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The Reckoning (or, What Mint Revealed)
Published on - June 26th, 2012 (Modified on - September 5th, 2014) (by J.D. Roth)
For the next week (or two), we'll be sharing "audition" pieces from folks interested in being new staff writers at Get Rich Slowly. Your job is to let us know what you think of each of these writers. Pay attention, give feedback, and after a couple of weeks we'll ask which writers you prefer. This article is from Honey Smith, who says she's at the beginning of her debt-reduction journey. Honey's first audition piece was about her cruise ship wedding.
My husband and I have been together for over six years now and lived together for four years prior to our wedding. While we're still in the early stages of merging our finances (a process that will no doubt speed up as we move toward buying a house), we do have a system that we have been using for several years now. It's called The Reckoning.
For us, the reckoning is a way of tracking who owes what to whom. We've perfected it now to the point that very rarely do we need to "settle" the reckoning. To give you an idea: He pays the rent, and I buy the groceries and pay the electric and internet bills. We more or less come out even at the end of the month. As long as the amount we owe each other remains under $100 or so, we let it ride. If it goes significantly above that, we settle up.
At this point, however, we're talking about a different type of reckoning. How much debt do we have? Because I've heard good things about Mint, this is the tool I decided to use to get us talking about our debt so we can begin to set and move toward mutual goals.
Arizona is a community property state. There are only nine of these, and they are almost all in the West, so many people aren't familiar with them.
Basically, it means that debts or assets belonging to an individual prior to the marriage remain the sole and separate property of that individual after the marriage unless you draw up paperwork saying otherwise. So legally, we cannot be held responsible for the other person's debts if they were incurred prior to our marriage.
Going forward, however, everything that we earn/buy/incur is jointly owned between us. This means that while obviously our debts affect each other in terms of the life we are building, I couldn't get sent to collections if he defaulted on one of his credit cards providing the balance was incurred pre-marriage. It is also possible for one spouse to declare bankruptcy while the other one doesn't. (I asked another attorney friend about this confidentially prior to the marriage.)
The Reckoning
Without further ado, here is our reckoning. Please note that I've consolidated some separate accounts of the same type into one balance for simplicity's sake.
Honey's Reckoning: Debts and Assets
- Debt 1: BoA CC, $2,435.66 @ 7.9%. My share of the wedding expenses not covered in advance.
- Debt 2: USBank CC, $2,386.72 @ 9.9%. This is actually my husband's balance transfer (at the time it was the best rate he could get), so I don't pay it, but since his name's not on the card and the transfer occurred prior to our marriage, I'll count it here. He's had a balance on the card for over two years and paid off more than half the original balance.
- Debt 3: Federal Direct Loans, $94,295.99. None of this is from my BA; I have an MA and a PhD, so this covers 8 years of graduate school (I work at a university in an administrative role). I am in the process of consolidating one more loan into this balance, but it's in limbo at the moment and I'm not sure what the exact total will be. It's an additional $5,200 or so, though.
- Asset 1: Retirement, $12,240.41 in a 403(b).
- Asset 2: Emergency Fund, $4,500.
Hubby's Reckoning: Debts and Assets
- Debt 1: Pentagon Federal Credit Union CC, $12,935.83 @ 0%
- Debt 2: BoA CC, $8,311.35 @ 0%
- Debt 3: First National CC, $2,838.37 @ 0%
- Debt 4: Discover CC, $2,075 @ 0%
- Debt 5: Chase CC, $1,500 @ 9.9% (this is a loan to the business to cover his partner who was short, it should be repaid this month before any interest accrues)
- Debt 6: Student Loans, Various, $102,204.28. None of this is from his BA, either; it is all from law school. Law students have to pay graduate tuition and law school tuition, and they're not allowed to have jobs except during the summers. He went to a public, in-state, Tier 1 school and was on Law Review, aka, this is as good as it gets.
- Debt 7: Auto Loan, $5,452.02. The car is a 2008 and worth more than twice this.
- Asset 1: Retirement, $19,026.46.
- Asset 2: Emergency Fund, $2,194.77.
So that's where we stand. I think from here the next step is to do some goal-setting. Hubby has mentioned both buying a house (which to me only makes sense if we are going to stay here for at least 10 years, preferably more) and moving to another state (which to me is opposed to the previous goal), so I'm not sure what's more important to him. I have observed (and he has admitted, both to myself and our mutual best friend) that he finds prioritization — of anything — almost impossible, so this should be interesting.
An Example
When I mentioned that my purse was wearing out and I'd like a new one, he said something along the lines of, "We'll have to decide whether a new purse is more important than buying a house."
Now, I probably will not buy a new purse even though I love my Dooney & Bourke handbag like it was a human being and have worn it almost every single day for over four years (bringing its daily use cost to 13.5 cents per day).
However, contrast his attitude towards my handbag with this: when he mentioned moving out of state, I said that if neither of us had a job lined up that we shouldn't move until we had $20,000 in savings and no credit card debt. He replied, "Well, obviously you don't want to move and you're using our debt as an excuse." No. I would love to move to the northeast; I just want to be done making financial mistakes and instead make some headway.
Asking the Readers
If you are in a committed long-term relationship, are you the spender or the saver? Do you have trouble prioritizing, or know someone who does? If you do, what tips and tricks have you employed to help yourself (or the other person) along?
If you were me and anticipated paying off your credit card debt within three months, would you thereafter divert your extra cash toward a mutual savings goal (say, a downpayment fund) or would you help your significant other pay off their debt? I'm eager for other perspectives!
This article is about Food, Frugality, Funny Money
1MARIA says:26 June 2012 at 4:21 am
Humm, $200,000+ in debt and you have a Dooney and Bourke hand bag… Well, if that thing didn't come from the thrift store for less than $5.00 I think you two need to do some REALLY serious reckoning. The reckoning you have now is NOT working.
124Kelly@thehungryegghead says:26 June 2012 at 8:35 am
Don't think the Dooney and Bourke hand bag should be the primary focus especially when they are considering buying a house.
At the end of the day, splurging on 1 Dooney & Bourke handbag will not put you in danger of bankruptcy, but a house will!
Not buying a house in your current situation is my best advice.
248LC says:26 June 2012 at 4:59 pm
I'm a bit appalled by this disclosure after being mildly disappointed with the post on financing a wedding by adding additional debt. I fail to see what if any useful information or teaching could be gleaned from this situation in a staff writer with this kind of debt and the willingness to add MORE with a wedding and a mortgage. Wow. Where are the lessons? Plan of attack? Hindsight and how you'll make better choices in the future? Esp when the last take away implied the "savings" on the wedding was to be commended by coming in under the national average. Sure, I'll give you commended if someone had no debt or little debt and had a wonderful ceremony at a fraction of the cost. This revelation of $200K debt spins that story entirely.
290JH says:29 June 2012 at 5:46 am
I see the usefullness. To me it says: IT CAN BE SOOOOO MUCH WORSE! And that I should stop hyperventilating everytime I look at my debt. Although, maybe if they hyperventilated a little more they wouldn't have so much credit card debt and a car loan ON TOP OF the 200K student loan debt. And you want to buy a house????!!! I think they need a good punch in the face.
295Kioni says:20 July 2012 at 2:08 pm
I'm looking forward to reading about their journey through this mess that SO MANY of us are in, to one extent or another.
Some readers will balk at Honey's situation and flee because they don't think they can learn anything from people with a high debt load who aren't working seventeen jobs and eating raman to get out of it, but I see potential. I think even if I don't agree with some of their decisions, Honey is likely to find great tools for managing money (which I can use even if I'm not in their situation) and Hubby is not always going to get it (which is entertaining).
So I want to see where the train is heading here before I pronounce it a "trainwreck."
2Kathryn says:26 June 2012 at 4:28 am
You SERIOUSLY are not considering buying a house, with the amount of debt you already have?? What kind of debt reduction plan do you have? That should be your #1 priority, rather than new handbags, moving, or purchasing a house.
184Jason says:26 June 2012 at 11:20 am
I was going to the say the same thing. Their net worth (given the numbers) is around $-196,000. Not exactly where I'd want to be when trying to buy a house.
185Jason says:26 June 2012 at 11:26 am
I also wish there was an edit button – I didn't read the comments before posting, and just realized most of them are very similar to mine. I apologize for the redundancy!
3Chase says:26 June 2012 at 4:31 am
I say to 'splash' the extra cash to a variety of things. It doesn't have to ALL go to debt or ALL go to a down payment.
145SB @One Cent at a Time says:26 June 2012 at 9:21 am
Are you really seeing extra cash in her financials? And are you sure you made that comment with your complete sane self?
161Samantha says:26 June 2012 at 10:05 am
And reading all the words of the article would have provided:
"If you were me and anticipated paying off your credit card debt within three months, would you thereafter divert your extra cash toward a mutual savings goal (say, a downpayment fund) or would you help your significant other pay off their debt?"
4Money Beagle says:26 June 2012 at 4:31 am
That's a ton of debts and a ton of debt. Both the numbers and the totals scare me. Unless you're making tons of money and can pay that down with no problem, you need to concentrate on reducing the number of debts and your overall debts. That's a big mountain to climb as it is. First rule has to be: No new debt. Period.
66Honey says:26 June 2012 at 7:15 am
Agreed! Aside from previously mentioned wedding and cat-death-related debt and the loan to the business mentioned in this post, we haven't added any new debt in 5 years.
160Sara says:26 June 2012 at 10:05 am
Honey, I think part of the point here is that a mortgage is a new (giant!) debt.
282Holly says:27 June 2012 at 9:57 am
To be perfectly honest, without knowing your DTI ratio, I would actually be surprised if you could find a lender who would offer you a mortgage with this debt burden, especially after the issues in the lending market over the past couple of years.
Pay off all of the non student loan debt first, get a solid payment plan down for that, and get your DTI below 30%. Then see where you both are and what makes sense.
5Lance@MoneyLife&More says:26 June 2012 at 4:38 am
If I was married I would totally help my significant other pay off debt. This is the plan when my girlfriend and I eventually get married. While I cannot predict the future we both take marriage very seriously and never want to get divorced. We'll be combining finances too when we get married so we don't have the money drama issues of one person paying more than the other.
245SLCCOM says:26 June 2012 at 3:43 pm
Until that marriage contract is signed, I'm not paying of anyone else's debt!
6Jessica says:26 June 2012 at 4:45 am
Holy cow. I would be completely uncomfortable with that level of debt, especially since it's not even for a mortgage.
My DH and I combined our finances upon marriage. We're both savers. We lived on his income with the intent that one day we might want one of us to be a stay at home parent. We did take a mortgage loan but paid it off in 6.5 years. We've also paid off $25k in my student loans, we had to put $30k into home repairs (basement, roof, new HVAC, new windows, new fence, new hot water, new washer). We paid cash for a new to us car 4 years ago and will be doing that again soon to replace my 14 year old car.
Having a "his is his and mine is mine" mentality is not what marriage is about.
10Jessica says:26 June 2012 at 4:53 am
So once we became debt free and had been for 1 year, I quit my job to be a SAHM. I was earning 60% of our family's income at the time, and our kids were ages 4 and 1. I'd been miserable in my job for 3.5 years and it was time to leave. We're all so much happier now. And having the peace of mind knowing that we're debt free is such a blessing.
We didn't have to change our lifestyle. We don't worry about paying the next bill that comes in. We live modestly and very simply. We have an average house in an average neighborhood in an average city. I don't have an i-anything, designer anything, we've had 1 vacation in 10 years of marriage and buy used, from books to cars.
Peace of mind, my mental health and time with my children is so much more important to me and to my DH than any "stuff" could be.
