Case Study for the slimeball son-in-law

[MikeMoeJackB]

Hey all,

Now that I better understand the case study format, please help my family realize our dream of debt-freedom.

Topic Title: Reader Case Study – Currently stalling, how can we most efficiently get over the debt-free finish line?

Life Situation: Married filing joint; mid-thirties parents (mid-career: government and non-profit); two kids under three; moved four times cross-country in five years; currently living in rural California near Yosemite.

Gross Salary/Wages: $115,020 yearly/$9,585 a month

Pre-tax deductions:
Pretax Health Ins.   $476
Pretax Vision/Dental Ins.   $102
Healthcare Flex Savings Acct. (FSA)   $192
Daycare FSA   $384
Traditional IRA   $153.02
401(k) / 403(b) / TSP / etc  $384.18
Life/LTD Insurance   $14
 
Total: $1707.20

Adjusted Gross Income:
$108,077.76 yearly/$9,006.48 per month

Taxes:
Federal tax   $377
State/City tax   $147
Soc. Sec.   $238.15
Medicare   $55.69
Self-employment Tax   $0
Total income taxes   $818

Current expenses:
Rent: $1150; California rental prices are outrageous.  We currently live as close to my work as possible (without living in the park) but have a 30 minute commute.  That being said, our house is a double wide and this is the most affordable accommodations we could find. In April it is possible to move inside the park and pay <$1100 and eliminate the commute and storage needs.  We must wait until April so not to break our lease. 

Verizon: $110; this is the next item I’d like to eliminate. Verizon does not work well in the mountains and I have a work phone that I use for common things, but I have a device that is on monthly payment plan (<$650) and my boss loses his mind when I talk about getting rid of my personal cell. Also, my wife likes to have the ability to create a hotspot anywhere because she teleworks from all over the country.

Storage: $100; I would really like to get rid of this. We already have too much stuff and my goal is to sell off all of our surplus stuff.

Landline/Internet: $75; my wife teleworks so she needs a reliable landline and dsl internet.  We also have the Verizon hotspot which seems surplus with this set up.

PGE/Electricity: $57; we do really well with electricity costs.

Directv: $110; I hate paying for this TV package, but my wife and I love watching football and sports.  My wife feels that we don’t do anything already (with the toddlers and money situation) that this is a “cheap” option.  I want to get rid of it.

Childcare: $1100; so expensive in CA, but no other option.  In fact, we’ve just changed from an arrangement that didn’t work out but cost us $1,800 a month.  I was basically working to put my kids into daycare. This forced us to look hard at our current situation and even contemplate one parent quitting work.

Gas/Propane: $50; really $150 over three months.

Food/groceries: $350; we have been trying to eat better and we’ve always cooked at home. We never eat out. However, diapers and such are expensive. Costco has been our best friend in the past years, but we are now two hours away from the nearest warehouse.

Insurance: $138; two paid off vehicles, just changed to USAA and this was a cheaper option.
Transportation: $250/gas; a lot of driving every day, sometimes three hours a day, my main goal for the near future will be to remedy this issue.

Monthly Total: $3240


Assets:
2005 Jeep Wrangler Rubicon Unlimited- Blue book- $14-17k

2006 Jeep Commander- Blue book- $9k

Edward Jones- Stocks: $8000; Roth IRA: $4500

TSP: $8,000; possible to borrow half/$4000 @ 1.8% to pay down debt.

Acorns indexing: $1,000; experimenting with this platform since it is a very passive way of investing/saving.  Links to checking account and invests the dollar differences in purchases.

Cash on hand: $8k (including money from family; monthly cash flow is $5,394/$2,697 per paycheck)

Liabilities:

Loan from family $25k

Wells Fargo Credit Card: $7,000 @ 12% (Trying to snow ball the biggest debt- we put as much as possible on this every month)

Fed Student Loan: $17,800 @ avg 5.375% ($291 per month)

Navient (personal loan for past medical bills): $3,500 @ 5.5% (wife auto-pays this $52.91 per month)

AMEX balance transfer: $467 @ 0% for 12 months (at least $50 per month)

Bank of American balance transfer: $4,210 @ 0% for 16 months (at least $50 per month)

USAA balance transfer: $5,000 @ 0% for 12 months (at least $50 per month)

Paypal Credit: $3,500 @ 0% for 6 months ($500 paid per month)

Citi balance transfer $1,317 @ 0% for 12 months (at least $50 per month)

Balance transfers were used to stop the bleeding; also have spread out a lot of the debt to improve our credit scores; we average a 700 as of right now.

Total Liabilities: $67,794/ we average about $3600 a month on these liabilities and have made significant progress. That being said, when we don't need the extra money left over (that has not been lately with car repairs, deaths in the family, and childcare struggles) I use it on debt almost every month. 

Specific Question(s):
Please give any insight on what we should do next.  We have some cash on hand and liquid assets, should we use these in order to pay down debt? Do you agree with the snowball method of paying debt or is there a better way? Which debts are the worst to pay first? Do you have any other advice for trimming the fat? 

[Choices]

I'm not quite sure I understand the title of this thread. Are you posting for someone else? If so, is there a reasone he's not posting for himself? He might be able to provide more insight into his decisions so far.
If you're posting for yourself, do you mind sharing why you've moved so often over the past few years?

[clarkfan1979]

I don't understand the title either. Is slimeball appropriate? If they are really bad with money, maybe they are confused or beginners. When I think of slimeball, I think of someone doing something unethical.

[SKL-HOU]

I'm not quite sure I understand the title of this thread. Are you posting for someone else? If so, is there a reasone he's not posting for himself? He might be able to provide more insight into his decisions so far.
If you're posting for yourself, do you mind sharing why you've moved so often over the past few years?

He is posting for himself. The title is explained in a different post "need an honest opinion" post.

[MikeMoeJackB]

No worries, this is a post for myself.  In another thread I made myself out to be a slimeball because of my out of the box thinking.

Anyway, for the past ten years I've been a park ranger and, quite frankly, in order to even earn permanent full-time work you have to move around to find it.  I'm in a pretty good situation here in Cali so no need to move anytime soon.

