HELP!

[daverph]

I need help bad. I am turning 30 in September and my first child is due in one week. I have been a pharmacist since 2000 and have nothing to show for it. I have lots of student loans, one credit card loan (somewhat large), and no savings of any kind. What can I do to dig my way out of this hole I am in. I am in a management position so I make good money but it all goes to bills. We rent an apartment and do not spend extravigantly. I want to save money and buy a house but I know I must pay down my debt and build and emergency fund. I want to contribute to my 401k but will not have enough money to live on. Things are tight right now with the baby coming and my wife not working. I know what I need to invest in but just can't seem to get the money to do so. Please help me to clean up this mess. Thanks.

Dave

 

[Robert the Red]

You need to find out exactly what you ARE spending money on now, so that you can find someplace to cut back.  Eating out more than once a week (and I include lunch in this) sucks up money fast, for example, but doesn't seem extravagant.

 

[brewer12345]

First, calm down.  Not easy with the first baby on the way, but if you can relax it will make everything easier.  I know from quite recent experience that the run-up to the first birth is pretty stressful, so don't make it worse by blaming yourself for what may or may not have happened in the past.

Second, recognize that this is not something you solve overnight.  Expect it to take some time, especially since you will be occupied primarily with a newborn and holding down a day job.

Third, I've heard exactly this basic story many times in the past.  Do you really know where all the money is going?  Could you account for every dme if every paycheck for the last year?  You obviously need to stick to a budget, but before you can even draw one up, you need to know where the money is going.  Start tracking every exenditure.  That will help you figure out where the "leaks" are and what you stand to gain from plugging them.

Oh, and welcome to the forum.

 

[grumpy]

daverph,

Cut up the credit cards. Set up automatic deduction (e.g $250) from paycheck to a mutual fund (e.g. Vanguard). Spend cash for all purchases. When paycheck is gone, STOP SPENDING until next paycheck. Rinse and repeat.

Grumpy

 

[daverph]

I have a budget that we pretty much stick to. We only have one credit card that we use for emergencies only. I have cut back as much as possible. We do not eat out much at all, maybe once a week. However, I am paying for the stupidity of my youth with my credit card loan. Its kinda high but it is my only debt other than student loans. I have been on my wife to control her spending and she tries her best. I am just afraid of what I will have to spend once the baby comes. She will start working again with me maybe around September so we will have decreased gas and I hope food costs. I try to LBYM but theres not much left over.

 

[brewer12345]

Hmmm, something's not adding up here. A few possibilities:

- your wife is not on board with the budget
- you don't track expenses as well as you think you do
- you really have an unmanageable debt load.

So is it one of these or a combination? Care to share debt, payments, income, etc.?

 

[Rich_by_the_Bay]

Dave,

There is no magic here. You have gotten good advice from others. I can only emphasize that your way out of the hole is a long-term deal. Get a plan, automate it as much as possible with autobill-pay and such. Don't dog it every hour of every day.

I would not start investing until the debt is paid off, or at least keep investments very small for now. Set it up right, enjoy your new kid, and stick to your guns. A year from now you'll be all smiles.

 

[HobbyDave]

I have a budget that we pretty much stick to.

Well, if you really want help, you're going to need to give us a bit more information. I know it may feel odd at first, but many of us regularly post salaries, debt, etc numbers here for others to look at. It's the combination of being anonymous (well, anonymous enough), and because otherwise people can't help a whole lot

So I'd say:
What is your salary?
How large is that c-card loan?
How large is your student loan?
How much do you pay to service loans each month?
How much does your apartment cost per month?
Where does the other money go?

I'm making the assumption that you're making a decent penny (as you've mentioned). I'd even guess that you make more than most of us here. If you're a couple making that much without kids yet, I'm struggling to understand where the money goes (if you're living on a budget). So we certainly need more information before we can help much.

We do not eat out much at all, maybe once a week.

Well, that's pretty good. I know that has always been a major cost for my wife and I.

However, I am paying for the stupidity of my youth with my credit card loan. Its kinda high but it is my only debt other than student loans.

No car loans? How large is this c-card loan? Is it still with the credit card company or have you re-financed it? What's the percentage you pay on it?

I have been on my wife to control her spending and she tries her best. I am just afraid of what I will have to spend once the baby comes. She will start working again with me maybe around September so we will have decreased gas and I hope food costs. I try to LBYM but theres not much left over.

