I'd like to make this a positive thread, since I'm definitely not a know it all about finances, I figured I would start a positive, clean, no-negative topic about what some of the best ways to eliminate debt is. This can even include minimalizing your lifestyle so that you have more disposable income and hence, more money that you can save.
I'll start with a few things that I typically do:
1 - If you have credit card debt, focus on the credit cards which have the highest interest rates first. 2 - Try your hardest to pay cash for everything. 3 - If your company doesn't provide lunch (most don't), then make your own lunches rather than going out to eat. 4 - Avoid going to large group lunches where people decide to "split the bill", you always end up getting screwed! hahah... 5 - Relegate yourself to not going out to eat for dinner no more than 2 times a month. 6 - Lay out a budget, and take a total accurate amount of all your "revolving debt" and all your savings.
Above all else: Do NOT attempt to live beyond your means when it comes to discretionary spending. I see people here in my town every week that have attempted to match what they see others do, by going into debt to try to "keep up with the Jonses". A recipe for disaster.
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12:10 PM
Pyrthian Member
Posts: 29569 From: Detroit, MI Registered: Jul 2002
yup - and for you youngsters - think of credit like any other vice just avoid it altogether in the first place if you cant afford it - you cant afford it. you will not have more later - especially if you burden your future earnings
just how stupid is it to pay 10 $10 payments on a $75 dollar item? impatience it gets costly quick
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12:17 PM
Formula88 Member
Posts: 53788 From: Raleigh NC Registered: Jan 2001
Above all else: Do NOT attempt to live beyond your means when it comes to discretionary spending. I see people here in my town every week that have attempted to match what they see others do, by going into debt to try to "keep up with the Jonses". A recipe for disaster.
Been there, done that. I don't think it was to keep up with the Jonses... but it certainly wasn't for any responsible reasons either...
quote
Originally posted by Pyrthian:
yup - and for you youngsters - think of credit like any other vice just avoid it altogether in the first place if you cant afford it - you cant afford it. you will not have more later - especially if you burden your future earnings
just how stupid is it to pay 10 $10 payments on a $75 dollar item? impatience it gets costly quick
This is the smartest thing I've ever heard you say Pyrthian...
See this is good!!! That's a compliment... we're making progress! hahah..
I agree with your list except for the credit cards with the highest interest. It is better to pay off your smallest debt and once paid off to roll that payment into the payment for the next smallest debt. Mathmatically it doesnt make sense, but if you were doing math in the first place you wouldnt be in credit card debt. By paying off the smaller one first you get a sense of acomplishment and pyschologically you feel you are winning and will stay on the program. If you go up against a huge credit card debt and are only making small payments it will feel like you are going up against an impossible task and you will give up.
The most important thing is to live within your means and not to try to keep up with the joneses. No one really cares what kind of car you drive so dont go out and "justify" to yourself that you "need" this new car with the "low payments" from the dealer for the next 72 months.
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12:25 PM
82-T/A [At Work] Member
Posts: 23866 From: Florida USA Registered: Aug 2002
I agree with your list except for the credit cards with the highest interest. It is better to pay off your smallest debt and once paid off to roll that payment into the payment for the next smallest debt. Mathmatically it doesnt make sense, but if you were doing math in the first place you wouldnt be in credit card debt. By paying off the smaller one first you get a sense of acomplishment and pyschologically you feel you are winning and will stay on the program. If you go up against a huge credit card debt and are only making small payments it will feel like you are going up against an impossible task and you will give up.
I understand exactly what you're saying. I know mathematically it's not the greatest idea... but for the psyche, it might actually be a better idea.
What do you guys think of balance transfers? Back when I was paying off the majority of my credit card debt, I ended up rolling over money I had from a high interest account into a low interest account (there by eliminating the debt on one revolving account). There was a small fee associated with it, but it was no more than a single months worth of interest payments!
Originally posted by 82-T/A [At Work]: I understand exactly what you're saying. I know mathematically it's not the greatest idea... but for the psyche, it might actually be a better idea.
