@Anonymous wrote:
Hey all,
I'm trying to figure out what my ideal course of action is for improving my credit and eventually becoming debt free. I'll break down some of my income and debt information and see what you think my priorities should be. I'll be blunt with you; I was not financially responsible while in college and accrued a lot of debt.
I'll start with credit cards...
Chase Sapphire Preferred - $0 / $12,000
Discover It - $2,050 / $10,700 Pay Fourth
Capital One Quicksilver - $2,000 / $7,500 Pay Third
Best Buy Store Card - $3950 / $6,000 (interest free for another 18 months) Pay Last
Chase Amazon Rewards - $1,162 / $2,000 Pay Second
Amazon Store Card - $640 / $3,300 Pay First
Next, loans...
Don't worry about these yet. You should pay the mortgage and auto loans off with regular monthly payments. No need to ever pay those two off early. You can kick some extra money at the student loans after your credit cards are paid off.
Mortgage - $172,000 / $174,000
Discover Student Loans - $40,400 / $48,000
Federal Student Loans - $31,000 / $33,000
Auto Loan - $5,600 / $9,000
And, finally, income...
My income - $75,000
Wife's income ~ $5,000
Rent from room mate - $7,200
I also put away approximately $260 a month to my 401k which my company matches 100%.
What do I pay off first? After paying all of my monthly payments (utilities, internet/tv, cell phones, groceries, dining out, mortgage, student loans, cc's, etc.) I have approximately $1,000 left over to pay down debt each month.
Thanks for any input. It's greatly appreciated.
Brandon
Well...How big is your emergency fund?
You really do need an emergency fund because if one thing is certain in life, bad things sometimes happen to good people. Your emergency fund should be at least 2 to 3 months of your salary and should be tapped only in case of real emergencies. That sale on that cool power tool at Home Depot is not an emergency! This money should be kept in a savings account so it will be easily available when an emergency does arise. Once you have 2 to 3 months salary in your emergency fund you can start investing in other products that have a higher rate of return but might not be as easily accessed in case you need some money fast.
You don't have to wait to start paying down your credit cards but how about splitting your money between the emergency fund and paying off credit cards? How about $500 to each?
I edited your post showing the "snowball" method of getting out of debt. You make the minimum monthly payment on all your cards except the one with the lowest balance. You put any extra money towards the card with the lowest balance until it is paid off. Then start on the card with the next lowest balance. Rinse and repeat as needed.
You should just make sure that your mortgage payments are made in a timely fashion. No need to pay the mortgage off early.
Same goes for the auto loan. It doesn't need to be paid off early unless you have a high interest rate.
Attack the student loans with the same snowball method used for the credit cards. DON'T PAY LATE! Pay off the student loan that has the highest interest rate first.
It is very important that you understand that you need savings and investments along with paying down your debt. If something should happen and you couldn't work for a few months you need to be prepared. YOU WILL BE GLAD THAT YOU PREPARED!
Starting Score: EQ 653 6/21/12
Current Score: EQ 817 3/10/20 - EX 820 3/13/20 - TU 825 3/03/20
. House, car, presumably a degree to go with those loans, and a decent income that equates to 1k / month free cash flow. If you don't have any derogatories / deliquencies you have a pretty easy path to a high credit score.
