"moral" money dilemma...

[crisi]

Pay down the debt.

Ten years ago we came into some "free" money - an inheritance. We could have bought cars or taken a vacation. Instead we changed our lives. We paid down the little bit of credit card debt we had. We paid off the car loans and moved to just paying cash for cars. We paid off the loan we had out to adopt our son. Suddenly we were looking at over $1000 more money in our hands every month by not having those bills hanging over our heads! (Now, granted it was more than $4,000, but every little bit does help).

We've had more fun with that extra $1000 a month. DVC was paid for in cash out of savings - because we had an extra $1000 a month to save. You won't believe what it is like to "have" almost every penny of your check to pay for now and the future instead of paying for the past!

We also have no debt but our mortgage (well, right now I do have a car payment - I have the money invested, but the car loan was "free" and I make more money putting the cash other places) - and our mortgage will be paid off in about two years - less than ten years after moving into our house.

My brother in law came into the same amount of "free" money. They bought motorcycles, They took a really nice vacation. They bought a new house they needed a huge downpayment on - and still had a huge mortgage. They didn't touch the significant amount of debt they had. If anything, they gave themselves a taste for "stuff" they didn't have before - once they'd started spending that money, it was hard to stop. Last year they declared bankruptcy.

 

[welovedis]

I agree with most of the posters that suggested paying off your debt. We were in a similar situation a couple of years ago and ended up going to WDW. While we enjoyed the trip we certainly spent more than we thought and spent more than the bonus money we started with.

We also were in VERY serious CC debt at the time but thought "what the heck you only live once!". Now we use Mary Hunt's Cheapskate Monthly and her RDRP (Rapid Debt Repayment Plan) and we are well on our way to financial freedom. It takes a lot of belt-tightening but someday we'll be debt-free and loving live.
http://www.cheapskatemonthly.com/

WDW will always be there (I hope) and it will be more fun to enjoy it without the CC debt looming overhead.

 

[tink2dw]

Just a Thought....... Someone mentioned Disneyland!! in 2005 it's the 50th anniversary Celebration for Disneyland!! This is going to be a special party!

Pay some cc debt, but start a savings for a 2005 trip to DL

Start a Change Jar[this works great]
start packing lunch to work-put the savings in the jar each week
use coupons to save on groceries-put what you saved in the jar
Find ways to find Bargains for all purchases

Keep asking Questions here
And visit the DL board to see whats happening in 2005!!
http://disboards.com/forumdisplay.php?forumid=26

 

[DawnAK]

I didn't think I would get so many responses, and I appreciate every one of them. Thanks for taking the time to help me out. Well, I think we have decided to skip WDW this year (boo-hoo). We will still go to Colorado to see DH's family since it has been 2 years since we saw them last. We may go to Vegas for a few days, but will still be on a budget, and it will be much cheaper than WDW. I have taken many of the budget board suggestions lately and have been trying to cut back on our expenses. We have cancelled our cable TV, cut back to eating out once a week (used to be 2-3 times), pack both of our lunches, and started a change jar. We have not used our credit cards in some time, but the amount due doesn't seem to budge much.
Welovedis-thanks for the link, I am going to check it out. We don't want to resort to a credit card counseling place but do need some help in how to make our money stretch when it comes to payments.
Thanks again everyone. I appreciate each of you taking the time to respond. I will be hanging around the budget board, you guys are good folks!
dawn

 

[disneysteve]

Originally posted by DawnAK
We have not used our credit cards in some time, but the amount due doesn't seem to budge much.

Just curious. Are you just making the minimum payment or are you paying more than that? If you just pay the minimum, it could take 10-20 years to repay the balance. Of course, sending in that extra $4,000 will help a lot.

 

[crazelion]

Pay off credit card debt.

 

[tink2dw]

DO YOU OWN YOUR HOME?? If so, refinance your home to a lower rate and include all your credit cards to be paid off.

Need info PM me!!

 

[Ozymoe]

This may be more information than you want to share so don't think you are obligated to respond...but it would help some people give you more specific advice...how much is your credit card debt...more than 20k?...or less?

