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

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:"Our house is extremely modest and too small for a family of 5" -- yet it's worth $800K.

I don't understand this. How can something be "extremely modest" and cost $800K? We are a family of 5 living in a 3BR condo in Columbia Heights like this one, on the market for $325k, and we're doing ok.
https://www.redfin.com/DC/Washington/1429-Girard-St-NW-20009/unit-305/home/96098202

I can't wrap my head around the numbers the OP is saying. Holy moly, you earn more than three times what we do and you burn through SO MUCH every month.

I agree. This is exactly the kind of place OP should be living in given her childcare costs and debt. it would afford her to pay off her student loans. The extra 1-2n a month she would save in housing could go to the cc debt. She could take transit to work for free since she's a fed and sell her car. She could save a good 750 a month there.

Even better - she could hire a nanny and improve her quality of life by not having to do drop offs and pick ups for the kids.

Repeat, what school would the kids go to in Columbia Heights?

Two of my kids go to a charter school and one goes to a public school. Please don't belittle someone posting at DCUM for living in DC and using DC schools.

Right, that's fine...and that's your decision with your children's educational priorities. But why would OP give up a terrific school district (I am guessing Arlington) to move into a condo in columbia heights, where she will have to hit the lottery to get a decent charter school? Let's be realistic. She is putting her kids' education first, and I don't blame her.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:"Our house is extremely modest and too small for a family of 5" -- yet it's worth $800K.

I don't understand this. How can something be "extremely modest" and cost $800K? We are a family of 5 living in a 3BR condo in Columbia Heights like this one, on the market for $325k, and we're doing ok.
https://www.redfin.com/DC/Washington/1429-Girard-St-NW-20009/unit-305/home/96098202

I can't wrap my head around the numbers the OP is saying. Holy moly, you earn more than three times what we do and you burn through SO MUCH every month.

I agree. This is exactly the kind of place OP should be living in given her childcare costs and debt. it would afford her to pay off her student loans. The extra 1-2n a month she would save in housing could go to the cc debt. She could take transit to work for free since she's a fed and sell her car. She could save a good 750 a month there.

Even better - she could hire a nanny and improve her quality of life by not having to do drop offs and pick ups for the kids.

Repeat, what school would the kids go to in Columbia Heights?

Two of my kids go to a charter school and one goes to a public school. Please don't belittle someone posting at DCUM for living in DC and using DC schools.

Right, that's fine...and that's your decision with your children's educational priorities. But why would OP give up a terrific school district (I am guessing Arlington) to move into a condo in columbia heights, where she will have to hit the lottery to get a decent charter school? Let's be realistic. She is putting her kids' education first, and I don't blame her.

+1. OP's mortgage is $3400/month and house is currently valued at approximately $800k. So they probably paid somewhere in the $500s for it when they bought, depending on downpayment. Good schools is key. Moving to Columbia Heights condo with less than desirable schools, and having to play the charter lottery, just doesn't make sense, especially if one kid will be out of daycare next year and into good public and the third will be out of daycare and into good public in a couple of years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:"Our house is extremely modest and too small for a family of 5" -- yet it's worth $800K.

I don't understand this. How can something be "extremely modest" and cost $800K? We are a family of 5 living in a 3BR condo in Columbia Heights like this one, on the market for $325k, and we're doing ok.
https://www.redfin.com/DC/Washington/1429-Girard-St-NW-20009/unit-305/home/96098202

I can't wrap my head around the numbers the OP is saying. Holy moly, you earn more than three times what we do and you burn through SO MUCH every month.

I agree. This is exactly the kind of place OP should be living in given her childcare costs and debt. it would afford her to pay off her student loans. The extra 1-2n a month she would save in housing could go to the cc debt. She could take transit to work for free since she's a fed and sell her car. She could save a good 750 a month there.

Even better - she could hire a nanny and improve her quality of life by not having to do drop offs and pick ups for the kids.

Repeat, what school would the kids go to in Columbia Heights?

Two of my kids go to a charter school and one goes to a public school. Please don't belittle someone posting at DCUM for living in DC and using DC schools.

