Anyone else in serious debt ?

phillywife2007 · February 2014

Currently trying to get out of some serious debt-- a couple nice cars, student loans and cc debt. We have always made decent money, but weren't smart about it to start out, then I was laid off and it just spiraled from there. Anyone else in a similar situation ? What is your strategy ?

VadersValkyrie · February 2014

We got ourselves into trouble when I bought a house and now-H wasn't employed. Thought we could cover everything and still have a life like we had before he lost his job. Not so much. So, anyway, married now. Went to whatsthecost.com and put in all our numbers, figured out how to get out of ALL debt (including the mortgage) in 77 mos. We've just started, and things might change, but we have a goal of him going back to school at least part time, so we need to have the majority of our debt (mortgage notwithstanding) paid so we can send him to school and he can quite a job he hates for something else.

The thing is to be REALLY honest about where your money is going. Look at how much each of you brings home a paycheck. After you pay the minimum on all your bills, what's left over? Take out for gas, groceries, and savings, and then throw the rest at one particular bill. When you get your tax refund (if you do), throw that at a bill. The goal is to get rid of one at a time, and then roll that amount into the next bill. You will not have a very exciting life for awhile, but it can be done. We've just started our journey, but seeing the numbers go down every paycheck is very satisfying and gives me hope.

phillywife2007 · February 2014

Thanks for the advice! I'm definitely going to look into the site you recommended. That's great it's helped you formulate a game plan and set out some goals. And you're so right, the worst part is cutting out the fun stuff that costs money, its hard but I know the end result will be worth it.

mana8503 · February 2014

I read total money make over - Dave Ramsey last January. It breaks down building a budget, having an emergency fund, then tackling the debt as started above (snowball). We were able to pay off so much up to the present, even with me being on furlough due to the govt budget fiasco. We would have been screwed if we weren't doing this plan.

Post your budget and people can help you find places to look into saving money.

Wulfgar · February 2014

We have debt, but it is all manageable even if either of us makes less money. MW would love to be a stay at home mom but we want to send our kid to private school she most likely will never be able to since I will be near retirement around the time our child is ready for college.

phillywife2007 · February 2014

Mana 8503: I read total money make over - Dave Ramsey last January. It breaks down building a budget, having an emergency fund, then tackling the debt as started above (snowball).

I'll have to look that book up, I've been trying to read up on the subject. I do love watching suze orman, but her views seem a bit unrealistic for the typical person in the workforce, I'm doing baby steps(which is frustrating), just find it hard to prioritize-- for example, how much to put towards debt, what to save, feel like I'm being pulled in so many different directions, its hard to enjoy life.

vlagrl29 · February 2014

we paid off both DH and mine credit cards that had small balances and DD's hospital bill which was $2500, THEN we put money into an emergency fund. For us 3 months expenses is what we feel comfortable with. We are less than 2k away from that and then I think we will take the amount of money we are saving and split it up into retirement and savings for goals (travel, home improvements, etc).

MintWardrobe · February 2014

I use to recommended the snowball Dave Ramsey method as mentioned above to clients. Now that I don't work in that field I still recommend the method.

Google 'Vertex 42 Snowball Spreadsheet' to get some great free spreadsheets to get you started.

The site looks a little shady, but I promise you it is not. It's just a no frills site. This is the spreadsheet that I most often recommend. Good luck!

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

Erikan73 · February 2014

Yes and it's going to take a long time to get it under control but we will get there. I didn't realize how much debt hubby had before we got engage. I wasn't the best at saving, but usually any trouble I got myself into I was able to get myself out of by the end of the year when I got my bonus. Well, I let his love of spending and not managing bills turn into my way of life and I agreed to buy a house before we were financially ready to, so that added to debt, plus took out 401k for downpayment, plus another loan to pay off cc, but then cc creeped back up after moving into the house because we needed to so much stuff and things just got out of control. But I then started spreadsheet to figure out spending, didn't live religioulsy by it like I should have but things are better for this year. We are living by our budget that I set up and we have paid off several of the debts and will continue to work on them. As we have ones paid off, working on adding new ones to monthly list to pay them off. I expect it to take us about 5 years to get things cleared up, not counting mortgage or cars. But if I can get things to just mortgage & cars, I think that would be pretty good. I just have to keep telling myself that we will get there, I just have to have patience.

ab6704a · February 2014

Patience is key. Keep chipping away at it. And whatever you do, don't add to it. If you have an expense that comes up, scale back for the month on paying down the debt (always pay the minimums at least though) and use the cash to pay for the unexpected expense. If you put it on a CC you'll just see that balance start creeping back up and it can be discouraging.

