getting out of debt advice

[LivingAlmostLarge]

I've a friend who stared at me when I said we never carry credit card debt. Everyone carries a little bit of debt was the statement. I said no. Sometimes big repairs, medical bills, emergencies, etc. How do you not carry debt? We just don't.

Followed up with how did you get in the position of not carrying a little bit of debt? I say this because another says they don't have CC debt but they do carry a little that gets paid off every year with bonus checks. How do people manage without carrying a little here and there?

How do you manage without a car payment? When I suggested a 10 year plan that you maybe spend 10 years with the same car and then alternate between spouses/partners changing cars means you won't have more than 1 payment at a time every 5 years. Truth is not many people keep their cars 10 years.

But honestly how do you tell people to stay out of CC debt? I mean if you are already there how do you get out? Trust me I pondered this a LONG time.

I mean if you start out from college without debt it's a lot easier. Make a budget, pay off school loans, live within your means. But if you start out always spending a little more than you make, it just sort of creeps up KWIM?

And then cutting back to spending what you make isn't enough. That's the real problem. When i suggested spending only cash the friends said it could work. But how do they pay off debt? I mean that's a cut in lifestyle already to cut up credit cards and pay cash.

I can see that. Say they were overspending by 10%. That's a 10% lifestyle reduction. But then to cut another 10% for debt reductions seems insane. Honestly 20% of lifestyle cut isn't easy.

Have you guys ever lived through cutting 20% or more of lifestyle to get out of debt? Any suggestions? I can only imagine how hard it is. I mean it's hard to cut 10%. How do you cut even more.

[HundredK]

It is hard. We are currently paying well over 50% of our take-home income toward debt payments, in order to try and get out from under it. It's not easy. I don't have any good advice yet, I just linger on this board and try to think of the freedom we will feel when we don't have to deal with this monster.

[MonkeyMama]

Debt is about 99% mindset. We've never considered credit card debt as an option so we have never carried cc debt. I'd say that having ample savings/liquidity also helps a lot with that. Advice would be to put down the credit card and think through other options. We've bought a lot of used items over the years and worked a lot of jobs to stay out of debt, just as a couple of alternatives.

Cars, we save $100/month/each for. Every 10-15 years that means we have $12,000 - $18,000 to replace each vehicle. First cars were something very inexpensive we could pay cash for ($1k). Worked our way up from there.

We've never cut our spending, at all. I expect that cutting back spending is very difficult. You get used to what you get used to.

I'd probably recommend an inspiring blog. I don't have any personally to recommend. Some inspiring "get out of debt" blogs?

[creditcardfree]

LAL, I'm shocked you don't have advice...

The first step is to stop using the credit cards. Only use cash that comes in each paycheck. If that isn't enough to live on and pay down debt, one needs to consider all their expenses, fixed and variables. There are so many things people thing they need that they just don't (coloring hair, cable tv, having nails done, new iphones every year, ect!)

People can get part time jobs. Change jobs. Sell their stuff. Look for credit card offer at 0% and transfer high interest balances.

I would guess many of us that don't actively carry credit card debt, have come to the point of having an emergency fund to handle those unexpected expenses. Then we don't have to pull out the credit card to pay for those things.

[sv2007]

Debt isn't all bad; for example if you financed a house 6 years back, chances are you are into a pile of money by leveraging your savings, i.e. down payment. Mortgage can give you a 3:1 leverage.

We've actually carried way too little debt (now we have none, save CC, which gets paid off each month). We were not aggressive; otherwise, we'd have a lot more money. But we do what's comfortable for us.

If our comfortable level is to avoid all debts then there's no way we'd be at were we are now. So, in a way, our personality has a lot to do with how well we manage money.

[MonkeyMama]

Debt isn't all bad; for example if you financed a house 6 years back, chances are you are into a pile of money by leveraging your savings, i.e. down payment. Mortgage can give you a 3:1 leverage.

I think you are preaching to the choir.

[Eagle]

I've a friend who stared at me when I said we never carry credit card debt. Everyone carries a little bit of debt was the statement. I said no. Sometimes big repairs, medical bills, emergencies, etc. How do you not carry debt? We just don't.

Followed up with how did you get in the position of not carrying a little bit of debt? I say this because another says they don't have CC debt but they do carry a little that gets paid off every year with bonus checks. How do people manage without carrying a little here and there?

How do you manage without a car payment? When I suggested a 10 year plan that you maybe spend 10 years with the same car and then alternate between spouses/partners changing cars means you won't have more than 1 payment at a time every 5 years. Truth is not many people keep their cars 10 years.

But honestly how do you tell people to stay out of CC debt? I mean if you are already there how do you get out? Trust me I pondered this a LONG time.

I mean if you start out from college without debt it's a lot easier. Make a budget, pay off school loans, live within your means. But if you start out always spending a little more than you make, it just sort of creeps up KWIM?

And then cutting back to spending what you make isn't enough. That's the real problem. When i suggested spending only cash the friends said it could work. But how do they pay off debt? I mean that's a cut in lifestyle already to cut up credit cards and pay cash.

I can see that. Say they were overspending by 10%. That's a 10% lifestyle reduction. But then to cut another 10% for debt reductions seems insane. Honestly 20% of lifestyle cut isn't easy.

Have you guys ever lived through cutting 20% or more of lifestyle to get out of debt? Any suggestions? I can only imagine how hard it is. I mean it's hard to cut 10%. How do you cut even more.

