In debt & Stressed out

[mickeyluv'r]

Have you looked into a Direct deposit account with your local credit union? They might be able ot set up a way to help you dispurse the money more evenly. I know for exmple that local teachers usually get paid on a ten month schedule, but through the credit union, they are able to set up a savings/checking combo account so that income goes into the savings account,and is disbursed into the checking account as if the employee were on a twelve month cycle. In the meantime, the money in the savings account is earning interest, instead of getting spent. The person using this method not only insures summer income, but actually earns a little extra.

 

[crisi]

Recently My husband switched jobs and in his previous job he would get paid every friday and now its only on the 15th and the 30 or 31st. (Bi monthly) and before each payperiod my account runs dry. My bills have been late and we've had a little finance trouble. Our bills have gotten out of hand (mainly credit card bills). Has anyone tried in charge debt solution?? or what have you done to overcome debt?? I am a stay at home mom as well as a full-time student. I am in the process of doing the mass-connections sampling thing to make extra cash. Things just got out of control and It's our fault. I just need a little advice.

Sincerely,
Kelly

As a stay at home mom and full time student, you are probably pretty stretched, and its stretched at two things that are expensive (but both worthwhile) for a household. You may want to think about taking a semester or two off while you get the credit cards paid off - and using the time to work. When you go back to school, you will have less stress and find it more enjoyable. Bringing in more income, combined with cutting what you spend, will get you out of the hole that much faster.

And don't forget the cut what you spend. A lot of people really like Dave Ramsey, though his advice is really common sense. Look at EVERY purchase you make and ask yourself 1) "Do I need this?" and 2) "Can I get it cheaper?" Dress your kids in hand me downs or garage sale clothes. Avoid eating out. Learn to eat cheap at home (from scratch will help if you don't already).

Best of luck.

 

[punkin]

You may want to think about taking a semester or two off while you get the credit cards paid off - and using the time to work.

I'm going to disagree with just this part of your advice. It is very hard to go back to school if you have children and are working. I had to make the same decision when I got pregnant 2d year of law school. Every one was telling me to take at least a semester off. I didn't. It was hard. We had very little money. We had almost no time. Thank God, my mother helped out with child care so I spent a lot less on that. I took out more student loans. We ate a lot of rice and beans and ramen. I nursed the baby (even though I was in school full time) to save money. We used cloth diapers made from cut up and sewed old sheets (I kid you not). Despite all this, I finished law school on time and got a job that paid well enough that I could pay off all my student loans (including some leftover undergraduate) within 5 years. If the education is leading to better earning potential, I think staying in school and cutting out all extras is the better choice.

 

[MrsPete]

Recently My husband switched jobs and in his previous job he would get paid every friday and now its only on the 15th and the 30 or 31st. (Bi monthly) and before each payperiod my account runs dry. My bills have been late and we've had a little finance trouble. Our bills have gotten out of hand (mainly credit card bills). Has anyone tried in charge debt solution?? or what have you done to overcome debt?? I am a stay at home mom as well as a full-time student. I am in the process of doing the mass-connections sampling thing to make extra cash. Things just got out of control and It's our fault. I just need a little advice.

Sincerely,
Kelly

Am I hearing this correctly: He makes enough money for you to get by . . . the problem is that you've allowed credit card debt to sneak up on you, and you're just having trouble budgeting?

Advice:
1. You sound like you're kind of out of touch with your finances. Write down exactly what you owe, to whom. (Lots of people don't like to do this because it's scary -- you'll never get rid of it if you don't face it.) Then write down everything you're spending; search for problem areas -- maybe it's fast food, maybe it's excessive kids' clothes -- you'll find areas in which you can cut back.
2. Write out a budget together. Make sure it's a realistic budget: it's all well and good to plan that you'll spend no more than $25/week on food, and you'll never, ever go out to dinner -- but none of us could stick to that for more than a week. Include enough "wiggle room" for comfort, but make some cuts so that you can get rid of these debts.
3. Search out less expensive options for the things you need. Can you shop for food at a salvage store? Buy kids' clothes at yard sales or consignment stores? Use reserve room textbooks in the library instead of buying your own books?
4. Look at your fixed expenses: housing, cars, etc. Is what you're spending realistic for your income? It's very easy to be sucked into the "gotta have an upscale house" idea or "if you're going to make payments on it anyway, go ahead and get the new minivan instead of the used sedan" . . . but if it's more than you can afford, you might need to downsize something. Can you raise your insurance deductible? Most agents write ridiculously low deductibles like $100, yet no one would ever really file a claim for $100. Depending upon what deductible you're comfortable with, you could lower your premiums by about 1/3.
5. Do not borrow anything else -- nothing. Remember that every time you use your credit card, you're essentially taking out a small loan. When you do this, you've spent tomorrow's paycheck. You've borrowed against your future; you can get rid of this problem, but you have to stop using the credit cards.
6. I suspect the interest on your credit card bills is high; it might be wise to look into moving it to another credit card with a 0% interest intro program (or something similar); however, you must realize that this is a band-aid, not a solution. You can NEVER borrow your way out of debt.

