Young dad, $15,000 in credit card debt

@Money July 19, 2012: 1:02 PM ET
financial advice credit card debt

Carlos Rodriguez, 33, Austin. He's a health care project administrator.

(Money magazine) -- Like many thirtysomethings, Carlos Rodriguez is repairing financial damage from his twenties.

The health care project administrator has $15,000 on credit cards, partly from financing a master's degree, but also from "reckless spending," he admits.

When real estate was hot, he bought a seller-financed house in Austin to use as a rental property, inheriting a property lien that's now $3,600.

And he has grownup obligations: He has an 8-year-old son from a previous relationship and pays $720 a month in child support.

The good news is that Rodriguez recently received a promotion that pushed his salary from $59,000 to $67,000. In addition, he earns $6,500 annually working as a division petty officer in the Navy Reserve. Eventually he'd like to become a chief strategy officer in his field.

He also wants to save more for retirement and his son's college. But he knows the credit card debt is holding him back.

THE PROBLEM

One word: debt. Besides the credit cards and property lien, Rodriguez has an $8,100 auto loan, a $73,000 mortgage on his rental property at a 7% interest rate, and a $139,000 mortgage at 6% on a multifamily home (he lives in half of it and rents the other side).

Plus, he has only $1,000 saved for emergencies.

RODRIGUEZ'S FINANCES

Income: $73,500

Assets: $36,000 in retirement accounts, $1,000 in cash

Goals: Pay off debt; move up in his career

THE ADVICE

Refinance. Rodriguez enjoys being a landlord. His rental income covers three-quarters of the monthly payments on his home loans -- including the one he lives in.

After speaking with local mortgage brokers, Austin financial planner Eric Hehman says Rodriguez could drop the rates on his loans to 4.5% and 4%. By then applying the $370-a-month savings to the high-rate debt, he could wipe it out in just over two years.

Save more. Post-raise, Rodriguez should hike his 403(b) contribution from 3% to 10% of pay. He can also put $150 a month into his emergency fund and $150 into a 529 college savings plan for his son; once his debt is retired in two years, he can boost that emergency savings even more.

Focus on career goals. Rodriguez should reach out to higher-ups in his current organization and broaden his contacts outside his immediate network to include, say, advisory firms that help support chief strategy officers, says Kate Wendleton, president of the Five O'Clock Club, a national career-coaching group.

Says Wendleton: "He might even get hired by one of them."

LESS DEBT, MORE SAVINGS

A refi -- and a raise -- will give Rodriguez the means to wipe out his high-rate debt in 25 months.

Currently, he pays $776 a month in high-interest debt and puts no money away for his son's college.

Monthly contributions post-raise and refinance:

  • High-interest debt payments: $1,146
  • Cash savings: $150
  • Son's 529 plan: $150

Contributions in two years:

  • High-interest debt payments: $0
  • Cash savings: $1,296
  • Son's 529 plan: $150

More Financial Fixes

3 tuition bills, with just $35,000 saved

6 years to retirement, tons of expenses

$400,000 portfolio, too many holdings To top of page

Help! We need a makeover
Young dad, $15,000 in credit card debt
Readers' Choice

Carlos Rodriguez is trying to rid himself of $15,000 in credit card debt, while paying his mortgage and saving for his son's college education.

$400,000 portfolio, too many holdings
Readers' Choice

Susan Carson and Laura DeLallo make $225,000 and have half a million in retirement savings, but their sprawling portfolios is proving hard to manage.

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
  • -->

    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.