topic Re: How can I get out of credit card debt? in Credit Cards

How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 19:14:53 GMT

I'm new here and would like to get some input on how to get out of credit card debt. I don't really have any good 'financial role models' in my family so I am turning to the MyFico experts. Here's my stats:

$8k in credit card debt
Bring home $4k per month (single)
Mortgage - $845/mo
Car - $450/mo
Student loan - $200/mo
In my 401k I have $5k available to take out in a loan

What is the best plan of action? Thanks.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 19:17:58 GMT

Wow, buy a cheaper car!

It's a shame that we Americans are being brainwashed into believing everyone needs to drive a $20k+ car.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 19:20:56 GMT

@Anonymous wrote:
Wow, buy a cheaper car!

That was exactly my thought. Exchange that one for something cheaper.

Is that gross or net income? I have to think gross, otherwise I don't see why you could not save several hundreds per month to pay those 8k back easily.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 19:25:56 GMT

I drive a Honda Civic which I thought was a pretty cheap car........

$4k per month is net.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 19:29:23 GMT

@Anonymous wrote:
I drive a Honda Civic which I thought was a pretty cheap car........

$4k per month is net.

I don't consider a $450 car payment per month cheap.

Anyway, with 4k net as a single home owner, you must have other money leaks than the ones you listed in order not to be able to pay those 8k down quickly.

Re: How can I get out of credit card debt?

haulingthescoreup — Sat, 09 May 2009 19:29:57 GMT

alli71 wrote:

I'm new here and would like to get some input on how to get out of credit card debt. I don't really have any good 'financial role models' in my family so I am turning to the MyFico experts. Here's my stats:
$8k in credit card debt
Bring home $4k per month (single)
Mortgage - $845/mo
Car - $450/mo
Student loan - $200/mo
In my 401k I have $5k available to take out in a loan
What is the best plan of action? Thanks.

Hi, alli, welcome to the forums!

You have two options: increase income, or reduce spending. OK, you have three options: do a combination of the first two. There are countless articles on how to cut back on spending in this economy --check out the various financial websites.

I'd get a written budget going. Compulsively record every single expenditure, from a package of peanut-butter cheese crackers from the vending machine on up. Examine your cell phone plan, your cable/internet plan, all the other things that we get sucked into.

Take all your cc's out of your wallet but one. Buy one tank of gas per month with that card, pay it off online (so you don't continue to increase your debt), and then take it out of your wallet. Rotate each card through to keep them all alive. You might have to do two cards a month, depending on how many you have, but only use them for something that you would have to pay cash for, if you didn't have the plastic.

This is $8K out of how much total extended credit? Not the amount left on each card, but the original limits. How many cards, what are your minimum payments, what are your APR's, which cards do you have and what are their balances, etc, etc?

One of the best tactics is to "snowball", paying minimums plus $10 or $20 on everything except the lowest balance, while paying that one off ASAP. Then take that amount and apply it to the new lowest-balance card; lather, rinse, and repeat.

But you mainly have to get a gut-level understanding of the flow of money through your life. You might want to read Suze Orman's Young, Fabulous, and Broke. Suze drives me crazy much of the time, but this book has a lot of basic info that everyone needs, and she can help supply that understanding of financial responsibility that you missed out on.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 19:58:05 GMT

maybe you should think about a refi on your car. $450/mo is a lot! I'm not judging you, mine is $441. I'm looking into a refi. I just joined a credit union, so hopefully I can get a decent refi rate.

Again from my own experience, you will be surprised how much is spent on fast food. Starbucks in the morning, McD for lunch adds up quickly. When I tracked my spending habits for a week, I had spent $73 in fast food! Ridiculous I know. Now, I allow myself $20 for the entire week. It works for me, but good luck with you!

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 20:09:07 GMT

Spend a month tracking EVERYTHING you spend. You'll be surprised at where your money "disappears" to, I know I was. Little things here and there add up. Make a list of your priorities and what you can easily cut out. Packing a lunch to work is a big money saver. Shop in bulk, use coupons, little things like that add up just like it adds up going out.

Re: How can I get out of credit card debt?

GregB — Sat, 09 May 2009 20:14:15 GMT

Are those numbers correct? $4,000 NET?

I'm making less than that thanks to the economy. My housepayment is $1,000 more than yours. My car payment is $80 more but no student loan.

I would have NO problem paying that CC debt off at $1,000 plus per month and I am a full time single parent.

What are you spending the money on? Something is missing here.

