Don't know what to do...need advice

[Kharisma]

Thanks

Thanks Jillycd and SeanH.

I should have found this site about 20 years ago to be honest. But I was/am an artist and money never meant much to me until I got older and then realized "hey time has flown by and I'm OLDER - extreme middle aged. I've been in this same financial rut and with similar debt for over 15 years now. This is crazy." I see myself making the same poor financial decisions my parents did. No savings and no retirement (lost about half of my retirement investment in 2008 when the economy crashed and I cashed in what was left when I was unemployed/underemployed from late 2011-2012).

Well, I've gotten some advice that makes me feels like there's hope. It's a start and I believe that if I stick with this plan, also continue with Suze Orman's book "The Money Class" which is opening my eyes and giving me such an education, then I'll become better and better in money matters and develop more towards making good financial decisions and managing my finances. I've always heard good things about Dave Ramsey and plan to get some of his books in the future.

[Wino]

I've always heard good things about Dave Ramsey and plan to get some of his books in the future.

Get them from the library or just look for his advice online. There is no need to pay him so you can do the work to get out of debt. I agree with his principles, but as he says himself, it's just common sense. Look up his baby steps online.

Basically, what you have to do is:

Make a budget
Stop borrowing (debt cards, cars, everything)
Lower your lifestyle
Stay on the budget you set
Set up an emergency fund ($500 to $1000)
Pay off debt
Build up your emergency fund to 6 months of expenses
Stay on the budget your set
Start saving for retirement
Pay off mortgage (if you have one)
Keep saving
Stay on the budget you set (Yes, I kept writing this)
Relax, you've earned it

[BMEPhDinCO]

Great advice so far... here's a few more things.

1. If you KNOW it'll take a few months to get reimbursed, you should have a "business account" set aside for these expenses, so that you can take from and add to that without adding to your CC debt. THAT is where that $6xx should be going! (That said, I'd take $200 out of the $6xx and make a separate EF)

2. For tithing, I would recommend calculating how much your time is worth (ie, you make $20 an hour) and then donate that time... sometimes it is easier to give time than money.

3. You mentioned exceptions to your entertainment & clothing - but those were nearly $200! That's about $16 a month that you should be saving to a special account for those things.

I think if you put yourself on a strict pathway, you will be able to move forward. But you will be tight for a bit yet.

[Kharisma]

Wish I could

Great advice so far... here's a few more things.

1. If you KNOW it'll take a few months to get reimbursed, you should have a "business account" set aside for these expenses, so that you can take from and add to that without adding to your CC debt. THAT is where that $6xx should be going! (That said, I'd take $200 out of the $6xx and make a separate EF)

2. For tithing, I would recommend calculating how much your time is worth (ie, you make $20 an hour) and then donate that time... sometimes it is easier to give time than money.

3. You mentioned exceptions to your entertainment & clothing - but those were nearly $200! That's about $16 a month that you should be saving to a special account for those things.

I think if you put yourself on a strict pathway, you will be able to move forward. But you will be tight for a bit yet.

Currently, it would be difficult for me to put aside $200 at one time for a business account alone because I have so many other obligations (rent, utilities, credit (debt) cards, car insurance) to pay during each of my weekly pay periods for the month. If I was paid once a month, I'd be able to do it. If I can stick with a budget long enough to see some positive results and really turn my financial picture around then I'll be able to do put aside money just for work travel expenses in the future.

The thing about strict financial discipline is that initially I'm gong-ho about it! Then a few days later I'll see something on SALE that I'd like to have on feel will be needed in the near future (for example: winter boots) and the thought in the back of my mind says "you work hard everyday you might as well do something nice for yourself" or "you should treat yourself, you deserve it!" I give in thinking I'll catch up some way or another and replace the money I'm spending. Meanwhile, life keeps going on and there are continuous demands on me financially so I that I never replace the money that I spent impulsively. It becomes a hole that I can't seem to dig out of. One thing about my spending with the credit cards is I don't blow large amounts of money at one time (ex: expensive designer handbags, clothing, jewelry); instead I nickel and dime my finances to death.

[breathemusic]

If nickle and diming is your problem and you have trouble keeping track of your expenses, I'd suggest you stop using your credit and debit cards as much as possible and try to stick to a cash system. That way you know exactly how much you have left to spend, and if you set aside cash for your needs like gas and groceries and stuff, then you'll see what is left over. And if you see that it's not all that much, you'll be less likely to spend it on things you don't really need.

Or if you don't want to carry cash, wrap a sticky note around your cards that says something like "you're trying to pay down debt" or something to remind you and make you think "do I really need this?" every time you pull out your card to buy something.

[JoeP]

Balances, lowest to highest = C, B, A; called "Debt Snowball"
Interest rates, highest to lowest = C, B, A; called "Debt Tsunami"

Both typical pay off methods (as above) say you should pay off the cards C, B, A

Question 1: Reverse the order listed, and pay them off C, B, A. Minimum payments to A, B, and everything that is left over to C. Once C is paid off, then send minimum to A, and everything left over to B. Of course, at that point send everything left to A.

