topic Re: Well, That Escalated Quickly... in Personal Finance

Well, That Escalated Quickly...

Anonymous — Wed, 05 Oct 2016 16:49:56 GMT

Holy debt mountain! I started off at 400s scores in January/Feb of this year, and clawed my way to 720 MMS with 770s FICO 8s. I now have completely clean reports. I bought a house (closed on 9/15). In a firey blaze of glory I opened a ton of tradelines and furnished my house, refi'd my cars, and started doing things to make our house our home. My AAoA was 11 months when I bought my home, it is down to 7 months now. I don't really care, as I am now in the garden.

At this point, I have 48,600 in debt, not including my house, student loans or cars. I have a budget in place to pay all of this debt off in the next 24 months. At that point I will accellerate payment on my vehicles. Then we accellerate on the house. I hope to be completely debt free in 15 years or so.

My take home pay is about 3155/biweekly at this time, with that increasing to about 3300/biweekly in January (hooray cheaper health insurance options!) and again to 3400/biweekly in June (annual raise). I will also have a bonus in March at a currently undetermined amount. I have savings at this time of 4,500 as an 'Oh **bleep**' fund. I feel a bit overwhelmed, but I believe that I can do this. I have been sharing my journey on the rebuilding forums and mortgage forums, and it has really helped me hold myself accountable for the things that I do, and the things that I can control. Now it's time to move to the longer term... stabilization. So, here I am. My lowest score is a 611 (EX) and I haven't even seen all of the balances update to maxed out yet. MyFICO says all accounts being maxed with temporarily reduce me to a 580 across the board. Ugh, at least it's only temporary and I did it to myself.

My picture as it stands -

Ashley Furniture Acct 1 - 3499/3500 (12 months no interest)

Ashley Furniture Acct 2 - 3499/3500 (12 months no interest)

Lowes - 3299/3300 (6 months no interest on partial)

Amazon - 800/1500 (12 months no interest)

Guitar Center - 1446/1500 (24 months no interest)

Home Design - 2260/2500 (12 months no interest)

Sears - 4000/4000 (12 months no interest on partial)

Discover - 2000/2000 (no interest)

CapOne - 776/800 (no interest)

CredOne - 209/300 (interest)

CU CC - 799/1000 (14.99% interest)

NavChek - 15000/15000 (15.9% interest)

Navy CC - 10400/10400 (14.9% interest)

PenFed PLOC - 3000/3000 (10.5% interest)

PenFed OLOC - 0/500 (no interest, no balance)

My debt snowball plans -

1. CredOne - pay total 10/2016

1. CapOne - pay 25%, total 2/2017

1. CU CC - pay 20%, total 3/2017

1. Sears - pay 8%, total 10/2017

2. Discover - pay 5% now until 3/2017, pay 12.5% until total 9/2017

2. Navy CC - pay 6% now, total 1/2018

2. NavChek - pay 3.37% now until 9/2017, pay 5.9% until total 11/2018

3. PenFed PLOC - pay 6.5% now, total 3/2018

My various Synchrony cards (Ashley 1 & 2, Guitar Center, Home Design, Amazon), and my Sears Citi will be paid equally to avoid interest altogether on those accounts.

I also have my bills budgeted -

Internet

Cell Phone

Mortgage

Car Insurance (PIF every 6 months)

Utilities

Groceries, fun money, etc. (650/mo)

Is there anything that I am missing here? I have only budgeted 650 a month extra cash, and am counting on not maxing out anything again. However, I have my savings and it grows little by little, with a steady rise after December of this year. I gotta admit, I am scared. Any suggestions for me?

Re: Well, That Escalated Quickly...

Dalmus — Thu, 06 Oct 2016 20:56:22 GMT

@Anonymous wrote:

I also have my bills budgeted -

Internet
Cell Phone
Mortgage
Car Insurance (PIF every 6 months)
Utilities
Groceries, fun money, etc. (650/mo)

Is there anything that I am missing here? I have only budgeted 650 a month extra cash, and am counting on not maxing out anything again. However, I have my savings and it grows little by little, with a steady rise after December of this year. I gotta admit, I am scared. Any suggestions for me?

