Quote:
Originally Posted by Metric6
If I had to be late on a bill which one would be the safest?
From your stand point am I completely screwed? I feel like my life is over. It is a real depressing feeling. I understand that it is my own fault, and I alone bear the burden, but still I like to hope for some sort of way out at some point.
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I can't say anything to which is least critical to be late or underpaid on... that's risky no matter what, but others can advise you better there...
Are you in deep? ... well, yes. Too deep you can't recover? Not at all. Here are my recommendations for you, take them for what you will. This is going to take some time, but you're in a place where
you CAN make it work.
From what you've said, it seems you have an average income of $3025/mo, and expenses are $2560/mo (at current levels). This means that you make $464/mo above your current expenses. This is GREAT NEWS (you aren't going further in the hole each month).
Step 1: Work with your debt holders and try to negotiate lower interest rates for your debts. You can also try to get them to decrease the monthly payment. This would stretch out your debt over a longer period of time, but free up more money each month to put toward debt reduction. It will help if you can explain to them that you're having trouble making the payments as they are, but with a lower rate and/or with a lower monthly payment, you will be able to pay everything off over time. Guarantee them that you can and will pay everything off, that it will just take some time.
Step 2: Reduce your expenses as much as you possibly can. Get creative. You can (should?) also look at selling some stuff you can't/don't use on eBay, Craigslist, or in a yardsale to give you some extra cash.
Step 3: Open (or designate) a savings account as an Emergency Fund for yourself. Look for something that will give you 2.5-4% interest on your money. You need an EF no matter what, because it provides a security backstop for you if something happens. Send $100/mo to your EF, at least until it is $1000 strong, or better. Also, ensure you keep no less than $500 in your checking account at any time--this is your buffer, and will prevent you from paying any more overdraft fees.
Step 4: Reserve enough in your accounts to pay your monthly expenses. Take ALL remaining funds you have and pay down your debts' principle balances. Focus in on one debt at a time so that you can eliminate them one by one. When one debt is totally paid off, take all of that money and now pay all of that toward your next debt.
Two options here: you either (A) pay down the lowest-balance debt first (this will lower your
number of debts faster, which for alot of people can be encouraging); or (B) pay down the highest-rate debt first (this will save you money on interest charges over the long run).
Follow step four until all of your debts are gone. This will likely take up to 3 years from when you start, but remember... If you do this and stick to it, all of your debts WILL be gone, PAID IN FULL, at the end of that 3 years.
Step 5: Congratulate yourself. You are debt free! Now, you need to build up 3-6 months' worth of expenses in your EF. At your current expenses, that's $4200-$8400. That will help you make sure something like this doesn't happen again, because instead of going into debt when something happens, you will have cash available to you.
Step 6: Never let yourself get into serious debt again. Act responsibly, and this will not be a problem for you.
Good luck! You CAN dig yourself out. It's just gonna take time and dedication.