[USER]

Would appreciate input and feedback back . Thanks in advance for not passing judgment.
My wife and I are both 32 with 2 grade school kids and currently bring in a combined total of $12,395/month (net pay; after taxes, benefits, 401k etc).

We live in a HCOL area and our monthly expenses are ~$10,570 (inclusive of mortgage, monthly HOA assessment, brokerage accounts, life insurance, kid sporting activities, car payment , utilities, groceries, gas, kid tutoring, loan payment, etc.)

That leaves a balance of $1,875 that we are planning to put towards our debt. This amount is in addition to the minimum amount due that I factored into our monthly expenses.

I’m also planning to use my bonus this year and apply it towards the debt which should help quite a bit. My annual bonus is $32k before taxes.

However it will be prorated this year since I started my new role in August of ‘24 so I’m expecting to get ~13.3k and about $10k after taxes.

Breakdown of the debt below but my ask is how you would tackle this if you were in our shoes. Was planning to snowball it but didn’t know if that was the best option considering one of the lower balances has a higher interest rate.

The Amex card balance is so high because I use it for everything and usually pay off what I spend monthly but had some things come up in 2024.

The personal loan was used for a business venture that didn’t go as planned. Nonetheless, you live and you learn…

Amex personal loan – balance of $21,871.96 (9.98% APR)
Amex card balance (22% interest when I carry a balance)- $ 15,260
Auto loan – $7,222.81 (3.74% rate)

Thanks again for the support!

[Greg]

Sounds like a good plan
What is the rate on your auto loan?

Maybe consider pausing brokerage contributions until those credit cards are paid.

[Juliett]

Stop investing in brokerage and pay off your debt. Start with credit card first.
Cut all extras until your credit card debt is paid off.
-Credit card
-personal loan

You live way outside your means.
I get living ima HCOL area and having $10k-ish a month in expenses.
But you are spending too much.

Stop using the card asap. When you carry a balance you get charged interest on EVERY SINGLE purchase. Even if you pay off what you used.

They use average daily balance. So, every coffee, grocery store trip, or gas purchase, you’ve paid 22% interest on.

That’s why you can’t fry out of debt because you’re paying 22% interest on every single thing you buy.

At this rate your debt is never going to go down. It’s just going to keep going up.
Tighten your belts for a year.

Your current level of debt is what 1 year at an in state college costs. You’ll probably squander away an entire college education in interest.

I’m being blunt so you can see how bad this really is and nip this and get it under control.

[Cheryl]

I found the free undebt.it website was really helpful in determining what payoff options would cost the least amount in interest.

It’s free. You need to have the details of your debt – balance, minimum payment, due dates, APR, etc.

Plug it all in and you can play with payoff dates and snowball versus avalanche. It’s a great tool to help get out of debt.

[Kerri]

If I were in your shoes, I’d pay off the credit card first , and then snowball that payment into the personal loan payment.

Since the interest rate on the auto loan is significantly lower than the other two, I’d save it for last.

In fact, I’d make sure I built up a fairly healthy emergency fund before I worried too much about paying the car off.

I’m sure you have or are working on it, but I’d track your expenses for a bit and see if you can lower them any.

[Erik]

How much are you throwing in 401k? I’d decrease it for a bit (leaving just enough for company match) to pay down the credit card

[Ronke]

Focus on the highest-interest debt first Amex credit card while maintaining minimum payments on the others.

Amex has a way you can create a plan where it gives you up to 24 months to pay off with a plan fee which is usually cheaper than interest rate.

If offered, make a lump payment with bonus then start making payments or you can find a 0% bal card for both AMEX make payments towards it to reduce interest

[Kris]

I know people who say payoff the lowest balance first but that interest rate is so low and your payments are probably going to mostly to principal by now anyway.

I would get those credit cards paid off ASAP and do what you can to not charge more – or payoff any current months charges plus extra to paydown the debt.

[Angela]

I’d take a hard look at spending and try to cut at least $1k (10%) a month to put towards snowballing the debt, highest rate first.

[Elizabeth]

Why do you have money going into your brokerage account listed as an expense? That is not an expense. You should also be using that money to pay off your high interest rate debts.

Also, if you are currently carrying a balance on the Amex card, you need to stop using it immediately as you lose the grace period on new purchases.

[Lisa]

I would get a 0% transfer balance card and put highest interest rate debt on that.

[Cica]

Bonus is taxed at 40%. You might get $7,000-$8,000.
But, see if they also match 401K if you make a contribution from the Bonus too?

Free money.

[Author]

Posts