Total Money Makeover

[dvcgirl]

My stepdaughter and her DH got "the book" today and she actually called me in tears tonight.. They had both reached the point where they felt bankruptcy was the only option but now they feel as though they at least have some sort of "plan" to try to rectify the situation before they're forced into that final step.. I think they'll give it their best shot, but whether it will work for them or not remains to be seen.. Some of their habits definitely need to change, but in all fairness, some of the problems were unavoidable.. (The DH donated one of his kidneys to his son and it involved a great deal of travel.. After the donation surgery there were complications; unpaid time off from work for both of them; etc. Then the new kidney for the son failed, his medical insurance tapped out and they were doing what they could for him, at their expense..)

I don't know if it will work for them or not, but I do know that some kind of plan is better than no plan at all! Hold a good thought for them, if you're so inclined..

I wish them all the best. And yes, sometimes major financial problems are not the fault of those experiencing them. A lot of bankrupties are tied to medical problems and the debt that can go along with them. But it's never too late to try, and with the new bankruptcy laws that take effect in October (I think...it's October) it's in their best interest to try and pull themselves out. Filing for bankrupty is not going to be nearly as easy as it used to be and even when you do file, it's going to be necessary to pay back lots of the debt. So, no more "get out of jail free" card. I'm glad that you bought them the book and hopefully they'll get on the right track.

 

[RichNKatHolly]

Thinking good thoughts for them as well! Keep us posted!

 

[Free4Life11]

If you have debt, how do you balance paying off the debt, but also having a little fun in life? Is it wrong to go on a vacation if you are carrying a balance on your credit cards? I do have a lot of debt but there are times when I just need a break from life!

 

[Muushka]

If you have debt, how do you balance paying off the debt, but also having a little fun in life? Is it wrong to go on a vacation if you are carrying a balance on your credit cards? I do have a lot of debt but there are times when I just need a break from life!

You are a very brave poster! I will just sit back and listen.........

 

[C.Ann]

If you have debt, how do you balance paying off the debt, but also having a little fun in life? Is it wrong to go on a vacation if you are carrying a balance on your credit cards? I do have a lot of debt but there are times when I just need a break from life!

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I've never taken a vacation that I didn't have the cash to pay for, but in your circumstance, I suppose it would depend on a number of things..

What kind of a vacation are you talking about?
How long of a vacation?
How often a vacation?

I've never had credit card debt, but over the course of 30+ years I have done refunding, worked part-time and full-time jobs, worked more than 1 job at a time, held garage sales, crafted items and sold them at craft fairs, cut back in other areas to stick more in the vacation fund, sold things on eBay, etc..

If I remember correctly (can't look it up because I've passed the book on to the couple it was intended for) there's a section in DR's plan for "blow" money, I believe.. Maybe you could save that for vacation while paying off the credit cards at the same time.. It probably wouldn't be a big Disney vacation, but it could be the "break from life" that you need.. Only you can determne what your priorities are..

 

[ElizaB39]

You are a very brave poster! I will just sit back and listen.........

hee hee

 

[dvcgirl]

If you have debt, how do you balance paying off the debt, but also having a little fun in life? Is it wrong to go on a vacation if you are carrying a balance on your credit cards? I do have a lot of debt but there are times when I just need a break from life!

It sounds like you need a plan. First of all, what kind of debt do you have? Is it student loan debt or a mortgage? That's not bad debt. But if you're carrying a lot of credit card debt, first of all you probably need to figure out how you got there...and come up with a strict budget to get yourself out.

As for the vacation, well, it's not wrong to go on a vacation if you're carrying debt...if you're paying cash for the vacation and have a plan to pay down the debt. Or if you have plans to pay off the credit card within a few months. Otherwise, aren't you just going to sink deeper into debt? How can a vacation even be relaxing and enjoyable when it will just put you in a deeper hole that you'll eventually have to dig yourself out of? I know people who have gotten themselves into deep financial troubles and it can be very depressing. And so why not take a vacation to make yourself feel better? Well, because in reality it will only make things worse. It's just a short term fix for a long term problem.