Right, that's fine...and that's your decision with your children's educational priorities. But why would OP give up a terrific school district (I am guessing Arlington) to move into a condo in columbia heights, where she will have to hit the lottery to get a decent charter school? Let's be realistic. She is putting her kids' education first, and I don't blame her.

+1. OP's mortgage is $3400/month and house is currently valued at approximately $800k. So they probably paid somewhere in the $500s for it when they bought, depending on downpayment. Good schools is key. Moving to Columbia Heights condo with less than desirable schools, and having to play the charter lottery, just doesn't make sense, especially if one kid will be out of daycare next year and into good public and the third will be out of daycare and into good public in a couple of years.

So how exactly is OP drowning in debt? Close to 300k home appreciation 400k in their 401k, minus 200k student loans and 50k cc debt.
OP is net positive 450k! I don't think that's hardly drowning in debt.

[Anonymous]

Anonymous wrote:

Anonymous wrote:DH and I earn decent money (not a huge amount by DC standards, but comfortable) $285k HHI. But we are so drowning in debt, we don't know how or where to begin to dig out. $200k in student loans. $50k in credit card debt (a lot from grad school and also while I was on maternity LWOP). We basically live check to check because of mortgage payments, student loan payments, credit card payments, and daycare expenses for two kids. We have very little savings, despite trying to participate in our respective 401(k) and federal tsp.

How do we start to tackle this? Do we see a credit or debt counselor? I have no idea how to find someone legitimate who isn't out to rip us off or destroy our credit even further. We need a game plan, as we are in our mid-to-late 30s, and cannot sustain this. We take one vacation per year, not luxurious, but nevessary for two fulltime working parents of three kids. We do have our kids in a lot of activities. We do drive two newish cars we had to get for space when the kids came along (three car seats).

Can anyone recommend a legitimate accountant or debt advisor/credit counselor, who could meet with us and help us sort this out and come up with a plan?

Oh dear, OP, there are so many mean and petty responders here. Just ignore them. Remember the rule of karma.

I can relate. We've got 3 kids and are mired in debt as well. I posted here just about a year ago with similar circumstances, and many people responded very helpfully. Granted, I outlined my budget and that was very informative, which led, in turn, to some very insightful and helpful recommendations. Last year, at this time, we were about $210K in debt. Mortgage (primary and secondary), two cars, credit card debt, and student loans. The first step was creating a detailed budget - daily expenses, regular bills, debt, investments, etc. And tracking it like a hawk. The second step was ridding ourselves of unnecessary expenses - no more cleaning lady, no more cable/phone, no more piano lessons, no more dance lessons, no more tae kwon do lessons. That alone freed up around $600 a month. The third step was stopping our TSP investments, painful as it's been (but a great motivator to get ourselves out of debt); that freed up a good $1000 a month (again, painful, knowing the long-term investment losses).

Dave Ramsey has been a godsend for us. I listen to him every day. He keeps me motivated and on track.

We paid off our credit card bills first - around $7500. We are due to pay off our second mortgage in March - around $60,000. We are slated to pay off one car and one loan later this year. And then the other car, a family debt, and the second loan next year. The student loan will be paid off in early 2018. We will be debt-free at that point.

You live in a rowhouse and are paying $3400 a month. That is very high.
You have two car payments. Again, very high.
You pay for people to walk your dogs. Necessary? We have two dogs, they are crate-trained.
Restaurant/eat-out? We cut that out of our budget as well. Our grocery budget is about $400 a month. Not easy with three kids. But we became frugal and creative with our food.

Develop a budget, and stick to it. Create goals, and stick to them. Your kids are young enough that they won't remember these tight times coming ahead, but they'll appreciate the sacrifices you made on their behalf.

Good luck!

You are losing quite a bit by not making that TSP contribution. Plenty of people do that and carry mortgages and student loans.

