How do I prioritize needs and credit issues?

[w87]

Hello - thank you for reading this.

I am a young professional who has let her financial life spiral out of control. I've dug myself into a hole I can't get out of on my own knowledge.

My immediate need is transportation. After having a repo in 2011, I was able to get another car in 2013. Unfortunately I fell behind in payments again and four months ago after the engine blew, the car was repo'd. I've been blessed to have a coworker transport me to and from work, but that needs to change soon. I can't seem to get approved with the down payment that I can afford ($500).

The repossession is not the only thing that has bruised my credit. I have over $100k in student loans. $29k is in collections, Sallie Mae is being paid, and my federal loans are deferred. On top of that I have the stupidest things in collections - cell phones, parking tickets, etc. You may ask why not pay it off? I have low income. I struggle making my monthly rent and expenses. However, in November I will get a pay increase, but what do I do in the meantime to improve my situation?

Breakdown:

Income $27k (also get varying commission)

Credit Card: Limited - Bal: $244 (current on min payment)

Collections:
NCO - $29k
Traffic Tickets - $355
Verizon - $528
Tmobile - $921
Comcast - $78

Student Loans
Sallie Mae -$89k
Fed -$35k

I currently have $600 to my name with weekly pay and rent due on the 1st. I don't have family support. It's just me.

I recognize that I have bad financial habits and I feel trapped and stressed. Thank you for your responses and support. I look forward to getting on track.

[Glkslngr]

I would start by paying off your CC balance since, I'm assuming, you are paying interest on that. Next, I would tacke debt in collections from the lowest amount first..  Comcast, then parking tickets. Try getting in touch with Verizon and TMobile and see if they are willing to settle for less than what you owe them, after those two, I would try the same approach with NCO. Since your student loans are being deferred I would not put them in top priority at the moment. I am by no means in any great financial position, but I though I would just offer you a little advice on what I have found to work for me. 

Good luck! 

[Anonymous]

I agree with the person above me, but just wanted to add in there that calling them and asking for a payment plan doesn't hurt either. Whichever you decide to start paying first, call and tell them I can pay X amount a month, can we work something out? Surprisingly a lot of companies are very willing to work with you so long as they receive SOMETHING from you every month, at least that has been my experience. 

[w87]

Thank you for the responses. I did receive a letter in the mail from Tmobile about setting up a payment plan. Do you all think I should give up on getting a car and focus my attention on these accounts? I can't seem to do both at the same time with what I'm making currently.

[bdhu2001]

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@w87 wrote:
Hello - thank you for reading this.

I am a young professional who has let her financial life spiral out of control. I've dug myself into a hole I can't get out of on my own knowledge.

My immediate need is transportation. After having a repo in 2011, I was able to get another car in 2013. Unfortunately I fell behind in payments again and four months ago after the engine blew, the car was repo'd. I've been blessed to have a coworker transport me to and from work, but that needs to change soon. I can't seem to get approved with the down payment that I can afford ($500).

The repossession is not the only thing that has bruised my credit. I have over $100k in student loans. $29k is in collections, Sallie Mae is being paid, and my federal loans are deferred. On top of that I have the stupidest things in collections - cell phones, parking tickets, etc. You may ask why not pay it off? I have low income. I struggle making my monthly rent and expenses. However, in November I will get a pay increase, but what do I do in the meantime to improve my situation?

Breakdown:

Income $27k (also get varying commission)

Credit Card: Limited - Bal: $244 (current on min payment)

Collections:
NCO - $29k
Traffic Tickets - $355
Verizon - $528
Tmobile - $921
Comcast - $78

Student Loans
Sallie Mae -$89k
Fed -$35k

I currently have $600 to my name with weekly pay and rent due on the 1st. I don't have family support. It's just me.

I recognize that I have bad financial habits and I feel trapped and stressed. Thank you for your responses and support. I look forward to getting on track.

---

You need a budget you can stick with. Is the 27K before or after taxes? What is your actual take home w/o commission. How much is your housing costs and living expenses? What are your monthly expenses( include everything that you spend funds on).  What is the minimum amount you can pay on each obligation (i.e. you say you're current on minimum of credit cards and tell us the total owed on loans.; need to know the amount  of obligated payment and the interest rates)? Do you live in area that has good public transportation (as a backup)? When you work, is it a straight shift or is it a split shift?  Is the public transportation available during the hours you need to get to work and when you would be getting off work?  Do they have established car pools at your job?  

I set up carpool on my previous job where everyone met at a large stores parking lot, like Home Depot, and the car left at 7:15 a.m.  It saves gas, the environment, and the driver picks up and drops off multiple ridders at one locatiion. You don't want to buy another junker that get's you more in debt, but doesn't fix your transportation problem.

Right now you're feeling overwhellmed, because of the total$$$.  You'll get past this, but it won't be easy or instant.  

[w87]

I take home $402 weekly after taxes. My rent is $575 and my living expenses add on another $250 combined. Where I live has no reliable public transportation.

My credit card minimum payment is $25. Interest is 24.99%

The NCO student loan which is in collections actually wants to me to pay at least $5k to be able to start making payments on it. I don't have that. There is a law suit out :-/

Sallie Mae is being paid monthly by a family member (so grateful)

Federal loans deferred till September.

The other accounts in collections are not accruing interest.

[w87]

Actually I take back the $250 for expenses... Way off.