KatieCutie05 · February 2014

Yes!!! DH and I are on the Dave Ramsey plan and its been amazing. Reading Total money Makeover changed our life. Let's just say that I have a ton of student loans and I don't have the income to back it up. I don't make bad money for my age or my field, I just have a lot of debt. I made a lot of mistakes in college, transferred twice, one of them a private school and lived on campus the first two years. So between that and our cars and a little credit card debt.... When we started this plan our non mortgage debt was double our yearly income. We got our income up a little and debt down a little but the student loans are still looming over my head and i need to get our cars paid off before i can even think about paying any extra on them. Its really hard and its going to take us probably 7 years but once we get there we'll actually be able to do things we never thought we could so it will be worth it in the end. One step at a time.

bingbongsmama · February 2014

No cc or car debts but between DH and I we have 100k in student loans and no, we are not doctors or lawyers or high earners who can easily pay it back. I feel very overwhelmed by it. Very.

hiketheworld · February 2014

We are in serious debt- it's all student loans from law school - started near $300k and now about $240k. So, we are making progress but it weighs heavily everyday. We pay half our take home pay to the loans, a quarter to rent and a quarter to everything else. We also max out our 401k each year and have a sufficient emergency fund.

We have jobs where we can make progress on the loans but I guess my advice is to track everything on mint, cut expenses as much as possible and increase your automatic debt payments as much beyond the minimum payment as you can afford.

For me, my biggest challenge is to avoid spending like my colleagues. No extravagant trips, designer clothes shoes and bags, nice restaurants, etc. There is a lot of pressure to spend like that though, I couldn't tell you the number of times people have told me that I can afford to buy or do something because of my job. Since my debt is the only reason I'm still in this job (which I hate) I have a lot of motivation to avoid the temptation. I think it's a good idea to keep in mind why you want to be debt free and how that would make you feel when you are tempted with an unnecessary purchase.

sparklerose · February 2014

We were in serious debt....some people would say we still are with one credit card that has a 14k balance. But we started out with 96k, none of that was student loans it was all credit cards and car loans. We learned our lesson but it was very very hard. I highly recomend whatsthecost.com We put everything into the snowball calculator and posted it on our fridge. Every month we crossed a line off.

We also followed Dave Ramsey's Total Money Makeover, but we aren't any more. We are putting the majority of the debt payments we had all to savings for our emergency fund and a house down payment. We still pay well over the minimum on the CC, but are no longer paying all to debt.

Its taken us nearly 4 years to get to where we are now, and we had a baby in that time which slowed us down.

Don't give up! You will make mistakes and have months that are bad, just keep at it, that's my best advice. And whatsthecost.com is what really changed things for us.

hoffse · February 2014

hiketheworld said:

We are in serious debt- it's all student loans from law school - started near $300k and now about $240k. So, we are making progress but it weighs heavily everyday. We pay half our take home pay to the loans, a quarter to rent and a quarter to everything else. We also max out our 401k each year and have a sufficient emergency fund. We have jobs where we can make progress on the loans but I guess my advice is to track everything on mint, cut expenses as much as possible and increase your automatic debt payments as much beyond the minimum payment as you can afford. For me, my biggest challenge is to avoid spending like my colleagues. No extravagant trips, designer clothes shoes and bags, nice restaurants, etc. There is a lot of pressure to spend like that though, I couldn't tell you the number of times people have told me that I can afford to buy or do something because of my job. Since my debt is the only reason I'm still in this job (which I hate) I have a lot of motivation to avoid the temptation. I think it's a good idea to keep in mind why you want to be debt free and how that would make you feel when you are tempted with an unnecessary purchase.