Congrats on the new house! Moving from an apartment to my own home where I had laundry facilities in my own place was the best part for me!

But... Holy maxed out accounts, Batman! You should be thankful you have the income to pay off (per your plan) your credit/LOC balances in 24 months.

I wouldn't budget Groceries in the same category at misc. Set a hard budget for a weekly/monthly grocery bill.

I don't see you budgeting anything towards "savings." This should also be a hard amount, however small. Even $50 per pay period is $1,300 over the course of the year.

I'm not sure about all of them, but most store card/store LOC must be paid in full by the end of the no interest period. If not, you are on the hook for all the interest on the total balance from the date of purchase. So in 12 months, if you don't have both Ashley accounts PIF, you'll suddenly have an extra finance charge of some high interest rate (somewhere around 30%) on $$3,500 for 12 months pop up on your 13th statement. That adds up to about an extra $1,000 that will show up on the 13th statement. On each account. I know Amazon, and probaly the other store cards with 0% interest deals are the same way.

Do you mind sharing what the minimum payments are for all bills and LOC's? People with better minds for numbers than me would probably have some great pointers on what order to pay off what and how much to pay towards the rest.

The fact that you've thought out a plan puts you ahead of about 80% of the people out there.

Re: Well, That Escalated Quickly...

bigq — Thu, 06 Oct 2016 21:55:20 GMT

When I was maxed out like that 8 years ago over 90% utilization with no missed payments(on 12 cards, $53000), all of my cards % rates went to the max due to usage and when I asked why I was told it was due to "random" inquiry into my credit history. Long story short I enrolled in a Debt Management Program with fixed amounts that was $825 mothly instead of $1240 and was on a 3 year plan( not debt settlement plan) paid off program 5 months early after getting a second job for almost 2 years. The new credit card act stops this from happenning now so I'm glad you won't have to worry about that happening. I haven't looked back since and now I have only 4 cards with 2 being 18 months old. Average credit score 795 with low of 776 13% utilization, with $6500 recent balance at 0% of course for 12 months and going to zero fast. problem now I have is I see all these nice offers available but I actually dont need them. Good Luck having a plan and a good income to dig out of your financial situation.

Re: Well, That Escalated Quickly...

Anonymous — Thu, 06 Oct 2016 21:56:00 GMT

@Dalmus wrote:

Congrats on the new house! Moving from an apartment to my own home where I had laundry facilities in my own place was the best part for me!
But... Holy maxed out accounts, Batman! You should be thankful you have the income to pay off (per your plan) your credit/LOC balances in 24 months.

Oh yes, I am DEFINITELY grateful, and I was very intentional in doing this. I knew I had to have a plan.

I wouldn't budget Groceries in the same category at misc. Set a hard budget for a weekly/monthly grocery bill.

I will have to do this - I currently have it wide open - some weeks we are kind of lazy and spend 50 on food, and some weeks my wife goes all out Korean buffet. I am going to have to face this delicately, because it's a cultural thing.

I don't see you budgeting anything towards "savings." This should also be a hard amount, however small. Even $50 per pay period is $1,300 over the course of the year.

My savings is kind of 'if it happens, it happens' over the next year. I have my uh-oh fund. I will have to look into budgeting this as well.

I'm not sure about all of them, but most store card/store LOC must be paid in full by the end of the no interest period. If not, you are on the hook for all the interest on the total balance from the date of purchase. So in 12 months, if you don't have both Ashley accounts PIF, you'll suddenly have an extra finance charge of some high interest rate (somewhere around 30%) on $$3,500 for 12 months pop up on your 13th statement. That adds up to about an extra $1,000 that will show up on the 13th statement. On each account. I know Amazon, and probaly the other store cards with 0% interest deals are the same way.

I have these account set to pay off a couple of weeks before the promotional period runs out.

Do you mind sharing what the minimum payments are for all bills and LOC's? People with better minds for numbers than me would probably have some great pointers on what order to pay off what and how much to pay towards the rest.

