Money Matters
DaBearsBride
member
Dear Community,
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
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Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Young and Clueless
My husband and I got married two months ago (been together 4 years) and are struggling to prioritize financial goals. Honestly, we both come from very poor welfare families and we are desperate to lead more financially stable lives. The problem is our families werent able to teach us finances and priorities so we aren't starting off well. I had a lapse in health insurance and racked up $7,000 in an ER visit that went to collections. It didn't help that I maxed out to credit cards. I didn't know about the debt ratio until I started lurking here. Husband is not much better, he financed a car early on and missed a couple payments, maxed out three cards with late payments.
It wasn't until last month we found out we could check our credit report and score (they are terrible, think low low 500s) for free and now that we know what's wrong we are desperate to get on the right path so we can buy a house.
We set up a payment schedule that should get us out of debt (aside from medical and school) in three years but we really wanted to get a house next year. What do we do?!
It wasn't until last month we found out we could check our credit report and score (they are terrible, think low low 500s) for free and now that we know what's wrong we are desperate to get on the right path so we can buy a house.
We set up a payment schedule that should get us out of debt (aside from medical and school) in three years but we really wanted to get a house next year. What do we do?!
Re: Young and Clueless
Welcome! You are in the right place. And, you are starting in, which is something to be feeling good about. Congrats on the wedding BTW!
It's really normal for a newly married couple to want to buy a house. But, I will just be honest. You and DH have a journey ahead of you with the financial matters and credit you have described. I think you will serve yourself well to not focus on a house right now. Don't put it out of your mind completely, as it is a great goal to work toward, however, it's going to take you longer than a year to fix the situation you two are in. I'm not saying this to be mean, just to be honest so you don't get false hopes and then get discouraged.
You can fix your situation, but it will take work and time. I would prepare mentally and emotionally on it taking two or three years to improve your credit to a place where lenders will look at giving you a loan. This is okay! Having a house is fine, but if you aren't financially ready for one, it becomes a scary financial burden hanging over your life and marriage.
Can you post your budget here with income and expenses?
Along with paying off the debts, you will want to get an emergency fund started. The general recommendation is to have at least 3 months of essential (meaning: electricity, gas, water, food, car insurance, etc.) expenses saved up.
You may also want to check out the book Smart Couples Finish Rich by David Bach.
Congratulations on recognizing and problem and wanting to change your financial ways & circumstances.
Rule #1 - SAVE something from EVERY check you take home.
Rule #2 - Live BELOW your TAKEHOME pay.
Read Total Money Makeover by Dave Ramsey - VERY helpful and motivating to get out of debt.
You NEED to differentiate NEEDS and WANTS. Know the difference. Fund needs. Save and allow some $ for a few wants as debt repayment allows.
I like Dave Ramsey's snowball repayment method (in book)
Start by tracking your spending - EVERY dollar. Then look seriously at where you money is going. If you are eating out too much - is that supporting getting out of debt?? No - well cut it out or at minimum reduce significantly. Same with each budget line item.
You can get almost everything for less money = on sale, clearance, consignment shop, rent it, borrow it etc. Save for large purchases rather than putting on a credit card.
As for the house - sorry to say, but it is going to take TIME, more than a year before you are ready financially to be home owners. (we saved for 6 years before buying our first home - and we had no debt starting out!). Homeownership is much much ore than the monthly mortgage payment. First you need to get out of debt and then re-establish substantial savings for downpayment, an emergency fund etc.
To make this go faster, can you sell items you no longer need or use, down size your vehicles (selling a gas guzzler and buying an older than current car that is more fuel efficient etc. Another option is to work a second PT job.
Meal plan - cook at home, eat at home.
Entertainment does not need to cost a lot of money.
Eliminate or reduce alcohol, soda, and assorted junk food from your diet.
Cell phones - talk only (unless you need data for work) - consider pay as you go such as Trac Phone plans.
Personal care - haircuts only - no additional salon services. Do your own nails. With a simple flattering hairstyle you do NOT need highlights, color etc.
ALWAYS make payments on time. If circumstances are such that it is not possible, contact the and make arrangements for alternative payment plan.
I grew up dirt poor, but was fortunate to learn how to stretch a dollar, the difference between a need vs a want, how to budget as well as delay gratification. You can do this as well.
Start with cutting up all credit cards but one and put that one in a block of ice in the freezer.
Stick to your new budget . You will not believe the sense of freedom and power over your life once you are debt free and have money in the bank. One day at a time. One financial decision at a time. You will get there. (and remember that five $20 purchases are the same as one $100 purchase . The little stuff adds up! Watch EVERY dollar.
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Put a picture of a nice home and a baby on your refrigerator. Use them as motivators to stay on track to pay off y our debt and save for both future events.
WANTING is not sufficient to buy a house nor have a child. Both require a good deal of money and a child. I am sure you want to be able to provide for your child on a level you did not experience in your childhood. You have time. Use it to your advantage to make a better future for yourself and future family.
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In terms of having a child, I would say that really depends on the specifics of your situation. How old are you two? Will waiting to have children make it more difficult for you? Will you have to pay for child care? If not, a baby doesn't have to be that expensive. Having a child sooner may put off your ability to save an buy a home by a couple of years, but that trade-off may be worth it for you. You definitely don't have to own a home to have a child.
This is going to sound harsh, but this is a want vs a need. Do you WANT to raise your children in a similar way to how you and your husband were raised, or do you NEED to give them something better? If you want, then have a baby next year, if you need, then wait until you're in a better place. No one is ever totally prepared (emotionally, financially, etc) to have a baby, but as a parent it's your JOB to ensure that you give that child the best life you can. You were raised in a financially irresponsible environment and you're now seeing how easy it is to repeat that in your life. What we know is comfortable. But you're an adult, you're married, you're employed. IT'S IN YOUR POWER TO STOP THE CYCLE!
Follow the previous budget and debt busting advice, down to the letter. And make getting your financial house in order your priority before purchasing a physical house and having children.
DaBears.
I hope you can see that you have a lot of support for a new financial path. It will not be easy, but it is very do able. Please do post your budget (and if you do not have one - start tracking every dollar coming in and going out and then categorize it - I am sure you will see some surprises)
We can and will help all people who are serious about using their money wisely, to make it work for them. Things change by making changes.
IF you always do what you have always done, you will always get what you you've always got.
DaBears.
I hope you can see that you have a lot of support for a new financial path. It will not be easy, but it is very do able. Please do post your budget (and if you do not have one - start tracking every dollar coming in and going out and then categorize it - I am sure you will see some surprises)
We can and will help all people who are serious about using their money wisely, to make it work for them. Things change by making changes.
IF you always do what you have always done, you will always get what you you've always got.
Read. Go to your library. Read the financial books. Subscribe to the money saving sites on the internet. Never pay full price for anything. We got our furniture at thrift stores. We buy gently used cars etc. We use priceline & groupon.
You can also take low cost classes about financial planning & debt management at your local high school (adult education) or community college.