Need guidance on Girlfriend's debt...

[Milwaukee]

Hey all,

I'm sure there are a few of you out there who can help me help my girlfriend;

18 months going strong, living together and all around happy, yet I will not consider putting the ring=contract on her finger until some of this bad debt she has is sorted out.  I am very good at saving and staying out of debt.  She on the other hand, is not.  I asked her if she wanted help and her answer was a resounding "YES!  PLEASE!"  I had her gather all of her financials for me over the last month so I could see the total picture....

Yikes!  3 credit cards, 1 student loan and an upside down car totaling $40,000.  I was floored.  How can a smart, college educated 30 year old get into this much financial trouble?

I need to know where to start and I need some help with suggestions.  I will be buying her car from her at private party sale prices and she will throw some cash into the car to get the title over to me (she got a company car and I sold my "paid for" Audi so this is possible).  This will reduce bad debt to $32,000.  My plan was to have her hand me EVERY card but one for emergencies.  Then I will have her direct ALL savings to ONE card with the highest interest and LOWEST balance.  Get that done then direct ALL available income to ONE card until it is done then move on to the next.

We live pretty cheap and she makes about $55k per year when everything is factored in (IE: car and phone paid for)  I think if she really works at it and sacrifices she can have it done in 12-24 months.  Am I being to optimistic here?  Should we consider an alternative?  Chapter 7?  Debt consolidation services?  Other?

Please help.  This is seriously hampering what I plan to do as an investor going into the future if I can't get this worked out.

[phlemboy]

Hey Milwaukee. Here's my suggestions.

1. Have her contact her student loan and see if they'll let her "suspend" her payments temporarily. They basically just suspend it for 6 months or so and extend the terms out 6 months. That can free up some money to plunk on the credit cards.

2. Have her cut her expenses to the BARE MINIMUM.

3. See if she can get a part time job/ overtime to generate some extra cash.

4. Take all the available cash from steps 1-3 and pay just the minimums on the CC's EXCEPT FOR ONE. Find one that with the lowest balance and pay that down first. When that's paid off, apply the payment from the first card to the minimum of the second card that has the lowest balance. Keep doing that until you have paid off all the cards. By paying the cards with the lowest balance first, you have more money faster to apply to the next. The student loan is likely to have a lower interest rate with fixed pmts. It's also a loan instead revolving debt ( which is a better type of debt to have). I'd say there at least 2- 3yrs. of pmts. before its all done depending on how much money gets applied to the debt.

This is going to take A LOT of work, sacrifice and discipline. Expect a fight or two. But she needs to learn how to manage her finances on her own so she doesn't repeat the same behavior. She needs to change her entire way of thinking. Good luck to you both.

[propertymanager]

It would be easier to find a new girlfriend than to live a life of debt.  If you think that's she'll change, I've got a bridge for sale!

Mike

[fdjake]

I agree with Mike.......Get yourself a new girl friend.

I've seen this EXACT scenerio DESTROY a very good friend of mine.

He MARRIED his girl friend and THOUGHT he had changed her...

He didn't...

NOW he's divorced......HIS credit is destroyed and more importantly...

HE LOST 10 YEARS that could have been spent with a woman that ALREADY understood you can't SPEND MORE THAN YOU MAKE!!!

Why would you even bother wasting the time it will take to straighten her out?

Find yourself a new girl with a HEAD on her shoulders and $50K in the bank.

You'll BOTH be millionaires in 10 years....INSTEAD of divorced.

Sorry........You asked for it.

[phlemboy]

  . That's pretty funny Mike! But if she's willing to change, maybe it's worthh a shot. I would add that this should be BEFORE he buys a ring. If he says he won't marry unless she changes her ways, that should motivate her to get 2 or 3 jobs to pay them off!!

[Milwaukee]

Strangely enough the scene you guys paint for the future is exactly what happened to her in the past.

She was once married with a great career and a terrible husband. He took out $30 k in casino debt that she ultimately had to pay back half of. After the divorce she was broke with mounds of debt she didn't earn and she subconciously decided to ignore money problems which only sunk her deeper naturally. She doesn't really add to the problem as she lives pretty cheap. However, by not paying it off it keeps creeping higher and she keeps making the minimums.

I hear you all on the "leopard can't change her spots" but I don't think she is a terminal financial wreck either. If 5 years from now it is behind us an she is on the same earning track as me, then we will see about the future. If she is still abusing her own worth, I would be a fool to sign that financial partnership known as "marriage".

[fdjake]

And in 5 years......You'll realize...

Hey.....I can't BUY those 5 years back!!!  They're GONE. 

When you're in your 20's to early 30's 5 years seems like nothing.
When you hit 40+ and start looking at HOW LONG it takes to pay off mortgages on investment properties.....That's when it HITS you...
"I gave up 5 years of PRIME TIME.....for a woman that couldn't handle her money, and CHOSE to live in fantasy land."

The real problem with that is you just TRADED 5 years in your 30's for 5 years in your 50's...

That's NOT an even trade.....THAT is a very COSTLY decision.