52Kevin says:26 June 2012 at 7:02 am
Correction: Your HUSBAND hasn't had a vacation in 10 years. You've been on vacation since you quit your job. You get to stay home every day and play with your kids, and it's obvious you really enjoy it.
I pity your husband, however. Carrying the financial burden for an entire family and not having had a vacation in 10 years. I'm guessing you're receiving the lion's share of "peace of mind, mental health and time with [the] children" in your household. Maybe it'd be nice of you to try and arrange a little bit of R 'n R for the lynchpin of your family?
58abby says:26 June 2012 at 7:07 am
Well that's more than a little rude. You think staying at home with two kids every day is a vacation? Stay at home parents work just as hard as "working" parents, the parameters are just different.
60eec says:26 June 2012 at 7:09 am
63Kevin says:26 June 2012 at 7:11 am
I'm sorry, abby, but SAHMs don't get to play the martyr card at the same time they play the "I've never been happier." card. It's either the best decision you ever made, or a daily labour of love equivalent to a full-time job. Pick one. You don't get to have it both ways. I've no more patience for self-worshipping SAHMs who profess to "not regret a second of it" at the same time they expect us to gush over their monumental self-sacrifice.
64shalom says:26 June 2012 at 7:15 am
C'mon, Kevin, one can enjoy one's full-time job. It's still work.
65abby says:26 June 2012 at 7:15 am
Kevin, if you've never worked hard at a job you loved, then I feel sorry for you. Loving what you do and feeling fulfilled does not equal being a martyr.
6826 June 2012 at 7:21 am
As a mother of a 3 year old and a 1 year old, I have to disagree with you. I choose to work because I feel that staying home with my kids is too hard on me- emotionally and physically. I love them to death, but I get exhausted by them after a long weekend and am ready to go back to work on Monday. I think stay-at-home-moms do a very difficult job that I, myself, am not even willing to do.
77Stephen says:26 June 2012 at 7:35 am
There is such thing as a job you love. I have one in the tech industry. I enjoy it so much that today I'm working from home as I'm physically unable to go to work. No joke, I really do enjoy it and look forward to doing the things I get to do and know I'd be less happy not doing the work, but at the end of the day it is still a job.
I would assume the same applies with stay at home parents.
126Eileen says:26 June 2012 at 8:37 am
I am totally LOL'ing over the notion that being a SAHM is a vacation. My old office job was a LOT easier – and I could take potty breaks without worrying about someone biting the dog's tail or running outside, too.
132smirktastic says:26 June 2012 at 8:48 am
So can GRS readers assume that you are living such a "vacation" since you seem to know so much about it?
142Gina W. says:26 June 2012 at 9:11 am
Kevin, Please don't have kids. You don't deserve them and certainly won't work hard for them and their best interest. Being home with a parent (doesn't matter which) is 100% best for them and it's WORK! Most, not all, Mom's are hard-wired to want to be home and take care of them… mold them… cherish them… and do all the hard work to give them stability.
I will say that I work and honestly it's so much easier to work than to stay home… but when I'm home it's so special and I'm so happy to be doing that hard work. It's a double-edged sword for sure.
Show a little respect. You were raised by a Mom. I hope you don't make someone a Mom though.
183Courtney says:26 June 2012 at 11:15 am
Wow, dude. That is incredibly disrespectful. First off, if you had kids and a wife, you'd be dropping the kids off at daycare or a babysitter and paying them to do the job SAHMs do everyday, with no break, from the time the kid wakes up until the time the kid konks out at night. And that's besides cooking, cleaning, etc, which usually has to be done when the kids are sleeping or occupied, and sometimes that's not a whole lot.
Second, I'm a stay at home wife and my husband prefers it this way. We have no debt besides mortgage, he has a good job that he loves, and we save a significant portion of our income each month. I do my work by researching and shopping for the best deals on things we need, cooking everything we eat from scratch, managing our finances, etc. I also make a little side cash by being a dog walker, and I have given piano lessons. Basically, my job is to make our lives better. My husband and I are very happy with this arrangement because we both work hard and we enjoy each other when we're finished with work. Life isn't all about money and working yourself to death. If we needed the money because of debts or a strain on my husband, I would go outside the home to work, but as it stands, we manage our finances in a way that we don't need to. We're fortunate to be able to do this, and hopefully will keep doing this when we have kids.
You should consider that it's likely the husband wanted the mom to stay home as much as the wife does, because it's good not only for the kids, but the whole family.
216Jessica says:26 June 2012 at 1:13 pm
Um, no. My husband doesn't ever have to cook, clean, wipe butts, wipe noses, grocery shop, shop for the kids' clothes, or any other household management activities. I even make his doctor's appointments. Heck, I even buy his underwear for him because he abhors shopping of any kind.
And like I said, for 9 years I earned more than he did, but we lived off his earnings and used mine to pay off OUR mortgage, the loans for my BA and masters, paid cash for the car that HE drives.
He was unemployed for 6 months during our 10 years of marriage also.
I worked fulltime for 9 years during our marriage and for 7 years before that. I also didn't get but one vacation. And as a SAHM (I also do freelance writing and pull in $1k/month to fund my retirement Roth IRA account and my kids' activities), it's sure not a vacation.
My husband is an active parent and takes the kids to the park and reads to them and we discipline equally.
However, like just about every other man, my man likes to be "taken care of". He likes to come home to a happy wife, a clean home, calm children and a healthy and tasty meal that is ready. He doesn't have to deal with the drudgery of hauling kids to the doctor, calling the insurance company or taking the cat to the vet.
Working fulltime outside the home was easier. Even with two kids.
We're expecting our third kid and it would have actually cost us for me to keep working and us to pay for childcare. Even with me earning 60% of our income.
229Becka says:26 June 2012 at 1:55 pm
The words that came out of my mouth when I read this are… not words that I think are appropriate to post to GRS.
140victoria says:26 June 2012 at 9:07 am
@Eileen, I can see that, but it's not always that cut-and-dried. With two preschoolers at home, yeah, it can be tough sometimes. (I don't agree with those who say it's the toughest job someone can have, but yeah, it's tough.)
But I know more than a few folks who SAH with school-age kids. Perhaps Jessica is among them, though it's impossible to tell whether "one vacation in ten years" includes the time before kids or means ten years from the time the little one was one year old. Sure, SAHMs of school-age kids can get a lot done; I know the schools are really grateful for their help, and their households probably run a lot better because they can get stuff done during the day. But it's a pretty darned easy job.
250Jessica says:26 June 2012 at 5:16 pm
My kids are ages 5, 2 and I'm pregnant. I quit my job 10 months ago.
273Laundry Lady says:27 June 2012 at 6:14 am
Yes, being a stay at home parent is hard especially with little ones. But most of chose this, and even if it is hard we consider it worth it. Obviously it varies based on difficulty and age of children. But jobs outside the home also vary with difficulty. I would never describe being a stay-at-home parent as "pretty darned easy." But neither would I call it "the hardest job in world." (I would consider it one of the best and ultimately most worthwhile jobs, but that doesn't mean there aren't days I want to pull my hair out). I'm sure being hostage negotiator is harder (though sometimes being the parent of a toddler feels similar), but I've also worked desk jobs that were way easier than what I do all day, every day, and those easy desk jobs came with cost of living wage increases, vacations and at least the weekend off. Sure, my husband works hard at his job, but he only works 8 hours a day and then helps out a home. Even vacations aren't really vacations for stay-at-home parents, unless you go without the children or go some place that provides all the meals and entertainment for the kids. (Which is why, for me, camping is not a real vacation).
7A-L says:26 June 2012 at 4:46 am
I can already see that there will be plenty of people here talking about your debts. So instead I'm going to address some of the other issues in your post.
The two of you are now married. If you took the traditional vows, then you've promised to be with each other forever, for rich or for poor. So even if the debt technically belongs to one person, it's affecting the entire couple. So the entire couple should help get rid of it.
This didn't quite hammer home for me until I was posting over on bogleheads.org, and someone noticed that I had a taxable investment account with enough money in it to pay off a significant amount of my husband's student loan debt. Though we were paying for his student loan (and car loan) jointly, I never thought of touching that money. But at 6.5% interest, the loan was costing us a lot more in the long run, because the interest on the investment account was significantly less. So something to think about.
And if you are considering having the husband declare bankruptcy, remember that student loans are not exempt. Meaning, he will still owe that money even if he declares bankruptcy. The remainder of his loans (approx. $30k) are a sizeable amount, but still very doable at eliminating. And then the two of you won't have the black mark of a bankruptcy on his record. Yes, I said the two of you. If you do want to buy a house in the future, do you think you'll be able to qualify for a mortgage for the type of houe you want on your administrator's salary? If not, you'll need the two of you. And a bankruptcy will increase your interest rate dramatically, if anyone's even willing to lend to you.
9A-L says:26 June 2012 at 4:50 am
P.S. J.D., I miss the edit button.
Note: the taxable investment account was from before we got married.
-In relation to how we have our finances, we have a joint account, and then separate accounts for our allowances which goes strictly toward fun stuff for us. I'm the more frugal of the two of us, but hubbie's on board with the savings habits, even though they're new to him.
11Kris says:26 June 2012 at 4:55 am
Just as an aside, student loans CAN be dischargable. I used to think they were not dischargeable either. I wouldn't use what I say here as the final word as there are probably a lot of stipulations.
You have to be in a pretty bad place, and I don't know the ins and outs, but I do know people who have had them discharged.
Anyone out there have more experience with this? It is a little off-topic, but I think GRS readers would be interested in this type of information.
14Tom says:26 June 2012 at 5:04 am
Most people agree that it is near impossible to discharge student loan debt. It is highly dependent on who hears your bankruptcy, and their definition of what a minimal standard of living is. It's better to bank on not being able to discharge them.
Total disability beyond any reasonable belief you can get a job in your field of expertise is the most likely way they could be discharged.
70Sara says:26 June 2012 at 7:23 am
If you are interested in reading about a very recent case addressing the "undue hardship" standard for discharging student loan debt, here is a link to a summary of Todd v. Access Group. http://www.newyorklawjournal.com/PubArticleNY.jsp?id=1202555921200&slreturn=1
Basically, a 63 year old woman with Asperger Syndrome had amassed approximately $340,000 of student loan debt to three lenders between incomplete law school and completed master's and a PhD from an unaccredited online school. She also recently lost much of the support that made her few previous employment experiences possible. The judge found that her situation fell within the narrow exemption and granted discharge of the debts.
76Kris says:26 June 2012 at 7:31 am
Thanks so much Sara!
119Tom says:26 June 2012 at 8:30 am
Yes thanks for that review.
I think the point I was trying to make is that you really have to be an outlier in bankruptcy court to get student loans discharged. Just look at that statement: 63 years old, Aspergers, $340K in debt, went to some sort of uncredited school for a PhD. Probably not your average college graduate's debt level!
I'm not saying it's just, either. It is just the way it is.
278Holly says:27 June 2012 at 9:39 am
Just another angle to the student debt situation.
In many states, defaulting on student loans will prevent entrance to that state's bar (and, or result in suspension or disbarment of those already admitted).
So if he paid $100k to go to law school and plans to actually do anything with that legal education that would require him to be admitted to the bar, defaulting on the student loans is not an option and would be a dramatic and significant waste of that money AND the time invested to gain the legal education.
286Jennifer says:27 June 2012 at 1:27 pm
Suze Orman talked about discharging student loans in bankruptcy on one of her shows. She said that of the 72,000 people who applied only 20 something were able to discharge by declaring bankruptcy.
28Nicole says:26 June 2012 at 6:02 am
Agree agree. Although a court may see his debt as /his/, practically in your life, as long as you are married, it is both of yours. It holds up your ability to move into savings goals – and don't forget that your debt is actually a lot more than it looks on paper, due to interest.
