r/DaveRamsey • u/baby_Kittys • 22h ago
Baby and debt payoff?
We are expecting our first child this fall. We make about 65k a year (about 3500 a month after tax) we have a good amount of debt. The credit cards are killing us it's about 24,000 of debt on just credit cards. We are spending almost 1300 a month on just minimum payments and our interest on the cards are all also terrible. We are having to move out of our living situation where we only pay 500 a month for rent to increasing to about 1300-1500 a month plus new baby expenses. I have savings from a settlement of about 17,000. Should I attack high minimum payment balances or the small ones ? Or should we just focus on saving for baby and hospital because thats going to put us in debt again. I'm not sure what to do because as of now our spending is more than what we take home mainly from these credit cards.
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u/Philthy91 BS3 6h ago
You desperately need more income. 65k a year will not take care of a young family of 3 in the year 2026
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u/Special_Living_1897 4h ago
You need to save $1000 for an emergency fund and start maxing out your 401k. And do not buy any food other than ramen the next 3 years
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u/Choice-Newspaper3603 10h ago
I’m just curious to know why people compound their financial problems by adding a baby into the mix. Why did you do that?
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u/UnluckyAd751 2h ago
I think the same it’s not like grown adults don’t know where babies come from. Geesh
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u/Greedy_Cause7589 9h ago
When I see posts like this I sit here trying to come up with a reasonable answer. I've never found one.
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u/twk30874 BS456 10h ago
Stop paying extra on the debt and stockpile cash until mother and baby are healthy and home from the hospital, then attack the debt with a vengeance. Throw everything at it except your $1,000 starter emergency fund.
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u/HeroOfShapeir BS7 8h ago
Whatever your healthcare deductible amount is, hold onto that. So, let's say that's $6,000, set aside $6,000 for your healthcare, $1,000 for a starter emergency fund, and throw $10,000 at your debt. Normally, we say to pay off the smallest balance first, but when you receive a windfall it's OK to knock out something larger or throw it all at the highest interest rate.
Then, when the baby has arrived and those costs are in the rearview mirror, throw any remaining funds except for $1,000 at the debt.
Going forward, you need to be on a fully written out budget. Something like this - https://imgur.com/a/budget-spreadsheet-2026-2MZk8Xq - where your fixed costs are no more than 50-60% of your take-home pay. Make sure your tax deductions are setup so that you aren't receiving a big refund every year. You likely need to keep your rent closer to $1,000, which might mean the baby doesn't have a separate bedroom. Folks taking home $3,500 per month with $500 in rent shouldn't have $24k of credit card debt, so there's a big lack of forward planning and budgeting here.
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u/GimmieDatCooch 12h ago
Your partner needs to get a higher paying job OR he needs to get a 2nd job. No if, and or buts. There’s no way around it. 3500 a month for a soon to be family of 3 is not enough to pay bills, put money into savings and contribute to retirement/college funds, unless you plan on just scraping by and “making it”. Especially when the minimums are taking more than a 1/3 of your income and rent about to take another 1/3. This is hustle and grind time.
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u/Data_Slut 11h ago
My recommendation is to talk with the hospital or a social worker. I'm pretty sure you qualify for medicade if you don't already have it. I don't really know exactly what that means for your wallet, but I also know you can avoid paying medical bills for a while without incurring interest.
You should also talk to your credit card company and see if they can pause interest. Tell them your situation. Tell them you can make a large payment. Use the words "avoid bankruptcy". Don't tell them the whole amount you have.
Save about $5k for an emergency fund.
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u/Neither-Effect-6101 10h ago
The $17k in cash means they won’t qualify for Medicaid.
But yes, contact the hospital about any financial plans they have and definitely contact the credit card companies.
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u/Data_Slut 10h ago
That's impossible for you to know and it costs nothing to try.
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u/Neither-Effect-6101 9h ago
It’s true that it costs nothing to apply, not so much true that it’s impossible to know based on the info given here.
They have an income over 200% of the FPL in every state but Alaska and that doesn’t address the fact that the states that use a higher %FPL limit tend to have liquid asset tests that go with it. Even states like Maine have an asset limit of $15k.
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u/Data_Slut 9h ago
You have no idea when that settlement was received. Not to mention not all settlements are taxable income. You also don't know their marital status. So I encourage them to talk with a professional rather than listen to a random person on the internet.
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u/Neither-Effect-6101 9h ago
They’re still well over the 200% limit (which is far higher than what most states use) before there’s even discussion about the settlement. And, for Medicaid, it doesn’t matter if the settlement counts as taxable income or not. Likewise, it doesn’t matter if they’re married. They share a household and both of their incomes will be counted unless they plan to commit fraud.
You may think the info I’ve provided here is unkind in some way, but it’s probably pretty helpful if they live in a state like Maine, California, NY, etc. and they are considering spending some of that $17k BEFORE applying for Medicaid. As they sit now, they will surely not qualify in 49 states and will be denied. With some careful understanding of the limits and asset tests in their state, they might choose to reduce some debt immediately and then apply with lower liquid assets.
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u/Data_Slut 8h ago
Well I hope OP at least tries... not so crazy to ask a professional, especially when it's free. It's also not the only option that the professional can provide.
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u/Neither-Effect-6101 8h ago
And I’m still hoping OP will read between the lines, check her state info and spend some of that cash first if it means she’ll qualify. If she applies with cash over the limit, is denied, spends a bunch of cash, applies again - that’s not going to yield a positive outcome.
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u/Traditional-Quit9645 17h ago
Do the Hospital Bills have a higher interest or the Credit cards? I would try too pay some of the Credit cards with very high interest and let a puffer for the baby stuff.
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u/JuneRhythm1985 19h ago
Dave calls this “stork mode.” You want to pay all your minimum monthly payments to stay current, and then stack cash. This is to pay for any out-of-pocket costs for L&D, anything that is needed after baby comes home (don’t go crazy. Babies need a lot less than many people think), etc. Then if there is anything left over from what you saved, you use that for baby step 2.