Earning Well but Drowning in Debt...how to dig out?
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Anonymous
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Op again. We are navigating the summer camp thing now. $450 (or even higher... Smithsonian camps are closer to $540/week with aftercare!) seems to be pretty standard unless you do a city camp or Ymca type camp, which are ok but not for the whole summer. They aren't always well organized. We are looking at sending kids to stay with relatives for part of the summer.
I honestly think a big problem is the cost of living here. $450/week per child for camp is so crazy. Housing is so expensive. Even food is more expensive. Daycare most expensive in nation. I would love to move somewhere cheaper. But I am a fed and DH also works on the Hill. |
Anonymous
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OP again. A PP asked if we have any emergency savings. We do have a little. We both have 401k/TSP valued at around $400k total. For retirement. We also have a $50k emergency fund. The question is, do we wipe out the emergency fund to pay off the credit card debt!? Do we cash out the 401k and pay the penalties to pay off the high interest CC debt
At this point, I am tempted to cash out $50k in 401k and pay off the credit debt. Then work on the student loans. |
Anonymous
No. The problem is your mortgage is too high for your income and you chose to have three kids and two cars. Why do you need two cars if you live in dc in a rowhouse? Does this mean you're also driving to work? Here is what you need to do: Sell your house. Use proceeds to pay off credit card debt and some of student loans Rent a two bedroom apartment in DC Sell both cars and use public transportation Pack your lunches You're not being honest with yourself about the unpaid maternity leave. You are basically saying you spent 50k in three months. I assume only one of you was on unpaid leave. This equates to maybe 10k in earnings MAX. What was the other 40k spent on? You're going to have to make major changes. Even if you were to move from dc, if you purchase a home too expensive for you and own cars you don't need you'll always be poor. |
Anonymous
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Do not touch the 401k!!!! You need 6 months of expenses in emergency fund just in case. I went to ymca and county camp all summer long for many summers and was fine. It doesn't have to be every week.
How much do you put into the emergency fun each month or did you stop that? Redirect that to the credit card. Put everything you can towards the card without emptying your emergency fund. Good luck. |
Anonymous
Do not cash out the retirement. You need to yes, use the emergency fund or at least part of it. Save six months of mortgage payments and then use the rest to pay off the debt. Now with the cc payments gone use that money to build your emergency fund back up. Can you also sell the cars? Can you not take public transport to work? It may be less expensive if you hire a nanny and sell both cars. This way you and your husband can both take public transport to the hill. If you work on the hill and live in a rowhouse I don't see how this isn't possible!!!! |
Anonymous
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You had no business buying a home with an expensive mortgage payment (for your income) with 200k in student loans.
To put things in perspective we earn almost 400k and have a similar mortgage payment. Except we have NO children, no student loans and no auto loans. Which means we can save over 125k a year. We still: Have one car and take public transportation Pack our lunches Clean our own house Rarely use credit cards (for air travel and online purchases mostly) |
Anonymous
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How old are you and your dh? How old are your kids?
Here is a budget template: Common Budget Categories Budget Categories: BILLS mortgage/rent garbage cable/Netflix phone internet cell phone electric gas water alarm life insurance car insurance home insurance daycare/preschool Total DEBT (list smallest to largest by total due, include monthly minimum) car student loan medical bills (add anything else you have here - credit cards, rent to own, whatever) Total MONTHLY SPENDING auto: fuel charity groceries/toiletries eating out blow money entertainment college savings retirement savings newspaper/magazine/online subscription Total SINKING FUNDS (Take the amount you expect to spend in a year, divide by 12 and set aside this amount each month in savings.) clothing & shoes haircuts pet care gifts, parties school expenses household/garden Christmas/birthdays home maintenance (1% of house value per year) car maintenance/tags ($75/car recommended) medical (rx, copays, contacts, dental) kids classes/activities adult classes/activities tuition property taxes (if not included in mortgage) adult classes travel AAA, etc. Total |
Anonymous
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op what can you do? Are you willing to:
Sell cars Sell house and downsize If you're unwilling to do either of these then stop complaining about your situation. |
Anonymous
There is absolutely NO reason you cannot live within your means. You cannot afford a $450 a week camp so you do a camp for half the price. No they may not be as good or organized, but you also need to live within your means. Housing is not crazy expensive - its the housing choice you make. We have a small 3 bedroom for $2000 a month mortgage. You don't buy fancy food and buy on sale with coupons. Day care is time limited a well. You are not willing to look at your lifestyle choices so enough complaining. Many feds make decent money. |
Anonymous
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OP, you are full of excuses, trying to justify living in a luxury house, sending kids to pricey camps. Sounds like you aren't willing to set limits or goals, follow a plan, say no to wants, if it means not living a life of the rich. Of course you can dig out of debt if you really wanted to.
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Anonymous
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When you put everything in the budget, it will be easier for you to see where to go.
Taking money out of the 401k is like LAST DITCH, my kids are starving and I am homeless kind of thing. Not for two people who have jobs and a place to live. The future cost to you of taking that money out is way higher than anything else. |
Anonymous
There you go. You refuse to make any changes. No, a sibling isn't always priceless. My husband hates his sibling. I have many friends who are not close to their sibling(s). It simply was reckless to have three kids with those kind of student loans. |
Anonymous
You are living above your means. You do not need a bigger house. You choose to have three kids. You choose to buy a house without taking child care into consideration. You knew you had high student loans. Your child care costs are pretty low for 3 kids. Your kids can do less activities or go through the gov't ones or groupon. Life is about choices. I cannot imagine spending $50,000 on maternity leave, well, maybe we did only because it was an adoption. You made the choice not to save your leave for maternity leave. You made the choice to take 3 months off vs. 6 weeks. You need to get you spending under control and look at your choices. |
Anonymous
Agree. Which is why the op is in this position to begin with. These kind of posters are always the same. Always. This person is basically unable to live on at least 14k of take home pay a month. Which would mean: 3500 housing 500 utilities and bills (cheap cable, no iPhones, simply water, gas and electricity) 2000 (500 a week for groceries, incidentals). Bring your own lunch 3000 childcare (nanny) 3000 student loan payment 1750 savings 250 unexpected (child needs new shoes, birthday cake, wedding present etc) If your both Feds then your metro card should be free. You should max out retirement. Eventually you won't have childcare costs and then that money can go to student loans. I assume you earn a small bonus every year which can go towards clothing, inexpensive vacations, a new couch etc). |
Anonymous
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You need to make hard cuts now so that things will be easier even in 5 years. It just gets harder as your kids get older. They truly get more expensive. People look at day care costs and think it is short term but kids who are older are just as expensive, you just pay it out in bigger chunks less often than you pay it for childcare now.
Do a budget with your husband. I live in a major metro area and probably have a different idea of what "too small" is - how many sq ft is your home? One bathroom was hard for us but with two bathrooms I can handle anything. Most likely you need to get rid of stuff. I have friends who spent 5 years with two kids in a one bedroom place - you do what you have to do. My kids share a room by choice now (although it was by necessity before). |