What to do first? Debt vs Savings/Retirement

[Anonymous]

Anonymous wrote: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!

Incredibly helpful, thank you. I am not used to doing that kind of budget. I usually just budget for fixed expenses and then, whatever we have left over, we contribute to other items that are in the budget you just posted. The lack of budget is what is killing us. I realize that.

[Anonymous]

This is OP. I guess I should have mentioned that our household income just got to 230K. It was 210K as of two weeks ago. So now that we have more, we can use more to get out of this hole.

[Anonymous]

Anonymous wrote:1. Switch phones to Cricket wireless. Save about 100.00 month.[i] 2. Let go of cable. 3. Math tutor for a first grader??? Get rid of that. 4. 200.00 in fuel when you use mass transit for work? 5. Let go of the child activity and music class for a while until you get this under control.

I just looked into this last night and will do it. Thanks.

[Anonymous]

Anonymous wrote:This is OP. I guess I should have mentioned that our household income just got to 230K. It was 210K as of two weeks ago. So now that we have more, we can use more to get out of this hole.

Congratulations! This is a big shovel! I imagine that taxes are killing you guys because you aren't contributing much to your 401ks. Up those retirement contributions!

You can do this!

[Anonymous]

Look into YNAB or Mint. I haven't used them myself, so maybe others can chime in, but I think you'll find them helpful. And definately check out Dave Ramsey. You can download his podcasts. Very motivating.

[Anonymous]

Anonymous wrote:OP's montly expenses:

Student Loans $125
Rent $3000
DH’s CC Consolidation Loan $305
Cleaning $150
Child Care $400
Car $821
Car $492
Car Insurance $192
Internet $90
Tv $156
Cell $158
Hair $80
Mass Transit $100
Fuel $200
Groceries $400
Music $29
Child Activity $105
Child Math Tutor $200

How do you both work and only pay $400 for childcare? Was that a typo?

[Anonymous]

Get YNAB subscription (stands for you need a budget). It will help you track where every dollar of your spending (and saving) is going. I would build up $2,000 in cash. Then start contributing to 401Ks so you can get employer match. Then start a debt snowball with your highest interest rate loan. How good is your credit? Can you get that credit card debt onto a 0% card?

I wouldn't be in a hurry to deal with the cars (unless you and your husband are super motivated). Get a good picture of your finances, start saving, and start paying off your debt.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP's montly expenses:

Student Loans $125
Rent $3000
DH’s CC Consolidation Loan $305
Cleaning $150
Child Care $400
Car $821
Car $492
Car Insurance $192
Internet $90
Tv $156
Cell $158
Hair $80
Mass Transit $100
Fuel $200
Groceries $400
Music $29
Child Activity $105
Child Math Tutor $200

How do you both work and only pay $400 for childcare? Was that a typo?

The kid is in first grade public school. It's not a full time daycare it's probably an after care program through the school

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP's montly expenses:

Student Loans $125
Rent $3000
DH’s CC Consolidation Loan $305
Cleaning $150
Child Care $400
Car $821
Car $492
Car Insurance $192
Internet $90
Tv $156
Cell $158
Hair $80
Mass Transit $100
Fuel $200
Groceries $400
Music $29
Child Activity $105
Child Math Tutor $200

How do you both work and only pay $400 for childcare? Was that a typo?

We have a school age child that uses after school care only via SACC.

[Anonymous]

Anonymous wrote:Get YNAB subscription (stands for you need a budget). It will help you track where every dollar of your spending (and saving) is going. I would build up $2,000 in cash. Then start contributing to 401Ks so you can get employer match. Then start a debt snowball with your highest interest rate loan. How good is your credit? Can you get that credit card debt onto a 0% card?

I wouldn't be in a hurry to deal with the cars (unless you and your husband are super motivated). Get a good picture of your finances, start saving, and start paying off your debt.

Agree. The car part is a bit complicated. Spend a couple of months getting a handle on where your money is going and work on slashing expenses and rolling that debt snowball. Then see what you can do with the cars.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is OP. I guess I should have mentioned that our household income just got to 230K. It was 210K as of two weeks ago. So now that we have more, we can use more to get out of this hole.

Congratulations! This is a big shovel! I imagine that taxes are killing you guys because you aren't contributing much to your 401ks. Up those retirement contributions!

You can do this!

Thanks! We were always told that we should get rid of debt first and THEN save the max for retirement. I paid off $7K of high-interest CC debt last night, so that's gone. Now I need to tackle this car situation.

[Anonymous]

Anonymous wrote:Look into YNAB or Mint. I haven't used them myself, so maybe others can chime in, but I think you'll find them helpful. And definately check out Dave Ramsey. You can download his podcasts. Very motivating.

Ok, I have Mint already but I realize I need to refine my budget and add other things that aren't fixed daily living expenses. I like some of Dave's stuff but some of his views on housing are hard to adhere to here in the DC area. It's very expensive here.

[Anonymous]

Anonymous wrote:Get YNAB subscription (stands for you need a budget). It will help you track where every dollar of your spending (and saving) is going. I would build up $2,000 in cash. Then start contributing to 401Ks so you can get employer match. Then start a debt snowball with your highest interest rate loan. How good is your credit? Can you get that credit card debt onto a 0% card?

I wouldn't be in a hurry to deal with the cars (unless you and your husband are super motivated). Get a good picture of your finances, start saving, and start paying off your debt.

So I have Mint already, is YNAB better? My 401K employer benefits suck, honestly. But I'll still contribute more. My credit isn't that great because of the 6 months of unemployment but I'm working to rebuild it. The credit card debt is gone now. I felt like that needed to go first because of the 24% interest. Thank you for the helpful reply!

[Anonymous]

OP here. Here is an update to the debt situation:

Credit cards: $7K @ 24% (These have been paid)
Car: $30K ($820 payment monthly w/48 months remaining)
Car: $17K ($492 payment monthly w/48 months remaining)
DH's CC consolidation loan: $11K @ 5% interest (He just got this a few months ago)

[Anonymous]

Anonymous wrote:

Anonymous wrote:Look into YNAB or Mint. I haven't used them myself, so maybe others can chime in, but I think you'll find them helpful. And definately check out Dave Ramsey. You can download his podcasts. Very motivating.

Ok, I have Mint already but I realize I need to refine my budget and add other things that aren't fixed daily living expenses. I like some of Dave's stuff but some of his views on housing are hard to adhere to here in the DC area. It's very expensive here.

I think you can apply his principles without adhering to exactly everything he says. In this area, most people would have a hard time with his exact recommendations of 15 year mortgage and 25% of take home pay. You can still follow his advice if you have a 30 year mortgage and a slightly higher payment. Don't throw the baby out with the bathwater. Follow his steps and use the debt snowball and get "gazelle-intense", and you'll be in fine shape even if your housing is off from his advice. Follow the spirit of the law, if not the exact letter of the law.