In the short-term, to get yourself out of crisis mode (and to stop paying extra for those late bills), you could consider having a yard sale or selling some thing on ebay.

 

[crisi]

I'm going to disagree with just this part of your advice. It is very hard to go back to school if you have children and are working. I had to make the same decision when I got pregnant 2d year of law school. Every one was telling me to take at least a semester off. I didn't. It was hard. We had very little money. We had almost no time. Thank God, my mother helped out with child care so I spent a lot less on that. I took out more student loans. We ate a lot of rice and beans and ramen. I nursed the baby (even though I was in school full time) to save money. We used cloth diapers made from cut up and sewed old sheets (I kid you not). Despite all this, I finished law school on time and got a job that paid well enough that I could pay off all my student loans (including some leftover undergraduate) within 5 years. If the education is leading to better earning potential, I think staying in school and cutting out all extras is the better choice.

I'm in school now, taking semesters off and on. School is really nice, but to me it sounds like they need income, not just cost cutting. And that means time needs to come from somewhere.

Yep, its hard to go back. Yep, its hard to do both simultaneously (I work full time, go to school half time, and have kids). But school will be there, the kids will need you less as they get older, and it takes income to pay debt.

It also - as countless threads here have shown - depends on what she is majoring in and how much she is paying for it. A college degree in Art History (my first degree) isn't exactly a bread winner, and if its a private college liberal arts degree may take years to pay off. If its something like nursing where she is pretty much guaranteed a decent paying job out of school, it may be worth sticking it out - depending on the depth of the debt hole.

 

[karynnix]

This has been mentioned several times, but it is worth repeating...do not make more loans to cover the ones that you have now. It doesn't help the situation at all to get yourself further into debt. Consolidation loans seem like an easy way out, but it is so easy to get right back into a bad situation. Try to only deal with the debt that you have now. Don't dig yourself in further by adding another payment if you can help it.

 

[Barbers2005]

If the op took out a low interest rate loan to cover the entirety of her cc debt, she would still owe the same amount of money, but on better terms. Call me naive, but why is that bad?

 

[disneysteve]

If the op took out a low interest rate loan to cover the entirety of her cc debt, she would still owe the same amount of money, but on better terms. Call me naive, but why is that bad?

It sounds good on paper, but it often backfires because it fails to address what caused the problem in the first place. For example, I believe the stat is that 2/3 of people who take out home equity loans to pay off consumer debt proceed to run up their credit cards again and end up in far worse shape. Plus they've now put their house on the line. So if the OP takes out a new loan to pay off the existing debt but doesn't change the spending situation, she risks accumulating more debt in the future.

You can't borrow your way out of debt. That's the bottom line.

 

[grlpwrd]

As a stay at home mom and full time student, you are probably pretty stretched, and its stretched at two things that are expensive (but both worthwhile) for a household. You may want to think about taking a semester or two off while you get the credit cards paid off - and using the time to work. When you go back to school, you will have less stress and find it more enjoyable. Bringing in more income, combined with cutting what you spend, will get you out of the hole that much faster.

And don't forget the cut what you spend. A lot of people really like Dave Ramsey, though his advice is really common sense. Look at EVERY purchase you make and ask yourself 1) "Do I need this?" and 2) "Can I get it cheaper?" Dress your kids in hand me downs or garage sale clothes. Avoid eating out. Learn to eat cheap at home (from scratch will help if you don't already).

Best of luck.

Well, I believe she has a young son and they do live on Staten Island, NY according to her profile.

Kelly, I think realistically you will have to enroll in school part-time and work.
GL!

 

[Chicago526]

It sounds good on paper, but it often backfires because it fails to address what caused the problem in the first place. For example, I believe the stat is that 2/3 of people who take out home equity loans to pay off consumer debt proceed to run up their credit cards again and end up in far worse shape. Plus they've now put their house on the line. So if the OP takes out a new loan to pay off the existing debt but doesn't change the spending situation, she risks accumulating more debt in the future.

You can't borrow your way out of debt. That's the bottom line.

Very true! But what a person can do is either call their credit card companies and ask for a lower interest rate (be nice, but be persistant, ask for supervisors if the rep can't help you) or do a balance transfer to another card with 0% interest, or at least lower interest. You can also ask they waive late fees, annual fees, cash withdrawl fees, and anything else they charge you. I sometimes think they make more in fees than interest!