 

[DawnAK]

dh and i just sat down and did a budget for our monhly payments and such. he has been a college student for the past 5 years and has worked only part time or seasonally for those years. as you can imagine, that is very damaging to a persons finances. anyway, we are about 27.000 in debt. we rent a small apartment for a very low rent. we both own our vehicles, so truly our only monthly expenses are montly living expenses such as electric, phone, rent, food, etc and the ever present credit cards. we did just go to the cheapkskte website and it really helped us with the big picture of our debts and what we need to do to pay them off. does anyone know if it is possible to lower the interest rate on your credit cards? is it a good idea to find a cc with a lower interest rate to consolidate the cc's on to? or does that just add to the problem?
also, if we do send the $4000 into a cc, which one does it go to? the one with the highest interest rate or highest balance?
thanks again all. dawn

 

[peacefulgirl]

DawnAK,

You may want to read my post about debt and paying it off.... I have had a lot of great ideas come in from that post. (thanks to all of the great people on this baord) I am on a budget journey myself

go to http://www.disboards.com/showthread.php?s=&threadid=644815&perpage=15&pagenumber=1

Also spend a lot of time here....

MSN money: http://moneycentral.msn.com/Content/Savinganddebt/Managedebt/Managedebt.asp

I suggest you really think this out. Use the debt calculators http://www.bankrate.com/brm/calculators/credit-cards.asp to determine what will work out best for you.


There is no right and no wrong, it is what works best for your financial life.

Best of luck

PG

 

[ajksmom]

DawnAK,

Does any of your debt include student loans for your DH's last 5 years in college? I have heard alot about students having the interest lowered on older student loans (re-financing them?). Maybe have your husband stop by the financial aid office at his college for more information if he does indeed have any loans due.

The interest rate on your CC's can be lowered. Make a phone call to the CC companies and ask if they are willing to lower yours. If you are in good standing with them and don't have late payments they may be able to give you a lower rate.

Finding a CC with a lower rate can work. Several things are VERY important if you try this route. 1) You must make sure you'll be able to afford the new payment. I believe a minimum pmt is set at about 2-3% of the total debt (someone correct me if this is wrong)
2) You cannot continue to use your newly balance free CC's. It will start a fast downward spiral if you don't get your spending in check NOW. 3) Be VERY aware of the conditions of the new CC. Quite often the low interest rate is only for a year or so, and then skyrockets. ONE late payment will almost certainly cause your interest rate to rise above 25%!!! There is often a balance transfer fee involved, so make sure you are aware of how they will compute that.(Set fee or % of balance transferred) RESEARCH the fine print of all offers before deciding that this is the route for you to go.

In terms of where to send the $4000. pmt to, there are different ways to look at it. I personally would call the CC companies, see if they were willing to lower my interest rate, and then send it off to the one that had the highest interest rate. The other "school of thought" about this is to pay off your LOWEST balance first. The theory is you are "done" with one bill quicker. Then you take that payment and add it to the payment you are already making on another CC, then that one is done, and so on...... I would've thought that this would be an expensive way to pay off debt but..
I am currently helping my BF cope with her divorce and the financial burden it has placed on her. I did a worksheet for her, showing her the two ways and what the cost will be using both methods. It will "only" cost her $170. over the next 31 months to start by paying off the lowest balance CC first. Knowing her as well as I do - I think this is what is better for her. She has cut up all but one CC, given that one to me for safekeeping, and will feel the weight lifted as she writes less checks and sees one balance rapidly going away. I also recommend checking into the new book out by Jean Chatzky - Pay it Down! From Debt to Wealth on $10 a Day. My BF bought it and has me reading it now for her. I am only 1/2 way through it but it seems to have a ton of info in it.

Regardless of how you choose to pay off this debt, TRY TO PAY MORE THAN THE MINIMUM EVEN IF IT'S ONLY BY A FEW DOLLARS PER MONTH.

You can PM me if you have any other ?'s. Sorry so long!!!
Kristy

 

[suzifli]

Try this for perspective on your credit card debt.

A $2500 balance at 18% interest if you make the minimum payment will take 45 years to pay off. Yes I said "45" years.

I do not know your situation but the above is a statement of how unwise it is to carry debt on credit cards for more than a few months. Never ever just make the minimum payment. Use your money to pay down your credit card debt. It will greatly reduce your stress long term.

