Earning Well but Drowning in Debt...how to dig out?

[Anonymous]

Anonymous wrote:AND THIS IS WHY I'M SAVING FOR MY KIDS COLLEGE AND IT HAS BEEN DRILLED INTO THEIR HEADS THAT THEY WILL ONLY ATTEND A STATE SCHOOL. The ROI on the OPS expensive education is not there.

I went to northern va community college and then UVA. I graduated with 5k in loans. I have a higher income than OP. An expensive education is foolish.

Not everyon grows up in a state with good community and public university system. My high school was abysmal, offered NO AP courses, and community college was effectively 13th grade (non-honors at that). People who went to the 'local' state universities (hours away), never leave my low income southern state.

You grew up in VA, already had an excellent public education before college, and one of the best community college systems and public university systems in the state. OP may have had to pay out of state or private tuition to escape that cycle of poor opportunities.

[Anonymous]

Anonymous wrote:^pp I feel like your advice is good but would be better for someone who is unable to save vs someone who is in massive debt.

It seems like the op is spending too much because of certain choices she's made around her number of children, house, commute and childrens' activities. Until she makes some big changes she's going to have a hard time not ordering convenient food.

Her biggest outflows are related to her home, childcare and two cars. Something has to give because she needs to almost free up an entire salary to go towards the debt. She needs at least 50k a year going to the debt. That's not going to happen by quitting some activities and cooking at home. It's going to happen by moving to an inexpensive apartment, selling a car, changing the childcare situation, etc.

Regardless op needs to do the math. It all comes down to inflow vs outflow. The numbers don't lie. Do the math op. Figure out how you can dedicate 5-6k a month towards the debt and to savings.

But I do not think the OP knows where the money is going right now.
In the short term she needs to break it down by line item so she can create a plan for how to get from the current state to being consumer debt free. (I assume this is the 1st goal)
Without having a full understanding of all of the family expenses - and planned expenses for the next few years you do not know what your target is for new car payments or new rent. (note - I think child care costs only go down by 50% once kids are in school given before / after care, care for teacher work days and camps)

[Anonymous]

What's the total debt?
200k student loans--how much at what interest rate?
50k credit cards (this seems like the scariest one to me)
30k cars? Or more?

I'd:

Take 35k from savings and pay down the cc
Cut all activities for the younger two.
Make a list of all family help for summer childcare and also look for a college babysitter. I'm a professional artist and I promise you that not doing music camp won't harm a talented child at all!
Take a major look at food and incidentals.

I wouldn't move. Moving and selling costs suck and if you buy a bigger place farther out the maintenance costs are a bear.

Own the process. Joke with friends that you are on a "spending freeze. Tell your kids you are doing a meal planing "challenge".

Pay off that CC.

Then learn better spending habits and tough it out on a budget that has you paying off the cars in the next 3-5 years and the student loans in the next 8-10.

Oh, and absolutely konmari you're townhouse. It'll feel so much better and peaceful and bigger if you are just living with items you love.

You CAN do it. People who say you are screwed are being mean and probably driving you away from the help on this thread. You have great incomes and with persistence can dig out of this by the time your kids are in high school. And you'll be teaching them great habits.

[Anonymous]

Anonymous wrote:

Anonymous wrote:^pp I feel like your advice is good but would be better for someone who is unable to save vs someone who is in massive debt.

It seems like the op is spending too much because of certain choices she's made around her number of children, house, commute and childrens' activities. Until she makes some big changes she's going to have a hard time not ordering convenient food.

Her biggest outflows are related to her home, childcare and two cars. Something has to give because she needs to almost free up an entire salary to go towards the debt. She needs at least 50k a year going to the debt. That's not going to happen by quitting some activities and cooking at home. It's going to happen by moving to an inexpensive apartment, selling a car, changing the childcare situation, etc.

Regardless op needs to do the math. It all comes down to inflow vs outflow. The numbers don't lie. Do the math op. Figure out how you can dedicate 5-6k a month towards the debt and to savings.

I disagree with you, for several reasons. First, while $50k a year toward debt would be great, it is not actually necessary for OP to tackle this situation. Will it take longer with smaller repayments? Of course. But that doesn't mean it's impossible. Lots of people carry a mortgage, students loans and a car loan or two, and still manage to be very financially secure.