What do you guys think of balance transfers? Back when I was paying off the majority of my credit card debt, I ended up rolling over money I had from a high interest account into a low interest account (there by eliminating the debt on one revolving account). There was a small fee associated with it, but it was no more than a single months worth of interest payments!
yes, there are cautions to balance transfers watch the charges. usually worth it - but sometimes not when I chased down my credit card debt - I was lucky enough to be doing it during the heyday of Credit zero interest for years on balance transfers I actually pulled money out of my mortgage balance, and moved it to credit cards, and saved quite a bit but, again - you must be endlessly careful on the varying accounts - they will do ANYTHING to catch you missing a payemnt, and shooting you out to the 20-32% default rate. and that happens real easy when you have multiple open accounts, and monies shifting from one to another - and you are not sure of the status.
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12:36 PM
avengador1 Member
Posts: 35467 From: Orlando, Florida Registered: Oct 2001
Credit cards are basically personal loans that you can give yourself. The credit card companies charge interest for these loans, especially if you plan to carry a balance and pay the loans over time. This is good if you want to build a credit history. The best way to use credit cards is to not spend more money than what you have. You also should pay your credit cards in full and before the due date on your bill. If you can roll your debt from one card with higher interest to another with lower interest, that will definitely save some money. The best way to get out of debt is to pay it off as soon as possible. If one can afford larger payments than the monthly payment, make them. If one has possesions they no longer need, these could be sold to get money to pay of debt. You can't take your material possesions with you when you die so don't get too attached to them. Bankruptcy should only be considered as a last resort. The rules to do so have changed and debts may still have to be repaid. Bankruptcy can ruin your credit for many years. You need good credit to buy cars, homes, etc. If you don't have good credit you are considered a risk and will face higher percentage loan rates, that is if you can find someone that is willing to give you a loan. Big companies also check your credit before they hire you. They want to see how responsible and reliable you are. This is just another way for them to determine this. If you have other family members that can work and contribute to help lower your debt that is a bonus. If you don't you might consider taking another part time job to increase your income. One's income should be enough to pay all the monthly bills and some left over for entertainment and savings. Living from paycheck to paycheck is not a good living.
[This message has been edited by avengador1 (edited 11-10-2009).]
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12:49 PM
rpro Member
Posts: 2920 From: Rockledge, FL Registered: Jun 2006
Many people would be surprised to learn that you can contact your creditors and explain that you're eager to pay them off, but are in a financial bind. By doing so, you'd be surprised how many of them would consent to reducing the interest rate, rather than risk losing you to default. This could save literally thousands of dollars if you're carrying a large balance.
I will add my .02 that I learned from my brothers mistakes.
Do not ever ever ever go to a title loan place and get a loan on your vehicle.
Do not get a "payday loan" for any reason. It is cheaper to go without power for a few days, and pay the "shutoff fee", or whatever your utility charges. I have been there, I suffered through it, you can too.
Just because a place advertises that they are cheaper (Wal-Mart) does not mean they are, usually once a place starts advertising that they are cheaper they become more expensive. Shop around and save money.
Never shop hungry. Even if you have to stop at McDonald's and get a dollar burger it'll save you in the end.
Always keep track of spending. When you are at the store getting groceries (even one or two items) use a calculator and add each item.
Always remember that stores are designed to help you spend money, not save it. Everything you do in a grocery or department store is designed to get you to buy.
Brad
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02:52 PM
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Doug85GT Member
Posts: 9670 From: Sacramento CA USA Registered: May 2003
I believe in keeping the plan as simple as possible. You are more likely to stick to a simple plan than a complex one. Here are some things that I do:
--I set an allowance for myself of $100 per week of discretionary spending. I withdraw $100 cash out of the ATM once a week. I can't spend what I don't have. Also, if I am good one week, the money rolls over into the next week. --I set up an emergency fund. I started it with just $50 per month. This is to cover any unplanned purchases so that I don't have to resort to a credit card. --I do all of my billpay online and I pay all of my bills all in one sitting once a month. I get a total at the end of the session and I know exactly how much money I have left in my account for the rest of the month. BTW, it also only takes me 5 minutes to pay all my bills and it saves me money on postage.
