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

[Anonymous]

So you took out $200k in loans for college/grad school, then lived on credit cards in grad school, then bought a $700k 3-bedroom house with very little down, then had three kids (putting nine months of expenses on credit cards in the process). Then took loans for two cars.

Have you ever paid cash for anything? Have you ever put anything in savings?

I don't think you know how to live within your means.

[Anonymous]

Anonymous wrote:So you took out $200k in loans for college/grad school, then lived on credit cards in grad school, then bought a $700k 3-bedroom house with very little down, then had three kids (putting nine months of expenses on credit cards in the process). Then took loans for two cars.

Have you ever paid cash for anything? Have you ever put anything in savings?

I don't think you know how to live within your means.

You forgot the two cars even though they live in DC in a rowhouse. They most likely drive to work. It's insanity.

[Anonymous]

Anonymous wrote:

Anonymous wrote:So you took out $200k in loans for college/grad school, then lived on credit cards in grad school, then bought a $700k 3-bedroom house with very little down, then had three kids (putting nine months of expenses on credit cards in the process). Then took loans for two cars.

Have you ever paid cash for anything? Have you ever put anything in savings?

I don't think you know how to live within your means.

You forgot the two cars even though they live in DC in a rowhouse. They most likely drive to work. It's insanity.

Oops. I see you did include it. Sorry.

[Anonymous]

OK, the snowstorm is the perfect time to sit down with your DH to figure out a budget for 2016. The PP gave you a perfect template. Start filling in the numbers until you get a budget that matches your take home pay.

Assuming your DH's Hill job is stable, I recommend you take $35k out of your emergency fund to put a significant dent in you cc bills. This will leave you with 6 plus months of mortgage payments. When you create your budget add a line item for paying back your emergency fund.

Leave your 401k alone!

Camps: the Smithsonian is the best of the best and very expensive as a result. You have to find something else. How about hiring a summer college student for the summer? We did that one year and the cost was reasonable and the kids had a blast.

If you really can't make the numbers work your DH will have to do what the rest of Hill rats have done and become a lobbyist. The private sector pays significantly more.

[Anonymous]

Anonymous wrote:OK, the snowstorm is the perfect time to sit down with your DH to figure out a budget for 2016. The PP gave you a perfect template. Start filling in the numbers until you get a budget that matches your take home pay.

Assuming your DH's Hill job is stable, I recommend you take $35k out of your emergency fund to put a significant dent in you cc bills. This will leave you with 6 plus months of mortgage payments. When you create your budget add a line item for paying back your emergency fund.

Leave your 401k alone!

Camps: the Smithsonian is the best of the best and very expensive as a result. You have to find something else. How about hiring a summer college student for the summer? We did that one year and the cost was reasonable and the kids had a blast.

If you really can't make the numbers work your DH will have to do what the rest of Hill rats have done and become a lobbyist. The private sector pays significantly more.

Just to point out their hhi is around 280. Some lobbyists make a lot but I was surprised many lobbyists only make around 150-200. In other words, not much more.

[Anonymous]

Anonymous wrote:We got out of consumer debt that was just over 100k in 18 months. Our income is about 100k higher than yours, but we do have an AuPair so our childcare expenses are pretty high.

The key is we have a pretty low mortgage due to living in Loudoun county. A crutial piece of info missing is what's your housing expenses and equity? Because people telling you to pack your lunch are really good missing it. Packing lunch won't dig you out of this.

What we did was went through every single bill and figured out ways to lower it, we then tracked ALL spending each month and each month fought to lower it. We removed our kids from travel sports ( they survived). We not only paid off the debt, we now have a quickly growing cash savings. We are up to 40k in cash now.

I'm sorry, what? Your HHI is $378, and you have a measley $40K in cash???? You have not paid off your mortgage? WTF do you spend your $$ on? How can you not save a lot of $$ on an HHI of nearly $400K??

Consumer debt of $100K??? How do you do that? Big screen TVs for every room including all the bathrooms?