Agreed. The point of the debt snowball is to get a psychological win by paying off a debt quickly. With bigger debt, this might amount to going from 3 credit cards to 2 in 6 months instead of say 10. So those extra 4 months give earlier opportunity to attack the next one. It doesn't always make mathematical sense, and Dave Ramsey admits this, but the power of a win can give you what you need to feel productive in eliminating debt.

Finally, figure out what went wrong in your finances that warranted credit cards with balances, and then don't do that again! If it was an emergency, you'll see the value of creating an emergency fund. If it was self-control, then you'll see the value of budgeting.

I'd actually recommend you close all but one credit card. Call each company and ask for a lower rate. Be honest and tell them you have 3 cards and want to keep only the one with the lowest rate, and see where they go. Start with the highest rate and follow through with the cancel if they refuse to lower your rate.

[Wino]

I'd actually recommend you close all but one credit card.

I don't agree with this for the short term. Your credit score affects a lot more than the interest rate you pay when borrow money; insurance premiums, amount of deposit when you open accounts (utility, cell phone, etc.), and job prospects are all part of the mix that are related to credit rating.

If you close the cards, then your available credit variable goes into the trash along with your credit rating.

Once you have no debt at all, and you can self-insure, already have a house or mortgage, and are secure in your job field, you can start closing credit cards. So, when you no longer need a good credit score, start closing your cards if you want to; however, if you are in a position where you don't need them, then you aren't using them, so there will be no reason to close them.

I have at least five credit cards. Not counting the one that DW just put several thousand on for a short term zero interest loan (that we didn't really need, but that's another story), they have zero balances. Why should I close them?

[snafu]

The thing about strict financial discipline is that initially I'm gong-ho about it! Then a few days later I'll see something on SALE that I'd like to have on feel will be needed in the near future (for example: winter boots) and the thought in the back of my mind says "you work hard everyday you might as well do something nice for yourself" or "you should treat yourself, you deserve it!" I give in thinking I'll catch up some way or another and replace the money I'm spending. Meanwhile, life keeps going on and there are continuous demands on me financially so I that I never replace the money that I spent impulsively... instead I nickel and dime my finances to death.

Kharisma, at the moment you've racked up about $7,460. in credit card debts, with the major portion likely the result of interest rates 26.99%, 22.90%, 13.25%. With the bank rate less than 1% you can see why we are so alarmed. Perhaps you would find it a helpful to add up how much interest has been added to each statement in the past six months to help you clarify the importance of slaying that dragon.

For the short term...Your winter boots may need to last one more season. If that's impossible, do yourself a favor shopping the Thrift Stores, it's fun and no one needs know. My suggestion would be to review all the items in the apartment to identify stuff you no longer use, need or love. Those items are candidates to sell within your building, on Ebay or CraigsList, whatever you're willing to do.

I'm confident you can get through this patch and move forward better managing your money. We're here to cheer your every step forward.

[ktmarvels]

Currently, it would be difficult for me to put aside $200 at one time for a business account alone because I have so many other obligations (rent, utilities, credit (debt) cards, car insurance) to pay during each of my weekly pay periods for the month. If I was paid once a month, I'd be able to do it. If I can stick with a budget long enough to see some positive results and really turn my financial picture around then I'll be able to do put aside money just for work travel expenses in the future.

The thing about strict financial discipline is that initially I'm gong-ho about it! Then a few days later I'll see something on SALE that I'd like to have on feel will be needed in the near future (for example: winter boots) and the thought in the back of my mind says "you work hard everyday you might as well do something nice for yourself" or "you should treat yourself, you deserve it!" I give in thinking I'll catch up some way or another and replace the money I'm spending. Meanwhile, life keeps going on and there are continuous demands on me financially so I that I never replace the money that I spent impulsively. It becomes a hole that I can't seem to dig out of. One thing about my spending with the credit cards is I don't blow large amounts of money at one time (ex: expensive designer handbags, clothing, jewelry); instead I nickel and dime my finances to death.

Getting out of debt is a hard process, and a big change from where you have been. You will make mistakes, but it's important to understand why you want to get out of debt and remind yourself of that goal as often as possible.

You mention you couldn't get $200 all at once for your travel expenses. But maybe next time you get reimbursed you put all, half, some of it into a work expenses account to start building it. This month, if no friends come out, put $10 aside for when they do. This month, forgo those sales, and set aside part of what you would have spent an item for a"splurge account". You're right if you live completely miserly and deny yourself everything you used to have, you will burn out and end up spending more.

Your debt situation is bad. My recommendtion is slightly different than others may be. I'd take a month (or maybe 2-3 at the most) and get your house on a little better foundation before tackling the cards with full force. Pay the minimums on all the cards, set up a $300-$500 Emergency funds (that really shouldn't be touched), use extra money to start a splurge fund and a work expenses fund. During that time also be militant about writing down what you spend on EVERYTHING. That soda at work, the newspaper, car insurance, everything. As you are writing it down see if there are trends where you can either substitute something less expensive or cut altogether. Perhaps you use all cash and write it on the evelope when you spend something.

