Paying down debt, strategies to stay on track?

**neatdesign** · 03-01-2013, 04:08 PM

My suggestions:

Change your spending habits. Limit yourself to buying needs, not wants. And remember that just because you want a want to be a need, that doesn't mean it really is.

Sell the motorcycle. With all due respect to your girlfriend, it's not her debt -- it's yours. Sell it, pay down your debt, then save up to buy another motorcycle to replace the one you've sold.

As for your car: You're not really worried? You have $52,500 in consumer debt. You shouldn't have a $32,000 car to begin with! Can't your auto insurance pay for some or all of the cost to repair the damage to your car? That way you could sell it, buy a much cheaper car (for cash) and use the difference to help pay down your other debt.

Now, some questions:

First, your list of monthly expenses is missing a lot of stuff. Like, a lot. What about groceries, clothes, toiletries, gifts, entertainment, eating out, housewares, pet expenses (if you have one), etc.

Second, you list "Bestbuy" as a monthly expense. Is this your monthly payment to pay down your Best Buy credit card? Or do you spend that amount at Best Buy every month to buy stuff?

Third, you say that you make $90,000/year. I'm assuming that is your take-home pay, since gross income really doesn't help determine what you can afford to spend. So if you're take-home pay is $90,000/year, that means your monthly take-home pay is $7500. However, your monthly spending only totals roughly $3450. (I know it's more than that, since you omitted many things from your expenses list, but for argument's sake let's say that's everything).

Where is the extra $4050 going? Are you saving it? Are you putting it towards paying down your debt? A combination of the two? How much are you putting towards your debt repayment every month?

Another question: Do you have a budget? How do you keep track of your spending?

**~bs** · 03-01-2013, 06:26 PM

if you're serious about it, dump the motorcycle, dump the car. At $100 of gas in a month, doesn't seem like you drive much anyways. Buy a $3-5k car that runs well. That should drop your insurance costs down as well to maybe $70/month. Do you need cable? dump the dish. Bring home lunches and prepare your own food. That should drop your meal cost to $3 per meal or so. Any way to get the "transportation" cost down? Refi the mortgage.

So, if you're serious about paying down debt, this will allow you to pay down the credit card, motorcycle, and best buy loans in full. It'll also free up another couple hundred for you to start working on that car loan in addition to being able to use the money you previously were paying on the best buy card, motorcycle loan, and credit card to the car loan. Unless your monthly expenses has some pretty huge holes, you should be able to make some pretty impressive strides towards paying down the 30k car loan. Could pay off all your debts in under 1 year, excluding your home mortgage.

**Wino** · 03-01-2013, 09:12 PM

neatdesign and ~bs both stated the obvious, in very nice terms. As I'm not the king of tact, I'll say it in plainer terms.

Your budget is incomplete, unless you only eat during emergencies. You can look online for all kinds of free budget templates for you to fill in. You can find them in Excel, Word, and pdf format, so you can do them electronically or on paper.

You need to write down an actual budget. The first couple of months are a lot of guesswork, unless you have very good records, but I am guessing that you don't have great records. The key point is that every month you need a budget. You'll also find that it is probable that you left off an annual payment (personal property taxes or life insurance as possible examples), but as those are not emergencies, you need them on your monthly budget so you will need to adjust your budget as the "I forgots" are identified.

Note that you should have ONLY basic payments on the original budget. Don't add a bunch of "pie in the sky" payments where every penny you didn't write down is sent to your Best Buy payment, only to find you are not eating for the last week of the month without borrowing on your credit card. Don't forget to include entertainment (bars and restaurants) and other things (Starbucks) that you know you're going to buy. The budget is no place to lie to yourself.

Once you have a real budget, you need to decide your goals. If you have zero money left over in your budget, your goal should be to make more money. Use "left over" money to work toward these goals. A few suggested goals: Get at least $XXX in an account for emergencies. This amount varies from $500 for low-income, low-needs singles, to $1000 for "Dave Ramsey fans," to "three to six months' expenses." For your income level, I think one full month of take-home pay would probably be sufficient to start.

I'm going to speculate that your May payoff for Best Buy is looking a bit more out of reach right now. I'm going to further speculate that in June or July, the "zero interest" you noted becomes something much closer to 20% and probably on the far side of that 20%. A little perspective tells me that with $2500 on it now, your balance to be paid is probably closer to $3000, and 20% of a year's interest on that is going to be a minimum of $600. Your Best Buy bill needs to be a real priority if my speculations are correct.

