New Family Need Budget Help

[FamilyOfThree2014]

Looking for help writing a budget plan. Recently drained our emergency savings down to only about 2k left due to a high risk pregnancy that ended up with a lot more medical bills than we anticipated taking place and also turning into a c-section. No regrets though, healthy baby and we were able to pay everything off without any use of credit, all cash which felt great; but now we need to figure out a new plan that we have hardly any savings left and have a new family member .

I found this forum and have done a lot of reading, and we have practiced a budget in the past, but we think we need a new budget plan. We are looking for help to get all of our debt paid off, and live a better life for our baby and future children. We have no credit card debt, but have about $25000.00 credit limit spread across 7 credit cards that all have a $0.00 balances. Last I checked our credit score was around 800. We have a lot of student loan debt which is overwhelming to us looking at the large amount. I contribute 3% matched, and 1% unmatched to 401k through work. I would like to contribute more, but I know debt is more important right now. Wife is now a stay at home mom so I am the income and am willing to do whatever I need to give us a better life which brought us here hoping to get some help beginning all of this.

Where should we start with our debt, savings, savings for current child and future children. Baby was just born so I think this is a good time to re-evaluate our finances and get on track. We don't know which debt to start to tackle first or what we should be setting aside for money right now.

My wife and I are both on board and ready to tackle this we just could use some guidance from people who have been down this path before and can show us direction and motivation when dealing with such a large amount of debt to pay.

Here is a list of our debts and monthly bills.

DEBT

Car 1 - Owe $4946.04 - 5.15% interest

Mortgage 1 - $83389.59 - 6.50% interest
Mortgage 2 - 2714.17 - 8% interest

My Student Loan 1 Unsubsidized Fed Loan - $6000.00 - 6.80% interest
My Student Loan 2 Unsubsidized Fed Loan - $6000.00 - 6.80% interest
My Student Loan 3 Unsubsidized Fed Loan - $6000.00 - 3.86% interest
My Student Loan 4 Subsidized Fed Loan - $4500.00 - 3.86% interest
My Student Loan 5 Subsidized Fed Loan - $3500.00 - 3.40% interest
My Student Loan 6 Subsidized Fed Loan - $3500.00 - 3.40% interest

Wife Student Loan 1 Unsubsidized Fed Loan - $6000.00 - 6.80% interest
Wife Student Loan 2 Unsubsidized Fed Loan - $6000.00 - 6.80% interest
Wife Student Loan 3 Unsubsidized Fed Loan - $6000.00 - 3.86% interest
Wife Student Loan 4 Subsidized Fed Loan - $4500.00 - 3.86% interest
Wife Student Loan 5 Subsidized Fed Loan - $3500.00 - 3.40% interest
Wife Student Loan 6 Subsidized Fed Loan - $3500.00 - 3.40% interest