This happens to me all the time too. I think a lot of people assume that lawyers and doctors have a similar level of debt as they do... and their incomes are twice as much. Nope, the debt is also twice as much. So it's all relative.

I was completely confused about how my lawyer friends maintain that image, because I certainly can't afford to do it. H and I do take one big trip per year, but I also still wear clothes from high school and college to the office so that I don't have to buy new stuff. If I shopped the way they did, we couldn't take trips. But yeah most of them shop, travel, drive BMWs, etc. I never understood how. Then my firm's women's group had a meeting with a financial adviser during my first year, and the first thing she asked us was how many people at the table had credit card debt. I was the only person who didn't raise my hand. I also made the least amount of money, and I think I went to the most expensive school of the group so I should have had the most debt. After that, I finally understood how they maintain that image. They charge it. When my shoes are on their last leg and my sweaters are starting to pill, I try to take comfort in the fact that at least I don't have credit card debt...

nicolen08 · February 2014

However you decide to tackle the debt, just try not to get discouraged. What's done is done. Just move forward from here, be responsible, but also take some time to do nice (not too extravagant) things for yourself so you don't feel too deprived while you are getting back on track.

phillywife2007 · February 2014

vlagrl29: good for you guys paying off your cc debt, that must feel so great ! Thanks for sharing your personal experience, I'm hoping to get our debt down slowly and consistently, just have to work on being proactive about it.

phillywife2007 · February 2014

Erikan73: Patience is definitely key and easier said than done. That's great that you're setting financial goals and working towards them, we are as well. It just sucks when those random expenses pop up that can sidetrack your progress. So, I've just been trying to remain dedicated to bettering our situation.

phillywife2007 · February 2014

I'm curious, anyone that doesn't mind getting too personal, what are your salaries and what schools did you go to that you have that large amount of student loans ?

Personally, H and I's take home(monthly) is $6200 and my student loans are 20k(not near as bad as my car loans), went to a couple different state schools(in PA), and the worst part is I haven't even completed my degree yet, makes me sick, but life gets in the way.

hoffse · February 2014

phillywife2007 said:

I'm curious, anyone that doesn't mind getting too personal, what are your salaries and what schools did you go to that you have that large amount of student loans ?
Personally, H and I's take home(monthly) is $6200 and my student loans are 20k(not near as bad as my car loans), went to a couple different state schools(in PA), and the worst part is I haven't even completed my degree yet, makes me sick, but life gets in the way.

Ha I'll bite. My take-home (without H because he's still in school) is around $5K/month. I have about $75K in student loans from law school, but I got very lucky. I had a half-tuition scholarship, and my parents gave me money now and then for some living expenses (usually birthdays and christmas). I also had two part-time jobs in school to keep costs down. My parents actually paid off my federal loans, and now I'm paying them back at a lower interest rate. It's saving me about $11,000 in interest. I went to Vanderbilt for undergrad and law school. They paid for the vast majority of undergrad, I paid for the vast majority of law school.

And no, my parents are not crazy wealthy. They're just cheap and have invested well. Both of my parents have always made less money than public school teachers in my district.

My H is also at Vanderbilt. He's going to have about $125K total when he's done. He also has a half-tuition scholarship, but he has about $14K from undergrad (Emory) which is included in that total, and he has one part-time job instead of two. His parents have not given him money for xmas and birthdays like mine did while I was in school. That accounts for the difference in our loan amounts.

If we had paid full price, didn't have part-time jobs, and weren't insanely cheap? Easily $225K - $250K each. I have a friend who is a lawyer and whose wife is also a lawyer. He went to UVA and she went to Harvard. Combined they have about $525K in student loan debt just from law school.

So yeah, my lawyer friends all make good money. But we also spend a boatload on student loans each month. H and I are looking at buying a house soon, and we anticipate our student loan payments being twice as much as our mortgage. My friends with the $525K student debt pay three times their mortgage in student loan payments each month.

hoffse · February 2014

And I should probably explain why people pay that much for law school. I call it the T14 phenomenon.

The T14 are the top 14 schools as ranked by US News. The reason we care about the top 14 is that they have always been the top 14 since US News started ranking. They've swapped places with each other, but they've never dropped out of the top 14 entirely.

