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Last year I was at a good university and I decided to quit my job and take on a huge load of classes in order to finish in two semesters. I have a wife and a child and the student loans are based off the cost of a single person attending. I supplemented our income with my credit cards. I have since graduated and am making ~90K a year. Our rent is $1300, we have other payments like phone bills, utilities, etc, and my credit card debt is around $11000. When I was calculating how much I could pay back before graduating it seemed like I would have about 1500$ a month to put towards paying off credit card debt. But in actuality we are struggling just to pay minimum payments. One of my credit cards (the one with the highest balance) has a high interest rate and paying the minimum payment gets us nowhere in paying off the debt. I have had excellent credit scores up until the last couple of months of school when my debt got out of hand. What are my options?

EDIT- I am putting ~500$ a month into my 401K with 100% matching for half of that and 50% matching for the other half. Should I postpone that so I can pay off more of my debt each month?

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    I'm rather surprised that you can only make the minimum payments considering your income and your rent. Can you explain where else your money is going? My quick back-of-the-envelope calculation shows you really should have no problem putting $1500/month aside to credit card debt, or at least $1000/month. This, practically, has more than 20% return on investment. – ChrisInEdmonton Jun 25 '16 at 14:25
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    My wife isn't very supportive of me paying off our debt. Which I think is one of the biggest culprits of where our money is going to be honest. I think she is frustrated because we lived on nothing while I was in school and she was expecting that we would be able to live comfortably on my salary after school. – user44572 Jun 25 '16 at 14:56
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    Understandable (even though I don't agree), but the point is that 11k is not that much to pay off. If you 'live on nothing' for just another six or ten month, that should be taken care off, and then you are rid of the high interest issue. (You still might have a wife issue though) – Aganju Jun 26 '16 at 1:41
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    "My wife isn't very supportive of me paying off our debt". So it's pretty easy to answer this issue. Ignore your wife. "she was expecting..." ok, so that's interesting, and .. well, that's about it. Pay off your debt, for God's sake. When you wife (or anyone) says words like "I am not supportive blah blah..." give a huge smile, kiss her on the cheek and say in a loud voice I love you! You look great today! then ignore everything and pay off your debt. – Fattie Jun 26 '16 at 2:45
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    Furthermore, $750/mo to a church seems high for someone struggling as you say you are. I'm sure your deity/ies of choice will forgive you if you reduce or defer that money for a few months to get you back on your feet. – Kevin May 30 '17 at 20:44
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Summarizing the info you put into your comment:

After tax, insurance, 401K etc, I'm bringing home about 5000$ a month

Expenses
1300 goes to rent
 200 utilities
 180 phone
  60 internet
 250 car
 750 church
 600 food
---------
3340 TOTAL

By your own estimate, you have an extra $1500 or more every month to put toward the debt. If you don't actually have that much, it suggests there are significant expenditures that you're not fully aware of. I suggest you take a close look at your actual spending and see where it's going.

  • Did OP say he gives 10% of his gross to a church? – JTP - Apologise to Monica Jun 25 '16 at 19:24
  • @JoeTaxpayer: In his comment he said $750 goes to his church. – BrenBarn Jun 25 '16 at 22:54
  • Missed that, thx – JTP - Apologise to Monica Jun 25 '16 at 22:57
  • I agree. there's something missing from the listed bills. – NotMe Jun 27 '16 at 19:35
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    I can't imagine giving a church $750 a month... – user27283 Jun 28 '16 at 17:43
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It seems that you should have enough income to do all of this. Here is my estimate:

$90,000 gross pay
  * 75% (very rough tax estimate)
$67,500 take home pay
  - 15,600 rent ($1300 * 12)
  -  6,000 401(k) ($500 * 12)
$45,900 remaining

You should easily be able to pay $11,000 of credit card debt in less than a year.

If you are having trouble coming up with $1500 per month for debt elimination, then you are probably spending too much on something else.

