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Debt Management Advice

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  • Avatar artemis 
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    medical school scholarship sponsor

    Another way around that if you meet resistance is to refinance and cash out house equity into 30year;  and payout the IRS and credit card debt — a simple consolidation way that doesn’t involve anything fancy.

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    I’d caution against doing this until the OP is sure that ongoing overspending on credit cards isn’t a major issue.  Otherwise the OP and his wife could find themselves out the current equity in the house AND back in serious credit card debt in a few years.

    After addressing spending and current debt, the last is planning for the kids.   This actually may be the hook where you can get her attention as the kids sound like an agreed common ground.  Use their future planning needs and do simple math extrapolation of $$$ needed to fund those needs while addressing ongoing expenses and debt.   As you already know ===kids are expensive and can easily double your current debt demand.

    Luckily you have a big shovel and can erase the debt fairly easily if you can get buy-in on the expenses.   The parties involved typically don’t know what they don’t know on expenses until it’s spelled out like what Personal Capital does.

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    Agreed.  “How are we going to save for the kids’ educations?” could be a good motivator.

    And that big shovel will be a lot of help once the OP figures out what approach to dealing with their current debt problem resonates most with his wife.  That might take some time, but in the meantime tracking expenditures will help figure out where the problems lie, and the OP can do that (on his own, if necessary) easily enough.  He may feel like his hair is on fire, but at least on paper he’s not in an unfixable situation.

    #221059 Reply
    Liked by ddswifey
    jfoxcpacfp jfoxcpacfp 
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    I did not read every post, but I did see the WCI post about getting your spouse on board. I figured I would drop the MMM one here as well. Good luck, I’m rooting for you both.

    http://www.mrmoneymustache.com/2012/03/22/selling-the-dream-how-to-make-your-spouse-love-frugality/

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    I hate to be a wet blanket, but didn’t the MMMs’ divorce?

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #221060 Reply
    Avatar Brains428 
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    In terms of focusing on children… I would do your best at having these conflicts be civil in front of your kids. I’m not saying you aren’t, but feuds over money are the most consistent memory of my parent’s relationship (divorced after 40 years of marriage), and is some of the root to my own personal failings with money (avoidance of responsibility).

    It sounds like problems are being addressed, and I’ll leave some of the debt management and relationship advice to those more senior than I. Good luck.

    #221064 Reply
    Avatar ZZZ 
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    “I hate to be a wet blanket, but didn’t the MMMs’ divorce?”

    Yep.

    Either long tail is bad. Living like your rich when you’re broke (the OP), and living like a pauper when you’re rich (MMM).

    #221103 Reply
    Avatar Allixi 
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    I did not read every post, but I did see the WCI post about getting your spouse on board. I figured I would drop the MMM one here as well. Good luck, I’m rooting for you both.

    http://www.mrmoneymustache.com/2012/03/22/selling-the-dream-how-to-make-your-spouse-love-frugality/

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    I hate to be a wet blanket, but didn’t the MMMs’ divorce?

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    Quoted From MMM’s blog:

    Update:Some of the negative speculators have assumed “your wife dumped you because you were too frugal.” This part may be necessary to address because of the money theme of this blog.

    The answer is NO. I was the one who asked for the separation so you can blame me for it. And no, there were no frugality issues because earning and accumulating money was always extremely easy for us. We spent whatever we wanted, we just happened to have finite desires. Plus I was not the “boss” of the house. Mrs. MM has always been an independent-minded person who is good with money and decides on her own spending.

     

    #221111 Reply
    Avatar FamilyFirst 
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    I did not read every post, but I did see the WCI post about getting your spouse on board. I figured I would drop the MMM one here as well. Good luck, I’m rooting for you both.

    http://www.mrmoneymustache.com/2012/03/22/selling-the-dream-how-to-make-your-spouse-love-frugality/

    Click to expand…

    I hate to be a wet blanket, but didn’t the MMMs’ divorce?

    Click to expand…

    Quoted From MMM’s blog:

    Update:Some of the negative speculators have assumed “your wife dumped you because you were too frugal.” This part may be necessary to address because of the money theme of this blog.

    The answer is NO. I was the one who asked for the separation so you can blame me for it. And no, there were no frugality issues because earning and accumulating money was always extremely easy for us. We spent whatever we wanted, we just happened to have finite desires. Plus I was not the “boss” of the house. Mrs. MM has always been an independent-minded person who is good with money and decides on her own spending.

     

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    Well, I was not aware of all this. Thank you all for educating me on potential biases and weaknesses of my sources.

