Best Next Steps....?

[Anonymous]

Hello all you fantastic people that help everyone out. It’s much appreciated by me and many others. I’ve been on and off here for a few years and have had some ups and down and all arounds. But thanks to great people I’ve held steady. 

Due to and unfortunate split last year, moving to a new city with a new job, I’ve acquired some debt. So, the last 6 months of last year crap was flying all over the place with some of it beyond my control. Now that the dust has pretty much settled and I have stabilized everything, I’d like some advice on my next steps please. 

I have a variable monthly income that fluctuates between $3,200-$9,000 per month depending on season and other things. Average right now over the past 8 months is roughly $4,045/pm. Although in Dec. I made $9,000 and this Jan. I’ve made $4,700. I expect my income to grow slowly every month to about an average of $5,000/pm over the next 6 months and level out there from there. 

I’ve kept meticulous records of every income and purchase category for the past 8 months as well. I have specific categories for everything so I understand we’re all money is going and coming. I can now know exactly how much money is going to be spent every month to make a tight budget. 

When everything happened last year my entire savings was wiped out and massive debt was added to my credit cards that were all basically at zero. This all happened without warning and extremely quick. I hade no time to really react due to the situation. When I was able to move I basically started with absolutely no savings and living a week or two behind every paycheck. This is started about 8 months ago and then I took back control and started my path to debt freedom. Sorry, just wanted people to have an understanding so I may get better advice. 

I now has a savings of around $6,000 cash on hand and I’ve paid the credit cards down, that were pretty much maxed at about $22,000, down to around $15,500. So I’ve paid off around $6,500 in that short time while getting about 1 months savings worth for a e-fund. 

I’d like to lower my interest rates on these last few cards. My plan, if advisable, is to use the max available on my Navy Federal CLOC ($400) to my Navy Federal Credit Card. That would create about $1,300 of available credit on the NFCC. With the current promotion, for me, of a BT for 1.99% and no transfer fee, I want to move the Capital One debt over to the NFCC. That would massively reduce my interest rate for that one card. If I’m able, I want to try and get a CLI on the NFCC just before all this and move as much as I can from Discover to NFCC as well. Is this a good plan?

I always pay way more than the minimum balance on all cards combined. I then want to knock out the Discover with all available income possible, while paying the minimum on the remaining cards and do the avalanche method until all debt including the car is payed off. By my calculations, I should be able to have it all payed off by Dec. 2023. 4 years. All the while continuing to create more savings. It really scares me not having a savings. 

Any thoughts on improvements or other ideas I don’t know of would be extremely helpful. Thanks for your time and I sincerely appreciate it. I promise to put all good advice into practice and know it’ll help someone. 

FICO 8: (From FICO as I pay for it every month)

Equifax:        618

TransUnion: 632

Experian:      642

                       Limit       Balance      ULT       APR

Discover       $8,700  $7898.30  90.79%  25.24%

NFCLOC       $3,000  $2,557.81  85.26%  16.90%

CareCredit   $1,200   $1,011.00   84.25%  0.00%

NFCC           $3,600  $2,669.48  74.15%  18.00%

Cap1QS1      $2,600  $1,289.94  49.61%  25.24%

Target           $700     $0.00

Amazon        $1,700   $0.00

Cap1              $300     $0.00

Merrick         $1,200   $0.00

VS                  $700     $0.00

Total              $23,700  $15,426.53  65.09%

Car Loan      $19,773.96  16.19%  $444/pm

[Anonymous]

Congratulations on taking control of these things and getting yourself on the path to where you want to be. It sounds like you've taken the right first steps, and many times, that's the hardest part. So good job and keep it up.

A lot of the information you provided is helpful, but it doesn't tell the whole story. The income you described would make you very comfortable if you live in Fargo, but you'd be struggling to get by in San Fransisco. You also mention a split, which I took to mean a relationship ended. I recognize that sometimes those kinds of splits come with a residule, ongoing finanical obligation.

I don't expect you to fill in those blanks in any detail (in fact, I advise you not to), but I just want to acknowledge that there's a lot of your situation that I don't know, which might make my advice more or less practical.

That said, my advice is to bite the bullet and pay the debt off as soon as possible. $15,500 in credit card debt is not that much to pay down on a $60k income, especially if you're single. One big month and you could knock off the Cap1, if you're willing to make some lifestyle sacrifices. And by this time next year you could have it all gone. I don't see any reason to battle it for four years. Short-term sacrifices for long-term gains. Even if that means drip coffee instead of espresso for awhile.

Then you'd have this albatros off from around your neck and you'd be able to really start to enjoy the benefits of your work in whatever way you want.

If you decide to take this approach, I'm not sure consolidating makes a lot of sense. As to savings, I agree with you. You need to have savings -- at least a couple of month's worth of your obligations and bare necessitites.

[Anonymous]

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@Anonymous wrote:

Congratulations on taking control of these things and getting yourself on the path to where you want to be. It sounds like you've taken the right first steps, and many times, that's the hardest part. So good job and keep it up.

A lot of the information you provided is helpful, but it doesn't tell the whole story. The income you described would make you very comfortable if you live in Fargo, but you'd be struggling to get by in San Fransisco. You also mention a split, which I took to mean a relationship ended. I recognize that sometimes those kinds of splits come with a residule, ongoing finanical obligation.

I don't expect you to fill in those blanks in any detail (in fact, I advise you not to), but I just want to acknowledge that there's a lot of your situation that I don't know, which might make my advice more or less practical.

That said, my advice is to bite the bullet and pay the debt off as soon as possible. $15,500 in credit card debt is not that much to pay down on a $60k income, especially if you're single. One big month and you could knock off the Cap1, if you're willing to make some lifestyle sacrifices. And by this time next year you could have it all gone. I don't see any reason to battle it for four years. Short-term sacrifices for long-term gains. Even if that means drip coffee instead of espresso for awhile.

Then you'd have this albatros off from around your neck and you'd be able to really start to enjoy the benefits of your work in whatever way you want.

If you decide to take this approach, I'm not sure consolidating makes a lot of sense. As to savings, I agree with you. You need to have savings -- at least a couple of month's worth of your obligations and bare necessitites.

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Average monthly essential spending is about $2,800. That’s just to pay absolute bills including credit cards minimums. All other spending is variable like food and extras beyond just living.

Thanks for the perspective. I like your train of thought. 4 years was for all debt. 

[xaximus]

Personally, I would cut out all unnecessary expenses, live barebones for awhile and drop everything you can in your debts. Simple example - $16k in CC debt - $1000 a month, sound take you only 16 months to pay it off. I understand the emergency funds situation as I have around 30k sitting just for that myself. But, if your employment is stable, I would try to pay off the debt as the interested accruing is making the impact of your money less.

4K a month minus your spending $2.8k leaves around 1200. If you can dump 1k out of that into your CC debt, you should be free of it with in half a year. If you get extra, dump that in, from my (quick) calculations, if you get another 5k and 9k month, you can pay off your debt in less then a year easily. It all depends on how much money you are comfortable with in paying off your CC debt.