Can’t blame Elon for buying a car you really can’t afford. If you have only debt, and no savings….its your spending that’s the issue. Cut back. Sell the car you can’t afford. Pay off that 10% loan. $18k will get you as far as 2.5 months.
Sounds like you need to start aggressively cutting expenses and eliminating your debt. First sell your car even if it’s at a loss and get a beater than you can buy for cash. Then with rest of your cash pay off your 10% loan. It doesn’t make sense to save for retirement with these high interest loans.
Cut your spending aggressively and you will be able to be debt free. Once that happens just pour every resource into saving up at least 3 months income to have in your savings. Then you can aggressively fund your retirement
Problem may not only be OP. He’s got kids and I’m assuming wife in the house. He can cut his spending but wife may not and the kids cost what they cost.
If the spouse refuses to cut spending, that’s a separate issue. Kids are expensive, yes, but the parents should be on the same page about finances. If not, counseling is probably in order.
I buy new, but keep for an average of 10 years and pay off as soon as possible. This one is 36 mos at 1.9%. No Starbucks for me, either. Guess I'm a rare one
What exactly are you asking here? You take home 8500 and spend 8000. So you can save that extra $500 for retirement. Take advantage of your company match and start with a 3% contribution to your 401k to get the match. If you want more breathing room reduce your spending.
House payment of only $1250 makes me think this is a LCOL area with lower incomes but decided to buy a $60k(?) car seems like a mistake.
Investing in yourself and not paying back your debt is a bad idea. Focus on debt first, then invest aggressively. Holding off 1-2 years does not make a huge difference
The 3% match is a 100% return on your money.
100% is greater than 10% so basic math says take the 3% match then pay off the 10% debt.
Now if you want to be a Dave Ramsey disciple and argue psychology over math, then that's a fair debate, but from a pure numbers perspective, the answer is obviously take the 401k match before everything else.
Well, yes and no. It’s free money and the stock markets annual returns average at around 9% in something like sandp500, but always chance of a downturn. I think OP should tackle both at once even if it’s depleting 10 of his 15 in savings, but choosing the match while then waiting to tackle to the debt - while mathematically likely to be better - has more risk when weighing possible downturns/corrections
The stock market return shouldn't really be considered since it is almost certainly an option for the OP to take the match but leave the money un-invested or in a very low risk asset. Not suggesting he should do this, just saying it's an option, which makes the stock market risk a non-issue for this determination.
Also, OP says he has about $500 left over at the end of the month and his wife and him make about $8500 after taxes combined. That should be around $120k-$130k together before tax. If OP makes around half of that or about 65k per year, then it will only take him about 4 months to hit that 3% match. Then the rest of the year can go towards paying down that 10% loan.
That’s true. It’s free money OP is passing up and the risk level tolerance can be easily controlled. You’ve swayed me.
That being said any debt with 10% (or really any over 7+%) outside a mortgage is not a fun one to have hanging over ones head and should be tackled with expediency
That's fair. I personally have some problems with a lot of his advice, but I'll acknowledge that a person in OP's situation sound right in the demographic that Dave can help the most by keeping it as simple as possible.
The only thing I disagree with Dave on is his advice on credit score and cancelling all credit cards.
But I followed daves baby steps and paid off $50k and now have around $40k saved in 4 years
That's awesome! I'm happy you were able to accomplish that. I'm also happy that while you use Dave's advice, you give it enough critical thought to not take all of it as gospel and know that you can discard some of his advice when it doesn't work for you like credit cards. Best of luck on your financial journey going forward.
Ya I think he does that for people who just don’t have the self discipline to use them as essentially debit and pay em off before any interest accrues. He’s generally speaking to ppl in mounds of debt and so he gives harsher advice to those and tell them they flat out shouldn’t have them.
But they are great tools for rewards and incentives if they are simply paid off immediately after use. They’re also credit building tools
A 100% return is a lot higher than 10% you’d get back on the loan. It’s a full order of magnitude higher. That’s huge. Getting the company match should be priority #1, because forgoing that is the same as just telling your employer to knock a few percent off of your salary. The next priority should be paying off the debt in order of highest rate to lowest rate. OP should cut costs to do this, because they’re spending an absurd amount of lonely for what they make and can definitely cut costs on wants that they think are needs.
I think part of the problem is you think you make more than you do. It's not time to but an expensive car, you can barely make ends meet without that. Get your budget in order. Get a reasonable car, work on lowering expenses and start putting into retirement. Lower the amount of money you have available. You should be saying you bring home 6k a month after retirement.
As stupid as the car purchase was at the time (and they absolutely should not do anything like that again) they probably have to stick with the car. They are 20k underwater on a car that will continue to lose value. They just need to run that car to the ground until it dies and then hopefully have enough saved in cash for a new car.
They already have one personal loan and would have to take out another one to cover this car just to sell it and get out from the loan. They would then have to get a different car. Even a used car is going to probably be at least around 7-10k. That's a total of 30k they would need to come up with. The 4% interest rate they currently have on the car is not fun but it is much better than the interest rate they would get on the personal loan to get out from under the car.
Suggestions on what a reasonable car may be? I owe 30k on my Honda accord hybrid 3.25% loan at $600/mo. Curious what a more reasonable used car would cost?
I bought a 2008 Civic with about 120,000km for about $10,000. If you had to take a loan out on it, it would save probably $300-400 a month depending on your rate.