From the above, you can see that you're only part-way to making a dent in your debts. You're hoping to pay things off, but you have no plan. You don't want to lower your lifestyle, without acknowledging that you're living beyond your means. If you were living within your means, you'd have no debt. You're spending more than you make, and the only way to stop this is to cut back your lifestlye. In your initial planning on reducing your debt, you've already eliminated two of your biggest offenders - the car and the motorcycle - from consideration for reducing your debt.

You have choices to make, and you seem to be in denial about the choices. Basically, you've said, "I want to keep borrowing money but I don't want to owe any debts."

Good luck meeting your goals once you have them written down and have developed a set of steps (a plan) to reach the goals. You have taken the first step: You've recognized the need to stop paying interest. I've given you a couple of the next steps above, but there are more steps after you complete those. Let us know when you've made some progress, and others here who are more tactful will be sure to help you.

**28andlearning** · 03-02-2013, 10:12 AM

I am a male..

So, I don't buy clothes. I work 5 days a week, and I wear the same things. I don't care about looking like a model.

My vise is food/drinks.

I use Mint.com, have for a while I just have ignored it. Yes, I have bad spending habits, yes I have extra income at the end of the month that I "could" be using towards paying down debt. I haven't and that's why I am here. Yes, I know I could sell the motorcycle and my car, and everything i own to pay off debt, again. That's not reality. So lets start small and I can work big. If I sell everything, I will buy again to get back in this cycle. So please provide actual advise that works. It's like a diet, you don't just go cold turkey one day and you change your lifestyle, you have to ease into it and accept it and then go bigger and bigger until one day it has become a lifestyle change.

I spend maybe $100 a month in gas. Car is very economical
Food currently is $700/mo using Mint that includes groceries etc.
Fancy coffee a month alone prior to March this was $300+
Entertainment is $0 as I stay home 90% of the time, or I am at church or on the internet.
I have been spending the rest on purchasing guns and I just paid off 7k in surgery, which depleted my savings and brought me here to ask for advice.

Ok, so I have a payoff date of 1/31/2014 on Bestbuy at the 0% interest. 24.24% interest hike if I still have a balance after that date. It shows a deferred interest charge of $275.86.

As you can see if I cut out things I have a lot of disposable income left over to pay off debt. That's what I plan on doing. So realistically I think by the end of May that Bestbuy card should be paid for.

This month I get a "free" paycheck as how my bills fall I don't "need" that paycheck for anything. So I was planning on dumping 80% of that towards bestbuy.

So I guess my question was, is it worth it for me to re-finance my home to pay off my main credit card or should I just cut out a bunch of extra spending and pay down debt and just stick to that?

**neatdesign** · 03-02-2013, 12:47 PM

Originally posted by 28andlearning View Post

I am a male.. So, I don't buy clothes. I work 5 days a week, and I wear the same things. I don't care about looking like a model.

Gender has nothing to do with it. All people need to buy clothes once in a while. Don't your sock ever get holes in them? Your shirts never thin out? You've never dropped ketchup on a pair of pants and couldn't get the stain out? Or a sweater that was washed in the wrong cycle and shrunk so small that you can no longer wear it? These things happen to everyone.

Originally posted by 28andlearning View Post

So please provide actual advise that works.

I was going to respond to the rest of your post also until I read this. You equate not being told what you want to hear with receiving bad advice. You have decided that it's not important enough to you to make big, bold changes in order to get out of debt. Well, I'm afraid that's all I can suggest to someone who has more than $50,000 in consumer debt.

Sincerely, good luck to you.

**kork13** · 03-02-2013, 01:10 PM

Originally posted by 28andlearning View Post

So I guess my question was, is it worth it for me to re-finance my home to pay off my main credit card or should I just cut out a bunch of extra spending and pay down debt and just stick to that?

It's definitely a far far far far far far FAR better idea to cut down on your extra spending in order to pay down your debt. If you try to do it with a refi, you're just replacing debt with debt. Bad idea. You seem to know exactly where you can trim your expenses, so just go and do that. Cutting out wasteful spending will not only free up cashflow to pay off your current debts, but if you can maintain more reasonable (responsible?) expenses, you can prevent yourself from going BACK into debt later on.

**~bs** · 03-02-2013, 01:42 PM

Originally posted by 28andlearning View Post

I use Mint.com, have for a while I just have ignored it. Yes, I have bad spending habits, yes I have extra income at the end of the month that I "could" be using towards paying down debt. I haven't and that's why I am here. Yes, I know I could sell the motorcycle and my car, and everything i own to pay off debt, again. That's not reality. So lets start small and I can work big. If I sell everything, I will buy again to get back in this cycle. So please provide actual advise that works. It's like a diet, you don't just go cold turkey one day and you change your lifestyle, you have to ease into it and accept it and then go bigger and bigger until one day it has become a lifestyle change.

