Case Study - Too Old For Debt

[oldmanintech]

Topic Title: Case Study – Too Old for Debt

I would like to figure out the best course of action, I plan to take the bonus I get in March of 2019 to help pay down debt.  We are putting an extra $2K toward debt each month now.  If I get rid of Lending Club at $1,054 per month in March, I can put more toward CCs and have lower monthly minimums in case something bad happens.  I am not sure if I should continue to contribute to my 401k even though the company doesn't match.  I was trying to avoid a huge tax hit in April.

As you see below, groceries and eating out are killing us.  Just looked at Mint yesterday to see this trend.  We have had to travel a lot lately to see my mother who is not well.

I think if I am aggressive I can be out of debt except for student loans and IRS next fall and start saving.  I just got the Marcus loan to pay off 25% credit cards.  As those trade lines update on my report my score should go up, they are ~ 712 right now.

Life Situation: 42 Yr Old Man. Married with a 9 yr old boy

Gross Salary/Wages: Me: $150K/22.5K Bonus, Her: $80K

Individual amounts of each Pre-tax deductions: 401k of 6%, company does not match

Other Ordinary Income: Some consultancy on the side, ~$5K/year

Current expenses:
•   House Payment - $2400
•   HOA - $80
•   Life Insurance - $75
•   Electric - $200
•   Groceries - $600
•   Eating Out - $600 - Now $100
•   Gas for autos - $120 - This has been closer to 400 driving to see my mother in FL
•   Water and Sewer - $150
•   Internet - $65
•   Verizon Cell Phone for both of us - $210
•   Car Insurance - $250 - Now 98
•   Toyota Lease (ends 9/2019) - $342
•   Afterschool Childcare (8 months per year) - $382
•   Navient Student Loan - $352
•   IRS Payment Plan- $300
•   Lending Club - $1,054
•   Marcus Loan - $754
•   NFCU CC - $340
•   NFCU CC - $220

Assets:
•   House: $495,000
•   401k: $7,800
•   Ford Edge - $5,000
•   My wife's 403B is $51K


Liabilities:
•   Caliber Home Loan: $403K @ 4.25%
•   Navient Student Loan – 24K @ 6.5%
•   IRS Payment Plan- $13K Owed
•   Lending Club - $19850 @12%
•   Marcus Loan - $22000 @ 15%
•   NFCU CC1 - $17000 @ 16%
•   NFCU CC2 - $11000 @ 18%


Net Worth:
•   ~40K

[YttriumNitrate]

With almost 70K in debt at a rate more than 10%, is there any chance you can shuffle that around onto lower rate product? In many/most cases I view balance transfers as akin to shuffling deck chairs on the Titanic, but in your case it might make a significant difference.

[walkwalkwalk]

Please include your retirement accounts in assets.

[ysette9]

That is some significant debt. Can you talk a bit about how you got into this situation? It is great that you want to tackle it, but it is important to understand how you got here and how you have changed to not get yourself back into debt once you fix the mess.

Is your spouse on board? You need to be aligned before you can really do anything meaningful or it will fail.

You debt is an emergency. http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/. Emergency. This means no more eating out, definitely not $600/month eating out. You can’t afford it. Period.

Those are some eyebrow-raising interest rates. I think you need to do everything humanely possibly to knock out those high-interest debts first. If you only are a payment or two away from wiping out other debts I can see how the psychological win of getting rid of them would be a good boat. But definitely focus on the high interest stuff first because it is eating you alive.

[Another Reader]

I'd start with no more eating out until the debt is paid.  That's an easy target,  My guess is you have not accounted for all your spending.  That needs to be tracked much more carefully.

The only reason for that much credit card debt is that you have been living way beyond your means, unless you had some kind of major emergency you could not cash flow.  Again, tracking will help you find the money leaks.

In your shoes, I would buckle down and get this mess cleaned up.  It can be done, but your spending must be reduced substantially.  You may not be able to balance transfer right now (guessing your credit scores are not the best with those interest rates), but do that to lower interest rates when and where you can.

[oldmanintech]

I'd start with no more eating out until the debt is paid.  That's an easy target,  My guess is you have not accounted for all your spending.  That needs to be tracked much more carefully.

