Getting Serious About Debt
When I set up nYNAB a few months ago (I'm a YNAB4 convert), I added all my accounts/debts, and for the first time I added up all those red negative numbers. Horrified doesn't describe it. Not counting the mortgage, it's a little over $80k. Monthly, we're paying over $1600 just to cover debts, and that's just the minimums. The panic hasn't subsided, and it's been over 2 months.
BUT! With that panic has come a renewed motivation to get a hold of my finances. So, how did I get here? Well...
1.) Student Loans - $50k - Between my wife and I, this is how much we've got left after paying for 5 years. We're both on the standard 10-year plan, so without paying anything extra, they've still got another 5 years.
2.) Car Loan - $15k - About a year ago, my wife's transmission went, and we decided to buy rather than repair. She was pregnant with our first, and we have a huge dog (Great Dane), so we went with a pretty large SUV. It was certified pre-owned, so we got a good deal, but still a big expense.
3) Credit Cards - $15k - We put about $4k for a landscaping project that we thought we could pay back. The dog has a genetic heart defect that we recently found out about, so that was another few thousand dollars (along with ongoing expenses for tests and medication). We had our first kid in January, so things were tight while my wife was on maternity leave. Then the daycare costs started coming. That doesn't go on the card, but helps explain why some other stuff has. About half of this total debt is 0% interest until Feb 2019.
Starting December 1st, we began our journey to debt free. First, we stopped using the cards. Talk about scary... my AoM has dropped to 3 days. There's not much free money in the budget to throw at the debt, but I'm expecting a bonus in January. Paired with our expected tax refund, we plan to take a huge bite out of the card that's still accruing interest. Once it's paid off, we'll snowball, hitting the other credit card, then the car, then the student loans.
I'm extremely motivated to crush this, but I have a hard time knowing that this is going to take me 3, 4, maybe 5 years to climb out of. I'm just looking for some support, and some pointers on how to keep the sense of urgency over such a long period of time.
Thanks for reading!
I hear you in the stress of the sense of urgency. My debt is on a smaller scale, as I am single, not yet married and don't have any kids (though I would like to have kids soon and am in a serious relationship). That being said, my stress resides in paying off all of my debt in order to focus on saving more for these milestones in my future.
It's great that you are motivated, that alone is a huge step!
I think it's normal to feel overwhelmed at the time-span of what it can take. I, too, seek support in these forums to stay motivated.
One thing my mom always told me as I was growing up is "Inch by inch is a cinch, yard by yard is hard". This is what I tell myself through all of my stressful tasks. If I can take it on step at a time, it will feel less overwhelming. With using YNAB, my goal is to take it one month at a time, doing the best I can each month and giving every dollar a job. I still try to leave room for fun and dining out, keeping in mind that every dollar that I have leftover can be put into my pay-off-debt categories.
You and your partner can do this -- Inch-by-inch!
I (thankfully) don't have any student loan debt thanks to my parents, but my husband just finished college and now his student loans are kicking in close to $90,000. I'm feeling really stressed about it because obviously I want to help him get out of debt, and we are at a weird point in our lives where we don't have kids yet (I'm almost 34) but maybe want them some day soon, but feel like we shouldn't have them until all these debts are paid. Plus, I want to do a little traveling first, but how can we travel when so much needs to go towards debt?
I really want to work on crushing his debt this year. We are looking at our finances to see if we can manage to survive on just one paycheck to pay all the bills, and then send the other entire paycheck to his debt. It'll take a lot of frugality, and we might be able to only keep it up for a few months, but even that will make a huge difference.
A lot of us are in the same boat as you are - it's how we found out about YNAB, out of panic, desperation, or pure necessity.
I am by no means out of the woods on debt (just take a peek at my journal for that), but I am trying to focus on the progress and gains we are making, rather than the parts where we trip up. Because everyone trips up or makes a mistake from time to time. That what Rule #3 is for - whether something else punched you or you punched yourself.
If you're interested, I imagine there will be Debt Smackdown Challenge coming in 2018, so stay tuned to the forum for that. I like what g.359 said, "Inch by inch is a cinch, yard by yard is hard." One tiny step at a time.
I am in a similar position except I am single but with approx A$40k in debt from a combination of credit cards and student loan (mainly credit cards.)
I have had that from a while and it has made movements down them up, largely because I became demoralised. What I suggest is breaking it down into chunks of focus. So X by X time. It feels more achievable than trying to focus on the full 80k.
Keep going! We're in a similar boat - two kids, tons of student loan debt, and one income because my wife is currently in school, accruing... more student loans. But it sounds like you've already been able to get a lot of your debt into interest-free situations, which is huge because it's not getting worse. Stay motivated, celebrate your victories even when they're small, give yourself enough small treats that you don't feel deprived and fall hard off your path, and keep your eye on the prize. We can cheer each other on.
I don't know if this is the type of advice you're looking for, but...
Have you ran the IRS.gov withholding calculator so you have more in your paycheck every month instead of giving the government an interest-free loan for the year? That would give you more cash flow to increase your debt payoff and possibly prevent taking on new debt if you have more money to budget with.
For me personally, 3+ year debt payoff is a really long time. Is there anything you can do to break up the log jam? 24-36 months really would be the maximum time to payoff debt. If you can't get it done sooner, I'd get creative -- sell things, take on a second job, deliver pizzas, drive Uber, offer landscaping to neighbors, meal plan to cut down groceries, reduce eating out, fun spending, no family vacations. It's all temporary and the sooner it's done, the better you'll feel and then you can add those luxuries back into your budget when you're debt-free.
I don't know your entire situation obviously, so take what I say with a grain of salt, maybe you're already doing those things. Those are just things we did when we were paying off all our debt (we paid off $41K in 17 months, btw).
I was in a similar situation to a lot of folks on here, no student debt, but had about $30k in credit card and line of credit debt. When I got super serious about dealing with it, I did all the math and attempted the avalanche method (or is it snowball) - in either case, it was hard and I was basically living paycheque to paycheque all the time.
One day I get a call from my bank - not a collections call or anything - I was always at least making my minimum payments.
Thankfully, even with debt, I was not missing payments and my credit score was considered stellar (795 - 800). The bank suggested consolidating the debt into a single loan. Which I did, and it made my life a whole lot easier.
The interest on the debt is much lower than it was on credit cards, and I have a single monthly payment to worry about now. The monthly payment is also lower than the combined total of the payments I was making on my own - so my cash flow is now a bit better, letting me put aside some money in an emergency fund so that I can actually start to always use last month's money. Makes budgeting a lot easier.
I am curious about the YNAB team's opinion on this sort of approach to paying down debt...