- 4 years ago
- Wedding: September 2015
Good morning, bees! I would really appreciate your advice and insight with my finances. This is long, so buckle in!
Background: FI and I are in our late 20s. I bring home ~$20,500/year after taxes, and FI makes slightly less. We both have substantial credit card debt; I have ~$9,000 and he has closer to ~$10,000 if not more. I have ~$19,000 in student loan debt. The monthly payment for one loan (the biggest one) is $190, and the payment for the other is $120. FI is still in school and will be until late summer of next year; he’s been in school off and on for 10 years, so when he graduates he will have substantial student loan debt (~$45,000? I really don’t know – thinking about his future monthly payment scares me). Our wedding is at the end of September 2015, and we’ve set a budget of $10,000. I don’t anticipate getting any help from family, so it’s all on us. We haven’t saved/spent anything on the wedding yet. My parents have sold a parcel of land and will send me an ~$18,000 check in March of next year, ostensibly to pay off my student loans. I am of the opinion that once I have that check, I can use it for whatever I want, and I want to make sure I use it in the best way possible! So, of the following scenarios, which do you think is the smartest move?
I use the check to completely pay off my student loans. Once the student loans are out of the picture, I will be able to focus completely on paying down my credit card debt. If I don’t change my contributions to the joint account (currently $460/paycheck – I get paid ~$800 every two weeks), I’ll be able to get my credit card debt completely paid off by the end of 2014 (I also plan on putting my entire 2013 tax refund of ~$2,000 toward my credit cards). Downside: there will be no “extra money” to put toward the wedding until the start of 2015 (which means that most of the wedding expenses will end up on a credit card, creating more debt), and FI will get no assistance with his own debt until my debt and the wedding are out of the picture (i.e., his credit card payments and student loan payments will overlap, and I just don’t think he can handle that).
FI and I split the check and completely pay off all of our credit card debt. If there’s any money left over after doing this (unlikely), it will go toward my student loan debt. This will leave me with a $310/month student loan payment for the next 6 years, but I’ll have several hundred dollars “extra” per month to put toward the wedding (assuming my monthly contribution to the joint account does not change). FI will also have additional money to put toward the wedding (at least until his student loan payments start at the end of 2014). Under this scenario, I think it would make sense for us to have our paychecks deposited into the joint account instead of our individual accounts like we do currently. Set “fun money” allowances will be transferred to individual accounts each payday. Student loan payments will be paid out of the joint account. A separate checking account will be established for wedding expenses. We may not be able to come up with the entire $10,000 wedding budget in cash between March 2014 and September 2015 (this would require coming up with ~$600/month). Therefore, we’ll need to put some expenses on a credit card, creating new debt. However, we can apply for a joint credit card for the wedding with no interest for however many months to avoid accumulating interest charges, and all cash gifts from the wedding will go toward paying off the wedding debt.
I use the check to pay off all of my credit card debt as well as my student loan with the highest balance and monthly payment. This would leave me with a $120/month student loan payment for the next 6 years, and the remainder of my income would go into the joint and wedding accounts. Since this scenario would mean that FI gets no immediate assistance with his own debt, it would make the most sense for me to shoulder the lion’s share of the joint/wedding expenses, leaving FI with more money to put toward his credit card debt. I’m honestly not sure how FI is approaching his credit card payments currently. I give myself a strict $50/paycheck for “fun money” but he doesn’t do the same. If we go with this scenario, we’ll need to have a come-to-Jesus talk about his finances, which I do not think would go poorly. It would just be eye-opening for both of us. Under this scenario, FI should be able to pay off a solid chunk of his credit card debt before his student loan payments start. After his credit cards are paid off, we’ll probably move to the checking account scenario described at the end of Scenario 2.
We set aside $10,000 from the check, which will cover the entirety of the wedding budget. I’ll use the remainder to pay off my credit cards. This leaves me with a $310/month student loan payment for 6 years and several hundred dollars per month to put toward an increased contribution to the joint account. Downside: FI gets no assistance with his own debt aside from a decrease in his contribution to the joint account. We’ll need to have the same talk as described in Scenario 3. He will most likely not be able to pay off his credit card debt before his student loan payments start, so I imagine I’ll be left shouldering the majority of our joint expenses until his credit card debt is gone.
I think Scenario 2 makes the most sense, followed by 4, then 3, then 1. What do you think? By all means, offer critiques and alternatives! I’m happy to provide additional info if anybody needs it.