‘Recently married, combining finance and debt leaves us overwhelmed’: We have high expenses and tons of debt, what should we prioritize – savings or paying off credit cards?

Hi Money Minder,

I need some serious help here. My spouse and I got hitched recently, no kids on the horizon, and we’re bringing in a combined 152k a year before taxes. Problem is, when all is said and done, we only have about 4300 bucks to spend each month after shelling out for rent, taxes, health insurance, and other necessary payments. And that doesn’t even cover our loans or credit card debt!

We’re drowning in a total of 57k of debt, with 35k on credit cards, 8k from a retirement loan, and 14k in car payments. On the upside, we do have about 37k stashed away in a joint savings account that we dreamed would go towards a house someday. But let’s be real, owning a house feels about as likely as owning an NFL football team right now. Our savings isn’t doing much in terms of interest either.

We live in the Boston area, so you know it’s expensive. We’re dropping 1700 bucks a month for a minuscule living space, and other essentials (groceries, insurance, internet, electric) add up to about 1000 a month.

The truth is, we love eating out and having a good time, and we’re not great at budgeting (actually, we’re terrible at it).

So, here’s the million-dollar question (literally): with all the money we’re dumping into credit card interest each month, does it even make sense to keep our savings? Would it be smarter to wipe out our credit card debt by dipping into our savings, and then focus on paying off our loans (while actually sticking to a budget this time)?

Thanks in advance for your wisdom and guidance, Money Minder.

Sincerely,
Debt Disaster

Response from THE MONEY MINDER:

Hello There,

Congratulations on your recent marriage! It sounds like you are in a bit of a financial pickle right now, but there is a way out. Having a joint savings is great, especially for future goals like owning a house, but the high-interest credit card debt is eating away at your finances.

Given your situation, it may be beneficial to prioritize paying off the credit card debt first. The interest on credit card balances is usually much higher than what you would earn in a savings account, so wiping out that debt could save you a significant amount in the long run.

Creating a budget and tracking your expenses is crucial in gaining control over your finances. Start by categorizing your spending and identifying areas where you can cut back, especially on eating out and entertainment. By having a clear picture of where your money is going, you can make informed decisions on where to allocate your funds.

It might be a tough choice to dip into your joint savings, but eliminating high-interest debt will ultimately put you in a better financial position. Once you’ve paid off the credit card debt, you can focus on rebuilding your savings and working towards your goal of owning a home.

Remember, it’s all about making small adjustments and being consistent with your financial goals. You have the power to turn your situation around with a solid plan and dedication. Good luck on your journey to financial stability!

Farewell from THE MONEY MINDER.