The faster you can pay down debt, the cheaper it is. Especially if you think moving is on the horizon, I'd push to get rid of debt, all debt, yours and his, ASAP. If you can manage to drop expenses so that you're living on just one salary, or just over, I think you'll be surprised how quickly this can happen, even with that amount.
69Honey says:26 June 2012 at 7:22 am
This will be really hard to implement while he's building his business and his income is fluctuating so wildly, but once he's on an even keel (he's actually changing his engagement letters to include a new payment policy that should improve things drastically) then the idea is for us to live off his salary and have mine first for debt repayment and once that's done, retirement (contributing the max to the 403(b) and max out IRA's for both of us)
8626 June 2012 at 7:45 am
I think it's as simple as "we are planning a move to THISCITY as of THISDATE". I don't think employers have any problem offering a job to someone that they want to hire and not offering relo. Then it's up to you to take it.
The cost of making recon and/or interview trip(s) to your future desired location will be a drop in the bucket compared to moving someplace and not having income for X amount of time.
8726 June 2012 at 7:46 am
Oops, the above reply was meant for comment 73. I'll repost there. Sorry!
8Mike Piper says:26 June 2012 at 4:47 am
~$228,000 of debt and ~$38,000 of financial assets.
Like the commenters above, I would not take on more debt, even to purchase something that could possibly go up in value.
155Sheryl says:26 June 2012 at 9:50 am
I think that looking at total net worth, I'd be working at paying off a much bigger chunk of the debt before anything else – whether it be focusing on the hubby's credit card debt, or working on Honey's student loans once the rest of her credit card debt is done.
16526 June 2012 at 10:17 am
DH and I had a better looking balance sheet (than Honey and her hubby) when we mutually agreed to live on his income and put most of mine into debt repayment & then savings.
I am a saver and he is a spender, and it had become clear that by each taking care of "our own stuff" we were not getting ahead.
Our balance sheet is now solidly in the black and we have not suffered. Honey and her hubby, I fear, are going to need to suffer a little.
I frankly can't believe he went into business for himself when they have that kind of debt load.
279Holly says:27 June 2012 at 9:44 am
Agreed. The legal market right now is extremely flooded, very competitive, and is feeling the effects of the economic downturn just like other industries. (If businesses can't afford general operation costs, they can't afford legal representation or must find lower-cost representation, etc.)
So as hard as it may be to believe, it may have been a quicker road to income to open his own practice than to try to find employment with another firm.
Unfortunately law degrees aren't the most solid investments anymore. If I had it to do over again, I wouldn't have mine.
12Tom says:26 June 2012 at 4:56 am
I would agree with your logic that wanting to buy a house and also move to another state is kind of incongruent. While 10 years in one place may be longer than necessary, you're on the right track.
And I would agree with most of the commenters thus far, with nearly $200k in just student loans, I think it would be prudent to bring down the debt level prior to getting a mortgage.
13Steve says:26 June 2012 at 5:01 am
"I said that if neither of us had a job lined up that we shouldn't move until we had $20,000 in savings and no credit card debt"
Huh? Why would someone move somewhere they don't have a job? (short of taking care of ailing relatives or retiring). If you can get a job there in 6 months, then get one and then move. If you can't, then obviously you shouldn't move there anyway.
73Honey Smith says:26 June 2012 at 7:24 amMost of the places we would be interested in moving to are far enough away that job-hunting prior to moving (though obviously we'd give it a go), would be challenging. It's my understanding that a lot of places won't even interview you until you live in the city to avoid paying relocation.
80mirror says:26 June 2012 at 7:38 am
While finding a job in another state is difficult, it's not because a company doesnt want to pay for relocation, but because there are SO many candidates available to choose from within the state. Why bother with phone interviews, or trying to get the timing right for someone to fly in and be interviewed, when you can talk to someone in person who also has great credentials, very easily?
(my husband got a job with the federal govt clear across the country and they flat-out said "You applied for the job, you pay the relocation costs.")
8826 June 2012 at 7:48 am
I think it's as simple as "we are planning a move to THISCITY as of THISDATE". I don't think employers have any problem offering a job to someone that they want to hire and not offering relo. Then it's up to you to take it.
The internet makes everything much easier "job hunting wise". You'll only need to show up for face to face interviews. In fact, it worked that way in 1994 when we subscribed to the Sunday paper for the city we intended to move to, faxed our resumes, and had phone interviews. Traveled to the city for final interviews.
The cost of making recon and/or interview trip(s) to your future desired location will be a drop in the bucket compared to moving someplace and not having income for X amount of time.
108Michele says:26 June 2012 at 8:16 am
I don't understand why someone would spend time and money to build a business if they are thinking of moving. It makes no sense. Make 5 and 10 year goals and insure that all your choices match those goals.
203Steve says:26 June 2012 at 12:40 pm
I assume we're talking a law firm here, not Starbucks. I don't think they expect to find their associates already living in their city and don't exactly fret about relocation expenses.
256Sherry says:26 June 2012 at 8:11 pm
Most of the people I have recruited for positions the past 10 plus years end up relocating. If you have the skills for a job and see that there is a need in the target area you want to live…start looking for those jobs. Contact a recruiter, and start networking. Even in this job market employers are hiring candidates that need to relocate. Just depends on what your skills are. Also – you could always try to find a job where you telecommute. They do exist. I have been working on a virtual basis for years!
210Andrew says:26 June 2012 at 12:52 pm
The ancestors of most Americans picked up and moved across oceans and continents without any job guarantees. Sometimes the safe thing to do is the worst thing to do.
15Credence@Toddlerisms says:26 June 2012 at 5:04 am
Living in a community property state does not protect you from ALL of your spouse's premarital debts. I found this out the hard way when the IRS took my tax refund because my husband owed $25K in back taxes(*) from YEARS before we even met.
(*)That he did not tell me about. I found out about it when unsolicited letters from lawyers (Roni Deutsch types) began to arrive at the house after a lien was filed.
54Some Guy says:26 June 2012 at 7:03 am
Did you file IRS form 8379 'Injured Spouse'? Its purpose is to protect money earned by one spouse against debts that the IRS would normally collect from the other. If you have not gone this route, you can still file it after the fact.
78Credence@Toddlerisms says:26 June 2012 at 7:36 am
yep, i did — it was denied bc i lived in a community property state! i was flabbergasted.
16Hanne says:26 June 2012 at 5:07 am
Pay off the debt!
41Susan says:26 June 2012 at 6:30 am
I was about to post this link! Please, Honey, read this post by Mr. Money Mustache. Your debt is an emergency!!
74Honey Smith says:26 June 2012 at 7:25 amThanks! I love MMM
17Pamela says:26 June 2012 at 5:07 am
I'm not going to focus on the debt or the handbag or the problem with prioritizing.
I have a much bigger picture suggestion. I think you and your husband would benefit from working with a neutral, disinterested third party who can help you articulate what you both want, clearly agree how you'll get there and equip you both with some effective ways to communicate with each other.
260Student Loans Worked Out For Me says:26 June 2012 at 8:26 pm
Yes, I agree. From your article, it seems that your relationship is in need of some attention even more than your finances. It appears you have some resentment towards your husband's position (and in your husband towards yours), so clearly there is a disconnect there somewhere, which needs to be resolved.
As for the handbag – c'mon, folks. Yes, the author has formidable debts, but a young woman cannot be expected to wear old rags and lag around a shopping cart for a bag. Yes, that's an expensive handbag, but even while repaying debts one HAS to have little allowances, otherwise one ends up feeling deprived and motivation goes to pieces. A handbag indulgence once every couple of years for a young woman is really not a crime, and $200 to improve one's mood every day for 2-4 years (yes. a handbag does that!) is worth it.
280Holly says:27 June 2012 at 9:49 am
I agree completely with this point, and it was exactly what I was coming here to post. I am more concerned about the last two paragraphs of the article than any of the debt or the handbag. There is resentment coming through even in this post, which I presume wasn't written in the heat of a disagreement and was carefully considered and edited afterward.
It sounds as though you are both stressed out from the debt and inability to feel as though you are gaining traction and moving forward in life, which is completely understandable. But I think your marriage is your most important investment right now, and that the debt, moving, handbags, and all else will keep until you ensure that you are paying your emotional debt to each other.
18Michelle says:26 June 2012 at 5:10 am
How do you sleep at night with that level of student loan debt? How can you enjoy *anything* without thinking of this mountain upon your shoulders?
264A says:27 June 2012 at 12:25 am
By knowing it has provided an opportunity that would otherwise be closed to you. $130,000 and worth every penny. Would I have done it differently if I had understood exactly what I was doing… yeah… but by keeping my work levels at a minimum during school I was able to put in 10 hour days at the computer labs and network with teachers and other students. Two years out of college and working at an enormous fortune 500 company with my dream job.
Yes, my debt it worth every penny, and I'm here reading at Get Rich Slowly to keep my motivation up in making 2x payments on my loans every month.
281Holly says:27 June 2012 at 9:52 am
The same way people with underwater mortgages, jumbo loans, and heavily leveraged businesses sleep: You just cope because you have to. Losing sleep and fretting every minute isn't going to make one more productive and able to suddenly get out from under a decision that has already been made.
The debt will be there for a long time, so there's nothing to be gained by counting pennies that are already gone. Instead, working toward a solid debt reduction plan and getting a feeling of genuine forward movement is far more beneficial and stress-relieving.
19nicoleandmaggie says:26 June 2012 at 5:13 am
Well, hey, at least you know what your DH's interest rates are now. That's a step up.
But yeah, I'm going to agree with Pamela at #15. You guys need professional help. A fee-based planner would be a good idea, one skilled at mediation between couples.
I'm not interested in reading about more of this impending train wreck. Obviously I would read if she were a staff writer, because one can't look away, but it would make me feel dirty.
3426 June 2012 at 6:08 am
*Ding Ding Ding Ding Ding*
That is exactly how I feel. This whole situation is a catastrophe waiting to happen.
I don't visit GRS to hear about people with extreme financial difficulties. I want to hear success stories or how people made mistakes but are learning from them. Honey is just digging a deeper hole, slowly but surely. If I wanted to see hear about bad financial decisions, all I would need to do is call either one of my siblings or half of the people I work with.
This is sad.
262Student Loans Worked Out For Me says:26 June 2012 at 8:32 pm
I disagree. I think it is interesting to read about how people deal with their (very dire) problems. And I applaud the author to put it out there for every one to see. I shall be interested to learn how it works out, and I think there will be more than one useful lesson to be learned from authors experiences for all readers.
51Sarah says:26 June 2012 at 7:00 am
I thought the article was well constructed and easy to read. Also, as much as I gain from reading articles of people who are "doing it right", that's not the only side of the coin that can be beneficial. It could be helpful to read articles tracking someone currently working TODAY in digging themselves out of debt, and learning through their experience – not reading only about people who dug themselves out years ago and are now in the maintenance stage forever.
71Rob says:26 June 2012 at 7:23 am
Sarah, I totally agree with you. It seems like Holly and her DH are at a potential turning point, which would make their situation an interesting one to follow. I would hardly characterize their situation as one of extreme financial difficulty as the poster above did. Their student loans make up 80% of their debt, but Holly and her DH are not longer adding to those. Presumably, both are making good salaries, so they have the firepower to bring their debts down quickly. Is the will power there though? Solidifying your balance sheet is a marathon that takes place over months and years. It's tough to stay focused and certainly mistakes happen along the way. Following alongside in that journey I think would give the GRS readers a different and valuable perspective.
16626 June 2012 at 10:21 am
+1. I want to smack both of them, but I am honestly interested in how (or whether) they manage to turn this around and start getting rich slowly.