A written budget is the key to this. Write your take home pay amount for this month at the top of the page, then write down every fixed bill that you know you will have this month. (Rent, utility bills, etc.) Then write down all the other expenses for necessities that you will have this month. (Groceries, transportation/fuel, clothing, medical expenses, etc.) Don't forget to include bills that only come up once or twice a year, such as car insurance bills.

What you have left is your discretionary income. Things like entertainment would come out of this, but I would encourage you to keep entertainment (including restaurants) to a minimum until you are out of debt. As I said, you should easily be able to do this is less than a year. (At $1500 per month, it should only take you about 8 months to clear your credit card debt.)

If you need more help budgeting and getting motivated to get out of debt quickly, I recommend the book The Total Money Makeover by Dave Ramsey. When it comes to the process of budgeting and keeping track of your spending, budgeting software such as YNAB, EveryDollar, or Mvelopes can make the process much easier.

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It seems a spouse meeting is in order. When you sit down with your wife, don't use the word budget. Instead, talk about priorities. You need to find a way to show that you understand her, that she's sacrificed for this time, and deserves a bit less restraint on the spending. On the flip side, you need to show what the interest on this debt is costing, yet compromise on the payoff. Stretching out to 18 months instead of 12 might be a happy medium.

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    Quite, the key issue, the real issue at hand is the OP is getting pressure from someone (doesn't matter who) to "not pay off debt". OP appears to be wavering on this. So: don't. Pay off the debt. Every time your wife talks about anything, just sit down and write her a love note about how great she looks. Have a huge smile and give her a kiss on the cheek. Then pay off your debt. – Fattie Jun 26 '16 at 2:48
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    @JoeBlow, I'm a bit concerned about your statement. Certainly in my marriage, if I just sat my wife down and wrote her a love note and told her how great she looked every time she disagreed with me on a matter of substance, that relationship would have been over incredibly, incredibly quickly. While I understand many marriages don't involve equality, I'm not sure you should be going around advocating such breathtaking inequality here. – ChrisInEdmonton Jun 26 '16 at 22:27
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First, if your credit score is suffering from not paying credit cards, that means you are more than 30 days late. Pay up to full current minimums right now, you have the money. Where to get it? First cut the tithe (read on), then the 401K and if necessary defer the student loans. All are important but less important than the small effort necessary to keep your credit rating. Like Suze Orman says, you have to put the (financial) oxygen mask on yourself first, or you will not be able to help anyone else.

Why are the credit cards so important? Because you gave your word - and only a person who keeps it can be financially successful and happy in the long term. It's not for them, it's not for God, it's for you.

Also your credit report, which has a huge impact on your financial effectiveness.

(Nothing against those who are overwhelmed to the point where they need "resets" like bankruptcy to get back to where keeping their word is possible. That is not this.)


Some people have mansions and fancy cars and the trappings of wealth, but behind the facade they are in terrible debt, with lives full of stress and unhappiness.

There are also people with an old car in front of a modest home... who have five years of emergency fund put back, who give half their money to charity. I've been that guy and it's nice. But he doesn't brag about any of this, and doesn't give $750/month. He smiles every week and gives nothing... and then, when church leadership is talking about how they'd really like to open a new homeless shelter, he drops a quarter mil. You can be that guy. If your numbers are correct and you're willing to sacrifice, I think you can be that guy inside a year.


How? I wrote it up in detail, but it was big and came off a bit know-it-all-ish, so I'm reluctant to post it unless people want to see it.