I live on a fraction of your HHI, and have a great life, no debt, one kid in private schools, great house in lovely area, take nice vacations every year, eat at nice restaurants, etc. How do I do it? I don't buy a lot of crap!! That's how I do it!!

BTW, I have no mortgage and more cash then you do on my pathetically (by comparison) small HHI. I'm rich compared with you!

[Anonymous]

What are your CC minimum payments?

My gut now (without seeing your budget, so with only limited info you have provided on this thread) would be to go down to one month expenses in your efund. This is your "baby efund" in Dave Ramsey speak. It is NOT a fully funded efund.

Take the rest of it and pay off the CCs as much as possible. Then take the minimum payments you WERE paying (this is your snowball) and put those on the CCs (higher interest rate ones first) until they are paid off. You can predict when that will be done but calculating it out. Say you can have all your cc debt paid off by June. Great. Then take the total minimum payments that you used to be paying (your snowball has now gotten larger) and apply that to your car loan with the higher interest rate. Snowball that loan and when it is paid off, roll that to your other car loan. By now your snowball should be very large and you will have all consumer debt paid off and you can roll the snowball to building your savings to getting a FFEF. 3, 4, 5, 6 months of full expenses. Whatever the number is that you feel you need. THEN you take your snowball and start paying down those student loans.

It is going to take a long time to pay the student loans off, and so you should build in to your budget a car replacement fund so you don't have to go in to debt when you need to replace your cars in the future.

[Anonymous]

Yes, I'm a lobbyist. As a Hill staffer he is topping out at 165ish, and my guess is his pay a bit less based on HHI. If he goes with a company the salary is 180-200k, but the bonuses are usually pretty good (around 100k). The travel is often rough, but the pay is ok.

[Anonymous]

Do not worry - your child will not get into Smithsonian summer camp.

I live in DC - my 3 kids go to a combo of camps including low cost summer program at DC Parks and rec and at our school.

You and your spouse do not know how to make choices - there are many minivans that are less expensive than a Honda. Why not sell it and buy a lower cost minivan? In lieu of a Honda SUV how about a sedan - it fits 3 carseats.

If you keep making excuses - "inexpensive camps do not have enough structure" you will not budge on getting out of debt.

[Anonymous]

Anonymous wrote:What are your CC minimum payments?

My gut now (without seeing your budget, so with only limited info you have provided on this thread) would be to go down to one month expenses in your efund. This is your "baby efund" in Dave Ramsey speak. It is NOT a fully funded efund.

Take the rest of it and pay off the CCs as much as possible. Then take the minimum payments you WERE paying (this is your snowball) and put those on the CCs (higher interest rate ones first) until they are paid off. You can predict when that will be done but calculating it out. Say you can have all your cc debt paid off by June. Great. Then take the total minimum payments that you used to be paying (your snowball has now gotten larger) and apply that to your car loan with the higher interest rate. Snowball that loan and when it is paid off, roll that to your other car loan. By now your snowball should be very large and you will have all consumer debt paid off and you can roll the snowball to building your savings to getting a FFEF. 3, 4, 5, 6 months of full expenses. Whatever the number is that you feel you need. THEN you take your snowball and start paying down those student loans.

It is going to take a long time to pay the student loans off, and so you should build in to your budget a car replacement fund so you don't have to go in to debt when you need to replace your cars in the future.

I disagree with the car issue. The op is living in a city where a car truly isn't a requirement. They need to move to an apartment building in Virginia that's near the metro. Use the metro to get to work. There's a post properties building in Alexandria that's near a grocery store and the metro. Put all three kids in one room. You guys have the other bedroom. You'd save:

Two car payments
Monthly parking for two cars
Around 500 cheaper than your mortgage

This is at least 2k a month if not more that could go to student loans.

Use the proceeds from the house to pay off the credit card debt.

[Anonymous]

Anonymous wrote:What are your CC minimum payments?

