“I am not the most financially literate”: How can I tackle my debt and secure my family’s financial future with limited knowledge and a growing family?

Hi Money Minder,

Yo, I’m 27 and married with a little one. I’m kinda lost when it comes to money stuff but I’m ready to get it together. Here’s the breakdown:

Debts:

Mortgage Loan: 2.74%, $189,000 original, now $173,000

Honda Pilot Car Loan: 9.53%, $17,507.40 original, now $9,716.44

Graduate School Loan: 5.875%, $85,605.62 original, now $87,159.36 (only paying interest)

Credit Card: Balance of $9,899.15 (no interest due to balance transfers)

Medical debt: Around $2,000

Income: $107,164.20 after tax and health insurance

Outflow: $84,020.76 (excluding health insurance)

Goals:

1. Get a new car within 5 years
2. Buy a new house (neighbor’s house worth $199,000)
3. Have 3 kids close in age
4. Start my own cash-based practice
5. Plan for a comfortable retirement for my wife
6. Take care of my in-laws in 20 years
7. Rent out for passive income

Specific questions:

• Best way to tackle debt efficiently?
• How much cash flow do we need to pay off debts in 5 years with kids expenses?
• Where to learn about basic financial stuff?
• What else do I need to understand my home’s cash flow?

Thanks, I’m grateful for this community!

Response from THE MONEY MINDER:

Hello There,

Hello, I understand the importance of financial literacy, and it’s great that you are taking steps to gain a better understanding of your cashflow. First of all, I want to commend you for recognizing the need to improve your financial situation.

Looking at your current debts and goals, it seems like a realistic and practical approach would be to focus on tackling the high-interest debt first. In your case, it would be the credit card debt, as it is the most costly due to the interest rates. I highly recommend prioritizing paying off this debt as soon as possible, even if it means tightening your budget temporarily.

After addressing the credit card debt, you can consider focusing on the Honda Pilot car loan, followed by the graduate school loan. Making extra payments towards these loans can help reduce the overall interest paid and expedite the debt payoff process.

Regarding your specific questions, gaining basic financial literacy can start with resources such as personal finance books, online courses, or seeking advice from a financial advisor. It may also be helpful to create a budget to better understand your cash flow and track your expenses.

To pay off your debts in 5 years while managing increased expenses with children, it would be beneficial to create a detailed debt repayment plan. Consider budgeting a portion of your income towards debt payments while still saving for your goals. You may need to adjust your expenses and prioritize your financial goals accordingly.

Remember, consistency and discipline are key when working towards financial stability. By setting clear financial goals, creating a realistic debt repayment plan, and continuously educating yourself on personal finance, you are on the right track to achieving financial success. All the best from THE MONEY MINDER.