So high-performing college kids start to research law schools and learn about this. And suddenly getting into the T14 becomes a thing. Harvard is in the T14. So is UVA. There's also this myth that if you go to a school in the T14 you are virtually guaranteed a job after graduation. The T14 does a pretty good job of convincing recruits that this is true. Granted, employment rates are pretty high, but it's definitely not guaranteed.

Anyway, so we have the T14 and you have thousands of kids trying to get in. The result is that these schools rarely have to give scholarships. People will pay full-freight to go because of 1) prestige and 2) "guaranteed" employment.

Vanderbilt is not in the T14. Vanderbilt is usually ranked between 15-16. As a result, Vandy has to give a lot more scholarship money to recruit kids who got into the T14 but who are hesitant about the price. H and I both got into the T14 and then went with the money instead of the prestige.

We both agree that if we could do it all over again we would have made the same choice. Our degrees were essentially half-price, and while we did pay more than people who went to state school, we also had a much easier time finding jobs. Vandy certainly does not have 100% employment rates, but it's still a lot higher than schools like Alabama. The result is our debt is comfortable (if a bit tight some months) for our income. Our friends who went T14 do not have comfortable debt, and several of my friends who went to Alabama are unemployed. Vandy really hit the sweet spot for us.

mana8503 · February 2014

phillywife2007 said:
I'm curious, anyone that doesn't mind getting too personal, what are your salaries and what schools did you go to that you have that large amount of student loans ?
Personally, H and I's take home(monthly) is $6200 and my student loans are 20k(not near as bad as my car loans), went to a couple different state schools(in PA), and the worst part is I haven't even completed my degree yet, makes me sick, but life gets in the way.

I went to Bloomsburg actually! I got a few scholarships, and grants the last year, and came out with about 35k in student loans between my federal loan and a parent plus loan. My parents tried to pay the parent one, but times got hard and I took it over 5 years ago. I am very lucky and my work did put 10k towards my loan 4 years ago. I paid it off last summer and my parent loan should be paid off this spring/ early summer. Took me 7 years but I only got serious about getting debt free 2 years ago.

Our combine bring home is about 7k, but MH can vary by the season (he's a truck driver and hauls frozen food). He also gets quarterly safety bonuses.

emily1004 · February 2014

I won't give exact figures but this may answer your question: H and I have been out of college for more than seven years. We both went to the same state school in Michigan and we had the same major. We also both took basic classes at local community colleges for credits that trasfered. H's parents paid for all of his schooling. They bought a MET (Michigan Education Trust) when he was only 8, so they only paid $7K. That guaranteed him four years at any state school tuition free, so to speak.

My parents only paid for my first two years, so when I left I had about $28K in student loans including the interest. My first job out of college paid me only $27K a year. H graduated the year after me and he made $70K for the year at his first gig (different industries, but still related). I will point out he started training in high school and was freelancing in the industry his freshman year of college, so his first job was not entry level.

I left the business after four years as my pay was not going up. I looked into going to law school, took the LSAT and decide against it because it was going to cost too much. (Like hoffse, I too have lawyer friends that are crippled in debt. I also have friends who's parents paid for all of their schooling. They are lucky). I then decided to get my certificate in Paralegal studies. That only cost me $4K. I was able to pay for it without taking any loans and by that time I had just paid off my original student loans.

At the time, we lived totally off of H's salary. I used my salary to pay off the loans and wedding gifts to pay off the car. We are totally debt free, but have not bought a home. H is a really good saver and his income has gone up every year. But I admit it's easy to save when you have no student loans, no car payments, and you're making a good salary. According to our taxes, we made six figures last year. Which is high for our state, but average for the area where we live. Also, I only work part-time.

As for your original question about our strategy; We found a cheap place to rent, drove the same cars we had in college and high school, got rid of cable, no smartphones, got creative in the kitchen (i.e. No Meat Mondays), avoided eating out, and clipped coupons etc. I believe you said you messed up in the past and I assuming you are still relatively young, you have time to turn things around.

