What to do first? Debt vs Savings/Retirement

[Anonymous]

So, I have the following in debt:

Credit cards: $7K
Car: $30K ($820 payment monthly w/48 months remaining)
Car: $17K ($492 payment monthly w/48 months remaining)

HHI is 230K. One of us receives an annual performance cash bonus ranging $15-20K. We have a first-grader. We are renting and have not been saving much for retirement or college (have family money for this but still want to save for college expenses). We are late 30's and early 40's. No emergency fund to speak of due to 6-7 months of unemployment. We are just now getting our heads above water from that situation.

What order should the above to tackle these things and get on track?

[Anonymous]

What are the interest rates?

[Anonymous]

Holy moly - that $820 car payment is simply insane on your income. Trade in that car for a cheaper but reliable sedan. You will save at least $500/month right there.

[Anonymous]

Standard advice:
1) build up liquid savings/emergency fund
2) contribute to 401(k) as much as is matched
3) pay off highest interest loan until it's gone, then repeat (while paying minimum on other accounts)

You mention family money; if you could use that as emergency funds, I'd contribute to 401k up to the match, so you're not throwing away free money.

[Anonymous]

I say you should do a bit of everything. But you don't give enough info:
- what are your minimum expenses? and how much can you save a month? No daycare but aftercare and camp? Whats your rent?

[Anonymous]

Anonymous wrote:What are the interest rates?

Interest rates on CC's are 24%. The CC's mentioned are mine, not DH's. DH paid off all of his CC's with a consolidation loan that is $300 monthly.

Interest rate on car #1 is 11%. Car #2's interest rate is 7%.

[Anonymous]

Ugly picture...

1. Pay off CC
2. Save remains bonus as emergency fund
3. Re-examine your spending
4. Pay off other debts/save

How can a late 30/early 40 couple be this irresponsible?

[Anonymous]

Anonymous wrote:Holy moly - that $820 car payment is simply insane on your income. Trade in that car for a cheaper but reliable sedan. You will save at least $500/month right there.

It was a HORRIBLE deal and I admit it. I wish I could dump it but it's underwater and has been for the two years since I purchased it, so I was not able to refinance it because of the negative equity. Love the car, but it's a liability.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What are the interest rates?

Interest rates on CC's are 24%. The CC's mentioned are mine, not DH's. DH paid off all of his CC's with a consolidation loan that is $300 monthly.

Interest rate on car #1 is 11%. Car #2's interest rate is 7%.

Listen. You need some tough love here. You are making extremely poor financial choices. Like I said above, ditch the expensive car. You have one child and you do not need anything more than a cheap, reliable sedan.

What about your situation is causing you to consistently live above your means? With $230k, renting, and 1 elementary child you should not be stretched to save in an emergency fund. Where is your money going?

[Anonymous]

You have $1300 in car payments? That seems a bit high.

I'd focus on the credit card first, then the cheap car, then the expensive one. If your employer offers a 401k match, do that, but otherwise, I would buckle down and slash your spending and at least get the credit cards paid off. If you do that well, then get the cars done and start putting away for retirement. I'd focus on that over savings for college, especially if there is family money that could help with college.

[Anonymous]

Pay off your credit card. If you don't have emergency savings, put the rest into that.

[Anonymous]

Anonymous wrote:I say you should do a bit of everything. But you don't give enough info:
- what are your minimum expenses? and how much can you save a month? No daycare but aftercare and camp? Whats your rent?

Expenses are $6500 monthly. That includes daycare. I think I can save $1K monthly for emergency. But I was told to get rid of the CC debt first before trying to do big savings.

[Anonymous]

Dave Ramsey, stat!!

[Anonymous]

My cc rate is 7.99% on discover. Way to put cars ahead of your retirement and child's college.
You need to get rid of the cars and not keep paying them off.
CC at 24% first.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Holy moly - that $820 car payment is simply insane on your income. Trade in that car for a cheaper but reliable sedan. You will save at least $500/month right there.

It was a HORRIBLE deal and I admit it. I wish I could dump it but it's underwater and has been for the two years since I purchased it, so I was not able to refinance it because of the negative equity. Love the car, but it's a liability.

Where are you willing to make cuts to get this stuff paid down? Only you can know that. We can’t help you without a clearer picture of your expenses and what you can ditch.