Debt Dumpers - 2014

[Eureka]

Last week I posted about paying off our credit card with our tax refund and savings account. Made me nervous at first but now I am happy we did it. As of tomorrow we'll have $500 in savings, and we do have a little bit on the card that hasn't cleared yet, including a new bike and helmet for DS13 who's growing like a weed. DH and I were talking this week about how as long as we're heading in the right direction, all is fine. It's going to take a few months to pay for some spring expenses (home repairs, camp for one of the kids since we only had to put down a deposit, etc) before we can start putting any of my salary into savings (this is after college savings and retirement, BTW) but every week some of his goes in there, so "it's all good." At least for our planned spending we won't be using the credit card (or, if we do for points and/or security, we'll be paying it off immediately).

Instead of feeling dread that we don't have a chunk in savings, I am feeling lighter that we have no credit card debt other than the recurring bills that we pay every month (Netflix, EZ pass).

 

[AlohaNow]

Hi crew! I’ve been reading faithfully but haven’t posted in a while. Congrats on everyone’s successes! We are doing pretty well on the debt dumping front. Couple of steps forward, couple of uncontrollable steps back. Such is life for us all! I’ve been ramping up the eBay selling like crazy and am pleasantly surprised at the healthy PayPal transfers that I am making into my bank account as a result. I have also started mystery shopping and that is bringing in a good amount for me as well. (Search the threads for this topic, that is how I found out about it!) It feels good putting in extra effort and seeing it directly translate into the extra money we need to pay off debt.

We cash flowed season passes to our local amusement/water park and that is about to come to fruition when they open in two weeks. We are going to pick them up this weekend and I can’t wait to surprise the kids with it – they still don’t know and will be so excited! I’m so excited too!

We also had a great little trip where we flew (mostly on miles) to meet our new little niece! The slightly strange part of the trip was that the relatives we stayed with offered us only breakfast each day. Every other meal was eaten out! Oh my. We had not budgeted for that at all. It will affect our month $-wise but we will just have to work around it!

I finalized and filed our taxes on Sunday and had to put federal and state on the credit card, because we don’t have $5,000 lying around. Our taxes were quite wacky this year, but it is only a one-time thing. I looked into the IRS payment plan but various chat boards said that the interest rate (which you will NOT find on the IRS website) and penalties come out to about 10-11% which I can best off my credit card. Plus, I really did not want my name attached to an IRS debt! Because we could in fact pay by the deadline, I wanted to be a good citizen and pay by the deadline. As Colbert would say, “You’re welcome, America!”

OK DISer’s – talk me out of doing the following. If we cashed out a retirement fund from an old job and applied it to debt, then continue to make the regular above minimum monthly payments that we’ve been making, we could be credit card debt free by January. Like, within a year, and the thought of this makes me insanely happy. We are both 42 and the amount in the retirement account under consideration is $8,100. So we realize of course that we would be losing the future potential of $8,100. Other retirement accounts, and current retirement savings, are on track. There were a few years we were paying out full-time daycare for two kids where we stopped retirement contributions and that will always haunt me. There is no way to make up that time. And here we are thinking of consciously going backward again, but with an end result of getting ahead! I’m justifying it right now by saying that once massive monthly payments to the credit card are gone we can then re-start regular contributions to our ROTH IRA’s. And we will, as I’m rather psychotic about putting away for retirement. But that is also why I’m struggling with this decision. What would my fellow DISer’s do? Did you ever deplete an asset to rid yourself of debt? When you get really close, you just want it all gone right now!

 

[AlohaNow]

I just wanted to add that I do realize that we will pay the 10% penalty up front for early withdrawal and that the disbursal would be fully taxable. If we do this, we plan to voluntarily up the taxes withheld as well to not cause any problems next April. So we know what the net to us would be. And I’m looking at that net and just drooling over it!

I often sit and stare at my Quicken accounts. I see the red and think, “Why can’t I use the black lines to get rid of the red lines?” I realize that if every time I saw red, I used some black to erase it, I could run out of black. But there has been such a sea change in our thinking about debt since last October that I want the credit card red gone. After that I know that our black will increase. I am fine with mortgage red, and the student loan red is gone in about a year so that is almost all principal right now. I just want to kill off the credit card red. Like, I rabidly want to kill it.