We all had to start somewhere. I never had student loans, but the rest of the story is not unfamiliar.
187Lindsey says:26 June 2012 at 11:31 am
I agree. I think there are a lot of people out there just starting out and it's nice to follow along with someone you can relate to. When you're at that stage, it's not always helpful to read about ways to save money traveling, etc. when you can't even imagine having the money to travel in the first place.
20426 June 2012 at 12:43 pm
@chacha, if I thought there was at least an even chance that they *would* turn it around I'd be interested. But I can tell you any number of blogs who have exactly the same feeling they're entitled to live beyond their means and lack of self-awareness that have been doing exactly the same thing for years. The same dislike of "judgmental people who don't know how to live." The same refusal to make sacrifices or any real changes, etc. etc. etc. They'll stop buying lattes for a little while but then buy a house or fly to Vegas because why not? It gets really old.
I wouldn't be adding my comments if this weren't an audition (so one fewer judgmental person who just happens to be responsible making comments)… and I imagine the comments will dwindle after post after post of the same-old. Even reality tv shows with no growth get old after a while (and by growth, I don't mean the amount of debt they have).
By contrast, I really enjoyed Kristin Wong's post. I love the way she really seems to get what was going wrong and I have faith that she'll figure things out and keep moving forward, and that will be awesome to read about.
59Kevin says:26 June 2012 at 7:09 am
I disagree. I find Honey's story extremely compelling. With the loss of the ability to comment meaningfully on Trent's blog (The Simple Dollar), I would welcome the arrival of such a train wreck on GRS for my regular does of shadenfreude, and the inevitable torrent of self-righteous, judgemental comments it would generate.
75Honey Smith says:26 June 2012 at 7:28 amThis is my favorite comment so far. Reminds me of why I love reality TV so much
220Amanda says:26 June 2012 at 1:28 pm
You need to get rid of your cable/satellite & direct that $ to your debt. 6 years and you haven't paid off your wedding? I did mine in 1.
186CandiO says:26 June 2012 at 11:26 am
Ahhh so that is the same Kevin. I thought the tone of your posts seemed familiar.
207DOTTIE says:26 June 2012 at 12:47 pm
I enjoy your posts Kevin both here and at the simple dollar(previously). I gave up on the simple dollar though, talk about a train wreck. Keep speaking your mind.
208Andrew says:26 June 2012 at 12:49 pm
Wait a second! What could be more meaningful than the word "coupon?"
223DOTTIE says:26 June 2012 at 1:43 pm
Simple put… coupon
225DOTTIE says:26 June 2012 at 1:47 pm
Ups! I need the edit button back!
should have said..Simply put…
9526 June 2012 at 7:58 am
Agree about the uncomfortable factor at this point. First off, it IMMEDIATELY made me think that our financial situation must be close to perfection in comparison. And that's not true. We still have challenges and goals and things we need to correct or fine tune. I'm not sure having a recurring story like this, without some real progress being made is a good fit for a personal finance blog.
Unless there is some sort of plan and ongoing progress, I just don't see this being inspiring. Almost voyeuristic.
123Dog Lover says:26 June 2012 at 8:34 am
I enjoyed this article–well-written, and I liked seeing actual dollar and % amounts. I'd like to see more of Honey's progress. What made me uncomfortable was that some of the comments about her husband came off as one-sided bickering. I'd never write about my husband like that on an online forum unless he had reviewed and okayed it–and I'd be pretty hurt if he wrote about me in that manner. But I'm an introvert like that; I trust Honey knows what's best in her situation.
Regarding the discussion questions at the end: I am the natural saver (and money manager) in my relationship. I've encouraged my husband to save during the six years we've been together, and we're working towards common goals. Every so often there's a new gadget or video game he wants to purchase, which is why we set aside a small amount (only $20 per paycheque, but it adds up slowly but surely) as fun money–he can spend that however he wants, and I have the peace of mind that we are paying our bills and working towards our big savings goals. (I do not have a similar "fun money fund" because I am more disciplined in my saving/spending, so it's unnecessary.) We do still have moments of wondering "would we rather go to this concert or put more money into our down payment fund?" but generally agree to save. Our shared goals and desires really keep us on track.
20Jennifer says:26 June 2012 at 5:29 am
This post makes me frustrated! The introduction talks about you starting your series is to eliminate your debt, but instead end up focusing on making new purchases, including a house. You only mention paying off credit cards first, then saving for a down payment for a house. (Instead of "Should I pay my student loans or increase savings?") And why is, "I need a new purse" really code for an expensive handbag when you could get one for $50 or less that will last as long. And why do I feel like the financial maturity is lacking here? It seems like the massive student loan debt doesn't seem important. Especially when you look at your explanation. You explain exactly how justified you were in taking those loans (not for undergrad!), but didn't explain how/why you have credit card debt too. I have too many issues, not necessarily with the debt itself if you are willing to fix it, but your inability to understand the ramifications of massive debt and your lack of insight into the importance of eliminating ALL of it and no real plan in place to tackle it.
55Sarah says:26 June 2012 at 7:05 am
She said that she would NOT be buying a new purse and brought it up as a way to illustrate her husband's way of prioritizing – thinking a purse was an unneccesary expense (which she apparently agrees b/c she isn't buying one), but thinking it was a good idea to move out of state at this point.
118Janette says:26 June 2012 at 8:26 am
Why would they move if they are currently employed? Like there are not enough lawyers and PhDs hanging around Portland (seems to be the mecca these days)?
As far as being a staff writer.
I think this couple is far more common of their age group than many of the writers who currently write. They have been in graduate school gaining debt since the depression began. How do they begin their American dream? What do those priorities look like? How are they going to journey into the new economy. They are well read, well educated and totally naive. I see my daughter and son in them. They want to start the climb- but want it all at the same time.
Train wreck or not- they are the new reality! We cannot all live in a trailer by a beach or write a blog and make big $$. The economy HAS to grow again.How does this next generation do it?
120mirror says:26 June 2012 at 8:30 am
Like x 1000
162jim says:26 June 2012 at 10:10 am
I don't see any mention of moving to Portland. She said something about maybe wanting to live in the Northeast.
104victoria says:26 June 2012 at 8:11 am
Uber-nitpicky point (since I mostly agree with you) and probably off-topic, but I've learned the hard way not to skimp on purses.
I've never had a $50 purse last more than nine months; usually they're really beat up by six. When my last one died, I asked the folks at Corporette whether a "name" purse would last long enough to justify the added expense, and they overwhelmingly agreed it would.
You know what? They were absolutely right. I think the bag I'm carrying now (which lists for about $400, though I got it much cheaper) will last pretty much indefinitely; I'm about to the point where I will have spent less in purses over the time I've owned it than if I'd kept buying $50 bags; and when I decide I want a new one, I'll be able to either sell this one for a reasonable amount at a consignment store or pack it away for awhile and use it again later.
169Sara says:26 June 2012 at 10:24 am
Totally agree. It's not like she has a collection of designer purses or something — just a single one that was on the lower price end (as far as designer purses go) and that has already lasted her four years of everyday use!
172partgypsy says:26 June 2012 at 10:33 am
Hmm I have a treated canvas shoulder bag I use every work day and it seems to be holding up just fine (got it for around $70 or a little less). I have a cloth shoulder bag I got in 2008, which I don't use as often but still looks pretty brand new. Can even throw it in the wash if I want.
175Jennifer says:26 June 2012 at 10:37 am
I agree with you! =) I know that certain things are better to buy quality and it'll save money in the long run. I just can't fathom spending even $50 on a purse if I was well over $200K in non-mortgage debt.
195Lindsey says:26 June 2012 at 12:06 pm
Dooney & Burke is made in China at the same factories as those $50 purses…then they slap on a label. Just saying.
214A-L says:26 June 2012 at 1:10 pm
There is a happy medium with purses. 1) Sales. 2) Solid brands like Fossil. They're not hundreds of dollars, but they last a long time and are made well. You don't have to spend $XXX to avoid junk.
269Kevin says:27 June 2012 at 4:54 am
I feel the same way about sunglasses. I own a couple pairs of $400 Oakleys (one for everyday, one for sports), and people often remark, "Why? They're $15 at the drug store." Right, and how many of those cheap-o sunglasses have you bought/broken/lost/repeat over the years? I've had my Oakleys for over a decade, and they're still in great shape. Quite simply, they're built to a different standard than the plastic made-in-Korea junk on the rack at CVS.
21Jane says:26 June 2012 at 5:29 am
I would vote no mortgage, at least not for the foreseeable future. In essence, you guys already have a large mortgage payment, but it's in the form of massive student loans. I think that's one of the more unfortunate consequences of the high student loans rates of so many – that it hinders their ability to own a home in the future.
I know you can't necessarily help who you fall in love with, but my first thought was how much easier this would be if only one of them had the insane loans. This would make it at least a little easier to get ahead, but as is, they've got a hard road ahead of them.
I agree with whoever said above that I would read Honey's articles in the future, because I read GRS, but I does make me feel a little uncomfortable to see their dirty laundry. It's interesting that I feel this way, because of course I read years back about J.D. getting rid of debt. But this just seems different somehow. Maybe it's the magnitude of it. Regardless, it took a lot of guts to put all of that out there for everyone to see.
22ShackleMeNot says:26 June 2012 at 5:30 am
It's great that you put yourself out there and shared your financial snapshot with GRS, but…
Your debt load is not the problem. It's a symptom of the problem. The real problems are poor decision making and an inability to prioritize needs vs. wants.
Yes, you have a PhD and he has a JD, but you shouldn't spend like it because you obviously don't earn like it. Your first and only priority needs to be to KILL all this debt and don't add any more. Between the two of you how much interest do you pay to lenders over the course of a year? It has to be in the thousands of dollars.
I'm actually interested in seeing you continue as a staff writer because I'm interested to see if you file bankruptcy in a year or if you make significant changes and stop living WAY above your means.
30MARIA says:26 June 2012 at 6:06 am
Actually, I just reread the first post about the wedding and the author states she makes 40k a year..??!!
100k of student loans for a 40k admin job..does not make any sense to me. I am with the commenter above that I just don't want to read anymore about this trainwreck.
82Honey Smith says:26 June 2012 at 7:40 amOriginally the plan was to get a tenure-track job, though those jobs in my field start at only $50K, which is not all that much more after taxes (though every penny counts).
However, Hubby graduated a year before me and at that time was making $92K/year and was traumatized by the bar. So when I was done I moved to his city and this was the job that I got – in July 2008, right before the economy tanked. In fact, the week after I started there was a hiring freeze and the first year I worked there was mandatory furlough (so I actually made 10% less than my stated salary that year).
It can reasonably be expected that a tenure-track opening in my field would have 250 applicants, all of whom would be willing to relocate at their own expense if they had to, and even if the position was in, say, North Dakota (sorry North Dakota, but I grew up in Florida and now live in Arizona so snow is pretty much the scariest thing there is!).
I have been a finalist for positions at other institutions, but none where Hubby could have been expected to make a comparable salary to what he was making at the time. I think the main draw for him at the idea of moving out of state is actually that he's not hostage to his salary at his old company anymore. Now I just have to get him to see we are hostage to our debt until we do something about it!
In any case, we aren't going to be able to talk seriously about moving for at least one more year, because that's when I get vested in my retirement plan. He knows that I'm not leaving my institution until those funds (it will be about $13K) are deposited into my TIAA-CREF account! Though I apply for every higher-paying job at my institution that I'm qualified for (not many, since state support of higher ed in Arizona is slowly but surely being dismantled).
99PB says:26 June 2012 at 8:04 am
North Dakota currently has more jobs than people to fill them and is debating what to do with a state budget surplus projected to be about 2 billion dollars. Believe me, there are worse places to be.