Second, in a couple of years when the youngest is in elementary school, one of those three major expenses you've cited will naturally drop dramatically, as long as OP doesn't put that money toward something else (like nicer vacations or more kids activities). A lot people with young kids go through periods where they don't save much while their young children are in childcare, and then make up for it later. On the mortgage thing, didn't OP say her mortgage was $2,500 a month? She's not going to find an apartment for 5 for much less than that unless they move so far out they're looking at 90+ minute commutes for both of them each way, which just isn't good for the kids. I do agree that she can cut kid activities, I addressed that in my advice above. Cars may not be so easy as you say to get out of, if getting rid of a car means having to pay a bunch out of their savings because they're underwater and then they start incurring a bunch of other expenses related to commuting adjustments. If they move far away from their jobs to get the cheaper apartment you mention, getting rid of a car is probably even less feasible and they drive up their fuel costs.

Third, if OP starts with small changes, it may turn into big changes. After a few cuts they may not really notice the small cuts anymore, and seeing that extra $500 a month going toward their debt might motivate them to make bigger changes and pay it off faster. Whether you agree with it or not, OP isn't willing to make big changes right now, and isn't it better to make small changes (with an eye toward bigger changes, like putting former child care money toward debt repayment in a couple of years) than to make no changes at all?

Their mortgage is 3400. Not 2500. There are added expenses that come with owning a home. A couple with this kind of debt can't handle home maintenance. The idea is for her to move to a location that reduces their commuting costs (two cars to one) and is much cheaper than the mortgage. They could easily save 2-3k a month through thee changes. They are both Feds and aren't even taking advantage of the metro card!

Also childcare costs decreasing, yes. However these costs will be replaced with other expenses.

So you're saying the op should learn to save 500 a month. That's 6k a year. At that rate it would take the op over 40 years to repay her debt.

[Anonymous]

OP I found you an apartment in Alexandria that's 1800 for a three bedroom. It has an express shuttle to the metro! This would allow you to get down to one car.

Reduction is housing cost 3400 - 1800 = 1600 savings
Cheaper utilities for an apt = 200 savings
One less car payment = 500 savings
One less gas and parking = 200 (at least) savings
One less parking (both take metros) = 200 savings
Quit childrens activities = 400
No takeout = 200
no dog walker = 100

Ok I'm up to 3,300 in savings.

[Anonymous]

Anonymous wrote:OP I found you an apartment in Alexandria that's 1800 for a three bedroom. It has an express shuttle to the metro! This would allow you to get down to one car.

Reduction is housing cost 3400 - 1800 = 1600 savings
Cheaper utilities for an apt = 200 savings
One less car payment = 500 savings
One less gas and parking = 200 (at least) savings
One less parking (both take metros) = 200 savings
Quit childrens activities = 400
No takeout = 200
no dog walker = 100

Ok I'm up to 3,300 in savings.

Metro is expensive and not everyone can get to their job via metro. At their income they can afford more but choose not to live within their other means.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP I found you an apartment in Alexandria that's 1800 for a three bedroom. It has an express shuttle to the metro! This would allow you to get down to one car.

Reduction is housing cost 3400 - 1800 = 1600 savings
Cheaper utilities for an apt = 200 savings
One less car payment = 500 savings
One less gas and parking = 200 (at least) savings
One less parking (both take metros) = 200 savings
Quit childrens activities = 400
No takeout = 200
no dog walker = 100

Ok I'm up to 3,300 in savings.

Metro is expensive and not everyone can get to their job via metro. At their income they can afford more but choose not to live within their other means.

Op said they are both Feds. The metro is free! Op also said they work on the hill. So yes, they can get to work via metro but are insisting on a home that requires two cars.

Our hhi is close to 400k and I take the bus to work. Free metro card.

[Anonymous]

Jeez! Everyone is a party-pooper! OP does not want to slum it. She just needed some DCUM love and support. She gives a shit about your budget spreadsheet.

OP - you are doing fine. Your earnings will grow to match your spending and saving needs and wants soon. Carry on!

[Anonymous]

OP is never going to move, unless she is foreclosed on, because it is very clear that either she or her husband or both have a very big emotional attachment to the big $$ house in the perfect location and downsizing to an apartment would not let her save face. Same with having 3 kids, same with the fancy activities and camps.

Big hat, no cattle is the saying in Texas.

[Anonymous]

Anonymous wrote:Jeez! Everyone is a party-pooper! OP does not want to slum it. She just needed some DCUM love and support. She gives a shit about your budget spreadsheet.

OP - you are doing fine. Your earnings will grow to match your spending and saving needs and wants soon. Carry on!

I agree! op you probably have some more money you can spend on that credit card!

[Anonymous]

Anonymous wrote:OP is never going to move, unless she is foreclosed on, because it is very clear that either she or her husband or both have a very big emotional attachment to the big $$ house in the perfect location and downsizing to an apartment would not let her save face. Same with having 3 kids, same with the fancy activities and camps.

