What to do first? Debt vs Savings/Retirement
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Anonymous
I wish. Child was recently found to have a LD and is struggling. She needs the tutor. |
Anonymous
NP here. OP, you need some basic financial education. Both you and your husband are very naive and undereducated about finances for those in your late 30's and early 40's. You need to make the effort to get yourself some basic finances 101 and get yourself on track to fix the issues that you've created with 15-20 years of bad financial decisions. Just like you are prioritizing your child's activity and math instruction, you need to prioritize your own financial education or you will continue to make bad choices and struggle financially when you should be much more comfortably off. So, here are some tips: The biggest expense you have when you borrow money is paying interest. You have borrowed money in many ways: - buying cars with car loans - charging money on CCs - consolidating your husband's CC debts into one loan You need to get out of paying for all of that interest, overhead and finance charges that go to the banks and financial institutions every time you borrow money. That said, I would aim to get rid of the bold expenses and minimize the underlined expenses: - Stop paying housecleaners to clean for you until you get your financial house in order. You cannot afford housecleaners with this much debt - First you should pay off your CC debt which you are paying 24% interest annually to hold - Second, you should sell the expensive car at a loss and use some of the bonus to pay the difference between the value of the loan and the sale price. Yes, you will lose money, but you will lose less money than if you pay off the loan fully since the interest at 11% if costing you a ton. Purchase a small sensible used car with good gas mileage for a lot less and get a loan for lower interest. You should be able to save a lot here - You did not list the interest rate on your husband's CL. After you pay off the expensive car, you need to focus on either paying off the second car (even 7% is not a good rate for a car loan) or your husband's CL, whichever has the higher interest rate. Then you need to replan your optional expenses: While it doesn't seem like a lot, $80 a month for hair care is a luxury that you really shouldn't give yourself now. I know that some types of hair need professional help, but even if you cut that back to every other month and apply that $80 towards debt relief, it will still help. $90 for Internet, $156 for TV and $158 for cell phones are also luxuries that you can't afford. Look for cheaper cell phone plans. We currently pay $100 for up to 4 lines. We use one for each of our phones and one for one tablet that has a line so that it doesn't need to have WiFi or have to set up one of our phones as a hotspot so the kids can use it. You can switch to a combined package for TV and Internet for a lot less. We currently pay $80 for a triple play of landline, FIOS-TV and FIOS at home. |
Anonymous
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This budget is not yet complete. I think if you do look at dave ramsey with your husband you guys can get on the same page and support each other in this. It will be easier to make cuts if you are both on the same page. Right now you have a high income but you are bleeding money to debt instead of investing money and letting it work for you.
Your budget is not complete in that it has no gifts, no birthday parties, no pet expenses, no medical copays, no clothing, no shoes, no car maintenance expenses. You need to budget every dollar of your income so you are directing it instead of being led by your expenses. You have what is known in Dave Ramsey world as a big shovel - you have a high income and can dig yourself out. You have very low student loans - the cars and credit cards are from living beyond your means. Those past choices are hindering your ability to invest in your future. Good luck! |
Anonymous
By DFSA, do you mean DCFSA? If so remember that it is use it or lose it, so if you are on a calendar year plan, you need to use it by December (and thus might not want to max it). If you're in education you might be on an academic year plan so that's fine if so. But it's still not the missing money--that's only $400/month. Check your respective paystubs to see what else you may be paying pre-tax (and also how much tax is being withheld--you could be overwithholding). You need a full budget to begin to understand where and what to cut. I suspect most of what's on this list is not the issue. |
Anonymous
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OP, would you and your husband consider reading together Dave Ramsey's book "Total Money Makeover"? It would be great for you. Even better would be if you were willing to go to his classes (usually at a church, and you don't have to be members or religious).
