Two Incomes, Two Credit Cards, and One Employer Match
Marisol and Dev, ages 34 and 36, have two children, ages 7 and 4. Dev grosses $68,000; Marisol works 25 hours a week at $17 per hour. Monthly take-home is $4,910. Fixed costs: rent $1,310, utilities $240, child care $680, groceries $700, car payment $415 (9.4% APR, 41 of 60 payments remaining, payoff $11,400, private-party value $9,900), minimum payments of $185 on a $6,400 card at 24.99% APR and $45 on a $1,700 card at 0% until June, student loan $190, insurance $210, gas and commuting $180, phones $140. Emergency savings are $650. Dev's employer matches 50% of contributions up to 4% of salary, and Dev contributes 0%. They want to buy a house in about two years and believe they need $14,000 for down payment and closing costs. Marisol wants to skip the retirement account and clear the cards; Dev wants to pause the cards and save for the house.
1. Calculate their monthly surplus and rank the competing uses of money over the next 12 months. Show the math behind each ranking.
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Fixed costs total $4,295, leaving a surplus of $615 per month.
Ranking by guaranteed return: first, capture the match. Four percent of $68,000 is $2,720 a year, or about $227 a month; the match adds $1,360 a year, a 50% instant return that no card payoff can beat. Because contributions are pre-tax, the hit to take-home pay is smaller than $227. Second, clear the 0% card before June. It is a cliff, not a rate: when the promo ends, a default APR near 27% typically applies going forward, and some agreements apply it retroactively. Paying $45 plus $120 a month clears $1,700 in about ten months; accelerate to $340 a month to finish before June. Third, attack the 24.99% card, where roughly $133 a month is interest alone. Fourth, the house.
Look at the ordering honestly: $227 for the match plus $340 for the promo card consumes the entire surplus for five months. The house goal is not fundable at $615 a month in two years. Say so now rather than in month twenty.
2. The car is worth less than the payoff. Evaluate refinancing versus selling, with numbers.
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Remaining payments total $415 x 41 = $17,015 against a payoff of $11,400, so the current loan costs about $5,615 more in interest and principal than the balance. That interest figure is the real target, not the monthly payment.
Refinancing $11,400 for 41 months at 6.9% produces a payment near $313, freeing about $102 a month and cutting total interest to roughly $1,430. That is the strongest single move available and requires no lifestyle change. Verify there is no prepayment penalty, that the credit union will lend on a vehicle worth less than the balance, and that they keep gap insurance if they refinance rather than let it lapse.
Selling is not viable on its own: they are underwater by about $1,500 and would need cash to close the gap while also losing reliable transportation for two working parents. Rolling negative equity into a new loan is worse. Recommendation: refinance, redirect the $102 into the promo card, and keep the car until the loan is positive.
3. What should they verify in the credit card agreement and in their mortgage pre-qualification before acting?
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On the promo card: the exact expiration date, the default APR, whether deferred interest is retroactive to the original balance, whether new purchases are charged at the promo rate or the standard rate, and how payments are allocated between balances. Many issuers apply the minimum to the lowest-rate balance first, which quietly extends the promo balance. Confirm in writing.
On the mortgage: how lenders treat a 401(k) loan or a new retirement contribution is minor, but debt-to-income is not. A $415 car payment counts against them even if they intend to refinance; a $313 payment may help. Pull both credit reports, dispute errors, and target a middle score before applying. Ask what reserves the lender requires and whether gift funds are allowed. Also confirm the $14,000 estimate against current rates and local closing costs, because that figure, not the surplus, determines whether the two-year timeline is realistic.