he would love his paid off.

A little about what we have:
*My car is paid off (2 dr sports car not baby friendly)
*DH has an suv that we bought used in 2017. We owe 12k on it still
*We have a house with a mortgage of about 180k
*we have a lawn tractor that he took a personal loan out for... We own 3k on it
* have 4 credit cards (2 store, a m/c and the care credit card) between them we owe 6k
*and I still have a student loan that I owe 12k on (I'm on an income repayment plan so I pay $0/mo right now)

I know we live paycheck to paycheck (he brings home about 4k/mo) but he has a "vacation fund" from the union that we can use monthly. I've been using it to slowly pay down some bills. The care credit will be paid off next week.

Has anyone heard of velocity banking? Tried it? Does it actually work? I'm not so sure about taking a personal line of credit (LOC) out to pay off credit. Yes smaller interest rate and it's figured differently on the LOC but its basically consolidation with a reviving account.

Help please? I want to pay things off so that we can have a great retirement when the time comes. As of right now that won't happen quick enough for him.

P. S. I want to learn about stocks and bonds but have no clue where to start with that.

I haven't read all the replies, so I may be repeating some things, but...

1. Velocity banking might work for someone who already has good financial habits and is very strict about spending. However, for someone who isn't, it's a recipe for disaster. It's just an easy way to go further in debt. I'd avoid it.

2. Why aren't you working? You have student loans that are accruing interest and other debt and are living paycheck to paycheck. Get out there and work. I know this may sound harsh, and others may disagree, but the age of the stay at home partner is over, unless one spouse has a very high income. Get into the workforce and add money to the table. We have four children, ranging from 6 months to 16 years, and both my wife and I work. We wouldn't have it any other way. Even if you come close to breaking even on childcare costs (which only the 1 year old should be really expensive), you will presumably get raises and promotions and make more in the future. As long as you stay unemployed, you won't move up in pay scale or promotions. Oh, and stop having kids! As someone who has a lot, I know firsthand just how expensive they are!

3. Sell the tractor and buy a used one and pay off that loan. I have about 1.5 acres and use a $500 tractor I bought used five years ago. It isn't as nice as the newer or more expensive ones, and requires maintenance, but it works just fine. Of course I drool over the more expensive tractors, but I can't justify the cost. And for comparison, our annual household income is $330,000.

4. I will second (third, fourth, maybe) the recommendation to read Dave Ramsey's book The Total Money Makeover. I don't agree with everything he says, but his principles are sound, and whether you follow it loosely or to the tee, you'll get out of debt.

5. Once you're done with that book, read the Millionaire Next Door. It's hands down my favorite book and was life changing for me and my family.

6. Is he contributing to a 401K or does he have any other investment plans? Do either of you have any savings, retirement accounts, brokerage accounts, etc.? If he has a 401K with matching, I'd advise to start contributing to that up to the point of maximum matching. This is where I differ from Ramsey, in that he says to wait until debt is paid off to start contributing to a retirement account. I disagree because any funds that are matched earn far more than any debt you're paying off (usually 50-100% matching, depending on the employer).

7. I like the idea of refinancing high interest loans, AS LONG AS it's done congruently with a plan to change your financial habits. If you refinance and never change your financial habits, it won't make much of a difference in the long run.

8. Any thoughts on downsizing your house? I'm not sure how much your house is actually worth/cost you, just your mortgage. From a quick Google search, it appears northwest Indiana has low house prices, even lower than my area. And in my area a $200k house gets you quite a bit. Just a thought in order to put more money in your pockets both with a lower mortgage cost and lower utilities.

9. This should be obvious, but no nonessential big purchases. Especially not on credit, but if you have the cash saved up, put that toward paying off debt, not a new toy.

9. As far as stocks and bonds go, you're still a little ways from diving into that, but keep reading everything you can here, and pick up a beginner's investment book.

Good luck!

 

[pb4uski]

Robo,

I have a couple better examples for you and your husband to consider that I believe show that if you have free cash flow that just making additional principal payments to your mortgage is preferable to velocity banking.

This first link is a good primer on velocity banking and offers a good example of someone with $4k of income (interesting coincidence), $3k of monthly expenses and $1k of monthly free cash flow available for debt service. They have a mortgage of $100k with $25k in equity and take out a $12.5k 7% HELOC (but it could just as easily be a $100k mortgage with negligible equity and taking our a $12.5k personal line of credit--- if they could get one).

The velocity banking example results in them paying the mortgage off in 77 months (6 years and 5 months) and paying $17,438 in interest.... a great accomplishment!