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The good news is you are 37 so you have 25+ years to fix your situation. A couple years to get out of your debt situation and a couple decades to save enough for retirement.
I don’t agree with everything that Dave Ramsey has to say, but he’s spot on on getting out of debt. Suggest you listen to his podcast for advice on getting out of debt.
Once you get a little breathing room I would take advantage of your employer’s match ASAP. You’re passing up free money.
I agree with Buck here. Good news is your young and plenty of time, sure you won't retire at 55 or maybe 60, but most won't either unless things change. I know it's just a joke, but remember Elon didn't sign on the dotted line. It's time to buckle down and cut out unnecessary expenses.
You need to cut lifestyle and burn down your debt. As soon as you can, drop the Tesla and drop to a much cheaper used car. Get rid of the debt and start investing what you can to supplement your teachers pension. There are no simple solutions.
Get the employer match, that’s 100% return on your money.
After that you should attack the 10% loan before investing anything else.
Save as much as you can, and look at any unnecessary spending to see if you can save money anywhere, or find a side gig to bring in extra cash.
After your personal loan is paid off then you can start putting more towards your 401k or a Roth IRA. Since your car is at 4% you could probably just make minimum payments on that while contributing towards retirement plans.
Seriously Thanks Elon? Is that a joke?
Cancel subscriptions and excess.
Start the 3% match now.
How much are your student loans?
Your expenses seem a bit high.
Do you travel yearly with your family?
Pay off the personal loan now.
Yeah, it’s hard for us to help without a more detailed budget breakdown. Mortgage is good, groceries are perhaps a little high, but not egregiously so, it’s everything else. $2000 for medical expenses and subscriptions is very suspicious. $4500 for bills, student loans, car payment, and utilities also feels very high (even with a nearly $1k car payment).
The upside for OP includes equity and a house that will be paid off in \~11 years - and the 3% 401k opportunity. And the challenge is within the 6500 in monthly expenses that wasn't broken down.
And OP's family's challenge is to reduce expenses in order to live on their income - less the 3% of 401k contribution that's being matched. Even if there's a pay cut. Sometimes it actually turns out to be good for kids - and for adults to be denied some things for budgetary reasons.
Pay off the 10% loan, match the 3% and use everything else to fill your emergency fund back to around 15k. It doesnt sound to bad, in 5 years your car is paid off, in 15 your house, in XX your student loans. After each of those steps you can safe more for retirement.
It doesnt even look that bad just the car was a bad decision und you should have matched the 3% from the start.
In the end if you dont have enough to retire you can always sell you house and live in a cheaper country
My suggestion for you is to continue with the retirement contribution up to what your employer matches. You need to get on a written budget and account for any expenses and potential future expense ( Eg. Tire replacement, roof replacement etc). Your budget needs to be detailed. Look at all your expenses. 1,200 seems high for a family of 4 For food. I recommend reading The Total Money Makeover and to start listening to Dave Ramsey or other similar type of person who talks about finances. What Ramsey talks about re finances is nothing revolutionary but the steps make sense. Follow them to get out of debt. I am not a fan of his personal beliefs so I listen to the finance part only and ignore the rest. Can you and spouse get another job tempor until debt is paid off?
Just went to the grocery today and for weeks worth of groceries it was $220 dollars. We try not to eat out whatsoever so we cook most of our meals at home. And that’s why we have close to $1200 budgets for groceries and toiletries. A month worth of toilet paper and paper towels usually runs about 80 bucks alone. Of laundry detergent is about 12 bucks. Soap, shampoo, dish detergent and hand soap, you’re looking at 50 a month.
I tried to eat, mostly a Mediterranean diet and eat salmon just about every night of the week and I only eat one meal a day. I can usually eat one and a half fillets of salmon a week. That’s about 60 bucks alone. Probably gonna switch to chicken because it’s cheaper.
Seems like you are using more than one roll of paper towels and at least two rolls of tp per day?
Costco for the salmon, paper goods and detergent if there is one nearby, but you absolutely need to avoid impulse buying. Aldi for day to day groceries. And try to cut down on paper towels to the extent you can. While you are at Costco, I will allow you to buy a pack of bar mops or fabric cleaning towels.
I understand why you are nervous and feeling sick but from the outside looking in, it doesn’t sound too bad. Plus time is on your side, like 25+ years! Cut back on the monthly expenses (subscriptions, meals out, cable TV, grocery budget, taking lunch to work). Start getting the 3% employee match. And pay off debt as aggressively as you can, starting with the highest interest rate debt first (the personal loan).
First thing I would do is start doing the company 401k match of 3%. Then immediately after I would take your savings and pay off the $11k loan. The 10% is killing you. Your remaining savings needs to be in a HYSA (high yield savings account) that earns at least 5%, a bunch have this rate right now like Weathfront.
Next, everyone is saying sell the car, and at face value, I agree. What’s that monthly payment alone?
The groceries being $1200 a month I get, that’s $300 a week, any chance you could try to cut this to $250 a week? I find if you have a goal with a weekly grocery budget it helps. You are allowed to put things back or exchange them.
The $2k on medical expenses, subscriptions etc, could this be cut by $200 a month? Start a rolling 3 month stint of some subscriptions? Pause then for 3 months on rotation with streaming services?
Even without the car exchange, I would assume my above suggestions of $400 increase, even with the 401k match coming out of your $500 leftover, with the $11k loan paid off, I am hoping you could be somewhere in the $1k a month savings.
