My husband and I are in over our heads, for many reasons, some of which were a result of the poor economy and bad timing, job losses, health crises, and others were simply our poor financial choices. We are 35 and 36, have a $275,000 mortgage (barely above entry-level home in our real estate market, while still having good schools and safe neighborhoods), $285,000 in student loans from my college and law degree, $70,000 in consumer debt, $5,000 in medical bills, and no car loans. We have 2 kids (8 and 3 yr old), so weâre still paying for childcare ($900/month, which is very cheap for our area). We have significant health care needs, so we have to pay for the most expensive health plan my company offers, which is over $600 a month for our family (I know, this could be much worse), on top of the deductibles and co-pays. I finally landed a good job, but my husband recently lost his. So weâre trying to make it work on his unemployment and my salary. We were making approximately $180,000/year annually prior to his job loss, $110,000 is from my job. To top it all off, weâre having significant expenses with water intrusion from our basement and roof, resulting in huge bills. We also had over $2,000 in car repairs on our vehicles (2007 Corolla and 2014 Venza- nothing fancy) right after my husband lost his job. Iâve been prioritizing consumer debt payoff, due to the interest rates and weâre on the income based repayment plan for my student loans, but the interest on that is killer too (all federal loans, but the bulk of my loans are graduate loans at 7.5%). I recognize my income is more than so many and Iâm very grateful for that. But, it is still not enough to make it possible to pay off these debts and pay for kids, food, etc. We donât live extravagantly. How in the world are we supposed to manage all of this debt and pay it off eventually? How do we feasibly save for our kidsâ college expenses or our retirement?
You could possible use Dave Ramseyâs baby steps. If you can get his book that I believe can help you focus on your debt. You can watch his youtube channel and listen to podcasts to give you an idea of his method. What I like about it, is that its a complete plan from getting out of debt to saving for college and saving for retirement. Good luck on your journey to getting out of debt!
We did Dave Ramseyâs program and it worked very well. I know it is overwhelming, but this is more acute at the moment since your husband will hopefully be back working very soon.
Just some brainstorming. With a $110,000 income what do you net after taxes? What is your husband netting from unemployment? About half of his former salary? Thatâs the real number youâre working with. // Have you kept track of your outgo for a month (listing every penny) and determined which are necessary and non-necessary expenses? Do you have a budget for food, clothes, gasoline, etc.? // There are two types of expenses you mention, current and future. Of the current expenses a couple things blindsided you. Medical bills and car repairs. I believe Dave Ramsey is a big one on having a cash cushion for emergencies. That should be a priority. Especially with older cars. // Iâd wait on the future expenses for college and retirement all the while aggressively paying off debt and putting together an emergency fund. Just put it out of your mind for now and revisit it in 5 years. // Debt interest is a killer. Have you considered going to a free credit counseling service and seeing if they can work with you to get a payment plan in place and negotiate your interest rates with your providers? // As your husband isnât working do you need the second car? Or if youâre keeping it for future use once he gets a job, put it out of service until then, and drop itâs insurance to that level for the interim? Can he watch the kids until he gets a job, thus eliminating day care costs? $900 a month is significant. Just hire a babysitter when he has interviews? // Do you cook food at home from scratch? That saves a bundle. // Iâm assuming itâs a 30 year mortgage. What is your monthly payment? About $1350? Utilities another $500? //The $70,000 in consumer debt, is that in credit cards? Those interest rates are probably the highest. What kinds of things did you buy? Is anything still new and can you return it? Can you sell any of the stuff you purchased and throw it at the debt? Can you stop incurring consumer debt? Like cut up the cards and go cash only until youâre back on your feet? Can you transfer that consumer debt to a peer to peer loan and thus get a lower rate? // Can you talk with your medical providers and work out a payment plan? // Then revisit the little normal expenses. Cable, eating out, Amazon prime, Netflix, anything that isnât life or death. Buying used clothes instead of new. Using a cheaper phone provider, like Republic Wireless. Negotiating car insurance rates. Putting a freeze on household purchases unless something is absolutely unusable and cannot be substituted for.
