One Couple's Brutal, Infuriating Story of Debt in America

[Demovictory9]

NEWSER) – Tom and Kate live in quite the neighborhood in a northeastern suburb, surrounded by people "who have seven cars and fly off to Italy for three weeks." They don't. They're broke, or, more accurately, so deeply in debt it's staggering. In a lengthy interview for Wealthsimple, the couple were granted anonymity in exchange for laying bare "the brutal details of their life in the grip of an epic cycle of debt." The two, 48 and 46, respectively, have three kids, work in insurance, make upwards of $160,000 combined, and "have an insurmountable amount of debt." That's no understatement: They owe $18,000 for a loan, $60,000 on their credit cards, $360,000 on a home worth that same amount, and somewhere north of $120,000 on loans for Kate's unused law-school degree.

"We’re always broke. We shop at Goodwill. We have a garden so that we can have fresh vegetables instead of going out," says Kate. That may sound prudent, but the two then proceed to detail a series of bad decisions. In the next breath, Kate describes spending a "crazy amount" on organic food, and not "reeling in" their kids from doing things like buying $15 of sushi from Whole Foods. Short on cash, they bought their son a tux for prom, because it could go on a Nordstrom card. They send their kids to a $32,000-a-year private school (they pay only a fraction of that, but took out loans to do so). They cashed out a $70,000 401(k) without anticipating the tax penalties of about $20,000, some of which went on, yep, a credit card. Five years ago, they borrowed $40,000 from Kate's parents and paid off all their credit card debt—then built it right back up. Read the full piece, which ends with Tom explaining why they'd be "better off dead." (Read more Longform stories.)

http://www.newser.com/story/267577/one-couples-brutal-infuriating-story-of-debt-in-america.html?utm_source=part&utm_medium=uol&utm_campaign=rss_top
Kate: I’m Kate. I’m 46. I have a law degree. I don’t practice law though. When I got pregnant with our first, I took the highest-paying job I could find that still allowed me to stay home and be close to my kids when they were growing up. So I work for an insurance company, paying claims. I make about $70,000 a year. We live in the suburbs of a city in the northeast of the U.S. We have three kids: ages 11, 14, and 18.

Tom: My name is Tom. I have a graduate degree in advertising. I’m 48 and I’m an insurance claims manager. I earn about $90,000 a year doing that, but I also work a second job as a bartender a couple times a week catering in private homes. I make between $100 and $250 a night doing that.

Kate: We have an insurmountable amount of debt. I’m not even exactly sure how much it is anymore. We have $60,000 in credit cards, $18,000 in a loan, and then there’s our mortgage and the second mortgage we took out, which is about $360,000 all together. And that’s not even counting our student loans. How much are those, Tom? Are you at home? Can you look it up?

Tom: Yeah, I’m at home, but I have no idea how to even look it up. The only time I go on the site is to ask them to push back when we have to start paying it. I know that’s irresponsible and horrible, but that’s really, truly what I do. I think it started at about $90,000.

Kate: Now, with interest, the law school debt is at a hundred and something. It’s either around $120,000 or $140,000, somewhere in there. We’ve almost never paid my law school loans — every year we ask them to put us in a financial hardship status so we don’t have to pay. But the interest keeps building.

Tom: I think education loans probably started us on this path. But credit cards got us in trouble.

Kate: It all dates back 20 years. Tom and I were living together in Boston, where I was in college and he was in grad school. We started to get into a little bit of credit card debt at that point. We got married in 1997. Initially we put my loans in forbearance thinking that we would buy a house and then earn more money. But we just keep putting off the loan. I actually read something about how Betsy DeVos has been saying that she wants to collect all the student debt that is in forbearance, and I said to Tom, well, here we go.

Tom: We bought our first house in 1997 for $195,000. It was fine, but then we tried to go big on the house we live in now. We bought a house that we probably couldn’t afford.

https://www.wealthsimple.com/en-us/magazine/money-diary-couple-debt-us

with that salary, they could get out of debt with a major focus on it. in Southern Calif, 360K mortgage aint bad

[ret5hd]

1. Man, not a lot of sympathy from me.

[Demovictory9]

2. They need Dave Ramsey. He's tear into them... then show them the way out. Bottom line.large income

[BSdetect]

3. If you can't pay off all you CC spending in the time / month that it's due do not use it.

[exboyfil]

4. The $120K in student loans is a killer

Not dischargeable in bankruptcy.

That should be the first debt paid and not the last. You should walk to work, take a bus, or own a clunker until you get a handle on it. You should the absolutely cheapest place to rent that still is safe enough.

[TheFarseer]

8. I wonder what the monthly payment on that is?

Not that it matters since they said they don’t make payments. My wife’s small student loan is an annoying $250/month but not anything close to that monster I’m sure.

[violetpastille]

5. I do have sympathy for them.

Tom: I think education loans probably started us on this path. But credit cards got us in trouble.

I never messed with consumer debt, but I think most of us can relate to crushing student debt. Gen Xers and Millenials can definitely put their hands up.

[JustAnotherGen]

6. Not a lot of sympathy

I expected to read medical bills and one list their job . . . I expected to read debilitating illness, lawsuit, something awful but this -

Five years ago, they borrowed $40,000 from Kate's parents and paid off all their credit card debt—then built it right back up.

There's no reason for them to still be in this situation. Pull your kids out of private school, move into a condo or apartment (sell the house) and learn the art of "no".

[DeminPennswoods]

7. Yep

nt

[wasupaloopa]

9. I have empathy for them. Basically they lived a lifestyle they could not

afford and put on credit what they could not buy with cash.

Lot’s of people do that. I did.

I retired with a pension and social security. My wife who is 17 yrs younger than me still works.

I went back to work because I was bored, very healthy for my age

Together we earn $180,000 a year and are using a large chunk of it paying off debt.

It will take a year or two but I have learned a lesson that took 72 yrs to learn.

Live within your means and don’t use credit for what you can’t afford. The payments take all you money.

[NewJeffCT]

10. They're in the suburbs of a city in the Northeast

If they mean New England, that is basically Boston, Worcester, Springfield in Mass, Providence in Rhode Island, and Hartford, New Haven, Bridgeport and Stamford in Connecticut. Each of those cities has suburbs with excellent public schools - pull your 3 kids out of the $32,000/year private school and put them in public school. Even if 90% of the tuition is covered by financial aid, that is still nearly $10,000/year for the three kids.

Spend a few years not buying organic food and sushi to save money as well - or, find a place to buy it cheaper.

And, stop using your damn credit cards.

[MissB]

11. So many ways out of that debt. So.many.ways

Three first major steps: 1. stop spending money 2. Downsize the house and 3. Put the kids in public school.

Their oldest is 18. Colleges look at income, not debt. Any guesses how they plan on paying for kid #1’s college costs?

Their debt isn’t insurmountable.

[blueinredohio]

12. Living beyond your means. Most people would kill for an income like that.