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

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[quote=Anonymous][quote=Anonymous][quote=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.

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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. [/quote]

I agree with this PP, too.  Dave Ramsey would say to sell the cars and buy cheap beater cars (or maybe even no cars since you live in DC and can take public transportation), use MOST of that emergency fund to pay off the credit cards.  Dave Ramsey would also say to stop contributing to your 401Ks for a little bit and use that to pay down the debt.  But ONLY if you dramatically reduce your spending and the 401K money goes directly to paying down debt.  Don't cut down on your 401Ks just to keep up your lifestyle.

Dave Ramsey would also say that you're in a big hole but you have a BIG shovel (your large income).  Use that big income and those stable jobs.  Buckle down for a couple of years and you can get out of debt.  You really can.  You shouldlisten to Dave on a podcast to get some inspiration as well as read his books.  Will keep you company while you take public transportation after you sell those expensive cars :)

Don't sell your house - your mortgage isn't crazy given your income when you take the other debt out of the picture.  But DON'T buy a new house, for god's sake.  The transaction costs alone would kill you.  We've got a $900K budget to buy a new house and that much house will be $30K in closing costs alone.  You can't afford that right now.

One other thing - day care costs should not last more than 3 years.  You're in DC so you should be able to get public PK3 and PK4 for your kids which is a HUGE benefit compared to other places that don't have school until K.  Tackle that debt now and then as the kids age out of day care, use the day care money to pay off debt.  Can you send the kids to grandparents in the summer instead of camp?  Or have grandparents come stay for a week and hang out with kids?  We do that and it's a win/win - saves money and kids get to spend time with grandparents.[/quote]

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