What to do first? Debt vs Savings/Retirement
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Anonymous
One nice thing about YNAB is that you budget next month's expenses with the current month's income so it sets you up to always have 1 month expenses on hand. |
Anonymous
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Why were you unemployed recently? Could that happen again soon , ie are you a contractor or in a field with income fluctuations or frequent layoffs?
Why did your credit score suffer during your unemployment? It sounds like maybe the spouse who was unemployed makes significantly more than the other. If I were you, I would first save $5000 in an emergency fund pronto (Cash), next I would contribute in IRA at work up to the employer match (5% at my job), next I would use any leftover money from the budget to aggressively pay of the debt, starting with the smallest debt balance. Once all the debt is paid off (this may take a while, since it took a while to build the debt!) I would then build that emergency fund to at least $15,000, max out Roth IRAs for both you and your spouse (think this will be $6,000 in future), then go back and max the traditional IRAs at your jobs (think this will be $19,000 in the future). That should get you back on track. Fwiw, I followed this path with my own debt several years ago, and it was tough paying all the debt off, but once I got through it , I felt amazing! Since then I've managed to stay out of debt (except my mortgage) and grow my net worth and savings substantially, while also not having to worry about splurging (in cash!) for some luxuries in my life now (small vacations or a nice meal out now and then). But you have to make eliminating the debt a priority! Nothing else matters until that car debt, credit card debt, and student loan debt are gone! |
Anonymous
Well even that showed poor judgment ?. DCUM is consistently judgy. Are you trying to keep up with the joneses? I had a similar mindset as you when I was younger and missed the opportunity to save money when I was younger. We are fine, but could have more saved. It’s not too late to turn it around. |
Anonymous
It's not really $7000 monthly expenses. The spending listed left out a lot of categories (clothing, gifts, trips, household, apartment decorations etc.) and $400 a month for food in this area while certainly possible is not believable given the spending on the cars and the impulse shopping at Target, IMO. $800 would be a lot more likely. |
Anonymous
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I just want to say that you have a great attitude. You can do this OP! The important thing in life is that you learn the lessons that it has to offer (which you are doing!). Keep your focus and don't give up. You are well on your way to a much better financial future. Good luck to you and your family. |
Anonymous
Okay, here are OP's numbers. Rent 3,000.00 Phone/Internet/Cable 400.00 Auto Ins 250.00 Hair 80.00 Auto Gasoline 200.00 Food/Groceries 1,000.00 Car Payment 1,300.00 Credit Card Loan 305.00 Day Care 400.00 School Loans 125.00 Travel to Work 100.00 Cleaning 150.00 Activities for Child 335.00 I plugged this in my budget and it show's we still have almost $1900 left over at the end of the month. This is AFTER taxes, health, dental, vision, TSP deductions etc. Oh, and this is on a salary of 197k per year. Someone has a gambling or drug addiction if they can't manage those numbers on 230k per year even if you don't account for an extra "$800" bucks a month for incidentals. |
Anonymous
| Spending like crazy... |
Anonymous
but you don't know what her take home is because you don't know her insurance costs, they have two employees making this so double the SS/FICA costs you do, and as we said before, this is not a complete budget. She hasn't even gotten a paycheck yet at the 230k increase. It only started 2 weeks ago. Comparing apples to oranges to kick OP when she is down is not helpful. |
Anonymous
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OP- as others have stated, your income and expenses don't match. At $230K/yr, you are taking home between $11,000 to $13,500 per month. Your "fixed" expenses are $6500/month. This means:
YOU HAVE A BIG SPENDING PROBLEM. You have $4000-$6000/month that disappears. CUT UP YOUR CREDIT CARDS IMMEDIATELY (or freeze them in ice in the freezer for 6 months until you break your spending habit. No more shopping trips. You have enough extra income in 1 month to pay off that whole credit card. Then save $5000/month for 3 months and pay off that car. Then do it again and pay off the other car. Then max out your 401ks (which you should have been doing for years already.) We were maxing our when our income was $180k. You have very high income and can turn your whole situation around in less than a year. Start now. |
Anonymous
OP here: that's exactly what I need help with. The rest of the budget. $400 a month is very easy to do, actually. I use Aldi most of the time and Costco once a month. DH and I also don't eat three square meals a day, we fast.. |
Anonymous
| This is OP: I went through all of the responses and appreciate the helpful ones. I'm confident that I'm on the right track now and can turn this around with a formal budget. Thanks to all that helped me here. |
Anonymous
| Do you work downtown or anywhere near a place you can live? I’d rent a place where I can walk to work and ditch BOTH cars. That’s what my spouse and I dudbto save a lot for a downpayment. I’d seriously rent a one bedroom and section for an area of the living room for you and your husband to sleep. I promise your kid won’t mind. Try and really sock away some money. You can’t save money if you have high fixed expenses like 2 car payments. |
Anonymous
You don't seem to know where a ton of money is going, so I'm just skeptical that you are actually spending only $400 a month on food. Yes, it can be very easy to do; but it also very easy to not remember a lot of what you are spending on food or to think you are only spending $100 at Costco once a month to stock up, but when you look at Mint you realize you had more Costco shopping trips than you remembered... that kind of thing. People who pay $1400 a month on car notes aren't known for spending only $400 a month on food! But if that really is what you spend, good for you! Once you get the car payments under control, you already have food under control. That's the amount super frugal Mr Money Mustache spends per month for his family of three, so you are already doing something frugally! You can just look in your budget for the other missing $4000 to find ways to save there! |
Anonymous
You took out a 6 year car loan at 11% and $820/month payments? Yikes. I would suggest selling that while it's still reasonably new. Can you trade it in and get a less expensive used car? |
Anonymous
Bad choice. The next debt she needs to take care of is the $30K car loan. That is at 11% interest. The second car ($17K) is at 7%. The consolidation loan is at 5%. In a situation this bad, I don't agree with the Dave Ramsey theory that you pay the smallest balances first. You have to go with the financially more sound policy to pay off the highest interest loans first. The feel-good effect of paying off loans has been achieved by paying off the 24% CC debt. Now, go for the path that gets them out of debt fastest and that is paying down the loan that will cost them the most money if they leave it outstanding. They are paying more than twice the interest rate on the first car than the consolidation loan. Based on her $820 monthly payment, she'll be paying $9360 in interest over the next 4 years on that car ($2340/year). She's paying $6616 in interest on the second car ($1654/year). It's harder with the consolidation loan. We only have the rate and not the APR, but they are paying about $550-600 in interest per year. Paying off the high interest rate first car loan will save them over $1000 in the first year alone vs paying off the consolidation loan. That's just throwing more money away. |