GF debt

[rutgers07]

Hi all. This is my first post in the forum. My girlfriend (who I plan on proposing to in the next couple/few months) has a good amount of debt. We're starting to work on finances since I'll be moving in with her in about 2 months or so. I knew she had debt, she's been upfront about all of this, and it was nice to sit down and see the numbers and do some math. I don't have much debt myself, about 11k for my car but it's only at 1.9% interest so I'm not too worried about that. I make about 34k and she makes 33k but I also work a ton of overtime so my pay tends to be upwards of 50k. Now that you have all that, here is her situation:

Credit Cards:
~5k with 29.99% APR!!!
~9.5k with 16%
2k with 14%
2k with no interest

Student Loans:
Total is 73k - interest is 6.8 or 3.2 (around that) depending on which loan.

Our monthly bills will be fairly low totaling around 1200 or so. Our take home after taxes but before my overtime willl be a little under 4k monthly. I also put 6% into our 401k and she's planning on doing the same.

So my question is (sorry for all this information) is how to go about paying off her debt? I have about 6k in savings with 1k as my emergency fund. The 5k can be paid off easily but I have some thoughts of having her transfer some of her balance (or all if possible) to a 0% APR card. We found a good one that has no fees and is 0% for 15 months. We can easily put the money aside into my MM account, earning some interest along the way, to pay it off when the introductory rate expires. My thought is by transferring (unless one of us loses our job the total transferred can easily be paid off in 15 months) allows us to put more money into her student loans for now instead of putting everything towards the CC's. What do you guys think?

[disneysteve]

Once the two of you are MARRIED - not just living together, not just engaged - then is the time to sit down and come up with a plan for how to pay off what will then by joint debt. Until that day, her debt is her debt and your debt is your debt.

For now, my concern and focus would be on figuring out why she has $18,500 in credit card debt. That's an awful lot of overspending for someone only earning 33K. Has she gotten a handle on her spending so that she is now living within her means? If so, great. If not, that really needs to be the focus at this point. Hopefully between now and whenever you get married, she will have cleaned up some of this mess. I suppose it will help when you move in and start helping with living expenses - paying half the rent, half the utilities, etc. It will free up money for her to put toward her debt. Certainly, the 29.9% one needs to be the first to go.

[rutgers07]

Once the two of you are MARRIED - not just living together, not just engaged - then is the time to sit down and come up with a plan for how to pay off what will then by joint debt. Until that day, her debt is her debt and your debt is your debt.

For now, my concern and focus would be on figuring out why she has $18,500 in credit card debt. That's an awful lot of overspending for someone only earning 33K. Has she gotten a handle on her spending so that she is now living within her means? If so, great. If not, that really needs to be the focus at this point. Hopefully between now and whenever you get married, she will have cleaned up some of this mess. I suppose it will help when you move in and start helping with living expenses - paying half the rent, half the utilities, etc. It will free up money for her to put toward her debt. Certainly, the 29.9% one needs to be the first to go.

The 18.5 is from past issues. She was in school, not working, and spending freely. She is excellent now with money though. She's certainly learned her lesson but is willing to work hard to fix it. She pays for everything with cash and hasn't racked up any new debt for some time now.

Waiting until marriage isn't necessary, at least not to me. We're both mature now, I'm 28 she's 30 and we're ready. But to go about your way Steve, I can always take over the monthly bills (rent, utilities, etc.) and she can put everything towards debt. This way her debt stays her debt.

[disneysteve]

The 18.5 is from past issues. She was in school, not working, and spending freely. She is excellent now with money though. She's certainly learned her lesson but is willing to work hard to fix it. She pays for everything with cash and hasn't racked up any new debt for some time now.

Great. That sounds perfect.

Waiting until marriage isn't necessary

Nobody thinks it is necessary - until something happens and they get screwed.

Don't combine your money and finances until you are married. Until then, you have absolutely zero legal protection if anything goes wrong. Nobody thinks a relationship is going to end, but it happens every day. Nobody thinks a young person will get sick and die or be in an accident, but it happens every day. Protect yourself and keep things separate.

[bjl584]

I second the notion to wait until you are legally married before you start paying off her debt. If she splits you are out that much money and you will have no legal recourse. Once you are married you have legal protection should something happen.

[breathemusic]

I agree with these other guys, the debt needs to stay separate. If you're willing to take the risk, then I can understand you paying more of the utilities and rent if you really wanted, or you can pay for dinners out and things like that... but at the very minimum, do not transfer the debt to any joint credit cards or any of your cards or do anything that might legally attach your name to her debt.

