Anybody been in debt and got out?

[DeafCaroline]

Although you need to look at their advice carefully. Sometimes the banks' "financial counselors" are really thinly-disguised salespeople for the banks' products like annuities, or certain types of savings accounts, or even loans. It's not quite the same as getting completely unbiased advice from someone who has nothing to sell you.

There are plenty of financial planning books available at your nearest library. I'd start with reading some of those, whatever looks most appropriate for your situation, before sitting down with any sort of advisor. You need to know the right questions to ask to make the most of your time with a real, live person.

Good advice - to weed out salespeople from so-called financial advisers, ask them for their certifications and qualifications. Salespeople usually don't have such certifications.

Salespeople are also not well informed on long term financial planning and retirement plans so that's another give away.

It's YOUR money so you have the right to ask tough questions and demand advisers to prove their qualifications and knowledge before you make the decision to entrust your savings to them.

 

[KristinaB]

DeafCaroline, we are definitely two peas in a pod re: your method of staying out of debt!

Michelle Singletary is a financial columnist for the Washington Post. She has two or three columns a week, plus a web chat. She is EXCELLENT for discussing the sort of problems most people have.

Her basic guidelines for saving:

1) set up a "life happens" fund. This should have around $2,000 - $3,000 in it. This money would be to cover stuff like you suddenly need new tires, or the furnace gives out, or you have an unexpected medical or vet cost. Cuz "life happens" to all of us, and if you have the funds, then you don't have to put these minor emergencies on a credit card.

Do I pay off old existing bills at the same time, or do one before the other?

2) Emergency savings. This should be a sum large enough to cover 3 to 6 months of living expenses, should you lose your job or have a serious emergency (your house gets flooded, say, or you have a kitchen fire that does serious damage, that sort of thing). This money should be in a CD or other vehicle that is accessible, but not TOO accessible, because the idea is that this is for SERIOUS emergencies only. Not "gotta have this newest, greatest, PC, pair of shoes, handbag," sort of emergency.

Same question here. Do this at the same time when paying off, or pay off first then do this, or do this and then pay off?

3) Retirement savings, through IRAs, or work-related plans, whatever. Whatever your age, start saving for your retirement as soon as possible.

Hubby has this, but stupidly, he used his to move back to Florida. I never had one.

Then in addition to that, depending on your lifestyle, you might have savings accounts to buy a car, or for family vacations, or to fund your kids' education, that sort of thing.

Luckily, we are working on a saving account, but it gets used once a month when paychecks are short. It was son's with me joint, but he cleaned out all his money already.

Then, hurrah! If there's anything left, you can spend it!
--------------------------------

In practical terms, what I did years ago: with my first car loan, I rounded up what I owed to the next $100. So every month I was paying it off a little faster than I absolutely had to. After it was paid off, since I was already used to living without that money, I kept putting the same amount into my "car savings" account. The next car, I didn't have to take out much of a loan. Did the same thing to get that loan paid off.

After that one, I've never had another car loan; have paid cash for all my cars since 1986. Also I try to keep my cars for as long as possible.

Same principle worked for paying off our mortgage early.

Day to day stuff: some people find it easier to just have a certain amount in cash for the week, to pay for groceries, drugstores, whatever, and not charge anything at all. That gives you a good handle on what you're really spending.

I do at least round up on the car payments and other bills to get them paid off earlier. I will be doing that on my my phone bill as well.

 

[Beach girl]

Michelle Singletary is a financial columnist for the Washington Post. She has two or three columns a week, plus a web chat. She is EXCELLENT for discussing the sort of problems most people have.

Her basic guidelines for saving:

1) set up a "life happens" fund. This should have around $2,000 - $3,000 in it. This money would be to cover stuff like you suddenly need new tires, or the furnace gives out, or you have an unexpected medical or vet cost. Cuz "life happens" to all of us, and if you have the funds, then you don't have to put these minor emergencies on a credit card.

Do I pay off old existing bills at the same time, or do one before the other?

Try to do both at the same time. Even if you only put a small amount into your savings account, say $25 a month, that's better than nothing and gets you into the habit of putting that deposit in just like any other bill. It's the "pay yourself first" principle.