The only reason for that much credit card debt is that you have been living way beyond your means, unless you had some kind of major emergency you could not cash flow.  Again, tracking will help you find the money leaks.

In your shoes, I would buckle down and get this mess cleaned up.  It can be done, but your spending must be reduced substantially.  You may not be able to balance transfer right now (guessing your credit scores are not the best with those interest rates), but do that to lower interest rates when and where you can.

Yes we know eating out is an issue, we are doing our best and my wife is on board.  I have updated my original post with my credit score and 401k balance.  I have a citibank card with 5000 credit limit, 0% balance transfer for 21 months.

[Greyweld]

I assume your phone is the unlimited data plan? Is that something you both need? If not, I would consider cheaper options. It's not your biggest budget item but if you don't really *need* unlimited data it could be low-hanging fruit.

[Tass]

In the Investment Order thread, you will see that paying off high-interest debt is more important than non-matched 401k investment: https://forum.mrmoneymustache.com/investor-alley/investment-order/

"Doing your best" at fixing your $600 eating out budget means quitting it cold turkey, now. Even if you switch to buying microwave meals at the grocery store, that is still an improvement in your habits. I might be inclined to allow one meal out to celebrate when each large debt is paid off, in order to reward yourself. Eating out needs to be seen as a special treat, not a method of feeding yourself regularly. $600 every month will be a serious acceleration to your debt repayment.

Eventually you may also want to whittle down your grocery spending, but one thing at a time. Quit the restaurants first.

The other red flag I see is your cell phone bill. I'm on a family plan with T Mobile that costs about $20 per person per month. That may not be possible for only two people - but maybe you could go in with some extended family or friends. Even if not, my understanding is Verizon is one of the most expensive providers out there. Shop around, and think about what your plan actually needs to include. What do you want more, unlimited data or freedom from debt? If you can get that bill below $100, or even below $50, that's extra money every month from a one-time decision rather than something that requires your ongoing willpower.

Finally, can you get rid of your leased vehicle?

Getting out of your hole will require buckling down and changing your lifestyle. But cutting just a few things out of your budget is going to give you a massive boost in the right direction, and once you get that ball rolling you can ride the momentum. Each debt you pay off gives you more cash each month to focus on the next one. (And pay off the highest-interest ones first!)

[CalBal]

I recommend doing a case study and fully tracking all expenses. You can go backward in time and get a rough estimate of categories if you use a credit card on most things. It doesn't take that long, it's what I did when I first started. You can use a simple Excel or Google spreadsheet if that lowers the barrier (no need to use/learn a budget/tracking software). What an eye opener it will be (it was for me). That way you will know where you stand and where you can cut. Right now there are a lot of categories unaccounted for. I agree with some other posters, the restaurant budget should be 0 right now, phones are really high, groceries are highish (depending on where you live).

You don't say what your net take home pay is, but your combined income with your partner is 230k. That is a ton of money. Using an online tax calculator that uses California as a basis for state taxes, it tells me that on a salary of 230k, with no retirement withholdings, your yearly take-home is over 146k. That's 12,200 per month. The items you have listed above come to something like 8,500 per month, so that is nearly 4,000 missing. Obviously this is an estimate. But if you could account for that missing money (and/or go on a SEVERE spending diet for a few months, ie no new ANYTHING!!!), plus trim a few of the categories above, you could knock down CC2 in probably less than 3 months, and then snowball into CC1 and get rid of that one in less than 3 more months. At that point you have a lot more breathing room, and sure throw your bonus at the Lending Club loan, even though it is mathematically inferior, because it improves cash flow a LOT. At that point you could relax a little, not be so strict on budget, since you can easily burn out with severe restrictions.

These are obviously estimates since you haven't posted a full case study.

It would be difficult, you would have to really want it, but very worth it.

[oldmanintech]

I recommend doing a case study and fully tracking all expenses. You can go backward in time and get a rough estimate of categories if you use a credit card on most things. It doesn't take that long, it's what I did when I first started. You can use a simple Excel or Google spreadsheet if that lowers the barrier (no need to use/learn a budget/tracking software). What an eye opener it will be (it was for me). That way you will know where you stand and where you can cut. Right now there are a lot of categories unaccounted for. I agree with some other posters, the restaurant budget should be 0 right now, phones are really high, groceries are highish (depending on where you live).