I think it's great to be supportive of her goal to pay down the debt, and none of us is trying to say that the relationship is doomed to failure. But the reality is that joining finances too soon can cause issues if something does happen in the future.

[rutgers07]

Just to be clear, my name will NOT be attached to any of this debt. Everything will still be in her name. We also won't have any joint bank accounts or anything. The only thing our names will be on together will be the lease for the apartment.

So let's assume then she's asking this question herself, so I can help guide her. Would transferring to a 0% balance transfer card (the debt she knows she can pay off within the timeframe for 0%) be a good idea? I can't see any reason why it wouldn't. Or is there a better way for her to approach the debt?

[shaggy]

Our monthly bills will be fairly low totaling around 1200 or so. Our take home after taxes but before my overtime willl be a little under 4k monthly. I also put 6% into our 401k and she's planning on doing the same.

So my question is (sorry for all this information) is how to go about paying off her debt? I have about 6k in savings with 1k as my emergency fund. The 5k can be paid off easily but I have some thoughts of having her transfer some of her balance (or all if possible) to a 0% APR card. We found a good one that has no fees and is 0% for 15 months. We can easily put the money aside into my MM account, earning some interest along the way, to pay it off when the introductory rate expires. My thought is by transferring (unless one of us loses our job the total transferred can easily be paid off in 15 months) allows us to put more money into her student loans for now instead of putting everything towards the CC's. What do you guys think?

I'm not going to tell you what to do with your relationship, since you didn't ask. I for one commend your generosity.

I wouldn't raid your savings to pay off debt. Keep your savings intact, and think about how much you can contribute monthly to debt. Contribute something to savings even as you are paying off the debt. Maybe you can set up a plan where you contribute x to her debt, and she contributes 2x that amount. That would be more fair than you paying it off for her.

The 0% APR transfer is only good IF you pay off the balance in full while the interest rate is 0.

[rutgers07]

I'm not going to tell you what to do with your relationship, since you didn't ask. I for one commend your generosity.

I wouldn't raid your savings to pay off debt. Keep your savings intact, and think about how much you can contribute monthly to debt. Contribute something to savings even as you are paying off the debt. Maybe you can set up a plan where you contribute x to her debt, and she contributes 2x that amount. That would be more fair than you paying it off for her.

Thanks Shaggy. I suppose what I can do is put the money into my Ally account and seeing how things are by the end of the promo period (if she needs help) I can use that money to help. If not, great, I have plenty saved up. I am not going to be "paying it off for her." I'm just going to be helping out so when we truly start our lives together, we're in a better financial place than we would be compared to if we started off today.

[disneysteve]

Would transferring to a 0% balance transfer card (the debt she knows she can pay off within the timeframe for 0%) be a good idea?

If she can transfer the 29.9% debt to a 0% card, definitely go for it. Even if there is a small transfer fee, she'll likely come out ahead. Just make sure she runs the numbers.

Also, keep an eye on the 2K that is currently at 0% and try to get that paid off before the promo period ends.

[rutgers07]

If she can transfer the 29.9% debt to a 0% card, definitely go for it. Even if there is a small transfer fee, she'll likely come out ahead. Just make sure she runs the numbers.

Also, keep an eye on the 2K that is currently at 0% and try to get that paid off before the promo period ends.

The 2k will be dealt with immediately. We both did the numbers and there should be no problem with transferring it even if she pays it herself. The 9k is another story. She's not sure how much of a credit limit she'll get. She's got okay, not great credit, but has been making steady progress since she realized the hole she's dug herself into.

[disneysteve]

Can she move any of the 29.9% money to the other cards, like the 14% card? Even that would be a huge improvement.

[rutgers07]

Can she move any of the 29.9% money to the other cards, like the 14% card? Even that would be a huge improvement.

Didn't even think of that as an option. We've only been researching opening up new cards. That's certainly worth considering. Thanks! She's thinking about finding another PT job too just to get rid of all this too. Sounds like she'll have a few options and I'll be able to help lessen the blow with the bills once I move in. We're lucky to live in an area where rent is dirt cheap.

[Petunia 100]

Transferring balances to a lower rate is a great strategy, BUT, you do need to keep the balance transfer fees in mind. The rates are not annualized. Rather, they are assessed upfront on the entire balance and added to the debt. Always do the math to see if you are truly coming out ahead.

Good luck!

[shaggy]

One thing to watch out for: As your GF opens new accounts, she needs to be careful not to fall back into the habit of charging on all those old cards. I have known many smart people fall 'off the wagon' and run up even more debt as the number of credit accounts expands.