Author Topic: Putting out the Debt Fire  (Read 6328 times)

medicaustik

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Putting out the Debt Fire
« on: March 29, 2015, 01:05:49 PM »
Mustachians,

I'm four months into finally, after years of refusing to face reality, fixing the mistakes I made in my financial life.

And I'd like to think I'm doing well so far. Thanks in large part to MMM, some subreddits and the book Your Money or Your Life I've had my reality check.

I've reached a bit of a fork in the road, and I'd like to hear what you all think about the best way forward.

First, I'll paint the picture:

Monthly Income: $3580
Monthly Expenses: $2000
Credit Card #1: $7000 @ 14.99%
Credit Card #2: $4300 @ 8.99%
Car Loan: $22,413 @ 8.75%

My expenses are down by about $500 from last month, and I'm hoping I can get even lower.

My monthly expenses:
Rent: $550
Utilities: $150
Phone: $50
Car Loan: $440
Car Insurance: $260
Gym (Martial Arts): $139
Groceries: $250
Fuel: $80 (some reimbursed by job)
Pet Supplies: $60

I've worked my groceries down a bit, and starting next month, have convinced my job to reimburse my phone payment.

The biggest problem I see is my car.

I bought my car brand new last year, and it's current value is $19,000. I'm upside down.

In the past 3 months, I've been dumping $1,500/month into my higher APR credit card, but this car is feeling like a real anchor. It's locking up a lot of cash flow and it's depreciating every week I keep it. I'm resolved to cut my losses and get out of this thing as soon as possible.

So, I'm thinking about shifting my $1,500/month of excess into paying my car loan down until I'm not upside down, then saving a couple month to buy a used, reasonable car for cash. Then offloading the car and refocusing on the credit cards.

My other option I was considering would be to focus on just paying down the cards first, which would have me credit-card-debt free in 7 months. Then I could turn my focus on to the car. I did the math, and the car costs me about the same amount in interest as the credit cards. The only thing is, it's depreciating, and because it's a 2014 Ford Mustang, it's depreciating rapidly.

What do you all think I should do? Car first? Credit cards first?

rpr

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Re: Putting out the Debt Fire
« Reply #1 on: March 29, 2015, 01:17:29 PM »
Are you planning to sell it? If so what are you going to replace it with? If another car, then you need to save for that as well. Can you bike/walk or do without a car for a little while?


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caliq

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Re: Putting out the Debt Fire
« Reply #2 on: March 29, 2015, 01:18:04 PM »
I would say the car, especially if you're going to replace it with something much older (aka no payment, no comprehensive/collision). 

Your monthly car insurance is half of my 6 month payment for two cars, two drivers (2010 Ford Fusion Sport AWD, with full comprehensive/collision & 2004 Suburban, liability only).  Yikes!

Sibley

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Re: Putting out the Debt Fire
« Reply #3 on: March 29, 2015, 01:41:23 PM »
Consider reducing or eliminating the gym expense.

Can you transfer your credit card debt to a lower interest card?

Have you tried to refinance the car loan to a lower rate?

Gas - make sure you buy gas from the less expensive station when practical. There's 2 stations near me and one is consistently a little lower. I usually go there.

Can you reduce your auto insurance with a different company, modify the coverage at all? (increase deductible, are you above required coverage, etc.)

And, I'm a pet lover. I'm aware that there are sometimes things you can do to lower costs without compromising health or care. I'm going to be switching foods for my cats, it's less expensive and I can find coupons sometimes, but its a good quality food (vet approved the change). Also, many people over feed their pets. In addition to being bad for their health its also more food you're buying. If your pet has a weight problem, reduce the amount of food a little bit. I did that, the cat is a much healthier weight, happier, and I use about 5% less food. Its not much, but every little bit helps.

medicaustik

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Re: Putting out the Debt Fire
« Reply #4 on: March 29, 2015, 01:54:18 PM »
Are you planning to sell it? If so what are you going to replace it with? If another car, then you need to save for that as well. Can you bike/walk or do without a car for a little while?