[mustachepungoeshere]

He started an earlier thread which led to this exchange:

I hope I don't sound like a slimeball son-in-law here. I am only trying to use the most logical approach to free us from debt.

An honest opinion....yes, you are sounding like the slimeball son-in-law.

http://forum.mrmoneymustache.com/ask-a-mustachian/need-an-honest-opinion/msg1317553/#msg1317553

That's where the title comes from.

[marty998]

You are bleeding a lot of money if your spending is $3200 a month but your income is $9000 a month and you're not making significant progress.

The debt should be easy to knock off, provided you are serious about doing it.

I would discontinue Acorns. No disrespect, and I understand some people need to start small, but investing 39c at a time is not going to make a material difference. Take the thousand and pay Wells Fargo. Pay that off then move to Navient.

Make sure you pay Paypal in the 6 months - $500 per month is not going to get you to $3500.

[Choices]

Also run far and fast from Edward Jones. They have super-high fees and will steer you away from index funds. Plus, with your high-interest debt you should start there rather than invest.
After seeing the other thread, it would be a good idea to go to dinner with your wife and the family who loaned you the money to discuss repayment terms face to face. It's making things very uncomfortable and damaging relationships, which IMHO is worse than a huge interest rate. Unless it truly is a gift with no strings attached, you might want to tackle this first for the sake of those relationships, including your marriage.

[MikeMoeJackB]

I would discontinue Acorns. No disrespect, and I understand some people need to start small, but investing 39c at a time is not going to make a material difference.

Yeah, I'm not too attached to Acorns and I could drop it easy. I thought about using it as a way to teach the kids early about investing, etc.  But as far index funds go its pretty weak.

[MikeMoeJackB]

Also run far and fast from Edward Jones. They have super-high fees and will steer you away from index funds. Plus, with your high-interest debt you should start there rather than invest.
After seeing the other thread, it would be a good idea to go to dinner with your wife and the family who loaned you the money to discuss repayment terms face to face. It's making things very uncomfortable and damaging relationships, which IMHO is worse than a huge interest rate. Unless it truly is a gift with no strings attached, you might want to tackle this first for the sake of those relationships, including your marriage.

Thanks for the advice.  I'm definitely on board with dropping Edward Jones.  In fact, sort of some back story, I used some of that "loan money" from the family to pay off a niggling 6% loan against our stocks account (EJ makes it near impossible to pay back loans against your account) so that I can free up the full amount just in case we need to liquidate the account; ie. to pay back our family or debt.

My wife is attached to EJ because we had a local friend as a broker when we started it who made us a lot of money. He's since gone independent. We've pilfered the account over the years, but contributions also ceased when we got serious about debt repayment hence the low amount in the account.

The wife is cool.  She knows the trouble we're in, but chooses to ignore it. Truly, that's how her family operates, they don't talk about the hard stuff.  That's not to say I'm going to exploit the situation I just know that everything is alright.

[lizh]

I am impressed that you can keep food/groceries at $350.00 a month for 4 people.
Good work!
Liz

[Lews Therin]

You do seem to have  a lot of cash flow, however the most important is to make a plan of how much you'll be able to repay in how much time. Your cash flow of 5394 per month. That means that in 6 months (when the first CC has to be repaid, you could have already paid-back over 30,000 without doing any changes.)
 
It is excellent that you were able to receive so many 0% transfers, however these will be extremely important to clear before hitting the end date as they will rapidly be your biggest expense.

You have a few options depending on how comfortable you are with moving debt around. If you have more space in 0% tranfers (Looking at the 16 month CC in particular, you could get rid of the 12%, save the high interest and continue paying them down, thus not making your total owed higher than it has to be.

My recommendations: You have 12% interest rate on your credit card, yet you have 8000$ in stocks. I would sell them immediately and pay off the CC (Think of it as a 12% return on your stocks). Same thing for the 1000$ in acorn. Until you hit the magic number of interest rates being lower than your investment gains, leave the stock market alone and get rid of those debts. I would also bring down the emergency fund down to 0-1000$ (think of the TSP loan at 1.2% as your emergency fund) Every month you have 5000$ coming in which you could simply repurpose to the emergency if one happens. You should be able to be working on the family debt within 6 months, without having any other loans at high %.

For your emergency fund, if you get some push back from your S/O, you could always tell her that if you have some unexpected expense, you now have space on your CC. (Which you will 100% avoid to use, but you don't need to specify that)

17000$ if you are willing to put everything on your debt repayment could go a huge way.

Don't forget to pay down from the highest % to the lowest, as even though one might be smaller, it doesn't matter if you have 24 different loans, you want to keep putting all your effort on the ones that have the highest interest rate, and the ones that will become extremely costly if you don't pay them off fully before the end of the 0% period.

[MikeMoeJackB]

It is excellent that you were able to receive so many 0% transfers, however these will be extremely important to clear before hitting the end date as they will rapidly be your biggest expense.

You have a few options depending on how comfortable you are with moving debt around. If you have more space in 0% tranfers (Looking at the 16 month CC in particular, you could get rid of the 12%, save the high interest and continue paying them down, thus not making your total owed higher than it has to be.

Thanks for the smart analysis and suggestions.  Originally the balances on a few 0% cards were much closer to their maxes; however, I also realized (too late) that this had a profound effect on lowering our credit scores (high 500's for awhile).  Since then I've spread the debt out onto other 0% balance transfers so that none of the cards hold more than 30% their limit which I've learned does wonders for your credit score and we're in the 700's again.  In the future, a good credit score, I believe, will also help us balance transfer our debt again onto 0% offers if need be and our current offers expire.  Yeah, it seems like a shell game at this moment, but I can tell the difference our debt payments have had since I made this move. 

Oh and yeah, $17k in my mind would go a huge way in conquering our debt struggles, that's exactly the way I look at it.  Unfortunately, thinking that way has made me a slimeball.

[msilenus]

What do you need a credit score for, and on what timeframe?  Looks like your first zero-interest teaser expires in 12 months.  Sounds like your credit score responds pretty quickly to transfers, so you could consider a plan around maxing out the 0% cards for 10-11 months.