Thanks for your reply and brainstorming ideas! I keep our budget in an excel file where nearly everything is accounted for and keep tabs on how weâre doing vs. budget in an app from our bank. We stay pretty close to budget most of the time, especially right now. My net paycheck every two weeks is $2,600 and my husbandâs weekly unemployment check is $611 (monthly approx $7,644). Our consumer debt is a mix of low interest and high interest credit cards and loans (some are for a roof, furnace and A/C system in our prior home that we choose to not payoff when we sold because we used funds to pay off higher interest debt instead). We have been selling off many things and that has been helping us make up the $1700 shortfall in our monthly budget due to my husbandâs job loss. Dropping the daycare would help a lot, but we really like it and itâs really hard to find good, affordable daycare in our area. Spots are snapped up quickly and they wonât reserve spots, even in these circumstances. Believe it or not, this is well under half the normal cost for this type of care. 
People often pay $400-450 a week for childcare in my area. I donât know how they do it, especially those with multiple kids in daycare! We have cut our eating out to basically emergencies at this point. Our total food and household supplies budget is $1000/month (mostly shop at Aldi and Target, cook from scratch and by off-brand where we can). Our mortgage is a 30yr FHA loan- $1,996 a month. My husbandâs medications cost approx $500/month and my student loans are $1,300/month. We do have a few pretty clear âluxuriesâ at this point- our daughter plays an instrument and we have not yet cancelled her lessons and instrument payment ($200/month) and my husband has a gym membership that weâre working finding ways to reduce itâs cost. We did have a few thousand on hand in cash, but all of this just completely wiped us out. I struggle with how much we really need on hand for emergencies. Weâve literally had $6,000 in home insurance deductibles for the problems with our house, then the over $2,000 for the car repairs and $1000 for an A/C repair. So, should I be aiming to have $10,000 in cash for emergencies before I pay off debt? If so, then I donât know when we can actually start paying off debt because it will take so long to get to that level of cash reserves. I guess the plan for now is cut and pinch as much as possible to figure out how to get through his stint of not working, then check out Dave Ramsey?
I donât intend this in any mean way. How committed are you to cutting back? Are you hoping this is only very temporary and you can make modest cuts and let the debt float, or are you willing to cut to the bone and dig out of the hole? Two different approaches.
I want to see you succeed and get out of this hole, but this journey is yours to take. Comparing your daycare costs or housing costs with other peopleâs is not helpful here. Dave Ramsey would have you take a good hard look at your finances and teach you how to make a budget on what you actually bring in, all the while aggressively attacking debt. Debt is the killer. Especially credit card debt as the interest is so high. If your credit card interest is 18% and you were to totally stop charging on the cards, your cc debt would double in 4 years. So you have to plan to eliminate debt, even now. When faced with a grim situation we tend to think it wonât last long, that we can weather it. Thatâs rarely true.// If you want ideas on how to cut back, there are plenty of people here with hard earned lessons on this forum who are willing to give you their thoughts. Itâs not impossible, just painful at first, until you adjust to the ânew normalâ.
@birdie13 I feel your struggle. Having had a child in daycare I agree your daycare is really a good price and if itâs a good one you donât want to mess with that in my opinion. I know you donât want to cut the instrument and lessons but $200 a month doesnât seem like much but it could really help go to some payments. Once your husband gets back to work and things are a little less chaotic then she can go back to the lessons. Do not be afraid to think you are disappointing her. Children are resilient. It sounds like you are doing a lot to cut back with groceries and cooking. My hat is off to you for doing that.
I did sign up to reply to your comment i was surfing around about some specific topic.
I used to be in finances currently Iâm in sales over 3 years . Sorry to hear what you going through this shall pass.
I read plenty of upper comments . My question to you is do you know how much of equity line you have or can you refinance your house? Consumer debt is the highest if you can take off one from table that will give you an ease to you and you will have more room .
By refinancing your house you can stretch that 70K into your mortgage pay and add less monthly payment what you currently pay for that 70K . Iâm sure your husband also soon will get a job and bring an ease .