DH and I saved about $250 a month in interest by transfering our higher balances to a 0% for 12 month offer. We've already stoped using credit cards since our wedding last October, so I know we have the disapline not to run them up again (we do use credit cards for purchases like gas, but they are paid off each month, no more hitting the mall with Master Card, though!). So we are making the same payment $ wise, but more of it pays off the principal.

 

[Barbers2005]

Well, I do agree that the op needs to stop using her credit card to have any success at bringing her finances under control. Whether she cuts costs or finds a way to increase her income, neither one will really help if she continues to live beyond her means. That being said, taking out a loan to cover her credit cards could help her to pay off that debt sooner. I owed about $3000 in credit card debt with an average interest rate of 20%. By taking extra in student loans for one semester I paid off the credit cards- I still had the debt, but at only 5%. Even though I was paying the same amount on the loan as I had been making minimum payments on the credit cards, I was paying them off much faster by lowering the interest rate. I would never use a home equity loan to pay off debt, though- it's just too much of a risk.

 

[NotUrsula]

If you find yourself tempted to use your CC's, but can't close the accounts because you owe on them, try freezing them. Literally. Get a fairly large plastic freezer container and put your CC's in it, fill it with water, and turn them into a large solid block of ice. This allows you to have access to them in dire emergencies (car breakdown, roof leak, etc.) but will be pretty effective in keeping you from using them frivolously.

 

[loveysbydesign]

Keep you head up and have faith that it will get better! It will as long as you cut expenses and if need be work parttime. Best of luck to you, we've been there but aren't there now thank goodness. It did however take a good 3-4 years before it started to get better!

Oh and freezing your cards is a fantastic idea...it helped us a bunch and we haven't used a credit card for 3 years now! We still do live paycheck to paycheck and my dh gets paid bi-weekly. It really does stink...one check covers our mortgage, car loan and car insurance. The next one pays for everything else...I've learned to grocery shop once a month (except for milk, bread etc.) and to take care of errands that are close to one another at one time to save gas and to STAY HOME! Do not leave your house just to go browse at the store...it almost always leads to a purchase!

 

[karynnix]

If the op took out a low interest rate loan to cover the entirety of her cc debt, she would still owe the same amount of money, but on better terms. Call me naive, but why is that bad?

Transfering balances and lowering interest rates aren't the bad thing. Going to these "check cashing" places and finance companies is!! They do more harm than good. It becomes a cycle of getting further and further into debt.

 

[disneysteve]

If you find yourself tempted to use your CC's, but can't close the accounts because you owe on them, try freezing them.

This is one of those old-time pieces of advice that I just don't think makes sense anymore thanks to the Internet. I can go online anytime and spend money 24/7. I know my CC number and don't need to physically have the card in hand to use it. Some sites, like Amazon, store your card number for you for "convenience" so you don't have to re-enter it each time you shop. Isn't that nice of them?

 

[TnTWalter]

you can fast forward during commercials...it's great and free.
http://www.daveramsey.com/radio/home/index.cfm?FuseAction=dspContent&strMode=dspShowArchives

We started the TMMO [total money makeover] last spring and we paid of all our debt except the house [I love owning my van!] and have a large Emergency Fund in place. I can't believe the difference. I feel peace. We went to Disneyworld for the first time in January [our first family vacation besides camping!] with money we had saved! It was a blast.

The money we used to pour out to minimum payments on credit cards and car payments now goes to the bank of ME and Hubby!! It's amazing.

It takes discipline and hard work, but it is so worth it. His saying is 'Live like no one else so someday you can live like no one else!' We're still working on the first part but can't wait to get to the latter!

Here's the messageboard I like 'No more debt'.

http://forums.delphiforums.com/n/main.asp?webtag=nomoredebt&nav=start&prettyurl=/nomoredebt/start/

You can check out his book at the library {I did it a couple times plus Financial Peace Revisited}.

Trish

P.S. I tweeked the system to fit me...I do not do the cash system [he recommends envelops and cash]. But I do have envelopes and use my debit card so I can track where all my money is going. We do a monthly budget and check it weekly to see where we are. We also still have a credit card for travel and internet purchases only. The amounts though also go on the envelopes so we have to have money to use them [unlike my old way of thinking with credit cards...use them because I'm out of money!].

 

[crisi]

This is one of those old-time pieces of advice that I just don't think makes sense anymore thanks to the Internet. I can go online anytime and spend money 24/7. I know my CC number and don't need to physically have the card in hand to use it. Some sites, like Amazon, store your card number for you for "convenience" so you don't have to re-enter it each time you shop. Isn't that nice of them?

