Financial Help! Debt Help! Advising?

[CaliforniaPaul]

Here's my situation..

I am 27 years old and I am in serious debt. I have about $45,000 in student loans. $19,000 car loan (I know I probably shouldn't have done that), and $2500 in credit card debt. I also have a condo mortgage of $100,000 at 4%. I am engaged to someone who has $4000 in credit card debt and a $10,000 car loan. Total debt (not including condo) is $80,500. I have $7,000 in my savings account that will likely all be going to the wedding.

My predicament is.. the condo I bought for $100,000 about 6 months ago is already worth more than $150,000 and I could likely sell it for $160-175,000. Currently, the mortgage on the condo is only $725 per month. Should I sell my condo and use the money to pay off the debt and rent (rent is way more expensive than the condo mortgage by about twice) or stay in the condo and keep chipping away at my debt? Another alternative would be to sell and invest the money, but that would be a huge gamble with my debt.

Note: My annual salary is only $45,000 and my fiances in about $35,000. We are expected to make more money within the next few years, but not by a dramatic much.

[MakeAStash]

Be sure to allow for capital gains taxes if you sell. IMO don't sell the condo unless you are having trouble keeping up with payments on the loans.

[CaliforniaPaul]

Re

@makeastash Thanks. I haven't started paying back the student loans yet. Why shouldn't I sell?

[esb3357]

What is your total monthyl payments for your dedt. I am assuming since it is a condo your home owners cots are low. If you sell you are going to have an additional monthly payment of 725 (approx) due to rent increase. If your dedt costs is lower tban this I wouldnt even dream of selling. Honestly i would go bare bones and start chipping away at everything.

[CaliforniaPaul]

I haven't started paying the student loans yet, but when I do my guess is it will be about $400 a month. Car payment $280. Condo HOA $230. Credit Card payments approx. $225. Her car payment is $380. So there's a lot of monthly bills that is more than the difference I would pay in rent.

[snafu]

It's difficult to assess your situation with the limited information you've offered. Are you and fiancee currently living together and sharing the costs associated with the condo [mortgage, HOA, utilities etc}? What was the down payment? Is getting out of debt your primary goal? Is your fiancee on board with this goal?

What are your monthly expenses? Are the bills up-to-date? How secure is employment for each of you? Are you each contributing to a retirement plan to take advantage of any employer contribution? What is the net income? What is Student Loan interest? What will the monthly payments be set at? Does fiancee have SLs as well? What interest rate are each of you paying on cars and CCs? What is your current budget for expenses like insurance, auto operations and maintenance, food, clothes, entertainment, electronics/phone, gifts and the myriad of expenses adults incur. Are you willing to start with a plan?

[CaliforniaPaul]

@snafu

I pay $725 mortgage, $230 HOA, $100 credit card (total cc debt $2500 & my yearly car insurance is on my credit card). $20 internet bill, $45 cable bill. We also pay $130 total bill for smart phones, which we take turns paying or whoever secures the payment first.

I owe $19,000 on the car at 4.29%
I owe $92,000 at 4% on the condo. I put 5% down on it at purchase price of $100,000.
I owe $2100 on a credit card at 10.15% APR
I owe $450 on another credit card at 22% APR
Total Student Loans $39,740
$22,167 at 6.8% fixed
$17,573 at 3.4% fixed

My fiancé has about $4,000 in student loans at 6.8% fixed. Neither of us are paying on them yet.

Currently, I have $7,000 in my savings account and she has 0 in savings. We are paying for most of the wedding ourselves and that is where all of our savings is going for now. I put minimum of $500 in my savings account each month. Usually between $500 to $750. Sometimes none if something comes up. I count spending money as food, gas, and leisure. Our leisure is mostly spent on eating/drinking out. She spends most of her extra money eating out and clothing.

We definitely are willing to start a plan and she is willing to support whichever financial decisions I make, as she isn't good with money. Thanks for the help.

[CaliforniaPaul]

@snafu

My fiancé and I are currently living together. We both have secure jobs, however one of our biggest problems is that she doesn’t get a consistent 40 hours per week, but that is suppose to change by January. She is investing in a 401K (not sure how much) and I currently am not. I have a pension plan and am planning on enrolling in the 401K as soon as we get married which is likely to be early 2013.
Her bills are $380 for car payment, $160 for car insurance, and $250 in credit card bills (total credit card debt for her is about $4,000 high interest, don’t know #’s). She also pays my car payment of $280 as it counts for her share of rent.