Reality is you are deep in debt and have no savings worth mentioning. If you find out that you have skin cancer, do you start wearing sunscreen? Or do you consult with a doctor to do surgery/chemo? If you lose your job tomorrow, do you have a fall back plan? Or do you immediately default on all loans and debts.

Seems like you're still in denial, and minor or major changes aren't going to mean much if you'll just rack up the debt again once you're clear. There is no magic bullet. It will take a compelete lifestyle & mentality change otherwise you're doomed to treading water for the rest of your life. If that happens, one day, you'll wake up, realize your 65 and that you made great money for the past 30 years, and have absolutely nothing to show for it.

**kork13** · 03-02-2013, 01:56 PM

One more thing I'll add, as far as "strategies to stay on track"... Automation is your best friend. Set up automatic payments for your debts, and also automatic transfers from your regular checking/savings account into a separate account that you don't have regular access to. By setting things up to be done automatically for you without any input on your part, it'll make saving and paying your debts that much easier and simpler.

**Wino** · 03-02-2013, 03:01 PM

So please provide actual advise (sic) that works.

Maybe you just don't like the advice that works.

I'll get rid of the fluff.

You need to write down an actual budget.
(Snip)
Once you have a real budget, you need to decide your goals.
(Snip)
You're hoping to pay things off, but you have no plan.
(Snip)
You have taken the first step: You've recognized the need to stop paying interest. I've given you a couple of the next steps above, but there are more steps after you complete those.

There. That's the advice that works: Write down a budget. Decide what you want to do. Figure out a way to do it. Let us know when you get to this point, and we'll help you more.

I will, though, reiterate that you're in denial about your habits, and your response does nothing but reinforce that fact.

$300 in coffee and $700 in food for a month and you don't know where you can cut your spending? You're pulling in close to $2700 per paycheck, and you owe nearly a year's income to your creditors. Here's the plan: Cut back on your lifestyle and pay off your debts. To do it quickly, you need to get rid of the motorcycle, sell the car and get a beater, stay out of the coffee shop, eat from a brown bag, and stop buying CD's (or whatever it is that you're buying at Best Buy).

Cut. Back. Your. Lifestyle.

**lindsay06** · 03-02-2013, 06:03 PM

I have family who have used debt consolidation loans before. But definitely don't go the consolidation route if you are just going to get back into your old habits. Take serious action and pay as much down as you can every month because you may get too comfortable with the payments on a consolidation loan right. best of luck to you

**28andlearning** · 03-04-2013, 10:46 AM

$300 in coffee and $700 in food for a month and you don't know where you can cut your spending? You're pulling in close to $2700 per paycheck, and you owe nearly a year's income to your creditors. Here's the plan: Cut back on your lifestyle and pay off your debts. To do it quickly, you need to get rid of the motorcycle, sell the car and get a beater, stay out of the coffee shop, eat from a brown bag, and stop buying CD's (or whatever it is that you're buying at Best Buy).

If you read my post above you would realize I was explaining that I knew I could cut back in certian areas, IE, coffee, food, etc.

Yes, you guys are right I am a typical american who lives on credit and I don't have a backup plan. I imagine if you were to poll the US, you would find over 80% of the U.S.A in the same boat.

Once I am financially free, what changes in my life? Absolutely nothing. I think some of you are in denial here. I understand you are trying to provide financial advice, but saying sell all your assets and now your financially free is absurd.

You think a bumm on the side of the street enjoys his life more than me because he is debt free? I think not. Selling everything just to have nothing makes no sense at all.

I have read all the big hypocryte books like Dave Ramsey about saving etc. Do you know how he managed to live that lifestyle? He over leveraged himself multiple times, went bankrupt multiple times and then finally once he did it the last time and had millions he decided he wouldnt risk it anymore. But he didn't have a bunch of debt and just pay it off, he always declared bankruptcy and then would do his same housing ways to make money.

Obviously he couldn't live the same lifestyle that he preached.

Dave Ramsey, Bankruptcy Survivor!

http://emmettlaw.wordpress.com/2009/03/02/dave-ramsey-bankruptcy-survivor/

Dave Ramsey . . . (eventually) did file, received the discharge of his debts, and was able to move on with his personal and business lives to be the success he is today. Could he have done this WIT…

Do I know selling everything and not having debt eliminates debt, obviously. I am not an idiot. But, what we know, and what we choose are totally different things.

I have accepted that I want to live my lifestyle with some minor changes. I explained in my very first post that I was not looking to sell anything, and what could I do besides that. The only real advice that has been given here was by two people. They stated create a better budget and cut out the fluff, and the other person suggested debt consolidation.