Ashley Furniture Acct 1 - 3499/3500 - 74$ min (12 months no interest)
Ashley Furniture Acct 2 - 3499/3500 - 74$ min (12 months no interest)
Lowes - 3299/3300 - 104$ min (6 months no interest on partial)
Amazon - 800/1500 - 44$ min (12 months no interest)
Guitar Center - 1446/1500 - 78$ min (24 months no interest)
Home Design - 2260/2500 - 60$ min (12 months no interest)
Sears - 4000/4000 - 123$ min (12 months no interest on partial)
Discover - 2000/2000 - 45$ min (no interest)
CapOne - 776/800 - 24$ min (no interest)
CredOne - 209/300 - 25$ min (interest)
CU CC - 799/1000 - 40$ min (14.99% interest)
NavChek - 15000/15000 - 262$ min (15.9% interest)
Navy CC - 10400/10400 - 140$ min (14.9% interest)
PenFed PLOC - 3000/3000 - $75 min (10.5% interest)
PenFed OLOC - 0/500 (no interest, no balance)

The fact that you've thought out a plan puts you ahead of about 80% of the people out there.

I have put my notes in. Thank you so much for taking the time to reply! The only thing I want to make sure is considered is I want to be out of debt in 2 years.

In other news, I said no to the Kirby guy, even though he was a REALLY good sales guy.

Re: Well, That Escalated Quickly...

Anonymous — Mon, 24 Oct 2016 04:32:25 GMT

Your score will bounce back up once your cards are payed off. I wouldn't be too upset. I was discourage too when I maxed out a card and it murdered my scores. Anyhow, your plan looks decent. You are paying off the credit cards with the highest amount of interest first which is great. You are saving yourself more money in the long run. However, this amount is fairly large. Did you mention how much of your paycheck is going to your debt? I would try to pay as much as you can and save as much as you can. I worry that if something were to happen, your debt will continue to grow and you will be forced to use your savings to keep afloat and I won't know what will happen once that savings is gone. Anyways, that is the worst case scenario. Just something to think about and hopefully it will encourage you to pay it off faster. Another advice would be to spend money that you have. Credit cards are not a mean to obtain free money or something to swipe because you want these things now. Remember that debt can be healthy, if you have some but once it gets out of control, it will be extremely difficult to pay it off. This is because the purpose of credit cards is to make money for the banks because of the interest intact and the bank, banking on people to overspend so it becomes an extremely vicious debt cycle for the individual. As cruel as that sounds, that is the honest truth and why credit cards exist. Keep this in mind because the bank is not your friend. They are trying to entice you to bite off more than you can chew so they can make money off of you. Hopefully, you will be able to pay off your debt and start with a clean slat eventually. Congrats on your new home!!

Re: Well, That Escalated Quickly...

iced — Mon, 24 Oct 2016 05:43:24 GMT

The damage is done at this point so your plan to pay it off as quickly as possible is of course the best course of action. The score hit is temporary and the least of your concerns; the fact you're now going to spend the next 2 years diverting as much cash as you can toward paying the bills off means 2 years you're probably not saving as much as you can. You don't mention your 401k/savings/retirement withholdings, so either they're pre-tax and you're already withholding $18,000/year (good job!) or you're not and now you won't be able to for a few more years.

I can't really offer specific advice since you didnt mention any amounts on your monthly expenses, so I don't know how much of you rincome you're devoting to them and if any can be trimmed for a year or two while you dig yourself out of this hole. Taking what few numbers you do share and I was able to extrapolate a few ballpark numbers:

- Take-home pay is around $6200. We'll ignore the 2 bonus checks you get each year on 3 payday months.

- Incidentals is $650 a month. Let's round up to $700. That leaves $5500.

- To pay off $48000 in debt in 2 years is around $2000/month (interest will bump it up some, but you also have those bonus checks to help knock it down). This leaves $3500.

- Where I live, insurance is about $1,800/year for single driver or $2,600 a year for two drivers. You mentioned "our house" and "cars" so I'll go with the latter and round down a bit as I'm in a bit more expensive part of the country. $200 a month leaves $3300.

- It seems most Americans spend too much on cable and phone. I'll guess $250/month for both. That leaves $3050.

- I'll guess mortgage and your refi'd cars total about $2500/month. That leaves $550.

- Student loan. I'll guess around $350. Down to $200.