182Emma says:26 June 2012 at 11:10 am
I am impressed by your graceful reply to outright criticism here. And congrats on getting a salaried position, that was a rough time to be searching.
217A-L says:26 June 2012 at 1:16 pm
Is this Honey, from Honey and Lance? If so, I rembember your posts from EMK's blog. Your posts over there (assuming you're the same Honey) were clear and reasonable. Making that connection actually made me significantly more interested in reading Honey's progress here, because it makes me much more hopeful that this will not turn into the trainwreck that some people fear.
233Bonnie says:26 June 2012 at 2:27 pm
Has your husband done his homework about moving out of state? I ask because I am reminded of a friend who is stayed in AZ longer than he originally planned because it lacked reciprocity with most (perhaps all) other US states.
234Bonnie says:26 June 2012 at 2:29 pm
Probably should have been more specific. I am talking about admission to the bar and the need to take it again in another state.
276Honey Smith says:27 June 2012 at 8:27 am
@Bonnie, Arizona gets reciprocity in September, though I am not sure whether it's for all states or just some, and which ones those might be.
91Stephen says:26 June 2012 at 7:53 am
According to the stats, having 100k of student debt puts you in the highest 3% of outstanding debt.
I agree with others, unless you are willing to make "huge" changes, I don't think GRS is the place for you. However I do like your writing style, it is easy enough to read and follows properly. Just the scale of the problems here is insane. A house purchase should not be on your mind until you have substantially dropped your debt levels. Perhaps your husband will start bringing in proper six-figure yearly amounts and help you get there, but then that would put you on a different level than most GRS readers (I think)
189jim says:26 June 2012 at 11:41 am
That 3% figure is mostly people with only bachelors degrees. High debt is much more common for people with graduate and professional degrees. In fact average debt level for professional degrees is over $100k (mostly lawyers and doctors).
23Genny says:26 June 2012 at 5:33 am
The comment about 'using the debt as an excuse' makes me think marital counseling should be the first priority for this couple, before any financial counseling takes place.
171amber says:26 June 2012 at 10:31 am
I agree, not a way to lift up your new wife!
Honey – just curious why you don't count husband's car as an asset? Possibly you have a car as well? One of these could be sold to facilitate debt repayment.
Keep renting while husband's company gets sorted out. You have faith in him but it may be a long time before things stabilize, probably much longer than both of you will like.
24J says:26 June 2012 at 5:36 am
My husband and I have shared all of our money ever since we got engaged, so we never feel indebted to each other for who bought the groceries or who is paying the mortgage! After we got engaged my husband paid off what was left of my student loans with what money he had saved up to avoid US as a team paying additional interest. Marriage is a team effort– if one person has the ability to pay off the other's debt, why on earth would you, as a unit, forfeit your money to interest because the other person earned the money??? I can't imagine watching my husband struggle to pay a bill and thinking, hm, should I give him some of my money? LOL. I really do not understand how married people can share an entire life but not share their finances.
3626 June 2012 at 6:13 am
I totally agree.
When my husband and I were engaged and he was in mortuary school- I paid some of his debts for a while that he wasn't working. I didn't want to start off our marriage in debt. After marriage, we paid off our debts *together* regardless of who incurred them and who earned the income. That's what marriage is- a true union between two people. Nothing is mine, everything is ours.
25Hey Now says:26 June 2012 at 5:51 am
Maybe I missed it, but what is your income to debt ratio?
I agree with a majority of what is being said and will add or pile on some more.
#1 – Get those tiny CC's paid off. No reason to have those sticking around
#2 – Emergency fund does not look to be anywhere close to where it should be. Some people say 3-6 months of living expenses but I am a 6-12 month kind of person
#3 – I missed the ages of the couple, so if you are in your twenties that will explain your retirement funds. If you are not… wow, you must quit acting as if you are rich and spending every dime you make and start throwing at least 5-10% into retirement while you pay down all of that debt.
#4 – Follow this simple advice http://www.hulu.com/watch/1389
121L says:26 June 2012 at 8:31 am
Perhaps what some folks are feeling uncomfortable with is that this isn't just a look inside Honey's finances, but her marriage as well. Sharing a private conversation/argument, revealing that she secretly talked to an attorney pre-marriage, etc is what feels voyeuristic to me. While personal finances and personal relationships are tightly connected, there is a bit of TMI in this post.
As for the separate finances, which don't kid yourself, is exactly what you have, I'd say combine, combine, combine. You're not really working together as a team right now, and the best way to overcome this kind of staggering debt (mindblowing!) is to work together as one unit. ALL of the debt is your AND his. Same goes for ALL of the income. From where I'm sitting, you're little more than roommates with benefits. Of course, that little nugget of advice (it's worth what you paid for it – ha!) goes out the window if you're unsure your marriage will last.
Our financial paradigm changed when we started following Dave Ramsey. Financially savvy pundits complain that his plan is too simplistic, but if you've made nothing but financial mistakes (as we've done, and as you've done), sometimes it takes a brutally simple approach to change the way you relate to money. DR's approach in dead simple and makes so much sense. We actually had "Doh!" moments while reading it. We're not 'believers', and DR is very vocal about his religion, but I appreciate that he's not trying to convert anyone. Instead he's detailing how his religious beliefs fit into his plan, and how you can be any religion (or none) and still reap the rewards (instead of tithing, for example, give to a charity you believe in).
For years I tried to figure out investing and retirement and all the other mumbo jumbo I was 'supposed' to do, all the while I was p*ssing away my income on goodness knows what. Low debt but I just had no clue what to do with the money coming in. It was overwhelming, so it got ignored. Now there's a plan of action we both agree on and are working toward. And that's where it seems your marriage needs a little work. Instead of treating each other like roommates or business partners, work together to become a team.
188Lindsey says:26 June 2012 at 11:41 am
I agree with the TMI. It almost feels like she's writing a post-argument revenge post or something. I can't imagine that her husband would be thrilled with the way she seems to point the finger at him as the source of their poor financial situation.
26Misty says:26 June 2012 at 5:55 am
You gotta tackel that credit card debt immediately. Pay it off now. Then start tackling your student loan debt. Then once your student loan debt is gone… then you can start thinking about a house. And dont even consider adding a car payment to the mix. Buy a beater with cash and throw the rest at the debt. And husband and wife means "our debt" not his/her debt. I cringe everytime I hear about split finances in a family. Pool your funds, create a single budget, and pay off your debt.
31Nicole says:26 June 2012 at 6:07 am
Yeah, if that car is really worth $10,000+, it ought to be pretty darn easy to downgrade without incurring any cost, or very little cost, and lose that car payment. I'd look into it.
89Honey Smith says:26 June 2012 at 7:48 amHe actually bought this car after getting towed three times in six months driving his previous beater. There's no way he's going to get rid of the car – taking repairs of his previous car into the equation as well as better gas mileage and insurance, this car costs far less than his previous one did. Since he doesn't have a physical office, he has to drive anytime he needs to go to court, meet clients, etc. Since clients often see and even ride in his car, it needs to be something reliable and decent. Nothing says "feel confident in paying me $200 per hour" like driving a beater, ha!
My car is 12 years old and has been paid off for at least 7 years, though I live close enough to work to bike, which I am trying to do more of (though July will be tough as it will be over 110 degrees).
246Leo says:26 June 2012 at 3:58 pm
Don't know if this has been suggested already, but why don't you estimate a mortgage payment, and add it to your debt repayment monthly? You will have at least a year to test how it works (or not).
I wish you the best for marriage and life, and please, buy yourself a decent bag. No need for a $1000 one, but a decent one.
27Steve says:26 June 2012 at 5:59 am
Some commenters mention that they do not want to read further about this 'train wreck', but I am looking forward to seeing how Honey and her husband plan on digging out of this massive debt, while beginning their life together.
One of the drawbacks to pursuing PhD's and JD's, is that individuals are pushing themselves into massive debt, and delaying traditional 'adulthood' a few years. Now, Honey and her husband need to plan out how/when to buy a house, if/when to have children, and how to pay off debt at the same time. There is no clearcut path, and these items were considerations for my wife and I as we were contemplating further education (she has decided not to pursue a law degree, and I received my MBA part time at night while working fulltime). If we had chosen fulltime education, we would be in the shoes of Honey and her husband, and I am curious as to how their choice impacts their decisions going forward. I think many can learn from them.
3326 June 2012 at 6:08 am
For future reference: Nobody should take on debt for a PhD (there are exceptions to the rule, but very few). If you can't get paid to get your PhD, then you shouldn't be getting one.
37Jane says:26 June 2012 at 6:19 am
Very true. Maybe I was lucky, but everyone I talked to told me to never get a Ph.D. unless I had a free ride. I took this advice and graduated with no new debt. Especially if you are looking in the humanities, you should only accept an offer that is free tuition plus some sort of stipend for teaching. I know some universities try to get you to foot part of the bill, but if they are trying to get you to do this, they don't really want you. This is cut throat advice, but the truth. I bet you their top pick got offered a full ride.
Years ago, I had a roommate go at least $75,000 in debt for a Masters in Social Work. This just blew my mind. How much did her future salary increase by getting that degree? $10,000 a year (if that)? I know life is not all about money, but if getting a degree straps you with that much debt, you really should reconsider. I think the only people exempt from this are physicians and perhaps those law students coming out of the top schools. Don't they usually command a pretty good paycheck at the end? Otherwise, skip the debt for graduate school.
92Honey Smith says:26 June 2012 at 7:55 amI did have a teaching assistantship throughout my PhD. Per university policy at the time, it didn't cover all my tuition when I started the program, just the out of state portion (this was the case for all assistantships at that university at the time). Every year they covered more and the year I finally finished was the first year tuition was waived in its entirety.
I made about $12,000 a year (average for my field) though of course there were three months during the summer when I didn't get paid at all. It would have been more expensive to "go home" each summer than it was to stay, though I did cobble jobs together as best I could.
Could I have lived more cheaply than I did? ABSOLUTELY, no denying it. But since there's nothing I can do about my past choices now, I am trying to learn from them and make the best choices I can going forward.
35Adult student says:26 June 2012 at 6:13 am
That decision clearly made a huge difference for Honey and her husband, but I just want to chime in to say that pursuing PhDs doesn't always have to lead to debt, because a lot of people are not aware of that.
My husband and I are both in PhD programs – we met at our university. We both receive stipends that keep us out of debt, above the poverty line, and able to save small but regular amounts for necessities like an emergency fund and retirement and personal goals like travel. My husband even puts money toward his undergraduate student loans every month even though he doesn't have to as long as he's a student (he doesn't want my help because he took on the debt before we met, so I donate about the same amount to charity).
It is true that being in school until you're 30 can keep you from being able to save a ton for retirement or buy a house, just like it's true that if you are a low-wage worker in general, it is hard to do those things. But you can also live like an adult financially and avoid debt. It's not as bleak as this post makes it out to be!
3826 June 2012 at 6:19 am
Absolutely right. DH and I paid of 10K of his unsubsidized high interest undergraduate debt, contributed to Roth IRAs (albeit, only 3K/year each), and saved up 50K for a house downpayment while graduate students (the stock market helped with that part, as did working as graduate resident assistants). Yes, we weren't able to contribute much to retirement (and have only now made up for those lost years) but we didn't dig ourselves into deeper holes either.
56Marisa says:26 June 2012 at 7:05 am
I couldn't agree more–never ever ever pay for a PhD. If they won't pay your tuition and give you a stipend, the school doesn't want you badly enough and instead is using you as a cash cow. My fiance is in a PhD program and while he's not a millionaire, his stipend covers his half of the living expenses, enough for him to pay on his undergrad student loans (even though they are deferred as long as he's in school), and for him to modestly contribute to his retirement. He would have never gone back to school if he hadn't been able to find a program that was willing to support him–as is traditional with the PhD route.