Just wondering, why will you have decreased gas cost once your wife is no longer at home? And why would your food costs go down? I may have missed some explanation, but usually living at home is cheaper on gas & food.

Anyway, I think we've explained enough about how we need more info, your turn

 

[TromboneAl]

Good news is that you are only 30.

Two books to get from the library: Your Money or Your Life, and The Complete Tightwad Gazette.

If you're doing dinner and a movie once a week, you're spending $2,600 per year on that. We cut our groceries from $800/month to $375/month (Another $5,100/year savings). Do just those two things and you'll dig out from the debt at a rate of $7,700 per year.

 

[macdaddy]

One idea (already mentioned) is to cut up your credit cards. Give your wife a debit card with a weekly "allowance" on it, determined by your budget, and give yourself one also. If you can swing it, skip cards altogether and use petty cash to pay for things, you will find that your expenses drop quite a bit.

 

[Coach]

Dave, I'll probably be hanged for suggesting this, but go to the library and see what they have by Dave Ramsey. He's got a great plan for folks in your position who want to get out of debt and start saving.

Coach

 

[2B]

I'll second the Dave Ramsey suggestion. It's a real simple formula and I think that's what you need now. Get his Total Money Makeover and go through the "baby steps." I've had some success getting people started on the road to financial control using it. It ain't easy. It ain't fun. But, It'll work.

 

[JPatrick]

As Al says- - -Your 30,  and combine that with being in one of the hottest professions going, a great wife (yes?) and about to embark on one of the most  joyful adventures in  life--what's not to like?
Do the budget and start a no brainer investment plan like a target retirement fund, even if just a small amount,  then get on with paying down the debt and being a Daddy.  Bigger and better investment plans can follow later.

 

[daverph]

So its ok even at my age to concentrate on paying off the debt. If I did nothing but pay it off it would take about two years. Heres the damage:
MBNA Loan (big mistake of mistakes from past)-25,000
Student Loans-Me-125000/her-60000
My car paid for, hers lease@ 432/month (yeh I know but she had bad credit at the time)
Mastercard paid in full each month, only use for emergencies-ie new tires, car repair.
I try to not use this at all but she always generates some use for it and then the money for savings or debt repay goes to that. I wish I could just cut it up but then what would I do in an emergency?
Good stuff:
Salary-96000 base with annual bonus (no idea what it will be)
I also take call for my old company every other week which comes to around 200 dollars plus whatever time I go in.
Budget looks like this
Take home=5400
Rent 980
MBNA 700+
Loans 1630
Her car 432
Geico 191
Verizon 171 (basic home, internet, cells with family plan)
Peco 55+
Gas around 200/month
Food 400 (anticipating with baby, was around 300)
Cash 400 (for month for both of us, take out/restaurant, etc or other needs such as medications)

On call money will go straight to ING for savings and eventually go to MBNA as soon as she goes back to work. I want some emergency savings with the baby coming. I am sure there are people who can do much better than this but I am happy to be getting by at this point. As long as I am not adding debt and slowly paying it off I am ok with that. Any further advice would be great. Thanks.

Dave

 

[JPatrick]

That's quite a pile of debt.
Anything for you in the upcoming school loan consolidation deadline?
http://loanconsolidation.ed.gov/

Your interest rates will dictate what to pay off first and how fast.  If you want to post those details you'll get some ideas.
Your budget looks OK and the thought of an emergency plan is a good one.  A money market fund (paying ~4.5%) is a good place for that.
You may not have much left over to invest, but it is important to find it somehow for the feel good factor if nothing else.  One of the really good things about being young is that you've got decades of compounding ahead of you provided you  get the cash working.
Does your work provide life insurance?  With kiddo on the way that is another thing to think about. 