Once you've got that all set up, you've got a mini EF and a better handle on your budget. Start accouning for every penny. You should know how much you can throw at your credit cards each week/month. Start doing that. Put every sent toward credit card "C" it's the highest interest and lowest balance. It will be a long road, but you can do it!

[deedee421]

I just noticed your post, so I wanted to weigh in and encourage you with regard to tithing. I had much more credit card debt than you currently have, and I was able to pay off my credit cards while tithing and serving, so don't get discouraged. However, your interest rates are much higher, so I was going to make the same suggestion as asmom that you either call to try and negotiate a lower rate, or see if you can transfer them to another credit card that has a lower rate. People on this forum tend to offer a lot of great advice, so I'm glad you found this site. I paid off my credit cards using the debt snowball and I started with the card that had the highest interest rate. I agree with everyone that having an emergency fund is important, but I'll be honest and say that is what I neglected while I attacked my debt, so I'm just starting to build my emergency fund now. I wish you well as you work your way out of debt.

[Kharisma]

Interest accrued is terrible! I could have used that money

Perhaps you would find it a helpful to add up how much interest has been added to each statement in the past six months to help you clarify the importance of slaying that dragon.



Oh don't worry, I'm very serious about slaying the dragon this time. The interest amounts are below. What I have in my arsenal this time that I've never had or used before is the Zero budget which is assigning every dollar. Before, I would have a rough draft in my head of how I planned to spend my money but I never listed every single expense and then determined what was needed per pay period for the expense. By listing everything on paper, I can see where I may be able to shave off expenses or do without for that particular week(s) or months(s), if necessary. As the saying goes "knowledge is power".

Although, I'm in the very early stage (this past Friday I received the reimbursement and my payroll which was the first time I've received money since asking for advise here), I feel much more confident this time around because I have knowledge about assigning every dollar.

Before, expenses would come up that I had forgot to plan for but needed (ex: groceries) or it wasn't on my list originally (ex: friends call me up with plans to take another friend out to dinner to celebrate her new promotion). I would play musical chairs with my bill money to do this or use the credit/debt card which was already near the limit. Now, I have all of that planned for and know instantly if I can agree to go out for dinner or not (NOT). The only surprise I could have now would be an "emergency" which thankfully I have placed money in a savings (EF) specifically for. I did actually see on paper that my weekly COL expenses and debts are more than I bring home weekly. However, I already have a part-time job lined up and the client has asked for me to start a new project after I finished the one I'm working on now. I'll be increasing my p/t income while attempting to decrease my overall living expenses.

I actually feel a mental weight removed from me regarding my finances. It was so stressful almost every week to have only a HOPE and PRAYER that my payroll would cover what was needed each week. Thanks to all who have advised me!


Interest for the credit/debit cards as of the August due dates:

Card A = 162.27 (last purchase was 6 months interest FREE)
Card B = 343.91
Card C = 195.00

TOTAL = $701.18

[Kharisma]

As of 8-23-13, I've set up EF

Ktmarvels,

I've set up the EF with $500. I've also started using the cash in envelope methods. I just started both of these a couple of days ago even though I've known about the envelope system for years. I was already writing down everything I spent so I had that information already. However, before coming to this board, I never knew how to use that information to help me. I was just doing because all debt sites said to do it. I really didn't understand the value of doing it or how it could help me.

I know that may sound strange but for whatever reason I couldn't put the information altogether to make sense. I'd see I spent $150 eating out for the month so I'd try to spend less the next month but then I'd purchase clothing that was on sale. Or maybe something else would come up unexpectedly (ex: co-worker's baby shower gift)and I'd have to spend it. One way or another it still left my hands and wasn't placed in a savings. However, now that I've applied the Zero budget (I've been visiting about 3-4 different financial websites lately and can't remember who recommended checking out Dave Ramsey's Zero budget) I'm able to USE in a productive way the information that I'd gathered from writing down everything I've spent. I know it should have been common sense all along but as the saying goes "common sense is not COMMON". This is finally making sense and yes, it really is common sense stuff.

[Kharisma]

Thanks

Wow, another tither. Thanks Deedee, your post was very encouraging to read!

[deedee421]

Wow, another tither. Thanks Deedee, your post was very encouraging to read!

You're welcome! It sounds like you're already off to a great start!

[theduc]

My pastor always said there are three T's when it comes to tithing... Time, Talent and Treasure (money). Not everyone is able to give their Treasure because it is not theirs to give (it's borrowed). Yet they can still "donate" and "tithe" with their Time and Talent. Volunteering in the church is a great way to give your time... you mentioned that you are an artist so maybe the church could use someone with your talents to help out on projects. In these cases you are still "giving" to the church financially as you are giving them something that may otherwise cost them money. The money you save the church can then go on to help others.

You are starting down the right path... just stay on it and you will be fine.