You don't say what your net take home pay is, but your combined income with your partner is 230k. That is a ton of money. Using an online tax calculator that uses California as a basis for state taxes, it tells me that on a salary of 230k, with no retirement withholdings, your yearly take-home is over 146k. That's 12,200 per month. The items you have listed above come to something like 8,500 per month, so that is nearly 4,000 missing. Obviously this is an estimate. But if you could account for that missing money (and/or go on a SEVERE spending diet for a few months, ie no new ANYTHING!!!), plus trim a few of the categories above, you could knock down CC2 in probably less than 3 months, and then snowball into CC1 and get rid of that one in less than 3 more months. At that point you have a lot more breathing room, and sure throw your bonus at the Lending Club loan, even though it is mathematically inferior, because it improves cash flow a LOT. At that point you could relax a little, not be so strict on budget, since you can easily burn out with severe restrictions.

These are obviously estimates since you haven't posted a full case study.

It would be difficult, you would have to really want it, but very worth it.

Thank you all so much for your thoughtful responses. 

Yes, our combined take home is around $12,200 with the 6% going to 401k.  My company does not take out for medical thankfully.  I removed that 6% contribution which gives us an extra $500 per month.  I plan to shop for cheaper car insurance and cell phone.

[Scandium]

•   Verizon Cell Phone for both of us - $210
•   Car Insurance - $250

WTF?! How is a cell phone bill $210/month?? $100 each?! who does that? I thought I was bad for not bothering getting my wife of her $60 at&t plan (I pay $30/month). holy hell.. I hope this includes a person carrying your phone around for you.

Same with car insurance, wtf? Is that really $3,000 per year?! Do you crash weekly or something? We just got a big, very new (3 years old!) car and ours jumped to $900/year. I thought that was bad.. So your cars must be worth >3 times ours? (which would be pretty bad). Or you crash a lot (also bad).

I wish I/we had any hope of making 1/4 million bucks a year in my 40s (I won't), but I guess at least I have positive net worth..

[marty998]

Your child appears to cost you.... nothing? No school fees, excursions, uniforms and shoes? No extra-curricular activities? Gifts and presents?

Do you budget for appliances? Repairs and maintenance on the house? Furniture? Laptops, tablets, other electronic gear like fitbits?

Lots of big ticket items are not being counted here...

[eav]

One recommendation in looking to the future...I would set aside a few thousand to buy a car outright once the Toyota lease is up in 09/2019. This should be ear marked for a full car purchase and not a down payment on a car or new lease. It's not just a matter of getting out of the debt, but once that is done catching up on retirement funding. This being the case I don't see room for another car payment in your future.

[Scandium]

Your child appears to cost you.... nothing? No school fees, excursions, uniforms and shoes? No extra-curricular activities? Gifts and presents?

Do you budget for appliances? Repairs and maintenance on the house? Furniture? Laptops, tablets, other electronic gear like fitbits?

Lots of big ticket items are not being counted here...

I summed the expense, and OP gave the after-tax income above. Assuming he does nothing they have >$4,000 extra per month! If that is true I find it hard to believe they got into so much consumer debt. It could all be paid off in ~a year. I too suspect there are lots of expenses not being counted, a raging coke habit or something to suck up that much cash.

[zz_marcello]

Like others said, with a changed mindset you can easily trim $600 from the combined food and restaurant spending and another $150 from the combined cell phone and car insurance position.

Now I would look that you really include all your spending (clothes, house repairs/upgrades, vacations ...)

Even if you spend some of the $750 from above on those positions you initially have something like $4.000 / month cash flow left to tackle your debt.

So its ridiculously easy to get out of this mess if you and your wife are serious about this and stop pissing all your money and with that your life energy away!

Start with paying off the highest interest rate debt (CC2) and then move down to the lower interest debt.

With this approach:
- CC2 would be paid off in three month (afterwards you have $4.220 monthly cash flow to tackle the next debt because no more CC2 payments)
- CC1 would be paid off four month later (so total 7 months and afterwards you have $4.560 monthly cash flow to pay off next debt)
- Marcus loan 5 month later (12 month total, afterwards you have $5.314 monthly cash flow)
- Lending Club 4 month later (16 total and $6.368 cash flow afterwards)
- Student loan 4 month later (20 month total and $6.720 cashflow)....
Then throw less than two months to your IRS payment if this has the lowest interest and you are done with this consumer debt crap.

