Okay, it's crunch time

[Thriftina]

Hello everyone

I am going to be very vulnerable with you all today. I am on a plan to really crunch down on my debt. I am a homeowner and I already have a car that's paid off, but I am in debt with credit. I paid off one card this March, but because I was trying to hold on to that wonderful credit score, I kept it, which is something I told myself not to do, now I am slowly creeping back up in debt. I kept it because I keep hearing that closing out a credit card will hurt your credit. I figure now since I already own a car and a home, the big items needed for credit, I will close out the accounts completely vs freezing or shredding the cards only. Here's a break down of the debt I am going to tackle:
Bank of America Visa- 6500
Target Visa- 6500
Sandals Visa- 1500
Student loan- 19000
One part of my mortgage- 45,000

I do have about 3 months of mortgage in my savings account.

I am in my late twenties, very active and I try to eat correctly and guess what happened? I am having lumbar back problems. It started last week and I was in a lot of pain, I couldn't hardly sit and my job requires sitting. I saw the xray and it looks like I have a herniated or slipped disk at the lower lumbar area of my spine. I had an MRI that cost me an unexpected $500 that I didn't have on hand, but I had to charge it. I am considering taking $500 out of my savings account and placing it toward this emergency. All of this to say, I am really looking to save more and spend less so that if I do have to consider disability for a while, it won't be so financially stressful on me.

[minnie1928]

I don't mean to sound rude (really I don't), but are you asking a question and looking for a suggestion/response to help you in your situation? If so, then you'll need to post more than just your debts. Income, expenses, etc. are needed to make an informed response, if that's what you're looking for....

[Thriftina]

I don't mean to sound rude (really I don't), but are you asking a question and looking for a suggestion/response to help you in your situation? If so, then you'll need to post more than just your debts. Income, expenses, etc. are needed to make an informed response, if that's what you're looking for....

I was just venting. I pretty much have a game plan about my financial situation.

[boosami]

Unless you can absolutely stop yourself from re-spending on paid off credit cards, it's better for you to close them. The effect of closing a card on is typically minimal in the short term (months), and insignificant in the long term (years). The more cards and account you have, the less the effect is.

For the medical procedure, I would definitely take $500 out of savings and apply it to your debt payoff to cancel out the additional charge you made.

You mentioned you have a gameplan for debt payoff. What exactly is your plan?

[croland]

I don't know if it's available to you through your employment, but if you are starting to have health issues, you may want to look into a FSA (Flexible Spending Account) plan. I can't link to a wikipedia article, but if you search online, there are a ton of articles out there.

Basically if you have to spend money out of pocket, at least it will be tax free.

Wikipedia:
"A flexible spending arrangement (FSA), or Flexible Spending Account, as they are commonly called, is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer in the United States. An FSA allows an employee to set aside a portion of his or her earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Money deducted from an employee's pay into an FSA is not subject to payroll taxes, resulting in a substantial payroll tax savings."

[Thriftina]

Unless you can absolutely stop yourself from re-spending on paid off credit cards, it's better for you to close them. The effect of closing a card on is typically minimal in the short term (months), and insignificant in the long term (years). The more cards and account you have, the less the effect is.

For the medical procedure, I would definitely take $500 out of savings and apply it to your debt payoff to cancel out the additional charge you made.

You mentioned you have a gameplan for debt payoff. What exactly is your plan?

1. Pay off that Sandals card and close it.
2. Tackle the remaining credit card debt and hope to have them paid off by April '10.
3. Pay double on the student loan after the credits cards are paid off.
4. During the time I pay double on the student loan, start paying off the 2nd home mortgage by doubling the payments every other month.

[wincrasher]

HSA monies are subject to forfeit if you don't spend them, so consider that in how much you put in. A nice little deduction if you use it.

Lots of people are maneuvered into paying medical costs immediately on credit cards. It doesn't have to work that way, and is probably the most expensive way to do it. You should always ask to stretch the cost over payments or at least bill you with net 30.

This is only a good plan if you are paying off in order of the interest rate. Highest rate first. Figure in tax deductablilty of 2nd mortgage to find order of that loan.

[Granite]

it really boils down to spending less that you make and trying to increase your income and decrease your expenses. My advice is to stop charging on your cc's and to see if you can transfer some of the debt to a zero percent balance transfer. This will give you a little bit of interest rate relief.

I would create an excel spreadsheet and starting tracking the debt and as you pay it off you will get some gratification.

[geojen]

[QUOTE=wincrasher;225482]HSA monies are subject to forfeit if you don't spend them, so consider that in how much you put in. A nice little deduction if you use it.
QUOTE]

HSAs you can roll from year to year, FSAs are the plans with the use or lose it rule, from what I understand.

[ernesto sidi]

Here's what I did, you be the judge

I am speaking from personal experience, and it worked out just fine for me. My credit score is 805 from all three credit agencies.

First off, don't close any of your cards. Leave them open. The credit bureu (sp?) will look at the ratio of your debt to your available credit, so you want your available credit as high as possible, while keeping your balances as low as possible. Keep balances low, make all your payments on time, no exceptions.

Get rid of your second mortgage by converting it into a line of credit. It does you no good to have that loan, at a higher interest than your first, without offering you any leverage to use on emergency expenses such as your MRI.

Go down to your bank and get an equity line of credit, and use it to pay off the 2nd mortgage. Do it at the same bank where you do your regular banking, say BofA. Get a balance a few thousand higher than your 2nd, say about $20,000. Use that available balance to pay off your cards. Next, take all you cards out of your wallet and introduce them to mr. shredder. Keep just one MC or Visa for emergencies.

Make regular payments to your line of credit. It will all be tax deductible and will take the place of the cc's until it's paid off. I got my loc at 3.25% a while back from bank of america, not sure what they are offering now. whatever it is, take off 30% after tax deduction.

Are you using bill pay? If yes, then set up a recurring payment to your emergency visa or MC cc, say about $5 or $10 per week, every week. It will build up a credit balance, and that will absorb those emergency situations such as medical bills or other expenses. Yes, you are loaning the cc company your money with no interest, and you could put it in savings. Doesn't matter, you're not out to get rich on the interest you could get from savings on a few bucks. Avoid mixing your savings with emergency funds. Your savings should be just for savings. If you're drawing from them then they are not savings, they are emergency funds.

After your credit cards get absorbed into your line of credit, take the minimum payment for each card, or whatever you were sending them, and apply it to the line of credit. Make an aggregate payment to the LOC and that will bring the balance down steadily.

Do everything online. Link your checking account, saving account, emergency MC or Visa, and your line of credit on the same online screen. it must be from the same bank. Doing this will avoid lots of confusion, expedite transferring funds between accounts, eliminate wiring fees, and put all your money within easy reach. I use Bofa just because it was the first bank I used when I left college, but you can go to wells, citi, chase, whichever large bank that offers all the products under one roof.

ernesto