I have 6k in credit card debt I want to pay off. All in the same interest rate category if 4% between three cards. One card is 4.5%. I will have one card paid off by December paying off $500 a month.
I make good money, close to 100k a year. And I get stuck with random bills that come up, like the $250 I just had to spend at the vet this morning. Those little bills end up costing a lot when added up. I'm pretty good about not overspending. But maybe I'm trying too hard to balance debt pay off and an emergency fund, because I do try to split the difference.
I also have a work bonus forthcoming of $1,200 after taxes. Do I just put that towards debt? Because I really wanted to save it since I only have $3,200 in savings.
How do you balance needs / wants with debt pay off?
Please tell me I'm not a total failure. I haven't had an easy 6 years and it's resulted in some debt. It makes me feel hopeless.
When we were dealing with a large amount of debt, our financial advisor told us to set aside $5,000 into an emergency fund. Funnel all extra money to your debt until it's paid off, then work on increasing your savings via 401k, Roth IRA, investments, etc.
He had me create categories and track every single dollar that left our bank account, was put on a credit card, etc. and categorize all the spending. It took forever and was a HUGE pain in the ass, but I tracked it for the previous 6 months. It taught me a ton about how we were *really* spending our money, as opposed to how I thought we were spending it. For example, at the time, I would have told you that I spent approximately $400-500 a month on groceries. In reality, I was spending close to $800 on average, almost double what I thought! I bet you have some categories like this as well. Do your financial homework and figure out where you're really sitting financially. We ended up going to an envelope system for all personal spending and I tracked receipts for things like groceries and gas. It was amazing how much money we "found" by doing this.
You can absolutely get this paid off quickly. It really shouldn't take you more than a few months, 6 at most, I would guess. But you really need to buckle down and make this a priority. Good luck! It feels so good when it's gone.
You are definitely not a failure. Focus on paying off a reasonable amount each month, but don't apply too much of your pay to the credit cards. If you pay too much each month, you likely won't have enough spending money and may end up charging it - which defeats the purpose.
Sure. And I guess I didn't realize that at 500 a month 6k can be wiped out in a year. I just need to make sure I'm not continuing to use the card. My biggest problem is that I don't keep enough in my account for these random $200 bills that come up. So I thought the bonus could be used for emergencies as I pay off the debt.
My husband and I have separate finances for now as he also has some debt, and he's paying it off as well. We plan to combine once we are both starting on a cleaner slate. We are recently married and it's worked so far. We keep the lines of communication open and take turns paying certain bills, like the vet.
What I pay on $4,400 a month after taxes
Rent is $1,050 Car is $300 Credit card I'm dumping $500 monthly Others two cards I'm paying $100 total monthly, or minimum until card 1 is paid off Student loans are $650 monthly Food is $500 monthly (H pays all take out) Cable is $125 I try to save $300 monthly The rest of the $900 goes towards target (paper products, Costco, haircuts, clothes etc). So doing this math maybe I could cut back in this area.
I always hate listing this out because it seems like I have more. Yet every two weeks I feel like I'm missing money! I'm very careful to stick with the food budget so I know that's on par with what I allocate.
Looking at my checking I've spent $250 on the vet, $150 medical bill, $120 on prescriptions, and another $120 to register my car in August. So many random expenses!
You are definitely not a failure. Focus on paying off a reasonable amount each month, but don't apply too much of your pay to the credit cards. If you pay too much each month, you likely won't have enough spending money and may end up charging it - which defeats the purpose.
One thing that helped me when we buckled down to buy a new house was to put everything on a debit card. I stopped caring about points/miles/etc. because those were an excuse to use a card. When it's cash coming out of our accounts, we started looking at purchases differently.
I agree with PP that said to get to a good threshold - maybe $5k- and then put everything into paying off debt. I saw this on MM and it made a lot of sense "when you finance anything, you finance everything." The premise was that until you are debt free, every dollar you spend that wasn't going toward decreasing your balance is essentially accruing at whatever your highest rate of interest is.
I also started using mint and it helped me easily categorize our worst spending areas so we could make cuts. This is just us, but for us, cutting down trips to Costco helped save a good bit because we always spent at least $100. Buying lunches out was a bad area for us, too. For a while, I even split my receipts at Costco into categories on mint to figure out what we were buying there.