22 month!

Then take a nice vacation with your family from the cashflow of month 23 and pledge to yourself that you will never ever ever in your life have one cent of consumer debt!

Afterwards you can invest the $7.000 cash flow per month in Vanguard index funds through your (and your wife's?) 401k (which of course you will max out) and your new after tax brokerage accounts.

After another 9 years you have about $1 Million in those accounts combined after tax and inflation.

-- > In a total of 15 years from today you are debt free and have about $1,5 Million in your 401k & after tax brokerage accounts plus a paid of house.

As a result any additional employment income from you or your wife would be optional shortly after you turn 55 years old!

Be a good role model for your son and show him that you dont have to drown in debt.
You can be happy and live a life without any financial worries!

Its super easy but what you and your wife have to do is stop lying to yourself. You have to open your eyes and realize that you where cheating yourself with this self inflicted debt and a networth of zero despite having a quarter million dollar gross income / year.

Make yourself the biggest christmas present ever - Turn your life around and get out of this debt now!

[oldmanintech]

Thanks again for your responses.  We haven't had this level of income long, I got a new job this past March that brought me from $105K/yr with no bonus to $150K with a 15% bonus.

Some additional face punch info.  We got help from my wife's parents in 2016 to buy our house, so, until June of 2018, we were paying her back, $1,000/month.  We started putting the extra $2K toward debt in July and got a $7K card paid off. 

Right now I am thinking I should refinance the two remaining credit cards into a Lending Club or Prosper loan.  With our inability to stay out of cc debt I feel like we should close most of the credit cards so we can't even be tempted to get back to this place.  Thoughts?

I like the plan of setting aside $5K from my bonus in March for a car when my lease is up.

Some positive steps this week.
1) Switching insurance to Geico which will cost us $120/month.
2) Lined up some side work starting in January, could be an extra $4k before taxes.

[ShoulderThingThatGoesUp]

Are you going to have enough to pay your taxes? I see the IRS loan there.

Can you downsize the house? In most places that’s a lot of house for 3 people.

[Another Reader]

Thanks again for your responses.  We haven't had this level of income long, I got a new job this past March that brought me from $105K/yr with no bonus to $150K with a 15% bonus.

Some additional face punch info.  We got help from my wife's parents in 2016 to buy our house, so, until June of 2018, we were paying her back, $1,000/month.  We started putting the extra $2K toward debt in July and got a $7K card paid off. 

Right now I am thinking I should refinance the two remaining credit cards into a Lending Club or Prosper loan.  With our inability to stay out of cc debt I feel like we should close most of the credit cards so we can't even be tempted to get back to this place. Thoughts?

I like the plan of setting aside $5K from my bonus in March for a car when my lease is up.

Some positive steps this week.
1) Switching insurance to Geico which will cost us $120/month.
2) Lined up some side work starting in January, could be an extra $4k before taxes.

No, that would not solve the problem.  You would be tempted to charge the cards back up instead or to get new cards.

The only solution is to change your mindset and your priorities.  Close the cards that do not provide benefits such as cash back as you pay them off.  Keep the ones that have benefits and use them only when there is a benefit.  Go to a cash system for the grocery store and other stores.  Stay out of Target/Kohls/whatever and cancel Amazon Prime if you have it.  Every time you want to spend money, stop and ask yourself if it's necessary and if it adds value to your life.

Simply do not go to restaurants or get take out.  Use some free time to meal plan and batch cook.  Having meals in the freezer ready to go makes it easier to say no to restaurants and take out.

If you need structure to control your spending, make a budget. Some people swear by YNAB.  There are a lot of free budget applications out there as well.

Right now, your spending and your debt control you.  You want to be in control of your money instead.  The above is how you get there.

[oldmanintech]

I agree the restaurants and spending are out of control. 

If I refinance my remaining credit cards into a lower interest rate Lending Club or Prosper, that would leave us with ~$70K in available credit which scares me.  I was thinking of closing all of them except the Chase Visa ($11K limit) which gives us the best rewards.