- Utilities tend to be about $200/month for most people, since hot summers or cold winters tend to skew up in some months and balance out over the year. And you're broke.

If I'm high on any of your numbers, great. You're doing ok there, or at least aren't doing poorly. If my numbers are low for you, that's your hint you have somewhere to trim to increase your $650 food budget (or toss in savings or IRA). Cable/internet is probably your best source for adjustment, though the gains will be small potatoes.

Re: Well, That Escalated Quickly...

Anonymous — Mon, 24 Oct 2016 10:08:14 GMT

Student loans - 50$ - Down to 1 loan @7500 from 80k.
Car Insurance - 1200/yr - I pay in full and use snapshot, multiple policy discount for homeowners.
Internet - 75$ - Necessity, I work from home. Don't have cable.
Cell phone - 219$ - 4 lines @ 20% discount
Mortgage - 1955$ - until January then its 2416 (taxes on a new build will be reassessed for improved with house)
Cars - 547$ - total for both, was 800$ before the refi

I stopped contributing to my 401k to pay for my 2015 wedding in cash, and then to put the first down payment this year on a house (which I'm hoping to get returned since I sued the guy and won), then the down payment on the 2nd house, and didn't start back up again. I will once I get my debt settled.

As far as incidentals I have $600 budgeted a month, with the rest going to savings. It puts me at a steady incline in savings.

So far I'm doing good. I'm not using the cards or their available balances now that I've started the pay down. I've got Capital One and Credit One paid off. I'm feeling a bit better about it. I've sat down with my wife and made her eyeballs bleed with my budget spreadsheets.

I've got a tab for each card, each bill, each paycheck and then incidentals. It calculates interest and gives me a running budget total that I reconcile with our bank account. Today I'm going to adjust it to only calculate interest on the principle balance of the cards. It's my baby.

Wife is a full time student and I work from home, so next to no gas expenses. We drive smaller cars. The things we do for pleasure are free-ish like hiking or window shopping. We don't really spend a lot. My wife was a saver before we met, it's lovely. All in all I think we will be ok. There's a point in the future where we will be debt free and it's coming quickly.

Thanks everyone!

Re: Well, That Escalated Quickly...

Anonymous — Mon, 24 Oct 2016 10:12:24 GMT

Oh forgot utilities! It's in the budget but I got my first bill - 200$ for gas, electric, water, sewer, trash.

Re: Well, That Escalated Quickly...

iced — Mon, 24 Oct 2016 13:41:45 GMT

@Anonymous wrote:
@Anonymous loans - 50$ - Down to 1 loan @7500 from 80k.
Car Insurance - 1200/yr - I pay in full and use snapshot, multiple policy discount for homeowners.
Internet - 75$ - Necessity, I work from home. Don't have cable.
@Anonymous phone - 219$ - 4 lines @ 20% discount
Mortgage - 1955$ - until January then its 2416 (taxes on a new build will be reassessed for improved with house)
Cars - 547$ - total for both, was 800$ before the refi

I stopped contributing to my 401k to pay for my 2015 wedding in cash, and then to put the first down payment this year on a house (which I'm hoping to get returned since I sued the guy and won), then the down payment on the 2nd house, and didn't start back up again. I will once I get my debt settled.

As far as incidentals I have $600 budgeted a month, with the rest going to savings. It puts me at a steady incline in savings.

So far I'm doing good. I'm not using the cards or their available balances now that I've started the pay down. I've got Capital One and Credit One paid off. I'm feeling a bit better about it. I've sat down with my wife and made her eyeballs bleed with my budget spreadsheets.

I've got a tab for each card, each bill, each paycheck and then incidentals. It calculates interest and gives me a running budget total that I reconcile with our bank account. Today I'm going to adjust it to only calculate interest on the principle balance of the cards. It's my baby.

Wife is a full time student and I work from home, so next to no gas expenses. We drive smaller cars. The things we do for pleasure are free-ish like hiking or window shopping. We don't really spend a lot. My wife was a saver before we met, it's lovely. All in all I think we will be ok. There's a point in the future where we will be debt free and it's coming quickly.

Thanks everyone!

