I am a new poster to this board. I have read posts here on and off for about the last 4 months. I am particulary interested in a response to one's financial situation as related to Y2K and debt.

I am a homeowner with a mortgage payment, car loan and a college loan. I am concerned about my money situation as it relates to an eventual Y2K breakdown in the system. I do have a few liquid assets i.e. cars, some savings (not much) and other items currently owned. I would appreciate some suggestions.

Thanks,

Tim

-- Tim (cre12ti@aol.com), June 24, 1999

Answers

Make reducing debt your #1 priority. If you have the discipline, eliminate all discretionary spending until you are down to just your mortgage. Most people fritter away the larger part of the income.

Regards,

-- Mr. Decker (kcdecker@worldnet.att.net), June 24, 1999.

Why is mortgage debt "special"? Why should debt-reduction stop short of trying to pay-off mortgages as much as possible (excluding highly- leveraged yuppie BMW drivers)?

-- Anonymous99 (Anonymous99@Anonymous99.xxx), June 24, 1999.

Tim, I've been thinking about that, too, because I have a house loan and a car loan and a credit card balance. If things end up only "1" then no sweat, I keep my job and my bills. If things end up "10" then there are no banks and so what if I lose my job and income - I have my Plan C. But, if things are "5" or "6" I may lose my job but there may still be repo men in business and courts to back them up. Yikes. So, I am paying down secured debt as fast as I can, and prepaying the mortgage loan by one month. Hope to have the car loan paid off 6 months early.

Don't know if this will work or not. It's hard trying to plan for a middle of the road potential.

-- Margaret (janssm@aol.com), June 24, 1999.

DEBT-COLLECTORS. thr fed. trade commision,will send you a free,pamphletconcerning>the fair debt collection-act.debt-collectors are very limited to what they can do. you can FIRE them.or get the book>BACK-OFF by benjamin dover.

-- al-d. (CATT@ZIANET.COM), June 24, 1999.

You need to ask yourself: Where do I stand in the way of my Y2K preparations? Everything else, including debt, is secondary. If you are not prepared for what is coming, and need to bear additional debt to prepare, then you should do it.

Don't get me wrong, in general you should try to minimize your debt as much as possible, anytime. But if, say, your current home is in the city, and you need to buy Y2K survival property out in the country, then certainly borrowing against your current mortgage might be an option worth doing.

-- Jack (jsprat@eld.net), June 24, 1999.

I am cashing out a retirement policy, taking the penalty hit, to pay off credit card debt, car, and make final Y2k preps. I feel a little risque doing this, but also do have lots more years to work after my young kids are in school/grown. Just a word of experience: In January 99 I quit my job in software development that came with a 70 mile RT commute. My husband started working more and I got a part time job in town, meaning less daycare/work related costs and MUCH less stress. We have never felt richer or happier. We think about every dime we spend, enjoy eating at home instead of grabbing fast food like we used to when we were so over extended, and feel pleasure that we have plenty of money to meet all of our simplifed needs and then some. If you want to reduce your debt you really can do it. We have saved so much money that one credit card is almost paid off before the retirement plan is cashed out giving us more cash to bury in a secure location away from our house :) good luck.

-- (y2kfallback@yahoo.com), June 24, 1999.

"We have saved so much money .... giving us more cash to bury in a secure location away from our house..."

HOW does one bury cash, anyway? In pvc pipe, sealed at both ends? If so -- Did you test if for leaks? If not, what did you use?

Burying gold is easy, because it won't corrode. Silver just tarnishes. Cash, however, if it gets wet eventually becomes pulp (& that's no fiction).

Thanks for any advice. I won't ask where you buried the money... haha.

-- just (grab@a.shovel), June 24, 1999.

>>Why is mortgage debt "special"? Why should debt-reduction stop short of trying to pay-off mortgages as much as possible [...]?<<

I agree with Mr. Decker that, in cases where multiple debt obligations exist (...house, car, college, credit card...) the number of obligations need to be reduced if possible to one. The mortgage is usually the obvious choice for that one. It often carries a lower interest rate than other debts, and extends over a longer term. The debt with the most advantageous terms should come last.

Of course, as soon as you are down to a single debt payment, you should accelerate those payments as much as you can. No one should "stop short" of paying down their mortgage as quickly as possible. It is simply a matter of going step-by-step, instead of attempting to do everything at once and failing to do much of anything as a result.

-- Brian McLaughlin (brianm@ims.com), June 24, 1999.

>>Don't know if this will work or not. It's hard trying to plan for a middle of the road potential. <<

You're right. It is terribly hard to put yourself into a *strong* financial position. But you can do something every day to put yourself in a *stronger* financial position.

To paraphrase Thoreau, "Our incomes are frittered away by useless knick-knacks. Simplify. Simplify."

-- Brian McLaughlin (brianm@ims.com), June 24, 1999.

Tim

Sell the BMW, buy a Saturn. Or what ever reliable thing you can afford with he cash you have from the Bimmer. If you can get great milage/ All-Wheel-Drive do so. Other wise trade off utility for reliablility and milage. One of those small station wagon things comes to mind.

Sell the beany babies, replace with a mortgage payment.

Is your house huge and expensive? Sell it and buy down to something else that will do. Something with redundant supplies of heat and water would be nice.

Cancel the concerts, vacations, new stereos, computer upgrades, etc. If your computer is too weak to run windows, throw on Linex. Runs on as little as a 386sx (16MHz) with 4MB RAM and you can't beat the price.

Learn to cook and only eat out once or twice a month. Huge savings here in most cases.

If you don't need it but it's on sale for a fantastic price, you still don't need it. (Exception: unless you can sell it for a profit, figure in your time and effort as well as your cost for "it" as well.

Watch six and keep your...

-- eyes_open (best@wishes.net), June 24, 1999.

If you are recently out of school then you can get a reduced payment plan for the student loan. If we hit a 10 then don't worry about defaulting on the student loans. Heck, our federal mafia routinely bails out the S&L's and foreign dictatorships. Yet we our expected to break our backs to pay off our debts. The house is #1.

-- Joe O (ozarkjoe@yahoo.com), June 24, 1999.