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Definitely planning on selling it.

I'm thinking I'll replace it with a car worth 5-6k.

I can't go carless, except for maybe one week. My job requires a lot of local travel for which I get some reimbursement. In a pinch I could go for about two weeks without a car while shopping for one. I already have my bike and have been using it to do most of my grocery runs, etc.

I would say the car, especially if you're going to replace it with something much older (aka no payment, no comprehensive/collision). 

Your monthly car insurance is half of my 6 month payment for two cars, two drivers (2010 Ford Fusion Sport AWD, with full comprehensive/collision & 2004 Suburban, liability only).  Yikes!

Yea that's my plan. I'll pick up a cheap commuter car. It will be tough to say goodbye to my Mustang, but I'd rather be free on a farm than enslaved in a mansion.

Yea, buying that car was such a big mistake. The car I traded in was close to paid off and perfectly fine. I was just stupid, received a sizable promotion/raise and said "well I can afford this" without considering the future. Oh youth..


Consider reducing or eliminating the gym expense.

Can you transfer your credit card debt to a lower interest card?

Have you tried to refinance the car loan to a lower rate?

Gas - make sure you buy gas from the less expensive station when practical. There's 2 stations near me and one is consistently a little lower. I usually go there.

Can you reduce your auto insurance with a different company, modify the coverage at all? (increase deductible, are you above required coverage, etc.)

And, I'm a pet lover. I'm aware that there are sometimes things you can do to lower costs without compromising health or care. I'm going to be switching foods for my cats, it's less expensive and I can find coupons sometimes, but its a good quality food (vet approved the change). Also, many people over feed their pets. In addition to being bad for their health its also more food you're buying. If your pet has a weight problem, reduce the amount of food a little bit. I did that, the cat is a much healthier weight, happier, and I use about 5% less food. Its not much, but every little bit helps.

I've considered cutting the gym expense, especially since I haven't been able to go as often as I'd like (thanks to increase workload). I'm going to see if I can get it lowered at minimum, since I get along well with the head of the gym.

I applied for two cards that are balance transfer friendly (Chase Slate), but got denied due to a low credit score and high balance to credit. That was two months ago, and my total debt is down $3000. In another week, I'll be down another $1500, unless I go with paying off the car quicker.

I haven't tried refinancing the car no. Honestly, I spent the last three months getting my bearings about finances. Sort of a boot camp using YNAB and learning what I was doing. I didn't realize the car was THAT expensive until I actually did the math. My car costs me as much as rent+utils. Insanity.

I'll have to be more aware of gas stations. I really drive all over the state. But I do get a lot of my gas money reimbursed through my job. I haven't accounted for that in my income, as I've just been applying my reimbursements directly into my credit card debt.

And I just got on this insurance plan. the rate will go down significantly once I get through this initial period.

As for the dog, his expense is typically 50-60 a month, for his food and treats. He has a specific food due to allergies, unfortunately.

Do you think I should wait a couple months paying down my debts and then apply for a balance transfer card again?
« Last Edit: March 29, 2015, 01:55:54 PM by medicaustik »

KungfuRabbit

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Re: Putting out the Debt Fire
« Reply #5 on: March 29, 2015, 02:41:51 PM »
i really don't understand your insurance situation.  You say you just got on the plan and the expenses will go down...huh?  Do you have a bad accident / speeding ticket record?  Or is it just because of that style of car.  My car is similar value (2010 Outback, i bought it new for $26,000 - i know i know, this was before i was a mustachian, but its paid off now and in great shape, no point in ditching it now) but my car insurance is less than $100 / month.   

A lot of dealers will give you a better deal if you buy and sell from them, have you tried talking to a few local dealers?  Tell them you will trade them your car for a used car of sorts.  Said same dealer would also likely help you out with the under water situation, giving you a loan for a few thousand $$s. 

Sibley

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Re: Putting out the Debt Fire
« Reply #6 on: March 29, 2015, 02:45:39 PM »
For gas, I use an app called Gas Buddy. I'm sure there's others as well. Might help.