Verizon: you can switch to a pay-as-you-go MVNO plan (ie: Airvoice Wireless) and keep things quick with your boss.  He doesn't have to know who your provider is.  Mine doesn't, and I'm on-call periodically.  Your wife's case is harder, but I bet you can wind up in an improved spot by getting you off V and shopping around for an alternative that meets her needs. 

+1 to everything the Canadian fellow said... but what you really need to do is convince your wife.  I think you've been more of a slimeball husband than a slimeball son-in-law. :)

You need to have an open and honest negotiation with her, and be prepared to meet her part way.  Maybe that means keeping the investments, or keeping some investing going, or paying her parents earlier than you'd like or even makes sense.  Maybe you could split your debt payments between her parents (perhaps to a special account) and your other creditors, for example.  You both can't get everything you want, but have to be able to get each other what you need, and you need to accept that her needs might not be financially optimal.

One thing that can help your pitch to sell or not invest for a while is that investments are expensive right now, and killing debt frees up cashflow for investment later, when investments may be cheaper.

[SKL-HOU]

I assume the pretax deductions and taxes you listed are biweekly and not monthly?

[Lews Therin]

A point of clarification that you have to figure our with your S/O and her family is when you need to repay the family loan. I was taking it as a long-term (1 year ish) with no interest, but if it was only supposed to be a short term thing, you should be ready to continue repaying them. Maybe by explaining you have some very bad debt right now you can get a little more time, but it needs to be straightened out.

Your credit score isn't really an issue right now, as the shortest amount of time before one expires is 6 months, and all the way up to 16 months, which allows you to get your credit back in order before the oldest ones expire. If your S/O family wants it repaid right away (or your S/O) then explain that this'll mean pushing any other long term plans another year in the future. Moving the 12% onto the various 0% at 12 and 16 months will give you some breathing room, just make sure that EVERYTHING is concentrated on repaying the debt. 25k is 5 months of your take-home, you still have 9000 (stock and acorn) that should be repurposed right away, same thing for the emergency fund. It's time to raid the accounts, and slowly built back up.

Best thing you could do is show an action plan to your spouse explaining the different effects each plan will have on your finances: Plan A repaying family first, Plan B getting your worst debts in order, Plan C a mix of both.

You might be getting off your debts, but if her family needs the money, it's not fair to have them be essentially taking on interest on your behalf.

On the other hand, maybe they'd be willing to loan it to you for 4% and you'd be paying them back 2.5k a month for 11 months!

[human]

I would love to own a jeep and live and work in the mountains so in one way many would say you are living the dream.

However 70k in debt and 250 in gas a month. Any way you could sell those vehicles for a crv? Not sure what the winters are like. Even when you do move inside the park I assume you will want to leave once in a while.

[MikeMoeJackB]

I would love to own a jeep and live and work in the mountains so in one way many would say you are living the dream.

However 70k in debt and 250 in gas a month. Any way you could sell those vehicles for a crv? Not sure what the winters are like. Even when you do move inside the park I assume you will want to leave once in a while.

I believe the fundamental issue is that we have been living the dream too long. Lol. Fixing the car issue has been a pet project of mine for about 6 months now and I've gotten research help from a fellow park friend (and MMM'er), but to no actionable solutions.

1. We've been here less than six months and have yet to experience a winter in the Sierras.  People give a lot of credence to Subarus in these parts, but I'm not convinced. I'd like to buy a Scion iA or Yaris but I'm not 100% convinced that I can get away with an econobox during these mountain winters. Which leads me to conundrum part 2...
2. Would it make sense to burn our liquid assets in order to save a few bucks?  My jeeps reliably get 17 mpg, (and theyve been paid off for five years) a CRV might get me 25 (many people have 4wd CRV's and report maybe 25 mpg). Best case scenario with the Yaris or iA (assuming they could do the job here) is savings of about $250 a month. Meanwhile, I lose liquid assets and also spend a lot of money on title and registration. Its expensive in CA too.

Bottom line: I've threatened to sell my rubicon several times in the past five years and that's when my wife looks at me like I've totally lost my mind. Selling the commander is a no-go not only because of its low resell value, but because it was a college grad gift to my wife from her father who just passed this year. Not going to happen.

[MikeMoeJackB]

Verizon: you can switch to a pay-as-you-go MVNO plan (ie: Airvoice Wireless) and keep things quick with your boss.  He doesn't have to know who your provider is.  Mine doesn't, and I'm on-call periodically.

One thing that can help your pitch to sell or not invest for a while is that investments are expensive right now, and killing debt frees up cashflow for investment later, when investments may be cheaper.

I think my boss just wants 24/7 texting communications even when I'm off work. But for that I just text him on my work phone which he does not like. He's old school. I don't understand it because txt plans on Verizon are free unlimited but he thinks I'm mixing business and pleasure while business picks up the tab. I just try to placate him because I have a promotion coming up soon with $600 more a month to pay down debt.

Your last point is my strongest conviction right now. I think my wife is very receptive to the ER mantra because of all the hardships we are facing right now (far from family, etc.) and the flexibility it would provide, but you can't have the chicken without the egg.

[kpd905]

I think the first two things you should do are to cash out the Edward Jones stocks and the Acorn funds.  Throw those at one of your debts.

As for the cars, I would just keep them for now.  I have driven into Yosemite and I would sure as hell not want to be driving a Yaris on those roads in winter.

[Another Reader]

You have a lot of accounts you are juggling.  I think some of the Dave Ramsey approach would help you,  In your shoes, I would pay off the two smallest loans immediately.  Work on the next smallest after that.  Paying loans off frees up cash to apply to the next debt and gives you some breathing room.

I can't match your income with your spending.  Money appears to be disappearing with no accounting.  Start tracking all of your money - Mint or Personal Capital.  Ask your wife to enter all her transactions as well.  Stop the leaks and there will be more money for debt repayment. 

After you have paid off some of the smaller loans, transfer the $12k on the Wells Fargo credit card to a zero percent interest card.