**here's where I don't like Dave's advice, as I said before. 1) I don't think you should turn down employer matches while getting out of debt 2) I don't think you necessarily need to pay for actively managed funds. But you're a ways away from that, anyway. You should both really consider it. It will be more thorough, give you more motivation, and overall change your mindset about money more effectively than any advice you can get on here. |
Anonymous
What expenses are you not reporting here? This list adds up to about $7,000 a month. At your HH income I'm guessing you are netting about $10,000 a month. Since you don't appear to be saving anything, where is this extra $3,000 a month going? |
Anonymous
| How much is left on the student loan? How much is on the consolidation loan? |
Anonymous
Developmental psychologist here. Is she in public school? They should be meeting her needs--work out an IEP. Talk to the special education resources in your county about ways you can support her learning. First grade is really young to need a tutor. You could learn strategies to support her--it will help you all in the long run too. |
Anonymous
Advertise it on Craigslist and take a little time to sell it, and get more than $24K for it. Maybe aim for $26 or $27K. Get it as high as you can. Use your bonus to make up the difference, and to pay cash for a reliable used car for under $5000. Use the rest of your bonus to pay down the highest interest credit card debt. How much do you guys own in student loans? I think $3,000 a month in rent is fine at your income level, but right now you guys are broke. I'd consider moving to a place that is only $2000 a month which would give you a lot more wiggle room. |
Anonymous
Ugly post by you. |
Anonymous
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OP, I assembled all of your information into one place here. I was having a hard time getting the complete picture because your details were posted but by bit.
DEBTS: Credit cards: $7K / $?? monthly @ @24% Car: $30K / $820 monthly @11% underwater worth $24K Car: $17K / $492 monthly @7% Consolidation loan: $Total ?? / $305 monthly at ?? % Student Loans: $Total ?? / $125 monthly at ?? % HHI is 230K Expected cash bonus ranging $15K Monthly Take home… $10,000? Monthly Expenses: Debt Repayment: 1743 Student loans 125 Consolidation 305 Car 821 Car 492 Housing: 3150 Rent 3000 Cleaning 150 Furnishings: ?? Costs of Kid: 705 Care: $400 Activity: 105 Education: 200 Clothing? Birthday/Gifts/Toys? Transportation (besides car debt): 492 Insurance 192 Gas: 200 Metro 100 Internet TV Cell Music: 433 90 156 158 29 Grooming/Clothing: 80 Hair 80 Clothing 
Makeup? Toiletries? Food: 400 Groceries 400 Household (aluminum foil etc) ?? Meals Out ??? That all adds up to $7000 so you are definitely missing something or else that would be another $3000 you could apply towards your debt! I think you should use your bonus to get out from underwater with your car #1 and then sell that car for as much as you can get for it. Replace it with a reliable but cheaper car. Sell your other car as well, and replace it with a much cheaper one. You only need one super reliable car. Your husband could Uber to metro, or maybe even ride a bike. Selling both cars and buying with cash will get rid of those monster car payments, and should bring your insurance payments down as well. As soon as those are sold, start paying down your $7000 credit card. Take the money you had been sending to the car payments ($1300) and add any savings from insurance to it, and add it to what you were paying as your minimum payment on the credit cards. By cutting back in the rest of your budget, you should be able to make payments of $2000/monthly on your income. So the CCs should be paid off in less than 4 months. Now take that $2000 and add it to the $300 you are paying on your husband's consolidation loan, which is how much? Can't tell how long it'll take to pay that off at $2300 a month. But keep paying, and if possible cut back elsewhere in your budget and send any little thing you can off to that debt, and then finally to pay off your student loans. If you moved somewhere cheaper you could pay everything off faster, but I can understand not wanting to move with a 1st grader in school. Once all your debt is paid off you will be in a great position to save for retirement. You will have reduced your living expenses and be used to sending $3000 a month off to debt repayment: just maintain your standard of living and send that money to retirement instead! |
Anonymous
Parent of child with LDs- yes you need an IEP to get the school to help. But the probability is that you will have substantial expenses associated with getting the right supports yourself too. Use that as motivation to get your financial house in order. You don’t want to be the parent that can’t afford the special school your child needs because of cc debt or a car payment. Early intervention/ support is most effective. |
Anonymous
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Anonymous
Thank you. That's exactly why I didn't respond to it. |
Anonymous
| This is OP. Trade in value sucks (-$5K) for the car so trading it in for another model isn't a good idea. I'll just have to sell it as posters have suggested here. |