Post # 1
I’m really embarassed to be writing this post (even anonymously) but I just thought maybe some of you can give me some advice. So I’m currently about $50K in debt. I just listed out all my debts (student loans, credit card, car, etc) and that’s what it came out to. It just makes me sick and I just want to cry! To make matters worse, I got a letter from my credit card companies saying I have too much debt so they lowered my credit limit. My credit score took a hit because of that, since my credit to debt ratio is really high now. I have four credit cards and they’re all pretty much maxed out, thanks to the companies lowering the limit, so I literally cannot use my credit cards. And I’m getting hit with interest fees every month. My take home pay after taxes, insurance, and 401K is about $2,000/month so that’s pretty much what I’m working with in terms of my budget. Of course there are the neccessities that I must pay for like rent, utilities, etc. I try to volunteer for overtime as much as I can but it’s pretty rare that it is available.
Some of the steps I’ve taken: I stopped buying unneccessary items like clothes/shoes, I make coffee at home and pack a lunch for work. I don’t have cable at home and I just gave up my smartphone and have a cell phone with no data plan. It’s painful but so much cheaper! Right now I am looking to stop all contributions to my 401K plan but I’m not sure if that’s a smart idea. Anyone knowledgable in that area?
If any of you have some good tips, it would be very much appreciated! Or if there are any Bees who were in debt, how did you pay it down? Thank you.
Post # 3
My debt is a lot less than yours, but what I’m doing is paying off one card at a time. Making minimum payments on everything, but each paycheck I put $50-100 towards the card I’m focused on at the time. It makes sense to pay off the card with the highest interest first, but mine are all about the same so I’ve paid the lowest balances first so I can cross it off the list. I’ve got 2 down, 4 to go and total they equal about $6000. Good luck!
Post # 4
A good way to lower credit card debt is to see your about about a loan to consolidate credit. The interest rate is much lower and with a fixed monthly payment makes it easier to pay down. An important thing to do if you go this route is to cancel any high interest cards and try to use only one card that you can payoff every month.
If this is not option, you can call the credit card companies and ask about lowering the rate on your cards. Some of the companies, especially MasterCard, visaand ex and discover will frequently have a fee for this, between 35-75 per year, but with high debt you usually end up saving ALOT more in interest than the fee.
You should also contact a financial advisor, most will offer free consults and help you plan out a reasonable budget, and payback plan.
Post # 5
First thing to attack is the credit cards. Take a chunk of what you have left over after essentials and pour it into them. Usually, one starts with whichever has the higher rate. In your case, I would start with the ones that lowered your limit. It takes patience and determination but can be done.
Dont read too much into the student loans. Kepp paying your monthly installment on time.
Post # 6
My suggestion is to get the CCs down to $0 as soon as possible. Take one of the cards, whichever has the lowest limit and keep that one open. The other 3, Cut Them Up now! Write up a budget and account for ALL of your expenses (do you get paid monthly or fortnightly?). Pay for everything in cash only and pay off your cards bit by bit, even if its just interest + $50 each payment, you WILL eventually get there. The loans can be managed quite easily with a strict budget and sometimes finance is not a bad thing but credit card debt is not good, especially multiple cards. Good Luck
Post # 7
I think as far as the 401k is concerned, most advisors would likely tell you that you should contribute up to the point that your company matches, because otherwise it would be like turning down free money.
Post # 8
@MASPA: I think this is the best strategy too. You could also pay off the credit cards in order of which one you can pay off first, sometimes getting that first bit of debt paid off can be really encouraging to get the rest of it done.
Have you considered consolidating your student debt or seeing if you qualify for deferment or forebearance? There are also some student loans/credit cards that will lower your monthly interest if you set up automatic bill pay.
Post # 9
Here in the UK student loans are the cheapest loan you will ever get and dont really account for everything so I don’t even think about mine. If it’s the same kind of thing, I would definatley make this the last thing to think about. Can you transfer the balance on your credict cards to one with 0% interest (usually for a set time?). Then whenever this period runs out, transfer to another one. Also, set up a direct debit to ensure minimum payments are met each month so you don’t rack up huge charges.