This link is to a mortgage amortization schedule calculator. If I put in a $100k balance, 30 years at 5% consistent with the velocity banking example, the total interest over 30 years is $93,256. If I add to that $1,000 per month of added principal (in the Add Extra Payments section.... the same additional cash outflow as the velocity banking example) the mortgage is paid off in 77 months as well... however, the total interest paid is only $16,888.

In the first link they indicate:

Velocity banking is not the fastest strategy for paying off a mortgage. Making extra payments equal to your free cash flow on your mortgage is actually the best strategy when it comes to quick repayment and less interest paid.

IMO simple is better.... the example demonstrates that there is no particular "magic" to velocity banking AND for either to work you need to have free cash flow to apply to debt service (that extra $1,000/month).

At the end of the day though, the difference isn't worth getting stressed out over or marital strife... but the interest rate of a personal line of credit like your husband plans to use would likely be a lot higher than a HELOC so the difference will likely be much more significant.

 

[4legsgood]

\
..In the meantime, ask DH to find some neighbors' lawns to mow to help payoff the lawn tractor.

That, or sell the tractor, and do what I've transitioned to (for large yard) - use a regular lawn mower or weed eater to mow 'trails', and diy landscape for bike (add little hillocks), plants that support mini nature walks with dogs and small children, meditation walks. I'm more and more pleased with this approach.

 

[joeea]

Try telling my husband that. He doesn't think velocity banking is a problem. He raved about it because his brother is doing it. It's not for everyone and we are one of them it's not good for. He just will not see my side of things.

I guess we all have our personal burdens to bear.

 

[joeea]

As far as income for me. Yes we did lose that $700/mo but I should have mentioned that we were paying childcare (for only child at the time) and it was $500-600 /mo. So for me to work and only bring home 200 a month isn't worth it when we would have 2 in childcare.

Bringing home 200 a month isn't worth it. Okay.

I also am not one to watch other people's children. That is just not my fortay.

Sometimes we don't have the luxury of our forte.

I have tried to find side jobs but I can't get a PT job as hubby is in the trades and goes to different job sites weekly of not daily. Right now he is driving almost 2 hrs one way for work so he isn't home until maybe 6pm if he doesn't catch traffic. So finding a job that would let me work whenever I could come in, isn't likely.

Unless hubby works 7 days per week, Saturday and Sunday would be available.

I have tried to sell my essential oils but I don't like pushing people to buy things like that. I have been applying to remote jobs from a specific group mom group that's credited. Just havent gotten anything yet.

Lots of reasons why you feel that you can't increase your income.

Sadly, it appears that you are stuck, unless you or your husband are willing to change your attitude/approach.

Sorry for being blunt - I wish you luck.

 

[samcat]

A lot of people in California lost their homes by doing something like this. They used their homes as ATMs during the good years but when housing prices went down, their homes were worth less than what they owed. Then, they had a mortgage rate that was resetting and couldn't refinance at a good rate because they owed more on their home that what it was worth. The mortgage reset at a higher rate and they couldn't afford the payments.

I'd say Velocity banking is a recipe for disaster.

You need to become disciplined about paying off debt. If you pay off your debt with funds from you house, there is nothing stopping you from getting into debt again. As someone mentioned, read Total Money Makeover. I have a copy I can send you if you want to private message me your address.

 

[Retired Expat]

I wish he would understand that velocity banking is not the way to go. Ex. You take out a 10k LOC, pay off the 6k in little debt. So yes you freed up your credit cards but now you still have 6k to pay as you just transfered it to the LOC. So then you take that 4k/mo he makes and give it all to the LOC. Then take back out what you need for expenses, bills etc. So 3k expenses means you only give 1k to the LOC. I hate this and he will not listen to me about it. His stupid brother started it and supposedly paid off 2 cars and credit cards in less than 2 years. However he also has more cash flow as we do not.

Dave Ramsey... Yes his snowball debt plan is what I'm trying to work on hence the care credit paid off next week. It's the smallest. The book you're talking about, is that the financial peace university one? Or his baby steps?

I wish I could tell him to go mow lawns but all of ours are 2.5 acres. Hence the tractor to cut it all. Plus he is actually working OT right now so at 10 hr days he's home by 6pm.

Thank you for the info. I will Def check back here for more advice on investing.

Most all of it is a bad idea. Freeing up credit on your credit card is too easy a way to spend money you don’t have.

But the idea of consolidating your debt at a much lower rate is a very goo$ idea. Credit cards and personal loans are designed to keep sucking you dry! I don’t like putting you house at risk but if jobs are lost then everything might be at risk anyway.