Explain your debt situation and work out a repayment plan with the in-laws.  Then stick to it.

I would worry about the cars next spring, after you move.  They should get you through the winter and their cost is the marginal gas cost because you owe nothing on them. 

ETA:  Dump the taxable account at EJ and pay off debt.  Transfer the IRA to Fidelity or Vanguard.  Close the Acorn account and apply the money to debt.

[MikeMoeJackB]

Best thing you could do is show an action plan to your spouse explaining the different effects each plan will have on your finances: Plan A repaying family first, Plan B getting your worst debts in order, Plan C a mix of both.

You might be getting off your debts, but if her family needs the money, it's not fair to have them be essentially taking on interest on your behalf.

Agreed, with the action plan. After this little intervention last night, I talked to my wife and we agreed to send $5k to my mother in law. She won't accept it because she just sent us more money to pay for our holiday travel to Atlanta. I hate being in this conundrum of constantly relying on others, and it has been a tough year.  My wife's father died earlier this year and my mother in law will not hear any excuses for why we can't accept the money.

Additionally, in hindsight, I should have taken a personal loan for the $25k instead of borrowing from family. Instead, they came to our rescue with cash in hand and wouldn't accept any other excuse. Originally, I believe they had a bank loan on the amount but then paid it off a couple months back when insurance money came in. That's neither here nor there, just some background. 

[somers515]

You have a lot of accounts you are juggling.  I think some of the Dave Ramsey approach would help you,  In your shoes, I would pay off the two smallest loans immediately.  Work on the next smallest after that. 

Unless you need help staying motivated to pay down your debt, I suggest paying the debt with the highest interest first.  Trust in math.  In light of your positive cash flow you should be able to wipe it out fairly quickly.  Good luck!

[Lews Therin]

You have a lot of accounts you are juggling.  I think some of the Dave Ramsey approach would help you,  In your shoes, I would pay off the two smallest loans immediately.  Work on the next smallest after that. 

Unless you need help staying motivated to pay down your debt, I suggest paying the debt with the highest interest first.  Trust in math.  In light of your positive cash flow you should be able to wipe it out fairly quickly.  Good luck!

+1, You have no need to go "snowball" and it would be counterproductive from your standpoint, you want to get rid your debt situation, not cosmestic steps by saying I paid off half my card (and yet still have most of the high interest debts and having to explain to your S/O that you are still unable to get out of debt-mode). When you show that the highest debt is gone, then you'll be able to keep it going from the fact you are now saving X amount of money. Day-to-Day you should be looking at all Debt as equal, unless they are at 0% (leave alone) or at higher % point (GET RID OF IT NOW!)

Excel could become your friend by showing exactly what each loan is costing you, and the effort you have to go through to get rid off. If you look at the amount of days to repay for example, every day you are not touching the 12% debt it's more than 2x the amount the 5% is costing you.

[Cpa Cat]

Paying down the Wells Fargo debt first is a no-brainer. Tell your wife that when you have no debt, you can always hire her friend to be your financial adviser again. Whether or not you do is an argument for the future. The market's up. Sell sell sell. Reserve a little for taxes. In fact, depending on your gain, it might make more sense to sell January 1 to push that tax bill 12 months into the future.

After Wells Fargo, you need a 6 month plan to pay off Paypal.

Getting rid of the storage unit is a no brainer. That is 100% within your control. Craigslist some stuff for some extra cash.

Personally, I'd dump cable and go for Netflix, but I don't care for sports. Honestly, we hardly noticed cable was gone. But with DTV, you might have a contract. However, from experience, I know that if you do cancel, they will harass you with deals for years afterwards. I just can't wrap my head around the idea that it's super important to pay off her parents... but not so important that she's willing to stop watching sports in real time. Doesn't Sling have sports? I don't know... cable + sports is speaking a foreign language to me these days. :)

If your MIL doesn't accept the payment toward the debt, then you're off the hook there. Use your money to pay off the other debt first. If she does accept the payment, then you're not off the hook. This debt carries a high emotional interest rate. But it's also your highest balance debt, so it will take time to payoff. I suggest paying at least $200/mo toward it, after you've cashed out your liquid assets and addressed your higher interest debt. It's small potatoes, but it shows you're making an effort - and you'll get half of that from ditching your storage unit (more, depending on what you're storing in there).

So this is what I'd do:
- Use Cash and Edward Jones and Acorns to pay down Wells Fargo (minus cash given to you for holiday travel)
- It sounds like $5,000 has been used for the family debt (or maybe not if she refuses to take it - I'm unclear if she has yet or not)
- $200/mo toward family debt - unless MIL refuses to accept repayment, in which case ignore it for now (but pay it before Student Loans or car loan debt if you end up having to pick some up)
- Then address debts as follows:
1. Ditch the storage unit, sell the stuff for debt.
2. Pay Paypal before it resets.
3. Look at all of your 0% interest rates and put them in order of highest reset interest rate to lowest.
4. Put Navient in order with the credit card interest rates (I have a feeling 5.5% is going to be at the bottom of the list).
5. Second to last, pay off family debt.
6. Last pay Student Loans (or let them ride and start investing)

Emergencies: Use TSP loan, or pull balance back onto your lowest reset interest rate 0% credit card.

[Another Reader]

In theory, paying odd the highest interest rate first is correct.  Given the emotional context, I think using the Dave Ramsey approach at first relieves some of the pressure and gives them some room.

With $9,000, you can pay off a lot of the small debt or pay down 3/4 of the Wells Fargo bill.  I would pay off all the small debt and look at transferring the Wells Fargo debt to another zero percent card.

[MacGyverIt]

My recommendations:

Iamcanadian807, this write up cleared out some of the cobwebs in my brain! This was a great face-punch that helped me realize I needed to sell some of my Vanguard stocks to cover existing debt that I'd grown accustomed to having. MMM always says tackle the debt first, the loan was there and so low interest that I wasn't *seeing* it as a problem, if that makes sense. So this remaining debt will soon no longer have a home in my financial portfolio!