SarahMD428

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Re: Putting out the Debt Fire
« Reply #7 on: March 29, 2015, 02:47:48 PM »
Can you transfer the higher interest balance on to the lower interest card?
If you are paying any fees - over the limit or late fees - STOP!  Get your balances under the limit and make on-time payments.

Also, what is your credit score?  I'm guessing not so hot.  If this is accurate, why is your credit score so poor?  **This is starting to seem like it might be a bigger problem then us Mustachians would have realized, seeing as most people on this blog probably have a good score. 
Maybe that should be a first step.  Ask for higher limits on your credit cards - it will lower your credit available/credit used ratio.  Don't cancel any cards.  (Again with the available/used ratio)  Write shot-in-the-dark letters disputing "red marks."  If they don't respond within a certain time frame, the marks get eliminated.  Call the companies and ask nicely if they'll eliminate marks.  Know that whenever you apply for something, your credit score takes a hit.  If you must apply for stuff, do it within a 2 week time frame.  Once you bring your score up, you'll qualify for lower interest credit cards, car loans and maybe even insurance premiums.  You'll look - and BE - more responsible and less risky. 

As far as debt pay-down, I'd say go with what speaks to you.  If it's personally motivating, it will be easier to stick with and feel good about.  For me, I can't imagine getting rid of my car - and I don't even "love" it.  I can't imagine not having one, selling one seems hard, buying one privately sounds risky, bleh.  (I know this is mostly in my head, but fears aren't usually rational.)  However, paying off cc debt is something I could totally get behind, brag about and would be "socially-acceptable" in my circle of friends/family.  But, if the car is a noose around your neck - which it sounds like it is, go for it (you could kill the car loan and lower your insurance even more).  I sort of view it as "should I eat better or exercise?"  Either way you'll end up healthier, so there's no bad choice.  Paying off debt, whether it's a credit card, car loan or mortgage, is a win.  So is spending less and saving more.  All wins!

Congrats on your financial awakening.  Enjoy the reduced face-punches.  :)

SaintM

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Re: Putting out the Debt Fire
« Reply #8 on: March 29, 2015, 03:43:33 PM »
It sounds like your credit is not that good.  Between that and high balances, you didn't qualify for the balance transfer card.  Don't worry about that for now.

My suggestion is to lower the credit card balances before you attack the car.  Can you transfer some of the 14.99% balance to the 8.99% rate?  Even a little?  If not, continue to pay the cards as you have until they are paid off.

I say this because you have already taken the biggest hit on the car.  Yes it depreciates every week, but it will depreciate less next week than it did last week.  I calculate that you have 64 months left of payments on the car.  By the time your credit card balances are zero, you will probably be about even between the car loan and the car's value.  You should be able to refinance at that point or trade down to a more reasonable car.

frugaliknowit

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Re: Putting out the Debt Fire
« Reply #9 on: March 29, 2015, 04:34:11 PM »
I would find out if your auto lender or another lender will loan you the difference between what the mustang sells for and the amount of the loan.  In that case, you can offload the loan sooner.

Can you do without a car for a few months while you save up for a cash car (maybe rent when you need to)?

If so, offload the car with most of the loan all at once.

frugaldrummer

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Re: Putting out the Debt Fire
« Reply #10 on: March 29, 2015, 04:34:35 PM »
Just another viewpoint:

Not to get into a fallacious "sunk costs" argument here, but:
You like your car? And you didn't overpay for it? Would you be happy driving that model for the next several years?

If so, I'd say keep it, pay off your credit cards first, then your car. With $1500 a month to pay towards bills, you can knock ALL of that debt out in two years. Then you'll have a car you love that you know has been well-maintained and you can drive it into the ground.

JetBlast

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Re: Putting out the Debt Fire
« Reply #11 on: March 29, 2015, 04:59:19 PM »
My suggestion is to lower the credit card balances before you attack the car.  Can you transfer some of the 14.99% balance to the 8.99% rate?  Even a little?  If not, continue to pay the cards as you have until they are paid off.

