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A Change in Debt Payoff Strategy – Hope

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As you may remember from my original debt pay off table, after I paid off Retail Card #1 and my Property Tax bill, I was going to focus on repaying my dad.

Here’s the original table posted on March 26th, 2014

 

Creditors Amt Owed Total Interest Pymts Left Payoff Date Interest Rate
Retail Card #1 413.00 1 Apr-14 0%
Property Tax 700.00 2 May-14 0%
Loan from Dad 3,830.00 6 Sep-14 0%
Credit Card 4,974.00 440.68 10 Jan-15 13.9%
Retail Card #2 2,264.80 499.76 12 Mar-15 25.99%
Car Payment 31,138.00 2,800.77 25 Apr-16 6.79%
Line of Credit 1,248.00 58.25 6 Sep-14 15.95%
Student Loan 31,687.00 2,622.91 42 Sep-17 2.88%

 

So I was successful at paying off Retail Card #1 in April and the Property Tax bill is on the chopping block for this month (stay tuned to next week’s debt update post to see what happens with that,) but I’ve really been taking to heart your comments on my next move…paying my dad back. I am unimaginably grateful for his assistance in getting into my home and having a stable place for my kids, and then add to that his help last fall when I floundered a bit after losing a large client (which led to this debt.) UNIMAGINABLY GRATEFUL! That must be put out there first and foremost.

But I am also really starting to look at the long haul here. The pressure is on to get the house in my name. My dad is not getting any younger or healthier and with four siblings, things could get pretty messed up if I don’t get that done. Unfortunately, I am nowhere near where I need to be to do that. With my marriage failure, my finances got turned upside down, I haven’t made the smartest decisions with the money I do have, and I am really evaluating what I want my life and my kids lives to look like for the next 3 years (twins go to college) and 8 years (younger two will be off to college.) In addition, I have to keep in mind my desire to foster/adopt other children as the need arises. So there’s a lot going on in my head these days.

With that being said, I KNOW the debt to my dad will get paid with the house situation, it’s all tied in together.  And in paying off the other debt more quickly, I will be in a better place financially to deal with the house. So…I’ve decided to remove the Personal Loan from this debt payoff journey at this time, focus my highest interest debt next.  From what I’ve read in the comments, this is the consensus of this knowledgeable community…so the next target with be Retail Card #2.

Agree, disagree, have some advice for me…I would LOVE to hear it!

I used college as a milestone, I am fully aware that they might not go to college, but I am anticipating they will have a life change around that time that will hopefully take some financial pressure off me…at least that’s the goal: college, trade school, job…I’m open and supportive, just used college as the mile marker indicating they are done with high school/homeschool.

Just thought I'd share a picture of my youngest at his first day of FlipFest in Crossville, TN on Monday.

Just thought I’d share a picture of my youngest at his first day of FlipFest in Crossville, TN on Monday. This was posted on their Facebook page this morning and I was thrilled to see him, it was hard to leave my 8 year old yesterday no matter how ready he was – I wasn’t!


21 Comments

  • Reply Lindy |

    Thanks for posting your totals. I disagree and would have to say that you should pay your dad first. It’s really good to clear debts with family members as soon as possible. It can get sticky. Also, as your dad is getting older, perhaps he will need this money.

    It was just the opposite with us as our four kids left high school. Our financial pressures increased because we helped them with college so that they would not have debt. Kids need help in today’s world. It’s crazy out there!

    • Reply Lindy |

      I also want to add that since you have four siblings, dad should be paid ASAP. Perhaps your father would like to offer financial assistance to one of them and has his money tied up in you. I have known families that have a kind of rotating family fund for needs, but the recipient must pay it back as soon as possible so that it is freed up. I don’t care about interest rates! Peace in the family is more important. (Even if your dad is not pressing you for repayment.)

  • Reply Jerome |

    I agree with the first comment. Pay of your dad asap. At zero percent interest that is the only decent thing to do. He did you a favour, now do him a favour by paying back as promptly as possible. Than go after the high interest loans.

