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Paying down debt, strategies to stay on track?

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  • JoeP
    replied
    You have 2 major tasks:
    1. Pay down your debt
    2. Change your spending habits so that you do not incur more debt

    Paying down your debt requires applying money to the debt. Paying the minimums will take a very long time and you will be paying extra on the interest. Paying more enables you to knock more of the principal down, so you will get out of debt sooner. If you want to do the latter, you need to free up more cash, either by cutting back in other areas, or by selling stuff, or by both. It might make it easier to sell something you're still making payments on if you consider it is really not "yours" yet.

    You should use your past experience ($32k in car debt? $270k mortgage? $12k credit card debt?) as a daily reminder of where you are, and where you never want to return. Maybe post them up on your bathroom mirror to motivate yourself to solve your debt situation. Then make a resolution to never buy anything unless you have the physical cash on hand.

    Finally, the advice given in this forum comes from people who have been where you were and want to help. It is normal to push back when you get advice that goes contrary to what you've been doing, but consider where you allowed your habits to take you.


    Philosophical Aside: Establish a "vision" of what your life will be like after your debt is cleaned up. You'll just be paying your recurring bills (utilities, food, mortgage, taxes, insurance, phone, etc) every month. You'll have a paid-for car in your driveway that you'll plan on driving for 10+ years. You'll set up automatic salary deposits to your bank or credit union so that when it is time to replace your car, you can buy a good used one for cash. You'll save money to go on your honeymoon and pay for it with cash. You can max out your Roth IRA every year, and put 15% of your pre-tax income toward your 401k. You'll have 6 months worth of expenses saved up in an emergency fund, so you won't have to panic if you lose your job, or scramble if your water heater goes. You'll have saved $5k a year in a "blow money" account for buying a TV or going on a trip or whatever.

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  • snafu
    replied
    OP, I'm guessing you're 28 y/o and haven't yet learned from your past experience that you're living a lifestyle you can't afford. You need to understand that gross income isn't net income. You didn't like taking a 2nd job and clearing debt last time, why get in debt all over again for coffee and restaurants? I guess I can understand buying tangibles like car or even motorcycle but you know that other stuff goes down the toilet.

    You know the drill, you know from experience what you must do. You know you need to clear the BB 0% debt before it reverts to high interest rates. You know you need to track spending on Mint or program of choice. You know you need to temporarily stop silly spending and concentrate on getting out of consumer debt. You know you need to accumulate an emergency fund for some level of protection when life throws nasty challenges your way.

    Good luck

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  • ~bs
    replied
    Originally posted by theduc View Post
    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...
    .............................

    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.
    He's basically asking how he can pay off his debts without making more money and without doing real meaningful cutbacks to spending, and likely in the end will end up reincurring the debts that he took a year or however long to make some payments on. That's like asking how do I win in a MMA fight with both arms tied behind my back while being blindfolded. Spending money that you don't have is like drinking. It's awesome while you're doing it and a hell of a lot of fun to do it in excess. But the hangover the next morning is a real bitch.

    He's asking for options, but excess debt LIMITS your options and backs you in the corner, as opposed to having liquid assets & a positive net worth. Options: make payments on the debt, declare bankruptcy and lose everything, orrefinance/consolidate (and make payments on the debt). That's it, no magic bullets.
    Last edited by ~bs; 03-04-2013, 11:03 PM.

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  • ~bs
    replied
    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.

    I like that quote.

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  • Wino
    replied
    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.

    Leave a comment:


  • theduc
    replied
    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.
    Last edited by theduc; 03-04-2013, 02:29 PM.

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

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  • 28andlearning
    replied
    $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.

    http://emmettlaw.wordpress.com/2009/...ptcy-survivor/

    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.

    Leave a comment:


  • lindsay06
    replied
    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

    Leave a comment:


  • Wino
    replied
    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.

    Leave a comment:


  • kork13
    replied
    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.

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  • ~bs
    replied
    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.

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  • kork13
    replied
    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.

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  • neatdesign
    replied
    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.
    Last edited by neatdesign; 03-02-2013, 03:02 PM.

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  • 28andlearning
    replied
    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?
    Last edited by 28andlearning; 03-02-2013, 11:16 AM.

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