I say this because you have already taken the biggest hit on the car.  Yes it depreciates every week, but it will depreciate less next week than it did last week.  I calculate that you have 64 months left of payments on the car.  By the time your credit card balances are zero, you will probably be about even between the car loan and the car's value.  You should be able to refinance at that point or trade down to a more reasonable car.

This was my thought as well.  You've already absorbed the worst of the depreciation, and selling the car and buying another one will incur costs (tax, title, registration...) that you'll have to pay.  A refi on the car will be tough now since you're upside down and have an admittedly poor credit rating. Yeah, you could pay more principal to get out from underwater more quickly, but the rate you refi into isn't going to be much better if you still have high balances on the credit cards.

I'd look into a balance transfer from the higher rate card to the lower if you can and pay the minimum on the lower rate to not incur any extra fees, while throwing everything else at the high rate card. Get it gone. You can knock that out by this fall.

I'm going to say something borderline heretical on this site, but maybe consider keeping the Mustang long term if it really makes you happy to drive it everyday. The mileage isn't horrible (my brother's truck got 8mpg highway) and someone else is paying most of the fuel bill. Being a year old it should provide at least a decade of reliable service with reasonable maintenance costs. Once you've got the credit cards paid off you'll have $1,500 a month to save and invest. You will probably be able to refi to a lower rate by then to add even a little more savings and have ~42% savings rate, so it's not like you'd be in a hair on fire emergency. It just depends on whether you want to sacrifice the car to reach FIRE a little faster.

medicaustik

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Re: Putting out the Debt Fire
« Reply #12 on: March 29, 2015, 05:07:53 PM »
i really don't understand your insurance situation.  You say you just got on the plan and the expenses will go down...huh?  Do you have a bad accident / speeding ticket record?  Or is it just because of that style of car.  My car is similar value (2010 Outback, i bought it new for $26,000 - i know i know, this was before i was a mustachian, but its paid off now and in great shape, no point in ditching it now) but my car insurance is less than $100 / month.   

A lot of dealers will give you a better deal if you buy and sell from them, have you tried talking to a few local dealers?  Tell them you will trade them your car for a used car of sorts.  Said same dealer would also likely help you out with the under water situation, giving you a loan for a few thousand $$s.

Well it's a brand new car as of last year. I just switched to USAA and pay $1230 every 6 months. If I understood my rep correctly, that rate will drop in the next 6 month period.

As for dealers, I feel like the common advice I've gotten is to avoid dealerships and stick to private selling of your car. But I have considered it. At least I could trade it in and roll the underwater amount into a new loan (if they'd go for it).. But, I really like the idea of doing everything cash based. You can see how much trouble I've got into with money I don't have.

Can you transfer the higher interest balance on to the lower interest card?
If you are paying any fees - over the limit or late fees - STOP!  Get your balances under the limit and make on-time payments.

Also, what is your credit score?  I'm guessing not so hot.  If this is accurate, why is your credit score so poor?  **This is starting to seem like it might be a bigger problem then us Mustachians would have realized, seeing as most people on this blog probably have a good score. 
Maybe that should be a first step.  Ask for higher limits on your credit cards - it will lower your credit available/credit used ratio.  Don't cancel any cards.  (Again with the available/used ratio)  Write shot-in-the-dark letters disputing "red marks."  If they don't respond within a certain time frame, the marks get eliminated.  Call the companies and ask nicely if they'll eliminate marks.  Know that whenever you apply for something, your credit score takes a hit.  If you must apply for stuff, do it within a 2 week time frame.  Once you bring your score up, you'll qualify for lower interest credit cards, car loans and maybe even insurance premiums.  You'll look - and BE - more responsible and less risky. 

As far as debt pay-down, I'd say go with what speaks to you.  If it's personally motivating, it will be easier to stick with and feel good about.  For me, I can't imagine getting rid of my car - and I don't even "love" it.  I can't imagine not having one, selling one seems hard, buying one privately sounds risky, bleh.  (I know this is mostly in my head, but fears aren't usually rational.)  However, paying off cc debt is something I could totally get behind, brag about and would be "socially-acceptable" in my circle of friends/family.  But, if the car is a noose around your neck - which it sounds like it is, go for it (you could kill the car loan and lower your insurance even more).  I sort of view it as "should I eat better or exercise?"  Either way you'll end up healthier, so there's no bad choice.  Paying off debt, whether it's a credit card, car loan or mortgage, is a win.  So is spending less and saving more.  All wins!