If your employer requires you work from home, you should be able to get internet reimbursed. Might be worth pursuing to free up a little cash.

Stopping your 401k to pay for a wedding was far more damaging to your financial future than running up 48k in debt. The good news is once you adjust to your current budget, and once your CC is paid off you should divert $1500 a month to 401k. You're creating a budget that will be able to withhold the max in 401k - DO IT. If you can start doing some shifting of funds sooner, I would push hard to do this. It cannot be stressed enough how important it is to get that money working sooner rather than later. $50000 put in at age 50 will return less than $10000 put in at age 30!

Yesterday I ignored Roth IRA withholding altogether because I had assumed at your take-home pay you were making in excess of the 194k/year for married (and definitely more than the 132k limit for single), but now knowing your income may be lower due to 0% 401k withholding, I would also highly recommend you put $400 that other $500/month into a Roth IRA. Your pay increases and bonus paychecks can go toward savings and slush funds.

Re: Well, That Escalated Quickly...

surferchris — Thu, 27 Oct 2016 05:23:17 GMT

Congrats on your progress!

Re: Well, That Escalated Quickly...

Anonymous — Thu, 27 Oct 2016 20:35:54 GMT

Thanks for the input. I am hoping that since I am only 32, I will have a little time to recover. I will be going to full throttle 401 contribution once this mound is paid off.

Re: Well, That Escalated Quickly...

Anonymous — Fri, 28 Oct 2016 00:24:52 GMT

First step - freeze all your accounts so you can't use them, even accidentally for more debt.

I've been there before.

If you have weekends/evenings free, consider a second job like Uber/Lyft or Amazon Flex. You can make decent spending cash doing this if you find yourself strapped.

Re: Well, That Escalated Quickly...

Appleman — Fri, 28 Oct 2016 16:30:20 GMT

Consider a budgeting program such as YNAB (YNAB.com for 34 day free trial)

Also undebt.it for a free snowball/avalanche program.

IMO, you have placed yourself on a fairly strict budget that is looking years into the future. Honestly, looking beyond the next 3 months can be difficult. You have a plan but you need to put a lot of effort in keeping on track.

Good luck!

Re: Well, That Escalated Quickly...

arizonahd — Fri, 28 Oct 2016 19:16:31 GMT

Impressive menagerie of debts you have there!

I highly recommend a good spreadsheet to manage your strategy and forecast. You're welcome to use mine if you are interested, I developed it in 2011 and have had great success managing both my debts and expenses with it. Debt software is lame in my opinion, I think we all live our lifestyles differently and a spreadsheet gives you the ability to tailer your strategies to your needs.

I am personally not a fan of snowball style debt payoff. It makes more sense to tackle the higher interest balances. For example, I paid off a promo apr balance instead of my car loan because the threat of 18% interest trumped the 6% interest of the car loan. Treat all interest accruing debt the same.

As others pointed out, growing your income by doing odd jobs would also be good to offset the debt payoff as well.

Re: Well, That Escalated Quickly...

woithk1 — Sun, 30 Oct 2016 18:53:11 GMT

I highly recommend you start listening to Dave Ramsey ASAP. Sign into Everydollar.com which is free to start your budget so you can see the results coming through to keep you motivatied. Please check out the links below for enrcouragement and strategy. I think you were smart to pay cash for your wedding and will be able to catch as you are in your 30's. I have lived by the Dave Ramsey methods and they have been very beneficial for me too. Here's to you paying off all your debts in a short amount of time. Congrats on the wedding and the new house.

http://www.daveramsey.com/

https://www.everydollar.com/

https://www.youtube.com/results?search_query=debt+free+scream

Re: Well, That Escalated Quickly...

Anonymous — Mon, 31 Oct 2016 01:09:27 GMT

@Appleman wrote:
Consider a budgeting program such as YNAB (YNAB.com for 34 day free trial)
Also undebt.it for a free snowball/avalanche program.

IMO, you have placed yourself on a fairly strict budget that is looking years into the future. Honestly, looking beyond the next 3 months can be difficult. You have a plan but you need to put a lot of effort in keeping on track.

Good luck!

Thanks for suggesting undebt.it!