BTW, If I didn't need my truck for work, it would be sold before I would pay a $530 per month car payment. However, it is 4 miles to work & doesn't snow here so I could walk to work.......

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 20:15:36 GMT

@Anonymous wrote:
@Anonymous wrote:
I drive a Honda Civic which I thought was a pretty cheap car........

$4k per month is net.
I don't consider a $450 car payment per month cheap.

Anyway, with 4k net as a single home owner, you must have other money leaks than the ones you listed in order not to be able to pay those 8k down quickly.

OK, maybe I should clarify from where I come here:

I bring roughly 2k net home every month (health insurance, some costs at work and 401k already subtracted), and I am also single. My rent is $763 per month (I like to have a bit more space ). Other fixed costs are phone, cellphone and internet ($95), electricity (about $100). I'm too lazy at the moment to break down insurances to a per month bases, but let's just assume that all this sums up to roughly $1k, which leaves me with another 1k to live on.

My one big vice is eating out. I spend sometimes more than $300 per month on this, and this would be an easy target for potential savings. A bit less easy would be moving to a smaller apartment. I could adjust some of my grocery spending, because there are often cheaper options available to what I buy. These are just examples.

At the moment, I don't really need to reign in on my spending, because I still manage to save a couple of hundred bucks per month. But I hope it helps to understand where I came from when I suggested that it should be easy for you to save enough money to pay that debt down.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 20:30:11 GMT

like others said, but I'll bullet a quick list:

1. Get a written budget TODAY. Identify all income and all expenditures

2. KILL all non-essential spending. No eating out. No renting movies. No fast food. No impulse buys, etc.

3. Cancel cell phone or downgrade to the minimum possible plan cost.

4. Cancel cable/satellite tv or downgrade the most basic, cheap cost.

5. Have a garage sale, ebay sale, craigslist sale. Sell the stuff you don't use, don't want, don't need, don't remember stored in the garage, attic, closet, under the bed, laying around gathering dust or ESPECIALLY if in paid storage unit. Sell luxuries you can live without.

6. Get another part-time job, even if it is fast food, grocery store, lower paying. The additional income can ALL go toward debt. Just a few extra hundred per month really makes a dent.

7. Start listening to Dave Ramsey daily for "get out of debt info"

8. Employ the "snow ball" debt method. Pay minimums on all cards, but pay as much as possible toward your lowest balance card. Once paid off, use that money plus the normal minimum toward the next lowest balance. Continue till all paid off.

9. DO NOT use credit cards for any new accumulation of debt.

10. Refi your existing car payment to a lower APR longer term loan to reduce the payment.

11. Call your Credit Card companies and see if you can negotiate lower APR, even if for a temporary period of time so that you can make more headway on principle.

12. Move to a lower cost housing arrangement. Get a room mate to share costs.

13. Turn the thermostats up/down accordingly for lower electric.

14. Make sure you car is tuned, oil level is full and tires are at optimum pressure....helps improve gas mileage.

15. If you use laudery/dry cleaners....start doing your own laundry.

16. If you are single and live close to parents or family, consider seeing if you can move in with them for 6 months till debt is paid down.

17. Car pool if/where applicable.

18. Walk more, ride a bike where applicable.

19. Go generic and off label brands for grocery and personal care products.

As you can see there are a million little things you can do....and added together they can really add up.

Message Edited by txjohn on 05-09-2009 01:30 PM

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 20:37:37 GMT

@Anonymous wrote:

7. Start listening to Dave Ramsey daily for "get out of debt info"

Now, let's not get extremist in the other direction .

Re: How can I get out of credit card debt?

athensguy — Sat, 09 May 2009 20:43:29 GMT

@Anonymous wrote:
Wow, buy a cheaper car!

It's a shame that we Americans are being brainwashed into believing everyone needs to drive a $20k+ car.

You can't extrapolate the cost of a car just from the payment.

You also need to know length of loan and interest rate. If it's a 3 year loan with a good interest rate, $450 would still be an inexpensive car.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 21:02:56 GMT

@athensguy wrote:
@Anonymous wrote:
Wow, buy a cheaper car!

It's a shame that we Americans are being brainwashed into believing everyone needs to drive a $20k+ car.
You can't extrapolate the cost of a car just from the payment.

You also need to know length of loan and interest rate. If it's a 3 year loan with a good interest rate, $450 would still be an inexpensive car.

It's only inexpensive, if it doesn't prevent you from getting rid of your credit card debt.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 21:39:41 GMT

@athensguy wrote:
@Anonymous wrote:
Wow, buy a cheaper car!

