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

[Anonymous]

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?

[Anonymous]

You do not need a person other than yourselves.
You need s budget. It's not rocket science.

Cut up all but one of your credit cards. No more eating out or discretionary sod driving.

Follow dave Ramsey's baby steps, starting with prioritizing an emergency fund.

Then focus on high interest debt, then student loans.

Honestly vacations are not a necessity, especially in your case.

You have to be willing to make a few sacrifices here if you want to pay off $250k in debt.

I had $100k in debt on about 1/2 that hhi, and paid off 70k of in in 5 years, by paying double on the loans. 1700 vs 800 a month. Now I only have the rest, 25k at 1% interest.

[Anonymous]

OP here. Thanks PP. I will see what Dave Ramsey advises. We also had some high medical bills this year, which added to the $250k in debt. Ugh.

[Anonymous]

Above /\
and consider packing your lunches.
seriously we went down to one income amazing how quick you spend 50-60 per week on lunch.

[Anonymous]

Check out mr money moustache.

[Anonymous]

You need to control your spending. I'll bet you can cut back on lots of things and still maintain a decent lifestyle. We live quite well on half your HHI, but we have no debt.

Can you take out a HELOC and pay off the credit card debt? That's the first place to start. The interest rate on credit card debt is outrageous, but the interest on a HELOC is a fraction of that. You might also be able to pay off part of your student loans with a HELOC if it's at a much lower rate.

That will cut your payments at least, and you would not be taking on any more debt.

Trade in your newish cars and get used minivans (they are spacious and cheap). Plenty of space to haul around three kids. Use the cash you raise to pay off more debt. Do not spend it or put it into savings.

Take cheap vacations or none at all. Don't throw away cash on big trips to Europe or renting a nice beach house when you can stay in a moderately priced hotel in a pleasant place for a week for the same price. Take day trips if you need to get out of town.

Look at your monthly expenses: What do you pay for heat? Do you really need to keep your thermostat at 72 degrees all winter? We keep ours at 65 degrees. Yes, it feels cold in the fall, but we wear sweaters and get used to it. As an added bonus, we get fewer colds when the temperature is lower in the house.

What are you paying for TV each month? Can you cut back on some of the premium channels? Can you live without cable? We don't have a TV, but we watch TV shows on our computers.

What are you paying for cell phones? There is lots of competition, so you can surely get a lower priced plan.

How much do you spend each week on lattes? Just cut that out right now. Bring your coffee from home in a thermos.

Go out to eat once or twice a month, period. And go to family-type places. You're over date night at fancy restaurants if you've got three kids.

How much do you spend on convenience foods? Takeout? Cook more, and you'll save money.

Have your housekeeper come every other week instead of every week.

Mow your own grass.

Shop at TJMaxx. They carry last-year's Nordstrom merchandise at a fraction of the price. I keep my clothes for more than a year, so it makes no difference to me.

That should get you started. as a pp said, it's not rocket science. You have to take a cold hard look at your "necessities" and cut back ruthlessly. Consider "needs" and not "wants". Get rid of the "wants."

Best of luck to you OP.

[Anonymous]

It's good that you recognize the problem. I really like this website: http://www.gailvazoxlade.com/resources/guide_to_building_budget.html

You maybe able to get away with one car, consider a smaller home. Also, skip the vacation. It's not "necessary." We have lots of free things to take advantage of in DC, so consider a staycation.

[Anonymous]

How much do you owe on your house? How much equity do you have?

[Anonymous]

How much are your car payments and how old are the cars?

[Anonymous]

I would start with doing a look at where all of your money is going?

You said your kids are in a lot of activities - if you have 2 in daycare I would think you can cut out all of their activities.

Also - are there ways to cut daycare expenses? 2 in daycare is a nanny cheaper? Can you do a nanny and alternate work schedule so you only need a nanny 4 days a week?

How much do you eat out? Lunch, dinner, weekend? (I find I spent a lot of extras when we have the kids in activities such as stopping for dinner on the way home)

Menu plan, bring your lunch and prep food on Sunday for the week. You will easily save $100 a week.

What are your guilty pleasures? Purchasing books? Go to the library. It is really easy to drop $ on amazon kindle.

Do you really need 2 new cars? Can you sell one and get an older model? We have 3 in carseats / boosters in an 11 year old sedan.

What is your annual vacation? Can you cut it down to basic from "not luxurious"?


It sounds from your post that there are things that you do as a little of keeping up with others. You made the choice to buy 2 new cars - when probably 2 used cars would have worked for a bit. Many families do not sign up their kids for more than 1 activity because they do not have the $ or time. Think about what your priorities are and prioritize them! If it is getting out of debt - that comes before every $ of spending.