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03:10 PM
infinitewill Member
Posts: 2335 From: Overland Park, KS U.S.A. Registered: Mar 2009
I agree with your list except for the credit cards with the highest interest. It is better to pay off your smallest debt and once paid off to roll that payment into the payment for the next smallest debt. Mathmatically it doesnt make sense, but if you were doing math in the first place you wouldnt be in credit card debt. By paying off the smaller one first you get a sense of acomplishment and pyschologically you feel you are winning and will stay on the program. If you go up against a huge credit card debt and are only making small payments it will feel like you are going up against an impossible task and you will give up.
The most important thing is to live within your means and not to try to keep up with the joneses. No one really cares what kind of car you drive so dont go out and "justify" to yourself that you "need" this new car with the "low payments" from the dealer for the next 72 months.
I agree completely with paying off the smallest balance first. Two reasons, if high interest were an issue you never would have been in this situation in the first place. You need to get in the habit of living within your means and paying things off. Second, the annual fees you pay for having the card (most all have gone through the roof) will really add up. Pay off the small one, then and only then, cancel the card. Eliminating the potential to relapse and eliminating the fee at the same time. If your credit score is a concern, canceling the card with a balance is far more damaging then paying down a balance on an open card. These greedy credit card companies are hustling in HUGE new fees before the credit card laws change (Finally! These people are nothing more than loan sharks!) and sticking it to even those who have perfect credit. All after getting billions in bail out money. Best way to stick it back to them? Pay cash and don't spend beyond your means.
[This message has been edited by infinitewill (edited 11-10-2009).]
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06:02 PM
82-T/A [At Work] Member
Posts: 23866 From: Florida USA Registered: Aug 2002
I agree completely with paying off the smallest balance first. Two reasons, if high interest were an issue you never would have been in this situation in the first place. You need to get in the habit of living within your means and paying things off. Second, the annual fees you pay for having the card (most all have gone through the roof) will really add up. Pay off the small one, then and only then, cancel the card. Eliminating the potential to relapse and eliminating the fee at the same time. If your credit score is a concern, canceling the card with a balance is far more damaging then paying down a balance on an open card. These greedy credit card companies are hustling in HUGE new fees before the credit card laws change (Finally! These people are nothing more than loan sharks!) and sticking it to even those who have perfect credit. All after getting billions in bail out money. Best way to stick it back to them? Pay cash and don't spend beyond your means.
I don't want to be a jerk, but this is EXTREMELY bad advice...
Cancelling a credit card will LOWER the available credit "value" on your credit. It's fine if you want to CUT it up, but to close an account will actually HURT your credit score.
Credit is determined (other than delinquencies) by total debt VS available credit. If you cancel a paid off card, you're going to SERIOUSLY hurt your credit when the only other cards you have, still have a balance on them.
Originally posted by 82-T/A [At Work]: I don't want to be a jerk, but this is EXTREMELY bad advice...
Cancelling a credit card will LOWER the available credit "value" on your credit. It's fine if you want to CUT it up, but to close an account will actually HURT your credit score.
Credit is determined (other than delinquencies) by total debt VS available credit. If you cancel a paid off card, you're going to SERIOUSLY hurt your credit when the only other cards you have, still have a balance on them.
All true, however using Credit is not saving money.
Brad
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06:17 PM
jimbolaya Member
Posts: 10652 From: Virginia Beach, Virginia Registered: Feb 2007
Originally posted by 82-T/A [At Work]: I don't want to be a jerk, but this is EXTREMELY bad advice...
Cancelling a credit card will LOWER the available credit "value" on your credit. It's fine if you want to CUT it up, but to close an account will actually HURT your credit score.
Credit is determined (other than delinquencies) by total debt VS available credit. If you cancel a paid off card, you're going to SERIOUSLY hurt your credit when the only other cards you have, still have a balance on them.