It's a shame that we Americans are being brainwashed into believing everyone needs to drive a $20k+ car.
You can't extrapolate the cost of a car just from the payment.

You also need to know length of loan and interest rate. If it's a 3 year loan with a good interest rate, $450 would still be an inexpensive car.

Somewhat true yes.

I personally think it's best to only pay cash for cars after having made the mistake of buying one that's too expensive.

I only think houses should require loans. Don't get me started on people who buy furniture/electronics/etc on loans.

Re: How can I get out of credit card debt?

athensguy — Sat, 09 May 2009 21:48:31 GMT

@Anonymous wrote:
@athensguy wrote:
@Anonymous wrote:
Wow, buy a cheaper car!

It's a shame that we Americans are being brainwashed into believing everyone needs to drive a $20k+ car.
You can't extrapolate the cost of a car just from the payment.

You also need to know length of loan and interest rate. If it's a 3 year loan with a good interest rate, $450 would still be an inexpensive car.
Somewhat true yes.

I personally think it's best to only pay cash for cars after having made the mistake of buying one that's too expensive.

I only think houses should require loans. Don't get me started on people who buy furniture/electronics/etc on loans.

I'd prefer to buy my next car on a CC.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 22:11:06 GMT

@Anonymous wrote:
@Anonymous wrote:

7. Start listening to Dave Ramsey daily for "get out of debt info"
Now, let's not get extremist in the other direction .

The OP suggested going BK, so I think "extreme measures" are appropriate in this instance.

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 22:31:21 GMT

@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:

7. Start listening to Dave Ramsey daily for "get out of debt info"
Now, let's not get extremist in the other direction .

The OP suggested going BK, so I think "extreme measures" are appropriate in this instance.

Did he? I didn't see BK mentioned. I also don't see how a BK would be approved with those numbers. The credit card debt is two months' net salary.

Re: How can I get out of credit card debt?

wmarat — Sat, 09 May 2009 22:44:57 GMT

@Anonymous wrote:
like others said, but I'll bullet a quick list:

1. Get a written budget TODAY. Identify all income and all expenditures
2. KILL all non-essential spending. No eating out. No renting movies. No fast food. No impulse buys, etc.
3. Cancel cell phone or downgrade to the minimum possible plan cost.
4. Cancel cable/satellite tv or downgrade the most basic, cheap cost.
5. Have a garage sale, ebay sale, craigslist sale. Sell the stuff you don't use, don't want, don't need, don't remember stored in the garage, attic, closet, under the bed, laying around gathering dust or ESPECIALLY if in paid storage unit. Sell luxuries you can live without.
6. Get another part-time job, even if it is fast food, grocery store, lower paying. The additional income can ALL go toward debt. Just a few extra hundred per month really makes a dent.
7. Start listening to Dave Ramsey daily for "get out of debt info" BAD ADVICE
8. Employ the "snow ball" debt method. Pay minimums on all cards, but pay as much as possible toward your lowest balance card. Once paid off, use that money plus the normal minimum toward the next lowest balance. Continue till all paid off.
9. DO NOT use credit cards for any new accumulation of debt.
10. Refi your existing car payment to a lower APR longer term loan to reduce the payment.
11. Call your Credit Card companies and see if you can negotiate lower APR, even if for a temporary period of time so that you can make more headway on principle.
12. Move to a lower cost housing arrangement. Get a room mate to share costs.
13. Turn the thermostats up/down accordingly for lower electric.
14. Make sure you car is tuned, oil level is full and tires are at optimum pressure....helps improve gas mileage.
15. If you use laudery/dry cleaners....start doing your own laundry.
16. If you are single and live close to parents or family, consider seeing if you can move in with them for 6 months till debt is paid down.
17. Car pool if/where applicable.
18. Walk more, ride a bike where applicable.
19. Go generic and off label brands for grocery and personal care products.

As you can see there are a million little things you can do....and added together they can really add up.
Message Edited by txjohn on 05-09-2009 01:30 PM

Re: How can I get out of credit card debt?

Anonymous — Sat, 09 May 2009 22:45:56 GMT

@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:

7. Start listening to Dave Ramsey daily for "get out of debt info"
Now, let's not get extremist in the other direction .

The OP suggested going BK, so I think "extreme measures" are appropriate in this instance.
Did he? I didn't see BK mentioned. I also don't see how a BK would be approved with those numbers. The credit card debt is two months' net salary.

Whoops....I had been replying to 2 separate threads and got my OP's mixed up....sorry