- Pregnancy
- Baby & Toddler
- Parents
- Getting Pregnant
- Baby Names
- Product Reviews
-
Registry
- Community
-
More
Want a personalized experience?
Download the free app
September 2011 Moms
tblauvelt
member
NBR: CC debt, how do you do it?
tblauvelt
member
I'm not in a financial crisis or anything but would really love to know how some of you ladies take care of your debt. I've heard of the snowball effect where you pay off as much as you can a month toward one card while paying the minimum on another until the first card is paid off. I've also heard of debt consolidation (but I'm scared these are scams). But what other tactics/tricks/what have you's do you have for eliminating debt? I'm usually pretty good at paying off my credit cards to a $0 balance at the end of the month but lately it has been carrying over for quite a few months and it's only getting worse. Whatever advice or help I can get from you would be appreciated!
This discussion has been closed.
Re: NBR: CC debt, how do you do it?
We are doing the snowball method. We have three big cc/loans that we are trying to get rid of and I have heard this is the best method to go about that.
https://www.vertex42.com/Calculators/debt-reduction-calculator.html
This is what we used. It was a very helpful tool. Good luck!
Really and truly being honest: We just won't spend it. For example.... if I know we have a few big payments coming up, like auto insurance, home insurance, whatever... and we know that we have to charge x amount on the credit card (we only use one) because of a vacation or something, we calculate how much we have left to 'spend' and charge only that.
When we got married, we both were up to our ears in debt. Mine was fairly small, but DH's was HUGE. We busted our bums and got rid of all of it within 2 years, and since then, have been debt free.
I'm afraid this may change when baby arrives, but we are trying not to. We'll see.
This is what I have always heard to do. If they are the same interest rate, then I would probably start with either the highest or lowest balance and do the snowball method. This is may be counter-intuitive, but I think that once you see yourself pay off one of them (like if you start paying off the one with the lowest balance), it gives you more motivation to keep going and pay off the rest.
This is what I am going to do with my student loans. I am going to start with the one with the lowest balance since they have the same interest rate and once we pay that off, we will start with the next lowest balance and so on.
We don't have any debt anymore (other than student loans and a car payment), but when we did have CC debt, we basically did what the snowball method is. It felt SO GOOD to get rid of even the smallest balance on a card. The weight lifted off of our shoulders was amazing! I would highly recommend The Total Money Makeover: A Proven Plan For Financial Fitness by Dave Ramsey.
Good luck!
Why are you not paying it off and why is it getting worse? Has your income changed, are you paying something else and therefore have less to go toward credit cards, or are you spending more?
My first advice would be to freeze your credit cards in a block of ice so you don't have easy access to them. And stop charging stuff. Then focus on paying extra each month until you've got them back at zero.
I think that's the biggest thing--choosing not to spend. I had a friend who was up to her ears in CC debt, and she and her husband were working hard to get it paid off. But after they would make a big payment, she would go back out and charge more on the card. It was two steps forward, one step back. I agree with PPs about debt snowballing, but I also recommend sitting down together and taking an honest look at your budget to see where you can cut back. Even if you decreased your grocery spending, for instance, by $25 a month, that's $25 more every month that you can put towards your CC debt. It doesn't always have to be about making huge sacrifices like never going out or spending all your time clipping coupons. Little changes here and there can really add up to make a difference. We live on one income, and there are a lot of things and experiences my friends get to have that we can't afford. But it is absolutely freeing and worth it to know that we are living within our means and are almost debt free. Currently just the house and the car, and the car will hopefully be paid off by the end of this year. Not saying that to brag, like we've got it all figured out. I've just been in a really bad place with debt, and now that I'm on the other side, I want everyone to feel the freedom and peace that comes with being debt free and living within your means.
I once had $26K in credit card debt and used a consolidation service to pay it all off in a little over 3 years. I have never had late payments, I just owed WAY too much and was irresponsible with credit during college. I agree that most are probably scams, but I went with a very reputable company and they got most of my interest rates lowered to 10% or less (some even 0%) which allowed me to pay it all off way faster than I would have been able to do on my own. They charged $3/account each month for their own fees, which was a small price to pay when I saved so much interest. The company is a non-profit and is American Consumer Credit Counseling www.consumercredit.com.
This doesn't sound like this is what you need, but thought I'd throw it out there for anyone else that may be interested. They also use the snowball effect, so in your case I think that would be the best bet as well.
1. Took all the cards out of our wallet (the "block of ice" idea... but we actually put them in a lock box in the basement). Didn't charge any more on them.
2. Set a realistic budget with as much devoted to paying off debt as we could reasonably afford.
3. Transfer what we could to 0% interest cards (this is usually around a 3% fee to do this, but often worth it!).
4. Debt snowball with highest APR first.
We paid off all of our CC debt a few years back- we still owe a little bit on one car loan, some student loans, and the mortgage but that is it. So nice to have that freedom.
Elliott Michael born 9/22/11
CC debt we have completely ignored. I don't recommend that method. But in NC if you don't pay them for 3 years they can't come after for the money anymore and I've past the 3 year point (once you make any payment though your 3 years starts over) and then it takes I think 5 or 7 years to rebuild your credit...again I don't recommend it.
But for hospital bills we snowballed it....starting with the smallest ones. Now we're down to one bill (it's a $1700 bill, but there's only one).
I'm late tot he part here but just wanted to chime in to add that once you pay off those credit cards you may want to cancel them. Or cancel all but one and keep it in a locked box as a PP suggested to be used only for emergencies or when you really want the extra consumer protection (or for renting a car or hotel room so they don't put a big "hold" on your debit card). CCs are great if you're disciplined enough to pay them off every month but if not they can be a recurring problem. I have plenty of friends who don't have any because they know they don't have the discipline to use them wisely, which I really respect.
I also totally agree with the PP who said to evaluate your spending carefully and eliminate luxuries (cable, smartphones, eating out, buying new baby gear, etc.) until your debt is paid down. It is hard when everyone else can have those things and you can't, but worth it in the end and saving money now is much easier than after the baby comes.
As far as next steps, once you get your debt paid off (the snowball method either by largest balance or largest APR depending on what motivates you is good advice) you should start paying yourself first. Have 10% or more taken out of your paycheck and deposited directly into a separate account. Most employers will happily do this for you, or you can set it up as an automatic transfer through your bank. What you don't see, odds are you won't spend. This is also a good way to set aside extra money to make larger debt repayment. Transfer a set amount, make your snowball payments, and then keep transferring that amount after your debt is paid but use it for long-term savings.
Then when you have a nice cushion (6 months or so of living expenses in an interest-bearing savings account, CD, or Money Market--something you can access easily if you need it) start saving for retirement or for LO's college education, both of which are tax advantaged. If you have access to a 401(k) or 403(b) plan with an employer match be sure to max that out as soon as you can because it is like getting free money. If not, consider an IRA. For education accounts, look into 529 plans if your state has them.