I've found that being realistic with my budget helps a lot. Like you said, unexpected bills come up almost every month, so I typically leave about $100-$200 extra in my budget for this. After that, I transfer money to savings and/or debt immediately upon getting paid. If at the end of the month I have some excess then that goes to debt pay off as well.
A few years ago I found myself very frustrated trying to budget very strictly with no wiggle room for unexpected expenses and having to transfer money from savings every few months.
If your job is stable I wouldn't put anything else in to savings and would just focus on the debt for now. It'll be gone before you know it!
I make a budget and stick to it. Hardcore, too. Like, when I was single, if I had a month where I exceeded my going out budget, I "borrowed" that money from my grocery budget. And I'd give myself quarterly budgets for shopping (clothes, shoes, makeup, etc.). So if I wanted I could blow it all in one day and have a great time, but then it was LOCKDOWN until the next quarter. In fact, I still do that. I'm on shopping for myself lockdown until 9/15.
All shopping for household goods/grocery stuff done with a serious, not-to-be-deterred-from list. EVEN AT TARGET (lol).
And since, for me at least, credit card debt was usually tied to spontaneous shopping (hence my shopping budgets) and 10,000 small things adding up, I worked to identify and eliminate those 10,000 small things. Bringing my lunch to work every day, no coffee out, calling it a night earlier on a Friday so I don't get that one additional $10 cocktail, etc.
One thing that helped me when we buckled down to buy a new house was to put everything on a debit card. I stopped caring about points/miles/etc. because those were an excuse to use a card. When it's cash coming out of our accounts, we started looking at purchases differently.
This. Points are tempting--sometimes too tempting. I monitor my spending more closely with cash.
I'm all about not being super strict with budgeting but $900 seems excessive. It seems like that could easily be scaled back to $200. Then like I suggested above, leave about $200 in your account for wiggle room and unexpected bills.
You'll still be done with the debt before you know it.
One thing that helped me when we buckled down to buy a new house was to put everything on a debit card. I stopped caring about points/miles/etc. because those were an excuse to use a card. When it's cash coming out of our accounts, we started looking at purchases differently.
This. Points are tempting--sometimes too tempting. I monitor my spending more closely with cash.
Yep. It sucked to do at the start but now that we're in the habit, I'm really glad we did it. We've totally changed our patterns and saved much more over the last 8 months than we thought we were capable of.
Sure. And I guess I didn't realize that at 500 a month 6k can be wiped out in a year. I just need to make sure I'm not continuing to use the card. My biggest problem is that I don't keep enough in my account for these random $200 bills that come up. So I thought the bonus could be used for emergencies as I pay off the debt.
My husband and I have separate finances for now as he also has some debt, and he's paying it off as well. We plan to combine once we are both starting on a cleaner slate. We are recently married and it's worked so far. We keep the lines of communication open and take turns paying certain bills, like the vet.
What I pay on $4,400 a month after taxes
Rent is $1,050 Car is $300 Credit card I'm dumping $500 monthly Others two cards I'm paying $100 total monthly, or minimum until card 1 is paid off Student loans are $650 monthly Food is $500 monthly (H pays all take out) Cable is $125 I try to save $300 monthly The rest of the $900 goes towards target (paper products, Costco, haircuts, clothes etc). So doing this math maybe I could cut back in this area.
I always hate listing this out because it seems like I have more. Yet every two weeks I feel like I'm missing money! I'm very careful to stick with the food budget so I know that's on par with what I allocate.
Looking at my checking I've spent $250 on the vet, $150 medical bill, $120 on prescriptions, and another $120 to register my car in August. So many random expenses!
I cannot stress the envelope system strongly enough. There is absolutely no reason for you to be spending $900 on miscellaneous items. The two of you do not go through that many paper products. It takes us months to go through a costco sized thing of toilet paper, a couple months of store bought paper towels. You don't need to get your hair cut monthly and you don't need new clothes every month.
Before you buy something, ask yourself, is this a need or a want? Do I NEED to get my hair cut this month or can it wait until next month? Do I NEED this new top or would that money be better spent by paying off debt?
It's not fun. I realize that. Use an envelope system. Give yourself $200 a month in CASH and do NOT use a card, including your debit card, to buy anything that is included in this category. Having to pull out actual cash for a purchase feels very different than using a card. I guarantee you, you will rethink certain purchases when you realize your cash is dwindling. The most important part of this is that you don't get more when it's gone! That's it for the month. Spend wisely and think ahead. Want to go out with friends next week? Better set aside some cash for the night so you don't spend it in the meantime. Be smart with your miscellaneous spending.