My biggest piece of advice: Be patient, you will get there! Now granted, depending on your majors you may not make as much as some people, and I understand some cities are more expensive than others, but if you are thrifty, plan properly, and don't spend too much on unnecessary things you can't afford, you'll have your loans and bills paid off in no time. Now don't misjudge what I am saying, but I see SO many people my age and younger that want the same lives their parents spent years earning, RIGHT NOW, with nice cars, huge homes and all around nice things. Again, you've got to be patient, you can do it!

phillywife2007 · February 2014

hoffse:

Thanks for the background info on the T14 ranking, I was totally unaware of this, very interesting. I wasn't terribly academically motivated, which is why I didn't look into other options outside of state schools. Do you find that the name recognition associated with your college helped with your job prospects ? My sister went to Purdue for animal science, which is a very good school, however she still had a very hard time landing employment post graduation, which I was surprised about.

phillywife2007 · February 2014

mana8503:

I went to Millersville and Gwynedd-Mercy ! And we just started focusing on bettering our financial situation as of about a year ago, better late than never right.

Does anyone have a 401k in addition to an IRA. I've been meaning to start on the IRA for a few years, but now that I'm in my late 20s, I need to actually follow through on that. Anyone here start that already ?

Xstatic3333 · February 2014

Our combined monthly take-home is about 4,800, after H's 9% pension and our health insurance our taken out. I need to make my retirement contributions with after tax money. Combined, we have $75,000 in SL; both loans and income are pretty much even, with mine slightly lower on both counts. We're in the same field, in which the highest either of us could ever make yearly is probably $80,000, but it's far from guaranteed and very competitive.

H's are undergrad loans for a private school that he considers well worth it. He had a partial scholarship, some parental help, and took out loans on the difference. He then got a full assistantship to grad school but took a few years to get going in the field. I had a full scholarship for undergrad, but my loans are for grad school from a public college that is out if state for me and is very strong in my field. I got a great entry level job right away, which I'm super grateful for.

I know it's strange, but we're not panicked about our loans and we're not putting our lives on hold because of them. They're all federal, and we're paying above the minimum, but we're still saving for a house, travel, etc. I felt very panicked when we had credit card debt, but now that it's gone I feel free to pursue our savings goals. The big thing for us is not building more debt, aside from a future mortgage of course.

To answer your earlier question, I have a Roth IRA and I highly recommend it! Start as young as you can, even if it's just a little money you're able to put away at first. We'll be opening one for H soon as well, though with 9% going to his pension fund it's a little tight to increase his contributions. I put 10% in my Roth IRA with a 5% employer match (very small employer that doesn't bother with a work plan), but would like to do even more. Money put away in your 20s is worth more at retirement than money put away in your 30s!

hiketheworld · February 2014

My DH and I both went to T14 law schools. Take home pay is about $12k/ month which doesn't include the withholding for our 401ks, etc. we take home about 50% of our salaries after all the taxes, insurance and 401k.

At my law school pretty much everyone had job offers upon graduation and in this market I think that does show that "prestige" matters. It certainly isn't everything because those who had better grades certainly had more interviews and offers than those who didn't. It also doesn't mean that the decision to take on a ton if debt to go to a school like that makes sense. The only reason I was willing to take on this debt was because of a program where my school will pay your loans for you if you go into public service. I didn't go that route for a variety of reasons.

Wulfgar · February 2014

Between MW and I, we bring home roughly 5K a month. I am a Mechanical Engineer who graduated later in life (I was 34 when I graduated). My parents helped me through getting out of the Navy and a divorce so they didn't help me much with college until I needed them to co-sign for a personal loan. MW got her Masters in Library Science from KSU (think NE Ohio not Kansas) and we both got our undergrads at KSU's rival. Our combined SL debt now is roughly 46K, our car loans are another roughly 16k (this is just a high estimate), we have a signature loan to replace our front porch railing and our garage roof, finally our mortgage is roughly 60k.

My student loans are 1.85%, her undergrad loans are 3.25% and her grad loans are 6.25% so we are focusing on those when we have the money.

