Financial Advice on How to be Debt Free

[spankamber]

I have a lot of credit card debt and was hoping this could be a place to post advice on easiest way to pay off and tackle and actually have a savings account. I've always spent everything I have and have over 15 credit cards with high interest and am paying the smallest revolving with the highest interest first and tackling one by one. I feel like Carrie from Sex in the City when she realized she had spent all her money on shoes and clothes and had nothing really to show for all her hard work, lol I know I have a problem. Whenever I'm feeling down I like to spend money and go shopping. I get bored with my surroundings easily and will put items on credit card even when I know I shouldn't. I'm drowning in my debt never have anything for taxes and have to make a ridiculous amount monthly just to pay the min bills. So I would love advice on the fastest way to be financially free.

 

[JerryBoBerry]

First of all you're not alone.

From here on you're probably not going to like the advice or just get bored with it because you're heard it before. Figure out which credit card has the lowest amount on it and cut it up. Yes, destroy it. Make your goal to just pay it off so you'll have one less monthly payment. Then don't think you have that money free. Instead cut up another card and use the money you would have paid on the other one to add to the monthly payment on the 2nd. Repeat till you have one (maybe two at most) left. As you progress, the additional money used from the other cards will pay off the current target cards even faster.

Additionally you need to rethink how you think of credit cards. Every time you cut up another card remind yourself that by having them you are actually able to spend LESS. All that money you are just throwing away, in interest and fees, to the credit card companies, you get nothing in return. Once you have no balance on cards all that interest becomes yours to spend however you want. Another way to think of this is to have a goal in mind. Normally I would say once you are down to one credit card that, you pay off to zero balance each month, plan on doing something you like as a reward. But in this instance you might also set goals toward investing. Tell yourself once you have zero debt your new goal will be $2500 to start an Ameritrade IRA account. Your future retirement becomes your new goal and can turn into a hobby in itself. Since you'll want to study the stock market to figure out which stocks you'll invest in. Or have a simpler goal for savings. Plan on investing smaller chuncks in CD's with your local bank. You won't earn a high return right now but they are safe. (just examples, you pick a goal you like)

Now for the hard part. Somehow you have to overcome the urge to go shopping when you're bored. I know that's a tough one. I have the same pattern towards bookstores. I get bored I go walk around one seeing what's new. I don't think I've ever been able to leave one without getting a book. All I can offer here is don't go to the stores in the first place. Try to get a new hobby that is inexpensive. Take walks or other exercise. Read books. Spend hours on ACF responding to each and every post like me. :icon-cry:

Basically I wish I could offer better advice. I already know you've heard all this common sense stuff before. But when it comes down to it I think this is just what must be done. There really is no other way to get out of debt the quick and easy way. Otherwise the average personal debt per person in this country wouldn't be over $50,000 right now.

One thing I will say for you is you've already made a great first step just in being willing to talk about it and share your desire to change openly. :handgestures-salute:

 

[HiGirlsRHot]

I've spent a lot of time on financial forums over the years. I've meet a number of reformed/cured shopaholics. Dave Ramsey http://www.daveramsey.com/home/ has terrific advice for people trying to take control of their finances. His Total Money Makeover seminar is highly recommended and there are forums you can go to get advice from people who have been there and done. that. I am not big a fan of Suze Orman, but her TV show is often worth watching, especially her "can I afford it segment". The steps she outlines for thinking about do I really need to buy this and can I afford it, are a good discipline to develop.

Finally, I've met a couple of "graduates" of this forum getrichslowly.org..

Good luck

 

[LadyLuna]

Leave your credit cards at home, and take cash. Only allow yourself 1 extra item per shopping trip (NOT store, TRIP). Once a month, take $11 to the dollar tree and treat yourself to 10 $1 items (they have all sorts of cute hairbows). Or to Target's dollar section. OR make a list of things you want. You can get 1 every month. No more than that. Once a month, you also get 1 item for work.

Work on your self control. Every day, count backwards from 100. If you get distracted, start over. This helps with self control, which will help you get over the problem. When you master that, count backwards from 100 by 3's (100, 97, 94, 91, 88...). It's harder than just counting from 100. The first gives you the discipline, the second provides focus to go with the discipline.