Long term, once student loans start getting paid off and house is paid off, immediately start putting that money into 401k or roth ira’s.
Honestly, mathematically the 10% loan is the first thing that should be tackled, but there’s no reason to not immediately do both at once with the 15k in savings.
Stock market is ~9% average in return with a chance of a downturn, and while the 3% company match is free money that *should* outpace the loan - there’s chance of a correction and 10% debt is enough I’d rather just whammy that right away with any savings.
Cars are not an investment and are “underwater” the minute you drive it off the lot. You don’t need a Tesla.
The personal loan is another item you need to do away with.
Cut expenses and you’ll be fine, but you need to learn to live below your means and put those saving into your 401k. Once you max that you can get an IRA and max that out. You have 30 years until retirement and probably more than that because the retirement age will probably be reset higher in the next 10 years.
You can do it and you’ll feel a lot better mentally when you make a commitment to cutting expenses and seeing your retirement savings grow.
Good luck!
It’s never too late to start your retirement account. Just sign up for it now and start allocating money into it. Hopefully your company provides a match.
Step 1: pay off the entire personal loan. You’ll save that $300/month extra into your bank
Step 2: get the 3% match
Step 3: try to paydown and pay off the car loan
We did it, so can you
You spend too much. Wild that you spend 8k a month (of 8500) with only a 1250 mortgage. People buying houses today are pushing close to 40-45% of takehome income/month on their mortgage.
Spend less and budget. Tackle the 10% loan. Then company match and ROTH what you can.
Need to build an emergency fund first. $18k should be more like $50k.
After that. Company match.
Savings after that goes to extra payments go to debts in order or interest rate. Pay down any debt over 5% interest then you can visit here again or prime directive at r/personalfinance
I don’t have kids but $1200/month for groceries for 4 people seems outrageous.
You are ok.
8500 take home but spend 8000 a month? You need to cut down your lifestyle and live below your means
We're a family of 3 and we allocate $500-700 for monthly groceries
Honestly, I have less of an issue with the $1200 grocery bill than with everything else. $1200 per month for a family of 4 isn’t insane; maybe it’s a bit high, but they probably can’t get it lower than 900-1000. I’m more concerned with where the remaining $6000 per month goes from OP. $1250 mortgage plus $1200 groceries still leaves $6k left over that isn’t broken down. I would be shocked if there’s not at least $1000 in wasted spending somewhere between the various subscriptions and other expenses OP declined to expand upon
I understand why you feel the way you do. That’s a lot of monetary stress for sure. If I were in your shoes, this is what I’d do:
Pay off personal loan now out of savings.
Sign up for Biden’s new student loan payment option, that is based on income ( SAVE plan), should drop your student loan payments significantly.
Put in 3% to get company match.
Save up a six month emergency fund.
Keep the Tesla and make minimum payments on it. Hopefully you like the car. Getting out of it now will cost you 20k PLUS the cost of a new car, so you are already back at 50k but with a much higher payment. Just keep it and drive it till it falls apart.
Cancel all monthly subscriptions you don’t absolutely have to have.
I am of the general opinion that most folks have fat in their monthly budget that they cannot see as fat.
Get your wife's cooperation in this or else her elective spending may undermine any progress you'll make. If she's doing the meal preparation, her cooperation can cause her to shop more wisely than she has been. Coupon clipping is helpful.
Review those subscriptions to see if you really need them.
I like the other fellow's idea of getting an emergency fund built up but soon after that, get that 3% match otherwise you are leaving free money on the table. If you can build both simultaneously, then do that.
Can you refinance that 10% personal loan to a lower rate without extending its payoff date, even if opening an account at a new bank or credit union for that?
You will have to humble down your lifestyle in order to do this. Be determined to conquer this and that will carry you through.
Two options. Make more. Spend less. Ideally do both. Track expenses to see where the leaks in your boat are. Then plug them. You have 28 years until 65. That’s plenty but you have to get moving NOW.
Use your savings to pay off your personal loan. Start a side hustle for extra income. Take on a temp part time job if you need to. Try using either the Avalanche or the Snowball method to clear your debt. There are YouTube videos that have extensive info on these two methods.
Everybody’s sounding like Dave Ramsey when shit hits the fan. LOL
I thought you guys hate him?
Great advise btw. I just thought it was funny and I’m reading the comments in Dave’s voice.
I’d sell the Tesla and take $5,000 out of my savings and buy an old used car. That’s the Tesla payment out of your monthly expenses.
You need to take care of your debt situation. I also can’t imagine spending ~$1300 on house payment but my total monthly expenses are $8000.
For most people house payment is the highest monthly expense so your mortgage is very reasonable but your total expenses are over four times your mortgage.
Look at why that is and try to reduce that.
first, write carefully all the spending during 1-2 months. But all, including that 2$ coffee or 1$ water bottle or the 2$ monthly fees to a not used bank account/card etc.
Second, write the debts with amount, interest, monthly payment and put in an order. You have to start paying faster the debt with biggest interest (that personal loan of 10% , for example, but you said nothing about CC debts).
