lrubin39
hpettifordA friend of mine asked me to share his note on the blog, and I’m sure that your feedback/comments/advice will be helpful.
Lee I need your help. I am looking for some help with my personal financial situation, but I’m not quite sure where to go. Even though I earn a fairly high salary, I don’t seem to be getting anywhere because have so much debt. 
Between school loans and credit card debt, I have close to $60,000 in debt, and its killing me. I feel like I’m working just to pay debt!
The real problem is that I don’t know who to turn to. My local bank just wants to give me another loan to consolidate all my debt. But that doesn’t solve my problem. And even though I have a high salary, the investment companies don’t want to help me with my debt situation. Also, I am not looking to claim bankruptcy. So it’s been hard finding someone to help me put a plan together to eliminate my debt.
Can you put this on the blog to see what others think?
April 21, 2009 at 9:59 am
This is a great question and am looking forward to the responses.
I always prided myself on staying out of debt… unfortunately, my financial situation has changed drastically and I have resorted to using credit cards to pay for groceries to feed my children. The money that comes in from my husband’s paycheck goes to straight to the bills… with nothing left over.
I am so frustrated and disappointed. I would like to know how some of you are handling your debt situations.
April 21, 2009 at 11:27 am
The first rule in getting out of debt is to stop digging. People say that they are sick of being in debt, but they keep using their credit cards. They are unable or unwilling to do without something that really is unnecessary.
April 21, 2009 at 12:00 pm
One helpful thing is getting rid of things that are not necessities. Some of us have a cloudy view of what a necessity is. Paying over $100 a month for cable isn’t a necessity. Going out to eat intead of to the grocery store isn’t a necessity.
On another note I refinanced my car and it cut my payments in half…that was a huge help. I try not to use my credit cards at all…only in emergencies llike if my car broke down.
I’ve started using alot of coupons for anything I can which is something that I had never done in the past and it helps a little.
Transfer balances of credit cards to lower interest rate cards if you can.
And sometimes you can consolidate student loan debt and get on a payment plan that may work better for you.
April 21, 2009 at 1:38 pm
J.J.
As I mentioned earlier, I stayed out of debt (all my life)… paid cash for everything… credit cards were not in use. If the paycheck pays the necessities… mortgage, gas/electric, insurance, etc. (and nothing is left over… not even for the nice to have), how can debt be avoided? This is tough for me… as my financial situation has changed drastically, and I have never been in a debt situation before.
I’m the coupon queen… always have been. Looking into my car situation. This is really tough…
April 21, 2009 at 7:33 pm
As a licensed CPA, I feel qualified to answer this question.
You mentioned in your initial response that you have a fairly high salary. Have you decided that your standard of living should be exactly at your salary or higher or did you make a conscious and sincere effort to leave beneath your means?
Be honest with yourself.
The reason you are not getting ahead is because you are spending too much of your income on debt servicing and not enough on debt snowballing or debt elimination.
You could also be leaving beyond your financial means.
Let’s ignore the student loans for the moment because they helped you obtain the job that pays your high salary, but exactly what item(s) were you putting on the credit card that could not be paid off by the next billing cycle? The credit cards should be used for emergency purposes and for short-term items that can be paid off relatively quickly (between 1-6 months). From what you said thus far, it appears that your credit cards have become long-term financing vehicles. The credit cards are your first area of attack.
Ask your credit card companies for interest rate reductions and turn the debt faucet on OFF. Stop piling additional debt onto your credit cards and commit to leave BENEATH your means until your financial storm is over. If you must, freeze the credit cards in a bowl of water in the freezer. Think of your credit cards as crack until you get financial house in order.
You are in a war against debt and you goal is to win. A lower interest rate will help reduce the debt pile-up. Refusing to make additional charges onto the cards will also prevent pile-up. However, consistently paying well above the monthly minimum is what produces the light at the end of the tunnel and helps you to get debt out of the way.
If you are truly serious about getting out of debt then you must take inventory of your current budget and strip yourself of “conveniences” that are blocking you from needed cash flow. Track your money for 30 straight days and get a snapshot of your financial habits.
You have to live beneath your means and reap the savings from doing that to reduce your debt load. And remember, in the long-run, ALL costs are variable!
