First time poster here – discovered MMM last spring and have been a devoted reader ever since. Finally jumping into the discussion, so hi everyone!
THE GOOD:
-you have a wife you love and a beautiful healthy baby
-you’re renting in a low-cost city and thus don’t have any home-related debts
-you and your wife both have steady jobs
-you have family members who have generously helped you out in your times of need
-you’ve eliminated childcare expenses by arranging your and your wife’s work schedules accordingly
-you’ve avoided money drains like cable and have kept most expenses at a reasonably low level
-you own one fully paid off, serviceable car
-you are young, healthy, and have your whole lives ahead of you
THE BAD:
-you’ve had to go through some terrible experiences in the past, including losing your first child, having fertility struggles, and going through extended unemployment in a bad economy.
-it also must be said that you’ve made some poor choices and have not yet taken full ownership of them (Tmobile smart phones, $40k in “student debts” without a degree, credit cards) (FACE PUNCHING COMMENCE HERE)
-you and your wife don’t have very high earning potential at your present skill/education level
First, heartfelt condolences for the loss of your first child. No one should have to go through that.
Second, congrats on taking the all important first step of coming here and seeking help. YOU CAN DO THIS!! No, it won’t be easy, but it also won’t be nearly as hard as some of the life struggles you’ve already had to go through. You seem (understandably) a bit overwhelmed by your situation, and some of the commenters’ suggestions, which to you may seem impossible right now. News flash: they’re not impossible, and your situation isn’t even all that bad. With some fairly modest changes (even letting you stay in your current apartment, and keeping your internet!), you can get on top of this mess and start down the path to financial security (and then independence). I don’t purport to be an expert on any of this, so other more experienced commenters will probably be able to improve on some of this, but I thought you might appreciate step-by-step instructions for things you can do RIGHT NOW to begin the process of getting back on your feet. And apologies for the repetition with prior posts, many of which cover these topics. Here goes:
1. Withdraw from online courses. While I understand your motivation here (to avoid going into repayment on the student loans), all the commenters are right on this one: taking on additional debt right now (not to mention the drain on your time and energy) makes matters worse, not better. Withdraw both you and your wife from all online education programs immediately, or as soon as the online institutions will allow you. Even holding off on this for one year will put your family on much better financial footing, as you’ll see below.
2. Cancel cell phone plan and switch to low cost prepaid plan. Call Tmobile and explain that you simply can’t afford to continue with the plan and request that they cancel your contract and waive the cancellation fees. It may be painful, but if necessary bring up the loss of your first child and related medical bills/debts. Ask to talk to a manager if all this falls on deaf ears. Regarding the smart phones, ask if they will waive the cost if you return both phones to Tmobile, or try to negotiate a lower cost than sticker value. Again, emphasize the unforeseen medical, family, and unemployment ordeals and resulting personal hardship. Even if none of this works, go through with cancelling and accept the charges. At the staggering cost of $150/month for the remainder of the term, it will be worth it in the long run. If they make you pay for the smart phones, do so and sell them online to make back at least part of the cost. Obtain cheap or free entry level cell phones (not smart phones) online or friends/family members ASAP, and sign up for a low-cost prepaid plan (see MMM’s posts on this) for about $10 each. Reduce cell phone usage to bare minimum necessary.
3. Negotiate payment schedule/plan with student loan providers. Call Sallie Mae and any other student loan providers and explain your financial situation (new baby at home, remaining medical bills and loans from prior medical issues and loss of first child, previous unemployment, both parents now working but unable to make enough money to meet student loan payment, etc.). Ask if they will defer repayment for a year (or 6 mos, or 3 mos…whatever you can get) while you get back on your feet. Many loans have hardship provisions that allow the loan providers to defer repayment or accept much less than the monthly payment otherwise required. Take advantage of this option.
4. Address $12k car loan/become a 1-car family. I’m no expert on how car loans work, but the expensive car/$12k car loan has got to go. It seems like a first step is contacting the lender/dealership to explain that you can’t afford the car anymore and will have to default if you can’t work something out. Though it might be unpleasant, defaulting and repossession may be the best option, with the expectation that (as pointed out by others) if/when the car company goes after you for the difference in value, you’ll be able to negotiate a payment you can afford (and in any event, you’ll have bought yourself at least several months to a year of time, during which you will have significantly improved your financial situation – keep reading).
5. Sell extra possessions for cash. Go through your home and identify anything you own that is not absolutely necessary. Playstation was suggested by someone else. DVD player? Computers? Furniture items? Christmas decorations (these are popular Craigslist items this time of year!)? Coats/clothes/outgrown baby items? Post stuff for sale on Craigslist (read this first:
http://www.mrmoneymustache.com/2011/08/11/get-rich-with-craigslist/) and/or hold a garage sale or find local consignment or thrift shops that might buy these items from you. Every $5 or $10 counts (
http://www.mrmoneymustache.com/2011/08/01/a-millionaire-is-made-ten-bucks-at-a-time/).
