Anonymous wrote:OP here. I appreciate all of the helpful responses. I know that I have made some bad choices. I came here for advice, not judgement. I am trying to make this right and get on the right track. Thanks.

You are doing the right thing OP ! Facing the situation and getting some tough love from the money forum... But this is the necessary first step, ignore the judgements and just focus on the good advice that people are giving you (which will boil down to understanding how you are living above your means and need to reframe what you think you can afford)

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%.

Oh that is insane. I would pay off the 24% CC ASAP. Like literally every available cent.

11% on the car loan is also insane. And that is a very high car payment for your financial situation. You should trade it in for something cheaper.

Here's what Dave Ramsey would tell you, and it works:

Step 1 - Save $1,000 Emergency Fund

Step 2 - Pay off all your debts, except mortgage, smallest BALANCE first to largest balance

Step 3 - Start contributing 15% of income to retirement savings

Steps 4/5/6 - Extra on mortgage or save a down payment. Don't take a mortgage with a payment greater than 15% of your HHI on a 15-year fixed. Save for college.

The only thing I'd do to modify Dave's plan is to make sure you're saving for retirement up to employer matching. I know why he says not to, but I can't advise turning down an instant 100% return.

Specific to your situation, you're a good person, and you've had some tough luck, it sounds like recently, but you really need to understand how bad your situation is for people who are about 40 with a $200k income to have nothing for retirement. And no home equity. That's horrible.

You need to see the car and buy a $8k Corolla. I don't care if you're underwater on it. Put it on a credit card for now, but you need to get rid of that car. It's insane for two broke people to be driving those cars, I don't even care what it is. You don't need to "refinance it." You need to SELL it.

You may need to rent a cheaper place, too.

Anonymous wrote:

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?

sent too quickly:
- what's the interest rate your paying on your 3 debts? I guess the credit card is the worse? WIth your level of income and strict belt tightening you should be able to get rid of it in 2/3 months max. If you are not something is wrong with your budget and you should share it here so we can point your mistakes..
- I would treat retirement as a fixed expense that is never negotiable as long as you have a job and no crazy medical or emergency crisis. This is not an optional / nice to have saving account. I personally contribute a minimum of 10% of my salary, my company adds 5%. i think 10% is minimum.
- stating the obvious but you are not ready to own a house and with rising interest rates maybe it is a better time to wait anyway. I wouldn't think of it as a tragedy, being a renter if you choose a smart rental can be a good financial option. And by that I mean: you don't need 4 bedrooms, a big yard and crazy updates inside your office. Be smart and minimize your current rent, focus on good schools (not the best of the best), if possible close to metro and get rid of one car...

Ha.. I see by the time i slow type this, the whole tread has been super active.. So yes, agree with the others:
- the car situation is unfortunately a really bad deal. anything you can do to get rid of it would be good..
- 6500 of fixed expenses is very high can you detail? You need to reduce this.. And how much variable expenses per month usually? Give us your detailed budget (if you don't already do so, I suggest using mint to see where your money goes)

OP here. I appreciate all of the helpful responses. I know that I have made some bad choices. I came here for advice, not judgement. I am trying to make this right and get on the right track. Thanks.

Anonymous wrote:Don't eat out. Don't go skiing/spa/nails/airplane vacations/new clothes/car washes for the next 3 months. Trust me, you'll survive. Expenses must be identified and crushed.

This, exactly. This is serious and dire, OP. If this were my situation I wouldn’t be able to sleep at night. If your interest rates are that high one or both of you must have seriously poor credit. You need to take this extremely seriously.

Pay off the CC right now and put the rest of the bonus into an emergency fund. Then tackle the cars and retirement savings. Get this monkey offf your back literally any way you can.

Anonymous wrote:

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?

+1000 Also, not to pile on, but your DH's card isn't paid off. He simply transferred the debt from the credit card to a consolidation loan that it sounds like you're still paying on. Just more debt upon debt.

Listen, it's time to google "Dave Ramsey's debt snowball" He gives very basic, sound advice about getting rid of debt, just ignore his Christian schtick if that's not your thing. He would tell you to stop contributing to any retirement or savings until your debt is cleared. Use any savings you have, but for $1000 (starter emergency fund) to pay down the smallest debt. Then, sit down, come up with a monthly budget. Pay minimums on everything except your lowest debt. Put everything extra toward that debt until it is paid off. Then do it again with the second lowest debt. At that point, you'll be putting your extra plus what you were paying on the minimum for that second debt to pay it off. Then do it again with the third lowest debt. You then see how the "snowball" builds. Don't worry about interest rates for now.

I also know he'd tell you to sell the expensive car. But if you can muddle through and pay it off in your debt snowball, that might work just as well at your income level.

Finally, when you're done paying off all debts other than your home, you start an emergency fund. You put that snowball into savings until you get to 3-6 months of living expenses. After that's done, you start your retirement contributions back up with the snowball money.

Don't eat out. Don't go skiing/spa/nails/airplane vacations/new clothes/car washes for the next 3 months. Trust me, you'll survive. Expenses must be identified and crushed.

OP here, I have a bonus and am willing to pay off the CC's now. So that takes away $600 from my monthly expenses.

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?

sent too quickly:
- what's the interest rate your paying on your 3 debts? I guess the credit card is the worse? WIth your level of income and strict belt tightening you should be able to get rid of it in 2/3 months max. If you are not something is wrong with your budget and you should share it here so we can point your mistakes..
- I would treat retirement as a fixed expense that is never negotiable as long as you have a job and no crazy medical or emergency crisis. This is not an optional / nice to have saving account. I personally contribute a minimum of 10% of my salary, my company adds 5%. i think 10% is minimum.
- stating the obvious but you are not ready to own a house and with rising interest rates maybe it is a better time to wait anyway. I wouldn't think of it as a tragedy, being a renter if you choose a smart rental can be a good financial option. And by that I mean: you don't need 4 bedrooms, a big yard and crazy updates inside your office. Be smart and minimize your current rent, focus on good schools (not the best of the best), if possible close to metro and get rid of one car...

Start listening to some Dave Ramsey podcasts and look into his books. You are exactly the people he talks to. You guys need to reframe your thinking about money completely.

Anonymous wrote:What are the interest rates?

+1 Need to give us those to get best advice.

But off the cuff--

1. Get rid of the credit card debt and never get any again (pay off in full every month) with a bonus.
2. Max out 401k for the rest of the year for both spouses if not doing that already. Automate a schedule to maximize it for rest of time going forward.
3. Build a budget with the remainder in which you have a plan to direct some cash to build a 3 months of expenses emergency fund, automated payments to 529 plan for kids' college, and prepayments if there are no penalties on the car with the higher interest rate.

Anonymous wrote: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.

Get rid of the cars how? As in reposession?

Anonymous wrote: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.

Family money mentioned isn't in our accounts, it will be used by the grandparents to pay for college with the child gets to it.

I would re-evaluate my life choices. How on earth do you owe $30k on a car?