We have a reader of this blog who would like to share their get out of debt journey anonymously and post regular updates with what they are doing to save money, how the debt repayment is going and ask for advice.
Here is their situation:
They are a family of four not currently living in the USA. They rent, have 1 car with a car loan, have 2 online tax returns due soon (approximately $6,000) and both children are in public school. Their income dropped drastically this year when he left a government job and she was let go of her job.
They have huge consumer debt and keep finances separate.
His debt: $29,900
Personal Loan $11,000 repayments $500 per month
Credit Card 1 $9,000 repayments $193 per month
Credit Card 2 $6,900 repayments $139 per month
Credit Card 3 $3,000 repayments $61 per month
All of them are a 17% interest rate
Her debt: $30,402.50
Personal Loan 1 $10,845 repayments are $400 per month
Personal Loan 2 $19,557.50 repayments are $560 per month
Hers were medical issues causing the debt. His was consumer driven.
Current bank accounts
His: $8,000 shares which he cannot access right now (if you want to have shares, we recommend learning about it first such as with Wealth Within Institute).
Hers: Car $20,000 (cannot sell for 12 months so not really an asset at this point)
His income: $2400 per month
Her income: $2800 per month
When they incurred the debt they were on significantly higher incomes which they are working on getting back to. In the meantime, this is what they have to live off and here are their expenses in monthly amounts based on recent expenditure, remember they do not live Stateside, so some expenses are much higher than if they were back home but these are per month expenses.
Car maintenance $125
Car insurance $90
Health insurance $230
Home insurance $50
School fees $50
Cell phone $103
Medical fees $500
Clothing, entertainment, miscellaneous $200
A few extra details
They cannot sell the car to buy a cheaper one. They cannot transfer to 0% credit cards right now either as their income is too low. They are unable to move and feel very stuck with the current situation. The car is still under warranty and must be serviced by a mechanic, so not savings there. The internet option they have is the only one available. Cell phone is locked into a plan until November.
1.) Food bill – it is massive! Check where free food is available, start growing some such as herbs and onions from food scraps already, look at what food is being thrown away and why, shop from your pantry first, menu plan, buy in bulk or join a food co-op, cook things from scratch and buy at the markets or wholesale. Cut processed, prepackaged foods and absolutely no takeaway.
2.) Get in a boarder or rent the room out on AirBnB to get some more money coming in and reduce the rent if you can.
3.) Do everything possible to drop the electricity such as close and seal gaps, hand clothes to dry instead of the dryer, unplug everything not in use etc.
4.) Walk everywhere, bundle trips, look into carpooling for school and work when going out or check out public transport options if viable
5.) Compare insurances to see if you are getting the best deal on everything
6.) Talk to the school to negotiate fees
7.) Compare cell phone plans and possibly go prepaid
8.) DIY Beauty? We’d need more detail on what beauty is being done
9.) Medical fees we assume are unavoidable at this time
10.) Look at ways to bring in extra income. Sell off everything you can, take on extra jobs like cleaning, delivery driving, freelance writing, anything you can.
11.) Get a $1,000 emergency fund. Freeze the credit cards and stop spending unless it is completely essential.
12.) Decide what debt you want to clear first. Are you going to keep finances separate and if so, you need to be clear on how you are splitting expenses, who gets what when you earn extra or sell things, what debt it goes to etc.
What are your thoughts?
Wealth Within Institute are an Australian share company. After this post was published they contacted to have a link placed for payment. We researched them and are confident in them as a company.