6. Increase income. Advertise your services on church or community bulletin boars and/or Craigslist. Whether it’s babysitting, mechanic work, computer tutorials, helping people move, helping elderly folks with household chores/grocery shopping/driving to appointments, doing yard work/odd jobs, even house cleaning – swallow your pride and take whatever extra work you can get for cash. Your wife should see if she can add a few more hours of work to her schedule each week (to the extent your child care schedule can handle that), and if not, should figure out a way to earn just a little bit more money each month through the above suggestions (or perhaps she has other skills to employ).
7. Ask for help from family/friends/church/community. If you’re part of a church (or possibly even if not, per others’ comments), ask someone there for help. Whether it’s in the form of food/meals, free babysitting while you and your wife try to pick up some extra hours of work every week, part-time employment from parishioners who need help with odd jobs, someone lending you their car when you need a second car for errands, etc., every little bit helps.
8. Skip Christmas gifts/expenses this year. (Duh.) Explain to family and friends that you’re working hard to pay down debts and won’t be doing presents this year (opt out of any family gift exchanges, secret santa exchanges, etc.), and instead would just like to celebrate the holidays by spending time together, playing games, baking goodies, etc. As everyone has pointed out, your infant son won’t know the difference, and the family members to whom you owe money will probably appreciate that you’re buckling down financially. Suggest that you and your wife exchange cards only, or give each other coupons for your services (like free massage, DVD date night, 1 month of bathroom cleaning duty, etc.). Recommended MMM posts on this:
http://www.mrmoneymustache.com/2011/08/03/mrs-money-mustache-receives-many-gifts-for-her-birthday/,
http://www.mrmoneymustache.com/2013/11/28/8740/.
9. Liquidate savings account. Take the $120 in your savings account and close the account if any fees are involved (which very well may be the case since many banks charge fees if account balances are below a minimum amount, like $500). You’ll return to savings (and investing) after you address your blazing Debt Emergency.
10. Cut out all extras. Embrace this next chapter in your life as a challenge and accept that it will require sacrifices, but in the end will give you and your family your life back and hope for your future. No holiday cards (send out an email instead). No road trips or vacations, and minimize driving in your day to day life. Definitely no new electronics, home furnishings, or clothes. No eating out, skiing, movies, professional sporting events or other activities that cost money. No Netflix or iTunes. Schedule game nights and free outdoor activities instead, and enjoy what time you do have together doing fun, free things as a family. Follow all MMM’s advice about grocery shopping on a budget, biking more, reducing your electric bill by turning down your thermostat and hanging clothes to dry, etc.
11. Use all leftover money each month to pay off loans as quickly as possible. Based on the info you’ve provided, by my calculations your family earns about $2,500 gross (before taxes, health insurance, etc.) per month. Assuming you adopt MMM-like behavior even only in moderate amounts, you should be able to get your expenses down from what I calculate as over $1,600 (not counting loan payments) to about $1,400, leaving about $900 in excess money per month (I admit I may be missing some expenses, but it seems you covered the key ones in your posts; chances are any left out categories are non-essential and can be cut or seriously reduced). First off, take the $120 from your savings account and use it RIGHT NOW to partially pay off the U. of Utah hospital bill.
-MONTH 1: After just one month of even low levels of badassity (including at least some of the above cost-savings measures), you should have AT LEAST $1,000 (over $900 of income left after paying non-debt expenses, plus over $200 of cost savings from reducing expenses, not to mention the possibility of several hundred MORE dollars a month from increased income through a few hours of additional work each week). Conservatively assuming you only have $1,000 available after the first month (to account for possibly having to pay Tmobile something, or being slow to make the recommended changes, or additional expenses you haven’t provided to us), do the following: (1) pay off the remaining hospital bill (about $100) just to get that one off the books (2) pay off your wife’s paypal credit card in full (which will be about $400 by that point); (3) pay off your paypal credit card in full (about $375 by then); and (4) make the minimum payments on all the other credit cards (totaling less than $100). So after Month 1 alone, you’ll get a much needed emotional boost from crossing THREE debts off your list entirely. (Do not pay anything toward the car loan.)
-MONTH 2: again conservatively assuming $1,000 available after covering basic expenses, do this: (1) pay off your Best Buy Mastercard in full (about $355 by then); (2) pay off your wife’s Capital One card in full (about $240 by then); and pay off $500 of your Capital One card (of the approximately $1,060 that will be owed at that point). Again, do not pay anything on the car loan.
-MONTH 3: again assuming $1,000 available (but you can probably do much better if you follow MMM’s advice): (1) pay off the remaining balance on your Capitol One card in full (should be about $700 by then). ALL CREDIT CARDS THUS CAN BE PAID OFF IN 3 MONTHS OR LESS!
This is just a start, and then you’ll have to tackle the $40k+ in student loans and the family loans (here’s to hoping your family members are understanding and willing to push repayment back for a little while!), but it’s amazing what you can accomplish in only a few months if you follow the wisdom on MMM and this forum. DON’T BE PARALYZED BY FEAR/UNCERTAINTY. Undertake at least some of these measures as soon as you can and you’ll be well on your way to a much better life. Next thing you know, you and your wife will be plotting your early retirement like many others on here ;) Good luck, and don’t forget to report back on your progress/ victories/ hiccups along the way! Though folks can be a bit brutal with their honesty on here, remember everyone’s trying to help and we’re all rooting for you. You can do this!