MONTHLY BILLS

Mortgage - $850.00
Car Loan - $200.00
Home and Auto Insurance - $110.00
Natural Gas Utility - $100.00
Electric Utility - $50.00
Water Utility - $40.00
Cable Internet - $42.00
Cell Phone - $80.00
Car Gas - $200.00
Groceries - $200.00
Baby - $100.00
Dogs - $125.00
Fun - $100.00
~~~~
$2197.00/month

Take home $4000/month after taxes, medical/dental/eye/life insurance, 401k taken out.

[creditcardfree]

Welcome to SA! You will get plenty of suggestions here. It looks like you have a decent amount of money to work with in paying these debts down, so I would guess you are going to do great!

Can you include the required minimum monthly payments on the debts? Also, are either of you in school part time? I ask to know if the subsidized loans are accumulating interest?

[FamilyOfThree2014]

Thanks and sure here are the min payments.

Mortgage 1 - 802
Mortgage 2 - 38
Car - 181
School loans nothing. We are both in school part time. Probably another 2 years before our degrees are done. The unsubsidized loans are the only ones accuring interest right now while in school.

[Petunia 100]

The interest rate on your mortgage is very high. Have you looked into a refi?

I notice that you and your wife have identical student loans. Same number of loans, same balances, same interest rates. Is this correct, or did you accidentally list one set of loans twice?

You have $1803 each month not allocated anywhere. Where has this money been going? Savings?

Congratulations on your new baby.

[FamilyOfThree2014]

Yes we have the same exact loans for school because we went at the same time, same loans.

It was all going to savings for baby and medical bills for the pregnancy.

[Petunia 100]

Thanks for answering. What about the mortgage? Did you look into a refi, but decide against it for some reason?

[FamilyOfThree2014]

We didn't look at it because we thought we would be moving in the next few years once debt is paid off.

[LuxLiving]

questions about unfunded categories

You, and your wife don't wear clothes & shoes? Give Christmas, Holiday or birthday gifts? Travel? pay for an exterminator? get haircuts? buy vitamins? ever have car repairs? oil changes? household repairs? lawn care equipment & associated costs, etc? Every time you put on the brakes you're spending them down. Looks to me like a lot of areas of a normal budget aren't covered so far in planning ahead for these types of expenses.

I'd build my emergency fund back up in month one and in month two I'd eat that 2nd mortgage up pronto!! ...for a quick WIN!! Then you can either go the debt 'Snowball' method or the debt 'Avalanche' method to getting rid of those other debts. Good luck!!! You can do it!!! Congrats on the new babe!

[Eagle]

Where should we start with our debt, savings, savings for current child and future children. Baby was just born so I think this is a good time to re-evaluate our finances and get on track. We don't know which debt to start to tackle first or what we should be setting aside for money right now.

Congrats on your little one! Good job in having no CC debt. And welcome to the forums.

As LuxLiving said you can pay down your debt through the debt snowball (accounts with lowest balance first) or avalanche (accounts with highest interest first). Since the unsubsidized loans are accumulating interest I'd personally pay those off first.

That said, you probably need to build up your emergency fund back up to 5-6k before going all out on getting rid of your debt. If you have an emergency this time you'd have to use CC's and I'd imagine you'd want to avoid that.

A few key questions to understand your situation:

A. Does your wife plan to return to work?

B. What kind of degrees are you guys pursuing? When will you graduate?

C. Once your degree is done what can you expect to make? Is it a degree for the industry you currently work in or will you be switching jobs to a new industry?

[FamilyOfThree2014]

You, and your wife don't wear clothes & shoes? Give Christmas, Holiday or birthday gifts? Travel? pay for an exterminator? get haircuts? buy vitamins? ever have car repairs? oil changes? household repairs? lawn care equipment & associated costs, etc? Every time you put on the brakes you're spending them down. Looks to me like a lot of areas of a normal budget aren't covered so far in planning ahead for these types of expenses.

I'd build my emergency fund back up in month one and in month two I'd eat that 2nd mortgage up pronto!! ...for a quick WIN!! Then you can either go the debt 'Snowball' method or the debt 'Avalanche' method to getting rid of those other debts. Good luck!!! You can do it!!! Congrats on the new babe!

We just buy those extra items with the extra cash we have each month. I'm guessing there is a better way to go about doing this. I don't know where to begin with knowing everything we will need in a month or in the following. Which would be the best route paying off what first, second, etc?

Congrats on your little one! Good job in having no CC debt. And welcome to the forums.

As LuxLiving said you can pay down your debt through the debt snowball (accounts with lowest balance first) or avalanche (accounts with highest interest first). Since the unsubsidized loans are accumulating interest I'd personally pay those off first.