Big hat, no cattle is the saying in Texas.

Love that saying

[Anonymous]

Anonymous wrote:OP is never going to move, unless she is foreclosed on, because it is very clear that either she or her husband or both have a very big emotional attachment to the big $$ house in the perfect location and downsizing to an apartment would not let her save face. Same with having 3 kids, same with the fancy activities and camps.

Big hat, no cattle is the saying in Texas.

What's funny is that in ten years my husband and I will have a paid off house and millions in the bank. Rental properties too. Why?

We bought a home much cheaper than we can afford and one which leaves plenty of money for childcare and savings
We only have one car and it's paid for. Won't buy a new one until it won't run
Don't order takeout unless it's the weekend
Take the bus to work

Whereas the OP will probably have years left on her mortgage, student loans and probably more debt to pay for her kids to attend college. She won't understand why they don't have anything and others do. Maybe OP can then rent one of my properties and I'll use the cash flow for vacations?

[Anonymous]

Anonymous wrote:

Anonymous wrote:^pp I feel like your advice is good but would be better for someone who is unable to save vs someone who is in massive debt.

It seems like the op is spending too much because of certain choices she's made around her number of children, house, commute and childrens' activities. Until she makes some big changes she's going to have a hard time not ordering convenient food.

Her biggest outflows are related to her home, childcare and two cars. Something has to give because she needs to almost free up an entire salary to go towards the debt. She needs at least 50k a year going to the debt. That's not going to happen by quitting some activities and cooking at home. It's going to happen by moving to an inexpensive apartment, selling a car, changing the childcare situation, etc.

Regardless op needs to do the math. It all comes down to inflow vs outflow. The numbers don't lie. Do the math op. Figure out how you can dedicate 5-6k a month towards the debt and to savings.

I disagree with you, for several reasons. First, while $50k a year toward debt would be great, it is not actually necessary for OP to tackle this situation. Will it take longer with smaller repayments? Of course. But that doesn't mean it's impossible. Lots of people carry a mortgage, students loans and a car loan or two, and still manage to be very financially secure.

Second, in a couple of years when the youngest is in elementary school, one of those three major expenses you've cited will naturally drop dramatically, as long as OP doesn't put that money toward something else (like nicer vacations or more kids activities). A lot people with young kids go through periods where they don't save much while their young children are in childcare, and then make up for it later. On the mortgage thing, didn't OP say her mortgage was $2,500 a month? She's not going to find an apartment for 5 for much less than that unless they move so far out they're looking at 90+ minute commutes for both of them each way, which just isn't good for the kids. I do agree that she can cut kid activities, I addressed that in my advice above. Cars may not be so easy as you say to get out of, if getting rid of a car means having to pay a bunch out of their savings because they're underwater and then they start incurring a bunch of other expenses related to commuting adjustments. If they move far away from their jobs to get the cheaper apartment you mention, getting rid of a car is probably even less feasible and they drive up their fuel costs.

Third, if OP starts with small changes, it may turn into big changes. After a few cuts they may not really notice the small cuts anymore, and seeing that extra $500 a month going toward their debt might motivate them to make bigger changes and pay it off faster. Whether you agree with it or not, OP isn't willing to make big changes right now, and isn't it better to make small changes (with an eye toward bigger changes, like putting former child care money toward debt repayment in a couple of years) than to make no changes at all?

Actually that's likely not to be true.

Before and After care for 3 kids all year round plus summer camp for 3 kids and the cost will drop but not dramatically.

[Anonymous]

I really hate when people start these threads and then only respond to people they can argue with and with "no no no" instead of a meaningful discussion and exploring options with people that have thought through things for them.

I like the PP who pointed out that OP's initial thought to just hire someone to do this for them was particularly telling about how that type of instant gratification/lets pay money to get something done is what needs to change, and its really the key to this whole issue.
It will probably involve marital counseling since she says her husband is not on board. If there is a divorce this family will be dead broke and OP will be really suffering on what kind of lifestyle she will have to have.
I disagree with the poster who suggested just waiting, basically passively, until each child goes to school and that money is freed up. That should be part of the "snowball" effect but OP needs to free up at least $1500 every month going forward in addition to paying down the CC with $40k savings and then attack the car debt.
I suggested previously (well many things that were ignored) I sell 1 car for a commuter car that is cheap and cannot fit 3 car seats (like at $10-15k sedan) because the drop off-pick is divided and one child is clearly now in elementary school and doesn't need a car seat.
So why is OP hanging on to 2 vehicles that can handle 3 across?

[Anonymous]

op did your parents live this way too? I assume they didn't teach you about finances? I want to understand so I can make sure and not make the same mistake with my children.