I think we are just the type of people who can not be trusted with credit cards for now.  It is easy to say change your mindset, much harder to do. 

Either way, we are going to bump up our extra debt payment to $3000 in December and look to lower expenses.

[oldmanintech]

Are you going to have enough to pay your taxes? I see the IRS loan there.

Can you downsize the house? In most places that’s a lot of house for 3 people.

I will do my own taxes this year, we usually get a refund from state which should cover what we would owe for federal. 

Our house is only 2,000 sq ft and is not crazy at 2x our income, our problem is cc debt. 

[Tass]

I think removing credit cards from your grasp is a fine first step to commit to the mindset change that Another Reader talks about, especially if you don't feel trustworthy with them. As they said, you need to also commit to not opening NEW cards.

Definitely close any cards that have annual or other administrative fees. But for free cards, would you consider instead shredding the cards, deleting the card info from Amazon/Google/wherever else it might be stored, and leaving the account open? Remove ACCESS to your credit, but leave it on your report. It is good for your credit score to have credit available that you are not using. HOWEVER if you think this scenario would be tempting or dangerous for you in any way, then yes, close them instead. Staying within your means is more important than credit score optimization.

By the way, reread @zz_marcello's post. They've laid out exactly why it's vital for you to cut hundreds of dollars out of your budget immediately, and how quickly that difference will add up. Follow that plan. Read it until you can taste the freedom from debt, less than two years away. You have to want it! You can make it happen!

[ShoulderThingThatGoesUp]

Are you going to have enough to pay your taxes? I see the IRS loan there.

Can you downsize the house? In most places that’s a lot of house for 3 people.

I will do my own taxes this year, we usually get a refund from state which should cover what we would owe for federal. 

Our house is only 2,000 sq ft and is not crazy at 2x our income, our problem is cc debt.

It’s not crazy for your income, but it is crazy for your indebtedness. You can’t pay as much debt off because you’re paying bills on a 400,000 house, and you have equity sitting there you can’t use to reduce your debt.

You have a debt emergency; you’re not the family those income-to-house rules of thumb are made for.

[CalBal]

If you close all your credit card accounts, your credit score is going to drop, and potentially by a lot. It is partially based on credit history (ie age of longest open card) and by available credit used. If you close all your cards, your revolving credit history becomes zero and it will take a long time to get that back. They take into account revolving credit (credit cards) as well as things like mortgage and car loans, but all these things cumulatively make up a good credit score. If you only use 10% of available revolving credit, for example (so, $7,000 on CCs with a $70,000 limit, paid off monthly) that does fantastic things for your credit score. And a better credit score gets you better interest rates on everything. I agree with Tass, removing ACCESS will go far. (Should go far, if committed.)

Your problem isn't cc debt. Your problem is your (current) attitude or relationship toward money.

You haven't said yet if you have retroactively recreated your spending for the past year using CC statements/bank statements/utility statements. You need to do this ASAP. Then post a full case study and people will be better able to help you with specifics. And it will illuminate for you where the big leaks are. Restaurant and phone and car we know, but we also know there are a ton others. You need to expose them and see them and sit with that knowledge for a bit to let it sink in. Even if the numbers are not 100% correct (because you won't know exactly was purchased at some stores), but you will get a good enough sense.

[Tass]

Are you going to have enough to pay your taxes? I see the IRS loan there.

Can you downsize the house? In most places that’s a lot of house for 3 people.

I will do my own taxes this year, we usually get a refund from state which should cover what we would owe for federal. 

Our house is only 2,000 sq ft and is not crazy at 2x our income, our problem is cc debt.

It’s not crazy for your income, but it is crazy for your indebtedness. You can’t pay as much debt off because you’re paying bills on a 400,000 house, and you have equity sitting there you can’t use to reduce your debt.

You have a debt emergency; you’re not the family those income-to-house rules of thumb are made for.

Downsizing the house is a legitimate step toward frugality, but it's also a big undertaking. I would get the ball rolling first. Cut the restaurants, the phone bill, the car lease and insurance. Aim that firehose of money toward your debt, then reevaluate. If you're still hungry for more, then consider whether the house makes sense.

OP needs to believe in this philosophy by seeing it work for him. Selling their house is a big step to take before that faith is cemented.

