Wish: to get out of debt

Tell us your wish, tell us your obstacle, and we'll try to come up with some useful suggestions to help you get into action toward your dream.

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Wish: to get out of debt

Postby elarue » Tue Jan 22, 2019 9:06 am

Wish: to pay off our over $16k in credit card debt. That would make my wife happy (as she never had to deal with debt before coming to the U.S.) and it would make it easier to meet one of our other goals - to buy a house.

Obstacle: We have a lot of expenses right now - besides the standard, I'm carrying a heavy student loan burden from a second bachelor's degree I got after our children were born. Plus our daughter is in preschool right now, which we have to pay out of our own pocket. We're even putting more debt on the credit card right now just with regular expenses.

I'm sure I'm just looking at my budget the wrong way, and I'm sure there are some things we could do more economically than we are right now. I could just use some help. ;-)
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Re: Wish: to get out of debt

Postby Tituba » Wed Jan 23, 2019 6:57 pm

You first have to stop the bleeding. Meaning, you can't get out of debt while continuing to use your credit cards for anything. I would suggest going to a respected credit counseling service. They will work with your credit card companies to lower (or eliminate) the interest charges.
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Re: Wish: to get out of debt

Postby elarue » Wed Jan 23, 2019 7:09 pm

Thanks for the suggestions. Any recommendations for a credit counseling service? Are they nationwide or local?

We're working on reducing our credit card usage. The regular expenses of living (plus the debt payments) aren't helping that much, though.

I forgot to mention that I also have a car loan as well as the student loan debt I mentioned. I'd love to pay those off as well.
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Re: Wish: to get out of debt

Postby SquarePeg » Thu Jan 24, 2019 6:50 pm

Does your current employer have EAP (Employee Assistance Program)? That's one entity that might provide assistance.

The only advice I can offer is to identify the credit card or loan that has the highest interest rate and pay that one first. So let's say you have three cards with the following balances and rates:

Card A $5500 25%
Card B $5500 21%
Card C $5500 19%

Make minimum payments on Card B and Card C and put as much as possible into paying down extra balance on Card A, which has the fastest-growing balance. Note that this advice assumes you have roughly the same balance on all the cards. I'm not sure this advice is valid if the balances are vastly different.

Well, one more advice... Loan consolidation can benefit. Using the example above, if you can get a loan for $16.5k at 18% interest, you'll accumulate debt at a slower rate. But watch out for fees and for early payment penalty.

Last one.... When you do finally pay off a card, don't close the account. Why? You credit rating considers the ratio of debt to available credit. By closing a card, you reduce the amount of credit you have available, and it will lower your credit score.
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Re: Wish: to get out of debt

Postby elarue » Thu Jan 24, 2019 9:43 pm

I do have an EAP - one that I’ve taken advantage of quite frequently to deal with some mental health challenges lately. But I’ll see if they have some credit counseling services as well.

We only have two credit cards, and one is our Costco card that we pay off every month. We do have the other loans, but the credit card definitely has the highest interest rate since that’s the nature of credit cards. ;-)

On the other hand, increasing my income would definitely help. Maybe I should post some more of my wishes to see how I can get a few extra dollars from them. ;-)
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Re: Wish: to get out of debt

Postby Elaine Glimme » Mon Jan 28, 2019 9:08 am

It's a hard wish to comment on. Do you have more $ coming in than going out? And if not, can you cut back (or make more) so that you do have more coming in than going out? And life ALWAYS throws unexpected expenses at you, so try to plan for that.

Good luck.
Elaine Glimme - author - "Temporary Address" and "The Molly Chronicles"
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Re: Wish: to get out of debt

Postby Jason » Tue Jan 29, 2019 11:59 am

There's another technique to get out of debt that keeps you encouraged because you see some changes sooner.

Rather than trying to pay off the highest interest rate debt, pay off the smallest balance first.

Once it's paid off, take the money you were paying monthly to that smallest debt and add it the regular payment you're making on the next smallest debt.

When the second smallest debt is paid off, take the regular monthly payment of the smallest and second smallest debts and add that to you regular payment for the third smallest debt.

You get the idea.

It's called the debt snowball. It'll give some quicker victories and keep you motivated.
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