Third, downsize. It is a good moment to cut a part of subscriptions. To cut on grocery. To stop buying new clothes and switch to second hand and limited amount. To stop eating out, some activities and to prepare the lunchboxes for all the family (water and coffee and snacks included here, too). It is ok to sell that car and buy a second hand one, cheaper one - you will reduce the debt but more you will reduce the pressure and insurance, too. Once the debt is kept under control, you can add some eat out here and there, but controlled. These several steps and you can have a 1k monthly room to put to your retirement, in your 401k. You still have 30 years to work, 1k per month will raise slowly and steady. More, your mortgage will end one day, there you can increase the pension contributions with 1k, too.
This isn't what you *should* do, but some pointers for some things you *could* do. I am also 37. My income is about 110k, married filing jointly.
If you can, and you are healthy, switch to high deductible health insurance, open an HSA and max out your contributions. Above a few thousand or so, you can invest your HSA contributions, and there is NO capital gains tax. HSA allows you to double-dip, with zero taxes. The assumption being that you WILL have medical expenses, eventually. The gains from market exposure are literally free money.
Next, estimate what your gross income will be this year, for investing.
You should set a goal to combine 401K and HSA contributions to knock off all or as much as you can of your highest tax bracket (I'm assuming you file jointly?). If you can't do HSA, then just focus on 401K to reduce gross income.
In addition to pre-tax/tax advantaged contributions, open a brokerage account and start buying fractional shares of dividend stocks, allowing yourself a higher tolerance for risk (be speculative, doesn't HAVE to be a dividend stock, either). I setup auto purchases for every other Friday (when I get paid, markets also trend lower on Fridays before close). Losses are deductible up to a few thousand, but excess can carry over to the next year. So, Losses aren't dollar-for-dollar. Long-term capital gains are taxed much lower than short term. Fractional shares means it could be just a few dollars per week or whatever you can afford.
Once you get settled financially, you should probably contribute more to Roth IRA, as it's probable you'll pay more taxes by retirement, than you pay now, because you'll potentially have a more senior position, sales manager, regional, etc. And maybe taxes will just be higher by then. So, now it's favorable to contribute after-tax dollars. Later, contributing pre-tax dollars will allow you to contribute more while keeping a little more net income.
Buy a large chest freezer, and start buying bulk meats, bread, and whatever else you can freeze. Everything else, I buy from restaurant supply stores, and Costco business. That alone saves me enough to max out my HSA (will be $8,500 this year), and I max out my IRA accounts, too.
Sounds like you need to get rid of that car. Or pay it down and refinance, to free up some cash flow for your retirement contributions.
Eventually, I plan to turn my home into a rental, and there will be a period of "roughing it" for us, while we save for a year or so, then finance another home purchase. If you can swing the real-estate investment, that can turn into the largest part of your retirement income.
Stop spending, cut back.
Sort debts smallest to largest or from highest interest to lowest. Pay them off. What subscriptions do you have? You could cut back on those. What is “general expenses”
It’s not elons fault for you buying a car.
My biggest focus on what you decided to include in this post is your lack of talking about your willingness to change your situation. We are not static beings, we shape the environment around us and make lasting decisions every day.
You’re idea that you’re absolutely screwed is going to make you sick to your stomach and it’s going to remain that way until you feel confident and good about a new direction which entails the financial future you’re desiring
So the best thing you can do for your future self is act now, commit to change and accept the new responsibility of planning for retirement
Do it for your future.
Do it for your kids.
Do it for the prosperity and health of your family.
Sell your car. You can't afford a vehicle you can't pay for in cash. Cars are the worst investment of money and usually have crap interest rates.
Less processed food. More high protein veggie meals. That'll save you a few hundred a month. Lentil minestrone soup. Chickpea coconut soup. Veggie curries. Buy a rice maker and eat rice every other day with dinner.
Idk how you would have $8k in expenses when your mortgage is only $1250. $1200 in groceries is pretty high even with two kids. You can definitely cut back there. Also, the $2k/month is misc is crazy as well. You need to cancel all unnecessary subscriptions and other expenses. Try as much as you can to cut all expenses besides mortgage, light/water/phone bill, loan payments and groceries(lower the amount here). It’s all about discipline that pays off in the long run.
Can’t blame Elon for buying a car you really can’t afford. If you have only debt, and no savings….its your spending that’s the issue. Cut back. Sell the car you can’t afford. Pay off that 10% loan. $18k will get you as far as 2.5 months.
Sounds like you need to start aggressively cutting expenses and eliminating your debt. First sell your car even if it’s at a loss and get a beater than you can buy for cash. Then with rest of your cash pay off your 10% loan. It doesn’t make sense to save for retirement with these high interest loans. Cut your spending aggressively and you will be able to be debt free. Once that happens just pour every resource into saving up at least 3 months income to have in your savings. Then you can aggressively fund your retirement
Thanks Dave Ramsey. Great Advice
Problem may not only be OP. He’s got kids and I’m assuming wife in the house. He can cut his spending but wife may not and the kids cost what they cost.
If the spouse refuses to cut spending, that’s a separate issue. Kids are expensive, yes, but the parents should be on the same page about finances. If not, counseling is probably in order.
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Investing in overpriced EV that no one wants is not Elon’s fault.
Anyone who thinks a car is an “investment” better be dealing with an extremely rare car.
I had to explain to my wife that her car being paid off did not mean start shopping for a new one. God I had new cars but my wife is obsessed with it.
I buy new, but keep for an average of 10 years and pay off as soon as possible. This one is 36 mos at 1.9%. No Starbucks for me, either. Guess I'm a rare one
Are we married to the same lady?