2) Emergency savings. This should be a sum large enough to cover 3 to 6 months of living expenses, should you lose your job or have a serious emergency (your house gets flooded, say, or you have a kitchen fire that does serious damage, that sort of thing). This money should be in a CD or other vehicle that is accessible, but not TOO accessible, because the idea is that this is for SERIOUS emergencies only. Not "gotta have this newest, greatest, PC, pair of shoes, handbag," sort of emergency.

Same question here. Do this at the same time when paying off, or pay off first then do this, or do this and then pay off?

Pay off your bills and get the "life happens" account funded first. As soon as you have $1,000 in "life happens," and your bills are paid off, then start funding the long-term emergency account, as well as putting in enough into "life happens" so you eventually have at least $2,000 in there.




3) Retirement savings, through IRAs, or work-related plans, whatever. Whatever your age, start saving for your retirement as soon as possible.

Hubby has this, but stupidly, he used his to move back to Florida. I never had one.

If at all possible, start now. Again, even $25 a month is better than nothing. You can have a "spousal IRA" if your husband is working.


Then in addition to that, depending on your lifestyle, you might have savings accounts to buy a car, or for family vacations, or to fund your kids' education, that sort of thing.

Luckily, we are working on a saving account, but it gets used once a month when paychecks are short. It was son's with me joint, but he cleaned out all his money already.

I hope it was just his money he took, and not what was rightfully yours.

Then, hurrah! If there's anything left, you can spend it!
--------------------------------

Slowly but steadily, you can do it. My mom was in debt for a while, after my dad died and she was raising four kids and going to college to get her teaching degree. Family finances were exceptionally tight, and she used to charge our "going back to school" clothes in September on her Sears card, which got paid off usually in December, just in time for spending more money on Christmas!

We learned to live pretty frugally, but she was not able to avoid all debt at all times - it came and went. After she finally got her degree and started teaching, though, everything was paid off and she was never in any debt after that, for anything. Got the house and car paid off, never took out any additional loans, and as I mentioned in another thread, she saved up enough so that eventually, she could spend her final years in a very nice assisted living place. It took discipline to do all that on a teacher's salary.

 

[Beowulf]

Although you need to look at their advice carefully. Sometimes the banks' "financial counselors" are really thinly-disguised salespeople for the banks' products like annuities, or certain types of savings accounts, or even loans. It's not quite the same as getting completely unbiased advice from someone who has nothing to sell you.

There are plenty of financial planning books available at your nearest library. I'd start with reading some of those, whatever looks most appropriate for your situation, before sitting down with any sort of advisor. You need to know the right questions to ask to make the most of your time with a real, live person.

The vast majority of them are, so be careful whom you pick, even those advertised on tv claiming not to be affiliated with banks.

 

[DeafCaroline]

KristinaB - if you're talking about credit card debt - this is a GREAT resource.

and p.s. yes, pay your old bills at the same time but make a list of what their interest rates are for late payments and the higher the interest rate, the more you should aim to pay them.


What will it take to pay off my credit card?

Just for fun, I entered different variables:

Credit card balance: $1000
Interest rate: 10%
Monthly payments: $100

It would take me 11 months to pay it off.

what if I only paid the minimum per month? That would be $10

guess how long it takes to pay it off: 193 months or 16 years!!!!



really - check out this calculator to see how long it would take you to pay off a debt based on their interest rates (or even late payment penalties, if we're talking about utility companies for example) and on your monthly payments.

And don't hide from creditors - see if they'd be willing to freeze your accounts (i.e. cancel your credit card) and halt the continuous late payment penalties and work out a repayment plan with you.

 

[Cheetah]

KristinaB - if you're talking about credit card debt - this is a GREAT resource.

and p.s. yes, pay your old bills at the same time but make a list of what their interest rates are for late payments and the higher the interest rate, the more you should aim to pay them.


What will it take to pay off my credit card?

really - check out this calculator to see how long it would take you to pay off a debt based on their interest rates (or even late payment penalties, if we're talking about utility companies for example) and on your monthly payments.

And don't hide from creditors - see if they'd be willing to freeze your accounts (i.e. cancel your credit card) and halt the continuous late payment penalties and work out a repayment plan with you.

I pay all of my debts at the minimum. Then I take the one with the highest interest rate and pay them almost all I can afford (keeping expenses and a little spending money).