Congrats on your financial awakening.  Enjoy the reduced face-punches.  :)

Can't transfer between my cards unfortunately. But I am not paying any late fees. I pay every dollar I can that I have extra directly into the credit cards. I probably post 5 or 6 payments a month as I receive reimbursement checks and get paid. I've been attacking this like a wild man. I have dreams where I pay off these cards. DESTROY IT.

Mint estimates my credit score at 630. I have 2 "marks" for paying late on one of my credit cards back in 2012. The real cause of the poor credit is that I've had both of my credit cards maxed out for two years. I maxed them out and only paid minimums. So far in 2015 I've already reduced that by nearly $5000, so hopefully my credit is on the way up. Also, I closed a credit card in 2013 that had one mark on it for late payment.

I don't necessarily feel like the car is a noose, but I do think about it and feel that it's unnecessary. I like driving it, and I spend a lot of time in it.. but it's existence in my garage is a bit contrary to my goals.

I want to get out of debt as soon as possible and save like a madman. I'm hoping that in two years time, I can have no debt and at least 30k in savings. I'm planning on taking a long trip around the world, and leaving money to live off of for a bit when I return.

It sounds like your credit is not that good.  Between that and high balances, you didn't qualify for the balance transfer card.  Don't worry about that for now.

My suggestion is to lower the credit card balances before you attack the car.  Can you transfer some of the 14.99% balance to the 8.99% rate?  Even a little?  If not, continue to pay the cards as you have until they are paid off.

I say this because you have already taken the biggest hit on the car.  Yes it depreciates every week, but it will depreciate less next week than it did last week.  I calculate that you have 64 months left of payments on the car.  By the time your credit card balances are zero, you will probably be about even between the car loan and the car's value.  You should be able to refinance at that point or trade down to a more reasonable car.

As above, credit score is 630. It's on the mend.

I'm worried about the volatility of the Ford Mustang market. By the time I have all my credit cards paid off (estimate October 2015) the new model year Mustang will be out, or nearly out, and my model year will probably take a 1k-2k hit in value.

I have also considered committing to keeping this car for the rest of my single adult life, as it fits my needs and serves the purpose of fun. It's just hard to swallow $700/month on a vehicle when your rent and utilities cost less. I really kind of wish I drove a junker. That $700 thats being locked up every month in the car could go SO far in getting me out of debt and working toward my goals.

I would find out if your auto lender or another lender will loan you the difference between what the mustang sells for and the amount of the loan.  In that case, you can offload the loan sooner.

Can you do without a car for a few months while you save up for a cash car (maybe rent when you need to)?

If so, offload the car with most of the loan all at once.

Unfortunately I can't for work. I do a lot of travel around the area. I travel to my office 2-3 times a week, and travel to client sites the other days. I have been working from home pretty often too though, which helps. And my bike and I have become great friends.

Just another viewpoint:

Not to get into a fallacious "sunk costs" argument here, but:
You like your car? And you didn't overpay for it? Would you be happy driving that model for the next several years?

If so, I'd say keep it, pay off your credit cards first, then your car. With $1500 a month to pay towards bills, you can knock ALL of that debt out in two years. Then you'll have a car you love that you know has been well-maintained and you can drive it into the ground.

I like my car, but I did overpay for it. The only loan I could get was at 8.75% APR. And I put basically nothing down on it. I think I financed for $26,000 on a car priced at $19,000.

It was stupid. But I was determined that I could afford a nice car now.

The only problem with it is it's not as utilitarian as I'd like. This winter has been difficult. And as someone who does a lot of projects at home, it's been a pain in the ass. I borrow my roommate's car pretty often.