It looks like August was a rough month for you with unexpected expenses. Realize that sometimes, you may not be able to funnel as much toward your debt payoff as you would like. Things come up, but that car registration is something you should budget for. Set aside $10 every month into a separate account. It seems like a tiny amount, but if you budget for it, you don't have to think about where that $120 is all of a sudden going to come from.
We use American Express savings account. I have several of them (5 total, I think) and each one is labeled for a specific purchase (college savings for the baby, home purchase (not using this anymore since we have since purchased a home), travel, emergency fund, car savings, etc.).
So looking at your budget, is the $500 for food groceries? If so, what are you spending at Costco every month? I bet there's some overlap there where you can cut. Costco is a big budget suck for us.
I'd also cut all the takeout.
No more new clothes for now.
That's just a quick scan, I'm sure if you really dig more you can find other things.
Post by pantsparty on Aug 30, 2014 10:13:28 GMT -5
I know you can't plan for unexpected expenses, but you mentioned registration. Surely you have other semi-regular expenses that you can break down into savings goals. Like every month I put aside some money for my hair (LOL) and Christmas. That way when these expenses come up I'm not pulling them out of monthly cashflow.
Post by polarbearfans on Aug 30, 2014 10:24:59 GMT -5
Sit down with your husband and come up with a realistic budget. You are married. Figure out what is a realistic budget for you each to pay to cover the household expenses, and then what the best course is to knock out the debt. Until my husband and I joined forces we were struggling. I was left with negative money every month after paying my share of the bills and trying to pay down my debt. I would get stuck taking a cat to the vet or picking up their food or some random grocery item.
My husband brought his own debt that was much higher than mine. We worked together to pay off each other's debt and now that our money is merged it is so much easier to budget and save. We each get an envelope of cash to help control the random spending. We communicate when a bigger purchase is being made with a credit or bank card so we know that needs paid for.
Good luck.
eta: we have $200 a month budgeted for the cats, which gives us a cushion for a random expense, covers their good, and covers their annual vet visits (well 6 every months for the 2 seniors).
One more, I don't do well with Mint. Not sure why, but it just never really worked for me. I have an excel spreadsheet that is color coded and labeled for all my bills, when the auto-pay comes out, and divided by date and month. I can send it to you if you want. It works really well for me as a quick reference and helps me keep my bank account high enough to pay for any upcoming expenses.
Post by speckledfrog on Aug 30, 2014 14:24:54 GMT -5
I think you just need to more aggressive about paying down your debt. Cut way back on the things you are spending $900 on and start putting that towards your credit cards. When those get paid off then you'll have that money to save and sometimes spend.
Are you getting a huge tax refund each year? You're only netting around 50% of your income unless there are some deductions in there we don't see
I bring that amount home after taxes, medical insurance, contributions to retirement. I don't get much back in taxes. Last year it was around 1k federal and $200 state. I once owed 3k and I freaked out and now am more careful and pay more. I also maintained the single rate when I got married instead of switching to a married status.
I re looked my checking and I bring in $4,638 a month after taxes. I slightly miscalculated my take home number. All my other numbers are correct. I took effort this past week to look at my interest rates and numbers left on my debt
Post by hopecounts on Aug 30, 2014 18:44:53 GMT -5
read up on snowballing debt. It's how I paid off my CC debt. Pay the minimums on 2 cards and pay the max you can come up with on the 4.5% card (meaning no Starbucks, brownbagging lunch, cut/reduce cable and so on putting that money towards the card). Once it's paid off throw that money plus the minimum at the card with the highest balance, once that's paid off put all that money towards the final card.
Post by Doggy Mommy on Aug 30, 2014 19:40:17 GMT -5
Your take home pay seems super low based on your income. Are you putting a huge amount into retirement? Are you doing your taxes correctly and taking advantage of all possible deductions?
Your take home pay seems super low based on your income. Are you putting a huge amount into retirement? Are you doing your taxes correctly and taking advantage of all possible deductions?
I don't put a ton into retirement. I'd have to go back and look but I think it's $600 - $1k monthly. I have increased that amount because I find that the more I put in the lower my taxable income. I don't own a home or have a kid. So no dedications there. How can I find out if I'm taking advantage of possible dedications? I make too much to claim student loan interest too.