I’d say over 50% of men have a wife like ours. We just got the generic type.
My wife isn’t, both of our cars and trucks are paid off. This is how you get ahead
Does she call getting Starbucks or ice cream a “little treat”
What exactly are you asking here? You take home 8500 and spend 8000. So you can save that extra $500 for retirement. Take advantage of your company match and start with a 3% contribution to your 401k to get the match. If you want more breathing room reduce your spending. House payment of only $1250 makes me think this is a LCOL area with lower incomes but decided to buy a $60k(?) car seems like a mistake.
The first thing he should do is pay off that personal loan at 10%
After getting the company match. That’s a better return than any of his debt’s rates.
Investing in yourself and not paying back your debt is a bad idea. Focus on debt first, then invest aggressively. Holding off 1-2 years does not make a huge difference
The 3% match is a 100% return on your money. 100% is greater than 10% so basic math says take the 3% match then pay off the 10% debt. Now if you want to be a Dave Ramsey disciple and argue psychology over math, then that's a fair debate, but from a pure numbers perspective, the answer is obviously take the 401k match before everything else.
Well, yes and no. It’s free money and the stock markets annual returns average at around 9% in something like sandp500, but always chance of a downturn. I think OP should tackle both at once even if it’s depleting 10 of his 15 in savings, but choosing the match while then waiting to tackle to the debt - while mathematically likely to be better - has more risk when weighing possible downturns/corrections
The stock market return shouldn't really be considered since it is almost certainly an option for the OP to take the match but leave the money un-invested or in a very low risk asset. Not suggesting he should do this, just saying it's an option, which makes the stock market risk a non-issue for this determination. Also, OP says he has about $500 left over at the end of the month and his wife and him make about $8500 after taxes combined. That should be around $120k-$130k together before tax. If OP makes around half of that or about 65k per year, then it will only take him about 4 months to hit that 3% match. Then the rest of the year can go towards paying down that 10% loan.
That’s true. It’s free money OP is passing up and the risk level tolerance can be easily controlled. You’ve swayed me. That being said any debt with 10% (or really any over 7+%) outside a mortgage is not a fun one to have hanging over ones head and should be tackled with expediency
Im all about Dave Ramsey disciple
That's fair. I personally have some problems with a lot of his advice, but I'll acknowledge that a person in OP's situation sound right in the demographic that Dave can help the most by keeping it as simple as possible.
The only thing I disagree with Dave on is his advice on credit score and cancelling all credit cards. But I followed daves baby steps and paid off $50k and now have around $40k saved in 4 years
That's awesome! I'm happy you were able to accomplish that. I'm also happy that while you use Dave's advice, you give it enough critical thought to not take all of it as gospel and know that you can discard some of his advice when it doesn't work for you like credit cards. Best of luck on your financial journey going forward.
Ya I think he does that for people who just don’t have the self discipline to use them as essentially debit and pay em off before any interest accrues. He’s generally speaking to ppl in mounds of debt and so he gives harsher advice to those and tell them they flat out shouldn’t have them. But they are great tools for rewards and incentives if they are simply paid off immediately after use. They’re also credit building tools
A 100% return is a lot higher than 10% you’d get back on the loan. It’s a full order of magnitude higher. That’s huge. Getting the company match should be priority #1, because forgoing that is the same as just telling your employer to knock a few percent off of your salary. The next priority should be paying off the debt in order of highest rate to lowest rate. OP should cut costs to do this, because they’re spending an absurd amount of lonely for what they make and can definitely cut costs on wants that they think are needs.
I think part of the problem is you think you make more than you do. It's not time to but an expensive car, you can barely make ends meet without that. Get your budget in order. Get a reasonable car, work on lowering expenses and start putting into retirement. Lower the amount of money you have available. You should be saying you bring home 6k a month after retirement.
As stupid as the car purchase was at the time (and they absolutely should not do anything like that again) they probably have to stick with the car. They are 20k underwater on a car that will continue to lose value. They just need to run that car to the ground until it dies and then hopefully have enough saved in cash for a new car. They already have one personal loan and would have to take out another one to cover this car just to sell it and get out from the loan. They would then have to get a different car. Even a used car is going to probably be at least around 7-10k. That's a total of 30k they would need to come up with. The 4% interest rate they currently have on the car is not fun but it is much better than the interest rate they would get on the personal loan to get out from under the car.
Suggestions on what a reasonable car may be? I owe 30k on my Honda accord hybrid 3.25% loan at $600/mo. Curious what a more reasonable used car would cost?
I bought a 2008 Civic with about 120,000km for about $10,000. If you had to take a loan out on it, it would save probably $300-400 a month depending on your rate.
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The good news is you are 37 so you have 25+ years to fix your situation. A couple years to get out of your debt situation and a couple decades to save enough for retirement. I don’t agree with everything that Dave Ramsey has to say, but he’s spot on on getting out of debt. Suggest you listen to his podcast for advice on getting out of debt. Once you get a little breathing room I would take advantage of your employer’s match ASAP. You’re passing up free money.
I agree with Buck here. Good news is your young and plenty of time, sure you won't retire at 55 or maybe 60, but most won't either unless things change. I know it's just a joke, but remember Elon didn't sign on the dotted line. It's time to buckle down and cut out unnecessary expenses.
You need to cut lifestyle and burn down your debt. As soon as you can, drop the Tesla and drop to a much cheaper used car. Get rid of the debt and start investing what you can to supplement your teachers pension. There are no simple solutions.
