Debt paydown strategy?

[kcbean]

I see folks paid off 27,000 in two years and 35,000 in 3 years. Is this really true? You don't know how badly I need to hear it is. Life is just throwing us one thing after another and I feel like I am completely drowning. We have never had much debt before and now we are drowning. How much monthly was going towards your debt to pay off that much in such a short time? Thanks for the life line!

 

[kcbean]

Has anyone ever used "lower my bills.com". What was it like? Would you do it again?

 

[DisDee]

Thanks for the tips on the "Snowball Plan". The plan is seems so simple and easy to implement. We plan to retire in less than 10 years, so I plan to start today! I'd love to hear any other financial tips anyone might have!

 

[Cindy B]

Snowball method. Its the best to see the debt being eliminated.

 

[chrismiss56]

Been following this thread and am really interested in what you have been saying. Which of his books do you recommend? Also has anyone every heard of Ellie Kay - How to save money everyday. Any thoughts?

Thanks and as always have a Disney Day!!

 

[strasfamily]

I see folks paid off 27,000 in two years and 35,000 in 3 years. Is this really true?

I was wondering this myself. Either they make a 6 figure income, or working 3 jobs????

 

[EthansMom]

I was wondering this myself. Either they make a 6 figure income, or working 3 jobs????

I'm one of the folks who mentioned payin off tens of thousands of dollars of debt. My DH and I have an above average income, which helps. But we also do without many of the luxuries that most people consider necessities.

For most of the last 6 years we haven't had any cable t.v., no call waiting, no voicemail, no cell phones...We don't buy fancy name brand clothes unless they are at a great discount and then only clothes that we need in order to replace clothes that are worn or don't fit. We go on vacation, but never stay Delux. We don't own a big screen t.v., surround sound, Tivo. We clean and maintain our home and autos on our own as much as possibly. Our automobiles were purchased new, but they are base models of mid-range, low-maintenance autos. We pay our credit card bills in full each month and don't purchase anything we can't pay for.

Despite these things, we live well. We don't focus on what we don't have or on trying to impress the people around us. We spend our money and time on the things that give us true happiness. We make nice dinners from scratch, play board games with the kids, take budget vacations. We've shifted our priorities away from having "stuff" to paying off debt and saving money for our future.

 

[Third times a charm]

<<<<What we do now is since I get paid biweekly, we budget our $ and whatever is left in the checking account the night before I get paid again, I write out a check to the finance company holding my car loan. We're on target to have my car paid off 2.5 years early, then we'll hit my husband's car and pay that off about 3 years early. Then we'll attack my new DVC purchase. We've been doing this for about 4-5 months and paid off $5-6,000! >>>>

That is such a great idea. Seems easy enough to do with online payments too. Thanks for the tips!!! Keep them coming, then maybe I can go for the DVC purchase before I'm a grandparent.

 

[justcruisin]

Check out daveramsey.com ... you can also hear him on xm and sirruis. He's wonderful. Makes such sense. He does say to NEVER NEVER buy a new car ...
He's changed my way of thinking entirely.

 

[MrsPete]

At the risk of pointing out the obvious . . . if you're trying to get out of debt, above all, don't ADD to your current debt. If you constantly add to what you already owe, you'll never get out of the hole.

Take a list to the grocery store and buy just what's on that list.

Cook at home more often, eat out less. If you're pushed for time, grab something from the supermarket deli; it's less expensive than eating out (plus it avoids 1.50 sodas and tips), and it's more healthy than grabbing burgers at the fast food place.

Stay out of the mall, Walmart, the craft store -- where ever you are tempted to overspend. Even if it's just the Dollar Store, if you don't need the items, it's money wasted. Impulse buys are rarely good choices.

Before you buy more shorts, shoes, whatever, take a look at what you already have and decide whether the purchase is necessary.

If credit cards are a problem, don't carry them in your purse. Leave them at home.

 

[chefdeb]

I'm one of the folks who mentioned payin off tens of thousands of dollars of debt. My DH and I have an above average income, which helps. But we also do without many of the luxuries that most people consider necessities.

