It's time to get organized, and while a financial adviser could be of help (you can use this free tool to get matched with financial advisers, from our ad partner SmartAsset, as well as sites like CFP Board and NAPFA), you can probably do this yourself.
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First up, it's essential to understand income and expenses. "Create a simple net worth statement and track your cash flow. Before making any adjustments, check in with your values and create a list of what is most important to you. Your values may be different which is OK; talk through them so you understand where you're each coming from," says chartered retirement planning counselor Jake Falcon at Falcon Wealth Advisors.
Your next step, according to Falcon, should be lining up your cash flow with your values and cutting what doesn't match. "If there is still no room to make the math work, then it might be time to look for another higher paying job or start a side hustle," says Falcon.
For people treading water with debt, attorney Ashley Morgan at Ashley F. Morgan Law says if you're worried about making ends meet, then you need to take a realistic look at whether you can cover monthly expenses. "If not, typically you will need to see if you can cut back on expenses or increase income. If you continue to use your credit cards and access the HELOC each month, you might be tighter than you realize. When people are paying $500 in minimums on debt each month but spending $700 more on the accounts, something has to change to break even," says Morgan.
Looking at your situation, fortunately, your kid in community college is saving on two years of state university tuition. "If they are interested, they can still transfer into a four-year state college in year three," says independent financial adviser Arvind Ven at Capital V Group. And even though you may want to, you shouldn't feel obligated to pay for your child's college tuition.
What about your credit card debt?
You don't mention your household income or your expenses, which are important details. "There is good debt and not-so-good debt. Credit card debt is poison. You want to focus on bringing that down first as it has the highest interest rate," says Ven.
Credit card debt is the worst type of debt and would typically be the most expensive in your case. "Is there still room in the HELOC to borrow more to pay off the credit card debt? This would potentially bring the cost of the credit card debt down significantly and reduce debt payment quantity to two monthly payments, the home mortgage and the HELOC," says Mary Sasmaz, assistant professor of accountancy at Case Western Reserve University. That said, putting your house on the line to pay off the credit cards shouldn't be taken lightly.
It also might be worth having a conversation with your credit card company. "See if they can offer a hardship program. You want to see if you can get a lower interest rate to help you pay down the credit cards easier. Some banks offer hardship programs that close your credit cards but dramatically lower interest rates. Instead of a 30% interest rate, a bank may be able to offer you 9% for a hardship. The closed bank account is a small hit to your credit, but if you're continuing to make payments, it won't be too impactful," says Morgan.
What about your HELOC debt?
If you have equity in your home that exceeds the current HELOC balance, refinancing might make sense as it would combine your debt into a 30-year mortgage. "While this could result in more interest paid in the long term, depending on borrowing rates and time, it could help get monthly payment amounts to be more manageable," says Sasmaz.
What are some other options?
Bankruptcy becomes an option to consider when you might default on your minimum payments or you realistically can't pay down your unsecured debt after three years, says Morgan. "Bankruptcy can help with credit card debt and any arrearages for the HELOC and mortgage, but cannot typically get rid of secured debts when you keep the asset they are secured against," says Morgan.
Who can help?
A financial adviser might be able to help you, but a budget coach or someone to help you review your income and expenses is probably a better bet. "If working with a financial adviser, you want someone who is less focused on investments and savings goals and more about the current spending and looking at options for your budget," says Morgan.
To find a financial coach, consider a consultation with someone from the National Financial Educators Council or the National Foundation for Credit Counseling. Additionally, the U.S. Department of Justice offers a list of approved credit counseling agencies where you can filter responses by state, preferred language or other keywords. The National Association of Personal Financial Advisors has partnered with Advisers Give Back, a pro bono financial planning program for those in need.
Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com.
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