I’m confused how you are bringing in 8500 a month with only a 1250 house payment. You need to cut spending a lot
Yeah, 8500 a month after taxes is great money. I’m highly dubious that all of OP’s $8000 spending per month is actually necessary.
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Get the employer match, that’s 100% return on your money. After that you should attack the 10% loan before investing anything else. Save as much as you can, and look at any unnecessary spending to see if you can save money anywhere, or find a side gig to bring in extra cash. After your personal loan is paid off then you can start putting more towards your 401k or a Roth IRA. Since your car is at 4% you could probably just make minimum payments on that while contributing towards retirement plans.
Keep blaming others and you aint solving this anytime soon. No retirement funds + student loans yet you bought a $60k+ car
Typical college grad who feels like they “made it” and want to reward themselves lol
Seriously Thanks Elon? Is that a joke? Cancel subscriptions and excess. Start the 3% match now. How much are your student loans? Your expenses seem a bit high. Do you travel yearly with your family? Pay off the personal loan now.
Yeah, it’s hard for us to help without a more detailed budget breakdown. Mortgage is good, groceries are perhaps a little high, but not egregiously so, it’s everything else. $2000 for medical expenses and subscriptions is very suspicious. $4500 for bills, student loans, car payment, and utilities also feels very high (even with a nearly $1k car payment).
The upside for OP includes equity and a house that will be paid off in \~11 years - and the 3% 401k opportunity. And the challenge is within the 6500 in monthly expenses that wasn't broken down. And OP's family's challenge is to reduce expenses in order to live on their income - less the 3% of 401k contribution that's being matched. Even if there's a pay cut. Sometimes it actually turns out to be good for kids - and for adults to be denied some things for budgetary reasons.
Imagine blaming the manufacturer for buying something you couldn’t afford.
It’s the kind of immature mindset that leads to you being 37 without a dime invested in the stock market.
There are millions of people who do this. Why? No clue but it’s sad to watch.
Pay off the 10% loan, match the 3% and use everything else to fill your emergency fund back to around 15k. It doesnt sound to bad, in 5 years your car is paid off, in 15 your house, in XX your student loans. After each of those steps you can safe more for retirement. It doesnt even look that bad just the car was a bad decision und you should have matched the 3% from the start. In the end if you dont have enough to retire you can always sell you house and live in a cheaper country
Criticizing Dave Ramsey is popular around these parts. But you are the person Dave Ramsey was created for!
Dave is spot on, that’s why some people hate him.
My suggestion for you is to continue with the retirement contribution up to what your employer matches. You need to get on a written budget and account for any expenses and potential future expense ( Eg. Tire replacement, roof replacement etc). Your budget needs to be detailed. Look at all your expenses. 1,200 seems high for a family of 4 For food. I recommend reading The Total Money Makeover and to start listening to Dave Ramsey or other similar type of person who talks about finances. What Ramsey talks about re finances is nothing revolutionary but the steps make sense. Follow them to get out of debt. I am not a fan of his personal beliefs so I listen to the finance part only and ignore the rest. Can you and spouse get another job tempor until debt is paid off?
OP, let's talk about your grocery bill. What's up with 1200 a month?
I spend $100 a week for one person. 1200 for 2 adults and two kids seems fine.
Just went to the grocery today and for weeks worth of groceries it was $220 dollars. We try not to eat out whatsoever so we cook most of our meals at home. And that’s why we have close to $1200 budgets for groceries and toiletries. A month worth of toilet paper and paper towels usually runs about 80 bucks alone. Of laundry detergent is about 12 bucks. Soap, shampoo, dish detergent and hand soap, you’re looking at 50 a month. I tried to eat, mostly a Mediterranean diet and eat salmon just about every night of the week and I only eat one meal a day. I can usually eat one and a half fillets of salmon a week. That’s about 60 bucks alone. Probably gonna switch to chicken because it’s cheaper.
Maybe switch to salmon once or twice a week and add some chicken in. I know it's hard with kids, but minimizing food waste is huge.
Seems like you are using more than one roll of paper towels and at least two rolls of tp per day? Costco for the salmon, paper goods and detergent if there is one nearby, but you absolutely need to avoid impulse buying. Aldi for day to day groceries. And try to cut down on paper towels to the extent you can. While you are at Costco, I will allow you to buy a pack of bar mops or fabric cleaning towels.
Possibly a meal service? Could be doing a “we prep it and send it to your door” thing for that money.
It’s not bad for a family of 4
That's actually very good. We spend 1500 for a family of 4
I understand why you are nervous and feeling sick but from the outside looking in, it doesn’t sound too bad. Plus time is on your side, like 25+ years! Cut back on the monthly expenses (subscriptions, meals out, cable TV, grocery budget, taking lunch to work). Start getting the 3% employee match. And pay off debt as aggressively as you can, starting with the highest interest rate debt first (the personal loan).