For most of the last 6 years we haven't had any cable t.v., no call waiting, no voicemail, no cell phones...We don't buy fancy name brand clothes unless they are at a great discount and then only clothes that we need in order to replace clothes that are worn or don't fit. We go on vacation, but never stay Delux. We don't own a big screen t.v., surround sound, Tivo. We clean and maintain our home and autos on our own as much as possibly. Our automobiles were purchased new, but they are base models of mid-range, low-maintenance autos. We pay our credit card bills in full each month and don't purchase anything we can't pay for.

Despite these things, we live well. We don't focus on what we don't have or on trying to impress the people around us. We spend our money and time on the things that give us true happiness. We make nice dinners from scratch, play board games with the kids, take budget vacations. We've shifted our priorities away from having "stuff" to paying off debt and saving money for our future.

I was the one who mentioned paying off $27000 in just under 2 years. We do not make a huge income...in fact I believe that 2005 will be the year we finally break the $100,000 mark. That is combined income, DH and me. I am a stay at home mom and I work a part time business on the side. In August 2002, we were drownding too. It was so bad, I didn't see any way we could get out. The first thing we did was stop using all credit cards. We did take out a home equity loan to consolidate, but keep in mind that Dave Ramsey doe not recommend this and neither do I. You are taking unsecured debt (credit card debt) and securing it with your HOME.... The fact that we had used our home as collateral on this debt was motivation enough for us to adopt 'gazelle' intensity about getting it paid off. The compound interest from those credit card debts was killing us and by getting a consolidation loan and paying the credit cards in full, that huge interest wasn't being added to our bottomless pit of debt. We were able to pay off an extra $1000-1500 each month just by watching our spending and concentrating on paying off as much as possible on our loan.

It was hard. I won't make it seem like it wasn't. But it also saved our marriage and we are closer because of it. As Ethan's mom said, we don't live above our means..something that is so counter culture today. We don't have cable/satalite dish, we only eat out once per month, we drive 2 cars that are paid for, one a 1998 and one a 2003. We tithe 10% faithfully and continually give thanks to God. We live a great life and have learned how to save. I used to get excited about buying 'things'. It was like an adrenaline rush or something. But now I get excited when DH and I are able to put $ into savings. We are working hard to build up our emergency fund and will soon be able to pay a lot more on our home mortgage each month. We also were able to save for our trip ( we leave tomorrow!!! ) and are paying cash for everything...yahoo!!! No one else cares about your financial peace more than you do, so get vigilent about it! Don't let a need to impress keep you from being financially free!! Read Dave Ramsey, Financial Peace...and then read it again! ( DH is an accountant and loves to read financial stuff...I'm more type B and would rather read a fluff book. But Financial Peace was not a boring book...I loved it!)

(Donning my flame retardant suit...) One thing I have noticed from reading this board is that a lot of the 'budget' advice that is posted is really just another way to spend, spend, spend. Just because something is on sale and is a smokin' deal, doesn't mean you need to buy it. When you decide to get out of debt, the difference between needs and wants becomes clear. I qualify purchases by asking myself this question, "Is this something I need because it will make my/family life better or easier, or is this something I want because I think it will make me look more impressive to others?" Please accept my apologies in advance if this offends you. I truly don't want to hurt/anger anyone. I'm stepping off my high horse now!

 

[Lisa loves Pooh]

chefdeb...your story is most impressive...however, I'm still having trouble seeing reality. Hubby wants us to live frugally for one year (yikes!!!). But even frugally...scraping an extra several hundred to a thousand dollars doesn't seem remotely possible. We will be reinvestigating that one though.

No flames for your last part.
You sound like hubby----"but I saved so much....yes you did, but you'd save even more if you didn't buy it in the first place".

