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Edit: Based on the comments, I will add a bit of clarification to our situation.

  1. For the coastal area we live in, $84K is a bit over the median income (which is not adjusted for number of children).

  2. Our credit card debt is a recent situation - while we have used credit cards to build credit since we married, we used to pay them off each month until the birth of our third baby. Medical bills, the need to buy a new car (which was secondhand and a great price, but still), lowered income during maternity leave, and a longer gap between graduate school stipend and postdoc salary than we had anticipated combined to get rid of our savings and put us in debt.

  3. Consumer goods are not a huge part of the problem. Currently, healthcare premiums, taxes, rent, utilities, childcare, auto insurance, commute costs, and gas, all of which are relatively fixed, make up 84% of our monthly income (this isn't including credit card payments or groceries). Our grocery bills have gone up recently due to a child with special dietary needs. We rarely buy takeout or eat in restaurants and rarely buy clothes or other consumer goods.

  4. Until recently, I was calculating our monthly income by dividing our yearly income by 12 - although this meant that our budget was technically covered, I still found myself using credit cards occasionally. I realized that this is due to the fact that most months only have two Fridays for paychecks so our monthly income is several hundred dollars less than I had been calculating - taking us from result:happiness to result:misery.

  5. There is no realistic way to downsize on car/home - they are all relatively inexpensive and as our cars are already quite old and our house is quite small they can't be downsized further without considerable loss in quality of life.

  6. Regarding asking family for help - they are not so well off that a $13,000 loan would be easy for them - when I wrote that we could ask them for help I meant that in the case of an emergency (medical emergency, job loss, etc.) we can probably count on them which is why my husband feels that a full emergency fund (3-6 months monthly income) is not a necessity for us.

  7. I am a big fan of David Ramsey - however, it is difficult to pursue paying off debt with gazelle-like intensity when one's spouse disagrees with the premise that debt is bad.

Our Plan

Thank you to all of you for your advice. We had a long discussion about how to handle our finances and were able to come to an agreement on how to view debt in general and on how to manage our finances in the short term:

  1. Debt consolidation - either by calling the credit card companies and asking for a better deal or getting a new card with low interest on balance transfers (and freezing all the cards in ice to prevent using them as much as possible), or possibly a personal loan if we qualify.

  2. Try to reduce somewhat negotiable fixed expenses (utilities, auto insurance, etc.).

  3. Reduce (already-small) spending on consumer goods as much as we can.

  4. Try to maximize income relatively easily (e.g. asking for a raise, tutoring nearby children during the evening, etc.) without sacrificing on personal/family time.

Edit: Based on the comments, I will add a bit of clarification to our situation.

  1. For the coastal area we live in, $84K is a bit over the median income (which is not adjusted for number of children).

  2. Our credit card debt is a recent situation - while we have used credit cards to build credit since we married, we used to pay them off each month until the birth of our third baby. Medical bills, the need to buy a new car (which was secondhand and a great price, but still), lowered income during maternity leave, and a longer gap between graduate school stipend and postdoc salary than we had anticipated combined to get rid of our savings and put us in debt.

  3. Consumer goods are not a huge part of the problem. Currently, healthcare premiums, taxes, rent, utilities, childcare, auto insurance, commute costs, and gas, all of which are relatively fixed, make up 84% of our monthly income (this isn't including credit card payments or groceries). Our grocery bills have gone up recently due to a child with special dietary needs. We rarely buy takeout or eat in restaurants and rarely buy clothes or other consumer goods.

  4. Until recently, I was calculating our monthly income by dividing our yearly income by 12 - although this meant that our budget was technically covered, I still found myself using credit cards occasionally. I realized that this is due to the fact that most months only have two Fridays for paychecks so our monthly income is several hundred dollars less than I had been calculating - taking us from result:happiness to result:misery.

  5. There is no realistic way to downsize on car/home - they are all relatively inexpensive and as our cars are already quite old and our house is quite small they can't be downsized further without considerable loss in quality of life.

  6. Regarding asking family for help - they are not so well off that a $13,000 loan would be easy for them - when I wrote that we could ask them for help I meant that in the case of an emergency (medical emergency, job loss, etc.) we can probably count on them which is why my husband feels that a full emergency fund (3-6 months monthly income) is not a necessity for us.

  7. I am a big fan of David Ramsey - however, it is difficult to pursue paying off debt with gazelle-like intensity when one's spouse disagrees with the premise that debt is bad.

Our Plan

Thank you to all of you for your advice. We had a long discussion about how to handle our finances and were able to come to an agreement on how to view debt in general and on how to manage our finances in the short term:

  1. Debt consolidation - either by calling the credit card companies and asking for a better deal or getting a new card with low interest on balance transfers (and freezing all the cards in ice to prevent using them as much as possible), or possibly a personal loan if we qualify.

  2. Try to reduce somewhat negotiable fixed expenses (utilities, auto insurance, etc.).

  3. Reduce (already-small) spending on consumer goods as much as we can.

  4. Try to maximize income relatively easily (e.g. asking for a raise, tutoring nearby children during the evening, etc.) without sacrificing on personal/family time.

Tweeted twitter.com/StackFinance/status/1070060261493624832
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anon
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Paying off debt and living within means vs. long term planning

My husband and I are divided as to the best way to handle our current financial situation. First, a little background.

We are in our high 20’s, have been married for six years and have three kids. We started our marriage with ~$25K in savings and no debt. I was in graduate school for the first five years of marriage with no tuition and a $35K stipend yearly and my husband has been a student with no tuition and a ~18K-29K stipend yearly (it has gone up over the course of our marriage). We also got some help financially from family members. Over the course of my graduate schooling and several difficult pregnancies, we burned through our savings and now have ~$13K in credit card debt and < $500 in savings.

I am now a postdoc with a salary of $55K while my husband’s current stipend is $29K. Our income very, very barely covers expenses (especially considering childcare/commute) and we live fairly frugally (we spend little on eating out, groceries, clothing, toys, vacations, etc.).

My husband’s attitude throughout our marriage has been that we are both in school and making much less than our maximal salaries and that we should not be afraid of debt. Most people come out of school with large student loans so we are already ahead of the game. Our family is better off than we are and if need be can help us out if disaster strikes. Either way, within a few years our schooling should pay off and we will be making ~150K and be much more comfortable.

My attitude has always been that I prefer to live frugally and within our means both because it is a good habit and because I have always been very afraid of debt. While it is true that our salaries will rise at some point, we hope to have a large family (we both come from families of ~8 children) and will be paying private school tuitions ($5K-10K a year) for religious reasons, so we will always have to be tightening our belts. While it is true that our family can help us out, I prefer to be self-sufficient as much as possible and would be mortified if we had to ask for help.

At this point, we have quite a bit of debt (and our credit cards are nearly maxed out, thus lowering our credit score significantly), little savings, and our income does not cover our expenses (with a several hundred dollar shortfall monthly). I hope to get a job with a close to six-figure salary within a year or two. Our question is what to do going forward until I get that job. I would like to try to maximize income as much as possible (tutoring jobs, etc.) while being as frugal as possible as well as utilize debt consolidation strategies to try to pay off as much debt as we can and/or build up emergency savings funds. My husband feels that this is a short-term cash flow problem and while it would be good to consolidate the debt, there is no problem with continuing to use credit cards going forward to cover our expenses and no need for us to maximize income. He feels that becoming too intense about budgeting/maximizing income will be detrimental to our current career paths and our mental/emotional health as a family.