Thanks for taking the time to respond to OP so thoroughly, you helped me save a lot of money in the process.

[Lews Therin]

My recommendations:

Iamcanadian807, this write up cleared out some of the cobwebs in my brain! This was a great face-punch that helped me realize I needed to sell some of my Vanguard stocks to cover existing debt that I'd grown accustomed to having. MMM always says tackle the debt first, the loan was there and so low interest that I wasn't *seeing* it as a problem, if that makes sense. So this remaining debt will soon no longer have a home in my financial portfolio!

Thanks for taking the time to respond to OP so thoroughly, you helped me save a lot of money in the process.

High percentage debt I hope, if you're talking about 2-3% (maybe up to 4-5 depending on your scenario, tax system, and investment timeline) then it's not always a winning proposition to use long-term investments, as you lose out on the return. But for sure, if you prefer the instant payout from the stocks at your debt interest its an easy way to feel less stressed. For example, low interest Mortgages that are tax-deductible might as well be left alone if you are willing to invest on the long term. (Even in Canada with some tax/accounting magic you can do this and have portions of the mortgage be tax-deductible)

[MikeMoeJackB]

The market's up. Sell sell sell. Reserve a little for taxes. In fact, depending on your gain, it might make more sense to sell January 1 to push that tax bill 12 months into the future.

Excellent points, thank you.

As a secondary concern, I have wondered about the tax implications of selling all our assets and January 1 was my trigger point to make a decision.  Conversely, who knows if the market will keep on like this for that long. Also, EJ will take 2% off the top after sale, but that just makes me want to drop them even sooner. Honestly, the strategy that I am considering involves using the TSP loan, acorns, and cash to pay off WF. The TSP loan rate is low and who knows how long it will stay that low (its gone up from 1.1% to 1.8% in a month). Also there are no other penalties for using the loan and I can pay it back via direct deposit so there's no fear of relapse.

Maybe after the new year sell EJ and use that for the debt next in line.  Meanwhile, a lot of my effort will go into preventing more debt accumulation. 

[MacGyverIt]

Personally, I'd dump cable and go for Netflix, but I don't care for sports. Honestly, we hardly noticed cable was gone. But with DTV, you might have a contract.

OP, do you have a friend from whom you can "rent" their login info to stream sports during those times of year? This way you are paying for the content but no longer paying an insane amount of money for more media than you can afford.

[MikeMoeJackB]

In theory, paying odd the highest interest rate first is correct.  Given the emotional context, I think using the Dave Ramsey approach at first relieves some of the pressure and gives them some room.

Both are correct strategies and I've used both to get where we are, even if it doesn't feel like much. (We were at $100k+ debt at one time)

For instance, I paid a loan on our EJ account, which was at 6%, for several reasons: it was hard to repay and all we did was ignore it, and because I wanted to make that account fully liquid.

WF is next up, but then I know it wont stay at zero long because we use it as an everyday card. The trick I've found is to compulsively pay the statement balance every month on top of normal debt repayment in order to stay ahead.  Regardless, paying the full $7k in one fell swoop would be a huge boost and momentum builder for the future.   

This is where I may need some more advice: if I can keep debt rolling to another balance transfer at 0% when the past terms have expired, should I then focus on others like NAVIENT, Fed Loan, etc.?  With the good credit score we have this possibility, but then I also read that long term, established credit with a decent % should be kept to maintain good credit.  I don't know, that seems at odds with mustachian philosophy, but I have seem some benefit from gaming the credit markets.

[MacGyverIt]

High percentage debt I hope, if you're talking about 2-3% (maybe up to 4-5 depending on your scenario, tax system, and investment timeline) then it's not always a winning proposition to use long-term investments, as you lose out on the return.

It was low percentage but on ~23k but more importantly, I realized this debt was adversely effecting decision making when it came to my work/stress situation. The emotional/mental relief from freeing myself from this debt will pay off in personal and professional dividends. Vague response, I know, but the best I can describe it atm :)

[former player]

I'm seeing a net monthly income of $7,914, monthly expenses other than debt repayment at $3,240, leaving $4674 per month to go to debt interest and principal.

Can I start with a high five on your expenses?  Considering your rent and childcare costs you are pretty badass on the rest, especially groceries.  I do note that there are no expenses listed for car maintenance, clothes or presents/toys, though.  If you can sell the contents of the storage, that is money coming in and a nice bit of headroom for any expenses not listed.

Your job is recent and you have a promotion in the offing: do not upset your boss by getting rid of your personal cell or using your business phone when he thinks you should be using your personal one (even if he is being irrational/unreasonable about it).  You have sacrificed a lot for this job over the years, don't mess up by not making this sacrifice now.  Look up I P Daley's communications guide for cheap options for your personal cell.

Your investments in your tax advantaged accounts are low.  For the time being, that's OK because you are paying down debt.  But it makes no financial sense at all to keep after-tax investments while you are 1) paying down debt and 2) not maxing out your retirement funds - if you were starting from scratch no-one here would recommend you putting money into the Edward Jones or Acorns accounts.  Cash them out completely and with a month's surplus cash added to it you have wiped out both your Wells Fargo and Navient debts entirely.  Once your other debts are on track, start upping your 401(k) etc. contributions - you should be aiming to max these out each year once you are debt free.

It looks to me as though you've had a rough time getting to where you are but that things are on the up: a more settled life, a good level of family income with more to come, a job you love in a wonderful location.  If you keep on top of expenses your finances will be looking good this time next year.

[Lews Therin]

This is where I may need some more advice: if I can keep debt rolling to another balance transfer at 0% when the past terms have expired, should I then focus on others like NAVIENT, Fed Loan, etc.?  With the good credit score we have this possibility, but then I also read that long term, established credit with a decent % should be kept to maintain good credit.  I don't know, that seems at odds with mustachian philosophy, but I have seem some benefit from gaming the credit markets.
[/quote]

If there is no downside to the TSP loan (I don't know the acronym) Then borrow the full amount possible.
For your 0% balances, your detailed plan will allow you to track exactly when you have to repay the CC's in order to completely remove the debt before the time elapses for the promotional rate. If right before you get another 0% offer, then by all means move it again, but remember the promotional rates might not be there exactly when you need it. When you have your spreadsheet - Plan in hand, you can track exactly how much to put on each account taking large chunks out of the accounts currently costing you more money. I'd also recommend not moving any of the money you have currently in any of the 0% accounts, as you will be hit by the transfer penalty, and it might make sense to get rid of it right away rather than add another penalty to the debt (3% transfer hurts a lot more than 5% yearly, as two transfers is worse than the 5% you have on other accounts).