Depends on your vices. If you are an internet shopper - no, freezing cards won't help. If you are a "use your card at McDonalds, swing through the mall, aren't-those-cute-shoes" shopper not having them with you goes a long way.

If you HAVE to have them with you (what if the car breaks down when I'm on the freeway!), duct tape them. Wrap them in saran wrap or alunimun foil then duct tape them. It will be so much work getting them out you won't use them for shoes.

 

[NotUrsula]

Some sites, like Amazon, store your card number for you for "convenience" so you don't have to re-enter it each time you shop. Isn't that nice of them?

Yes, it's nice of them, and it also makes it much easier for some hacker to get his mitts on your CC info. Personally, I don't store my CC info [with the CVV?!] on merchant websites, encrypted or not, so it wouldn't occur to me that that would be an issue. However, the duct tape or freezer trick still works, especially now that more and more merchants require the CVV, which few people memorize.

If online shopping is the vice and you have saved your CC info online, then the only cure is to voluntarily ban yourself. Merchants will do it if you ask.
(And make sure that they ban you by IP address AND street address; too easy to create a new account.)

 

[Tosie]

Another Dave Ramsey fan here!! We started our Total Money Makeover in January and paid all our credit cards off and are now working on the last of our car loan.

The budget and envelope system keeps you in check and disciplined. It's not an easy solution - it's hard work and there will probably be some sacrifices on your part. But it WILL change your life!! My dh gets paid once a month and I've had no problem making the money stretch until the next payday.

You can get a free 7 day trial at www.mytotalmoneymakeover.com


Read "The Total Money Makeover" and "Financial Peace" (You can get them from the library).

Our goal is to eventually buy DVC with CASH!!

Good luck!!

 

[deekaypee]

It sounds good on paper, but it often backfires because it fails to address what caused the problem in the first place. For example, I believe the stat is that 2/3 of people who take out home equity loans to pay off consumer debt proceed to run up their credit cards again and end up in far worse shape. Plus they've now put their house on the line. So if the OP takes out a new loan to pay off the existing debt but doesn't change the spending situation, she risks accumulating more debt in the future.

You can't borrow your way out of debt. That's the bottom line.

I don't want to speak for disneysteve or anyone else who advocates no borrowing to get out of debt--whether additional student loans, home equity, or credit cards (as was my caveat). But I generally agree with his claim. It reflects my own thinking, borrowing money to pay off credit-card debt ("bad debt" in personal finance circles) is often a risky proposition.

Why? Because a lot of people who borrow money with the best of intentions--to climb out of a financial hole using a consolidation loan, or a loan that offers lower interest rates, or a combination--take these steps as a short-term solution. Many folks fail to take the important step of carefully evaluating & addressing the cause of the debt itself. Additional loans can provide what appears to be solution, but one which doesn't address the problem. This strategy, then, can end up increasing rather than decreasing debt.

People often take out these loans with the goal of paying back the debt more quickly. For instance, the debt has transferred from, for example, a credit card with 12.5% interest to, say, another card with 5% or another low-interest loan. That means more of your payments go to principal instead of interest. The new loan can save someone money, but if and only if that person also has the self-awareness, strength, and ability not to add to the debt or to prolong paying back the debt. The loan isn't itself the problem, but neither is it truly a solution. Changed behavior is...and altogether too often, taking out a loan to pay off debt indicates one's behavior has not changed.

Useless Personal Information
In recommending the OP avoid accumulating additional debt by shifting it to another lending source, I'm not attempting to judge the poster's ability to stick to a financial plan. Instead, I'm speaking from personal experience about the challenges to using a loan-transfer strategy to pay down debt. I won't go into my debt history, but I will admit that I'd tried various loan shifting/consolidation plans several times. And it was altogether too easy to slide back into bad habits when I had a little extra wiggle room on the credit card, or could defer payments on the debt transferred to a student loan, etc. It wasn't until I addressed the reason for spending money that I didn't have, committed to a stricter budget, and followed long-term strategies for debt reduction and increased savings that I emerged from the debt hole I'd dug for myself. And, unfortunately, that hole was far deeper than it needed to be, because I'd previously tried to use the relatively painless, quick fix of borrowing money to pay off debt. It wasn't until I made a lifestyle change (oddly enough, also language used by those who have successfully lost weight) that I succeeded in permanently paying off my debt.

And I admit this says more about me than the OP. I can't fully know her situation, and so I speak from mine. At the same time, I do think that old Shakespeare advice (offered by Polonius, in Hamlet) rings true: "Neither a lender nor borrower be." Interestingly, it's in the same monologue as "Given every many your ear, but few your voice" and "To thine own self be true," so take my advice for what it may, or may not, be worth. [And I can't believe I just used Shakespeare to support my worldview...sheesh, what a geek I am! ]