21226 June 2012 at 12:58 pm
Also, for folks who aren't familiar with academia– PhDs do NOT generally lead to high salaries. Sure, a PhD in an in-demand field (like economics or pharmacy) that has uses outside of academia can get you a 6 figure starting salary, but most PhDs aren't that.
For example, my mom's tenured Spanish professor salary was less than the salaries of the Spanish K-12 teachers she taught. Many humanities professors have difficulties finding related employment after graduation and the industry options aren't that lucrative either. The same thing can even be true with some social sciences and sciences– I know PhDs from top schools in theoretical physics who spent some time working as research assistants for economists after graduation because they couldn't find a job. (There are a lot of masters in finance programs out there to turn these grads into people who can work on Wall Street.)
So no, if you're going into grad school for the money, look up stats on unemployment rates and starting salaries for your degree and for people in the program you're thinking of going to. The general heuristic is that when all is said and done, the PhD loses you money, so you don't do it for the money.
29FrankG says:26 June 2012 at 6:05 am
It was tough to read the part about your purse costing 13.5 cents per day. You are borrowing the $200 charge at 9.9% (whether or not this was the actual charge that put you in debt does not matter). Thus, you have understated the cost of the purse by about 46%.
With a car worth more than your loan, it sounds like a perfect opportunity to get a $3k car, pay off that loan, and put that extra $2k towards debt.
Ultimately, I feel it is difficult enough in a marriage to have a saver and a spender, but you are simply living as roommates in terms of the financial situation. There is no incentive for you and your husband to be aligned, as it is still 'your money' and 'his money.'
Best of luck to you, but this is not a story I care to follow on GRS. It is far too frustrating for me, plus I think most of us know the next steps. For the worst-case scenario it becomes a "train wreck" that some people will follow as a guilty pleasure. For the better scenario, this couple starts spending within their means and slowly chips away at the debt. Either way, it's not a story that interests me.
I would much prefer to see this couple's story ten years from now when they are working on building wealth as opposed to paying down debt.
201Carla says:26 June 2012 at 12:35 pm
I see you point, but at the same time, not everyone here at GRS is in the position where they can "building wealth". Some of us may not ever have the opportunity to build wealth and paying down debt (and not accumulating more) is the best we can do.
I prefer GRS to have some diversity.
32Robyn says:26 June 2012 at 6:07 am
Honey, my first reaction at that debt load was "train wreck" as many others have shared. However, I don't feel as though your situation should negate you from the process of getting hired on here. Does everyone want to read about "perfect" bank balances, credit scores, and paid off mortgages? There are many people that read this site that are probably worse off that you and your husband and could learn from what I see are going to be your future mistakes. The article was interesting from a debt standpoint (made me feel better about where I am!), but what was missing is how you are going to tackle this albatross. Expensive new purchases like designer handbags and a pricey mortgage are not going to get you there. That belongs on the site, Get Poor Quickly. What are you going to do right now? Eat beans and rice? Get a second job? Ride a bike to work? As an aside, I suggest you let your husband read your articles before publication if he doesn't already. Making private statements public like "Well, obviously you don't want to move and you're using our debt as an excuse." may end you up in Divorce Court faster than you can say destination wedding. I really am sympathetic to where you are, but there are several undertones of future failure and unhappiness if you don't change right now.
40MARIA says:26 June 2012 at 6:24 am
With the tone of this article,I have a feeling that we wouldn't be reading about "change right know", "beans and rice" or "riding a bike to work" or any other fast track to getting out of debt.
It would be more like house hunting, excuses for 200k student loans and disagreements between moving and purchasing handbags.
97Honey Smith says:26 June 2012 at 8:00 amWe are vegetarian, so "beans and rice" or as we call it the home-made Chipotle burrito-bowl, is one of our favorites! And I am able to bike to work and he is able to do 75% of his work from home.
122DOTTIE says:26 June 2012 at 8:32 am
So if you are eating beans and rice, biking to work and your husband has no commute, no office and works at home 70% of the time, how did you accumulate 32,000+ in credit card debt?
127maria says:26 June 2012 at 8:37 am
If you are already eating beans and rice, biking to work and your husband has no commute, no office and works at home 75% of the time how on earth did you two incur 32,000+ of credit card debt?
134Honey Smith says:26 June 2012 at 8:51 amThat was incurred while he was still in school, over five years ago. The starting totals were more. Over the last four/five years I've paid off $15,000 or so in credit cards and he's paid off about $25,000.
224anonymous says:26 June 2012 at 1:44 pm
combined you should have been paying off $15k A YEAR!
39Broke-Ass Mommy says:26 June 2012 at 6:21 am
I'm very interested in hearing how hubby and you are planning to aggressively pay down all of your combined credit card debt.
(Forget purses, forget the white picket fence, little Toto, and swamping yourself with a mortgage. You guys are in trouble.)
42Mary T says:26 June 2012 at 6:32 am
In a situation like this, the first thing a long-term couple (married or not) needs to do is agree on common goals, financial and otherwise. Once you have compromised and agreed on where you both want to go together, it's much easier to make a path to getting there. It seems like Honey and her husband need to tackle this first, and then work as a team to get there together.
Unlike people above, I don't think buying a house is out of the cards for Honey. If that shakes out to be the most important thing for them, then they can works towards getting there. Can they buy a house tomorrow? No, of course not. But can they get on the path to getting there? Yes, absolutely.
My viewpoint is if they have a true emergency fund and are steadily paying their debts, once they save up a good down payment (not using their emergency fund as down) they could get a reasonable house.
43Krose says:26 June 2012 at 6:42 am
I agree with the other comments about some underlying marital issues that are more disturbing to me then the massive debt. I would caution you AGAINST sharing his comments, that seem to have been made out of some sort of anger or frustration, with us. Specifically the comment about moving to the northeast and your priorities. It will invite (presumably) unwelcome judgment and speculation about your marriage, as it already seems to be doing.
Good luck with getting out of debt.
98Honey Smith says:26 June 2012 at 8:02 amHe reads (& approves!) my messages!
44Sarah says:26 June 2012 at 6:44 am
Although "his" debt may not legally be equally yours in your state – if you are expecting to stay married then you are building a life with this person. Therefore, I'd suggest (highly) that you both work toward paying down the household debt. The quicker the debt is paid off the quicker you'll be able to not have to take it into account when making decisions in your life – like buying a house or moving.
219Paularado says:26 June 2012 at 1:19 pm
I'm assuming that you plan to "enjoy" his income, so you should probably help pay off his debt too that will bring in the big bucks. It will make you stronger as a team. There's nothing better than building something together. I suggest that you combine your bank accounts and get rid of the His and hers mentality. My DH and I made HUGE financial strides when we did that. Good luck.
I personally don't see your situation as so dire. It costs a lot of money to get a law degree, but the payoff is big. We have multiple attorneys for our HOA, and the "cheap" one is $250/hour.
45Kevin says:26 June 2012 at 6:50 am
"I couldn't get sent to collections if he defaulted on one of his credit cards providing the balance was incurred pre-marriage"
This is a little misleading. The "providing the balance was incurred pre-marriage" part is irrelevant. You can NEVER be held responsible for another person's debts if you haven't co-signed for it. Whether you're married or not, or whether the debts were incurred before or after you got married are all irrelevant. You CANNOT be held responsible for someone else's debts, no matter whether it's a parent, child, spouse or anyone, unless you explicitly co-signed for that debt.
The only reason the "marriage" issue can get confusing is because you are part-owner of some of the assets that are vulnerable to a judgement if he should default and get sued. Specifically, if you are married, and you bought a house after you got married, then half the house is considered his. So if he defaults on some debt and gets sued, and his only asset is the house, he may be required to surrender part (or all) of his ownership interest in the house. Of course, that's impossible to comply without unless you sell the house, which is the point at which his debt becomes your problem. But it still does not affect your credit score at all.
His misdealings with debt can never damage your credit score, or cause you to get "sent to collections" unless you've co-signed for his debt. Married or not, it doesn't matter.
46Jen says:26 June 2012 at 6:54 am
It's an interesting back and forth here that I'd love to see J.D. comment on: the commenters who no longer want to hear about people digging out of debt and who may not be building "wealth" for years vs. those who don't want to read about anyone who pays more than the bare minimum for anything they purchase vs. those who want to read about those who have completed all the out of debt steps and want to know how to maximize savings, earning, and net worth.
I think there's room for everyone here, but that's just me.
5726 June 2012 at 7:06 am
No no, I *love* reading about people digging out of debt. It makes me feel warm and fuzzy.
Not so crazy reading about people digging into more debt, especially those who still have that "I'm entitled to dig into more debt" mindset. The marital dirty laundry-airing and poor communication is also unpleasant.
105Jason Beck says:26 June 2012 at 8:12 am
Well said! I cringed and wanted to jump in and say "wait, how's your relationship?!" But it's not my place and I'm a cynical, single 33 year old.
I love people that admit mistakes and love to learn. If this story looked more promising in that respect, I'd be much more interested.
47graduate.living says:26 June 2012 at 6:58 am
I actually recently talked about the anxiety I have about my partner's debt. He's totally fine with paying the monthly balance of his student loans and taking the full 10 years to pay them, whereas mine are still in grace (since I'm a PhD student) but I'm already paying them down. We don't live in an area where buying property is a priority (awesome rental market) but even if we did I wouldn't be comfortable taking out a mortgage and having a large amount of SL debt too.
If and when we marry, my SL debt becomes his and vice versa. Even though we keep all our finances currently separate, that debt is seriously going to affect our interests rates for mortgages, how much we can put toward retirement, and the amount we have saved to prepare for any future progeny. The faster the debt is gone, the better.
227amanda says:26 June 2012 at 1:49 pm
For all these "smart" PhD students why is there so much lack of logic regarding finances? Why are you paying down an interest free loan when you could be paying down the principal on a loan that's incurring more interest?!?!?!?!?!?
If DH really wants to pay off his on his own in 10 years couldn't he at least borrow the money from you and pay it back to you interest free later?!
231graduate.living says:26 June 2012 at 2:20 pm
I think this is a response to my comment, so I'll answer as if it is (I'm sorry if it's a reply to the actual post and, if so, please regard my answer).
The loans I'm currently paying on is in grace, but it's not interest-free. I am not obligated to make payments, but it's still accruing interest at the rate of 6.8%. At the balance I have now, that's $40/month. Over the course of the next four years (how long I have in my programs) that's well over $2,000, if you account for the interest compounding into principle each year, raising the monthly interest. I'm paying off my interest-bearing loans now so I don't have excess debt later. I am not currently touching my subsidized (read: non-interesting earning) because I want to pay on my interest-bearing one, as you advise.
The reason I'm not helping my partner pay off his loans is because we're not married, and I'm not comfortable paying off something that's strictly his debt (at least at this point in our relationship). I didn't make that explicit in my comment, and I apologize for the ambiguity.
272tas says:27 June 2012 at 5:47 am
Student loans are not set up like other loans. You cannot pay the principal on the balance until you have paid all the interest that is uncapitalized (i.e. accrues in a separate fund while the loan is in a grace period/deferment). And because many student loans have a fixed interest rate — that looked good 5-8 years ago (it's 6.8%) — that you can't refinance the way you can a mortgage, you're stuck paying a lot of money to the bank. It's a wicked system that no one really talks about…
48Steve M says:26 June 2012 at 7:00 am
You guys have to drop the system of owing eachother money. Who cares what the state law is….you're married! You are supposed to be "one" in lots of ways, including financially. Cut your lifestyle, cut up your credit cards, work hard with your good educations – together, pay off your debts, and in 4 or 5 years you'll be back to $0 net worth and you can think about saving a down payment for a house. News flash – you're poor! Start doing something about it.