 

[pryncess527]

When you get really close, you just want it all gone right now!

I understand the mentality of being really close and wanting the debt gone right now -- but is the debt really costing you so much that it's worth the penalty, taxes, and lost growth potential on that 8k?

If you cash out the policy and continue to make payments you will be debt free in January 2015.

If you DON'T cash out the policy and continue to make payments, when will you be debt free? Is the difference in time line really worth the cost?

It might be -- I don't know the interest rate on the debt or your tax situation to know how it will effect your burden. And there is an emotional benefit to being debt free that should not be ignored, but in general I like to try and let numbers guide my decisions regarding debt repayment.

 

[writermommy6]

I just wanted to add that I do realize that we will pay the 10% penalty up front for early withdrawal and that the disbursal would be fully taxable. If we do this, we plan to voluntarily up the taxes withheld as well to not cause any problems next April. So we know what the net to us would be. And I’m looking at that net and just drooling over it!

I often sit and stare at my Quicken accounts. I see the red and think, “Why can’t I use the black lines to get rid of the red lines?” I realize that if every time I saw red, I used some black to erase it, I could run out of black. But there has been such a sea change in our thinking about debt since last October that I want the credit card red gone. After that I know that our black will increase. I am fine with mortgage red, and the student loan red is gone in about a year so that is almost all principal right now. I just want to kill off the credit card red. Like, I rabidly want to kill it.

I understand the desire to want to kill it. We have been hacking away at our debt for quite a while when we could have simply paid off 100% with my hubby's 401k. But instead we kept our 401k money and have cut back expenses and put our nose down to only paying cash for EVERYTHING. We have one more year left before we reach the zero mark on our debt and let me tell you that the hard work that was involved with getting to this point over the last six years has motivated us to never borrow on anything again. As a result we have $250k in the 401k and starting January of 2015 we will have no other monthly payments than utilities. It is an awesome feeling. So instead of thinking let's do it all at once, maybe get creative with how you can cut corners a little more to make it disappear. Just a thought.

 

[cnetbuild]

Hi crew! I’ve been reading faithfully but haven’t posted in a while. Congrats on everyone’s successes! We are doing pretty well on the debt dumping front. Couple of steps forward, couple of uncontrollable steps back. Such is life for us all! I’ve been ramping up the eBay selling like crazy and am pleasantly surprised at the healthy PayPal transfers that I am making into my bank account as a result. I have also started mystery shopping and that is bringing in a good amount for me as well. (Search the threads for this topic, that is how I found out about it!) It feels good putting in extra effort and seeing it directly translate into the extra money we need to pay off debt.

We cash flowed season passes to our local amusement/water park and that is about to come to fruition when they open in two weeks. We are going to pick them up this weekend and I can’t wait to surprise the kids with it – they still don’t know and will be so excited! I’m so excited too!

We also had a great little trip where we flew (mostly on miles) to meet our new little niece! The slightly strange part of the trip was that the relatives we stayed with offered us only breakfast each day. Every other meal was eaten out! Oh my. We had not budgeted for that at all. It will affect our month $-wise but we will just have to work around it!

I finalized and filed our taxes on Sunday and had to put federal and state on the credit card, because we don’t have $5,000 lying around. Our taxes were quite wacky this year, but it is only a one-time thing. I looked into the IRS payment plan but various chat boards said that the interest rate (which you will NOT find on the IRS website) and penalties come out to about 10-11% which I can best off my credit card. Plus, I really did not want my name attached to an IRS debt! Because we could in fact pay by the deadline, I wanted to be a good citizen and pay by the deadline. As Colbert would say, “You’re welcome, America!”