True, but not totally accurate. I did it as infinitewill suggested. My wife and I paid off small balances first and then closed the accounts. We had 8 or 9 cards. we left 1 card open and we pay off the balance every month. This gives you a mental charge because you can see progress. Every time we paid a card off, it strengthened our resolve. The Credit Score took a small hit at first, but is now back in the 800's. It never dropped out of the 700's (we were in debt, but we always were able to make our payments) To quote Dave Ramsey, "Credit Scores are for creditors and you should not make financial decisions solely based on maintaining a good Credit Score." the priority should be sound financial decisions. The credit score will follow. Whats the point of a good score if you can never get rid of that big balance.
Jim
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07:26 PM
82-T/A [At Work] Member
Posts: 23866 From: Florida USA Registered: Aug 2002
True, but not totally accurate. I did it as infinitewill suggested. My wife and I paid off small balances first and then closed the accounts. We had 8 or 9 cards. we left 1 card open and we pay off the balance every month. This gives you a mental charge because you can see progress. Every time we paid a card off, it strengthened our resolve. The Credit Score took a small hit at first, but is now back in the 800's. It never dropped out of the 700's (we were in debt, but we always were able to make our payments) To quote Dave Ramsey, "Credit Scores are for creditors and you should not make financial decisions solely based on maintaining a good Credit Score." the priority should be sound financial decisions. The credit score will follow. Whats the point of a good score if you can never get rid of that big balance.
Jim
I'm not disputing the paying off part, I'm just disputing the closing the accounts part.
I can think of no SOLID reason why you would want to actually close the account (as long as there were no reoccuring fees).
Pay them off, cut them up, and leave the accounts open. I can find at least a dozen or more websites that will completely back up this claim.
I'm not disputing the paying off part, I'm just disputing the closing the accounts part.
I can think of no SOLID reason why you would want to actually close the account (as long as there were no reoccuring fees).
Pay them off, cut them up, and leave the accounts open. I can find at least a dozen or more websites that will completely back up this claim.
I did keep one account open for the reason you state. It was unnecessary to have 8 accounts open. My score has not suffered for it. I don't know what else to tell ya.
Jim
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07:37 PM
82-T/A [At Work] Member
Posts: 23866 From: Florida USA Registered: Aug 2002
I did keep one account open for the reason you state. It was unnecessary to have 8 accounts open. My score has not suffered for it. I don't know what else to tell ya.
Jim
Well, I agree certainly that having too many accouunts open are bad. But when you're trying to pay off debt, and you still have debt, you should be leaving those open.
As I said, credit score is based (in the long term) on the amount of debt you have VS open avalable credit. If you have lots of credit, but much less debt, it shows that you are at least reasonably responsible.
Saying that we shouldn't care about our credit score (or at least not focus on it) is like saying you shouldn't be concerned with how you dress because you shouldn't care how people judge you. You obviously always want to give a good impression in most situations (unless you're trying to get a good deal on parts at a junkyard, you don't want to be dressed in a suit).
I'm just saying that if if you have 6 credit cards, and one is paid off completely, but the others have a ton of debt on them, it's BAD advice to cancel that 6th open account.
8 is defintiely a LOT of credit cards. I really don't think anyone tecnically needs more than 4 really...
I work in lowering credit card debt ,,PAY off the small account first.. attack it ,,then the second highest card.
your credit score and fico are determined by the length of time you have an account and your payment history & a bunch of other diddleingcrap
If you do not own your home keep all accounts open ,,Talk to them ,,write to them,,set up payment schedual..ask for lower hard ship interest rate .. When you set up payments try to get bad credit ratings removed when you pay off .. Make sure experien,equifax and transunion bad rating will be removed when you get down to paying off last $300,, they WANT the money no one gives a flying rodents brownish blue flamer about you .. If you do not give a racoons glans about your credit and you are young ,,MOVE and establish a new life ,,you will have a wheelbarrow full of cash when you stop making payments !!difficult for the repoman to take your car if you leave your known caves, haunts ,make a new plan stan..a young guy 7years is nothing. Keep the home at all cost .GET 3rd job,,get roommates ..unless you live above your means If you are unreliable, bad credit ,,hate to pay anyone drunk,,always have a VAN or SUV paid for so you have a place to live,, the guys at the all night supermarkets thought I work there and I just camped there ..had a clip board..