[maat55]

Up front, I state what I would do.

IMO, you should not spend more than 1k on your wedding. I would payoff your two credit cards leaving you 3500 in savings. Newlyweds with no savings is a bad idea.

I would consider selling the condo(provided you have had it more than two years due to capital gains).

If you did, I would payoff your 22k loan and her 4k loan. Depending on how much you have left, I would payoff her car.


I would consider selling your car and replacing it with a 3k car or less. This may cost you a little more depending on how under water you are on the car.


The point is to get rid of as much debt as quickly as possible. Then, you would want to build your EF to at least three months. Then, you would start saving for a down payment on a house.

[bjl584]

I have $7,000 in my savings account that will likely all be going to the wedding.

This all needs to go to debt. Not a wedding. You can't afford to get married. At least, you can't afford a wedding.

[dawnwes]

Agreed.

Go to a local Justice and get married if you wish. Pay off the student loan and your cars and have a nice reception in a few years. Use that savings to pay off debt.

Your car insurance seems high.....is that for both cars or only one? That may be because of the cost of the cars (or your driving record) , but even when we lived in Los Angeles and had one brand new car and one almost new, we paid $150/mo for insurance.

You say some income should be changing in January.......if I were you I would just mentally not count on more income and put 100% of that into debt. Personally I would get rid of the CC debt first and then start tackling whatever carries the highest rate of interest......car or student loan.

It will take a while!!!!!!!!!! Just know that and don't get discouraged.

Dawn

This all needs to go to debt. Not a wedding. You can't afford to get married. At least, you can't afford a wedding.

[breathemusic]

Personally I wouldn't consider selling the condo just yet since you mentioned that the cost of renting would be double (though maybe less if you consider the condo fees, but still significantly more expensive). Before you look at selling the condo, you need to really write out a budget with your current bills and then all of your extras, like food, gas, eating out, etc. Cut everything that isn't necessary, like eating out and clothing shopping. Drop the cable and get netflix. Use coupons or sales when you grocery shop and try to keep that expense down, and then throw all your monthly spare cash at the CC debt. Once you free up that, stop using your Credit cards since you seem to have trouble spending within your means with them. I'd tackle the car debt next.

If you really wanna knock out some of the debt faster, you guys can take on part time jobs. Also, I agree with the other posters here in that you can't afford a costly wedding right now. You can always renew your vows and have a fancy reception later if you really want to. But all you're going to do is add more stress to your lives right at the beginning of your marriage by spending all your money on a wedding.

[BMEPhDinCO]

I pay $725 mortgage, $230 HOA, $100 credit card (total cc debt $2500 & my yearly car insurance is on my credit card). $20 internet bill, $45 cable bill. We also pay $130 total bill for smart phones, which we take turns paying or whoever secures the payment first.

I owe $19,000 on the car at 4.29%
I owe $92,000 at 4% on the condo. I put 5% down on it at purchase price of $100,000.
I owe $2100 on a credit card at 10.15% APR
I owe $450 on another credit card at 22% APR
Total Student Loans $39,740
$22,167 at 6.8% fixed
$17,573 at 3.4% fixed

My fiancé has about $4,000 in student loans at 6.8% fixed. Neither of us are paying on them yet.

Currently, I have $7,000 in my savings account and she has 0 in savings. We are paying for most of the wedding ourselves and that is where all of our savings is going for now. I put minimum of $500 in my savings account each month. Usually between $500 to $750. Sometimes none if something comes up. I count spending money as food, gas, and leisure. Our leisure is mostly spent on eating/drinking out. She spends most of her extra money eating out and clothing.

We definitely are willing to start a plan and she is willing to support whichever financial decisions I make, as she isn't good with money. Thanks for the help.

According to this, you can pay off that 22% CC this month if you are putting at least $500 to savings. Do that, NO reason to keep it going! Then, pay the $2,100 with the rest of "savings for the month money" ($100) plus $2k from your stash of $7k. Boom, CC are paid by 12/1/12.