My gut now (without seeing your budget, so with only limited info you have provided on this thread) would be to go down to one month expenses in your efund. This is your "baby efund" in Dave Ramsey speak. It is NOT a fully funded efund.

Take the rest of it and pay off the CCs as much as possible. Then take the minimum payments you WERE paying (this is your snowball) and put those on the CCs (higher interest rate ones first) until they are paid off. You can predict when that will be done but calculating it out. Say you can have all your cc debt paid off by June. Great. Then take the total minimum payments that you used to be paying (your snowball has now gotten larger) and apply that to your car loan with the higher interest rate. Snowball that loan and when it is paid off, roll that to your other car loan. By now your snowball should be very large and you will have all consumer debt paid off and you can roll the snowball to building your savings to getting a FFEF. 3, 4, 5, 6 months of full expenses. Whatever the number is that you feel you need. THEN you take your snowball and start paying down those student loans.

It is going to take a long time to pay the student loans off, and so you should build in to your budget a car replacement fund so you don't have to go in to debt when you need to replace your cars in the future.

I agree with this poster. Really good advice. OP, you can do this without selling your house, as others have recommended. Put a plan in place and accept that it will take you a full few years to get there. If the jobs are stable, your emergency fund can be lower for a bit until you can get the CC debt taken care of--that should be priority #1. Also, if you live in the district, see if there is a way to get yourself down to one car. We have only one car and it has saved us so much money. Occasionally, one of us needs to uber somewhere, but even a few times a week, uber is cheaper than a second a car. You can do this, PP. Don't get discouraged by the other posters.

[Anonymous]

I'm confused.
You had 3 months of maternity leave with each kid, so 9 months total, and spent $50k above what the single earner brought in. So an extra $16-17k, or $5k per month (for a nice round number) for each month.

And you did this 3x without saving up for the next one.

And you are two working parents with 2 -3 kids in daycare, at least 2 that are not school aged, that presumably go to bed around 8 and in addition to daycare all day you are carting them around to multiple activities during your down time either during the week or weekends.
And they are not even in elementary school.

Are you ever in your $700k home?

I bet you spend a ton on food, take out and eating out with that amount of running around, alternating pick up/drop offs and overscheduling.

It may be best to really take a look at your overall lifestyle, and the "go go go" and "more more more" approach you seem to be living by reading between the lines a little.

It sounds exhausting and stressful even without the money component which is unsustainable.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What are your CC minimum payments?

My gut now (without seeing your budget, so with only limited info you have provided on this thread) would be to go down to one month expenses in your efund. This is your "baby efund" in Dave Ramsey speak. It is NOT a fully funded efund.

Take the rest of it and pay off the CCs as much as possible. Then take the minimum payments you WERE paying (this is your snowball) and put those on the CCs (higher interest rate ones first) until they are paid off. You can predict when that will be done but calculating it out. Say you can have all your cc debt paid off by June. Great. Then take the total minimum payments that you used to be paying (your snowball has now gotten larger) and apply that to your car loan with the higher interest rate. Snowball that loan and when it is paid off, roll that to your other car loan. By now your snowball should be very large and you will have all consumer debt paid off and you can roll the snowball to building your savings to getting a FFEF. 3, 4, 5, 6 months of full expenses. Whatever the number is that you feel you need. THEN you take your snowball and start paying down those student loans.

It is going to take a long time to pay the student loans off, and so you should build in to your budget a car replacement fund so you don't have to go in to debt when you need to replace your cars in the future.

I disagree with the car issue. The op is living in a city where a car truly isn't a requirement. They need to move to an apartment building in Virginia that's near the metro. Use the metro to get to work. There's a post properties building in Alexandria that's near a grocery store and the metro. Put all three kids in one room. You guys have the other bedroom. You'd save:

Two car payments
Monthly parking for two cars
Around 500 cheaper than your mortgage

This is at least 2k a month if not more that could go to student loans.

Use the proceeds from the house to pay off the credit card debt.