I can only tell you that there's a wonderful sense of peace and freedom with being debt-free. It's better than any trip to Walt Disney World or any other vacation can ever make you feel.

 

[Kay7979]

I personally would not pay for a vacation on a credit card, but I would not go so far as to say I would never take a vacation unless I was debt free. People should get their finances under control, but there has to be a place for some discretionary spending, while reducing debt, IMO. It's sort of like going on a diet and telling yourself you will not eat any of your favorite foods for the next year or two. It's hard to stay on a diet that's too strict. You just have to find a reasonable balance between paying down debt and "having a life." With that said, a "budget vacation" rather than 10 days in WDW or Cancun might be appropriate.

 

[C.Ann]

but there has to be a place for some discretionary spending, while reducing debt, IMO. It's sort of like going on a diet and telling yourself you will not eat any of your favorite foods for the next year or two. It's hard to stay on a diet that's too strict. You just have to find a reasonable balance between paying down debt and "having a life." With that said, a "budget vacation" rather than 10 days in WDW or Cancun might be appropriate.

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Exactly.. I think this is where the "blow" money comes in.. I've never seen any budget plan (or pay down debt plan) that didn't allow for some sort of discretionary spending.. Such a plan usually fails because most people simply don't do well with total deprivation.. Discretionary spending can mean anything from taking a budget vacation to dinner out and a movie or a morning of garage sales.. It's totally up to the individuals and what works for them..

With some creative thinking, people are usually able to come up with some sort of vacation that fits their budget, yet doesn't interfere with their financial goals..

 

[Free4Life11]

Thanks for the replies. What I have been doing is setting aside 10% of each paycheck into my savings account. I'm not sure WHAT exactly I'm saving for, lol, but I just want to let it accumulate for a while and maybe go away for the weekend during value season, maybe after Christmas. I'm also trying to use 50% of each paycheck for bills and the remainder I split between tithe/charity and food/misc. things.

Nice thing is I work at a movie theater so I am able to see movies for free and get free popcorn and pop

 

[Muushka]

What I have been doing is setting aside 10% of each paycheck into my savings account. I'm not sure WHAT exactly I'm saving for, lol, but I just want to let it accumulate for a while and maybe go away for the weekend during value season,

Not sure if everyone else would agree, but here goes. Unless you have an extremely low interest rate on those credit cards (like 2%), wouldn't it be wiser to pay down that debt rather than pay high interest on the CC?

We had a car loan a few years back. It carried a 5% interest rate. We had a savings account which earned 2% interest. It took me a full year to get my husband to pay that car off and get rid of a loan that cost 3% more interest a year (plus we paid income tax on the interest earned on the money in the bank).

You would probably come out ahead paying down that CC debt and when it came time to take a vacation, use the CC then.

 

[Lisa loves Pooh]

LOL - I can say I am not like that. I would definately buy a used trailer. I just happen to have had some experience with used furniture that was NASTY!!!

Now I will buy almost anything used to save some $$. I get such a high off getting a great deal!!

Our used couches we had--were all freebies from people we knew...hubby grew up with the one couch. Now talk about nasties--my water broke on that couch. . I was so concerned--at the hospital when my sister finally went back to my house--I asked her to clean it--there was NOTHING there. More ewwww!!!!

We did eventually replace the cushions (not b/c of that)---but you do never know what happens on couches!

The couches have now made their way to my bil's new apartment. They will never die. It is an old style sectional that is about 25yo by now.

 

[Lisa loves Pooh]

Not sure if everyone else would agree, but here goes. Unless you have an extremely low interest rate on those credit cards (like 2%), wouldn't it be wiser to pay down that debt rather than pay high interest on the CC?

We had a car loan a few years back. It carried a 5% interest rate. We had a savings account which earned 2% interest. It took me a full year to get my husband to pay that car off and get rid of a loan that cost 3% more interest a year (plus we paid income tax on the interest earned on the money in the bank).

You would probably come out ahead paying down that CC debt and when it came time to take a vacation, use the CC then.

According to DR--the steps are a $1000 emergency account, snowball debt (credit cards and such), and then long term savings.....