  • Reply Kili |

    Hi Hope,
    thanks for the update. How did your travel go?
    I am sure you’ve thought long and hard prior to making the decision about which debt to attack next. So at this time I’d say: stick with the plans you’ve made. (Your reasoning makes sense to me).
    Maybe re-evaluate again in 3 months time & adjust if needed.
    Great to know your youngest is enjoying flip fest 🙂
    Good luck for the next steps!

  • Reply Jackie |

    I agree that it’s important to pay family off first, but CC #2 has a seriously high interest rate. So I think this new plans makes sense. I agree with the others who said to reevaluate in a few months. Maybe you’ll be in a position at that point to payoff your dad.

  • Reply Juhli |

    I agree with your strategy of paying that high interest card first (and the others with interest after that) assuming your Dad is on board with it. Those high interest rates are terribly impactful and that is what I would want my kids to do as I wouldn’t need the money back. It would be different it meant he had to borrow money or cash in investments to get by. Do you make a minimum payment to your Dad each month as you do with your credit cards?

    • Reply Shoeaholicnomore |

      I too have a “loan” from my dad. It’s at 0% interest and the majority of my debts are over 20% interest, but I don’t want my parents to feel like I’m taking advantage of them. Thus, I make a payment of at least $50/month to my parents. I don’t want to leave them to last, but its hard to keep paying huge amounts of interest while paying off an interest free loan from my parents first.

  • Reply Jenna |

    I’d argue on the side of paying off your father first. There is an emotional “interest rate” to owing family that wears far more than it is given credit for.
    Whether consciously noted or not, there is a shift in the relationship until that burden is removed. Might be more on your father’s side or your sibling’s side than your own – as you are looking at the % interest as the structure of repayment.

  • Reply Mary from SC |

    From the math, it seems like this will only postpone your dad’s repayment plans by a few months but can potentially save you a great deal in interest. If your dad doesn’t have any problems with this, I think it is a very good financial move to knock that credit card out as soon as possible. Since you are not counting on your 2nd job money, maybe you could use all of that towards this debt as well. Once this is paid off, you can pick right back up on repaying your father as soon as possible. I am a big proponent of paying family/relatives back as soon as possible but if he is in the position to let this ride for a few months, I think this will help you gain momentum in your debt free journey. Basically, if Dad is good with this…go with it!!!

  • Reply Ashley |

    I don’t know that I can render advice here regarding paying Dad versus CC (I feel like you have to have “walked in those shoes” to really “get it”). My inclination would be toward paying the 25% APR card…it’s just so high!! I’d want to get out from under that and then potentially move my attention toward paying back Dad. I liked Juhli’s comment about paying something toward Dad each month (like a “minimum monthly payment”) so you’re still making some progress, but really focusing on the higher interest debt.
    On the other hand, this could be a decision you actually discuss with him, if you’re open to it (my Dad doesn’t know about our financial situation so if its similar with you this might be tough). If you’re willing to be open about what you’re facing and get a sense of his needs (does he need the money ASAP, is he willing to wait a year, etc etc etc)…I’m sure there could be multiple options for repayment. And I also think its important to remember that whatever you decide, it’s not “set in stone.” You can always change your mind and switch up your debt repayments if you find that what you’ve decided isn’t working anymore.

    • Reply debtor |

      I too agree with get rid of at least that 25.99 interest and then come back and reassess. I think everyone is making good comments about having a “minimum payment” back to your dad.

      And it’s a personal decision that I know you feel strongly about but I wouldn’t think it’d be a great idea to take on more foster kids. I think that while you might find ways to make it work and the love and support would be priceless to all parties involved – we can’t always do what we would like. True sacrifice is giving up something you really want and not just stuff you would like to have.

      Once you’ve sorted all this out then you’ll be in a much better position to do more of what you please. that’s the beauty of financial freedom.

      Oh, I’m not sure if this has been brought up before but if you have 12 months left on the 24.99 card, seems like the math would make sense to get an 18month balance transfer at 0%. the 3% fee would certainly be cheaper than the current interest and then you could spread the payments to maybe 15 or 16 months and have more cash flow to attack your dad and some of the other ones? Just a thought.