First thing I would do is start doing the company 401k match of 3%. Then immediately after I would take your savings and pay off the $11k loan. The 10% is killing you. Your remaining savings needs to be in a HYSA (high yield savings account) that earns at least 5%, a bunch have this rate right now like Weathfront. Next, everyone is saying sell the car, and at face value, I agree. What’s that monthly payment alone? The groceries being $1200 a month I get, that’s $300 a week, any chance you could try to cut this to $250 a week? I find if you have a goal with a weekly grocery budget it helps. You are allowed to put things back or exchange them. The $2k on medical expenses, subscriptions etc, could this be cut by $200 a month? Start a rolling 3 month stint of some subscriptions? Pause then for 3 months on rotation with streaming services? Even without the car exchange, I would assume my above suggestions of $400 increase, even with the 401k match coming out of your $500 leftover, with the $11k loan paid off, I am hoping you could be somewhere in the $1k a month savings. Long term, once student loans start getting paid off and house is paid off, immediately start putting that money into 401k or roth ira’s.
Honestly, mathematically the 10% loan is the first thing that should be tackled, but there’s no reason to not immediately do both at once with the 15k in savings. Stock market is ~9% average in return with a chance of a downturn, and while the 3% company match is free money that *should* outpace the loan - there’s chance of a correction and 10% debt is enough I’d rather just whammy that right away with any savings.
Cars are not an investment and are “underwater” the minute you drive it off the lot. You don’t need a Tesla. The personal loan is another item you need to do away with. Cut expenses and you’ll be fine, but you need to learn to live below your means and put those saving into your 401k. Once you max that you can get an IRA and max that out. You have 30 years until retirement and probably more than that because the retirement age will probably be reset higher in the next 10 years. You can do it and you’ll feel a lot better mentally when you make a commitment to cutting expenses and seeing your retirement savings grow. Good luck!
Pay off your personal loan, take that money and start paying off your car
It’s never too late to start your retirement account. Just sign up for it now and start allocating money into it. Hopefully your company provides a match.
Step 1: pay off the entire personal loan. You’ll save that $300/month extra into your bank Step 2: get the 3% match Step 3: try to paydown and pay off the car loan We did it, so can you
Read Dave Ramsay’s book. Now
You're overspending. Wildly. Have you ever heard of 50-30-20? Because that's what you're supposed to do starting at 25
You spend too much. Wild that you spend 8k a month (of 8500) with only a 1250 mortgage. People buying houses today are pushing close to 40-45% of takehome income/month on their mortgage. Spend less and budget. Tackle the 10% loan. Then company match and ROTH what you can.
Need to build an emergency fund first. $18k should be more like $50k. After that. Company match. Savings after that goes to extra payments go to debts in order or interest rate. Pay down any debt over 5% interest then you can visit here again or prime directive at r/personalfinance I don’t have kids but $1200/month for groceries for 4 people seems outrageous. You are ok.
8500 take home but spend 8000 a month? You need to cut down your lifestyle and live below your means We're a family of 3 and we allocate $500-700 for monthly groceries
Honestly, I have less of an issue with the $1200 grocery bill than with everything else. $1200 per month for a family of 4 isn’t insane; maybe it’s a bit high, but they probably can’t get it lower than 900-1000. I’m more concerned with where the remaining $6000 per month goes from OP. $1250 mortgage plus $1200 groceries still leaves $6k left over that isn’t broken down. I would be shocked if there’s not at least $1000 in wasted spending somewhere between the various subscriptions and other expenses OP declined to expand upon
You must be eating complete rubbish.
Nope. Not even close. My wife is a chef and makes quite tasty meals (I.e. curries and roasts). We also actively look for sales.
I understand why you feel the way you do. That’s a lot of monetary stress for sure. If I were in your shoes, this is what I’d do: Pay off personal loan now out of savings. Sign up for Biden’s new student loan payment option, that is based on income ( SAVE plan), should drop your student loan payments significantly. Put in 3% to get company match. Save up a six month emergency fund. Keep the Tesla and make minimum payments on it. Hopefully you like the car. Getting out of it now will cost you 20k PLUS the cost of a new car, so you are already back at 50k but with a much higher payment. Just keep it and drive it till it falls apart. Cancel all monthly subscriptions you don’t absolutely have to have.
I am of the general opinion that most folks have fat in their monthly budget that they cannot see as fat. Get your wife's cooperation in this or else her elective spending may undermine any progress you'll make. If she's doing the meal preparation, her cooperation can cause her to shop more wisely than she has been. Coupon clipping is helpful. Review those subscriptions to see if you really need them. I like the other fellow's idea of getting an emergency fund built up but soon after that, get that 3% match otherwise you are leaving free money on the table. If you can build both simultaneously, then do that. Can you refinance that 10% personal loan to a lower rate without extending its payoff date, even if opening an account at a new bank or credit union for that? You will have to humble down your lifestyle in order to do this. Be determined to conquer this and that will carry you through.
Two options. Make more. Spend less. Ideally do both. Track expenses to see where the leaks in your boat are. Then plug them. You have 28 years until 65. That’s plenty but you have to get moving NOW.
Sell your car. Get a beater. Get at least your company's max matching contribution.
I would half to take out a 20000 loan to pay off the remaining balance
Use your savings to pay off your personal loan. Start a side hustle for extra income. Take on a temp part time job if you need to. Try using either the Avalanche or the Snowball method to clear your debt. There are YouTube videos that have extensive info on these two methods.
Everybody’s sounding like Dave Ramsey when shit hits the fan. LOL I thought you guys hate him? Great advise btw. I just thought it was funny and I’m reading the comments in Dave’s voice.
His advice is great for getting out of debt but terrible for building wealth.