I am lucky, my father gives me some money every month, all of which goes towards my debts. Then once everything is paid off, I start paying him back at zero % interest. It's like getting free money! On the down side, I share with him my entire financial story. I guess It's only fair, he is helping me get out of debt he deserves to know how I got there in the first place and that I have a plan in place to not go back there again.

 

[DeafCaroline]

I pay all of my debts at the minimum. Then I take the one with the highest interest rate and pay them almost all I can afford (keeping expenses and a little spending money).

I am lucky, my father gives me some money every month, all of which goes towards my debts. Then once everything is paid off, I start paying him back at zero % interest. It's like getting free money! On the down side, I share with him my entire financial story. I guess It's only fair, he is helping me get out of debt he deserves to know how I got there in the first place and that I have a plan in place to not go back there again.

Oooooooo....I really don't recommend paying the minimum at all. that's how you stay in debt forever. You're lucky your father is bailing you out because without him and you paying the minimum every month, you would have been in debt for years and years and years. Scary!

 

[Beowulf]

There are also tricks to cleaning up your debt. If you send a registered letter to a business you owe money to and ask how much the debt is, and they do not answer within a month, viola! the debt is gone.

 

[DeafCaroline]

There are also tricks to cleaning up your debt. If you send a registered letter to a business you owe money to and ask how much the debt is, and they do not answer within a month, viola! the debt is gone.

No way! how did you know this?

 

[Cheetah]

Oooooooo....I really don't recommend paying the minimum at all. that's how you stay in debt forever. You're lucky your father is bailing you out because without him and you paying the minimum every month, you would have been in debt for years and years and years. Scary!

I probably did not say that right. Pay the minimum on all except the one with the highest interest rate. Pay that one as much as you can afford until it's paid off. Then repeat with the next highest interest rate. and repeat until all is paid off. If all goes right, each time one is paid off, all that you put towards the previous one goes towards the next one. Each there after gets paid off faster and faster.

It's kind of hard when you have a low interest with a really high balance. Its still best to pay off the high interest first.

 

[Beowulf]

No way! how did you know this?

A friend got out of paying a few months rent at a previous apartment this way, but that was ten years ago, more or less. I think it still holds true, though, but I cannot SWEAR to it.
Find out for me, will ya?

 

[DeafCaroline]

A friend got out of paying a few months rent at a previous apartment this way, but that was ten years ago, more or less. I think it still holds true, though, but I cannot SWEAR to it.
Find out for me, will ya?

I just did! and you were correct!!!!!

There are certain steps you have to take but ultimately what it comes down to is this: say you owe money to your cell phone carrier and you haven't paid in a while, they sell off that debt to a debt collection agency who then takes on the responsiblity of claiming payment.

Here's the thing: you send them a registered letter asking for three things:

1 - that they contact you in writing only, no more calls
2 - that they send you PROOF of your debt
3- that they reproduce the original loan agreement you had made with the cell phone company.

Loan agreements get lost when debts are sold to such agencies so if they cannot show proof of your original loan agreement with the company they bought the debt from they cannot do anything and will leave you alone because they really don't want to go to court and have their semi-legal methods exposed.

 

[Secretblend]

I probably did not say that right. Pay the minimum on all except the one with the highest interest rate. Pay that one as much as you can afford until it's paid off. Then repeat with the next highest interest rate. and repeat until all is paid off. If all goes right, each time one is paid off, all that you put towards the previous one goes towards the next one. Each there after gets paid off faster and faster.

It's kind of hard when you have a low interest with a really high balance. Its still best to pay off the high interest first.

And as you pay off one, don't lower the amount for rest, keep paying same amount till all is paid.. For example..

If have 3 accounts.. and making 100 dollars payment per month..

1st is 25 dollar a month
2nd is 35 dollars a month
3rd is 40 dollars a month.

If you pay off the 40 dollar one first.. then start putting the 40 dollars toward the 35 dollars a month..

1st is 25 dollars a month

2nd is 75 dollars a month..

and so on till all 3 is paid.. that is quickest and easiest way to pay off faster.

 

[Beowulf]

I just did! and you were correct!!!!!

There are certain steps you have to take but ultimately what it comes down to is this: say you owe money to your cell phone carrier and you haven't paid in a while, they sell off that debt to a debt collection agency who then takes on the responsiblity of claiming payment.

Here's the thing: you send them a registered letter asking for three things:

1 - that they contact you in writing only, no more calls
2 - that they send you PROOF of your debt
3- that they reproduce the original loan agreement you had made with the cell phone company.