[This message has been edited by uhlanstan (edited 11-10-2009).]
Forgot ,,always have one good clean credit card ,,keep building the credit/balance limit,,you only use it to buildup strong rep on this card..so when the ex wife, cops,IRS,debt collectors friends who you have worn out thier patience come calling..you can slip out of town ,,maybe a cheap sleezy Mexican vacation while you sort it out ,, then move in with buddy who lives in another area ..it will be a while before he knows you made the list of failure nobodies..
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08:49 PM
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jimbolaya Member
Posts: 10652 From: Virginia Beach, Virginia Registered: Feb 2007
Not to be a jerk myself but my family has been in banking and securities for over 50 years (although not me personally) and canceling a paid off card will not destroy your credit. If you have heavy debt, your credit score has already taken a hit. Available credit, total debt and total income vs debt ratio are all factors in determining your credit score, as is length of debt and promptness of debt repayment.
[This message has been edited by infinitewill (edited 11-10-2009).]
Most of the folks who are in credit card debt these days are so far under water, that credit scores are the very last thing on their minds. They did not get in that shape because they were wise money managers. If they pay the smallest account off, and leave it open--they are going to use it again, and be right back in the same boat in a few months. Pay it off, close it, cut it up and proceed to the next one. In most cases, the 'hit' either way is so negligible at this point as to be non-existant, and the truth is, they have no business with credit open to them at this stage of the game.
Get out from under the debt, then concentrate on rebuilding your credit worthiness afterwards. (score)
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10:46 PM
Nov 11th, 2009
82-T/A [At Work] Member
Posts: 23866 From: Florida USA Registered: Aug 2002
Not to be a jerk myself but my family has been in banking and securities for over 50 years (although not me personally) and canceling a paid off card will not destroy your credit. If you have heavy debt, your credit score has already taken a hit. Available credit, total debt and total income vs debt ratio are all factors in determining your credit score, as is length of debt and promptness of debt repayment.
I'm not saying you're going to "destroy" your credit... I'm saying it's going to hurt it.
I think you should talk to them some more, because there isn't a single article I've found that supports your suggestion of cancelling accounts as soon as you've paid them off.
It's bad advice. I agree with you on everything else, but there IS harm in cancelling the accounts, but there is a benefit to keeping the accounts (as long as they don't incurr any annual fees).
Jimbolaya,, I was a soldier of misfortune ,,international misfit ,,I was personal friend of Ken Toliver and his advisor for low rent questionalble activities.."I was a mercenary once "" never got paid and escape with my buttock mostly intact,, I have not lived as other men,,now I pay the price .I live like a deranged womanizing Monk,,my life is VERY boring,,,EXCEPT when I travel to distant lands known for beautiful women and seek massive mammaries,,atop a small waist,,expensive work for a fat,blubbery ,, senile old blueberry muffin addict My ladies are MUCH better looking than your ladies,,Im still a minor scoundrel & womanizer at 67 !! Plus I do not care who beleaves me,,its fun..
Fiero Ladies ?? remember I give free samples,,Im more fun than a new puppy & seldom pee on the rug..
[This message has been edited by uhlanstan (edited 11-11-2009).]
SORRY !! credit unions have the best deals on creditcards,,the interest rates are lower ,,& when you over spend because you met an expensive looking woman,,recent wealthy widow or found choice Fiero parts bonnaza !! the penalties are smaller for late and over limit penalty .. CHASE & CITI are raising rates the most,,citi screwed up a while back and you may be able to get the new mafia usery rates dropped ;speak to supervisor,let himknow ,,that you know about citi bank problems previously raising rates to high,, There are some new Laws regarding credit card rates ,,take effect feb 2010 A credit union is the preferable card for the back up,, get out of town last resort card ,,they will wait to shut you down..giving you plenty of time to get out of town when your other cards found out you are a Bamboozler who has to screw his socks on & you have more crust than a pie factory ,,whip out the creditunion card and your off to new places..I try to pick an old friend who has lots of ladies..pick one off (do not be choosy here,,she will have friends ) untill I am in better financial shape
[This message has been edited by uhlanstan (edited 11-11-2009).]