So savings should have no more than $1000 for emergencies (Car repair, home repair--not indulgences--but needs)....and then after that the money is better applied towards debt.

YOu can also have blow money in the budget that can be blown however the budgeter seems fit. It can be $20 a month--it can be $100--but depending on your goals for getting out of debt...the number should reflect being able to reach the goals you set out.

 

[RichNKatHolly]

Now talk about nasties--my water broke on that couch. . I was so concerned--at the hospital when my sister finally went back to my house--I asked her to clean it--there was NOTHING there. More ewwww!!!!

OK, you win

Enjoy your new couches!!!

 

[arminnie]

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There was an article in the newspaper just the other day.. A debit card with the Visa logo on it now affords exactly the same protection.. Debit cards are becoming very popular as people begin to shy away from credit card debt..

I worked for Visa International (parent company of ALL Visa cards worldwide) for many, many years. At one time I was the Debit Business Manager.

U.S. law does not provide the same protections for debit cards BUT Visa operating regulations (the "laws" that govern all Visa transactions) do provide the same protection. In other words the Visa Op Regs go above and beyond the U.S. legal requirements.

I can't speak for MasterCard, but I would bet they do the same thing.

 

[Lisa loves Pooh]

OK, you win

Enjoy your new couches!!!

Wanna buy a sofa?

 

[HenDuck]

My friends always shake their heads when I tell them how much we/I put away towards retirement and my DS' college fund. They think I expect to be "rich" in my retirement.

But my rationale is this, I put away as much as I can NOW because you just never know what the future will bring. There may come a time when I won't be able to put away quite so much, if anything at all. Then all those years of saving for my, my DH and my DS' future will have "paid off".

Also, knowing that I have spent years putting away a substantial amount for our future will give me peace of mind if and when I have to cut back.

Just my 2 cents, for what it's worth...

 

[can'twait]

HenDuck:

The other thing to consider is that your invested $ grows for you. If you put $5 in the bank when your child is a baby, it could be worth $100 by the time he/she is ready for college. It's a whole lot easier to save $5 now than it will be to save $100 later. I really have no clue what the figures are, but you get my point. Multiply $5 by the thousands you will need for college. The sooner you start to invest, the more you will have when the time comes, even if your initial investment is low.

 

[HenDuck]

HenDuck:

The other thing to consider is that your invested $ grows for you. If you put $5 in the bank when your child is a baby, it could be worth $100 by the time he/she is ready for college. It's a whole lot easier to save $5 now than it will be to save $100 later. I really have no clue what the figures are, but you get my point. Multiply $5 by the thousands you will need for college. The sooner you start to invest, the more you will have when the time comes, even if your initial investment is low.

Yep!

I kick myself for not saving MORE when I first started my career, but live and learn...

 

[Free4Life11]

Not sure if everyone else would agree, but here goes. Unless you have an extremely low interest rate on those credit cards (like 2%), wouldn't it be wiser to pay down that debt rather than pay high interest on the CC?

We had a car loan a few years back. It carried a 5% interest rate. We had a savings account which earned 2% interest. It took me a full year to get my husband to pay that car off and get rid of a loan that cost 3% more interest a year (plus we paid income tax on the interest earned on the money in the bank).

You would probably come out ahead paying down that CC debt and when it came time to take a vacation, use the CC then.

I did that for a while, not saving any money, but it ended up just causing problems. Something unexpected would come up and I'd have to resort to using the CC. Paying off my CC's is a goal I have, but I'd also like to store up some money. As far as what I am saving for, I am saving for both a budget vacation, as well as a general emergency fund.

Question -- do they tax ALL interest income? Or do you have to make a
certain amount of interest for it to be taxes? I don't even think I
listed the interest I made last year on my taxes (less than $10.) Does
the IRS have a way of checking that? I'm noy saying I'd cheat them,
but I swear I read somewhere you only have to pay taxes on interest
income if it's above a certain amount (I think $250?). Seems ridiculous for the government to worry about collecting taxes on $20 bucks in interest...small potatoes if you ask me.