Thanks to those two people who can read and give helpful advice.

**Goldy** · 03-04-2013, 01:06 PM

You listed your debts but how much cash do you have in the bank?

**theduc** · 03-04-2013, 01:26 PM

It sounds like you know what to you need to do (drastically cut spending and change your lifestyle) but you not fully willing to do it...

I don't think they are telling you to sell EVERYTHING... just that you should spend your money smarter (and selling the motorcycle and car is big start in this direction).

You should find out if your car insurance will pay for the repairs and try to sell the car... then don't buy a $32K car (until you get your spending/debt under control and save and pay cash if possible). Repair the car and sell it and buy a cheap used car (Less than $5K) for now... it will be worth it in the end if you really want to change.

The reason people are telling you to sell the motorcycle is that you would have an instant $2K to put towards your debt while also reducing your debt instantly by $6K. The main point being to pay off the debt (other than the mortgage). I love motorcycles myself and have one as well (and looking to possibly buy another this year) but unless you are willing to make some major sacrifices then nothing will change. The point of selling the bike is NOT to buy another one and bring back the debt. Once you pay off the debt you will have extra monthly income (that was going to pay off the debt) that is now free for you to use to SAVE for a bike. I saved and paid $6K cash for mine and it took less than 3 months making less than you make being married with one income. Now I'm looking at the possibility of having two motorcycles and paying cash for the second as well. This will happen AFTER I pay off my car and another debt first.

What is your actual take home pay each month? Since you use mint.com you should easily be able to see additional areas where you can cut back.

The magic formula you are looking for is to spend less than you make (and as much as possible). It sounds like you know what the problem is (as you have been here before). This would be easier if your attitude towards debt was the same as your attitude towards the "big hypocrite books". One problem you have is how you look at debt... you look at debt like you look at food (a diet in your example). You don't want to eliminate it as you wouldn't be able to live if you eliminated food from your diet. This is not the same with debt and is the wrong way to look at it. You should look at debt more like smoking... to much and you have a very high risk of getting cancer and dieing! Right now you seem to be on two packs of debt a day and don't really care about the lump in your throat since your girlfriend likes it. You CAN quit debt cold turkey...

This is only meant to be helpful advice here... if your attitude doesn't change then nothing else will. But what do I know? I'm just one of those non-typical Americans who lives within my means while planning for my future.

**Wino** · 03-04-2013, 04:56 PM

Once I am financially free, what changes in my life? Absolutely nothing.

And where did you get this information? Having no income and no assets is not even remotely the same as being financially free. Financially free doesn't even mean "debt free."

Financially free means you get to decide what to do with your money. You aren't obligated to send most of your money - or even MORE money than you actually have - to a bunch of faceless names you correspond with monthly. Write down your budget, and figure out why your penpals are named "Chase" and "Citigroup" and "HSBC" and "GMC Finance."

I have accepted that I want to live my lifestyle with some minor changes.

No, you have not accepted anything. You have stated you want "to button down on my spending" because you want to pay off some credit cards, just like you paid off credit cards before.

You're in a cycle. Spend using credit. Realize you have too much debt. Work to pay off creditors. Buy new toys. Realize you have too much debt. Work to pay off creditors. Spend more on credit....

If you ever get off that ride, you'll realize what financial freedom actually means. Basically, financial freedom means doing what you want with your extra money at the end of the month, rather than figuring out what you want to do with the extra month at the end of your money.

But 80% of Americans would prefer to be in debt and have a regular crisis when they get a roof leak or the washer breaks, according to your figures. Where would you be in six months if you lost your job and couldn't find another one?

Now is the time to bring up the bum on the side of the street with no assets.

If you read the quote you pulled from me, it states "to get out of debt quickly" - the key word is "quickly" - you need to sell your assets. You can get out of debt more slowly without selling the assets, but that depends on your debt to income ratio, or more precisely it depends on your payments-due to income ratio. You don't even know how much you owe each month, because you haven't written it down. That's called "a budget." And my actual advice was for you to cut back your lifestyle, because you're spending more than you make. Nothing is going to change as long as that fact remains.

Here's what you're looking for - advice telling you to do what you are going to do anyway:

Don't buy coffee as often, and go out to eat less often. Put off buying another expensive toy for a few months until you get enough room on your credit card balance statement that you don't feel pressure at the end of the month due to your lack of money. Once the pressure is off, go buy another motorcycle or an ATV, and have a veinte to celebrate. Borrow money using debt consolidation if you're in trouble again.

Pay no attention to the man behind the curtain. You can spend more than you make, and everything will be OK.

Paying down debt, strategies to stay on track?