Working Like Maniacs

Tonya got married about a month ago and came into the marriage with a lot of debt. Her husband has never had credit of any kind. Tonya was just hired for a job making $30,000 a year. Where do they start?

QUESTION: Tonya in Virginia got married about a month ago and came into the marriage with a lot of debt. Her husband has never had credit of any kind. He doesn’t make much money, and Tonya was just hired for a job making $30,000 a year. Where do they start? Dave tells Tonya they need a written budget.

ANSWER: You’ve got somewhere around a $45,000 or $50,000 a year household income. You’ve got $25,000 in a mess plus a $15,000 student loan. Where do we begin? The first thing you do is take care of food, shelter, clothing, transportation, and utilities. You get on a written budget that the two of you agree to. With money that’s left over after your necessities are covered, you pay any payments you need to pay today on that student loan. Then what we’re going to do is start taking that credit bureau apart and making a list. Just build you a spreadsheet and list these debts smallest to largest. They’re all old, bad debts. None of them are current.

You’re probably better off selling the car, financing the difference, and getting a hoopty than you are paying 24% interest. You need to dump the car and borrow the difference to get out of it. Go to kbb.com, type in “for private sale,” the details on the car, get the car all shined up, and let’s get rid of it. The thing’s killing you.

Once we’ve gotten rid of the car, now we’ve got to get a couple of thousand bucks saved up from somewhere and get you a little hoopty so you can get back and forth to work. Both of you have to work like maniacs. We take care of food, shelter, clothing, transportation, and utilities. Then once we’re current with everybody except those old debts, then we wake up the smallest old debt and call them and try to settle with them. You do that in writing with no electronic access to your checking account. You call up Visa or whoever it is and you owe them $1,000, and you work out a deal with them to pay them $500 or whatever the settlement is on it. You settle that, you pay them with a cashier’s check or a money order through the mail, and only pay them when you have it in writing that they’re going to accept the amount that you’re sending in cash as settlement in full. You send them the money then. One by one by one, you work your way through this. If you have $25,000 in old, bad debt, you can probably work your way through that for $5,000. You’ve got to clean up this student loan. You’ve got to clean up this car mess. You’ve got to go through $5,000-$10,000 worth of miscellaneous stuff. You can do that as both of you get your incomes up and both of you start addressing your income in order to clean up your mess. But this whole idea of ignoring it for the last 14 years stops now. Now you’ve got to step up and fix your life.

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