Swimming From the Depths of Debt

Dr. SoS and I have the unique opportunity to impart our knowledge in the wise handling of money to our oldest daughter, let’s call her Ms. H. She is a 22-year-old woman currently living with her boyfriend, Mr. T., and her younger sister, whom we shall dub Ms. O. Previously, Ms. H had a fairly well-paying waitress job at a Karaoke club, but left it sometime last year due to drama. She is now a barista at a local coffee shop and is a part-time weekend hostess at a craft cocktail bar and restaurant.

In April 2016, we loaned $6,000 to Ms. H to purchase a vehicle when her previous vehicle died. We determined that she should pay at least $260 per month to pay the car off in 24 months. She made monthly payments for 12 months, but after quitting her more lucrative job, the payments stopped. Since that time, we loaned money for car repairs and other expenses, which she promised to pay back.

After months of not paying and much grumbling from me, Dr. SoS finally approached her and told her she needed to begin paying again. Ms. H broke into tears and explained how she was drowning in debt and did not know what to do. We had a choice. We could let her try to adult it out, which has not worked thus far, and continue to have our loan go unpaid or sit her down, figure out what’s what, and create a plan that would get her debt paid, and instill better habits of saving instead of spending.

Last weekend, I sat Ms. H down with a pad of paper and a pencil. I told her we first needed to know where she stands financially so we can create a plan. I like to look at personal finances like a business. First, I asked for her net (after tax) income and monthly expenses. Let’s take a look.

Income Statement
Ms. H (Barista) $1200
Ms. H (Hostess) $240
Mr. T (Unemployed) $0
Ms. O (Rent Payment) $275
Total Income $1715
Fixed Expenses
Rent $925
Electricity $140
Mobile Phone $118
Auto Insurance $84
Internet $50
Prescription $48
Variable Expenses
Gas $100
Gasoline $75
Groceries $400
Total Expenses $1940
Net Loss ($225)

It does not take a financial wizard to see that the reason she cannot make ends meet and is underwater in debt is because her expenses exceed her income by no less than $225 every month. Ms. O just moved in and has only paid for the first month in rent, so in prior months she was $500 behind every month. We also found that Mr. T has been unemployed for nearly four months.

I put it to her like this. These expenses are pretty stable. She is locked into a lease until June. Either she finds a better job, Mr. T finds a job, or she kicks him out since he’s not helping with the expenses. If she kicks him out, she would save money because the prescription is his, and her grocery bill would be at least half. She could also disconnect her internet, and cut back on her gas bill by wearing warmer clothing in the home. The prescription is $48, half the groceries $200, at least $12 savings in gas, and now she’s $35 in the positive instead of $225 in the negative!

When I told her, in front of Mr. T, that her best bet would be to kick him out she began to cry. Life is tough and sometimes you have to make hard choices, but when stuck between going further in debt to support a non-working freeloader and working your ass off, getting out of debt, and saving money, there is a pretty obvious choice. The choice is the third option, which is to make him get a job.

He should be able to make at least $10 per hour. Provided he can get 30 hours per week and works 50 weeks out of the year that means he should be able to add $10 x 30 x 50 / 12 = $1250 before taxes. At that income, he would be in the 12% tax bracket so $1250 x (1.00 – 0.12) or $1250 x 0.88 = $1,100 per month. This would significantly help her situation and set her on the path to financial freedom.

How far away from financial freedom is Ms. H. The depth of her debt is pretty stormy. Let’s take a look.

Creditor Amount
Back Rent $2,925.00
Car Loan $5,773.46
Mr. SoS Loan $500.00
Credit Union Credit Card $649.24
Capital One Credit Card $2,062.80
Old Navy $804.17
Victoria’s Secret $1,172.00
Total Debt $13,886.67

In the grand scheme of life, the universe, and thanks for all the fish, this is a fully manageable amount. I put $500 in her checking account so she would make it through the week. What I really do not understand is how much underwear can one woman own? I understand women’s underwear is expensive, but Dr. SoS and I began dating in 2011 and in all that time she has perhaps spent $200 on bras and panties. I spent more than that on the swimsuits I bought for her from Victoria’s Secret for our honeymoon! The past is the past, let us now focus on the future.

What’s the plan Mr. SoS? There is one more thing I should mention before we get to the plan. Since our conversation last weekend, Ms. H scored a new job at Starbucks managing a new store. This has been in the works for a while. Mr. T is still looking for a job, but we will be bugging her until he gets one and keeps one as this is part of the plan. How much does Ms. H earn at the new gig? She makes $15 per hour working 40 to 45 hours per week. It is not salary, but this is a good deal more than her current $11 per hour job. Her monthly primary source of income goes from $1,200 to $2,288 per month. Now we can make a PLAN!

The first thing Ms. H needs is an emergency fund. She has a High Interest Savings account with her Credit Union that pays an amazing 4% per month on the first $1,500 in the account. Yes, you read that correctly. Once she keeps $1,500 in that account she will earn about $5 per month in interest. How do we go about filling it? The first thing is that all her tips from both jobs, all the money from her second job, and 10% of her primary income will go into the emergency fund every paycheck. She is also going to pick up some dog sitting jobs as a side hustle and put any of that money into the emergency fund. Now that Ms. H can support herself she is also going to put Mr. T’s entire future paychecks into the emergency fund. This should grow substantially within a short amount of time.

Emergency Fund
Ms. H (Manager) 10% $228.80
Ms. H (Hostess) $240.00
Tips $0.00
Dog Sitting $0.00
Mr. T $0.00
Emergency Fund Total $468.80

Since the tips, dog sitting, and Mr. T’s future income are unknowns, we cannot reasonably include them, but even some minimal income increases sets Ms. H up with about $500 per month toward her emergency fund. The second thing is to figure out how she can swim against the tide of her debt and how long it will take.

Ms. H (Manager) 90% $2,059.20
Ms. O (Rent) $275.00
Income Total $2,334.20
Expenses ($1,940.00)
Debt Repayment $394.20

At this current rate, keeping everything where it is, it will take Ms. H no less than 36 months to pay off her debt completely. She already cut up all her credit cards and swore she will no longer use them, so she cannot slip any deeper. After going over all this with her, I told her that by careful budgeting, scoring a better paying job, and keeping Mr. T employed, there is not any reason why she could not have a nice Emergency Fund, begin investing for retirement, and pay off her entire debt within 12 months.

It behooves her to pay her debt sooner rather than later, because until her debt is paid completely, she gets to meet with us bi-weekly to go over her income, budget, and the status of her affairs. Along the way, we plan to share her progress with you. Hopefully, if you or someone you know is in this situation, this will show you how someone else drowning in debt is able to work hard, swim to the surface, and make it to shore safely, wealthy, and wise!

Keep Saving and Swimming!

Mr. SoS


  1. she’s lucky to have a safety net of family to serve up a cup of tough love. mr. t need to get to work. hell, i’m a scientist but cleaned toilets in the early 90’s when times were hard. that’s a good motivator to get it together so you don’t need to do it ever again.

    1. Thanks for your comments, Freddy. That’s the thing I do not understand. After my divorce in the late 90’s I found myself about $10,000 in debt. In order to get out of debt, I worked 7 days per week sometimes 12 hours or more per day, and had up to 7 jobs simultaneously. One of these jobs included mopping floors and cleaning toilets, but it is what I did to get ahead. This is the reason why I cannot for the life of me understand anyone that cannot get a job within a couple weeks. If you are motivated and can get over yourself, you can find work pretty much anywhere.

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