OK DISer’s – talk me out of doing the following. If we cashed out a retirement fund from an old job and applied it to debt, then continue to make the regular above minimum monthly payments that we’ve been making, we could be credit card debt free by January. Like, within a year, and the thought of this makes me insanely happy. We are both 42 and the amount in the retirement account under consideration is $8,100. So we realize of course that we would be losing the future potential of $8,100. Other retirement accounts, and current retirement savings, are on track. There were a few years we were paying out full-time daycare for two kids where we stopped retirement contributions and that will always haunt me. There is no way to make up that time. And here we are thinking of consciously going backward again, but with an end result of getting ahead! I’m justifying it right now by saying that once massive monthly payments to the credit card are gone we can then re-start regular contributions to our ROTH IRA’s. And we will, as I’m rather psychotic about putting away for retirement. But that is also why I’m struggling with this decision. What would my fellow DISer’s do? Did you ever deplete an asset to rid yourself of debt? When you get really close, you just want it all gone right now!

I am not a financial expert but I don't like the idea of cashing in retirement to pay credit card debt. You will pay a 10% penalty and lose the potential return (8%?). Are you paying more than 18% on the credit card? If the card is under 18%, you are losing money by using retirement money. in addition you are using a long term asset to fund a short term expense. Instead, search for lower interest debt vehicle, cut expenses, and find additional income streams.

 

[AlohaNow]

“When you get really close, you just want it all gone right now!”

I know, I know…..I’m Veruca Salt from Willy Wonka.

 

[writermommy6]

“When you get really close, you just want it all gone right now!”

I know, I know…..I’m Veruca Salt from Willy Wonka.

If you REALLY REALLY want it gone right now then I would look at it from a purely financial aspect. How long is it going to take you to pay off your CC debt at the rate you are doing it now? How much interest will you pay over that time?
Is it going to justify losing that $8000? Or could you cut a little here and a little there and pay it off faster to help eliminate a large amount of interest? AND will you be doubling the amount you put in your 401k to make up for lost time? Will you be putting money away for an emergency fund after that? There are a million reasons why using the 401k is very possibly a bad financial decision.

 

[AlohaNow]

I am a long time reader of Money magazine. I am a Boglehead. I know that what I am proposing goes against all basic investment advice. Please don’t anyone send Suze Orman to my house to beat me down, because she would. But one thing I have learned from my years of reading Money magazine is that, in the end, all that matters is net worth. Literally, that ‘bottom line’ in Quicken. Is your net worth increasing? Or is it decreasing? With the market going up and up, mine is increasing. For our age, it actually looks pretty good because we were smart before the kids came along and made disposable income a thing of the past.

Like I said, I stare at Quicken. I see lots of black lines, of which the $8,100 in question is one of the smallest, and I say to myself, “Self, why do we live like this? Why is there still a red line there when we have all the pretty black ones?” No car loans, just the mortgage, and the glaring red credit card line that could be taken out in one fell swoop. And knowing that immediately after: emergency fund will begin to increase, ROTH IRA balances will be added to, 529 balances will be added to. If you take a snapshot of where we are right now, and where we will be one year from now, won’t we be better off? Because otherwise a year from now that red line would still be there. Two years from now that red line would still be there. Really, doing this would just be a blip on our financial radar screen. My blood pressure would be lower and I would sleep much better at night, and I really cannot put a price on that!

 

[ruadisneyfan2]

Personally, I would never tap from our 401k unless we were on the street, living in a cardboard box. Really. I could make all our debt 0, including dh's truck payment by tapping ours too but that scares me. I don't need to live luxuriously in retirement, but I don't want to not have money for medicine, visiting grandchildren, etc.
That said, DR recommends that you stop funding your 401k to speed debt payback. I can't even bring myself to do that. I also could change my w-4 to more dependents so they take less out of my pay but we owed money once several years ago and had to put the payment on a cc. Also we usually use our refund for a house project, like our current painting project. In the past went to roof, driveway, garage door, etc. I'd love to get rid of the Verizon FIOS tv service but that would cause a revolutionary war.

