Need suggestions...

**rachelMcK** · 03-01-2007, 12:40 PM

Ok, DH and I are slightly confused as to what to do... We tried doing dave ramseys suggestion of EF then highest debt to lowest etc. It just doesn't work for us.

We live in a bad neighbourhood and we are going to be moving but we want to buy a house. We don't have any savings right now. We owe 15k on a LoC, 8k loan and 9900 OSAP. The 8k loan is the oldest as its DHs loan, the rest are mine.

What would you do? Do we pay the minimums while saving for a house? Do we pay off one debt then save for a house? or pay them all off then save?

We're new at being finacially "together" and just trying to figure it out. I'm completely overwhelmed when I look at how much we owe. It really makes me sick to think that this is all student debt. We're just starting out, we're 22 and 23, how can it be perfectly acceptable and expected for young people to start their lives with this much stress...ugh...sorry, venting.

Thanks for reading!

**3-boys-4-me** · 03-01-2007, 12:44 PM

What are interest rates on these loans?

**kaykwilts** · 03-01-2007, 12:49 PM

What kind of income do you have to attack these debts? It would help people give advice to you if they had more information.

**rachelMcK** · 03-01-2007, 12:55 PM

Sorry, I really forgot the major info...Ok, The 15k has 8% and the 8k has 6%, the OSAP loan, I won't have to pay interest or make payments until November (6 months after graduation). Our monthly income is 2500.

Sorry for not posting that, I don't know where my head was at...lol.

**mom2three** · 03-01-2007, 02:45 PM

IS that gross or take home income? What is your budget? Maybe you should start there and we can give suggestions on how to get more frugal and how to save.

**ConnieD** · 03-01-2007, 03:16 PM

Also, are you planning on buying a house in Toronto??

Personally, I can't imagine how you'll be able to pay down the debt AND have a mortgage with the prices of houses in Toronto.

Sorry to sound like a party pooper. I feel so bad for kids starting out in today's world......... especially when they're starting their married life with a lot of debt.

If it were me, I'd get much more of that debt paid off first. When you own your own home, there are a lot more expenses that you don't think of. Property taxes, all the utilities, new roof, broken furnace, leaking windows, etc.... then just the general upkeep of your property. You'll need a lawnmower, rake for leaves, etc.... lots of little things that add up in cost. I'm all for owning your own home (been a homeowner all my married life), but sometimes it's more involved than people realized.

Hope I was able to offer a different point of view. Good luck with your decision. You guys are the ones who have to live with the choices you make. Just try to think through every angle before you make any big life decisions. (eeeeckk......... guess it's the mom coming out in me, LOL!)

**rachelMcK** · 03-01-2007, 03:19 PM

Ok that is take home...i usually don't look at gross...it depresses me...lol...my budget:
monthly

Rent 880- soon to be 900...ugh (heat, hydro included)
insurance - 190 (we cant find anything lower because DH has been in accidents and it was the only company willing to take him, we will be shopping for cheaper when he turns 25)
Food, misc costs etc. - 400
phone - 160 (2 cell phones very expensive but we're thinking of buyig out our contract)
Net - 50 (DH won't comprimise of the highspeed since he agreed to cut out cable)
debt minimums - 300

This usually leaves around 500 to put wherever...so this is the confusing part, do we put the left over in savings, pay off a loan then save or pay off all of them then save???

I hope i didn't forget anything this time!
Thanks

**rachelMcK** · 03-01-2007, 03:22 PM

Connie:

No we wouldnt be living in toronto...i'm done university next month and we'll be out of the city. I hate it. I've definatly been thinking about extra expenses that a house involves and its scary.

**nuisance26** · 03-01-2007, 04:03 PM

~I strongly suggest paying off your loans before buying a house. Every debt book I've ever read has a story about a couple who gets in over their head with a mortgage on top of debt. Usually in these scenarios, they are unable to continue making payments because of a job loss or health issues(pregnancy!). Then they lose everything. You might be able to find a better renting situation, maybe not less money but perhaps a safer area. You already have alot of debt for your age,IMHO it would NOT be good to save for a house before paying down debts. Good luck with whatever you decide!~

**FrugalMomof3** · 03-01-2007, 04:08 PM

Well Dave Rasmey says to save FIRST then start the snowballing of the debts, so I would take $100 every paycheck and start saving that till you have the desired amount with your take home, it's $1000 EF but if your just thinking to just save for the house then you put that value at what you want.

First and foremost when you reach your desired amount get rid of the higher interest rate loan first, then when that's paid off start the 2nd highest interest rate and so on and so forth. Snowballing is actually fun once you get the hang of it and start seeing those debt totals get lower and lower.

I personally think the EF or saving part is fun too, it's great to see the amount in the bank get bigger and bigger if you have an ING account you get what I think is now at 4.9% interest on the money so that's really good compared to opening a savings account at a local bank.

One thing I must stress is this, keep focused and you WILL make it! Our take home is $2225 a month, we pay mortgage ($882), child support ($592), food, electric, cable and cell phones and I manage to save $20 every pay (sometimes more), even after saving and paying all the bills, we always have like $100 left over when the next paycheck comes in, that's after buying food too, if we can do it you can too! Just focus, make and stick to a budget, after a while it becomes a habit.

**pammy** · 03-01-2007, 05:35 PM

Originally Posted by rachelMcK

Ok, DH and I are slightly confused as to what to do... We tried doing dave ramseys suggestion of EF then highest debt to lowest etc. It just doesn't work for us.

Actually, you should be attacking the smallest debt to largest, if you follow Dave's baby steps. Did you try it that way??

Absolutely I'm on the side with not buying a home until your debts are paid off. It's just inviting Murphy. Any way to up the income to kill the debt sooner??? (((hugs)))

**cara-lynne** · 03-01-2007, 08:54 PM

Pammy - I was reading your signature and I had to comment. I am just starting Dave Ramsey's plan and as of today, I completed BS 1. On your baby step 2, it says you started out with 55,000 of debt and it is down to 5,000??? Is that true? or a typo?! How long did it take you? What an inspiration truly. How long have you been on the plan? Awesome job!

**cara-lynne** · 03-01-2007, 08:55 PM

sorry, Pammy, I just saw the "since 0ctober of 05" on there. Was it hard to do?

**Grayce** · 03-02-2007, 12:47 AM

Hello to another Canuck

Another thing to consider when deciding which debt to pay first is that the interest from student loans is tax deductable so I would save that debt for last. Pay the minimum on that while you pay the others off.

**chisgran** · 03-02-2007, 08:42 AM

You've got a lot of good suggestions here to work with. I agree on the not buying a house until all debts are paid or you're almost debt free. Do you have an established budget yet? If not, you need to know where your dollars are going. I would get a small notebook & for about a month write down everything little thing you spend money on. Start devouring books on money management. What about setting up all bills on automatic payments? You won't have to worry about paying things as long as the money is there & that'll leave you open to other options.