But I have thought of just keeping it forever. I mean, it'll be a classic car in the 2050's. Maybe it'll be worth something then :)

medicaustik

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Re: Putting out the Debt Fire
« Reply #13 on: March 29, 2015, 05:11:35 PM »
My suggestion is to lower the credit card balances before you attack the car.  Can you transfer some of the 14.99% balance to the 8.99% rate?  Even a little?  If not, continue to pay the cards as you have until they are paid off.

I say this because you have already taken the biggest hit on the car.  Yes it depreciates every week, but it will depreciate less next week than it did last week.  I calculate that you have 64 months left of payments on the car.  By the time your credit card balances are zero, you will probably be about even between the car loan and the car's value.  You should be able to refinance at that point or trade down to a more reasonable car.

This was my thought as well.  You've already absorbed the worst of the depreciation, and selling the car and buying another one will incur costs (tax, title, registration...) that you'll have to pay.  A refi on the car will be tough now since you're upside down and have an admittedly poor credit rating. Yeah, you could pay more principal to get out from underwater more quickly, but the rate you refi into isn't going to be much better if you still have high balances on the credit cards.

I'd look into a balance transfer from the higher rate card to the lower if you can and pay the minimum on the lower rate to not incur any extra fees, while throwing everything else at the high rate card. Get it gone. You can knock that out by this fall.

I'm going to say something borderline heretical on this site, but maybe consider keeping the Mustang long term if it really makes you happy to drive it everyday. The mileage isn't horrible (my brother's truck got 8mpg highway) and someone else is paying most of the fuel bill. Being a year old it should provide at least a decade of reliable service with reasonable maintenance costs. Once you've got the credit cards paid off you'll have $1,500 a month to save and invest. You will probably be able to refi to a lower rate by then to add even a little more savings and have ~42% savings rate, so it's not like you'd be in a hair on fire emergency. It just depends on whether you want to sacrifice the car to reach FIRE a little faster.

This is a helpful perspective. Thank you.

Honestly, I have no big emotional attachment to this car. I enjoy driving it, and I'm meticulous about it's care. But my goals in life are:

1. Get out of debt
2. Save 30k
3. Go travel long-term
4. Return home and get FIRE

I know the travelling will set me back on FIRE, but I enjoy my career field, and I'm willing to spend more time in the rat race if I can go on the trip I've been telling myself I would go on since I was 18.

Average MPG is 20 in this car. My monthly expense on fuel is probably $40 after reimbursement.
« Last Edit: March 29, 2015, 05:13:27 PM by medicaustik »

SaintM

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Re: Putting out the Debt Fire
« Reply #14 on: March 29, 2015, 10:12:20 PM »
I think of cars as consumable objects with no resale value, just like a box of cereal.  I drive the thing until the wheels fall off, then duct tape them back on and drive some more.

Mrkineticz

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Re: Putting out the Debt Fire
« Reply #15 on: March 29, 2015, 11:50:21 PM »
With all this going on I just wanted to tell you that you are in the right direction. I realize that the only thing that can make us feel better is time. We all wish we found this website earlier than when we did.

Pay your credit cards first. then decide on the car. One thing you wont have to worry about is the reliability of the ford. They are one of the leaders in fuel efficiency as well. Try to figure more things you can cut if you can and continue dropping that credit card debt!


MsPeacock

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Re: Putting out the Debt Fire
« Reply #16 on: March 30, 2015, 05:29:32 PM »
I think of cars as consumable objects with no resale value, just like a box of cereal.  I drive the thing until the wheels fall off, then duct tape them back on and drive some more.

+1 to this.

I am 3 months in here - so also just starting out - different starting point but similar issues. I have accepted that I bought a stupid car - but I drove my last car for over 100,000 miles and kept it for 10 years. Plan to do the same with the new one. Similarly, when I am out from under my cc debt and car will be paid off. 

Your car insurance is crazy high. Have you shopped around? Do you have ridiculously high personal liability on your policy or something? I would suggest called USAA and seeing if there is any way to get that rate down.