49Debbie says:26 June 2012 at 7:00 am
Howdy Honey and Fellow Arizonian,
Until about 7 years ago, my husband and I had a large amount of debt incurred by two years COBRA payments while SS decided to permanently disable me. Seven years ago, I recovered well enough and decided to address our finances as we had two sons heading into college. My rule is very simple, any extra "windfall" money, for example, tax returns, birthday gifts, bonuses and so on, are split three ways. One third goes to pay down debt, one third into savings and one third we get to spend. We have been debt free for 5 years and we paid off the mortgage in April. Best of luck to you; I hope some of these ideas may be helpful!
50KSR says:26 June 2012 at 7:00 am
Well Honey, this– like your past post about the wedding—is becoming the epitome of broken record syndrome. You represent a certain sector of our country that learned nothing from this past (and on-going) recession. You want it all and can have it too, on credit. Since the house seems to be the next knot you are willing to tie around your shackled ankles of debt slavehood, why not just ease into it. Rent a McMansion (they're all over the place because of couples like you) and just ease into all the little joys and extras that homeownership sucks from your wallet.
53randyD says:26 June 2012 at 7:02 am
I'll echo some of the comments above. This is simply a stunning level of debt for a young couple. Have you considered counseling? I'm serious…I'm not trying to attack you.
I don't know the specifics of your job prospects but I would certainly consider renting as a starting point. I understand school is expensive these days – but to have two of you each saddled with 6-figure school loans is daunting. Adding another 38k in credit card/car loan debt seems reckless, no?
I read your previous post and thought it was quaint – a nice way to save some money on a wedding. Looking at it now, you clearly have some major problems. You should have been married at city hall and considered a gala down the road when you were on a better path financially. People would have understood.
The weirdest thing about this post is you are just laying all this debt info out there and don't really seem to be very concerned about it…..guess I don't get it….
103Honey Smith says:26 June 2012 at 8:11 amWe are both DEEPLY concerned about our debt. That's part of the reason I'm sharing our story here. Motivation to do better than we have, feedback in real time as we move forward, and hopefully preventing others from finding themselves in the pit we have dug!
Yes, I have been able to deal with these issues without becoming clinically depressed. I'm grateful for that; I think having a healthy mental state is going to put me in a far better position to approach this strategically than an unhealthy mental state would be.
Though four/five years ago when we began paying down our debt, I would cry every time we went grocery shopping. Fortunately we're in a better place now, and it will get even better as we move forward with debt reduction.
177cc says:26 June 2012 at 10:47 am
my vote is for honey, because she's involved in the comments! some of the comments are not the kindest, but it hasn't gotten into an internet slap-fight which is all too easy to do- gotta respect honey for that.
also, i didn't catch her name was honey. i thought everyone was doing that southern-condescending-hospitality thing and just calling her honey. my bad!
61Amanda says:26 June 2012 at 7:10 am
I can't imagine keeping score like you two are in a healthy marriage.
62EMH says:26 June 2012 at 7:10 am
Bravo to those that never made financial mistakes but many people have. JD had a lot of debt when he started this blog and we followed it and watched him succeed. I was proud when JD wrote that he was debt free and I would love to have that feeling for Honey. I look forward to hearing Honey's journey and maybe the collective advice on what she should do next will help her. Let's be her cheerleaders and not demean her. The mistakes are in the past and can't be changed. Why don't we give her suggestions for her next steps so history doesn't repeat itself?
My suggestions:
Pay off the credit cards that have an interest rate above 0% with a portion of your emergency fund.
If you haven't, enroll in Upromise to help with the student loans and have your family enroll as well. It will make a very minor dent in the debt but better than nothing.
I know you love your bag (and I TOTALLY understand) but get a cheap bag for now.
Don't buy a house right now. Wait until you have a down payment.
Good Luck!
96Jen says:26 June 2012 at 7:59 am
Yeah, I mean it seems pretty obvious to me that if you end up with that much debt, you're doing things wrong. Plain and simple.
And if you've been doing things wrong, it's rare to be able to change everything all at once — and I don't mean just the debts. I mean the thinking that got you into the problems in the first place.
I'm personally not shocked to learn that people who have this much debt and who are conflicted about where their lifestyle should be and how they should go forward as a married couple are not suddenly perfect.
It could be a train wreck or it could be a lovely story or it could be half of a lovely story if the marriage doesn't last. I know lots of people commented — and even more likely just thought it — when JD talked about how he and his ex-wife split expenses and kept separate accounts that that was a bad sign…turns out it was, even if it wasn't a cause, it was a symptom.
67Sara says:26 June 2012 at 7:18 am
You know, it is actually impossible to judge the debt without knowing the income. I do feel that under most any circumstances, that is a big debt load, but they have advanced degrees. College administrators that have matured in their careers should make $100000 a year or more, even at a state school. If the PhD is specifically in an educational field, her prospects are quite good. And a lawyer from a top tier school at least stands a chance (although prospects for attorneys don't seem to be so good right now, especially if they are from a less prestigious school). I total about 32000 in total credit card debt, but most of it is HIS. What this article is really about is how a woman who seems pretty responsible re: debt can handle a marriage (read: legally binding financial commitment) to a man who seems quite out of control with his finances. Honey has a very difficult road ahead of her, in which it appears that the main responsibility of putting the marital financial house in order will be hers. I actually think this could make some interesting reading. I like the stories with the personal touch. Frankly, once J.D. got so financially balanced, he wasn't quite so interesting. Following a real story (and that kind of student loan debt is extremely real for young couples) will be extremely interesting AND create a resource for young professionals to help them paw their way out of a broken system. From a business angle, JD could be looking at a gold mine as far as bringing in new readers.
72Emily @ evolvingPF says:26 June 2012 at 7:23 am
I think you've been beaten up enough in these comments so I'm not going to add to it, though looking at all your debts did make me feel a bit nauseated! I'm going to assume you got married very recently.
1) Congratulations on NOT combining your finances before you were married (mostly)! I can understand that after years of living together but still keeping yours-and-mine money it's hard to switch your mindset. But I would encourage you to try to start thinking of everything as "ours" even as it takes some time to mechanically combine all your accounts. I believe your marriage will be stronger from viewing and using your money jointly, no matter what the law.
2) It looks like you have a goal to pay off all your credit card debt in the next three months. That is a great goal! Are you referring to only "your" cc debt or "our" cc debt? I would say if you are only referring to yours, you should also get your husband's paid off as fast as possible.
3) I very rarely say this, but I actually think you two, especially your husband, would benefit from following Dave Ramsey's plan. That is a strictly prioritized plan for you! If not that one, I encourage both of you to make a plan and follow it through, whether or not it's perfectly prioritized from the beginning.
4) Since your husband recently started his own firm (right? that's in your last post.) moving isn't really on the horizon, is it? I think you should put all your home-buying plans on hold until you have more certainty in his income and where you want to live. In the meantime, get all the debt paid off except the student loans and then attack those loans.
5) It seems that your husband is the higher-earner of you two, so if you do consider moving in the future, don't do it until he has a job and the new job is paying your moving expenses. Then you won't need quite as large a buffer. But get rid of the consumer debt first.
As for your question, both my husband and I are savers and so far we haven't had much trouble prioritizing. Once we graduate and get real jobs, we will probably go back and forth on how aggressively to save for a house downpayment vs. amping up retirement savings vs. establishing ourselves in our new city and in our new jobs. Thankfully we have no debt (despite both getting PhDs) so that isn't in the equation.
79Sam says:26 June 2012 at 7:37 am
Lots of people come out of advanced education with this kind of debt. Sadly the poster's experience is almost normal. But assuming good to very good incomes for Phd. and a J.D., prospects are not bad, however its unclear as to what the income levels are, university admin can vary and sounds like the top tier law school grad is working on starting his own firm which can be a drain for at least a few years.
When we got married, we had a total of $55,000 in combined debts, we had then paid off within 12 and a half months. Think about that, you could, if you worked really hard get your debt to a manageable level in under 5 years assuming good (and stable) incomes and extreme focus and discipline.
We worked the Dave Ramsey baby step/snow ball method and we lived a super frugal life. I earned more money than Mr. Sam but we combined our finances and we combined forces and got it done that first year of marriage. Mr. Sam will tell you that I paid off his MBA student loans, but that's not really true, we did it together. Our efforts and good habits developed that first year have continued on since then.
As I mentioned, I'm a fan of the snow ball method so I would work the credit card debts, starting with the smallest debts. Looking at your e/r fund monies, you've probably got too much in emergency funds between the two of you, I'd take some of that money and pay off the debt.
At this point, I would hold off on saving for a home. I would kill the credit card debt first, all of it, and only after that point would I start saving towards a home.
And I would agree that neither of you can be spending on luxury, purses or otherwise, until you get your debt under control.
Good luck to you.
81Tyler Karaszewski says:26 June 2012 at 7:39 am
I still think this sort of tit-for-tat scorekeeping is antithetical to the idea of what a marriage is supposed to be.
Maybe I should start paying my wife a salary for child care, and then take back half the mortgage payment firm her "paycheck". Maybe when my daughter turns 18 I can present her with a bill for services rendered while raising her. I could track the whole thing in mint.
It's ridiculous.
83mergirl says:26 June 2012 at 7:40 am
I'm sorry, this reads like the wife's passive aggressive attempt to get an audience of sympathetic readers on her side so she can convince her husband to do what she wants. I would not want to read about her attempts at debt-reduction in a marriage where she's already set up a "me-against-him" dichotomy. In a marriage, it should be us against the world.
84Bart says:26 June 2012 at 7:41 am
How refreshing to see such a revealing post from someone just beginning a debt journey! As a numbers man I really appreciate the real example. I am actually having to restrain myself from punching all of this up into an Excel sheet right now to figure out a good plan for you.
One thing that I would like to ask, though, is that we get to see the other side of this coin as well. What kind of income are you working with, and what are your monthly expenses? These numbers can seem like hey loom pretty large, but it may be that they can actually get paid down pretty rapidly. This is especially true if both of you are working with advanced degrees. Would you mind giving us a little bit more context for your challenge?
109Honey Smith says:26 June 2012 at 8:17 amI hope I get a chance to share!
18026 June 2012 at 10:58 am
I've very much appreciated your attention to the comments and the new information that's trickled in.
I am twenty years ahead of you age-wise but financially only ten. So I am still interested in this story.
I also appreciate that you don't want to dwell on the past, but may I suggest – for those readers who are at a similar point on their path – if a follow-up article is done, to do an interview format that will give those readers some of the rationale underlying your financial decisions?
A lot of the value of GRS is learning WHY people make the choices they do.
Best of luck to you. And for heaven's sake don't ride the bike to work in July/August.
85Marie says:26 June 2012 at 7:43 am
Thanks for an interesting article!
I suggest you fill out the job eligibility form for Public Service Loan Forgiveness and look into Income Based Repayment if you haven't already. You are better off paying standard, but pick IBR if you can do PSLF.
This is a link to the form
It's the ED site or Google employment certification for pslf
You may qualify if you work for a non profit university.
More info on PSLF
More info on IBR
Good luck!
112Honey Smith says:26 June 2012 at 8:18 amWe may do IBR while we pay off our consumer debt, but neither of us is eligible for the forgiveness option. Thanks, though, these links are super helpful!
117Kris says:26 June 2012 at 8:25 am
I really like this comment! For all the commenters that are talking about all the mistakes in the past, only a few have suggested a plan that mapped out her and her husband's debt-free future!
I guess we can turn this into a bad reality show on the internet, or we can help her without being judgy and condescending. This is the perfect way to do it.