Loan agreements get lost when debts are sold to such agencies so if they cannot show proof of your original loan agreement with the company they bought the debt from they cannot do anything and will leave you alone because they really don't want to go to court and have their semi-legal methods exposed.

Thanks for the quick work! I will certainly advise certain people to try this approach.

 

[DeafCaroline]

Thanks for the quick work! I will certainly advise certain people to try this approach.

It's better that they learn how debt collection agencies work and what the laws are so they would know exactly what to do. I found some info here:

Debt validation in Canada? Discussion Forum - Canadian

 

[Warped]

Not all debt are bad. As long as they don't have high interest rates and are tax deductible like mortgages and educational loans. I have both and I take advantage of the tax deductions. Debt is quite useful for many things especially when it comes to starting up a business. Nothing is better than making money on OPM (Other People's Money)

However, debts like credit card and car loans, or whatever that isn't tax deductible is a huge waste of money and time, avoid those at all costs.

 

[KristinaB]

KristinaB - if you're talking about credit card debt - this is a GREAT resource.

The only card debt is 1 Sears card that is hubby's. I think we recently paid off mine. I will have the "school" paid off in October. After that, it's just medical bills only and a cell phone bill. (hubby messed up big time and now we are suffering for it.)

We are slowly getting there, but it has been a struggle.

Beach Girl-
Hubby will check at work tomorrow to see if I can get in on his retirement options somehow. Other than that, MIL suggested that I call the bank to see what they can help with.

And, for that retirement option that he cashed in to move. It was everything we had collectively. We had 5 weeks to pack up, close everything, and move from Missouri to Florida. Easiest way was to withdrawal the retirement. He is taking the maximum allowable amount from his check into his retirement package now. Also, MIL has not told him, but she has 2 accounts that are set aside for our retirement later. We cannot touch either account until we are 62. Each account has quite a bit in, but not over the FDIC coverage. She has also set up accounts for each of my 2 children that they cannot touch until they are 35 and they have a sizable amount in them. The interest from those account is going into her working household account. Once we get our house, then she will allow us to get the interest for our household account just to verify we can pay the yearly taxes on real estate property.

 

[SneakerNet]

You know, debt is always a debt in a life time. With many years of my experiences in financial and investor, the best method in term of paying off debt... some sort... I do have debt but with zero percent interest on credit card. Yup, zero percent interest.

1: Yes, many financial adviser said that it's best to save up money into saving or fund account to use for emergency fund as for example: major auto repair, 3 months worth of bills (internet, electric, car loan and such) and rent/mortgage in case of you lose your job. Leave that emergency fund untouch, no excuses. That is one part...now move on to number 2....

2. Talking about improvement of anything like home improvement, outdoor improvement and such, of course some people start putting into saving account to reach certain goal that you want to buy, like if you want to buy super energy saver refrigerator, let say $1500.00 for example. This going to take a while to build it up in saving account.....but what if you run into super saving sales, let say %25 to %50 off? And your improvement saving is not ready to reach that goal?? So you are stuck with that saving. What I usually do that I tend to get once awhile if I received in the mail from credit card provider like Sears, Haversy, Home Depot, Lowes and such that say... 0% interest free for one year? So, I check to see if there's any good sales on Sears refrigerator and if I find that it's a good sale, I check the price and see if I can pay it off with in a year or less. Like the $1500 refrigerator, so I divided by 12 and it will come to $125 per month payment. If I can afford to pay $125 per month AND this is most important is to Pay It on TIME! I usually pay like around $140 so I can pay off one month earlier to be sure that it's been taken care of it. Now, this is ZERO interest payment...plus whatever the special sale, like 10% or 15% off of that refrigerator. I call that a great saving. The reason I say this is because suppose if you buy $1500 refridge with 10% sale and put it on Sears credit card and the interest is like 21%, meaning that you have to pay extra $110 on interest for one year (or higher if you go more than one year), do you call that special sale saving?? Noooooo... LOL You know, 10% off sale but you have to pay sears credit card interest... it's like you are paying the special sale back!! You are not getting any sales at all.... get the idea??