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08:44 PM
Nov 12th, 2009
blakeinspace Member
Posts: 5923 From: Fort Worth, Texas Registered: Dec 2001
I'm not disputing the paying off part, I'm just disputing the closing the accounts part.
I can think of no SOLID reason why you would want to actually close the account (as long as there were no reoccuring fees).
Pay them off, cut them up, and leave the accounts open. I can find at least a dozen or more websites that will completely back up this claim.
Because more open accounts increases your exposure to fraud and identity theft.
If you've never been through it... then you may not understand. Not arguing your point bud, you're right about the credit hit... but I am giving you at least one SOLID reason to close an account. Others would be, it is one less temptation (like a smoker not throwing away the last pack when quitting... why leave it there?). Also, the total number of accounts may give you an available credit limit that is high enough to go against you... stuff like that gets factored too.
So there are three reasons, but man... that number 1 reason... it's a doozie. It took 2 years to clear my headache of fraudulent and innacurate information. You would not believe the hours I spent on the phone. It's such a burden, you can even buy insurance for identity theft.
good thread!
My tips... cancel the cable (just get what you can over broadcast), cancel the magazines/newspaper (kinda old school there), ditch all the add on packages you don't need on your phone line like VM or caller ID, on cell ditch the data and texting, Dress warm in the winter, nude in the summer, 87 octane gas only (if your car can handle it), practice hyper-miling, buy quality synthetic oil and change your OCI to at least 10k miles, buy used but not abused, mac & cheese and ramen are cheap, generics, plant a garden, give up smoking, give up drinking, give up soda, cancel XM/Sirius, use coupons, take public transportation or walk or bike, cancel the netflicks, take a good hard look at everything you pay monthly, raise your insurance deductibles, fight the value of your home on the tax rolls (every year!), buy used tires instead of new (amazing deals there), beans instead of meat, no lotto, darn your socks and undies, dont water the lawn, and dont give up.
Yes, I have used all of the above at some point, still do on some. Thank God for your blessings. Remember his work when you make your budget. Without Him, you wouldn't even have any of those things to give up!
------------------ <---- did you buy Cliff a beer?
A place to start. 1st thing to do is eliminate monthy bills that are not necessities, think about it monthly you are paying, it is like a hole in the boat, it just keeps leaking every month. When these are eliminated you will see how much money you actually have to pay those creditors. In order to fix your situation your lifestyle must change. Blakeinspace referenced this as well.
-Eliminate paying for tv of anykind -Eliminate paying for any phone more expansive than 1 land line -Eliminate Internet unless it is on your land line. (You can use the libraries internet, or possibly at work if they let you, just not during work hours.) -Eliminate any extravagant monthly things, gym memberships, pmts on cars or recreational vehicles (you can sell the vehicles) then buy an older car with cash, reliable cars can fairly easily be found for $1000. -Stop eating out (that means everything, vending machines at work, and even "cheap" fast food.) - If you have a habit, alchohol, cigs, soda, quit it, you will save ALOT.
[This message has been edited by 2.5 (edited 11-12-2009).]
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01:42 PM
joesfiero Member
Posts: 2181 From: North Port,FL,USA Registered: Jan 2008
Joe is so correct nothing like a second job to help out while you are working you spend less,, I join the telemarketing group where I work and my salary has skyrocketed as I harrass the unwashed ,,actually they call me ,,I moved over in my company,, was concidering a second job .. Give up some T V time,, I no longer have one and I DO MISS IT.. my new income means extra sheckles/yuan for another flight to see some of the most beautiful women in the world,,get what you want ,,suffer to get it ,, or marry wealth
I was 62 years old,, IT WAS LOVE AT SECOND SIGHT,,DID NOT KNOW SHE WAS A WEALTHY WIDOW THE FIRST TIME
[This message has been edited by uhlanstan (edited 11-12-2009).]
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07:31 PM
82-T/A [At Work] Member
Posts: 23866 From: Florida USA Registered: Aug 2002
<---- did you buy Cliff a beer?
