‘Just got married realizing I’m not a stupid kid anymore’: I make $69k but live paycheck to paycheck with various debts. How can I get my finances on track?

Hi Money Minder,

Response from THE MONEY MINDER:

Sure! Here it is:

Hello There,

Congratulations on your recent marriage! It sounds like you’ve reached an important turning point in your life, and it’s commendable that you’re taking proactive steps to improve your financial situation. Managing finances can be daunting, but with a clear strategy and determination, you can certainly set yourself up for a more secure future.

First and foremost, consider creating a comprehensive budget that outlines your monthly income, fixed expenses (like rent and car payments), and variable expenses (such as groceries and entertainment). Identifying where your money goes every month is crucial for making informed decisions about where you can cut costs. Since you are living paycheck to paycheck, scrutinize your spending habits and look for areas to minimize or eliminate expenses. Simple changes, such as dining out less frequently or reducing subscription services, can make a significant difference.

Next, tackling your credit card and tax debt should be a priority. High-interest debt, like credit card debt, can quickly spiral out of control if not managed. Devote any extra funds you can muster towards paying down this debt aggressively. The snowball method—paying off the smallest debt first while making minimum payments on larger debts—can provide quick wins and build momentum. Alternatively, the avalanche method, which focuses on paying off the highest interest rate debt first, can save you more in interest over time.

Regarding your tax debt, continue working on your repayment plan with the IRS. Stay current on your payments, communicate openly with them about your situation, and explore any potential hardship programs that might offer relief or more manageable payment options.

It’s great that you have some investments and have started a Roth IRA. Continue contributing to your Roth IRA as much as you can, even if it’s a small amount each month. The advantages of tax-free growth and compounding interest will benefit you greatly in the long run. As your financial situation stabilizes, aim to increase these contributions.

Considering your modest savings, establishing an emergency fund is crucial. Aim to save at least three to six months’ worth of expenses to provide a financial cushion against unexpected events. Start small, perhaps setting aside any additional income, bonuses, or tax refunds until you build a comfortable safety net.

Seeking professional financial planning and budgeting advice is an excellent idea. A certified financial planner can provide personalized insights and strategies tailored to your specific circumstances. They can also help you develop a long-term financial plan that aligns with your goals, such as homeownership or retirement.

By making these incremental changes and seeking professional guidance, you can gradually build a stronger financial foundation for you and your spouse. Stay focused, be patient, and remember that financial stability is a journey that requires consistent effort and vigilance.

Best of luck on this journey towards financial well-being.

Warm regards,

THE MONEY MINDER