Ok, here goes...
A little background, I'm 42yo, married with 2 kids ages 8 & 10. I have a fairly good job (which I don't particularly enjoy) and my wife is self-employed but doesn't generate significant income after expenses as of yet. Twenty years ago (before we were married but living together) my wife and I both struggled with poor spending habits racking up significant debt with an all time high of more than 40k in car loans and CC debt. I took over the day to day finances and attacked the debt like crazy and after a few (or four) years we managed to pay it all off and buy our first house. I have also struggled with car addiction. I have owned a Honda S2000 (bought new!), Subaru STi, Nissan S14 240SX, and many other lesser, yet fun cars. (Almost every single one of them with a loan attached.) However, astoundingly, financially things were not that bad. Car loans and mortgage yes, but no CC debt. Fast forward 15 years, 2 kids and 1 house later and I've found us back in the same hole. She quit her job in 2010 to follow her dream and started her own business (with my full support). She also took over the day to day finances and left "all that retirement stuff" to me. I thought all was well but I wasn't paying any attention to what either of us were spending (I'm not trying to put the blame on her in any way, I like my toys and gadgets and was definitely spending way too much on them. I fully admit to sticking my head in the sand here.)
Some of these are approximations due to only recently tracking our spending in detail. The numbers are taken from the previous 90 days through June 30, they do not reflect any spending changes made in July and some stuff may not be accurately categorized in Quicken.
Income: ~$50,000 take home pay per year (after health/dental/vision/life insurance and 401k@18%, 84,000 gross) This can vary with overtime but there's not much of that these days so I don't count on it. I have been withholding too much Fed tax as we typically get a sizable refund every year, last year was more than 7,000 I think. I just changed that but it hasn't taken effect yet.
Monthly expenses:
Mortgage P&I: $1045 $1277 now with the refi 8.14.14
Property Taxes (includes school taxes): $8200/year so ~$683/month (Yay NY!) corrected this 8.14.14
Cell phone: $150 - smart phone with data required for both my job and wifes, my company reimburses $75.
ISP: $75 - required for my job and my company reimburses in full
Recurring subscriptions: ~$80 - NFLX/AmazonPrime/HULU/VPN/SWTOR/TESO/PSN $8 for NFLX 8.14.14
Recurring car wash thingy: $30 Cancelled 8.14.14
Gas (car): $200
Utilities: $250 - Highly variable, can be as high as $450 in the dead of winter and low as $150 in summer
Food+dining: $1000
Total: $3,385 after reimbursements Holy crap, this looks ridiculous now that I tally it all up.
Assets:
House $240,000 - Tax appraised value
401k: $235,000 - currently contribute 18% Dropped to 4% + max match + 4% company contribution. 8.14.14
IRAs: $305,000 - Includes Roths and rollover IRAs from previous jobs. Currently contribute $2000 into my Roth and $2400 into wifes Roth per year. Dropped to 0 until CCs are paid off 8.14.14
Total assets: $780,000 *I really don't like counting the house as part of my net worth as I don't see it as very liquid but I see that's a pretty common thing to do.
Liabilities:
Mortgage: 177,000 30yr@5.13% Just locked in a 15 yr refi @ 3.375, 0 points. Same lender to keep closing costs down (~2500) 8.14.14
CC #1: 12,856 @ 15% $8,400 @15% 8.14.14
CC #2: 9,680 @ 11%
CC #3: $3500 @ 0% <-- new card, balance transfer from the 15% card above. 8.14.14
Total debt: 199,536
Total net worth: $580,000
Well now that I have it all laid out this looks pretty dismal. The net worth number looks good until you look at the income vs. spending ratio, much worse than I thought it was when I started typing this. Looking at that ratio it doesn't actually look like I can make progress on the CC debt. My savings rate (~35%) is better than I thought but I'm essentially financing it at this point. (Diverting money into Roths and 401k vs. paying down the CC debt.) I also have no significant emergency fund.
I do get to tally a few points in the Pro column however. I started 401k and Roth IRAs early and never stopped contributing to them. We have/had no student loans. I paid my own way through college (the 11 year program I like to call it) and my wife went to a state school her parents generously paid for. My wifes current car is paid off but does cost us some maintenance, it's 12 years old and we live in the salt belt. My job provides a company car so we have the benefit of a second car without the expense. (I'm not cured of my car addiction but its been under control for a number of years now.) My job also reimburses my half of the cell phone bill and all the ISP charges. And psychologically, I know that this can be done. We've been in this situation before and dug ourselves out (neveryoumind the fact we dug ourselves right back in again lol!) But, it will be harder this time, our expenses are greater raising 2 kids. Unfortunately, a lot of those expenses are not reflected above, kids need clothing, music lessons, sports, etc. And they eat. My god, do they eat.
I have made some significant changes already so some of the expenses listed above are already gone. Massive cuts to dining out, we used to eat out probably 4-6 times per week. Mostly as a convenience/laziness thing and more often in the summer due to kids being home from school. For July I think we went out 5 times total. And that includes being on vacation last week (camping). Going out to eat so much also has the unintended consequence of "letting" a lot of the unprepared foods we buy go unused and spoil. We also need to stop buying so much organic stuff. My wife buys a lot of it and I'm all for natural and whole foods but the organic foods market is mostly a marketing ploy. Anyway, we can and do cook, we'll just need to do more of it. My wife also maintains a sizable garden (6 4'x10' beds!) but not sure if that's truly saving us any money. Fertilizer and material costs offset much of the savings of growing your own. But hey, at least its all organic! I have cancelled Hulu, Amazon Prime, the VPN service, PSN, and the online games TESO and SWTOR. I cut NFLX down to streaming only from streaming +1 disk. (Incidentally, when canceling Hulu they will automatically give you 2 months free, completely automated.) Also cancelled the car wash thing my wife signed up for.
Ok, so according to the Reader Case Study template this is the part where I'm supposed to ask my specific question so here goes...... Am I screwed?
No seriously, I know this is quite the word salad post but one question i do have is should I consider a 401k loan to pay off the CCs? 401k loans are not subject to taxes and penalties, correct? I understand we have to be disciplined enough to not use the credit cards EVER AGAIN and I'm confident we can do that. Now that I have my head out of my..... the sand.
Updated 8.14.14 with progress