Replace the desire to shop with something else. Tell yourself, "I don't need to shop." Try running instead. If that doesn't work, try meditation. If that doesn't work, try dancing. If that doesn't work, try drawing (on paper, on mspaint...). Keep trying things until you find a cheap substitute for shopping.

Most importantly, tell yourself that you can do this. That you don't need to shop, that you can break this habit, that you can get yourself out of debt. Keep telling yourself that. (Post it in the positive thinking thread if you wish). One day it will click, and you'll really believe it. Keep telling yourself it even when you finally believe it, and add in "I will not give in. I will <insert activity> instead of shopping." It will happen.

This will take time. It's not going to be easy. Keep your head up, believe in yourself.

 

[Red7227]

Sounds like you really need to get a debt consolidation load to pay off all those cards, and then have a fixed lower interest payment to make each month.

As for how to deal with spending, this is what I do. Not everybody can do this, so I'm just throwing it out there. Build false expectations.

1/ Allocate money for staples that you need to live (this does not include make up or shoes).
2/ Allocate money to pay off your cards.
3/ Anything over that you can spend as frivolously as you like (though spending the $11.50 you have left over is not quite the same as 15 credit cards.)

I have been doing it for years and its very hard work, but you can make it happen. I have about $1900 in credit card debt at the moment after a couple presents to myself, a trip to the dentist and paying for an emergency trip to visit a friend with a bipolar 5 yo.

I will have that cleared up with about 4 months of steady work once I'm back and be back to my natural debt free state.

 

[PersonalAngel]

I would say it depends what kind of person you are honestly. Do you want feel rewarded now or can you handle waiting?

In my opinion the best way to get out of credit card debt is to eliminate the HIGHEST interest rate one first and it will end up saving you the most money in the long run.

If you are the type of person who needs to feellike they are getting out of debt faster then pay off the credit cards with the lowest debt first.
This will cost you more in the long run but has a higher chance of success. People feel better clearing a $300 card instead of putting $300 on a $10000 debt.

 

[spankamber]

Thank you all so much for the helpful well thought out advice. I feel much better and hopeful I will do this!

 

[emptiedglass]

A guy told me once that he was terrible for making impulse buys all the time, but found something that worked. Like others here have suggested, he'd keep his card at home, and not in his wallet. In fact, he kept it in a glass of water, in his freezer. When there was something he saw that he really wanted, he'd have to go back home and take it out of the freezer. By the time it unthawed, he had usually talked himself out most purchases.
It's also hard to convince ourselves to mostly spend money on what we need. If I own 100 pairs of shoes, I probably don't "need" any more. Nor do I "need" a new phone/mp3 player/computer when the old one is still fully functional and is adequate for my usage. Booze, cigarettes, junk food: all enjoyable, but not really necessary (plus you'll live longer!). I'm not saying eliminate all of it - you still have to treat yourself every so often - but all things in moderation.
Consolidation will help bring down your interest rate so that more of your money can be applied to the actual debt, but they may ask you to cancel all the cards, leaving you without that spending power should an actual emergency arise.
:twocents-02cents:

 

[Mott_]

A friend of mine is/was in a similar situation to you SpankAmber. She did what a couple of people suggested here already - got a consolidation loan and worked out a monthly budget with a debt adviser from her bank. She also put a lot of stuff she bought on ebay, serving two purposes:

1. It raised money, which was used to pay off the loan.
2. It made her look at what she thought she "needed" and what she actually needed, were two completely different things altogether.

My friend is now on her way to paying off her debt and finally feels she has some control back over her life, rather than the debt controlling it.

Best of luck with it.

 

[Aella]

I've known some people who organize with different labeled envelopes. One's for food, another for hygeine items, another for bills, another for drinks with friends, etc.
And they can only spend the money that's in that envelope for that month. Once it's gone, it's gone.

 

[Miss_Lollipop]

This may not really apply, but its food for thought and there has been much better advice given than I could in this thread.

I turned over all financial control to my Dominant. (i am a saver, he is a spender)

His spending was out of control at the time, and i was making most of the income.