I can't speak the car or house sale thing for DC since I am not in that area and don't have a grasp of the market. But we did have crazy high debt and student loans and live in another VHCOL area. OP, that is a crippling amount of debt and you need to make hard choices. You are lucky to have your retirement presumably on track and that you earn a high income, but it isn't high enough to be able to do whatever you want. You have to make choices. The harder the choice you make now, the shorter the pain will be.

It takes time to change your mindset and if you just wipe out the cc debt by selling your house, you will most likely end up charging it up again. Dh and I both did this in the past. It is sooo common to do. When you have to make good choices day after day, it can actually change the way you think and act for the rest of your life. It is the same principal with people who have weight loss surgery. Most of them have not changed their behaviors and made new habits so they end up over weight again.

I would only sell your house if you can pay off a huge amount of the student loans. I think 50k in cc debt with a huge efund like you have now is doable. The most important thing is that you and dh are on the same page and supporting each other in your decisions. Being there for each other!


Right now you are looking at summer camp options. This should really be a sinking fund that you create and save each month so that the fund will be full for the summer by the time you have to pay the registration fees. So then you know your budget for summer camp options and can figure out a plan.

[Anonymous]

If your three kids are in daycare, why do you need summer camp?

[Anonymous]

Anonymous wrote:OP here. Not looking for a scolding but for advice. Ran up a lot of credit card debt on three maternity leaves that were largely unpaid - hard to pay daycare for two kids while on unpaid leave with a third. And we had to do that or else we would lose our spots. Plus the student loan debt. We have two Hondas 2012 and 2013. Minivan and SUV. Before that I was driving a 2001 Toyota that wouldn't fit three carsears so I had to sell it. Had it over 10 years. We cannot go down to one car because due to our work schedules DH and I alternate drop off and pickup from daycare and aftercare. We do not live in a huge home. In fact, we need a bigger house desperately. Our kids are doubled up in rooms and we are bursting at the seams. Same rowhouse we lived in when we got engaged! Mortgage is $3400/month. Student loans are $1500/month. Credit card bills. Car payments. Daycare and aftercare is $2450/month. We cannot get a nanny for an equivalent price (legally, anyway). I am a fed and the lack of pay increases hasn't helped. But at least job is stable. We do not take luxury vacations and rent expensive homes or take fancy trips. We go to the beach and stay with family. I hardly ever buy clothes and when I do it's at Target/TJ Max or even eBay. I buy kids clothes on eBay or at Target or old navy sale.

The thing is that we definitely aren't living the high life by any means. Our home is very modest and not suitable for the size of our family. Our vacations are budget vacations. Now I am dreading having to pay for summer camps for the older two kids. $450/week per kid for 10 weeks. Ugh.

The kids do a lot of activities. Music together. dance lessons. Soccer. Music lessons.

You need to go into crunch mode for the next twelve months and then see how you are doing.
1) No more than one activity per kid. No need for music/dance lessons or Music Together for the next year. Luxury Item- if you "must" have them have a relative give them to your child's for the birthday. Soccer is cheap. Plenty of free or nearly free activites.
2) Summer at the Y will not be horrible. It is one summer.
3) If you both work for the Feds and you live in the Distrcit in a row house, you can take public transportation. No need for two cars- you might not need one car. Crunch mode!
4) Your house is large enough- pare down, children do not need their own bedrooms especially if you have that much debt. Better spent paying off debt and then saving for college.
5) Do the David Ramsey thing. Now.
6) Crunch mode for one year means not going out to eat. No lunches no dinners. Plan dinners and lunches ahead. Google frugal dinners - savings will abound.
7) Plenty of free stuff to do in the city - no spending for entertainment.
8) no new clothes for you or DH for a year. Rummage sales, yard sales, thrift shops for children's clothes. Only "splurge" on children's shoes.
9) No gym members ships or other club memberships.
10) Cut up the credit cards- you can't handle them.
11) No vacations except to visit drivable family
12) Stop blaming the area, you make more than enough. Look in the mirror and learn about finances.