Wife and I disagree on plan moving out. Please help

[Andresdad]

My username is my first born son. His name is Andre. Username wouldn't allow a apostrophe. He's our guardian angel. He unexpectedly passed away 4 days after he was born. Now my wife and I have his brothers 2 boys. We never left the hospital with Andre. I can't say much more. It makes me unbearablely sad.

I'll try to keep this short.
I make $3,500 a month. Wife stays home with our boys. She does surveys and can make $50-$100 a month doing that.
Currently live in her grandma's basement to get back on our feet.
We now have $3,300 in cash saved up.

Our debts:
2015 Nissan Rogue owe $16,000 7.04% $340 a month car payment
Capital One 1: $510 owed on it. Maxed out. 23.99%
Minimum is $25 a month
Capital One 2: $490 owed on it.Almost maxed out.
Minimum is $25 a month.
Discover Card: $800 owed on it. Maxed out
25% interest. $32 is the minimum.

We had some financial setbacks and had to use the credit cards.

I want to pay off all the credit cards now and treat it like a debit card. Helping our bad credit.
My wife and I have bad credit right now. We would have to pay a big deposit to the apartment. We are working on our credit right now.

Wife wants to concentrate on the car loan right now. Making extra payments to the car loan. She wants to pay off the credit cards in next year’s tax refund.

We both didn’t want a car loan. Old vehicle died and needed an all wheel drive or 4X4 in Utah’s harsh winter driving conditions. Hard to get a car loan with our bad credit.

Which path should we take and why?
Thank you in advance for your help

[FireAnt]

Welcome!

Due to the extremely high interest rates of the credit cards, I would focus on that. They are low balances and you'll feel more accomplished getting them paid off. Then focus on the car.

[ysette9]

I absolutely agree. Wipe out the credit cards before anything else.

Once you do that, go back and reconsider the car. If you aren’t upside down on it then you really should sell and buy something way cheaper. You can get a very reliable car that is half that cost or less. Japanese cars are reliable and widely available used .
***
I’m very sorry for the loss of your son. We experienced two losses in the second semester of pregnancy and that was devastating enough. I can’t imagine losing a live child. I hope you can find peace with time. 

[frugaldrummer]

First, I'm so sorry about your loss.
Second - pay off the credit cards asap. The interest rates are crazy and it will improve your cash flow. You can then throw the money that was going to credit card payments onto car payment or savings, depending on how badly you need to move out.

How does grandma feel about you living in her basement? Is she happy to have the littles around and helpful to your wife? Or is it a difficult situation for all involved?

If it's a good multigenerational living situation, I'd focus on paying off the car after the credit cards IF your job is secure (if not, you might want to build up more savings before paying off the car).

How old are your boys? Parenting is a hard full-time job but it's still likely your wife could bring in a little more money. Maybe babysitting older kids after school or on school holidays? Reselling thrift items online? Specialty baking? I don't know what special skills she might have but she could probably bring in enough extra money to make that car payment with a little effort and ingenuity.

As for you - what options do you have to increase your income? Promotion, side hustle? Without a higher income you're going to struggle supporting a family of four (not saying it can't be done, but an extra $1,000 a month would go a long way). What avenues are open to you to bring in more money?

Also you need life insurance if you don't have it. A term life policy on both you and your wife. Shop online for the best rate but make this a priority.

[seemsright]

Your money, credit and debt is only a part of the story. I am sorry for your loss.

How is your wife doing mentally? How are you doing mentally?

Figure out that first and then work backwards to get where you want to be. If living in the families basement is a place where your wife feels like she has help and a safety net then that is where she needs to be. You did not say how old the kids are. But kids are HARD.

Time for you and your wife to get on the same page. Money is only part of the solution. If paying off the car helps your wife feel more grounded or etc then that is the direction you should go. I know this sounds crazy, but if losing a house, losing a baby, and everything else she does not want to lose her car too. The credit cards are not as concrete. Math says pay off credit cards too. 

[Lady Stash]

I am so sorry on the loss of your son.  That's devastating.

If I woke up in your shoes I would pay off all 3 credit cards tomorrow and then cut them up and close the accounts.  With $1800 on credit cards at 24% interest, you are paying around $40/month just in interest.  Personally, I can't use credit cards as debit cards.  Its too easy for me to lose track of how much I've spent and end up not being able to pay it off. 

Next I would build up a cash cushion.   

Depending on how comfortable you are in the basement vs. how important it is for you to have your own place as a family again, you could prioritize paying off the car vs. gathering a down payment.

I agree with seemsright, that maybe for your wife this is more of an emotional decision than a mathematical one.  Or maybe she's worried that if you pay down the cards but don't cut them up you'll end up with a balance again vs paying down the car you'll make progress.

[Montecarlo]

Agree on paying off cards first, disagree on closing accounts.  Keeping them open and zero balance will improve your credit score.

[Linea_Norway]

As long as grandma doesn't mind you living there, just stay there until you have paid down your debts. Credit cards first, car after and then saving up for a new home. Also consider renting instead of buying. Buying also gives you an extra burden of owning a place.

[YttriumNitrate]

Wife wants to concentrate on the car loan right now. Making extra payments to the car loan. She wants to pay off the credit cards in next year’s tax refund.