It's all about getting on a budget, saving for emergencies, and spending less than you make. Learning to say "no" now so you can say "yes" later. Reduce excess spending. Celebrate the wins.

As far as getting out of debt and changing their lifestyle I think Dave Ramsey's Financial Peace University is a good option. Or the book Total Money Makeover by Dave Ramsey.

[scfr]

Yes, I have made the type of lifestyle cut you are talking about . . . but it was not to get out of debt. It was to save up enough for DH to quit his salaried position and start his own business.

As MonkeyMama said, it's about mindset. If your friends don't want it, it's not going to happen.

I think it also requires the ability to look to the future. In our case the changes to our lifestyle weren't easy but the decision to make those changes WAS easy because we were motivated. We knew our end goal and really wanted it. It is probably a heck of a lot easier to get motivated when you are working towards something positive you are building (starting a business) than working to erase the damage of past mistakes (getting out of debt).

I know that you know the steps that they have to take to get out of debt. The challenge seems to be getting them to see why it's important and a way for them to find the motivation to actually do it. Maybe if you knew what they are spending each year in interest and finance charges, you could crunch some numbers and show them what that could equal by the time they reach age 60-65 if, instead of making the financing companies rich, they invested at a very conservative 4-5% return? Maybe it could mean a round the world cruise? Or a vacation condo on the beach? Or retiring several years earlier? Whatever would be meaningful to them. Something that they could look at to stay motivated.

[GoodSteward]

You need an emotional push to get out of debt. Usually starts with recognizing the pain of the debt and making a choice to not want that pain anymore. I think people just get used to the pain of debt and keep it going. It's like how a lot of people who are abused keep going back. To everybody else around them it's absolutely insane, just leave? However, to the one who is hurting..it's normal and what they know emotionally.

Everybody has mentioned good advice on getting out of debt as far as technical ways, but it does no good if they don't see a reason to be out of debt. if they don't know the harm it is causing now and for the future, they don't see any reason to change. That’s the physiological change that has to happen and will only happen when they are ready for it. That’s why Dave Ramsey's ways works so well. He has a very good way of really pushing on people to think different and make that change. That’s why he calls debt stupid so much. People need to recognize the debt they have that is getting them in trouble IS stupid.

There are only a few ways to avoid debt, namely credit card debt, from my experience.

1. Pay cash always (or debit card).

• If you don’t borrow or use credit cards there is never any worry. – Dave Ramsey way and best way if you need out of debt. You typically need a higher income or need to already be settled on the good side debt for this to work continuously. In other words, it is very hard to start out young and make it all your life this way. Most that do live this way used to be in debt, paid it all off, and now are just living without new debt. You already have good cars and a house, etc so you have time to save for the next thing when you start this method. This isn’t the same as someone who has never had debt and lived cash only. I don’t think I’ve ever met someone like this actually.

2. Know how much you have available to pay each month on a card and never spend over that amount. – Most on here I would assume.

• What I've noticed is that those who do this but don't budget very strictly also have a larger than avg income to cover plenty but never carry debt.

3. Track every single transaction and match it to a budget category so you only ever charge what is planned -

• What I do using Ynab (plus #2 sometimes if I buy something unplanned, I keep it within the no interest time frame and don’t roll it

4. Hit the lottery (but even those people often wind up in deep debt)

[disneysteve]

How do you not carry debt?

We don't buy things we can't afford.

How do you manage without a car payment?

Very nicely, thank you.

I kept my last car for 14 years (and it was purchased used). I had a loan on it when I bought it but it was debt-free for most of its life with me. I bought my current car with a loan that I paid off in one year. That was just over 4 years ago. I should have it for another 5 or so years. We took 3 years to pay off my wife's van but expect to have it another 6-7 years.

[Eagle]

How do you manage without a car payment?

Very nicely, thank you.

I kept my last car for 14 years (and it was purchased used). I had a loan on it when I bought it but it was debt-free for most of its life with me. I bought my current car with a loan that I paid off in one year. That was just over 4 years ago. I should have it for another 5 or so years. We took 3 years to pay off my wife's van but expect to have it another 6-7 years.

You manage by keeping a car for years as DisneySteve said... As well as having cash in an emergency fund to pay for repairs.

4. Hit the lottery (but even those people often wind up in deep debt)

Or sometimes they even go bankrupt!

[Petunia 100]

LAL, why don't you just tell the friend how you personally have managed live a nice life while staying out of debt?

Yes, it is more difficult when you start from a position of already being in debt. But, if you simply stop adding more, it will go away eventually.

[disneysteve]

if you simply stop adding more, it will go away eventually.

Step one is to stop adding more.
Step two is to get a handle on where every dollar goes and trim the fat (or slash the fat depending on the extent of the problem) and redirect those freed up dollars to debt reduction.

[rennigade]

Im not even sure what I would say to someone who asks "how do you carry no debt?" Ive never done it other than a small amount of student loans I paid off years ago.

I would probably tell them to stop buying "stuff." Stuff can be anything from drinks at a bar, going out to eat, buying clothes they dont need, etc etc. Unless you can pay it off in full...dont buy it!

[james.hendrickson]

Just to chime in here - one important piece of this equation is that you can reduce your debt by increasing your income and using the revenue to pay off your debt. Its not just about slashing your expenses only or changing your mindset - although these are very important parts of being financially healthy.

Side hustles/ways to make extra money, etc. - all of these are very popular.