That said, you probably need to build up your emergency fund back up to 5-6k before going all out on getting rid of your debt. If you have an emergency this time you'd have to use CC's and I'd imagine you'd want to avoid that.

A few key questions to understand your situation:

A. Does your wife plan to return to work?

B. What kind of degrees are you guys pursuing? When will you graduate?

C. Once your degree is done what can you expect to make? Is it a degree for the industry you currently work in or will you be switching jobs to a new industry?

Thank you!

We were thinking the student loans with interest should be the ones knocked out first, but weren't sure.

A. At the moment no, she plans on being a stay at home mom for our baby.
B. Bachelor in Computer Science for me and wife is undecided at the moment as she changed her mind what she was going for. I am hoping to graduate in 2 years maybe 3 depending on how much I can go.
C. I'm hoping to make a better amount than what I am currently at. It will be a whole new industry for me as I have never held an office position or work in any computer field which is a bit overwhelming in itself. I am very excited to get into an actual career and new industry, yet it is scary as I have never had a job like that before if that makes sense.

[TBH]

Congratulations! I love that you are both so ready to tackle the debt and that your new baby is inspiring you to get things in order.

If I were you, I'd do the following:

1. Make a more accurate budget. I know it's hard to predict those irregular expenses, but you gotta. I don't think you really have as much surplus every month as this budget makes it appear. Figure out what you spend on gifts annually (or what you feel comfortable spending annually,) divide it by 12, and add it to the budget. If you are worried about spending that money on other things during months when you don't have gifts, put the money in a sinking fund, a special savings account where you save just for gifts. Gifts are just one example, but you get the idea

2. As others have said, build that E-fund back up to at least a month's worth of expenses.

3. I'd tackle that second mortgage next.

4. I really do think you should refi. You can probably get your interest rate down a lot, which will free up money each month to pay down other debts. Do the math. It's likely that you will only have to be in the house another year to make refinancing worth it.

5. Once you refi and pay off the second mortgage, build that E-fund back up a bit, maybe to 3 months.

6. Then I'd tackle the unsubsidized student debt using the snowball method, throwing all your money at one loan at a time until it's gone, then moving on to the next one.

7. Once your unsubsidized student loans are gone, I'd pay off the car, and then build the e-fund up to 6 full months.

8. Then I'd increase your retirement contributions. A lot. You should be putting in 15%, at least, especially since you're the sole breadwinner so you're saving for two retirements.

9. Then I'd tackle the subsidized student loans.

10. After your debt is gone, start saving for your next car. The goal is to NEVER have a car payment again. If you have to finance it, you can't afford it.


That's a multi-year plan right there, but I think you'll start to feel so relief as you move along the path. I think this time next year you'll be in a much better place, with a healthier emergency fund and a lot less debt.

[Eagle]

Thank you!

We were thinking the student loans with interest should be the ones knocked out first, but weren't sure.

A. At the moment no, she plans on being a stay at home mom for our baby.
B. Bachelor in Computer Science for me and wife is undecided at the moment as she changed her mind what she was going for. I am hoping to graduate in 2 years maybe 3 depending on how much I can go.
C. I'm hoping to make a better amount than what I am currently at. It will be a whole new industry for me as I have never held an office position or work in any computer field which is a bit overwhelming in itself. I am very excited to get into an actual career and new industry, yet it is scary as I have never had a job like that before if that makes sense.

I agree with TBH include all monthly income and spend it all on paper or your spreadsheet. Make sure to include categories for saving and investing. Tweak this every few months and track your expenses with www.mint.com

What is the standard starting salary for someone with a computer science degree with little experience?

Often educational institutions will exaggerate the opportunities available to seniors and graduates. Check out this link on May 2013 National Occupational Employment and Wage Estimates and the “Annual Mean Wage” column or click on a specific occupation title for more details. Another good resource is www.glassdoor.com or www.indeed.com for looking up jobs by company and title.

[Permanent Temp]

I also think you should re tackle the spending part of your budget. Then a months worth of expenses into the EF.