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    In general, good thoughts, a +1 from me. But. It's tough to tell another about their religious practice. If this is their belief, what you propose may simply not be an option they would ever consider. . – JTP - Apologise to Monica Jun 27 '16 at 11:05
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    I think the OP has a large enough income to keep paying the 401(k) and tithe and still pay off the debt in a relatively short amount of time, if he and his wife choose to do so. It is a matter of how they set their own priorities. – Ben Miller - Reinstate Monica Jun 27 '16 at 12:15
  • And I think he's tangled up in those priorities, which is totally understandable given that he's new to having money. @JoeTaxpayer people can be equally rigid about many other things relating to money. More than a few and it can become a problem. – Harper - Reinstate Monica Jun 27 '16 at 22:59
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Use a budget tracking software where you forecast where all your money will go as soon as you get it. Then you record all transactions and adjust the budget as the money goes out to reflect reality, and to maintain balanced budget.

This will help you find the leaks. And you have leaks. There's one that I like. You can use their methods without subscribing to their software, but I subscribe because I can concentrate on using the method rather than using spreadsheets to simulate the software. Here are several tracking softwares:

  • You Need a Budget (YNAB) (personal favorite, free trial, try before you buy, YMMV)
  • Dave Ramsey has one based on his envelope system (the logic behind this system appeals to the analytical side of my nature, and it drives several envelope system clones, and shares a lot of concepts with YNAB)
  • Mvelopes and any number of apps that implement Dave Ramsey's envelope system
  • Mint and Quicken, traditional tracking and budgeting software, but they lack the envelope element.

The envelope element that grabbed me, first with Ramsey, then with YNAB, is pretty basic. You allocate your income when it comes in. Putting into envelopes with labels. Rent, utilities, groceries, weekend party money, vacation fund, whatever. So, Sunday rolls around and you are invited to the football game. Ticket is free, but you estimate you want to be able to spend about 50 bucks on refreshments. The party money envelope is at 40 bucks. You have to take it from another envelope. Rent and utilities are a no go. Groceries, maybe, but the logical choice is to pull ten bucks from the vacation fund. This allows you to stretch a category in your budget, while it forces you to consider where the shortfall has to be made up. The apps let you keep the money in the bank, but have a virtual envelope system to track what you have budgeted. Finally, the systems use money that you have, not money you plan to get, in order to do your budgeting.

Get your wife in on the business. Set a goal to be debt free. Then a longer term goal. With your income you could probably go the FI,RE route (financial independence, retire early), if you have the commitment.

When you hit debt free, reward with a vacation or whatever reward seems appropriate. (Without going into debt, of course).

I also agree that you should pause the tithing and the 401k, at least until you are up to date on your cards, and have saved up an emergency fund.


Here's a rough plan to consider:

  • Catch up on debt and establish budgeting habits.
  • Start your emergency fund. (1-2000 now, with a goal of 3-6 months of EXPENSES)
  • Debt snowball the cards. (Research Dave Ramsey's snowball method for repaying debt)

This should take you less than a year at your level of income and debt. Now the fun part.

  • Add tithing and 401k (at least enough to capture matching) back to your budget
  • Add to your emergency fund until you have enough that you feel comfortable. The usual advice is 3-6 months worth of expenses. For me, having experienced > 6 month period of unemployment on two occasions, my goal is 9 months.
  • Do a lot of research on balancing your retirement between 401k and Roth, or consult with a financial advisor.
  • Fund a Roth for your wife
  • 529 for the kids
  • Wealthbuilding

Be sure to budget for yourself and your family. Clothing, entertainment, travel. You won't be able to stick to any plan if everyone feels like they're poor and they're afraid to ask to do some activity due to the fees of it.

At the same time, watch out for lifestyle creep.

I'm trying to adopt some of the FIRE crowd's attitude towards 'stuff'. They believe that the average American is spending an inordinate portion of their income buying stuff because marketing tells us we need to do so in order to be happy. I see their point, but I have a smartphone and a dumb SUV, complete with almost 700 a month between the note and the insurance.

One of the FI blog sites had an article about how his wife eventually came around to his point of view on finances. He asked her what her perfect life looked like. Then showed her how they could accomplish that, by living on less than 40% of their take home and saving the rest.

If you do become financially independent, please go into research for time travel, and give my 25 (or even 30) year old self this advice.

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