For the gaming the system remark, you can actually kill your whole debt in a single year, so you can use the 16 month 0% as a safety net, and get rid of EVERY SINGLE DEBT ITEM and never need to get another 0% account, AS LONG AS YOU KEEP TO YOUR MONTHLY EXPENSES. (Sorry for the Capitals, but it needs to have emphasis!) 5000*12 = 60,000$

Order:
1. CC at 12%
2. Work on the 5.5% debts
3. Erase the Paypal and 6 month CC before they hit the 6 month mark (let's say in 3-4 months to give yourself some breathing room)
4.Continue on the 5.5%
5. Do the same as step 3 with the 12 month CC's

X. Depending on your family repayments, you might want to slow down the 5.5% repayments to allow a few "good faith" repayments to show your S/O family that you are both working on the debts, as well as getting yourself back in good financial straights.

[cincystache]

You have gotten some good advice already and your income is great, keep that up. I would also recommend you ditch Acorn and Edward Jones and pay off Wells Fargo. Also, rollover your Roth account to Vanguard or Fidelity, NOT edward jones.

If I were in your situation:

1. Pay off Wells Fargo now with your edward jones stocks (today)
2. pay off Paypal and Navient with your cash on hand and the remainder of your acorn/ed jones (today)
3. Pay off and close all of your other 0% balance transfers (5,000 per month should take ~3 months)
4. Replenish cash on hand to 3 months of expenses (2 months)
5. Pay off your family loan (5,000 per month ~5 months)
6. Pay off your student loan (5,000 per month ~4 months)

I'm counting 14 months from today you will have zero debt and 5,000 per month of cash flow to invest for retirement/house/replacement cars.

Buckle down, clean everything up, focus exclusively on getting out of debt. I'm sure you can do it by the end of 2017 if you stay focused and continue to earn/spend at these levels

Good luck!

[MikeMoeJackB]

I'm seeing a net monthly income of $7,914, monthly expenses other than debt repayment at $3,240, leaving $4674 per month to go to debt interest and principal.

Your job is recent and you have a promotion in the offing: do not upset your boss by getting rid of your personal cell or using your business phone when he thinks you should be using your personal one (even if he is being irrational/unreasonable about it).  You have sacrificed a lot for this job over the years, don't mess up by not making this sacrifice now.  Look up I P Daley's communications guide for cheap options for your personal cell.

It looks to me as though you've had a rough time getting to where you are but that things are on the up: a more settled life, a good level of family income with more to come, a job you love in a wonderful location.  If you keep on top of expenses your finances will be looking good this time next year.

At least $3600 goes to debt repayment each month, most times more, sometimes less.  Wife just did a lot of online christmas shopping so we most likely will be at $3600-$4000 this month. Most the time I will just pay all of our bills plus a little extra the day we both get paid so she sees that we have no extra money and she'll freak out a little and be fine later.  Honestly, I know this all sounds pretty crappy (slimeball husband here), but this is the only way it works.  She doesnt hold a grudge for too long because she knows shes an avoider. Her parents are the same.  And if I can prove that this works then in the long run I will immediately use all the money we are paying on debt straight into investments in the future. 

Thanks for the advice on the boss too. That's exactly how I feel, I just hate to bleed out that money each month and wanted a second opinion.

All in all, I love the park service (despite the fact that recetly the agency is becoming too political), we love where we live, I have a great career track that will pay huge dividends in promotions when we are financially stable enough to move again, but I'm not a big fan of California.  Oh well. 

[kpd905]

Off topic, but what types of jobs pay this well in the national park service?  Or is part of the pay because you are in high cost of living California?

Also, ouch on that 2% back end fee on the Edward Jones funds.  What funds are you in?

[MikeMoeJackB]

Off topic, but what types of jobs pay this well in the national park service?  Or is part of the pay because you are in high cost of living California?

Also, ouch on that 2% back end fee on the Edward Jones funds.  What funds are you in?

Well, my job doesnt pay that well.  I gross around $40k a year.  My wife makes double that and works from home.  My government benefits for healthcare are stellar though which is why we stick with it.  Anyway, I work in the safety and occupational health field. Very lucrative when not working for the government.

For EJ, we bought stocks outright and after five years see 20+% returns even after not adding to it for awhile.  I much rather invest the bulk of our income in Vanguard and TSP (thrift savings plan) and maybe a small percentage in straight stocks when we are ready.

[FIFoFum]

The hard part of cutting the cord and ditching the DirecTV is having to be intentional about what you watch or put on. But there are so many options that this is really just flushing $ down the drain, especially if you're tacking on extra channels and services because you're "already" paying for the monthly subscription.

You absolutely can get rid of DirecTV and still watch live sports. Other than sports, you could subscribe to Netflix, Hulu, Amazon Prime, AND HBO GO for less than half of what you are paying per month now. Of course, there is no reason you really would need all of these things - a lot of tv is free to stream online via network sites or youtube. Even twitter broadcasts games now!

For sports - The big question is what sports and teams you are treated as "must see" vs. just watching whatever game is on. Are you local to your teams or not? Are you living somewhere that you could use a digital antenna to get local stations and still see what you want to see? Can you get a streaming service package that operates as a league pass for you?

Even if your big issue is that you have to parent little children at home while watching an out-of-town NFL team play at 10 AM (because you're west coast now and your team is not), there are STILL cheaper ways to make this happen than spending that much money on DirecTV year round.

[MikeMoeJackB]

The hard part of cutting the cord and ditching the DirecTV is having to be intentional about what you watch or put on. But there are so many options that this is really just flushing $ down the drain, especially if you're tacking on extra channels and services because you're "already" paying for the monthly subscription.