After that pay off mortgage 2. Do you have to have both homes? For instance can you sell the first home with the mortgage on it and move into the paid off one? Is 2 a rental property which will help pay off 1?

After that is done I would actually pay the car loan because that would free up $200 a month that you can now put toward those unsubsidized loans. Then I'd start with one of the four 6000 at 6.8 loans and after paying off all 4 of those I'd move on to the 6000 with 3.86 loans. One of my subsidized loans gained almost 2K of interest in school deferment years 4 years so if I were you I would start trying to knock those out ASAP. Since these are in deferment and the subsidized do not accumulate interest right now I would just leave them alone until all the unsubsidized ones are taken care of.

[TBH]

After that pay off mortgage 2. Do you have to have both homes? For instance can you sell the first home with the mortgage on it and move into the paid off one? Is 2 a rental property which will help pay off 1?

I think they only own one home, but have a second mortgage on it.

[FamilyOfThree2014]

Congratulations! I love that you are both so ready to tackle the debt and that your new baby is inspiring you to get things in order.

If I were you, I'd do the following:

1. Make a more accurate budget. I know it's hard to predict those irregular expenses, but you gotta. I don't think you really have as much surplus every month as this budget makes it appear. Figure out what you spend on gifts annually (or what you feel comfortable spending annually,) divide it by 12, and add it to the budget. If you are worried about spending that money on other things during months when you don't have gifts, put the money in a sinking fund, a special savings account where you save just for gifts. Gifts are just one example, but you get the idea

2. As others have said, build that E-fund back up to at least a month's worth of expenses.

3. I'd tackle that second mortgage next.

4. I really do think you should refi. You can probably get your interest rate down a lot, which will free up money each month to pay down other debts. Do the math. It's likely that you will only have to be in the house another year to make refinancing worth it.

5. Once you refi and pay off the second mortgage, build that E-fund back up a bit, maybe to 3 months.

6. Then I'd tackle the unsubsidized student debt using the snowball method, throwing all your money at one loan at a time until it's gone, then moving on to the next one.

7. Once your unsubsidized student loans are gone, I'd pay off the car, and then build the e-fund up to 6 full months.

8. Then I'd increase your retirement contributions. A lot. You should be putting in 15%, at least, especially since you're the sole breadwinner so you're saving for two retirements.

9. Then I'd tackle the subsidized student loans.

10. After your debt is gone, start saving for your next car. The goal is to NEVER have a car payment again. If you have to finance it, you can't afford it.


That's a multi-year plan right there, but I think you'll start to feel so relief as you move along the path. I think this time next year you'll be in a much better place, with a healthier emergency fund and a lot less debt.

Thanks!

This is a lot of great information to help us start our new budget plan.

I agree with TBH include all monthly income and spend it all on paper or your spreadsheet. Make sure to include categories for saving and investing. Tweak this every few months and track your expenses with

What is the standard starting salary for someone with a computer science degree with little experience?

Often educational institutions will exaggerate the opportunities available to seniors and graduates. Check out this link on May 2013 National Occupational Employment and Wage Estimate and the “Annual Mean Wage” column or click on a specific occupation title for more details. Another good resource is or for looking up jobs by company and title.

I'm not sure what I would be able to start at, but it would be more than I am making now which would be a great help.

I also think you should re tackle the spending part of your budget. Then a months worth of expenses into the EF.

After that pay off mortgage 2. Do you have to have both homes? For instance can you sell the first home with the mortgage on it and move into the paid off one? Is 2 a rental property which will help pay off 1?

After that is done I would actually pay the car loan because that would free up $200 a month that you can now put toward those unsubsidized loans. Then I'd start with one of the four 6000 at 6.8 loans and after paying off all 4 of those I'd move on to the 6000 with 3.86 loans. One of my subsidized loans gained almost 2K of interest in school deferment years 4 years so if I were you I would start trying to knock those out ASAP. Since these are in deferment and the subsidized do not accumulate interest right now I would just leave them alone until all the unsubsidized ones are taken care of.

Actually we only have 1 home. The reason there are 2 mortgage payments is because we had a loan for the 2nd mortgage payment to use as the down payment back when we first bought our home if that makes sense.