  • Reply Walnut |

    Hi Hope – can you add a column for the required minimum monthly payment for each of these? I think that helps add a cash flow perspective to your payoff schedule.

  • Reply Marzey doats |

    I agree with your new strategy. the important thing is to get yourself in position to take the house in your name. All the other commenters have good points about how important it is to pay off family first, but your father won’t be paid off until the house situation is resolved. So that should be number one priority.
    I may have mentioned this before, but your father could give you a tax free gift of 14,000 per year. If your house is worth more than the mortgage, he can “give” you that equity without it costing him any cash. Depending on the amount of appreciation, that equity could be used as your 20% down payment! and get you much more favorable mortgage terms when you are ready for that.

  • Reply Mary |

    Since your #1 goal is getting the house in your name, I think your first goal should be to talk to a mortgage lender about that. You really need to see what you need to do to get a loan and know what type of loan you can get, etc. A conversation around that will help you with your plan.

    I think your strategy of paying off the higher interest credit card is good but once you have a conversation with a lender, you’ll have a better idea of the timetable for getting a mortgage and can make a better decision with regards to paying off that credit card or paying off your Dad. I had a unique situation when I was considering purchasing a home and found the lenders on the HUD website to be very good. (I live in an affluent area but thought that was the only type of home I could afford so I started there. Instead, I was able to buy a regular home and was approved in 3 weeks.) I found a lender I liked and then had conversations every few months with my questions so by the time I applied for the loan, I had done everything I needed to do and my loan was approved asap. (Due to my son’s medical issues, I had left a lucrative corporate job to stay home with him since he required 24/7 care and got rid of my credit cards and had no credit score!). Good luck.

  • Reply Mariah |

    If you decide to pay off the credit cards first, at least have your dad sign a paper that after his death, the house (at specific address) goes to you and should not be split among his other children as part of his personal estate. Get it notarized, keep copies for each of you and give one to his estate lawyer (if he has one). I’m sure he’ll understand that this is just a formality, but it will make you feel secure in your home.
    Once his loan has been repaid, transfer ownership and tear up the papers. It will give you peace of mind…and it should give him peace of mind, too, to know that his grandchildren will stay in their house and that a potential family feud will be avoided.

  • Reply theresa |

    Normally, i would go with paying your Dad first but in this case that 25.99% rate is just heinous. I would pay the retail card then review. You really need to build momentum. How much is your snowball each month? I hope next week you update us on your emergency fund. Also are you thinking about making your property tax bill for 2015? Are you putting anything away for irregular expenses?

  • Reply Morgan |

    Have you asked your dad what he thinks? He clearly had a long term goal in mind with the house/loan, and long term, the best thing would be to pay off the higher interest retail card. 24% is absolutely insane!!

  • Reply Sarah |

    I understand the conundrum you have about your high interest credit card versus your loan from your dad. But it seems to me that you were putting things on your cards, taking vacations, eating out etc. while you still owed your dad. Am I correct in assuming this? Perhaps because it was a family loan, it fell further down in priority? I think you need to demonstrate good faith to your dad and arrange for a significant monthly payment. You can still pay on other loans, but the balance on this one needs to be moving down!

    We once had to borrow $2,000 dollars from my husband’s parents so we would have enough to close on a modest home. It was our number one debt to pay off, and we did this in four months. It just felt good.

    • Reply Morgan |

      Sarah, you bring up a good point I hadn’t considered! If I owed my folk money, I would feel weird doing anything but paying them back. Of course nothing in life is that simple, but I do see what you are saying.

      Heather, would it be possible to make significant payments to both your dad, and the high interest card?

  • Reply Joe |

    I would imagine that only Hope knows the best path to approach paying back her father.
    Everyone has a slightly different relationship with family, especially in regards to money. The circumstances under which the money was lent and numerous other factors are unknown to us.

    Mathematically, the most prudent path would be to wipe out debts @25% and 15% interest. To delay paying them off is literally throwing money away, and making it harder to pay back ALL the debt.

So, what do you think ?