When you purchase something ask yourself - if you really want the $4 Starbucks coffee would you rather have less debt or the coffee? Do the kids need the activity? Or can we do something else as a family that is less costly?

Would going to a state campground for a vacation be a nice low cost getaway for a week?

[Anonymous]

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. [/b]We do drive two newish cars we had to get for space when the kids came along (three car seats). [b]

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?

You didn't have to purchase two newish cars. Do you even need two cars? With this kind of debt you should be driving older cars. Do see how ridiculous it is to have credit card debt and purchase two new cars?

To put things in perspective my husband and I make almost 400k. We own one car. Sure we live in DC but could still use another car. But do we have to have one? No. I can take the bus or walk to take the child for checkups. I take the bus to work.

Here are other suggestions:
Have one spouses paycheck go into a different checking account. This account goes entirely towards paying off debt and saving
The other spouses paycheck is for living expenses. If you can't live off of one paycheck you need to downsize your house, sell your cars etc.

Also:
Take lunch to work
Limit dining out. Plan meals on Sunday.
Take out cash weekly. You have a problem with spending and should not be using cards. Even debit cards
Sell one car
Don't shop until you've paid off the credit cards and most of the debt.
Get a cheaper cell phone plan
Don't go on vacation. You can't afford it until the credit card debt is paid off


Also why on earth did you have a third child if you hadn't saved up for leave?

Ready mr money moustache this entire weekend.

[Anonymous]

Omg cancel the kids' activities now. You simply can't afford it. Do you want them to sacrifice by not having activities or suffer when you can't pay your rent or mortgage in a few years? You're close to becoming a financial disaster


The problem is that people like this never learn. They can rarely sacrifice or tell themselves no. Everything is a have to have. Have to have new cars. Kids have to have activities. Have to order pizza. A normal responsible person doesn't get themselves into 50k of credit card debt. Unless there is a medical emergency.

Guarantee you OP will come back and say she can't move, can't sell the cars, can't cancel the activities , etc. well guess what OP? You'll continue to be in debt and never have anything. Not a dollar to your name unless you change your ways.

[Anonymous]

I'm assuming the biggest check you write is for the mortgage. How much? You aren't going to tackle 200k in student loans by bringing your lunch. You have to cut down the biggest expense, which I'm assuming is an expensive house. We make less than you but feel incredibly wealthy because of no debt and paid off house.

[Anonymous]

Stop the spending now. I bet you have plenty of stuff in your house. Every time you buy something-even on sale, add the % of the highest debt to it. That's what you are really paying for the bottle of water for example plus the interest will earn interest next month.
Please don't spend any money on a person. You need to do it yourself and educate yourself about personal finance.
Right down all your debts, income and spending. When will the car payment fall off? I know you are not going to get rid of the cars, but don't spend the extra money opening up soon. It should go towards debt.
Right all up. Then see what you can lower or get rid of to balance the balance sheet.
What activities do they need if they are in daycare? You should be working on figuring out your income and expenses and not taking them anywhere.
The sooner you take your situation seriously the easier it will be.

[Anonymous]

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?

If this is for real, you don't need to pay anyone to tell you that you have to reverse as many bad choices as you can and revamp your entire thinking of what you have to have.
From this one short post alone, we can tell that you don't understand how to leave within your means and have somewhat of a sense of entitlement and "everybody else does so we should" kind of thinking.

1. It is NOT necessary to take a yearly vacation because you work full time and have small kids. You have $50k in consumer spending. That needs to he laid down before you add to it. You cannot afford a yearly vacation, you are in major debt. Take that money and put it towards the debt.
2. Two children in daycare with two working parents do not need any activities. Period. Little gym, soccer team, movement classes are completely frivolous and a luxury when you are $50k in debt. You cannot afford this. Take them out and put that money towards the debt.
3. Two new cars when you are $50k in debt is unthinkable. Get out from under those car payments, buy used or go down to one car. Take that money from the car payments and put it towards the debt.

I bet you go out to eat weekly, take out, coffee, etc.

Eating out? Put that money towards the debt.

Just from the above, that is probably $1k/month at least to the credit card debt.
And I haven't mentioned the student loan, keep paying the minimum payments until you are rid of the credit card debt.

I'm curious about what you think a financial planner or debt consultant would take you for?
You are dead broke.
Your net worth is negative.

What do you think they would tell you besides spend way way less and pay down the credit card?
I'm curious what your ideas are.