Are you finding the process a bit exhausting? I am just finding the process of reorganizing my finances, adjusting spending, really taking account - tiring, and some what desperation inducing. From the sounds of it you are doing well - its just a matter of hanging in for the long haul. You have cut your expenses. You are actively attacking your debt. You are taking an honest accounting of your choices. GOOD JOB!

justjenn

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Re: Putting out the Debt Fire
« Reply #17 on: March 30, 2015, 08:40:51 PM »

Can't transfer between my cards unfortunately. But I am not paying any late fees. I pay every dollar I can that I have extra directly into the credit cards. I probably post 5 or 6 payments a month as I receive reimbursement checks and get paid. I've been attacking this like a wild man. I have dreams where I pay off these cards. DESTROY IT.

Mint estimates my credit score at 630. I have 2 "marks" for paying late on one of my credit cards back in 2012. The real cause of the poor credit is that I've had both of my credit cards maxed out for two years. I maxed them out and only paid minimums. So far in 2015 I've already reduced that by nearly $5000, so hopefully my credit is on the way up. Also, I closed a credit card in 2013 that had one mark on it for late payment.

I don't necessarily feel like the car is a noose, but I do think about it and feel that it's unnecessary. I like driving it, and I spend a lot of time in it.. but it's existence in my garage is a bit contrary to my goals.


Call up the credit card company and ask if they will lower your interest rate. Mention that you haven't had a late payment in over two years and that you have been making large, steady payments. If you've had them maxed out for the past two years, I'm assuming that you've been using these cards consistently. Say that you have been a loyal customer to the credit card company. The worst they can say is no. If they reject your request for a lower interest rate, then ask them to increase your credit limit. This will help your credit score by giving you a better debt ratio.

medicaustik

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Re: Putting out the Debt Fire
« Reply #18 on: March 31, 2015, 02:09:23 PM »
I think of cars as consumable objects with no resale value, just like a box of cereal.  I drive the thing until the wheels fall off, then duct tape them back on and drive some more.

I feel the same way about my car now. I'm single and have no kids, and so a sports car is "reasonable". I see no reason why I wouldn't own it for the next 22-24 months. I may even hold on to it for longer than that. As I said, my goal is to clear my debt and save up for a round the world trip. So, I will probably sell the car before I leave to finish the loan off and maybe make some money.

I do like my car a lot, and I spend a ton of time in it. Now that winter is over and I'm back to driving windows down and I can actually grip the road, it's much more enjoyable.

I think I'm going to continue to avalanche my money into the credit card debt and then revisit the car issue then. By that time, I'll have paid down an additional 3-4k on the car anyway, and would likely be even with the remaining loan balance. Also I plan on looking into refinancing the car as soon as possible.

My credit score was something like 605 when I bought the car, it's 630 now, and I believe that the more money I pay into my debts I should continue to go up. So hopefully by the time I pay off the credit cards I can refinance with a better rate.

With all this going on I just wanted to tell you that you are in the right direction. I realize that the only thing that can make us feel better is time. We all wish we found this website earlier than when we did.

Pay your credit cards first. then decide on the car. One thing you wont have to worry about is the reliability of the ford. They are one of the leaders in fuel efficiency as well. Try to figure more things you can cut if you can and continue dropping that credit card debt!

Thank you for the encouragement. I'm feeling silly for not having done anything about this sooner. I literally knew I was burning my financial house down, but ignoring it was as simple as not logging into my online account and not answering the phone when unknown numbers called. I can't believe I let it go so long.

I ended up with $15,000 of credit card debt, and the only things I can remember actually buying on those cards is a $600 mountain bike and a $1,500 computer. I guess I nickel and dimed myself out of $15,000 I could be putting toward my savings today.

Ah well, gotta forgive past me, he was a fool.

I'm continuing to learn where to get the best deals and I've already cut my grocery bill significantly. I also took control of the common household goods in my shared house (detergent, trash bags) and instead of paying for the stuff we need myself, I'm having everyone contribute equally.