Get a good tax person who can really work on your deductions so you can get a good tax return since you pay a lot of interest these are deductible .
Im here,what do i have to do to keep my heads up?
Birdie13 posted:
My husband and I are in over our heads, for many reasons, some of which were a result of the poor economy and bad timing, job losses, health crises, and others were simply our poor financial choices. We are 35 and 36, have a $275,000 mortgage (barely above entry-level home in our real estate market, while still having good schools and safe neighborhoods), $285,000 in student loans from my college and law degree, $70,000 in consumer debt, $5,000 in medical bills, and no car loans. We have 2 kids (8 and 3 yr old), so weâre still paying for childcare ($900/month, which is very cheap for our area). We have significant health care needs, so we have to pay for the most expensive health plan my company offers, which is over $600 a month for our family (I know, this could be much worse), on top of the deductibles and co-pays. I finally landed a good job, but my husband recently lost his. So weâre trying to make it work on his unemployment and my salary. We were making approximately $180,000/year annually prior to his job loss, $110,000 is from my job. To top it all off, weâre having significant expenses with water intrusion from our basement and roof, resulting in huge bills. We also had over $2,000 in car repairs on our vehicles (2007 Corolla and 2014 Venza- nothing fancy) right after my husband lost his job. Iâve been prioritizing consumer debt payoff, due to the interest rates and weâre on the income based repayment plan for my student loans, but the interest on that is killer too (all federal loans, but the bulk of my loans are graduate loans at 7.5%). I recognize my income is more than so many and Iâm very grateful for that. But, it is still not enough to make it possible to pay off these debts and pay for kids, food, etc. We donât live extravagantly. How in the world are we supposed to manage all of this debt and pay it off eventually? How do we feasibly save for our kidsâ college expenses or our retirement?
Hi Birdie 13,
I am so sorry you and your family are going through this overwhelming situation. But you are armed with information and numbers and you are not alone.
I would go through the Dave Ramsey baby steps (try to call into the show, sometimes he will send you a book.)
Personally, I would take the children out of daycare. Dad, if he is willing to accept this challenge, can be a stay at home Dad. (I have found with 2 children, if possible, it is cheaper for a parent to stay home and raise them at least until they are both able to be in school full time.
You can negotiate with your creditors, explain the situation and see if they will work with you on a payment plan and update your income information for the student loans.
I would sell the house and find an apartment close to where you work. That would help take some of the financial stress off of you. The house is an albatross right now.
Youâve got this.
I need info for a senior age 78. Moved to apartment 2 1/2 years ago at rent of 1560. Now it is 2000. I cannot afford meds or food. I live with my son who helps, however, I cannot pay all of my bills. I get loans to get thru the month. I can use all the information I can get.
@Janice Lokke, first of all welcome to the Penny Hoarder. Thatâs the problem with apartments is the rent goes up every year. Could you perhaps rent a house or condo cheaper? Seems like they hold their rent steady especially if you are a good tenant. Not sure what part of the country you live in which can have a lot to do with it.
@janice.lokke, are you on any wait lists for subsidized housing?
Not just your local housing authority, but there are generally others in the area.
https://affordablehousingonline.com/
Yes, there is often a list, but better to be on it and not need the housing when you get to the top, than to never get on the list.