 

[chefdeb]

I can relate, I had a hard time wrapping my mind around living differently from the way we were living. But once the dust settled I found that I really wasn't suffering because of our new strategies, in fact, I felt more peaceful and free than I had in a long time. No more worrying about what bill would come next in the mail, no more wondering if this was going to be the time my cc was declined, no more screening phone calls so that DH wouldn't realize how bad it really was, no more hiding purchases, no more lying to cover up.
I was scared because I thought that having no credit cards to use would make us more vulnerable. I was scared that I would never be able to have another new outfit or pair of shoes or ever eat out, go on vacation or that we would have to eat Corn Flakes every night. I was scared that people around me would notice that I wasn't getting my nails done, that I was wearing the same clothes I wore last summer, that I wasn't carrying the 'newest' designer purse. Guess what....no one noticed. In fact, the one comment I did hear from my mother in law was that I was much more relaxed and much more confident and she wondered what the difference was.
Just read the book and then decide. Don't compare yourself to me or to Ethan's mom....your situation might be different. It might take you longer to pay off what you owe, but it also might take you less time. You achieve what you believe, so as soon as you believe you can get out of debt, you will.
Good luck!

(Whew...I feel like I just bared my soul to the entire world....eekkkk! )

 

[sln88]

Everyone here has good tips. I will add one that I used when I paid off mine. Make a simple chart with your total debt on one axis and the month on the other. Each month put it your new lower debt amount. Nice to actually SEE the line on the chart go DOWN!

 

[grlpwrd]

...(Donning my flame retardant suit...) One thing I have noticed from reading this board is that a lot of the 'budget' advice that is posted is really just another way to spend, spend, spend. Just because something is on sale and is a smokin' deal, doesn't mean you need to buy it. When you decide to get out of debt, the difference between needs and wants becomes clear. I qualify purchases by asking myself this question, "Is this something I need because it will make my/family life better or easier, or is this something I want because I think it will make me look more impressive to others?" Please accept my apologies in advance if this offends you. I truly don't want to hurt/anger anyone. I'm stepping off my high horse now!

I don't know if you're referring to recreational shopping which is certainly counterproductive. No flaming from me, but sometimes it pays to buy on sale and get a smoking deal....

I stockpile and buy when the price is low or when the savings is substantial. For example, I stock up on toiletries when they go on sale and store them and when I find something at the dollar store that will save me $$$ rather than buy full price I will stock up.

Some folks even use a price book, keeping track of cyclical sales at different stores.

For many people stockpiling and planned purchases works and saves us money.

 

[EthansMom]

I don't know if you're referring to recreational shopping which is certainly counterproductive. No flaming from me, but sometimes it pays to buy on sale and get a smoking deal....

I agree that it's nice to get a great deal. But I think what Chefdeb was talking about was more along the lines of people using a sale price as a justification to purchase something they hadn't needed or wanted until they saw that it was on sale. You know, the people who see the Free Dining Package and have to book it even though they hadn't been planning on going on vacation until NEXT YEAR. Hey, if you were planning on going to WDW in Nov., then it makes a lot of sense to change your plans to Sept. or Oct. to save money. But if you don't have the money saved up and you just fall prey to the marketing, then that isn't very financially savvy.

After all, sales and coupons aren't intended for use by people who were going to purchase the product anyway.

 

[EthansMom]

however, I'm still having trouble seeing reality.

Being frugal isn't about suffering and it isn't something that you can change within yourself overnight. My advice, start in small steps:

Don't add any more debt. Don't use credit cards for any purchases except as absolutely necessary.

Sit down with a notepad and make a list of things you could do to easily save some money. Maybe you have some cable t.v. add-ons that you could drop? Do you have voicemail or call waiting that you could cancel? You could cut down on eating out or just stop ordering drinks when you dine out (order ice water w/lemon for free).

Make a record of everything you spend for one or two months and you'll find your problem areas. Work on trimming spending in your problem areas.

Use the extra money that you save to pay extra towards your debts and/or save towards an easier life in the future.

 

[minnie1928]

I use quicken (LOVE IT, LOVE IT!) and I can graph out my interest expense. Many mentioned using a graph to show your declining debt balances. If you are using a financial program like Quicken or Money, graph your interest expense. Not only will it shock you to see how much you pay for someone else's money, but you will be able to see the trend start to decline each month as you pay down your debt (while NOT incurring new debt).