    #221201 Reply
    Liked by Zaphod
    Avatar PedsDad 
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    Thanks all.  We went to our counselor yesterday and it was quite a good session.  Some things came out, not a lot of details, but enough that it almost became safe to talk about these things a little more.  After our session, we had some things come up that I think I can work on.  I said that I wasn’t happy at work because I felt I was working really hard just to pay interest and debt servicing.  Her comment was that “everyone we know has a lot of debt,” which immediately made me think of Dave saying “you’re normal.”  She said “in three years, it won’t be so bad.” Of course, my thought was, “why not 6-12 months.”  I think I would be happy with a compromise (paying credit cards and IRS fast, taking the rest slowly).  She also commented that she wanted her income, when she can go back to work, to be “vacation money.”  So, I have a tentative plan that I will propose some sort of vacation and a budget to be able to afford this vacation, while still being able to do some debt repayment.  I think if she can see the value of cutting spending (spend less, go to Disneyland), then maybe we can be more on the same page here.

     

    Like the bread manager (love that term), I have taken to sending biweekly finance updates.  In these emails, I have started to include “dreaming in HD” that I got from Chris Hogan on the Dave Ramsey stuff.  I am giving very detailed visions of things we can do with our money (trip to Cabo, a cruise on the Rhine, etc).  Again, not ideal way of communication, but hopefully the emails can evolve to conversations over coffee.

     

    Regarding how we got here, yes I am very culpable as well. I truly had no idea what was going on so that I didn’t notice her paychecks weren’t being taxed appropriately, and my bonus was buried in another check, so I didn’t know to check it over.  My company has made mistakes in the past and “overpaid” other partners, made them pay it back, and they sheepily obliged.  One of my partners has to pay extra taxes quarterly because her husband has a different business model and it screws her taxes up. I spent my share of money too, but there is absolutely a lot of extra spending on her side that could be limited a little bit.  I have a spreadsheet of all the modifiable spending this year (groceries, eating out, online shopping, home repair, and child care).  There are months when the online shopping was over 4000.

     

    Today I feel less on fire and more smoldering.  Thanks all for validating my terror and reminding me of why I care so much.  Hope to have more to offer to these forums than anxiety attacks in the future.

    #221210 Reply
    Avatar Panscan 
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    What are you guys buying for 4k online in a month. Thats 50k/yr pace..

    If all your peers were jumping off a bridge would you do it too? Average person vastly undersaves, doctors included so I’m not sure how your friends being in debt makes it ok, and I also am not sure how you guys would know that because people aren’t usually discussing that. Why will the situation be better in 3 years. It won’t get better unless you make it. And if you commit it certainly take 3 years.

    Seems like delusion to me. Your situation isn’t the end of the world but it’s not going to go away until you guys make the decisions to make it go away.

    #221212 Reply
    Avatar Panscan 
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    Certainly won’t take 3 years. On mobile

    #221213 Reply
    Avatar artemis 
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    Thanks all.  We went to our counselor yesterday and it was quite a good session.  Some things came out, not a lot of details, but enough that it almost became safe to talk about these things a little more.  After our session, we had some things come up that I think I can work on.  I said that I wasn’t happy at work because I felt I was working really hard just to pay interest and debt servicing.  Her comment was that “everyone we know has a lot of debt,” which immediately made me think of Dave saying “you’re normal.”  She said “in three years, it won’t be so bad.” Of course, my thought was, “why not 6-12 months.”  I think I would be happy with a compromise (paying credit cards and IRS fast, taking the rest slowly).  She also commented that she wanted her income, when she can go back to work, to be “vacation money.”  So, I have a tentative plan that I will propose some sort of vacation and a budget to be able to afford this vacation, while still being able to do some debt repayment.  I think if she can see the value of cutting spending (spend less, go to Disneyland), then maybe we can be more on the same page here.

    Click to expand…

    I think pointing out to your wife that the money you are being forced to spend on repaying debt is in fact money that could have been spent on other, more enjoyable things (such as a fabulous exotic vacation every year) if you didn’t have to make those payments is a fine idea.  There is a cost to debt, and it’s good to remember it.

    Your wife also needs to remember that the problem with spending nearly all of your income is that it can turn common temporary setbacks (such as a job loss or an illness that lasts more than a few weeks) into a full-blown financial crisis.  When you’re not saving much, the option of stopping your monthly savings to temporarily to boost your spendable income until the crisis is over simply isn’t there.  And when you owe a lot, you also may not be able to cut back on your spending much, either – lenders want their money on schedule.  The only options are to spend what you’ve already saved, or worse, run up even more debt.  If your wife was actually supplying a significant percentage of your family’s income, your family might be in real trouble right now since she’s currently unable to work.