I was suppose to get an increase in title and a decent raise last year but didn't get it (mainly because my boss spent most of the end of the year traveling to China and Germany). My company has been giving out roughly 3% raises a year. I am taking on more responsibilities and trying to pick up more slack from my senior engineers so I am hoping that I will get the increase in title this year with the increase in pay.

hoffse · February 2014

hiketheworld said:

My DH and I both went to T14 law schools. Take home pay is about $12k/ month which doesn't include the withholding for our 401ks, etc. we take home about 50% of our salaries after all the taxes, insurance and 401k. At my law school pretty much everyone had job offers upon graduation and in this market I think that does show that "prestige" matters. It certainly isn't everything because those who had better grades certainly had more interviews and offers than those who didn't. It also doesn't mean that the decision to take on a ton if debt to go to a school like that makes sense. The only reason I was willing to take on this debt was because of a program where my school will pay your loans for you if you go into public service. I didn't go that route for a variety of reasons.

Yes I agree the prestige matters for job offers in this market. If nothing else, the T14 (and really the top 25) schools get a LOT more employers who are interested in their students.

During the fall of your second year, law schools have something called on campus interviews (OCI) where employers come en masse and interview for jobs. You submit resumes and employers pick from those resumes for short interviews. Then they pick from the short interviews for call-backs. It's a lot like sorority rush. The more prestigious schools have a lot more employers who show up. Vandy has about twice as many employers come to campus as UGA does for instance. So if nothing else, students at the top schools simply get a lot more exposure to employers.

The alumni networks are also pretty aggressive. I recall how during my first day of contracts the professor said, "You have entered the gates of the kingdom. We take care of our own. Welcome." I thought it was strange at the time but it turned out to be pretty true.

Going to private school for undergrad was also very worthwhile. It teed me up to have choices for law school. I had deans writing me personal letters about how much they love Vandy grads. The dean of Alabama called me on Christmas day to wish me merry Christmas and to offer me a scholarship. Things like that.

But like anything there's a price point. Vandy was the sweet spot for us because it was half the debt of going to a school ranked 3 places higher. But we still got a lot of the tier-one school perks. We also knew we wanted to stay in the south. Our families are here, we are warm-weather people, and the cost of living is so much lower than NYC or DC. Vandy does place just fine in northern markets, but they're an absolute powerhouse for the south. Its only real competition is UVA. Going to a more expensive school with less placement in the southern region would have been a really poor choice for us.

Like Xstatic our debt doesn't really bother us. I mean, it's definitely annoying, but it's manageable, and eventually we will be done with it. We are taking it one loan at a time, but we are also balancing it with house savings, retirement, and being able to take one big trip per year. We don't want to put our lives completely on hold while we pay it down.

Re: Roth IRAs - YES open one. @Phillywife2007 if you have more questions about that, I would start a new post so more people chime in

mana8503 · February 2014

phillywife2007 said:
mana8503:
I went to Millersville and Gwynedd-Mercy ! And we just started focusing on bettering our financial situation as of about a year ago, better late than never right.
Does anyone have a 401k in addition to an IRA. I've been meaning to start on the IRA for a few years, but now that I'm in my late 20s, I need to actually follow through on that. Anyone here start that already ?

Ha! Millersville was my second choice, but it was too close to home. I enjoyed my stint in the mtns.

Always better late than never. It took us buying a house and struggling to get our butts in gear. Having a little wiggle room is an amazing feeling. You can do it!

brij2006 · February 2014

phillywife2007 said:

I'm curious, anyone that doesn't mind getting too personal, what are your salaries and what schools did you go to that you have that large amount of student loans ?
Personally, H and I's take home(monthly) is $6200 and my student loans are 20k(not near as bad as my car loans), went to a couple different state schools(in PA), and the worst part is I haven't even completed my degree yet, makes me sick, but life gets in the way.

This year we will gross about $110k. It varies each year based on my commissions and H's overtime. So we're anywhere from $90k-$130k.

I went to Robert Morris University (year round private school) and H went to Devry University (year round private school). My parents didn't pay for my college and they made too much money for me to get assistance, so I graduated with $55k in student loans. H's parents paid for 2/3rds of his, so he graduated with $20k. We've both been out 5 years, and we have about $42k left to pay off. Which we're working on right now with Dave Ramseys' Total Money Makeover. They should be paid off by the end of this year. Then we're working on our car loans.

Anyone else in serious debt ?

Re: Anyone else in serious debt ?

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