The responsibility of actually being in control of finances (something he'd NEVER had before) and responsible for me, not just himself, clicked the switch in him and he ..has been in tight control of our finances ever since.

we went to see his dad last year and we were sitting on the porch and his dad was complimenting me on how well we were doing, and telling me how before he met me, Duke was always so awful with money. I told his dad that Duke was now controlling all the money. His jaw was like, about to hit the floor. I told him we had paid a 10,000 debt off this year, were working on my student loan in nz and had been able to afford around $12,000 worth of dental work for him, me and the dogs. He put duke as the sole executor of his will a few months later (previously, his uncle had to supervise how Duke dealt with his estate) which to me was a "im proud of you son" message.

It can totally be done, and I know your determination about other things -you can be stubborn! so i know you can be stubborn about this amber!

 

[Just Me]

First of all, if you can avoid it, stay away from those debt consolidation/credit counselling organizations. Most of them seem to be scams of one sort or another. Also if you use one of those places it is almost worse in creditors eyes than filing bankruptcy. If you are already missing payments and being sent to debt collectors they can be something to consider, but make sure you research these organizations/companies on the internet, see who is reputable and you can usually find complaints and reviews from people who have used them.

Secondly, be a little wary of Dave Ramsey's advice. It has worked for many people, so I have heard, but he and his system is not infallible. His approach is based more on the psychological than on math and since everyone's psychology is different it might not work for you. If you follow this link http://www.reddit.com/r/personalfin...ow_do_you_guys_feel_about_dave_ramsey/c8s0jre , someone sums up the things to consider with Dave Ramsey's approach.

 

[Red7227]

First of all, if you can avoid it, stay away from those debt consolidation/credit counselling organizations.

Just use your bank. Get a loan that is manageable, that allows you to make additional payments. Its not a complicated process.

 

[spankamber]

First of all, if you can avoid it, stay away from those debt consolidation/credit counselling organizations.

Just use your bank. Get a loan that is manageable, that allows you to make additional payments. Its not a complicated process.

The only loans I can get are 22% apr or higher. I have one bank loan maxed at $7500 19.99% apr and bank credit card $6500 at 19.99% and a lending club loan of $12000 at 23.4% and several credit cards between 1-5 grand all 20 or higher % apr.

 

[JerryBoBerry]

In your case I'd really try to pay off the lowest one. That minimum payment will really help pay off the next faster. It snowballs with each one you get rid of as long as you can stick with using that money you 'would have' spent on the first cards to pay more on the next one.

May be a good idea to just pick two that have lowest interest rate and cut up the rest now all at once.

 

[HiGirlsRHot]

First of all, if you can avoid it, stay away from those debt consolidation/credit counselling organizations.

Just use your bank. Get a loan that is manageable, that allows you to make additional payments. Its not a complicated process.

The only loans I can get are 22% apr or higher. I have one bank loan maxed at $7500 19.99% apr and bank credit card $6500 at 19.99% and a lending club loan of $12000 at 23.4% and several credit cards between 1-5 grand all 20 or higher % apr.

I was going to suggest Lending Club or Prosper as an alternative to banks, but if you already have a 23.4% loan from Lending Club then there isn't much of a chance of you getting a reasonable consolidation loan. It looks like you've racked up 35K+ of high interest debt and interest payments alone are running $500+ a month.

To be honest, I think you are going need some professional help to stop the bleeding and develop a plan for digging yourself out of the hole. Especially since you live in the SF Bay Area one of the most expensive places in the country. There are number of professional debt counseling services around, sadly many of which are just awful, and some of which are inexpensive and very good. I don't know enough to help you sort out the former from the latter. But I am pretty sure the forums I suggested can help you steer some what clear of the bad ones.

 

[Kickaz]

I use an app called mint.com
It's free and it allowes you to set budgets and categorizes almost every purchase you make automatically.
You can set it to send you an email when you go overbudget for something. I gives you graphs and other cool stuff to see where your money is going.

This won't pay your debt but it will give you the exact amounts of money you are spending on each thing. Before mint I always thought I spent less than what I actually did so it motivated me to buy more.