(1) Car note — Car notes can kill an otherwise decent budget. How much is your car costing you a month? I have a 1999 Honda Accord which costs me $275-$300 a month when you factor in insurance, gas, and maintenance. Keep in mind that my car is paid in full and does not have a car note hanging over it. So, if you have a new car with a car note, you can easily be paying $700-$800/month of AFTER-TAX dollars. If this is your situation, it may be time to downsize your car and find out what kind of car you can get into WITHOUT a car note or at least with a very small car note. There is no need to drive yourself into the poor house impressing folks who have no intentions of helping you pay for that expensive, fancy car. If you don’t have a car note (but an older vehicle instead), you could free up to $5,000/year for debt reduction!
(2) Heating and cooling. Use fans in the summer and wear sweaters and socks in the winter like you are on ‘The Cosby Show’. Heating and cooling is one of the largest costs of maintaining a home. Never underestimate how much energy an air conditioner and electric gas/heater use. So learn the value of flannel in the winter and the benefit of fans in the summer. Unlock the potential savings by thinking outside the box and leaving beneath your means.
(3) $100.00/month Cable — nice to have, but basic cable or no cable is a viable option when at war. Get videos from the library, or try Netflix, and read books at B&N instead until you get out from debt. If you give up cable, that’s an additional $1,200 a year.
(4) Cell phone AND land-line. I have a cell phone and that’s it. For me, a land-line and cell phone are redundancies. I have invested in two phone chargers and a car charger so that eliminates my concern about loss of battery power. I pay $600/year for telecommunications. How much are you spending a year for phone utilities? Shift the paradigm and squeeze out the savings.
Hope this helps.
April 21, 2009 at 8:38 pm
Good stuff. I neglected to mention that I am not the one who submitted the initial question through Lee. I will however take into consideration everything you wrote.
I don’t have the luxury to live beyond my means…never been my style. I feel like I’ve penny pitched and downsized… But there’s still room for improvement. Thanks again.
April 22, 2009 at 10:11 am
I like the title. If more people viewed debt that way, we would have stronger families, economy, and nation. Thank you for advocating for less debt.
April 25, 2009 at 8:17 pm
One thing that I have done recently, is to put all my credit cards away.
If you dont have the cards, u cant spend.
Shop thriftily. buy things on sale. It doesnt pay to purchase expensive items if you have to use five or more paychecks to pay off.
Live within your means.
If you cant afford it, in one paycheck, or pay the bill in its entirety at the end of the month, learn to walk away.
Price compare.
Never buy anything unless u know its true value. Make supermarket circulars your best friend, and compare the items at all stores.
Same goes for buying a car. Never buy one from the first dealer u meet. Shop on line. Know the Manufactors listing price, and then work out how much more u want to pay for that new car.
The best time to buy a brand new car is really when the next years model is about to come in and I think that around July-Sept. Never fall in love with any car. i dont care how *fabulous* its supposed to be..
Know when to walk away and move on..
Learn to budget and learn to save.
My mom used to always say,
“Save for a rainy day, because rainy days always come”
I have found that out to be the truth.
Budget every check. Put away something in the bank., even if its just ten dollars a week. If you find that u cant save, let the bank deduct something out each pay day, especially if u use direct deposit.
As for the college loans.
I am still trying to figure out how to pay those!
April 27, 2009 at 8:31 am
I think the first thing everyone should do is take inventory. By that I mean, take a good look at what comes in and what goes out. I had a friend who always had “more month left after the money” and didn’t understand why she couldn’t get out of the hole. We soon realized that she had no idea how much money she made, nor did she know how much money she spent on bills and such. Our first step was to take inventory of her income, bills and other expenses. When we did that, we realized she was paying out way more than she was bringing in. She, like many, supplemented the shortfall with credit cards. Once we saw what she was working with, we were able to decide how to cut her expenses so that she was living within her means and then came up with a plan for her to start getting out of debt. Many people try to jump right in with a plan of attack when they don’t know their starting point. I want to emphasize knowing where you stand and then developing a plan to attack debt.
I know how you feel though. While I don’t have any problem paying my bills and even enjoying myself a little, my student loan debt looms over my head like an albatross. All I can do is take it one step at a time. My hope is that in a few years I’ll really start tackling that debt. I don’t want to pay for my education for the rest of my life.
Anyway, there are a lot of good books that I have found extremely helpful. Best to you and your family.
Larry Burkett’s, Complete Financial Guide for Young Couples (great book regardless of age or marital status); also Debt-Free Living (His books come from the Christian perspective but valuable to everyone!)
Michelle Singletary’s, Spend Well, Live Rich
Howard Dayton’s, Your Money Counts
Dave Ramsey’s, Total Money Makeover