     

    If all your peers were jumping off a bridge would you do it too? Average person vastly undersaves, doctors included…

    That’s what the OP’s wife doesn’t see yet.  The problem with judging what you can spend based on what the Joneses are spending is that all too often the Joneses are broke.

    The OP’s wife doesn’t quite grasp yet the true downsides of owing so much money.  That’s why she doesn’t yet share her husband’s concern over what they owe.  But if the counselor is helping them communicate better (and it sounds like she is), that awareness will grow in time.  The OP just needs to be patient.

    As I said earlier, it’s a marathon, not a sprint.

    #221255 Reply
    Avatar StarTrekDoc 
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    Good Progress OP!

    Four buckets of expense planning budgeting:   Have to’s,  Should do, Wanna do, and can live without — list these out on that budget ledger and each category, knock off the income

    Have To’s.  No question:     Taxes: IRS, Property.   Mortgage,  Debt servcing Student loan,  credit card debt, car loans

    Take that right off the top of income.

    Now, you have your ‘play money’ to divvy up between the rest.    We did the same for income split — Wife did the ‘luxury’ vacation income.   My income was to pay down the debt and save for the future.   She worked for the fun for the family.   When we got to a really good spot, she hung up her stethoscope and hasn’t gone back–perfectly being the bread manager (LOVE THAT!).

    Is she right about getting out of debt in 3 years?  maybe.  probably more like 5 years.  But there’s the savings for kids and retirement too.   You have a big shovel, but doesn’t mean you need to keep adding to the existing pile either.   Really does sound like you both need to get those expenses under control — nice shiny things aren’t all that.

    You’re a great candidate to have expenses automatically tracked with Personal Capital imho.

    #221266 Reply
    Lordosis Lordosis 
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      She also commented that she wanted her income, when she can go back to work, to be “vacation money.”

    Click to expand…

    Make sure you take the taxes out before you vacation.

    “Never let your sense of morals prevent you from doing what is right.”

    #221267 Reply
    Avatar Tim 
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    OP,
    There is a lesson buried in the MMM, segway.
    “Blame” and diagnosing the money issue, or supposed risk of relationship issues can be toxic. MMM split, the whys and wherefores don’t matter. When “I” becomes more important than “we”, you have entered dangerous territory. . Many happily married couples are poor.

    #221293 Reply
    Avatar hightower 
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    Joined: 12/07/2016

    Good to hear you guys made some progress on stuff with your counselor/therapist.  My wife and I went through a stage where we needed to see someone to work through our issues.  Ours weren’t really money related, though a big part of why I was so stressed and unhappy at the time was due to dissatisfaction with my career and the extreme debt we were carrying.

    Working with a counselor was the best thing we ever did together for our relationship.  We are a like a different couple now. We hardly ever get into arguments anymore and when we do they are very mild and we usually end up laughing about it right after.

    The reason I wanted to mention this is to give you some hope that this sort of thing is normal and you guys will likely work this out and be fine.  In fact, you’ll be better than fine because you’ll learn to work through your money issues and feel better about it all.

    Very interesting that she takes the approach of “well everyone we know has debt, what’s the big deal.”  It’s clear she’s just not there yet and will take some time to see that normal is not good when it comes to managing your money.  Normal in this country is bad because everyone relies on cheap consumer credit to maintain their lifestyles.  I’ve said it before and I’ll say it again, the next big financial meltdown in this country will occur when all the cheap credit dries up and people can’t get loans for their ridiculous lifestyles anymore.  I think we’re going to see it soon.  Now is definitely the time to get out of debt.  Like Warren Buffett says: “you don’t want to be caught with your pants down when the tide goes out”

    #221306 Reply
    Zaphod Zaphod 
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    Sounds good. Its just super important that youre a team and compromise on the plan and are going forward together. 6-12 months may be too fast. Its like a diet that is trying to lose 50 pounds per month. Its the end goal and tactics you learn for life that are important, not the exact speed you get there.

    Just focus on getting started first, getting better at spending and putting more money to debt each month, and ramp up. Its like any other cold turkey thing, very hard to just start at 1000 mph.

    Stop thinking about the IRS debt. It does not matter, put it on autopay and let it pay for itself. Focus on the huge and painful credit card debt first. That is priority 1-100. You have to learn to categorize debt from very bad to acceptable. Credit card debt (interest earning) is a never event.

    Most of us have been in your shoes before and know the feeling of “getting it” and the other person not and how frustrating that feels, and then realizing you are also a huge problem. Thats why we’re here.

    #221378 Reply

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