[Anonymous]

OP - sorry some of these posters are not being helpful. Sometimes people need to validate their own decisions by tearing down others. Ignore ignore ignore. You can't change the past, only make better decisions for the future. Lots of people have said this, but the first thing you need to do is take an inventory. I know it's scary and daunting when you are in debt, and it's hard to talk about money with spouses sometimes (which can lead to poor decision making), but you must do it. I promise you, it will be freeing for both of you. Make a date, open a bottle of wine, pull out your computers and a pad of paper and write it all down, debt, loans, all your accounts and all your bills. Then you can make some decisions. Maybe you pay off the cc debt with your emergency savings. Maybe you get an au pair or nanny who drives instead of all the daycare/aftercare/dog walker, etc. even if that's just a wash, your house will be cleaner, you'll be less stressed, etc. maybe you get rid of one car and carpool, there are lots of rideshare options. Number one priority is getting rid of the cc debt ASAP. It will feel so good and will be a weight off your shoulders. You just need to take the first step and talk numbers with DH. Once he sees returning laid out, he might be willing to talk about moving further out. Especially if a nanny is in the cards and takes the drop off/pickup out of your lives. Good luck OP.

[Anonymous]

Any update from the OP? What things have you implemented? Have you talked to your husband about getting on the same page?l

[Anonymous]

Anonymous wrote:
And we decided we would rather have some credit card debt and siblings than an only child. To me, a sibling is priceless.

Then you don't really have any debt to worry about. What's the issue?

[Anonymous]

Anonymous wrote:

Anonymous wrote:
And we decided we would rather have some credit card debt and siblings than an only child. To me, a sibling is priceless.

Then you don't really have any debt to worry about. What's the issue?

Agree, not really sure what OP wants to hear.

[Anonymous]

Anonymous wrote:Any update from the OP? What things have you implemented? Have you talked to your husband about getting on the same page?l

Of course not. She does not want to make any changes and wanted to be told all of her choices were valid. Since the post didn't work out for her, she bailed.

[Anonymous]

Anonymous wrote:You have to drop the activities. Do it now while your kids are young. Right now they are more for you than them. As your kids get older, it will get more expensive and more tough.

We did this too when our kids were young. The activities cost us way more than just the fee. There was all the little extras like cleats, dance recital fees, and eating out on busy days. There was also just not having time to focus on things like creating and sticking to and balancing a budget because actually those things do take time and you need to be able to focus on them especially the first year when you are really getting started.

Little things like getting coffee out each day (times x2 each time), grabbing snacks on the run, eating out, hosting other families and friends,etc.

THIS. I have a 2 year old and we've been doing activities on weekend mornings for about a year, and I've realized the extra costs that are a side effect of the activities really add up. Taking DD to swimming, dance or other activities on Sunday mornings takes away from my time to get things done like grocery shopping, cooking, etc. I spend $ to offset the lost time (takeout, prepared foods from wegmans/grocery store, wasted produce that I didn't have time to cook, paying shipping for online shopping due to lack of time to drive to the mall, etc). When you factor in those costs plus the materials (swimwear, dance clothing/shoes) the activities for 1 child probably take more than $300 per month from our budget. But these activities are a costly luxury and if I had signifcant debt I would suspend them until I dug myself out. We have your HHI and no debt other than our mortgage, so we can swing it, but even I am starting to question whether it's worth that much $.

I also suggest that you ID your preferred splurge areas and set a firm budget. When I was single and made about 100k I had credit card debt from my grad school days of trying to live above my means. I loved clothes at the time, so shopping was my vice. I set a firm monthly shopping budget that allowed me to pay off my credit card debt and until I had paid off the credit cards I stuck to that. It was habit forming and even afterwards I no longer felt a need to spend so much at once. So if you feel you 'need' takeout/convenience foods, decide how much you will spend on that and strictly adhere to it. I think this will work better for you than the zero-spending on luxuries/splurges that is recommended above.

[Anonymous]

Anonymous wrote:Any update from the OP? What things have you implemented? Have you talked to your husband about getting on the same page?l

More importantly, did Mr. Money Mustache reply back to OP's conundrum?

[Anonymous]

Anonymous wrote:"Our house is extremely modest and too small for a family of 5" -- yet it's worth $800K.