As for the debt my advice would be to pay the new debt first and then the one that is over 6 years old...(I don't know why it works like that for credit score purposes).
Also start paying your highest interest debt first.
After you are done paying all your cards close your accounts and just have one credit card and don't use more than 30% of your credit.
Don't increase your credit limit if you don't need it even if they offer you.

Wish you all the best!

 

[Red7227]

First of all, if you can avoid it, stay away from those debt consolidation/credit counselling organizations.

Just use your bank. Get a loan that is manageable, that allows you to make additional payments. Its not a complicated process.

The only loans I can get are 22% apr or higher. I have one bank loan maxed at $7500 19.99% apr and bank credit card $6500 at 19.99% and a lending club loan of $12000 at 23.4% and several credit cards between 1-5 grand all 20 or higher % apr.

Ok, that is looking pretty difficult. Shop around online and see what is available. You should be able to find a lower rate somewhere. The credit card rates are the same here but our loans are running between 8% and 15%. That's no guarantee that rates are lower in your part of the world, but you really need something better than you have.

Good luck sweetie

 

[SweepTheLeg]

I know too many people and have too many friends that live pay check to pay check, so with that along with my up bringing I am the exact opposite. I have only one credit card and I have the mentality that I don't make any big buys unless I know for sure that I already have that money saved up. I guess that's my advice that's worked for me my entire adult life on staying debt free is don't spend money you don't have.

 

[Paulie Walnuts]

Have you considered bankruptcy?
It's often the best alternative.

 

[spankamber]

Have you considered bankruptcy?
It's often the best alternative.

Actually I am considering it. Here they want like $3 grand or more to file and I have to read all the paperwork to make sure they won't technically own any of my content etc. Since in addition to all the debt I owe over 8 grand in taxes too that I haven't been able to save for. I know it's my own fault. I'm ready to make a change and take control. And thank you Lolli I'm totally willing to have "Daddy" handle the bills if he is up for it!

 

[Mott_]

Have you considered bankruptcy?
It's often the best alternative.

Actually I am considering it. Here they want like $3 grand or more to file and I have to read all the paperwork to make sure they won't technically own any of my content etc. Since in addition to all the debt I owe over 8 grand in taxes too that I haven't been able to save for. I know it's my own fault. I'm ready to make a change and take control. And thank you Lolli I'm totally willing to have "Daddy" handle the bills if he is up for it!

S Amber, do you have an organaisation like the Citizens Advice Bureau, which offers free and impartial advice, available to you?

http://www.adviceguide.org.uk/england/d ... ruptcy.htm

Maybe you could talk to an expert who can help you decide what your options are? It may be that bankruptcy is the best option for you, but I would want to rule out all other possibilities first before going down that route.

 

[JordanBlack]

Hi, my name is Jo and I'm a SHOPAHOLIC!

I love pretty stuff and I like computer parts (geek yup)! I used to spend all my paychecks on "stuff" - from pretty dresses to pretty shoes (I have clothes with tags on them and shoes I have never worn outside my apartment lol). I've had harsh times when I couldn't afford to pay my bills and feed my critters but I have never ran into debt, because I have NEVER owned a credit card in my life (it's too bloody tempting).

For the past year I just learned to restrain myself ... just a few things that worked for me:

- window shopping, be it online shopping or mall shopping. You'd think I would've been more tempted to buy stuff if I was actually seeing them, but no...I was so overwhelmed by how many wishlists I was making (from newegg, amazon to wholesale lingerie sites from China lol) that just by adding those things on my wishlist and not in my cart I was somehow satisfying my craving to spend money. Plus I'm an undecided type of shopper...give me too many choices and I won't buy anything. :lol:
- making two bank accounts, one where I receive my salary (and where all my money are) and another one which most times has nothing on it, that has a debit card attached. I told myself I'll be transferring money from my main account onto the other that actually has a card only when I REALLY needed it (for food, bills etc).
- I gave myself 4 days/ month to spend money ...every other Monday. Three Mondays for necessities and bills and one Monday to SPOIL myself - buy stuff I want, but don't need: clothes, lingerie, shoes, gadgets. My spoil day had allocated only 10% of my earnings for the entire month.
- also I put money aside, for emergencies & for travels - between 25-30% of my monthly paycheck.

These small things really helped me to somehow restrain myself and also save some money for rainy days.