Honey, I hope you are getting the message. My husband and I had over a quarter of a million dollars in debt and paid it off in four years once we got serious. Working together is essential. Not buying ANYTHING that wasn't a NEED or going to generate income is also essential. Please listen to all the well-meaning voices on this blog.
237Anne Cross says:26 June 2012 at 2:54 pm
You're really brave for sharing your financial situation with the world! There are indeed lots of options out there to get out of debt, and if you two decide to try to reduce your debt, I hope we'll hear back from you every six months or so to see what has worked for you and what hasn't.
90Lisa says:26 June 2012 at 7:52 am
My husband and I went through Dave Ramsey's Financial Peace University. It was fantastic!! It was so good for our finances, our marriage, unity. We started by listening to him on the radio, then read his books, then FPU. I highly recommend it.
I'd pay off all debt, together as a married couple. Then, continue to live simply and amass more money for a hefty downpayment (or even 100% downpayment!); Take a listen to Dave's show…the stories are inspiring!!
We've paid off cars, have college money for our son and no more mortgage. It sounds like you guys might possibly have the kind of jobs that bring in substantial income. Sell everything you can (including the purse! , garage sale, ebay, etc. etc. ~ live on rice and beans, beans and rice and get rid of all that debt!! Then go for it. You will prosper together!! xox
93lawyer says:26 June 2012 at 7:56 am
I get so frustrated with people who say they have to take out a ton of loans for law school. The fact is it was a choice. (One that I admit I made too, but at least I didn't go as far into debt as most) Because most lawyers are prestige-whores, most think that it's better to take out a bunch of loans to go to the most prestigious school they can. But the fact is that doesn't always make sense especially if you are planning on doing public interest/government work or solo practice or have no intention of going the big firm route. It might have been a better choice for your husband to take a scholarship to a second tier school and have a lot less debt that would give him flexibility with his career choices.
And it is simply not true that being in law school means that you cannot work during the year. I know plenty of people who went to the top schools full time and worked at night or on weekends, including one former army doc who spent his nights in the ER while at Stanford Law. It might make it more difficult and more exhausting but it is possible.
Wedding debt is just unacceptable to me. You can have a simple affair or just go to the courthouse or elope with just you and a the minister of your choice and you are still just as married. With a debt load this high, I can't understand that choice at all even if it is a relatively small part of the massive amount that you two owe. (although you didn't mention what all that credit card debt that your husband owes is for) At least you don't try to justify it here (I didn't have the energy to read your other post about it)
That said what's done is done. I would enjoy your posts more if instead of justifying your and your husband's mistakes, you owned up to them so others could learn from them.
143Honey Smith says:26 June 2012 at 9:15 amWe certainly admit that we made a ton of mistakes. We're just more interested in digging out of them than we are beating ourselves/each other up about it.
When I say he couldn't work during the school year, I mean the institution did not permit it. They would kick you out of the program if they found out you had a job.
Similarly, my assistantship during my PhD also prohibited other employment during the school year, though they weren't as rigid about enforcing it as law school. In my current role I manage PhD programs and write their assistantship contracts, and it is in the contract that they're not allowed to supplement with additional or outside employment.
251lawyer says:26 June 2012 at 5:30 pm
You did say..
" Law students have to pay graduate tuition and law school tuition, and they're not allowed to have jobs except during the summers. He went to a public, in-state, Tier 1 school and was on Law Review, aka, this is as good as it gets."
But this is not as good as it gets. If his school didn't allow work and he thought he needed to do it, there were other top institutions that would have allowed him to work. He could have considered part time or other options if working and keeping his debt load low was a priority. But it wasn't, which is fine. But your comment implies that this situation was completely unavoidable in order for him to end up with a decent degree. That is the justification that I question. And I hate when I see future law students coming into law school with that mindset that if you want to practice law you must take on such a debt load which is why I felt compelled to comment.
I don't think you should beat yourself up over it like I said what's done is done, but when you are a financial writer, you might want to consider telling readers the alternatives or at least acknowledging that this may have been unwise rather than to suggesting that this is a path worth following by describing it as "as good as it gets"
287Holly says:27 June 2012 at 1:43 pm
"But this is not as good as it gets. If his school didn't allow work and he thought he needed to do it, there were other top institutions that would have allowed him to work."
Well, this is half right.
It's an ABA accreditation requirement that, during the first year of schooling, law students not work during school, whether part or full-time. So if there are schools that allow work during that first year, they are in danger of losing their accreditation (or are not accredited at all, which raises other issues as far as national recognition and portability of the legal education, etc.)
However, for the 2L and 3L years, students are certainly free to have part-time jobs (if they can find them). It might not be a fancy or even law-related job, but yes, students are allowed to hold jobs during school.
94mirror says:26 June 2012 at 7:58 am
I'm going to say that I love this post and I hope to see more from Honey!
I'm a pretty new reader of GRS (about a year?) and I'm in my late 20s. To me, Honey feels like part of MY generation and my friends and I can relate with her about major life decisions (student loan debt, new marriage, house, getting started in adult lives, etc). I really want to read about Honey figures things out from the beginning. JD started this blog and freely admitted his financial mistakes.
I feel most long-time readers here have forgotten that not everyone knows all the proper steps for financial success like they apparently do. But the great thing about this blog is it doesnt have to be about the same thing every day! I'm actually sick of all the "I live in a dirt house and go nowhere and do nothing therefore I'm rich!" posts (exaggerating). I'd love to read more about BALANCING debt vs entertainment/housing/lifestyle/etc instead of the
100mirror says:26 June 2012 at 8:05 am
err..error in the posting. To finish:
instead of the EXTREME "dont do anything and just save all your money til your 70, then dust off your rocker and have some fun," (exaggerating again).
The majority of these comments prove that they dont relate to Honey and dont need much debt financial advice or "starting an adult life" advice. That's fine. But I do. I've found many of the posts in the past couple months pretty blah because it's all about "well I used to have debt, so I hunkered down and paid it off. Now I'm happy. yay." Boring! I really want to experience and learn through Honey's trials and tribulations.
If the majority of commenters have decided they know it all already and dont need to learn anymore from someone's experience from the very beginning, okay then. But I think it's cornering out a lot of us who are just coming to this blog and are in exactly the same position as Honey.
10126 June 2012 at 8:07 am
You make great points, but my concern is that some of the points raised in this post (considering buying a house and/or moving to a new city w/o jobs) makes me think that the author is not yet at the "working a plan stage".
111mirror says:26 June 2012 at 8:18 am
She may not be at a planning stage, but this was her first introductory post to her financial problems/mistakes. I think she deserves a few more posts about figuring things out and where to go from here. It wont be a clean process (like what I feel many of the 'blah' posts have been like lately) and years of (bad?) decisions cant be tidied up in 1 post.
My husband and I are nowhere near her debt, and we are not struggling, but we are not thriving either. Still, the confusion of looking around us and seeing our friends buying homes, new cars, etc makes us feel like we are doing something wrong. We are thinking of the next step (house) but not sure if we can afford it, not sure if it's a smart idea at this point in our lives, not sure if we should save more vs put it in a downpayment,etc…my husband actually feels like we should buy a house soon. He is the breadwinner and when he feels he needs new clothes/gadget/etc, we can afford it. I'm starting my own business and I havent bought new anything in years, but it annoys my husband when I need to buy something (it could be going toward a house).
Honey's purse story really resonates with me. It's just another example of figuring things out and working through the problems. I hope to read more.
197Kris says:26 June 2012 at 12:16 pm
I know there is a balancing act, but it has to be within the context of the current situation. And maybe Honey and her husband will get there eventually. But before they get to the spending beyond essentials part, they should have a thorough understanding of their spending consequences.
The amount of debt they have is a lot – and I am not sure they really understand the magnitude of what it will take them under the best of circumstances to pay that off. If and only IF they understand how much they are losing out on if they spend because they feel entitled (not saying they do) can I feel comfortable they are making wise spending decisions.
When disaster strikes (and it is not if, but when), you aren't going to be happy to have yourself surrounded by purses that make you happy.
You will be happy you have money in the bank and your debts are paid off.
218Sarah says:26 June 2012 at 1:16 pm
I agree although I can't relate to everything, I can certainly relate to high student loan debt and high debt overall. I'd like to hear more about what people are doing now to change their habits and to address the sort of debt issues that I have had since leaving school. and my student debt load is well below average in my field and in my class.
I shudder to think what all the commenters would say about my debt, which is different in make up, but similar in numbers to Honey's. And I do stress over the amount, and constantly have to remind myself that I made the best decisions I could with the information I had at the time and am working to pay it off.
In response to Honey's question about marital dynamics. Hy husband and I have had joint finances since we were married. I'm definitely the saver and I control all of the financial accounts, I can't even imagine having separate accounts and keeping tabs (then again I have always been the higher earner). We manage our extra spending by taking out a certain amount of cash each week for groceries and extras anything not spent on the weekly shopping trip is available for small treats (like soda or lunch).
102A.Cartter says:26 June 2012 at 8:11 am
My strong advice: Lay off the house buying plans. The housing market is a mess, and being able to jump ship and leave the area to take more profitable work could be crucial. Work on decreasing that debt. Once that monkey's off your back, THEN you can think about taking on a mortgage.
It worries me that you are using the debt to bludgeon each other when you're disagreeing. It also perturbs me that you're having to check with each other about personal purchases. My strong advice is that you two set up allowances. This is money that each of you can spend as you see fit on yourself, for clothes, bags, hobbies. It makes you feel less a child (Gee Daddy, can I have this?) but at the same time, if you really want something, you have a way of getting it without having to worry that you're breaking the bank. Ir may be only a few bucks a week – I know one couple that was doing $15/week each when they were going through a rough patch. The fact it was such a small amount helped them remember the big picture, and yet let them buy a (used) book or have lunch with friends without having to worry. Yes, you can save your allowance for a big ticket item. It's such a simple thing, but it works.
153Beth says:26 June 2012 at 9:46 am
I completely agree about the allowance system. I've been married 25 years, and most of that time, we've had a weekly allowance. It's gone up and down depending on our financial health (currently $15 a week, down from $30). He spends his on comics, I spend mine on yarn, and we're both happy. If we want to save up for something big (like a $1000 spinning wheel), we can. No fights, no justifications.
You can be sure that if I'm spending my allowance on something, I've definitely done my research and made sure it's worth it to me! If it takes a few months to save up for a bag and you still want it, then you'll know that it's important to you. And it's good to get into the habit of delayed gratification. I've been debating about buying a Galaxy tablet for over a year now, even though I have plenty saved up; I'm just not sure I'll get enough use out of it to justify spending $400 of my hard-earned allowance on it.
106KCP says:26 June 2012 at 8:14 am
I started reading GRS this year because my husband and I have been total boneheads for the last, oh, I don't know, decade and have piled credit card debt on top of student loan debt on top of you name it. We're not as far in the hole as Honey, but we're pretty far down, mostly because of underemployment, graduate school, unexpected medical problems, expected medical problems, irresponsibility, denial, ignorance, etc. Lately, I'm feeling like I can't relate to most of the posts. I'd love for compound interest to be relevant to me, and my goal is that sooner, rather than later, it will be, but right now, I could use some inspiration to keep me on the straight and narrow until I get there. I don't need to be reminded of how completely stupid I've been; I've had my "Oh, sh*#!" moment several times over. It would be nice to be able to commiserate once in a while. There are a lot of problems with Honey's story, and I can't entirely relate to her post either, but I so long to see stories by folks who are in the thick of it, making sacrifices and working hard to fix their money mistakes and get ready to finally build some wealth.
209Jenifer says:26 June 2012 at 12:51 pm