 

[Mom2Ashli]

Pay down your debt.

 

[EsmeraldaX]

DawnAK - I agree. Pay down the debt. But maybe take a tiny portion of the money, $100-$200 or so and have a nice evening out, or take a day trip.

Trust me. Earlier this year, I had a lot of debt. I don't know if it was as high as yours, but it was a pain in the butt for me. I basically started really skimping on things, made alot of sacrifices. I was able to seriously knock that debt down.

You will feel SO much better when the debt is gone. Then you can travel whenever you want because saving up for trips is a lot easier when you have less debt.

 

[EsmeraldaX]

Originally posted by suzifli
Try this for perspective on your credit card debt.

A $2500 balance at 18% interest if you make the minimum payment will take 45 years to pay off. Yes I said "45" years.

I do not know your situation but the above is a statement of how unwise it is to carry debt on credit cards for more than a few months. Never ever just make the minimum payment. Use your money to pay down your credit card debt. It will greatly reduce your stress long term.

This is such good advice. ALWAYS pay the minimum + the finance charges + as much as you possibly can.

I usually make the minimum + finance charges X3 whenever possible.

I started doing that when I was having problems earlier this year and my cc debt went down rapidly. In fact, the cc raised my limit because cc companies LIKE when you carry a balance and just pay the minimum. Apparently they thought upping my limit would make me spend more. (It hasn't).

 

[Jalva22]

I would ask how serious your "serious" debt is. If your looking bankruptcy in the face, by all means get rid of as much of that debt as you can. If not, my advice would be to stash the money in savings as a safety net. I wouldn't use "free" money to pay down credit card debt for one reason. My experience is that people who use savings, gift money or refinance their home (things like that) to pay credit card debt don't learn much by it. Generally, they build the debt back up again in a few years time. However, putting the money in savings gives you a vital safety net. That's step one. Step two is changing your lifestyle so that you free up enough money each month to start paying that debt down. It takes longer, it's more painful from a monthly standpoint, but my bet is if you accomplish getting rid of your debt that way the memory will be strong enough that you don't build it up again. Just my 2 cents.

 

[SleepyatDVC]

Remember "free" money isn't neccessarily free.

If it was a bonus, you will probably still need to pay taxes on it. The higher your income, the less tax refund (if any) you will be getting back.

I agree with most people about paying down your cc debt. It seems to be a substantial amount.

Definitely, try to lower your rates. Consolidating is smart so that there is less monthly payment to keep track of. Late payments are killers. In the meantime, while researching your transfer options, definitely call your current cc companies directly to try to lower your current rates.

Personally, I would keep a few hundred dollars (maybe 500) in a separate ING account for a credit card emergengy fund and sending the balance to pay down the cc debt.

This cc emergency fund is not an emergency fund for living expenses. It is not to be touched for "emergency" needs for cash. It is only to be used to insure that you will NEVER be late or miss or fall short of your monthly credit card payments. (I call it cash flow insurance) A late charge and increase in your finance charge interest will ruin all your hard debt reducing efforts, not to mention how it will affect your credit rating.

Good luck.

 

[MELSMICE]

Pay down your debt. I would find the CC company with the lowest rate, consolidate all CC's to that one card, then do what EsmeraldaX said - pay the minimum plus at least 2 or 3X the amount of interest they are charging if possible. At least pay more than the minimum. You'll get nowhere if you don't.

Good luck with your debt.

And also, after getting a different CC, cancel & cut the others up. Don't carry store CC's with you. Only carry the one you have just for emergencies, but "hide" it in your wallet.

 

[disneysteve]

Originally posted by MELSMICE
And also, after getting a different CC, cancel & cut the others up.

Be careful when cancelling CCs. If you cancel an account you have had for a long time and keep a new one, that can actually have a negative effect on your credit rating. It may be better to keep the card you've had the longest even if you don't use it.

 

[MELSMICE]

Originally posted by disneysteve
Be careful when cancelling CCs. If you cancel an account you have had for a long time and keep a new one, that can actually have a negative effect on your credit rating. It may be better to keep the card you've had the longest even if you don't use it.

If you decide to keep it & not use it, put it in the house somewhere & don't take it with you when you are out.