 

[brewer12345]

So its ok even at my age to concentrate on paying off the debt.  If I did nothing but pay it off it would take about two years.  Heres the damage:
MBNA Loan (big mistake of mistakes from past)-25,000
Student Loans-Me-125000/her-60000
My car paid for, hers lease@ 432/month (yeh I know but she had bad credit at the time)
Mastercard paid in full each month, only use for emergencies-ie new tires, car repair.
I try to not use this at all but she always generates some use for it and then the money for savings or debt repay goes to that.  I wish I could just cut it up but then what would I do in an emergency? 
Good stuff:
Salary-96000 base with annual bonus (no idea what it will be)
I also take call for my old company every other week which comes to around 200 dollars plus whatever time I go in.
Budget looks like this
Take home=5400
Rent 980
MBNA 700+
Loans 1630
Her car 432
Geico 191
Verizon 171 (basic home, internet, cells with family plan)
Peco 55+
Gas around 200/month
Food 400 (anticipating with baby, was around 300)
Cash 400 (for month for both of us, take out/restaurant, etc or other needs such as medications)

On call money will go straight to ING for savings and eventually go to MBNA as soon as she goes back to work.  I want some emergency savings with the baby coming.   I am sure there are people who can do much better than this but I am happy to be getting by at this point.  As long as I am not adding debt and slowly paying it off I am ok with that.  Any further advice would be great.  Thanks.

Dave

Dave, I was afraid we had scared you off.

Looks to me like there should be an additional $250 or so a month in your budget to play with.  Is this just lost through "leaks?"  I don't see anything in your budget for stuff that you pay for, but not every month (tires for the car, clothes, life insurance, etc.).  Maybe that is where the extra money goes?

What do you do with the bonus money?  I would imagine that should go directly to the MBNA loan.

I was thinking about you this morning as I crossed the George Washington Bridge.  9 years ago I crossed the GWB in a moving truck coming back to NYC after not doing to well in Ohio (lousy job market which remains the case there today).  At that time, I had just about enough left in the bank to pay for the moving van bill, and a couple of cars that I was upside down on.  That's it.  9 years later, I am mostly debt free (aside from the mortgage), and I am closing in on the elusive $1MM in net worth (a few more years).  You can do it.

 

[daverph]

It is actually more under 200 extra. Electricity is more like an average of 100/month and around 140 over the summer. We will try and cut down the AC use. The spending would probably be more around 500/month with the baby. I am hoping to save what I can now and when she goes back to work pay down the MBNA full force. I am not going to attempt to pay off the student loans, they are consolidated at low interest rates. Her loans on the other hand are over 7 and 10 years respectively so we may try to pay those down faster. They are also at decent rates. She will soon come to work with me so we will only have one car being used, so less gas. Also we will eat lunch together so no buying lunch. And then when we get home we will cook dinner so less eating out at restaurants. Plus all the income she will be getting minus day care. We can bring the baby with us for a while, I run a home care pharmacy and I am the only one there at this point so until I hire other pharmacists I can pretty much do what I want. My student loans I do not mind as they helped me to acquire my job which I like very much. However I hate the MBNA loan, it is a symbol of my youthful indiscretions and I want to get rid of it ASAP. The interest rate is 20% I think, but I may be able to get that lowered by calling. I will try when I get my next bill. If I pay 1300/month I can pay it off in two years, which may be doable.

 

[MooreBonds]

However I hate the MBNA loan, it is a symbol of my youthful indiscretions and I want to get rid of it ASAP. The interest rate is 20% I think, but I may be able to get that lowered by calling. I will try when I get my next bill. If I pay 1300/month I can pay it off in two years, which may be doable.

Good luck daverph!

One question - credit card companies will usually lower your rate (and sometimes by a decent amount) if you call them up and say that you received an offer in the mail from another company. Have you ever been deliquent on your payments, or was the rate on the card always 20%? If you've been paying at least the minimum payments forever, then they definiately should drop that rate at least a few percent if you tell them you received a 5% offer from another company (or something along those lines). If, however, you missed a payment or two, the amount they lower the rate may not be as much.

 

[grumpy]

Dave,

While your wife is staying home with the baby why does she need a car leased at over $400 a month? For that matter, why can't she drive a cheap used car until you guys dig your selves out of the hole? Leasing a car is one of the least cost effective ways to provide basic transportation, and given your circumstances, basic transportation is all you can really afford. Getting out of that lease would also decrease your auto insurance costs significantly.