Great ideas! Iâve been in your position but with different numbers. We almost lost our house and everything else. But, we were able to negotiate with almost all we owed money to, we cut to bare bones, thrift stores, Aldiâs, garage sales, budget plans with utilities (our water company was the only one that would not work with us), and eventually I found Dave Ramsey. I suggest checking his plan first while you are cutting things, pinching, and scraping right now. He has some great ideas that work. 211 is a good idea, places like Penny Hoarder are also great. We cut internet, tv, used grocery list and meal planning, ate at home always except in emergencies (crockpots are amazing) when we could we stretched recipes and food packages into more than one meal (rice and pasta are great helps with this). Use your imagination, and budget, budget, budget. Make it a game to see how much you can save on each bill each week and month. Giving yourself a reward for cutting expenses even more makes it fun (i.e. one extra hour a week to soak in a bubble bath, a quiet time to watch what you choose or to read a book or go for a run at the park or in the neighborhood, etc.) There are a lot of things you can do that cost nothing and are fun. I live in a rural area and we found things to do all around us, it is easier when you live in a city or town.You can do this and the kids will learn so much more helping you that will help them through their own hard times and adult choices. Let them be involved. At the grocery store give them a certain amount and let them pick out a meal/meat/or school lunch to shop for that is under that amount. Your 8 year old will probably find the challenge fun and it will show her she can do it. Let your 3 year old be the strong one to help put things in the basket. Kids find fun in so much that we think of as drudgery just because it is a âbig girl/boyâ or adult activity. They will also learn the value of money and how to manage it if you include them in things that they can understand. (Making a game of it takes much of the stress out of it for you and for them)
All good ideas, Debbie. I am a pensioner on a fixed income and I have done a lot of the things you suggested. A budget plan for utilities I never thought of. I get a lot of free local small town papers showing grocery store sales and free local family entertainment. I live in CT and was surprised how much free entertainment is out there for adults and children usually sponsored by churches and schools and civic organizations. So look at those circulars that clog up your mail box. There is a lot of things in them including family entertainment. I also was able to switch to Aldi and save a lot on groceries that way.
https://money.usnews.com/moneyâŠways-to-pay-off-debt
This article is really helpful in figuring out how you can pay your debt.
Birdie13 posted:
Thanks for your reply and brainstorming ideas! I keep our budget in an excel file where nearly everything is accounted for and keep tabs on how weâre doing vs. budget in an app from our bank. We stay pretty close to budget most of the time, especially right now. My net paycheck every two weeks is $2,600 and my husbandâs weekly unemployment check is $611 (monthly approx $7,644). Our consumer debt is a mix of low interest and high interest credit cards and loans (some are for a roof, furnace and A/C system in our prior home that we choose to not payoff when we sold because we used funds to pay off higher interest debt instead). We have been selling off many things and that has been helping us make up the $1700 shortfall in our monthly budget due to my husbandâs job loss. Dropping the daycare would help a lot, but we really like it and itâs really hard to find good, affordable daycare in our area. Spots are snapped up quickly and they wonât reserve spots, even in these circumstances. Believe it or not, this is well under half the normal cost for this type of care.
I would suggest checking out Dave Ramsey now and not wait to try to âfigure it outâ first. That is what he does - help you figure it out. It wonât be an easy fix. It will be hard choices (but they are your choices) and it will work. His record, personally and from his followers, proves that. He has a website, radio program, YouTube videos, books, and takes phone calls to answer questions (during his radio program), with a vetted list of professionals that you can use from varied fields.
So many good tips here and such support! I donât have much new to add, but I just wanted to wish you the best. Iâm currently in what feels like a similar situation and itâs so tough! I feel like itâs pointless sometimes and think I should just give up and live like some people in my family where I have no job, constant debt collectors calling, and just ignore it all somehow.
When that deflated mentality hits, I tell it to shut up as best as I can. Itâs hard, but itâs worth it. When it feels like too much, I think of how I want our lives to be for my family. I imagine the most ideal life, and how wonderful it will be once finances and debt are settled. We donât live extravagantly either, but Iâd like to give my spouse the world if I could. So thatâs what I focus on and hope it guides me.
For the Ramsey steps, I feel so similar! The mentality of saving first or paying down debt- either one feels miles away. My strategy right now has been just a small automatic transfer of $5 a week into a high yield savings account while I tackle some debt. Once I wrangle a couple accounts, I will focus on having that 2-3 months expenses saved up.
Great job at dealing with your life. People can control cash flow by controlling expenses oror making more money. I can help with both by helping people who need income who may be a fit with my company. On the side of how to save and control debt and retire with less taxes, I also educate and help as a finance professional. It may be worth talking to see how I can help.