I don't understand this. How can something be "extremely modest" and cost $800K? We are a family of 5 living in a 3BR condo in Columbia Heights like this one, on the market for $325k, and we're doing ok.
https://www.redfin.com/DC/Washington/1429-Girard-St-NW-20009/unit-305/home/96098202

I can't wrap my head around the numbers the OP is saying. Holy moly, you earn more than three times what we do and you burn through SO MUCH every month.

You have some nerve recommending this option, I hope you blushed just a little bit when you posted this link. A coop, with a $1,400 coop fee on top of the mortgage, bankruptcy sale subject to court's approval and on the market for 160 days? In a building with iron grates on windows? Don't you think if it was such an awesome deal that it would have been snatched by now, seeing as it's been out there for almost six months?

Shame on you for posting a BS link as if it was a legitimate option.

That's before we even get to a school discussion.

[Anonymous]

Anonymous wrote:

Anonymous wrote:"Our house is extremely modest and too small for a family of 5" -- yet it's worth $800K.

I don't understand this. How can something be "extremely modest" and cost $800K? We are a family of 5 living in a 3BR condo in Columbia Heights like this one, on the market for $325k, and we're doing ok.
https://www.redfin.com/DC/Washington/1429-Girard-St-NW-20009/unit-305/home/96098202

I can't wrap my head around the numbers the OP is saying. Holy moly, you earn more than three times what we do and you burn through SO MUCH every month.

You have some nerve recommending this option, I hope you blushed just a little bit when you posted this link. A coop, with a $1,400 coop fee on top of the mortgage, bankruptcy sale subject to court's approval and on the market for 160 days? In a building with iron grates on windows? Don't you think if it was such an awesome deal that it would have been snatched by now, seeing as it's been out there for almost six months?

Shame on you for posting a BS link as if it was a legitimate option.

That's before we even get to a school discussion.

It's very obvious that PP does not actually live in a 3BR condo in Columbia Heights with a family of 5, because if she were, she would be more sympathetic and realistic in her posting. No one in that situation would recommend a place that is a bankruptcy sale subject to court's approval. Everyone knows that takes forever to sort out.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:"Our house is extremely modest and too small for a family of 5" -- yet it's worth $800K.

I don't understand this. How can something be "extremely modest" and cost $800K? We are a family of 5 living in a 3BR condo in Columbia Heights like this one, on the market for $325k, and we're doing ok.
https://www.redfin.com/DC/Washington/1429-Girard-St-NW-20009/unit-305/home/96098202

I can't wrap my head around the numbers the OP is saying. Holy moly, you earn more than three times what we do and you burn through SO MUCH every month.

You have some nerve recommending this option, I hope you blushed just a little bit when you posted this link. A coop, with a $1,400 coop fee on top of the mortgage, bankruptcy sale subject to court's approval and on the market for 160 days? In a building with iron grates on windows? Don't you think if it was such an awesome deal that it would have been snatched by now, seeing as it's been out there for almost six months?

Shame on you for posting a BS link as if it was a legitimate option.

That's before we even get to a school discussion.

It's very obvious that PP does not actually live in a 3BR condo in Columbia Heights with a family of 5, because if she were, she would be more sympathetic and realistic in her posting. No one in that situation would recommend a place that is a bankruptcy sale subject to court's approval. Everyone knows that takes forever to sort out.

You're missing the point. There are other options besides this one listing. Op doesn't need to live in an 800k house without access to public transportation.

[Kaymoz]

Hello to the OP,

(And apologies up front to the other posters because I didn't have the patience to read the hundreds of message so might be duplicating here....)

But for my 2cents worth -- two comments:

Things WILL be better when you no longer have the full day care expenses and must only pay for after school care.
That is, unless you chose to send your children to equally pricey private schools once they reach kindergarten age, which I am assuming you won't.

Consider renting out part of your home to generate income. This could be anything from renting the garage to someone who just need car storage, or part of the basement to n artist that need studio space to renting the bedroom next to yours to somebody commuting from Philly who needs a place just a few nights a week to housing a student that could become part of your family to ????