You absolutely can get rid of DirecTV and still watch live sports. Other than sports, you could subscribe to Netflix, Hulu, Amazon Prime, AND HBO GO for less than half of what you are paying per month now. Of course, there is no reason you really would need all of these things - a lot of tv is free to stream online via network sites or youtube. Even twitter broadcasts games now!

For sports - The big question is what sports and teams you are treated as "must see" vs. just watching whatever game is on. Are you local to your teams or not? Are you living somewhere that you could use a digital antenna to get local stations and still see what you want to see? Can you get a streaming service package that operates as a league pass for you?

Even if your big issue is that you have to parent little children at home while watching an out-of-town NFL team play at 10 AM (because you're west coast now and your team is not), there are STILL cheaper ways to make this happen than spending that much money on DirecTV year round.

Great points. The only reason I havent ditched Dtv is because of the two year commitment. We tried to work some magic and got a 6 month no-pay status when we moved but they hit us with a new two year contract.  My wife was suppose to negotiate them down, but she hasnt yet.

Really though, I don't need/want it. I watch a lot of international soccer and years ago I did this on pirated chinese satellite feeds while living in my jeep in grad school. It drives my wife crazy though.  She wants to watch her Georgia Bulldog football every saturday and I have to say I don't mind watching great games like this Ohio State v Michigan game thats currently on.  I guess what I am saying is that nothing is really "must-see" for me anymore, but its nice to have when you don't go out because your life run by toddler terrors.

[ToTheMoon]

When our kids were really little and we discovered MMM, we were not ready to give up the TV entirely (middle of the night feeds/awake for multiple hours made it a tough proposition.) 

We compromised by having it on Oct-Apr, then putting it into Vacation Hold status for the other months (our contract allowed us to do this for up to 180 days per year.)  We gave it up entirely after two cycles like this.  Perhaps your DTV contract has something like this written in?

[MikeMoeJackB]

When our kids were really little and we discovered MMM, we were not ready to give up the TV entirely (middle of the night feeds/awake for multiple hours made it a tough proposition.) 

We compromised by having it on Oct-Apr, then putting it into Vacation Hold status for the other months (our contract allowed us to do this for up to 180 days per year.)  We gave it up entirely after two cycles like this.  Perhaps your DTV contract has something like this written in?

Great point, it doesn't hurt to ask. 

[fredbear]

If your mother-in-law forgave the $5K, start a 529 for each child with 2.5K and let her know this is her doing.  Once a year, send her a copy of the statements.  When she wants to contribute more -- she will -- give her the information to do so.  This will provide a good deal of social, familial capital, as well as a start on the kids' education costs.  Grandparents, to the extent they can, like to matter.

[sparkytheop]

A lot of great advice already.

You should be able to pay off the debt very quickly.  However, in the other thread it was mentioned you've felt you're "only two years away" for several years now.

Once you have a solid idea of how you want to pay off debt, make a budget that will make it happen, and stick to it.  The sticking to it part is the important part.  If you are paying debt but not keeping a budget, it's easy to just keep adding to that debt. Until you have balances paid off and can use a credit card for the rewards (that won't get cancelled out by interest), don't use the credit card to pay bills.  If your wife sees the "hit" when seeing a low checking account balance, but doesn't see the "hit" by seeing a high credit card balance, this could help shift the spending mindset.

Include everything in the budget as a line item.  Include things that are not paid monthly, but still have to be paid (I only pay car insurance every 6 months, but I put money toward it monthly).  Include house and car maintenance ("slush funds") so that you don't have to raid the emergency fund when those things come up.  Make Christmas and gifts a line item, and save a little each month for those things, then stick to what is saved when the time comes for shopping.  I'd also make in-law repayment a line item.  Again, keeping up the "good faith" payments.

Record every single financial transaction, even if it's $1, to see where that money is going.  Once you see everything laid out in how much you're spending, see where you can cut back.  Allow yourselves each a small allowance where you don't have to answer for any of that spending (I give myself $50-$200/month allowance, depending on how much overtime I work).

Set your debt payoff goals as line items first.  Then make the rest of your budget fit around that.

To help avoid spending-- don't bring home catalogs that come in the mail.  Don't "browse" shopping sites while online.  Don't watch commercials.

I'm not sure how old your children are, but, in my experience, my child did not get more expensive as he got older.  Even his first year of college, at a community college, does not even come close to what I had to pay in child care when he was little.  Yes, there are expenses, like sports, theater, lab fees, AP class fees, etc, that come up during school years, but just getting him out of daycare was a huge financial relief.  So, if you don't have more kids, you get to look forward to that in a few years!

Finally, the tsp loan...  I would only do that as a last case thing.  The downfall to it is that you lose that compound interest on your retirement money as long as it takes you to repay that loan.  And, if you lower your contributions to help cover the loan, you lose out on that as well.  I'm not completely against taking out a loan on it, I did so back in 2008 to make a down payment on my property.  However, stocks weren't making a whole lot at that time, and I repaid the loan back quickly.  You do need to look at that as a cost to the loan though, not just the repayment interest.  And, until spending is under control, I wouldn't take out a loan to cover spending debt.

[sparkytheop]

Oh, and thoughts on credit score...

The only debt I have that shows up in reports is my mortgage (my property debt is paid to the person I'm buying the property from, so it will not show up until I can get a house built and put a regular mortgage on everything).  No car payments, no CC debt.  I had a car payment for a year back in 1998, I hated having the payment, so paid it off as soon as I could.  I've never had to pay credit card interest.  Yet, my FICO score is currently about 840.  I don't think it's dropped below 80 in the last 10 years.

I use my credit card for all my the bills I can every month.  I use it for all my shopping (other than 12 transactions I have to make with my debit card to get 2% on my checking account).  I pay it off in full every month.  I have a few open credit cards, but only regularly use one of them, and the others only a couple times a year (one for Costco purchases, one for Cabela's, and one for anything with foreign transaction fees, since it doesn't charge those).  That's it.  It goes up and down about 10 points (so low of 830 and high of 850 for the last year or so).  As your balances and number of cards with balances come down, your score should go up.  I wouldn't worry about it too much, just stay the course with debt repayment and it will get to a place where it takes care of itself.