Pay off the high interest debt and get rid of the credit card. Switch to a debit card that only allows you to spend what you have. Review all expenses and figure out what to cut out? Do everything to learn how to be more frugal for some years until spending is under control and you know where it is all going. You can’t worry about savings and investment when personal debt other than mortgage is sucking up any spare cash you might have.

Your issue is not rocket science and no financial guru can help you until you deal with the fundamentals. Slash spending, eliminate high interest deb, eliminate wasteful spending until you are on solid ground again and saving money. Then worry about the next steps....

 

[Robocp4]

Just so everyone knows we would NOT be getting a heloc. It would be a personal line of credit that we would get. Unsecured as I am NOT putting my house up for anything. I know most of you are referring to helocs when you talk about VB but in our case it would be a PLOC.

I also figured out the snowball and I can have all 5 debts (minus house) paid off in about 2.5 years. I think this is a good time line for us. Just as long as we don't add to it. It should work out great. I have started it this month so we will see what he says.
His brother just left town to go home so I'm not sure how much more it will come up.

 

[Robocp4]

A lot of people in California lost their homes by doing something like this. They used their homes as ATMs during the good years but when housing prices went down, their homes were worth less than what they owed. Then, they had a mortgage rate that was resetting and couldn't refinance at a good rate because they owed more on their home that what it was worth. The mortgage reset at a higher rate and they couldn't afford the payments.



I'd say Velocity banking is a recipe for disaster.



You need to become disciplined about paying off debt. If you pay off your debt with funds from you house, there is nothing stopping you from getting into debt again. As someone mentioned, read Total Money Makeover. I have a copy I can send you if you want to private message me your address.

See my post #60 and I just bought the book and started reading it. I do have a 1 yr old so it's a little hard to read alot at once lol.

 

[dirtbiker]

See my post #60 and I just bought the book and started reading it. I do have a 1 yr old so it's a little hard to read alot at once lol.

Having four kids, the youngest being 6 months, I definitely understand the struggle for personal time for reading, etc. Pretty much all of my reading is done via an audiobook app on my phone. I listen when I am doing yard work, commuting to work, doing dishes, etc. It's a great way to read books with found time.

 

[Jerry1]

I also figured out the snowball and I can have all 5 debts (minus house) paid off in about 2.5 years. I think this is a good time line for us. Just as long as we don't add to it. It should work out great. I have started it this month so we will see what he says.
His brother just left town to go home so I'm not sure how much more it will come up.

This is great. Have some fun with it. Start calling yourself Ms. Velocity. Show him how well you can handle this (you can). Tell him to just keep working and bringing in the money and Ms. V will take care of the rest. Set a target, six months or so and if everything is going well, get a new tv. Maybe a 65”. Point is, a little reward along the way can be a great motivator. The main thing I would commit to is that you will never have more debt than you have at this time. The trend will always be downward. It will feel good very quickly.

How soon before you can have your first credit card paid off?

 

[FIREarly]

P. S. I want to learn about stocks and bonds but have no clue where to start with that.

Paying off debt is very important. Some fast thoughts on investing if you start after debt is paid off.

S&P500 index fund is an amazing investment. It diversifies your investment into 500 stocks at a reasonable price and is very straightforward. There are different stock tickers depending on which broker/dealer you use.

Personally, I am a strong believer in Microsoft, MSFT, and it is performing very well. If memory serves correct, it costs more than the S&P500 index and the index is more diversified.

People at the broker/dealers are also willing to sit down and speak with you about it. They are getting more friendly and a bunch are starting to offer $0 commissions when you buy/sell.

 

[Mdlerth]

Ferdinand the Bull Market meets the Berenstain Bear Market

See my post #60 and I just bought the book and started reading it. I do have a 1 yr old so it's a little hard to read alot at once lol.

Read "Total Money Makeover" and "The Millionaire Next Door" to the toddler.
There's no law that says the only things you can peruse with a 1 year-old are Doctor Seuss and Beatrix Potter.

I heard that Tiger Woods and Venus Williams started playing golf and tennis as soon as they could walk. Educate your rugrat on finances early and he could be the next Buffett.

 

[pb4uski]

Just so everyone knows we would NOT be getting a heloc. It would be a personal line of credit that we would get. Unsecured as I am NOT putting my house up for anything. I know most of you are referring to helocs when you talk about VB but in our case it would be a PLOC.