So, you know putting $125 per month into saving account to reach $1500 in one year, it would be the same as putting zero percent interest on your credit card for one year, lot of time that when credit card advertise that you can get zero percent interest free for one year plus special sales....and you can look for special sale during the special zero percent interest time frame. The only draw back with saving account, if you put all the money on saving account and if you earn interest, you have to pay taxes. Zero interest on credit card have nothing to do with taxes. See the differences.

So, I been doing that for many years... like I just purchase new super energy saver washer and dryer for $2500 and put it on zero percent interest credit card (cuz I got it in the mail) and I can afford $210 per month payment to finish off in one year.

So, other debt.. like car loan, mortgage, or rent will always be in debt.. and it's a necessity items, it's a "Got to have" in term of transportation and keeping yourself warm under the roof....

So as far as credit cards goes... if you pay it off your CC debt..then start on a "look out" for zero percent interest... this will help to pay it off easier than having very high interest rate.... once you missed the payment, your interest will double and can get spiral out of control easily.

This is my 2 cents idea...

 

[Secretblend]

You know, debt is always a debt in a life time. With many years of my experiences in financial and investor, the best method in term of paying off debt... some sort... I do have debt but with zero percent interest on credit card. Yup, zero percent interest.

1: Yes, many financial adviser said that it's best to save up money into saving or fund account to use for emergency fund as for example: major auto repair, 3 months worth of bills (internet, electric, car loan and such) and rent/mortgage in case of you lose your job. Leave that emergency fund untouch, no excuses. That is one part...now move on to number 2....

2. Talking about improvement of anything like home improvement, outdoor improvement and such, of course some people start putting into saving account to reach certain goal that you want to buy, like if you want to buy super energy saver refrigerator, let say $1500.00 for example. This going to take a while to build it up in saving account.....but what if you run into super saving sales, let say %25 to %50 off? And your improvement saving is not ready to reach that goal?? So you are stuck with that saving. What I usually do that I tend to get once awhile if I received in the mail from credit card provider like Sears, Haversy, Home Depot, Lowes and such that say... 0% interest free for one year? So, I check to see if there's any good sales on Sears refrigerator and if I find that it's a good sale, I check the price and see if I can pay it off with in a year or less. Like the $1500 refrigerator, so I divided by 12 and it will come to $125 per month payment. If I can afford to pay $125 per month AND this is most important is to Pay It on TIME! I usually pay like around $140 so I can pay off one month earlier to be sure that it's been taken care of it. Now, this is ZERO interest payment...plus whatever the special sale, like 10% or 15% off of that refrigerator. I call that a great saving. The reason I say this is because suppose if you buy $1500 refridge with 10% sale and put it on Sears credit card and the interest is like 21%, meaning that you have to pay extra $110 on interest for one year (or higher if you go more than one year), do you call that special sale saving?? Noooooo... LOL You know, 10% off sale but you have to pay sears credit card interest... it's like you are paying the special sale back!! You are not getting any sales at all.... get the idea??

So, you know putting $125 per month into saving account to reach $1500 in on year, it would be the same as putting zero percent interest on your credit card for one year, lot of time that when credit card advertise that you can get zero percent interest free for one year plus special sales....and you can look for special sale during the special zero percent interest time frame. The only draw back with saving account, if you put all the money on saving account and if you earn interest, you have to pay taxes. Zero interest on credit card have nothing to do with taxes. See the differences.

So, I been doing that for many years... like I just purchase new super energy saver washer and dryer for $2500 and put it on zero percent interest credit card (cuz I got it in the mail) and I can afford $210 per month payment to finish off in one year.

So, other debt.. like car loan, mortgage, or rent will always be in debt.. and it's a necessity items, it's a "Got to have" in term of transportation and keeping yourself warm under the roof....

So as far as credit cards goes... if you pay it off your CC debt..then start on a "look out" for zero percent interest... this will help to pay it off easier than having very high interest rate.... once you missed the payment, your interest will double and can get spiral out of control easily.

This is my 2 cents idea...

Also one thing to point out and I learned this the hard way

If you don't pay off the 0% interest within time, not only will they charge you interests, they would ADD BACK INTEREST going back to when you bought it..

 

[SneakerNet]

Also one thing to point out and I learned this the hard way

If you don't pay off the 0% interest within time, not only will they charge you interests, they would ADD BACK INTEREST going to to when you bought it..

Yes, that what I said above "If I can afford to pay $125 per month AND this is most important is to Pay It on TIME!"