Budgeting to Get Finances Under Control

I gross around $50,000. I refinanced my house in January to a 5/1 adjustable rate mortgage, and my house payment went from $801 to $679. The interest rate fell from 6.875 percent to 4.875 percent.
 

I have $12,000 in credit card debt at 11 percent, and am involved in prepaying for cemetery lots and funerals for myself and my (hopefully) future wife. That’s another $15,000 in debt at 11 percent.

In addition, my 1991 Honda has 205,000 miles on it so one of these days I will need to purchase another new (or used) car.

I put 6 percent into my 401(k) at work and want to open up a Roth IRA, but haven't. I’ve switched from abusing my credit cards to paying for everything with my debit card.

I have access to a line of credit through my mortgage lender, but my bank said they have something similar. I don’t know how to compare these deals or which way to go.

The longer I type, the more clueless I’m feeling. Please help me get back on track and in control.

A: Your letter is full of small details that add up to a scary big picture. It looks as though your financial life is spinning out of control -- no wonder you feel clueless. You're trying to do a lot on $50,000 a year.

First, I'm not sure how old you are, but you've taken on a big chunk by paying for your funeral expenses now -- and for the wife you hope to marry some day. While I'm sure it will feel good to get that out of the way, it's a large chunk of cash that you can't really afford to be spend right now at a fairly high interest rate (11 percent).

You also are carrying a fair amount of credit card debt (also at 11 percent), and you're telling me you need a new (or used) set of wheels in the not too distant future. And, while you're funding your 401(k), you're worried about a Roth IRA.

Does your future wife work? You could sure use an infusion of cash.

Let's start with your house. Do you have any equity built up in this property? If you do, go to BankRate.com and check out the home equity loans from local lenders. For a home equity loan of up to $30,000, provided you have that much equity in your home, you shouldn't need much more than a credit check.

If you pass that, there should be no closing costs or fees associated with the loan. If you get something around 6 percent, it will be about half of what you're currently paying. Try to get enough to pay off at least the cemetery plots. Then, you can start focusing on paying off your credit card debt.

Once your credit card debt is down to a manageable level (about $5,000 or less), then you can start to think about replacing your Honda. It won't be until next year. If you can wait until next September, when the 2006 models will come out, you can buy a 2005 new Honda for a great price on a good financing deal. Try CapitalOneAuto.com to comparison shop financing.

If you don't have that much equity in your home, consider taking a second job for awhile in order to boost your income enough to manage your debt. Call it a pre-wedding gift to your beloved. You don't want to go into a marriage feeling this out-of-control about your finances.

For free help on budgeting, I suggest you check out Consumer Credit Counseling Services of Greater Atlanta (cccsinc.com). They do most of their work by email and telephone and counsel people all over the country. Unless there's something you haven't told me, I don't think you need their debt management program -- just some help budgeting what you do have.

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