Can you increase your allowances and get the money sooner?

[Tuskalusa]

Hi There,

I’m sorry for your loss. There are no words.

Agree on credit cards first.

Another resource you might want to look at is Budget Boot Camp by Jordan Page (https://budgetbootcamp.com/). I just went through it, and I really liked her approached. Similar to David Ramsey, but more approachable..she’s a mom of 8. Good framework for organizing finances, especially when you have pressing debt.

[the_fixer]

I would pay off the credit cards immediately, cut them up or put them somewhere that you cannot access them without significant effort like freeze them in a block of ice. Far too easy to spend money on the credit card mindlessly and it adds up at the end of the month.

Take what is left over of your savings and put that in an emergency fund to stop you from using the credit cards.

Roll the amount you were paying monthly on the credit cards and put it towards the car each month.

Might want to look at going to a cash budget for a bit to get a real idea of your spending

Also see if you can pickup extra hours at work or outside work or maybe offer your spouse the opportunity to get a part time job while you watch the kids for that time to give her a break and some time with other adults outside the house.

With a little extra income you could be rid of this mess in under a year and on your way to the next chapter of your life.

Suggested reading
Your money or your life
Dave Ramsey total money makeover
Of course MMM




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[BrightFIRE]

I'm sorry for your loss.

The credit score is based on *using credit responsibly*, with a heavy weighting toward credit cards, so closing the cards is a bad idea. If you want to improve your credit, pay off the credit cards. Car loan payments (and loans in general) don't affect your score in the same way, so paying down the car loan will not have a positive effect on your score.

If you pay them all off and then use one of them for regular expenses that you pay in full every month, that will have the best effect on your credit score. You'll need to have a better score to rent an apartment or to buy a house, so if your goal is to move out, then the cards need to be paid first. A different forum that I used to figure out how to fix my own poor credit 10 years ago is https://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/bd-p/rebuildingcredit

I agree with others that as long as grandma likes having you around, you should stay there. "Getting back on your feet" should mean paying off your debt, so stay until that is done. Good luck!

[FireAnt]

If I woke up in your shoes I would pay off all 3 credit cards tomorrow and then cut them up and close the accounts.  With $1800 on credit cards at 24% interest, you are paying around $40/month just in interest.  Personally, I can't use credit cards as debit cards.  Its too easy for me to lose track of how much I've spent and end up not being able to pay it off. 

Incorrect. $1800 with 24% interest rate is $432/month in interest.

[35andFI]

If I woke up in your shoes I would pay off all 3 credit cards tomorrow and then cut them up and close the accounts.  With $1800 on credit cards at 24% interest, you are paying around $40/month just in interest.  Personally, I can't use credit cards as debit cards.  Its too easy for me to lose track of how much I've spent and end up not being able to pay it off. 

Incorrect. $1800 with 24% interest rate is $432/month in interest.

That would be 432 per year, not per month.

[FireAnt]

If I woke up in your shoes I would pay off all 3 credit cards tomorrow and then cut them up and close the accounts.  With $1800 on credit cards at 24% interest, you are paying around $40/month just in interest.  Personally, I can't use credit cards as debit cards.  Its too easy for me to lose track of how much I've spent and end up not being able to pay it off. 

Incorrect. $1800 with 24% interest rate is $432/month in interest.

That would be 432 per year, not per month.

Well thank goodness for that! Thanks for correcting me :)

[Fru-Gal]

What a terrible set of circumstances. So sorry.

I'd recommend paying off the credit cards. We did this a few years ago. It took a while but the feeling was amazing. I was dumb and did close an account or two -- do not do this, if possible, because it's a major hit to your credit. I'm still climbing out of the credit score hole (mostly out now).

Use either the avalanche method or the snowball method for paying off cards. Concentrate on one card at a time while you pay off the balance. Selling some items or making extra $$ can go toward this. Celebrate every time you zero out a card (with something that doesn't cost nearly anything, like baking a cake.)

Sign up for Mint or Personal Capital and get those cards linked on there, or put them in a spreadsheet, so you can see your progress. Fall in love with ZERO (I love seeing my card balances at zero.). It feels like deprivation at first but eventually it feels like empowerment.

Ways to make extra include cooking, cleaning, selling items on Craigslist, babysitting, dog walking, tutoring, mending, recycling, Uber, Lyft, various gig apps like Task Rabbit, part time admin work, home organizing...

Ways to level up your income include finding the top industries in your local economy and finding a way to get inside them via internships, freelancing, etc. Or entrepreneurship (preferably online, with no capital investment).

After you deal with the credit cards, I'd sell the car and replace it with a perfectly good model that's a few years older and way less than half the price. Or... no car! As others have said, not a lot of point in paying it off. You could potentially refinance with a private loan, though, with a lower interest rate. Or drive Uber/Lyft with it. But the car loan, if you are current, helps your credit.

I have been there -- bad credit, excess debt, no regular savings habit, emergency funds depleted by all the emergencies and very low income while raising a family plus supporting extended family. I had bad money beliefs and a lot of denial. I also never thought I could get a higher income. You have come to the right place to change all this and come out ahead! I did!