Can anyone offer advice on debt problems?
Mу wife аחԁ I аrе 25 years οƖԁ, wе һаνе over ,000 іח revolving debt, paying аח average apr οf 15%. Wе һаνе decent credit аѕ wе pay ουr bills οח time, bυt wе аrе חοt аbƖе tο ɡеt a loan bесаυѕе οf ουr credit available / credit іח υѕе ratio. Wе pay over 00 per month јυѕt іח credit cards аחԁ pay out a total οf 00 per month іח regular fixed bills, חοt including gas аחԁ food аחԁ entertainment. At tһіѕ point wе аrе јυѕt trying tο continue tο mаkе ουr payments οח time, bυt wе һаνе bееח living οff οf tһіѕ credit; borrowing frοm peter tο pay paul аחԁ now wе аrе reaching аƖƖ οf ουr credit limits. Wһаt іѕ tһе аחѕwеr tο manage tһіѕ without bankruptcy? Wе work аѕ much аѕ possible аחԁ һаνе חο assets tο sale οr pull equity frοm. Oυr net household income annually іѕ 000. Aחу advice (οtһеr tһаח suicide, lol)?
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Tagged with: Advice • Assets • bankruptcy • credit cards • Debt Problems • Gas And Food • Household Income • pay bills • Revolving Debt • Suicide
Filed under: How To Get Out Of Debt
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Firstly, how WONDERFUL that you are WAKING up at only 25. If you can rid yourself of this debt in the next 3 to 4 years, you’ll have a liftetime in front of you of pure weatlth. Took me till I was 45 (3 years ago) when I realized that we were $78K in debt on credit cards alone. (not to mention our house and car). When I first realized all this I just about had a stroke – no kidding. 3 years later and I am happy to report that we have just under 16,000K in credit card debt. I am still working on it but expect to be out of debt completely in less than two years. You need to change your mindset and treat this as a war, because that is exactly what this is. You have a huge battle, but you CAN do this. You are up against credit card companies with billions to back them, all their high end marketing to CONVINCE you that you need some dumb trinket, and off you go into debt. It’s horrible. Here is what I did to fight my battle.
1. CUT up all credit cards (save one for an EMERGENCY purposes only). You will NEVER get out of debt if you continue to use them. So don’t. NOT for anything. Don’t even carry the one that you keep for emergency purchases (like a car repair) on your person. You don’t need the temptation. If I can’t pay for something in cash, I don’t buy it, period. This was the hardest thing for us to get over. Its a mindset that you must learn to grab hold of.
2. Keep track of every penny that you spend. If you have MS Money or some other inexpensive money tracking software, begin using it TODAY. You will be AMAZED at where you are spending your money. Run the reports monthly to see where your money is really going. What’s the point of using a tracking system if you don’t REVIEW where your money went? You will find a million places to begin cutting. Example; if you have the internet, you don’t need a daily paper coming to the house. Wife getting her nails done? She can do them herself. Cable TV, cut it out altogether or reduce the package – there are probably tons of channels you never watch anyway. In other words, if you are tracking what you spend, you WILL find a ton of places that you are both comfortable disposing of while you fight this battle.
3. Call EVERY credit card company that you have accounts with and ASK them to reduce your interest rate. (I took two days off from work 3 years ago to do this and several of them DID just by asking.) If you are paying on time, you may find that many of them will reduce your rate just by asking. If they don’t reduce right now because of your overal debt ratio, TRY AGAIN in a couple of months. Mark your calendar, call them again and ask again. I did – it worked. This will save you HUNDREDS of dollars over interest to these slobs. (yes, that is what they are).
4. Look around for creditors that are willing to give you excellent interest rates for balance transfers. BE CAREFUL though, because many of them are only for a period of time. I found one (MBNA) that offered me a ZERO percent interest on balance transfers for 12 months & one for 18months. I took them up on it. I transferred 15K to two different MBNA accounts (30 grand total), and had one at zero % for 12 months, the other 15K was at zero % for 18 months. The trick is to watch your calendar LIKE A HAWK and as soon as you approach the end of that period you have to have a plan to do something with the remaining balance. Either pay it off or find another card that will allow you a balance transfer at another lower rate. Essentially what I did was put 30K over 2 cards at ZERO interest. This saved me a TON of money. But I was diligent and made certain that when the intro period was over, I found another card (one of my other credit card holders actually) that offered me a 4.99% interest for LIFE if I did a transfer. That is what I did. The point is, you have to watch these dates and USE the credit card companies to YOUR advantage, not THEIRS. Cause that is what they COUNT ON. Most people don’t watch the dates and then when the intro period is over the credit card company starts raking in the interest. I play the game, I just play it MY way now. Also, if you end up doing a balance transfer with a new credit card company, they will send you a credit card. CUT it up the MINUTE it arrives. You are doing this SOLELY for the benefit of the transfer and you dont want to be tempted to use the cards on new purchases. The purchase APR will be much higher than the balance transfer APR.
5. I also had a 401K with over 30K in it. I made a painful decision and because we needed immediate relief on our monthly outgoing expenses, I borrowed 16K from my own 401K to pay down some of the biggest card balances. The monthly payment on these credit cards was more than the payment back to my 401K, so I got immediate relief by a reduction in outgoing expenses of a little over $200.00 per month. I have one year left of payments back to my 401K and then I will have an additional $389.00 per month in my paycheck. Cant wait! As soon as that happens, I’ll be putting that $389.00 right onto the remaining last credit card in addition to the normal monthly payment.
6. The remaining credit cards that were left, (there were six left), I paid the minimums on 5 of them and made double payments on the one that had the highest interest rate. When that card was completely paid off, I took the amount that I was paying monthly to that card, added that to whatever amount I was paying on the 2nd highest interest card and paid that off. With each card that you pay off, you repeat the same process. Take all the previous monthly payments add them to the payment on the next card and so on and so on. You will eventually pay them all off.
7. Don’t try to pay extra on multiple cards all at once or you will get nowhere. When a general fights a battle he does not break up his troops and send them to 10 different places. Each troop would be defenseless and ineffective. He puts ALL his men in one place and they fight one magnificent battle to end it all. Your finances are the same. Put all your effort on one card at time, pay it off and move on to the next card (battle).
8. Whenever you find yourself with any extra money, as much as possible you should be putting it towards your highest credit card as an extra payment. If you get a bonus from your jobs, income tax refunds, birthday money – whatever, use it to pay down the debt. Seems extreme but trust me on this, you don’t want to get to the point that I did and wake up in your 40′s one day realizing that its even more out of control.
If you can truly get this in check now over the next few years, you will honestly have a lifetime of freedom and wealth staring you right in the face. Paying out what you are paying each month to these sickening credit card companies (who by the way are getting FILTHY RICH ON YOUR HARD EARNED MONEY) is what they thrive on. Time to start using them to YOUR advantage and making it your personal goal to stick it back to them. You will feel really great about yourself that you achieved this on your own without going bankrupt and you will have the financial world by the cahones (if you know what I mean!) Good luck to you and your wife and START TODAY!!