[frugalfoothills]

I can't even imagine pulling down the kind of money you two make in a year, much less spending the kind of money you two spend in a year. Sure you've got plenty of fat to cut -- huge house, big car lease/insurance, tons of food expenses... that is a LAVISH life just looking at your monthly expenses. The fact that you can't afford it on $250K a year is wild. The idea that on top of that lavish life you have OTHER expenses paid for with loans and ccs... phew.

Where did the loans and cc debt come from?? You said you borrowed from your in-laws to buy your home and you're scooting around town in a leased vehicle. Home renovations? Big trips? Health emergencies? Or was it death by a thousand paper cuts and you don't even know? That question MUST be answered.

As others on this board have mentioned, you need to figure out how you got into this mess before you can really fix it. The good news for you is that you have a TON of income to fix it with. I am all for cutting up the cards and deleting the info from your online accounts... no more credit access for you guys. I think you're right -- telling someone to change their mindset is easy, you already KNOW you need to change it, but the follow-through will be hard if the temptation is still there... just like with anything else in life. I wouldn't close the cards and accounts--as a previous poster mentioned that will hurt your credit score. Just take away all your access to them.

Envelope system is your friend. Paying cash is your friend. Evaluate every single purchase and ask whether it is furthering you to your goal. No more restaurants for now. No vacations for a while.

You have tons of money coming in. If you can't do it, no one can.

[Tass]

OP, the way I've seen people be most successful in case studies is to organize all the advice being thrown at you into a plan, which you can post here to keep yourself accountable and then follow up on. For example, your plan might look like:

• Quit all restaurants immediately. (Savings $600)
• Switch cell phone plans. (Savings $150)
• Switch car insurance. (Savings $130)
• Direct firehose of cash toward highest-interest debt.
• Use Mint (or similar service) to analyze spending history. Identify excesses. Develop a budget.
• Post budget to Case Study thread for suggestions. (Savings ???)
• After one month, share what parts of the budget worked and what didn't. Adjust.
• Update thread on cc payoff progress. Pat yourself on the back.

The exact list is going to depend on you and your goals. I'm glad you'e reporting your positive steps, but it would also be great to see what steps you're planning on next! That way the thread can help you optimize your plan and encourage you to keep it up.

[Greyweld]

A word on restaurants, it was really hard for us *ahem, me* to give up, because I was so concerned about the time cooking myself would take.

Some things that helped:
-Realizing getting takeout took about an hour between deciding where to go, going to pick up food, waiting for food to actually be done, and driving back. Eating in takes longer.
-White Rice, microwavable vegetables and chicken thighs are a time-saving godsend. They all are nearly prep-free foods, most of the cook time is passive, and you can increase the quantities up to a point without increasing the time.
-Leftovers are amazing.
-Less time out at lunch means getting home earlier.
-Slow cooker for starting food before you leave home to have it ready when you get home, or pressure cooker/insta pot for having food ready super soon after you get home.
-You can always buy a loaf of bread, meat, and cheese from the grocery store if you don't have access to a kitchen due to traveling to see parents. Or bagels and a tub of cream cheese. Or a bag of salad greens and dressing. There are many no-cook options that cost a tiny fraction of any restaurant meal.
-After you almost exclusively cook for 3 years, restaurant food... kinda sucks?

[robartsd]

OP, the way I've seen people be most successful in case studies is to organize all the advice being thrown at you into a plan, which you can post here to keep yourself accountable and then follow up on. For example, your plan might look like:

• Quit all restaurants immediately. (Savings $600)
• Switch cell phone plans. (Savings $150)
• Switch car insurance. (Savings $130)
• Direct firehose of cash toward highest-interest debt.

I absolutely agree that this should be the start of your plan. I'm not sure about cutting 401k contributions as you should already have a good deal of surplus money to fire at your debt (3-5k/month), your contribution space can't be recovered in later years. You should be able to wipe out both CC's by the end of March using your monthly surplus along with your bonus pay. I'm confident that you could pay off the Marcus Loan with your monthly surplus before the end of 2019 and use the bonus you receive in 2020 to finish of the Lending club debt. I'd crunch the numbers to figure the maximum 2019 & 2020 contributions to tax-deductible retirement plans I could make while still accomplishing the goal of paying off these debts by the end of 2020.