TV/Net : $117 (trying to get lowered!)
Electricity: $80-100 (high use to AC)
Water: $60
Rent A Center: $45 a week ( furniture set paid off, now paying off TV)
Cell Phone: $89
Renters Insurance: $12

[bdhu2001]

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@w87 wrote:
I take home $402 weekly after taxes. My rent is $575 and my living expenses add on another $250 combined. Where I live has no reliable public transportation.

My credit card minimum payment is $25. Interest is 24.99%

The NCO student loan which is in collections actually wants to me to pay at least $5k to be able to start making payments on it. I don't have that. There is a law suit out :-/

Sallie Mae is being paid monthly by a family member (so grateful)

Federal loans deferred till September.

The other accounts in collections are not accruing interest.

---

Okay, here's what I got for a quick and dirty.  I added your expenses listed + 200= 1050

402 x 4= 1608; 402 x 4.33 = 1740.66 (twice per year you get an extra check get a 5th check)

On a regular basis, you have an extra $558 if your miscl that you may have forgot to tell me doesn't exceed $200.

You stated that the public transportation isn't reliable.  Does that mean that you have a public bus system, but it's not always on time.  If that is the case, you schedule for the bus ahead of the bus that would get you to work on time.  I had to do this for two years when I worked at Pac Bell. I can't remember if it meant I was an hour early for work or 45 mins early for work, but "needs must."

Contact NCO and try to arrange payments.  Speak to someone above them if you must, but let them know you're living pay check to pay check.  My son has student loans and they had an agreement that he had to make 6 months of payments straight for his payment plan to be accepted.  Try to get your obligated payments as low as you can $50 so that you can be sure you'll be able to make the payments.  Review the Student loan area for more  accurate information on how to work with them. But you'll pay more than the $50.  You'll pay $100 after your 6 months of payments (if you can get them to agree to it).

Month 1: immediately pay off credit card $244 & put $200 in bank (the miscl funds).  Contact Comcast to see if you can get a pay for deletion (PIF).  Make sure to get it from them in writing and pay them the $78.  Contact Verizon for a PIF (if you can negotiate any of these payments for a lower amount and PIF all the better). You still have $236 from month 1.  That goes towards Verizon and in month two $292 to PIF (you hold onto the $236 to pay the full $528 in month two).

Month 2. $528 to Verizon (only $292 from current budget).  Contact TMobile (from what I've heard, they jip people so really try to get them to settle for less and verify that the amount they're listing is what you actually owe).  While that is going on, you pay off your tickets $355.  If you were accurate about your monthly expenses, this is where you use $100 of your misl funds so that both Verizon and your tickets are paid off this month.

Month 3.  Take a breath.  You've managed to keep two months of a good budget.  You know that you can spend an extra $558 to dig yourself out.  Use up to $80 of your miscl $200 to give yourself a pat on the back (i.e. go to a movie $11 and have a meal out $30-$45).  Since your credit card is paid off, use it for this pert, but pay the $60- $80 on your account immediately.  

Do this for 6 more months, while you're paying off your bills and you could be getting your credit good enough to apply for a car loan.  Before you apply for a car loan, save the amount of your anticipated monthly payment for 4 months w/o needing to dip into it for expenditures.  If you're able to do that, you may be ready for a car again.  If your credit isn't good enough to qualify for a good loan, just keep saving up the amount of the anticipated monthly payment until you can get approved.  

You should be able to turn your credit around within 9 -24 months.  You just have to be patient.  Your situation didn't get this way instantly and you can't fix it instantly.

Good luck on your Financial plan and Professional journey.

[bdhu2001]

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@w87 wrote:
Actually I take back the $250 for expenses... Way off.

TV/Net : $117 (trying to get lowered!)
Electricity: $80-100 (high use to AC)
Water: $60
Rent A Center: $45 a week ( furniture set paid off, now paying off TV)
Cell Phone: $89
Renters Insurance: $12

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Okay, you see the breakdown based on your original statement.  You're going to need to rethink your bills.  How much of the $117 is for the internet or what would the cost be for internet alone?  You've paid off your other furniture from rent a center.  You need to rethink the rental of the TV.  I don't know how much you've put into it, but watch netflix or Amazon Prime on your PC or phone.  There's also web TV. Use your miscl money to save up or buy a cheap or used TV (If you must have one).  Relook at your water bill.  Are you running the dish washer, instead of washing by hand etc? 

Just as a caveat, it's never good to rent furniture. Save up to get what you need and get cast offs from family members, in the mean time. Renter's insurance is a very good thing to have, but what do you have that is worth the expense of $12 per month. That's an extra $144 per year.  Not too much if that takes care of appliance breakdown and everything else.  What about your cell bill.  Is that a smart phone.  There are other phones that will allow you to text, connect to the webb and call. LG Extravert 2 and Samsung Gusto come to mind.

[buildafico]

I agree with bdhu. Couple of things to consider.
If you're living along consider getting a room mate.
Definitely kick RAC to the curb, it's too easy to keep renting stuff from them. $180 a month is too much for a $27k annual income and they know it. 45x52 weeks is $2340 a year. Half your rent is $575 with another person it would only be around 300 which is 175x12=2100. Or even better consider living with a family member or otherwise rent free situation for a year. That would free over 12k.
If neither of those is possible work a second job, for about 4 months, that is what I did.