You just have to find what you're comfortable with. We had a lot of cc debt 3 years ago, really out of control, and we had a lot of equity in our home so we refinanced and took some equity out to pay off debt. It was a lifesaver but when it's a "quick fix" you don't really learn your lesson. It crept back up again but not nearly where it was then. We make decent money and I wonder why we live this way when we shouldn't be. I'm determined this time to eliminate it for good.
Sometimes it's hard to stay strong. We've been painting our house since Saturday. We took a break yesterday to visit a college ds17 is interested in. The night before, somehow during dinner, we started singing the Carousel of Progress song and dh13 suggests we skip painting the rest of the week and go to WDW. Like a dope, I start looking up flights and seeing that we could fly from AC right after the college tour.
Then I rethink it, knowing how crowded it will be this week. Dh suggests a getaway for after the painting is all done. So I start looking up flights for my week off in June which flight prices are much more reasonable and next thing I know, I'm looking at a $3000 trip. Whoa!!! Where did all my strength & resolve go? I lost my head for a minute, slept on it, and in the morning I was back to my determined self, with no WDW trip booked. Whew!
I'm still half-considering WDW for the 4 day weekend off school in Sept and we can probably get just as much done in 4 days in Sept as we can do in 7 days during July 4 week and spend half the $. We also could use some old non-exp water park tix. I don't know. Sometimes I just have to stop thinking about getting away. I can talk myself into things so easily.

Stay strong & just keep swimming!

 

[AirGoofy]

I finalized and filed our taxes on Sunday and had to put federal and state on the credit card, because we don’t have $5,000 lying around. Our taxes were quite wacky this year, but it is only a one-time thing. I looked into the IRS payment plan but various chat boards said that the interest rate (which you will NOT find on the IRS website) and penalties come out to about 10-11% which I can best off my credit card. Plus, I really did not want my name attached to an IRS debt! Because we could in fact pay by the deadline, I wanted to be a good citizen and pay by the deadline. As Colbert would say, “You’re welcome, America!”

OK DISer’s – talk me out of doing the following. If we cashed out a retirement fund from an old job and applied it to debt, then continue to make the regular above minimum monthly payments that we’ve been making, we could be credit card debt free by January. Like, within a year, and the thought of this makes me insanely happy. We are both 42 and the amount in the retirement account under consideration is $8,100. So we realize of course that we would be losing the future potential of $8,100. Other retirement accounts, and current retirement savings, are on track. There were a few years we were paying out full-time daycare for two kids where we stopped retirement contributions and that will always haunt me. There is no way to make up that time. And here we are thinking of consciously going backward again, but with an end result of getting ahead! I’m justifying it right now by saying that once massive monthly payments to the credit card are gone we can then re-start regular contributions to our ROTH IRA’s. And we will, as I’m rather psychotic about putting away for retirement. But that is also why I’m struggling with this decision. What would my fellow DISer’s do? Did you ever deplete an asset to rid yourself of debt? When you get really close, you just want it all gone right now!

Since you mention multiple retirement accounts, not sure what type of account the $8100 is in. You know, so determine the penalty or tax rate. Would it be worth it? I wouldn't cash in my retirement and I don't want to bargain with the IRS. So, I would borrow $5K from my bank, pay off the IRS, and stop future contributions to the retirement account and use that money to get out of debt. At $500 a month, you would have that loan paid off in a year and still have the $8100 plus interest. If you could cut some expenses, then you get that loan paid off even faster.

 

[OhMari]

My stress levels have went down so much it's amazing. The last week I was there before I made the decision, I actually lost 7lbs that week because I couldn't eat. My stomach was so sick and my hands did nothing but shake uncontrollably. My mom even told me if I didn't do something I was going to end up with a nervous breakdown or stomach ulcers, and no job is worth that. So I made the scary decision to leave, and trust me - every now and then I have a little panic attack about what I did - but I feel really good.

Did you say anything or write a letter before you left? I am in the same position. As of July 1, my hours are going to be cut to part time and my pay is also cut in half. My boss is also new and I cannot say anything right now, that would be kind enough that would even begin to describe what is going on. I had a phone interview this week and I would love the job, but the hours would only be 40 hours a month, half of what I would be getting come July. I am told not to burn my bridges, but mean people really do suck.