This guy is amazing… http://www.moneysavingexpert.com/
Is your car on finance? Can you get out of the contract and get a cheaper one?
Do you have websites like http://www.moneysupermarket.com where you can compare deals for your bills? Make sure you switch when you can to get the best deals.
Do you pay for your insurance etc on a monthly basis? I saved over £100 paying mine in a lump sum rather than over 10 months.
Post # 10
Definitely don’t stop your 401K. You will NEED that one day.
As for factoring in your loans, take all installment loans (car/student) out of the equation and focus primarily on your credit card debt. Credit card debt is what kills your credit score. Having installment loans like a car or student however do not.
Whenever I need to tackle my credit cards, and I usually do after the holidays, I always pay off the card with the lowest balance first. It’s quicker to pay off and I get a sense of accomplishment that one of them is done. BUT, in order for this to be effective, be realistic about what your monthly expenses are and PAY YOURSELF FIRST. Then use whatever you have left to pay off the debt. If you don’t pay yourself first and just dump everything into paying off your debt, you’ll find yourself dipping back into your credit cards until your next paycheck, and that’s extremely counterproductive. (I speak from experience on that one)
Post # 11
I know it seems to make sense to pay off the biggest debt first, or the debt with the highest interest rate – but this is not true!
You need to focus on one debt at a time. It will snow ball. You pay off one card, and then you move onto the next (making sure NOT to rack up the debt again on that card). As each card gets paid off, you will be able to put more and more towards the next debt. At the end, let’s say your student loan is the largest debt, you will be able to put down much more than minimum payment and pay it off much faster – saving you in interest charges.
Post # 12
Is there any way you could get another part time job? Something simple and easy, maybe one day a week? You could bag groceries at the grocery store on Saturdays and use that money to go directly towards your debt. Grocery stores normally pay decently and it would be an easy way to feel like you’re doing everything you can to lower the debt. Either way, good luck!
Post # 13
@lala101: Im sorry you are stressed about this. I have a degree in Financial Management so first I would say read Dave Ramsey’s Total Money Makeover. Its an amazing book and a very easy read. As for stopping 401k contributions that really depends on you age. If you are in your 20s I would say stop for about a year but no longer than that. Definately do NOT take any money out of the 401k. If your credit score is 700 or lower you will not qualify for a private loan with your income so consolidating your CCs might not be an option. The main thing is 1. set up a small savings acct with at least $500-1000. Once that is set up start paying anything you have left over each month towards your smallest debt. Once that one is paid off, put that monthly payment plus anything extra towards your next smallest. This is called the snowball effect. I know $50 sounds like a lot but it should only take you a couple years to pay down or completely off if you really stick to a good budget. 🙂 But Definately get the book!! Its amazing.
Post # 14
I think you’re already on track of your finances as you’ve had the courage to look at the debt in the face – good for you! That’s step 1 in my opinion. You received really good advices here so i won’t meddle – also because things here are completely different. I have only 1 credit card and no students loan – never had. Wishing you the best of luck and i an sure with your attitude you can do this
Post # 15
+1000 to the snowball plan a PP mentioned! It WORKS and you will feel such a sense of accomplishment and freedom. You CAN do this!
Post # 16
Student loans are looked at differently than other debts. If they weren’t, SO many people would be really screwed. Car payments are also different.
Focus on your credit cards. Figure out how much your necessities (rent, gas, car payment, groceries, utilities) are a month, and the rest of your takehome minus that needs to be divided up between your credit cards. However, because of your level of debt, I agree that you should focus on paying them off one at a time. List out all of your cards and their balances. Pay off the smallest balance ASAP. When that’s at 0, focus on the next smallest, and so on. That will help you more mentally than anything–paying off something completely is a huge weight off of your shoulders. When one is paid off, don’t use it anymore. That’s kind of obvious, but it needs to be said.