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I need help---my husband and I have accumulated $11k in credit card debt on top of about $8k in student loans I am paying $250.00/month on and will be until June 2004. We recently had a beautiful baby girl and I am only working part-time to cut out any daycare costs. We own a home and just refinanced at 7.125% for 30 years. We also are at the end of a lease on our vehicle and need to buy a new vehicle and need 4wd because of the location of our house. I feel totally overwhelmed - we are able to meet all of our monthly bills, but I'm starting to feel like the cc debt will never be gone. Should we take out a personal loan or consolidate all of our debt. We both contribute to 401(k) and/or deferred comp. plans - should we stop those contributions - I am 27 and my husband is 30??

We really want to start a College Fund for our Daughter who is 7 months old - but realistically we know we need to get out of debt first!!

Taking these in order:
I'm assuming the $250/month until June 2004 is just the student loan payment. You're probably paying about the same monthly on your credit cards.

OK, here are my suggestions:
(1) Put the credit cards away. Get a plastic bowl, fill with water, put cards in, and stick it in the freezer. If you are worried about emergencies, take a card with no balance out with you (leave the others in the freezer) and put it in your shoe. This will do two things. First, it will make you assess if it's truly an emergency. Second, it will likely remind you with each step how much of a pain credit cards can be. :-)

(2) Get some money into a savings account, maybe $500-$1000. This is a small emergency fund. If something that's a true emergency (medical trauma, loss of transportation) occurs, this is where you go first. If the car breaks down, use this to get it fixed, not as a down payment on a new car. Scrounge any penny you can; empty your change into a jar each day, take your lunch to work, park in a cheaper lot or use public transportation, anything to free up money.

(3) If you haven't already, set up a budget. I wrote up a description of how I do it (, but use something that enforces spending discipline best for you. You need to make sure that you include your minimum debt payments and extra money (as much as you can) for debt reduction.

(4) Use the debt reduction money to start knocking down the credit card debt. If you have multiple cards, I'd recommend going after the lowest balance card first (that is, if the $11k is split up $2k, $4k, $5k, go after the $2k card first). When that is paid off, take the debt reduction money plus the minimum on the first card and go after the next one. Keep going until all of the cards are paid off. If you get offers for low rate balance transfers, take advantage of them, but cancel the old cards. If you get raises, increase your debt reduction fund first.

(5) Regarding the car: first, what's the buyout to purchase the current car? You mentioned buying a new car and a requirement for 4WD due to your location. Can you find a used 4WD vehicle? It doesn't sound like you need an expensive car payment right now, so these are options to explore.

(6) For now, you need to get these other pieces resolved before you start saving for college. Your daughter will probably prefer that her parents are in solid financial shape rather than living deeply in debt.

Hope these suggestions help.
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