Where do I even start? Paying off debt..

posted 6 months ago in Finances
Post # 32
Member
10709 posts
Sugar Beekeeper
  • Wedding: City, State

kmbumbee190618 :  

Would you be able to put your SLs on income contingent repayment plans? Not having any idea what your financial situation is, that’s just spit ballin’.

Post # 33
Member
7921 posts
Bumble Beekeeper

anev :  I am under the assumption that this debt is going to take a few years to pay off – not a few months. That’s why I think it’s too much time to stop retirement. I have an account I put about $20-25k of my own cash into when I was in my 20s (there were some employer contributions in the early years as well). I haven’t touched the account in 5 years and it’s up to $90k and is projected to hit a $1 million by the time I retire without any additional contributions. That’s HUGE. I’d have to be destitute and homeless to stop saving for retirement. 

Post # 35
Member
283 posts
Helper bee

1. How much in your savings do you have? Is it enough to pay for a car repair if needed? If so, I’d stop contributing to it for now.

2. Still contribute to your retirement 

3. Use the snowball method: https://www.nerdwallet.com/blog/finance/debt-snowball-calculator/

Pay your lowest balance off first and continue from there. You’ll pay the minimums on your other accounts.

4. Download the app Mint on your phone. Stick to a budget. 

 

You can do it! Honestly, your debt isn’t that bad. Student loans are the worst but they’re not considered a “bad” debt. 

Post # 36
Member
1631 posts
Bumble bee

Buying new isn’t always a bad thing. I bought my car new with a loan because it came with a 1% interest loan. I had the cash to just buy it in full, but had better things to do with the money at that interest rate. The newer cars had better safety features (side view camera etc.) so it was worth it to me. 

 

I disagree with paying off the smallest loan first. Prioritize highest interest rate. 

Post # 37
Member
53 posts
Worker bee

kmbumbee190618 :  I agree with most of the other posters- pay off the highest rates first, which will be the the CC. There’s no way in hell it’s 0% forever and carrying consumer debt is not financially smart. Then attack student loans and car loan in order of interest, not amount.

I can’t believe I even have to say this, but… PLEASE do NOT stop contributing to your retirement account.  LilliV : is spot on.  

Not that you’re considering it, but other readers might- It’s utterly stupid to make another financial mistake in order to solve your current debt situation.  You’d never replenish the compounding that you’ve missed out on and will hurt you more than your current loans will. 

Post # 38
Member
577 posts
Busy bee
  • Wedding: May 2015

kmbumbee190618 :  What are you degrees and career? Do you qualify for any loan forgiveness programs? That could help clarify your repayment priorities. 

Post # 39
Member
7921 posts
Bumble Beekeeper

mooncrown :  for kicks I just used a calculator to figure out how much I’d have to save to catch up if I took that $90k out now and started over. It’s $700/month for the next 35 years! That’s $294k to make up the same amount as that $20k I saved in my 20s. I’d rather keep putting in zero now and hit the same goal than put in $700/month.  Granted this isn’t exact because I did have some employer match, but still. It’s a lot to catch up. 

Post # 40
Member
930 posts
Busy bee

kmbumbee190618 :  credit cards, then car (depreciating in value), then fed loans/school loans.

BUT dont stop paying them. id pay the amount due or a little over on the last few and the credit cards need to be taken care of first girl. Credit buraues look at how much you are using from your credit limit. 

Post # 41
Member
8830 posts
Buzzing Beekeeper

anev :  The interest on her debts are less than what she would be earning on a typical 401k, and that’s not even factoring in the compounding. I agree with you that she should redirect the savings — earning 2% while she’s paying 5% doesn’t make sense. But her retirement is probably earning over 5% AND is being compounded AND is reducing her taxable income. Giving that up would be penny-wise but pound-foolish. And if her employer matches any part of her contribution, that is literally giving away free money. Even if they’re not though, with her low interest rates, it makes more sense to keep putting into retirement. Unless she finds out that Discover is about to skyrocket. If that’s the case, then yes, she should pause the retirement contributions until that’s taken care of. 

Post # 42
Member
806 posts
Busy bee
  • Wedding: October 2016 - Wedgewood Las Vegas

I’d tackle the credit card debt first. Secondly, I’d focus on the next highest interest rate loan you have and really try to knock that out. 

Create a strict budget, and stick to it. If you’re really serious about getting out of debt then you really need to cut any ‘extras’ out of your spending. This includes any fun shopping, going out to eat, coffees, etc. It sucks big time, but really is the only way to reduce debt quickly. It won’t be forever, either, and really is worth it in the end. 

Lastly, stopping contributing to your retirement isn’t the death-knell some PP are making it out to be. However, it also shouldn’t be something you should jump into without a really solid plan that you KNOW you’ll stick to. Your age, income, and how many years you have until retirement will really play into the decision as well. As will the length of time you would be stopping the retirement savings. A single year may not negatively affect you long term, but multiple years might. A good financial counselor will be able to help you decide if this is something you need to do or not. 

Personally, I don’t think you’re really in a dire enough situation to stop the retirement plan at the moment. I have much, much more student loan debt than you, and I haven’t gone through that route yet, and will not likely do so. 

While I’m not technically following Dave Ramsey’s plan, I do listen to his show on the radio. It has helped me make some financial changes, and does inspire me to do better. It is inspiring to hear about others who are in the same pickle as I am, and learn from them about how to get out of it. 

Post # 44
Member
7921 posts
Bumble Beekeeper

kmbumbee190618 :  I think the wait to join the 401k is sort of a silver lining. That’s such an amazing match that it would give me extra motivation to pay off the debt to be sure I’m able to max it out! 

One thing that really helps me keep spending under control (although admittedly I’m not a big spender anyways) is to budget misc. spending weekly. I take our monthly income, subtract out set bills and savings, and the divide the leftover into weekly chunks and track all of the misc spending in a simple phone app. Anything left over at the end of the week I either roll forward to the next week (depending on the amount and my expected expenses) or transfer into a separate “fun” savings account where I save up for bigger expenses. For example my budget is $200/week. That’s for groceries, clothes, gifts, random parking meters, dog treats, haircuts, manicures, random kid stuff, coffees, EVERYTHING that isn’t a seperately budgeted line item (gas for the car and medical care have line items in the monthly budget so aren’t included here). My husband’s budget is for his stuff and family entertainment. The worst case scenario is you want to buy something and you’re out of budget that week so you have to wait a few days which is much easier to do than waiting a month. 

Post # 45
Member
9447 posts
Buzzing Beekeeper
  • Wedding: August 2012

There is a “we are debt free” board over on babycenter that is really helpful if you’re willing to list out your whole budget/expense info. You don’t have to have kids to post there either lol. There are some super smart ladies who are totally great at this stuff.

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