[Milwaukee]

Mike, about that bridge

[Bluemoon06]

If you try to change her, it won’t work.  There are 2 sides to finances.  There is spending and earning.  Everybody always focuses on the spending side.  The budget and budget and they still end up in debt.  It is like dieting to lose weight.  You have food intake and exercise.  I had that same problem until I looked at the fact that it doesn’t matter how much money you spend you want certain stuff.  Your stuff level is like a thermostat.  You will spend until your stuff thermostat has reached its set point.  You can’t change that setpoint for long.  If you prevent her from having her stuff when will eventually bust out and spend or she will be so miserable that she will leave you.  It is like if to save money you only eat macaroni and cheese.  That will be fine for a while but eventually you are going to say to heck with this I need a steak.  If you only diet to lose weight eventually you are going to want something other than salad.  What you have to do is get your stuff at the price that you can afford.  If she likes Starbucks coffee, try McDonald’s coffee.  If she likes fine European road cars, instead of buying a BMW, try a Saab instead of buying clothes at Neiman Marcus go to TJMaxx.  When you go out instead of eating at the fine steak place find a local small restaurant that serves great food at friendly prices.

Then work on the earning side.  Money is like a ball game.  Spending and budgeting is like defense, earning is like offence.  If you play perfect defense but no offense what is the best you can do?  Right a tie 0-0.  You have to play offense to win.  Loyola Marymount University has the single season record for most points scored per game.  They averaged 130 points per game.  They played virtually no defense, all they did was score.  They won over 20 games that season and most of the teams they played and beat scored the most points in their school’s history that game.  That means that you can outscore your lack of defense.  What I mean is in personnel finance is that you can out earn your spending habits.  Make more money and afford your lifestyle. 

I believe it is like losing weight.  You have to diet and exercise.  When I was on the track team in college, I ran about 10 miles a day on average.  I ate like a horse.  I ate 2 steaks a whole plate of potatoes at a sitting.  I had whole loafs of bread in my room that I would make sandwiches with all night while I studied.  I still weighed 145 pounds.  How did I do that?  Because I ran so much.  I equate running with earning and eating with …well consuming.  If you earn enough you can afford to consume a lot. 

[hsavage5]

You can try this - it worked for me.

Go to a credit union and get a 2 year loan to pay off all but one of the credit cards. The credit union sends the check to the credit companies. Then destroy the cards being paid off, or it will recur again. It will not be easy, but if you/she stick to it, it will work.

Good luck.

[furnishedowner]

Make your future together financially contingent upon you BOTH attending the Dave Ramsey course.  It's about 6 lessons long and held all over the country.  There's some gratuitous preaching thrown in, but the workbooks have helped hundreds of people get out of debt, and more importantly GET ON THE SAME PAGE!.

Good luck to you.
Furnishedowner

[Bluemoon06]

GET ON THE SAME PAGE!.

Good luck to you.
Furnishedowner

That is the key!!

[BLL]

There are two types of people you will meet in this world: anchors and sails. Sails help you get where you want to go. Anchors slow you down. If you two can get on the same page and move in the same direction, you will do more together than each other could do separately. If not, it's time for a new GF.

[moellerryan]

40K in debt is nothing, I live in CA and know many who purchased 400-500K homes that are now worth half.  They are upside down 200-250K and are there bleeding cash flow is probably racking up other debt.

Here is my advice:

Let her credit go, it is temporary and can be rebuilt.

Minimize expenses, you do not need nice things if you are surrounded by great people and positive things.  Focus on what you need, not what you want.

Stop paying on credit cards and the car.  You will have to pay student loans.

Purchase a car for 2-3K cash that will last 3+ years.  It's a numbers game, find one on craigslist.

Do not do debt consolidation cause that will consolidate 100% of your debt into 1 payment.  Do debt management, they will negotiate half of the debt into 1 payment.

You will be able to repair her credit in 2-3 years, she will own her car and only have the student loans.

[Milwaukee]

40K in debt is nothing, I live in CA and know many who purchased 400-500K homes that are now worth half.  They are upside down 200-250K and are there bleeding cash flow is probably racking up other debt.

Here is my advice:

Let her credit go, it is temporary and can be rebuilt.

Minimize expenses, you do not need nice things if you are surrounded by great people and positive things.  Focus on what you need, not what you want.

Stop paying on credit cards and the car.  You will have to pay student loans.

Purchase a car for 2-3K cash that will last 3+ years.  It's a numbers game, find one on craigslist.

Do not do debt consolidation cause that will consolidate 100% of your debt into 1 payment.  Do debt management, they will negotiate half of the debt into 1 payment.

You will be able to repair her credit in 2-3 years, she will own her car and only have the student loans.

I can't say I understand why she should stop paying on car and Credit cards but pay the student loan.  One is ridiculous interest (CC) and the other is not (SL).  The car is a non issue if I buy it from her for cash.  She has a paid for company car she just got.  I agree with the Craigslist car purchase and have already done that several times.  Remember, I am the avid saver, defensive money making responsible one.  We both live well below our means. COmbined salary of $90k but we live in a $700 PER month apartment.  No phone bills, no car payments (soon) and I have decent cash in the bank but she has double that in debt while I have zero debt.  I doubt it is insurmountable.  She isn't a designer label queen and does almost all of her shopping at Goodwill and TJMaxx.

I was really looking for the ideas given about HOW to pay it off not HOW to throw in the towel on almost a 2 year relationship.  I do however, appreciate the honest replies.  It has given me a new sense of what I should and should not put up with.  If this can't be fixed and our goals don't align, I may be forced to make a choice on my future; can the anchor set sail?

Thank you for all the replies so far guys.  Furnished, I have been VERY interested in what you have been writing about (other topics)