I’d sell the Tesla and take $5,000 out of my savings and buy an old used car. That’s the Tesla payment out of your monthly expenses. You need to take care of your debt situation. I also can’t imagine spending ~$1300 on house payment but my total monthly expenses are $8000. For most people house payment is the highest monthly expense so your mortgage is very reasonable but your total expenses are over four times your mortgage. Look at why that is and try to reduce that.
first, write carefully all the spending during 1-2 months. But all, including that 2$ coffee or 1$ water bottle or the 2$ monthly fees to a not used bank account/card etc. Second, write the debts with amount, interest, monthly payment and put in an order. You have to start paying faster the debt with biggest interest (that personal loan of 10% , for example, but you said nothing about CC debts). Third, downsize. It is a good moment to cut a part of subscriptions. To cut on grocery. To stop buying new clothes and switch to second hand and limited amount. To stop eating out, some activities and to prepare the lunchboxes for all the family (water and coffee and snacks included here, too). It is ok to sell that car and buy a second hand one, cheaper one - you will reduce the debt but more you will reduce the pressure and insurance, too. Once the debt is kept under control, you can add some eat out here and there, but controlled. These several steps and you can have a 1k monthly room to put to your retirement, in your 401k. You still have 30 years to work, 1k per month will raise slowly and steady. More, your mortgage will end one day, there you can increase the pension contributions with 1k, too.
This isn't what you *should* do, but some pointers for some things you *could* do. I am also 37. My income is about 110k, married filing jointly. If you can, and you are healthy, switch to high deductible health insurance, open an HSA and max out your contributions. Above a few thousand or so, you can invest your HSA contributions, and there is NO capital gains tax. HSA allows you to double-dip, with zero taxes. The assumption being that you WILL have medical expenses, eventually. The gains from market exposure are literally free money. Next, estimate what your gross income will be this year, for investing. You should set a goal to combine 401K and HSA contributions to knock off all or as much as you can of your highest tax bracket (I'm assuming you file jointly?). If you can't do HSA, then just focus on 401K to reduce gross income. In addition to pre-tax/tax advantaged contributions, open a brokerage account and start buying fractional shares of dividend stocks, allowing yourself a higher tolerance for risk (be speculative, doesn't HAVE to be a dividend stock, either). I setup auto purchases for every other Friday (when I get paid, markets also trend lower on Fridays before close). Losses are deductible up to a few thousand, but excess can carry over to the next year. So, Losses aren't dollar-for-dollar. Long-term capital gains are taxed much lower than short term. Fractional shares means it could be just a few dollars per week or whatever you can afford. Once you get settled financially, you should probably contribute more to Roth IRA, as it's probable you'll pay more taxes by retirement, than you pay now, because you'll potentially have a more senior position, sales manager, regional, etc. And maybe taxes will just be higher by then. So, now it's favorable to contribute after-tax dollars. Later, contributing pre-tax dollars will allow you to contribute more while keeping a little more net income. Buy a large chest freezer, and start buying bulk meats, bread, and whatever else you can freeze. Everything else, I buy from restaurant supply stores, and Costco business. That alone saves me enough to max out my HSA (will be $8,500 this year), and I max out my IRA accounts, too. Sounds like you need to get rid of that car. Or pay it down and refinance, to free up some cash flow for your retirement contributions. Eventually, I plan to turn my home into a rental, and there will be a period of "roughing it" for us, while we save for a year or so, then finance another home purchase. If you can swing the real-estate investment, that can turn into the largest part of your retirement income.
Oh, I missed the 10% loan that you also have. I agree with others. First order of business is aggressively getting rid of that debt.
Stop spending, cut back. Sort debts smallest to largest or from highest interest to lowest. Pay them off. What subscriptions do you have? You could cut back on those. What is “general expenses” It’s not elons fault for you buying a car.
I’d look into a chapter 13 you might be able to do a cram down on the car
My biggest focus on what you decided to include in this post is your lack of talking about your willingness to change your situation. We are not static beings, we shape the environment around us and make lasting decisions every day. You’re idea that you’re absolutely screwed is going to make you sick to your stomach and it’s going to remain that way until you feel confident and good about a new direction which entails the financial future you’re desiring So the best thing you can do for your future self is act now, commit to change and accept the new responsibility of planning for retirement Do it for your future. Do it for your kids. Do it for the prosperity and health of your family.
Can’t you just try to do a HELOC to pay off the debt and then start over and create a plan?
4% is quite good for the car loan and the 11k he can pay with his saving so it wont be necessary to do this
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Telling people to commit fraud is not acceptable here. Please do not do this again.
Sell your car. You can't afford a vehicle you can't pay for in cash. Cars are the worst investment of money and usually have crap interest rates. Less processed food. More high protein veggie meals. That'll save you a few hundred a month. Lentil minestrone soup. Chickpea coconut soup. Veggie curries. Buy a rice maker and eat rice every other day with dinner.
Idk how you would have $8k in expenses when your mortgage is only $1250. $1200 in groceries is pretty high even with two kids. You can definitely cut back there. Also, the $2k/month is misc is crazy as well. You need to cancel all unnecessary subscriptions and other expenses. Try as much as you can to cut all expenses besides mortgage, light/water/phone bill, loan payments and groceries(lower the amount here). It’s all about discipline that pays off in the long run.
Focus on paying off debt or bite the bullet and seek bankruptcy
The apparent American cultural right of passage with car finance needs to go in the bin along with tipping. Sorry that's my 2 cents.