Make $200k, credit card debt, no savings

[Anonymous]

You can pay off everything except the student loans within a year. This is very, very doable even without the big cuts others have suggested (though those are good ideas too, as you definitely need to change your spending habits).

Even easier to do if either of you have bonuses coming.

Personally, I've found it easiest and most motivating to knock down one debt at a time. So pay off that 401K loan this month. Move the CC balance to something at 0% and pay the IRS in full in the next few months, and then knock out the CC bill by the end of the year.

I can't help your marriage Assuming DH does not have a gambling habit or other serious, negative drain on your finances, you could take it over in full. I have done this and it works well for our family.

[Anonymous]

OP here-

Thank you all for your help. I’m too embarrassed to talk to people in person. And you all didn’t roast me! You’ve been so encouraging and helpful.

I’m getting therapy and I’ll fess up to the therapist about how bad this issue is.

We’re in our 50’s and having no savings at this age is horrible and I’m ashamed of that. All kids have moved out and on their own so it’s just two of us. We shouldn’t be spending more than we did with all the kids at home.

I have control of the finances but I have a hard time not spending money or telling my husband he needs to stop. Last night I let my husband know how much debt we have and how much we’re spending. He says he’s on board. Now I need to follow through.

I’m not sure about what to pay first- my job is very secure and my 401K has a really low interest rate, so that should probably be left until later. I think either the credit cards or taxes needs to be paid off first. And I’m upside down on both vehicles so they need some of the principal paid off. That’s what happens if you pay more than the minimum, right? Our interest rates are high- 30-36%. We have some with really low amounts but the fees are high. If I pay those off and close the accounts, does that affect my credit rating?

Thanks again!

[Anonymous]

"Our interest rates are high-30%-36%."

OP: Have you fully disclosed your debts & obligations ?

Which interest rates beside the credit cards are in the 30% to 36% range ? Car loans ?

[Anonymous]

psychologically, it may help to pay off the smallest one first. Get some motivation going. Then go for the next smallest. Don't try to do them all at once. Pay the minimums on all but the one you are focused on.

I'm glad you are going to therapy. I think you'll get a lot out of it. Trust me, SO many people are or have been in your situation. You've got an awesome income, so this is fixable!

[Anonymous]

The credit cards have the 30-30% interest rate. The 401K loans and car loans are 5%.

[Anonymous]

Two people? How is this even possible? Is your house $5M? Are you surrounded in rolex watches? Like how? I don't get it.

[Anonymous]

Anonymous wrote:The credit cards have the 30-30% interest rate. The 401K loans and car loans are 5%.

What did you take the 410K loans out for? Why don't you transfer the cc to a lower IR CC if you can't pay them off totally right now?

[Anonymous]

Anonymous wrote:

Anonymous wrote:The credit cards have the 30-30% interest rate. The 401K loans and car loans are 5%.

What did you take the 410K loans out for? Why don't you transfer the cc to a lower IR CC if you can't pay them off totally right now?

The 401K loan was a vacation to see our daughter and try to help my marriage. Such a mistake but that's where it went. And we can't get a lower interest rate credit card since our credit rating is low.

[Anonymous]

Anonymous wrote:Two people? How is this even possible? Is your house $5M? Are you surrounded in rolex watches? Like how? I don't get it.

I think I've explained this already. And rolexes? Really? Those are 10-60k.

[Anonymous]

Anonymous wrote:We need to get a grip! We have no excuses anymore. We make enough money and still life paycheck to paycheck. We spend around $1500 a week on anything other than regular bills like rent, utilizes, car payments, minimum on credit cards… To stay on the budget I put together that would pay $500 a month over the minimum on the credit cards, and $500 a month in savings, we would need to only spend $800 a week on the costs we have more control over. Is that even feasible? There are only two of us.

OP we need to know more. What are your bills exactly where is the money going each month? Are you eating out a lot? Drink a lot? "We spend around $1500 a week on anything other than regular bills" WHERE is that $1500 going each week? This isn't clear at all.

[Anonymous]

OP, you stated right up front that you need to reduce $1500/month of discretionary spending to $800.

Good news #1: it is awesome that you acknowledge that and are willing to dive in. Also awesome from the follow up that DH is on board too. This isn't about finding the right credit card, it's about reducing spending. You can worry about what order to pay things off after you've reversed the cash flow.

Good news #2: $800/month in discretionary spending is totally doable. I know it sounds like an overwhelming reduction, but it really is manageable with a good quality of life. If you make deliberate choices, you won't have to feel deprived all the time - you can have all of your needs and some of your wants met, just not all of your wants ... And that's a perfectly good way to live. Keep the mindset that budgeting is about making choices, not straight up deprivation.

So here's the first thing you need to do: figure out where that $1500/month is going, and make some choices. You can cut everything in half, or you can choose to protect some categories of spending and eliminate others entirely. That is your choice. Just be deliberate about it - if you just go in with a vague goal of "spend less", you'll stress out daily and probably never get there. Set realistic (but aggressive) targets for household goods, groceries, entertainment, eating out, clothing, etc. Keep track weekly of how you're doing month-to-date. We're only a week in to Feb, so use this as your starting month. You can do it!

Also, plan a chunk of money in your monthly budget for things like home repairs or car repairs. If you don't use it, that becomes extra savings or debt payoff. But if you do need it, it doesn't feel like a total budget-buster if you've been planning for it.

[Anonymous]

My suggestion is much more simple:

STEP 1ay off the high interest (30%-36%) rate credit cards in 5 months AND do not use any credit card unless necessary AND pay off the credit card balance each month.

STEP 2: Do not deviate from STEP 1.

[Anonymous]

Sorry, not sure how the smiley face posted.

[Anonymous]

I'm still curious about the argument for paying off the IRS before everything else is paid. This is likely a low-interest-rate obligation that does not affect OP's credit score as long as minimum payments are being made. Given the interest rates mentioned above, it is obvious that the credit cards need to be the priority.

(As for debit cards: those are dangerous. Don't use them. Credit cards offer consumer protections and legal liability limits for unauthorized use. In the case of unauthorized use, you are not out the money while the bank investigates the issue, as you would be with debit cards. There is nothing wrong with using credit cards that are paid off every month, on time. Cash and checks are good, too. But don't use debit cards.)

[Anonymous]

Anonymous wrote:We need to get a grip! We have no excuses anymore. We make enough money and still life paycheck to paycheck. We spend around $1500 a week on anything other than regular bills like rent, utilizes, car payments, minimum on credit cards… To stay on the budget I put together that would pay $500 a month over the minimum on the credit cards, and $500 a month in savings, we would need to only spend $800 a week on the costs we have more control over. Is that even feasible? There are only two of us.

I’ve read your updates, and I think you can absolutely cut your discretionary spending if you’re determined to do it. I just want to clarify where you’re at. Are you spending $1500/WEEK on discretionary? And talking about cutting to $800/WEEK? If so, why does a weekly savings of $700 only result in $1000/MONTH against credit cards and savings? The math doesn’t math.

I would make a spreadsheet to show where all the money is going and decide what to cut. All extra money goes to the high interest credit cards first.