I've learned a lot in the 4 months I've been at it, and it's been a tremendous relief already. It does suck seeing $1500 leave my bank account every month that could be saving up for my goals, but I'm doing the time for my crimes :)

I think of cars as consumable objects with no resale value, just like a box of cereal.  I drive the thing until the wheels fall off, then duct tape them back on and drive some more.

+1 to this.

I am 3 months in here - so also just starting out - different starting point but similar issues. I have accepted that I bought a stupid car - but I drove my last car for over 100,000 miles and kept it for 10 years. Plan to do the same with the new one. Similarly, when I am out from under my cc debt and car will be paid off. 

Your car insurance is crazy high. Have you shopped around? Do you have ridiculously high personal liability on your policy or something? I would suggest called USAA and seeing if there is any way to get that rate down.

Are you finding the process a bit exhausting? I am just finding the process of reorganizing my finances, adjusting spending, really taking account - tiring, and some what desperation inducing. From the sounds of it you are doing well - its just a matter of hanging in for the long haul. You have cut your expenses. You are actively attacking your debt. You are taking an honest accounting of your choices. GOOD JOB!

If anything I'm impatient. I really, really don't like how much I look forward to getting paid. I get excited for my paycheck to post, so I can allocate it in YNAB. It's good, but I don't like the way it makes me feel like time is flying. I'm trying to be much more "mindful" of the present moment, and I think once I get out of financial hell I will be able to live more relaxed again. I just get a little depressed by my lack of flexibility in my current situation. I'm focused on my mission of having a net worth above $0, but it is difficult to show to work week after week knowing that your next 15 paychecks will be transported back in time to pay for the chinese food you didn't even need.

I literally have dreams where I pay off my debt in full. I saw a $15,000 watch last night and I thought of it like this: "Wow.. if I stole that watch I could be out of debt tomorrow."

Any way - good job to you too. I look forward to being debt free with you, and eventually, financially independent and TRULY free.


Can't transfer between my cards unfortunately. But I am not paying any late fees. I pay every dollar I can that I have extra directly into the credit cards. I probably post 5 or 6 payments a month as I receive reimbursement checks and get paid. I've been attacking this like a wild man. I have dreams where I pay off these cards. DESTROY IT.

Mint estimates my credit score at 630. I have 2 "marks" for paying late on one of my credit cards back in 2012. The real cause of the poor credit is that I've had both of my credit cards maxed out for two years. I maxed them out and only paid minimums. So far in 2015 I've already reduced that by nearly $5000, so hopefully my credit is on the way up. Also, I closed a credit card in 2013 that had one mark on it for late payment.

I don't necessarily feel like the car is a noose, but I do think about it and feel that it's unnecessary. I like driving it, and I spend a lot of time in it.. but it's existence in my garage is a bit contrary to my goals.


Call up the credit card company and ask if they will lower your interest rate. Mention that you haven't had a late payment in over two years and that you have been making large, steady payments. If you've had them maxed out for the past two years, I'm assuming that you've been using these cards consistently. Say that you have been a loyal customer to the credit card company. The worst they can say is no. If they reject your request for a lower interest rate, then ask them to increase your credit limit. This will help your credit score by giving you a better debt ratio.

I called them back in October of last year, when I was still carrying a basically full balance and they said no. I've paid down about $5000 of that. So I've paid about 30% of my debt down. Think it's an appropriate time to call and ask again? Later this week I'll be applying another $1500 payment to the balance. Once that clears maybe I should call.

SaintM

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Re: Putting out the Debt Fire
« Reply #19 on: March 31, 2015, 10:09:13 PM »
I called them back in October of last year, when I was still carrying a basically full balance and they said no. I've paid down about $5000 of that. So I've paid about 30% of my debt down. Think it's an appropriate time to call and ask again? Later this week I'll be applying another $1500 payment to the balance. Once that clears maybe I should call.

Credit scores update a few days to a week after the account statement date.

Have you tried Creditkarma?  They give you a score and full credit report for Transunion and Equifax, updated every 7 days.  Keep in mind that credit scores are not consistent, but vary depending on which reporting agency provides the data and who does the calculation.