Posted on 05/02/2013 7:49:50 AM PDT by Kaslin
Dear Carrie, I'm in my late-30s and trying to dig out from a mountain of debt (school loans, car loan, credit cards). What makes it so hard is that I have two young kids, and my money can only go so far. What should I pay off first? --A Reader
Dear Reader, For many young families, debt is a fact of life. But that doesn't mean it has to control your life. Of course, with young kids, you have a lot of essential financial obligations. And it's quite natural to also want to provide a few extras so the kids can enjoy sports, special trips, birthday parties -- all the things that make childhood special.
Realistically, you may not be able to cover everything. But you can make it a lot easier on yourself and on your kids by not only prioritizing your debt payments, but also getting a handle on everyday expenses. Because, no matter how you look at it, paying off debt and budgeting wisely go hand in hand.
Start by prioritizing your debt payments
Some debts work for you and some work against you. Debts like student loans and mortgages that are taken out for a benefit, for instance to create career opportunities or to purchase a potentially appreciating property, can work in your favor. They're usually lower interest and may have some tax advantages.
With these debts, while you have to make your payments on time, you don't necessarily need to focus on paying them off quickly at your stage in life. In terms of your student loans, just be sure to make at least the minimum payment on each loan to keep the government at bay and protect your credit rating.
High interest consumer debt like credit cards and car loans is another story. This is potentially costing you a bundle. So I'd focus on paying these off first with a bit of basic money management.
Start with your credit cards:
--List your credit cards and balances, from the highest interest card to the lowest.
--Pay off the highest interest card first, paying more than the minimum each month if you can.
--Continue to at least make minimum payments on the rest.
--Work your way down until all the cards are paid off.
Another way to approach multiple credit card debts is to consolidate them on a low interest card and pay the maximum that you can afford each month. But look at credit card consolidation offers closely. There are often fees involved.
When you have the credit cards paid off, direct any extra money to your car payment. With that taken care of, consider increasing payments on your student loans, once again focusing on the higher interest loans first.
Put payments on automatic where you can
Once you have your debts outlined and prioritized, set up automatic bill pay wherever possible. It will help you make payments on time and keep you focused on paying down your debt. I'd also suggest making an automatic deposit to your savings account each month to create an emergency fund. With these payments automatically deducted from your checking account, you won't be tempted to spend the money on extras.
Take another look at your budget
Speaking of extras, you now need to take a realistic look at your overall expenses. Write down the essentials -- mortgage payment or rent, utilities, food, health insurance, transportation, school costs, childcare, loan payments -- anything that's absolutely necessary for you and your family. Now write down the nice-to-haves -- movies, restaurants, new clothes, video games -- all the things you'd like to provide but don't really need. Put real numbers next to these items to see how you currently spend, or perhaps overspend, your money. While it's not easy, you may have to cut back for a time in order to stay on top of debt.
Get your kids involved
If you do need to cut back, don't apologize to your kids, enlist their help. Make a game out of finding the best deal in the grocery store or when buying clothes or toys. Have them save their allowance or gift money to contribute to the special things they want. Even young kids can learn valuable money lessons by making choices. Because that's the key to managing debt -- making balanced choices so you can handle both your needs and your wants with the money you actually have to spend. Best of luck.
Two kids, student loans and no husband.
Perfect formula for an Obama voter.
Let me guess, she graduated in an unemployable field too.
Probably a degree in Women Studies. It is also probably the reason she has no husband.
“Fortunetly”, my first professional job was in the law department at Seafirst/Bank of America.....
20 years later, I still have no debt.
Also, once you pay off one card or one loan, etc., since you’re used to being without it, add the payment of the first item to the payment of the next item.
For example, say you have three credit cards and you put say, $200 on one and the minimums on the otheres. Once the first card is paid off, move that $200 payment to the next card PLUS the minimum you’ve already been paying. Then do the same with the third card ($200+second card minimum PLUS third card minimum). In this way, you’ll be ratcheting down your debt without any extra outlays per month.
Sadly, a lot of folks lived off from CCs when the downturn hit and they got laid off.
Well, we saw way back in ‘92, how Dan Quayle was crucified by the left for talking about single motherhood not being a good life choice.
Due to political correctness, we’re not supposed to notice that this girl has children but no man in the picture. We’re not supposed to say anything about her struggles being so much worse because she is not married. We’re not supposed to notice any of that. After all, the left has decided that to say anything against anyone, in this case single mothers, means that you hate them.
I don’t hate anyone, but I hate the straight jacket which politically correct speech and thought has put us all in. We can’t discuss certain topics plainly due to political correctness and fear of being labeled some sort of hater or bigot by liberals.
Terrible answer,
You should go get as many new credit cards that you can, get enough cash advances or purchase stuff and resell it for cash and pay off your student loan, then charge everything you possibly can to live all while saving every dime of every paycheck you get. When the Credit Cards get turned off and you are unable to raise the Debt Ceiling artificially imposed by the Banksters. Quit your Job, apply for section 8 housing, free healthcare, get your welfare check and EBT card then File Bankruptcy on all your unsecured Debt, Then sit back and ask yourself if that Degree in Advanced Lesbian Dance Theory you have was worth it. Welcome to America.
Not only was Dan Quayle right back then but so was Pat Buchanan.
Just curious — what did you see in the article that told you the person is female?
How about a degree in gubmt social counciling work in a city that’s broke?
She just loves helping people with advice for their problems, like too much debt
HA_HA
Females are more likely to write to ask for advice than men are. And see doctors... and take courses in common stuff like balancing a checkbook.
Haha, that’s a keeper
The other give-a-way is two kids and no spouse mentioned points to single mom
The first line. The article is based on a question.
...or for that matter, that there was not a man in the life of the supposed female AND how does anyone know that the supposed female is not a sweet girl who just does not know how to handle debt?
The question says NOTHING about being a mom as opposed to a dad. Lot of assuming going on.
But I see your point once I reread it. It doesn’t specifically say. ‘Two kids’ could be anyone...like me... (it’s not me, btw)
:)
I have often wondered why these humanity go nowhere degrees are eligible for student loans? Those do nothing degrees should be dischargable in bankruptcy and ineligble for federal loan guarantees.
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