Now, I am an anal accountant and I know I sometimes (ok, always ) get a little anal over the checkbook, but this is a great motivator too!

 

[Jsme]

I have to say to pay off the debt I have I look at it in a way of a snowball method. I know all about how debt can kill you. I worked inthis field for several years prior to haviing my last child.

I paid off the debt that was the highest paymemt a month. Which was also a payment that I did not have any interest on if I paid it off in a certain period of time. Then I put that amount towards other debts. I only owe for my home, car and one other debt. Next summer my car will be paid off and I will then apply that payment towards the other debt. Once we have that paid off I will have to worry about college. LOL

 

[MrsPete]

I don't know if you're referring to recreational shopping which is certainly counterproductive. No flaming from me, but sometimes it pays to buy on sale and get a smoking deal....

I stockpile and buy when the price is low or when the savings is substantial. For example, I stock up on toiletries when they go on sale and store them and when I find something at the dollar store that will save me $$$ rather than buy full price I will stock up.

I understand what you're saying, and I agree. But I think that people who are "hooked on shopping and spending" SAY that they're doing this, when actually they're just looking for a way to justify spending. For example, I used to look through clearance stuff at Target and buy it because it was cheap -- as often as not, the items were never used. That was not wise stockpiling. I still look at clearance things there, but I'm much more selective. Ditto for the Dollar Store. If you don't need and use the item, it's money wasted -- even if it was only a dollar.

The test is whether you really NEED the things or not. For example, I already have several pairs of black shoes in various styles and height of heel. I genuinely have all the black shoes I need. If I were to go out today and find a great pair at a great price, that would be money wasted. On the other hand, August will arrive all too soon, and my children will NEED school shoes. If I were to find these at a great price and hold them until school starts, that would be a wise buy. I will definitely have to shell out money for tennis shoes in August, so if I could pay $10 now instead of $30 then, it would be smart.

I think you hit on the right words in your post: RECREATIONAL SHOPPING. I think many, if not most women use shopping as a hobby. It's an expensive and time consuming hobby, and I think it doesn't bring long-term happiness.

Don't use credit cards for any purchases except as absolutely necessary.

Keep in mind that credit cards are not the problem -- overspending is the problem. Used wisely and paid off every month, a credit card can be a valuable tool. You can use it anywhere in the country, and you can rack up rewards.

My husband and I didn't have a credit card for the first ten years of our marriage -- we just never thought about it. About five years ago, because my FIL told us we could get money back from Discover, we got one. We've found it to be quicker than checks; however, we've never paid and will never pay one single cent in credit card interest. We use the same rules that we used before we had it: don't spend tomorrow's resources today.

Hubby wants us to live frugally for one year (yikes!!!).

Here's what we had when we were married in 1990: $200 between us, a brand-new mortgage, two jobs, and two cars -- one with a payment. We decided that we'd live frugally in the beginning to get a good financial start in our married life -- aside from accepting Christ, it was the best decision of our lives. We sold one car, and we shared the other for the next three years (we do not live anywhere near public transportation). We furnished our house in Salvation Army furniture. We bought clothes at yard sales. We put every other paycheck straight into savings. We were very happy.

Today we live in a large, paid-for house in a great neighborhood. We have two paid-for cars, retirement accounts that are on track, children's college funds that are on track, and no debt. Those first few years weren't always easy, but they were well worth the effort. We recognized that whatever we would've bought at that point would've been only a bit of temporary happiness anyway -- today we spend much more than we did back in our early married days, but we are not any happier than we were then.

You sound like hubby----"but I saved so much....yes you did, but you'd save even more if you didn't buy it in the first place".

I insulted the manager of Penny's the other day. I didn't mean to do it. He handed me my bag and said, "You saved $42." I said, "No, sir, I spent $20." The conversation went on from there. He was downright angry and didn't understand the point at all.