Cancel the cable, cut back on eating out, clothing, and "leisure". With a combined $80k income, you can tackle the debt. You can't have a fancy wedding, spend $1-2k (ie, leaving you with 1 month in savings) and have a fun time for cheap, then plan on a fantastic 10 year anniversary party. With $600-800 "extra" every month, you should be able to pay off the $22k student loan in 32 months. Another 6 months will get rid of the other $4k loan at 6.8%.

That means that in 3 years and 4 months (or so), you will be down to the condo, car loan, and 1 student loan - with lower balances on all of these. Any extra on top of the $700 a month I sent to those debts should go to building yourselves an EF with 6 months of expenses and another savings account for car, house, misc, travel, whatever. Once all of your debt is 5% or below, you will be in much better shape.

If you don't like this longer term plan, at least pay of the CC NOW and then have a small, inexpensive wedding.

[Bayspieler]

Here's my situation..

I am 27 years old and I am in serious debt. I have about $45,000 in student loans. $19,000 car loan (I know I probably shouldn't have done that), and $2500 in credit card debt. I also have a condo mortgage of $100,000 at 4%. I am engaged to someone who has $4000 in credit card debt and a $10,000 car loan. Total debt (not including condo) is $80,500. I have $7,000 in my savings account that will likely all be going to the wedding.

My predicament is.. the condo I bought for $100,000 about 6 months ago is already worth more than $150,000 and I could likely sell it for $160-175,000. Currently, the mortgage on the condo is only $725 per month. Should I sell my condo and use the money to pay off the debt and rent (rent is way more expensive than the condo mortgage by about twice) or stay in the condo and keep chipping away at my debt? Another alternative would be to sell and invest the money, but that would be a huge gamble with my debt.

Note: My annual salary is only $45,000 and my fiances in about $35,000. We are expected to make more money within the next few years, but not by a dramatic much.

Paul,

If you take the student loan out of the equation, I don't think that your debt situation is particularly bad at all. You and your fiancee are living in a house that's less than twice your yearly income and driving cars that are worth more than six month's your yearly income. I believe your debt is manageable, even with your student loan.

I'd say keep the condo. (Provided both you and your fiancee/wife are happy there.) The money you pay into it will (1) earn equity by paying down your debt. (2) probably allow you to take the home mortgage interest deduction, which means that you'll do better on your taxes than if you rent.

The money you pay for housing has to come from somewhere. It might as well be going back to yourself instead of to a landlord.

Also, if you can actually sell the condo for $150K now, it seems unlikely the potential sale price of your condo is going to drop below $100K in the next year or two. There will be an opportunity to sell your condo later if you need to.

You and your fiancee need to have some serious talks about money -- all of us married people do.

I wouldn't suggest going all out trying to do everything you can to get out of debt as quickly as possible. If you get married and dramatically alter your lifestyle by stopping all going out, cable TV, and selling one of your cars to switch to bicycles, your wife may decide that if this is what being married is like, then she wants no part of it. I haven't done this myself, but I understand that divorces are _really_ bad for one's finances.

I suggest sit down and talk. Realize that some trade-offs will have to be made. Do you really need two cars? Maybe yes, maybe no. Could one of the cars be traded down to a cheaper model? There are trade-offs. Maybe drop cable. Maybe drop eating out. Maybe have a smaller wedding. Maybe put the wedding off for a while and have a larger one later.

But don't walk in with a plan that consists of totally altering your lifestyles overnight, at least don't do that unless she's prepared for it.

Yes, pay off the credit card debt first, then pay off the car notes, then student loans. Try not to keep a credit card balance. Contribute to a 401-K. Blah, blah, blah.

Also, if your condo is really worth that much, could you re-finance it for $150K? That would give you cash to pay off some debts while keeping the condo.

Anyway, congratulations, and best of luck to you.

[papa_squat]

Just a thought, but if you talk with your fiancé and decide you both really want a wedding, consider delaying it for 6 months to a year to begin saving up. It will give you time to settle a new budget to also keep up with the debt repayment, plus you'll have more time to shop around for good deals on the dress, the reception and maybe even a nice honeymoon. What's the rush to get married when you could be saving for the wedding you want? If the wedding isn't that important to the two of you, do a justice of the peace and a family reception. Only spend what you can afford, which right now isnt a lot, but with some time and smart saving it could be plenty for a nice wedding.