Grumpy

 

[daverph]

Well she has two years left on the lease. She would never go without a car, its too much risk if something happens with the baby. We have no friends or family within 1 hour so if something happens she would be stuck. How can you get out of a lease? Even so, we don't have the cash to buy a cheap used car and she would probably not go for that anyway. I have told her she could just use my car and drive me to work but then I am stuck without a car. Unfortunately I have to pay for her foolishness as I now make the payments. I would love to get rid of it but it would never work out with one car. I want to save money but I like being married so I think that would be more trouble than it would be worth. We are stuck with the lease and next time that mistake will not be made. She knows she is not getting anything expensive next time, a used small SUV at the most. I am on her all the time about spending money, sometimes she is on board and sometimes not. She just doesn't understand want vs. need and she has to have things NOW especially while pregnant. She tries hard but life has never been good to her so I think she subconsiously makes up for that now that she has things good. She is a good cook and shops frugally for groceries most of the time and she does not have expensive tastes. So no the lease is here to stay unfortunately.

 

[rrspike]

get out from under the lease. I ran into a young couple in similar situation as you..they wanted out of their lease. I bought their car, paying off the lease, minus about $2000 they said they would cover. It was the best deal I ever made. I got an almost brand-spanking new car for a lot less than it would have cost for a new one. And less than the other comparable used cars i saw in the market. The young couple got out of the lease and got my $14,000 or whatever it was. 'Course this worked well for me because i think they had put down a fair chunk at the time of the lease, so that was water under the bridge. But on a lease, you don't have any real equity in the car anyway. I could never see the value to leasing unless it was business and you could write it all off. I drive my cars until they are too expensive to maintain - which is usually 275,000 miles (never had a mercedes). Both current cars are over 200,000. They get me from A to B and are reliable as a car with 1,000 miles.

Another red flag...Eating out once a week is a real money pit. SO and I eat out maybe once a month, and we eat better than most people do when we eat at home. So tell me, what's the big attraction of 'eating out'. 40 years ago it was unusual for people to routinely do that.

I guess what i am saying here, is tt's a lifestyle thing, like most other expenses in our lives, and if you can master the struggles of changing your lifestyle (i.e it's not sufficient to simply change your spending habits or your budget) many, many good things will happen. And low cost lifestyle is not always the same as frugal.

 

[dumpster56]

30?

You lucky bast@rd!!

Your first child is due? You really are a lucky dude! A Druggest?

A great gig, heck you could do that forever!

You will do just fine, relax, take a deep breath, if its a girl in 25 or 30 years you get to pay for a wedding, we just did 2 years ago st us back about 35 grand, but WHAT A GREAT EFIN PARTY! It was worth every cent!

 

[yelnad]

35K?? Wow. Where do you live?

 

[macdaddy]

I don't mean to criticize anyone's lifestyle decisions, but unless my family or my fiance's family was loaded, and I mean millions and millions of liquid cash dollars loaded, I couldn't fathom dropping 35k on a wedding. I would head down to the courthouse and seal the deal. Or maybe fly somewhere nice and tie the knot on the beach, with both sets of parents and brothers/sisters. Or just elope and have it done with. Then that 35k could be used for a down payment on a house, for a kids education fund, etc.

I have been to a few weddings where the cost approached 100k. At one of them, the flowers alone cost 18k, and the couple, neither of whom have careers, live in a rented apartment and probably net 35k take home per year between them. I am sure they don't have any incentive to save a couple thousand per year or fund their roths, after their parents blew such a gigantic sum on them. I suspect the party was as much for their parents as them.

Pet peeve of mine...

 

[Cattusbabe]

I'll also chime in here. It seems that one of your biggest problems is your wife. She has to be on the same page with you money wise or you are going to have a tough row to hoe. Dear husband had similar problems with wives number one,two and three and came to me heavly in debt, bankrupt and on the verge of losing his job. I had more assets, stable job, home, a little saving but was also in debt. We dug out together slowly over time. It can be done if you two work together. Thats key.
We used Mary Hunt book the Complete Cheapskate and set up our budget using Mvelopes. we know where every penny of our money is and where it is going. We read and learn all we can about our assets and how to make the most of them. You did the right thing by coming to this site. These folks will give you good advice. We were debt free except for our very small mortgage when we inherited the money we are using to retire early. However we would not have been able to take advantage of this gift if we had not gotten our financial house in order. Dear Husband is in his 60's and I am in my 50's. Which shows that you can get you act together at any time and live better. You are blessed with the gift of time and are smart enough to want to get on track now. Get your wife on board, that will make or break any plans you have. Good luck.