2021 and onward, I'd pay the Student Loan, IRS Payment Plan, and mortgage on schedule while maximizing contributions to tax-deferred retirement savings. I would pay off the Student Loan and IRS debt before investing in a taxable account. After that you get to choose which side of the "don't pay off the mortgage" debate you're on.

[Kayad]

I would look into a HELOC as a vehicle to get some of that debt moved to a lower interest rate. 

[ShoulderThingThatGoesUp]

403/491 = 81%. OP is already above 80% LTV. To get that equity they need a cheaper house.

[oldmanintech]

My wife and I have been going through much of this and we are both on board.  We are increasing our snowball amount from $2,000 to $3,500.

I'll fill out the full case study tomorrow.

I have made some updates to my original post in bold

[Tass]

Good start. Looking forward to the details.

[use2betrix]

I recommend doing a case study and fully tracking all expenses. You can go backward in time and get a rough estimate of categories if you use a credit card on most things. It doesn't take that long, it's what I did when I first started. You can use a simple Excel or Google spreadsheet if that lowers the barrier (no need to use/learn a budget/tracking software). What an eye opener it will be (it was for me). That way you will know where you stand and where you can cut. Right now there are a lot of categories unaccounted for. I agree with some other posters, the restaurant budget should be 0 right now, phones are really high, groceries are highish (depending on where you live).

You don't say what your net take home pay is, but your combined income with your partner is 230k. That is a ton of money. Using an online tax calculator that uses California as a basis for state taxes, it tells me that on a salary of 230k, with no retirement withholdings, your yearly take-home is over 146k. That's 12,200 per month. The items you have listed above come to something like 8,500 per month, so that is nearly 4,000 missing. Obviously this is an estimate. But if you could account for that missing money (and/or go on a SEVERE spending diet for a few months, ie no new ANYTHING!!!), plus trim a few of the categories above, you could knock down CC2 in probably less than 3 months, and then snowball into CC1 and get rid of that one in less than 3 more months. At that point you have a lot more breathing room, and sure throw your bonus at the Lending Club loan, even though it is mathematically inferior, because it improves cash flow a LOT. At that point you could relax a little, not be so strict on budget, since you can easily burn out with severe restrictions.

These are obviously estimates since you haven't posted a full case study.

It would be difficult, you would have to really want it, but very worth it.

Thank you all so much for your thoughtful responses. 

Yes, our combined take home is around $12,200 with the 6% going to 401k.  My company does not take out for medical thankfully.  I removed that 6% contribution which gives us an extra $500 per month.  I plan to shop for cheaper car insurance and cell phone.

Are you not factoring your bonus into the take home? I feel like 250k should have a higher take home than 12k unless you have super high state income taxes and other stuff.

[oldmanintech]

Are you not factoring your bonus into the take home? I feel like 250k should have a higher take home than 12k unless you have super high state income taxes and other stuff.

No, I am not factoring in the bonus. 

[YttriumNitrate]

Yes, our combined take home is around $12,200 with the 6% going to 401k.  My company does not take out for medical thankfully.  I removed that 6% contribution which gives us an extra $500 per month.  I plan to shop for cheaper car insurance and cell phone.

Don't forget about shopping for new homeowner's insurance. If you've been with your current carrier for a while you might find some significant savings by switching.

[Unique User]

Lots of good ideas on lowering your expenses.  I wouldn't close your credit cards, maybe put them in a safe and open up a new cc with a low balance like $5k after you pay them all off?  Not enough of a credit limit to get you in trouble.  Also, if you have trouble with impulse purchases, maybe try  to fool yourselves your income is lower?  Once you are out of debt, bump up your 401ks to the max, create automatic transfers out of your account to Roth IRAs, contribute the max to any program you can - mega backdoor Roth, ESPPs, HSAs, etc. 

You can turn this around, you have a crazy income and this forum!  The beginning of 2009 neither I nor my spouse had a job, our assets had taken a huge beating and I was 40 that year.  By the end of the year we had crappy jobs that totaled under $100k for both of us.  We've more than doubled our income since then and our savings rate has increased from 45% to 60% (post tax).  Nine years later we are on track to retire in 16 months from now.  We could probably go this year, but OMY.