 

[zurgswife]

Looks like month number 2 I will be able to put my extra $450 toward my student loan that is my 1 yr pay off goal (I have multiple student loans). And I got a part time job that will start about May 1 that I will also use to pay down this loan so hopefully it will go quicker then I first scheduled. Unfortunately the PT job is in a school so it will only be until mid june then won't start again until September....but at least I know I now have it.....

 

[OhMari]

Looks like month number 2 I will be able to put my extra $450 toward my student loan that is my 1 yr pay off goal (I have multiple student loans). And I got a part time job that will start about May 1 that I will also use to pay down this loan so hopefully it will go quicker then I first scheduled. Unfortunately the PT job is in a school so it will only be until mid june then won't start again until September....but at least I know I now have it.....

Wow, now you can enjoy your summer.

 

[rusafee1183]

Hi there I'm Heather and I am new to budgeting. My DH and myself have gotten ourselves into a lot of debt troubles. We are starting Dave Ramsey's TMM program and sitting down to make a budget for (sadly) the first time ever. I am really looking forward to getting started and seeing progress made.

We are going to start a zero based budget and use an envelope system. I am a little confused how to do the envelope system and also continue to pay my bills online, but we will figure something out I hope!

Any suggestions for a budgeting newbie? Looking forward to chatting with you all!

 

[AirGoofy]

Hi there I'm Heather and I am new to budgeting. My DH and myself have gotten ourselves into a lot of debt troubles. We are starting Dave Ramsey's TMM program and sitting down to make a budget for (sadly) the first time ever. I am really looking forward to getting started and seeing progress made.

We are going to start a zero based budget and use an envelope system. I am a little confused how to do the envelope system and also continue to pay my bills online, but we will figure something out I hope!

Any suggestions for a budgeting newbie? Looking forward to chatting with you all!

You'll just have to budget in two places - cash in the envelopes for what you will be paying cash for, i.e., groceries, and the rest online. We have stopped doing the envelope system, but still use the zero based budget and pay bills online as well. Allow yourself to make some mistakes in the first few budgets as it is easy to miss an expense. It may seem difficult right now, but hang in there as it works.

 

[pryncess527]

Hi there I'm Heather and I am new to budgeting. My DH and myself have gotten ourselves into a lot of debt troubles. We are starting Dave Ramsey's TMM program and sitting down to make a budget for (sadly) the first time ever. I am really looking forward to getting started and seeing progress made. We are going to start a zero based budget and use an envelope system. I am a little confused how to do the envelope system and also continue to pay my bills online, but we will figure something out I hope! Any suggestions for a budgeting newbie? Looking forward to chatting with you all!

Check out youneedabudget.com - it's essentially an electronic envelope system, so works the same way but you don't deal with cash. I love it, it has been a real lifesaver for us.

 

[rusafee1183]

Check out youneedabudget.com - it's essentially an electronic envelope system, so works the same way but you don't deal with cash. I love it, it has been a real lifesaver for us.

Is YNAB worth the cost? I wanted to find some kind of budgeting system like this, but felt stupid paying money for something to help me save money. Lol

Sent from my iPhone using DISBoards

 

[pryncess527]

Is YNAB worth the cost? I wanted to find some kind of budgeting system like this, but felt stupid paying money for something to help me save money. Lol Sent from my iPhone using DISBoards

. I think it's worth ten times its cost, given how much clarity and peace it has brought to us. Try the free trial. They give 20% off to dis members.

 

[ziggystardust]

I am a little confused how to do the envelope system and also continue to pay my bills online, but we will figure something out I hope! Any suggestions for a budgeting newbie? Looking forward to chatting with you all!

I did the envelopes a few years ago (really need to start that up again! ). I found that the majority of my bills (which I paid online) were fixed so it made that part easy - rent, car, cell, etc. The ones that I needed to control, the ones that should be in envelopes were the variables - groceries, gas, eating out, shopping, etc. So I paid my bills first, then paid the envelopes. It's hard, but worth it. I'm newly married now and despite our good intentions, haven't worked out a budget yet. We need to get on that.