I also figured out the snowball and I can have all 5 debts (minus house) paid off in about 2.5 years. I think this is a good time line for us. Just as long as we don't add to it. It should work out great. I have started it this month so we will see what he says.
His brother just left town to go home so I'm not sure how much more it will come up.

Undetstood.... that he plans to use a personal line of credit rather than a HELOC.... most of the examples out on the internet use a HELOC or credit cards.... a personal line of credit would be more expensive than a HELOC and I wonder if you could even get one considering the other debt that you have.

From what you wrote it sounds like he is now at least reluctantly on board for the snowball? I woud suggest that you prepare a graph showing the plan for the debt reduction under the snowball for the next 2.5 years and then plot your actuals so you can see your progress... print out the most current chart and post it inside one of your frequently use kitchen cabinet doors.... and use that as motivation to stay on track... and little splurges to celebrate accomplishing milestones along the way.

 

[SunBlueSky]

I also figured out the snowball and I can have all 5 debts (minus house) paid off in about 2.5 years. I think this is a good time line for us. Just as long as we don't add to it. It should work out great. I have started it this month so we will see what he says.
His brother just left town to go home so I'm not sure how much more it will come up.

This is great. Have some fun with it. Start calling yourself Ms. Velocity. Show him how well you can handle this (you can). Tell him to just keep working and bringing in the money and Ms. V will take care of the rest. Set a target, six months or so and if everything is going well, get a new tv. Maybe a 65”. Point is, a little reward along the way can be a great motivator. The main thing I would commit to is that you will never have more debt than you have at this time. The trend will always be downward. It will feel good very quickly.

++1 Ms Velocity!

From what you wrote it sounds like he is now at least reluctantly on board for the snowball? I woud suggest that you prepare a graph showing the plan for the debt reduction under the snowball for the next 2.5 years and then plot your actuals so you can see your progress... print out the most current chart and post it inside one of your frequently use kitchen cabinet doors.... and use that as motivation to stay on track... and little splurges to celebrate accomplishing milestones along the way.

++1 on snowball graph as motivator, as well using the TV as a carrot..

 

[SpinDoctorTX]

Welcome!

Many great comments precede these, but here goes, Ms Velocity !

Perhaps you can negotiate six months to try it your way. You'll not be wrapped up in some new financial complication, and if you can show measurable results (you're smart, you can figure this out), why would he not agree that your recommended way is good enough? His idea will always be out there. Once you are at that 6 months and have accomplished a specific goal, have some planned for and affordable treat for the family and one as well for just you and your groom.

If you cannot generate any income, congratulations- you have a new job. As CFO of the family, if you manage it as seriously as you seem to desire, I see no version of you failing at this endeavor. I'd go for the scorched earth policy on many things- technology, TV, things that aren't needed. You can get a phone that just makes calls and sends texts- <25 prepaids refillable- be cool, have a burner phone.

Please don't eat ramen, eat beans/ go vegetarian/ get chickens. Grow things to eat- seeds are cheap and you have a lot of land. Make a barter community or if you cook, sell premade casseroles or make cakes/ pies and sell them to friends & neighbors who have more time than $ and will gladly pay for home cooked. My Mom & grandmother taught me the value of money & earning it as they talked a lot about the depression and how people lived. Grandma watched other people's kids, took in ironing & laundry, had a cow & chickens & her DH hunted & had a huge garden right up until he died. I come from frugal roots.

You went to school (hence the debt) so have skills and there is something you can sell or do to bring in extra cash. Make baby food that isn't full of mercury & lead and sell that to other mothers. When your husband is not working, can he cook too or do something else to fill the pay gap?

You are doing well to figure out a solution for this. Breathe- you have some time.

Lastly, $ ended my and my DH's last marriages & boy were we on the same financial page as a couple. We married in 2002, had about 250k in house assets plus maybe 50k in investments, but we managed to get him retired at 62 and me at 56, on roughly 200k in income total (my last yearly pay was 90k, so for 7 years it was just my pay and his early SS). What I'm saying is that you can get it done on less than you think. Key is to have no debt- get there well before 50 if you can. I look forward to hearing how you do over time whatever way it goes.

 

[Robocp4]

As of right now I just paid off 1 credit card. So I have 5 more debts to go besides the mortgage. I have it graphed and written out as a plan and I think DH is sorta on the same page. I say sorta because he still is talking velocity but I don't want to take on another debt so I have showed him my plan. Hence why I say sorta on point with me.

I will definitely keep everyone up to date and thank you all for your input. I appreciate it all.

 

[dirtbiker]

Great job! Keep us posted on your progress.