[MikeMoeJackB]

If your mother-in-law forgave the $5K, start a 529 for each child with 2.5K and let her know this is her doing.  Once a year, send her a copy of the statements.  When she wants to contribute more -- she will -- give her the information to do so.  This will provide a good deal of social, familial capital, as well as a start on the kids' education costs.  Grandparents, to the extent they can, like to matter.

Nice idea.  Thanks for the sound advice.  I've heard that they don't stay this expensive for long, but then I've also heard that it gets easier the older they get and that's not true.

[wenchsenior]

Just wanted to agree with Sparkytheop that I would advise not tapping the TSP for a loan unless there is no other option. It's one of the best investment vehicles going, with unbeatable low overhead, so just leave that money in there to do its work and focus on disciplining yourself to pay the debts off asap so that when that cash is free you can start maxing the TSP.

I speak from experience. We took a small loan from the TSP about 12 years ago. It was not needed, really, it just felt easy. Despite the fact that we paid it back in about 6 months, I still regret it. A few years after that we got into unavoidable debt to the term of ~80k. We paid most of that off within 3 years, without even considering tapping the TSP, just using a methodical disciplined approach (highest interest non mortgage debt first, etc.).

ETA: If it were me in your shoes, I'd immediately cash out the EJ account and pay the Wells Fargo debt. Then (if you don't have an emergency fund) I'd take half of whatever you were paying on the WF debt and build a one month's worth of expenses saving account so you don't keep adding to your credit card debt with every unexpected expense. Then I'd probably throw all the cash at the Paypal debt. Once that is paid, you have a lot of cash free to pay down the rest.

[MikeMoeJackB]

Thank you all for the help.

I may have had a little freak out earlier this week, but now I feel like I can develop a clear path going forward.  Just some key points I've learned:

1. Tighten up the budget.  I have spreadsheets I've used to keep track of debt payments and household bills, etc.  But its not really sophisticated enough to track our current spending. Most of the time I've averaged expenses like groceries over a few months and I realize now that sometimes its below budget and sometimes way over budget (under budget when I go grocery shopping, currently at $475 this month because my wife has done the bulk of the shopping). I've been working with mint since yesterday and hopefully that will keep things on track.  I really like the idea of making every expense a line item (I've done this in the past when I was a stay at home dad), but I am not super confident that I can keep up with it over time. Honestly, giving my wife the $1,000 slush fund (god, it kills me to write that) for over spending or debt repayment has been the best compromise we've made because she doesnt feel too limited.

2. Prioritize debt repayment.  This was the cause of my nervous breakdown because I've done so much to organize (or juggle) so many accounts which has gotten us this far and despite this it still seemed so far away.  Additionally, I love the idea of killing debt with big chunks of cash so when that kind of debt-killing money lands in your lap you get excited.  Nevertheless, there's still a lot to do with communicating with my partner and her parents to reach a compromise.  My wife will hate the idea of cashing out EJ and my compromise may have to be waiting until the start of the new year to do so.  Additionally, I'm on board with saving the TSP and holding it as our emergency fund (we could swing two months of our expenses on that cash and have enough time to replenish that emergency fund with our cash flow if needed).  Honestly, in the short term, I may be conservative and make a bigger than normal payment on WF ($4,500 or more) as not to make waves and hold the rest of the cash in case the in-laws do want "good faith" cash infusion of $2k to $5k.  Then, I'll have WF ($7k) paid off by January'ish and next prioritize the WF signature loan, NAVIENT, USAA, and Fed Loan. My homework the next few weeks is to find out exactly how much time is left on all of the 0% balance transfers.  I'm confident each one has at least a year left, but I'd rather not be surprised and if its less then I can use that for leverage to pay more on debt when explaining the strategy to my wife. In the meantime, I'd like to look at more 0% balance transfer offers and possibly find a way to lower the interest rate on the WF signature loan.  Any advice on negotiating a lower rate on a loan will be much appreciated.

3. Overhaul lifestyle slowly but surely. All of the above will give me a lot to think and do this holiday season, but when I have a good handle on those things I will prepare for other lifestyle changes to increase our progress even more.  Like I've mentioned before we are looking at moving into a better living situation by April of next year.  That being said, my time is very limited being a dad of two kids right now, but I want to treat our downsizing the excess from our lives as a "side hustle" or at least thats how I will sell it to the Mrs.  I know there is some money to make from tons of books, equipment, kids clothes, etc. from our storage unit and house.  If selling these items doesnt make much sense then we will be making A LOT of donations to the local SPCA. Really, we should make those donations before the end of the year so I will get on that immediately. 

Again, thanks for all the help and free therapy. Any other advice, suggestions, or encouragement means a lot to me.

[Lews Therin]

If you have detailed yearly gains on the EJ account, you can show your s/o exactly what it has made every year since you opened it, and my money is on it has made less than 12% yearly.

With that explanation, you can convince her that using the money to get rid of the 12% interest is the best use of the money, and that you plan on replenishing it when you no longer have credit card debt.

[MikeMoeJackB]

So, the wife and I did talk about selling EJ tonight and shockingly she seemed more on board than I expected. As I thought, she remembered what the broker told her when we first started our climb out of debt that "smart people" invest and pay down debt. I didn't like that philosophy back then-seemed like a conflict of interest for the broker to tell us this- but then again I was really uneducated myself back then. Either way, I can tell that she would feel more comfortable to wait until the new year to cash out that account.

Additionally, she likes the idea of using mint and creating a solid budget.  She also wants to contribute by doing better with spending on groceries and cooking which floored me because she already trying so hard and we do reasonably well in those areas. The topic of debt repayment to her parents was also discussed and she is amenable to establishing a repayment plan although it wasn't very clear when we would begin that repayment plan.

All in all, I think we both feel a little more confident about our situation. Now the trick is to keep us motivated and on track!