How to get out of debt?

[dgorila1]

I am looking for real world, proven ways to get out of debt (over $40k worth). This is all credit card and loan debt. Doesn't include the mortgage, as this is a monthly "living" expense that we would have regardless. I have read about many of the ways (the envelope method, pay smallest debt off and add that to the next one and so on, etc). What tactics worked for you guys and still allowed you to have a "normal" life as far as spending for family expenses? This is the most debt I've ever been in, and I don't intend to do this again once its paid off. I just need to figure out how to pay it off first. The thought of going to cedit counseling to consolidate the payments into one set amount and have them negotiate a reduced % rate crosses my mind, but I know it'll end up ruining my credit (which I don't intend to rely on much after I pay everything off, but its good to have it if needed). Same for bankruptcy.

[DarkSociologist]

Interest rates are killer (especially compounding interest). Credit card debt is considered short-term debt and therefore demands a higher interest rate than long-term debt, like a mortgage.

You want to get rid of your debt that has the highest interest rates first. This probably means paying off your credit cards first, while only paying the minimum payments on your mortgage.

If you simply cannot afford to pay off such debts, then another strategy is to borrow on the equity of your house (a second mortgage) to pay off your high-interest debt (credit cards), which will lower your average interst rate and consequently lower your payments.

As a side note, you should be very careful about the kind of mortgage that you have. There are kinds where even if you make the minimum payments, you can still lose your house.

Go see a financial advisor and they will help you work through all this and help you become debt free.

[sczzy]

I have read about many of the ways (the envelope method, pay smallest debt off and add that to the next one and so on, etc).

If you simply cannot afford to pay off such debts, then another strategy is to borrow on the equity of your house (a second mortgage) to pay off your high-interest debt (credit cards), which will lower your average interst rate and consequently lower your payments.

You are on the right track not my site but good tools.
Crown Financial MinistriesI would look into the money map. It gives you a good outline to follow.

[RT Wolf]

If you're not on a budget right now, then its time. This is a great guide to setting up a quick, simple and easy-to-follow budget:

Getting Finances Done » How to create a zero-based budget

Remember to create a debt repayment plan and budget for it.

Specific strategies, you've said you've heard of many. There was a thread here about debt repayment a little while ago, you could dig it up.

Out of curiosity, why aren't you doing any of the things you've read about?

[John Wesley]

Spend less money than you make.

[Caveman Joe]

It seems very, very obvious, but a lot of people fall foul of this: being in debt, while still having savings.
If you have savings, use them to pay off your debt. Your savings are accruing a far smaller rate of interest than your debt - if you have savings while you're in debt, they're costing you money.

[SeriousKidding.com]

Originally Posted by dgorila1

I am looking for real world, proven ways to get out of debt (over $40k worth). This is all credit card and loan debt. Doesn't include the mortgage, as this is a monthly "living" expense that we would have regardless. I have read about many of the ways (the envelope method, pay smallest debt off and add that to the next one and so on, etc). What tactics worked for you guys and still allowed you to have a "normal" life as far as spending for family expenses? This is the most debt I've ever been in, and I don't intend to do this again once its paid off. I just need to figure out how to pay it off first. The thought of going to cedit counseling to consolidate the payments into one set amount and have them negotiate a reduced % rate crosses my mind, but I know it'll end up ruining my credit (which I don't intend to rely on much after I pay everything off, but its good to have it if needed). Same for bankruptcy.

I am in a similar circumstance. The only way I know how to battle this epidemic is to rein in spending and find a way(s) to increase income. I have found something I believe will work for me. It's too early to tell. But if you want to talk about it, please email me at seriouskidding@gmail.com . Good luck with your struggle my friend. "brad"

[escapee]

What about using a scissors to cut your CCs in half now . I dont own any CC myself but i do use debit card sometimes .

[dor]

Originally Posted by dgorila1

I am looking for real world, proven ways to get out of debt (over $40k worth). This is all credit card and loan debt. Doesn't include the mortgage, as this is a monthly "living" expense that we would have regardless. I have read about many of the ways (the envelope method, pay smallest debt off and add that to the next one and so on, etc). What tactics worked for you guys and still allowed you to have a "normal" life as far as spending for family expenses? This is the most debt I've ever been in, and I don't intend to do this again once its paid off. I just need to figure out how to pay it off first. The thought of going to cedit counseling to consolidate the payments into one set amount and have them negotiate a reduced % rate crosses my mind, but I know it'll end up ruining my credit (which I don't intend to rely on much after I pay everything off, but its good to have it if needed). Same for bankruptcy.

one thing you can do with credit cards - asked for a reduced rate, cite financial difficulty. your cards will be frozen ( you won't be able to use them), but it shouldn't effect your credit rating. some companies do some don't.

Credit card companies are only a little worse than cigarette and alcohol companies -they try to get you 'hooked' on debt. I would not feel bad about doing anything within the grounds of legality to pay as little as possible.

Is it a 'fair' world where congress bails out s&l's and banks when they get in trouble yet passes legislation that makes it harder for you to declare bankruptcy?

[ispf]

dgorilla1: I think you have already taken the first step by acknowledging that you are in debt and starting to look for information on how to reduce debt! Just keep at it and you will definitely be debt-free soon! A few years back, we were in a similar situation with about $42K in debt (credit cards + car loans + private student loans). We got rid of it and the feeling of being debt-free (apart from mortgage) has been incredible!

I wrote a detailed post about my experience on my blog. The link is 7 Steps That Made Me Debt-Free.

Here is a quick summary:
1. Stop adding any more debt (This one is self explanatory)
2. Know your personality (You need to know how much you are willing to push yourself without breaking down and giving up)
3. List your debt and sort it (Do you want to pay the least amount in interest or have the best psychological advantage?)
4. Negotiate lower rates or transfer balances (The debt will not go off overnight - so minimize the amount of interest paid)
5. Plan the attack strategy (based on 2, 3 and 4, determine what is the best way to go forward)
6. Implement the plan (Make as much of it automated as possible, so you dont have to keep worrying about debt - psychologically this was very helpful to us)
7. Periodically re-evaluate (Every now and then, return back and repeat 4 and check if 5 and 6 need to be modified)

That's it. If you stick to this plan and exercise some discipline, it will work. Atleast, it did for us

Good Luck.

[RT Wolf]

Once you finalized on a plan, I would recommend getting some big paper (or just lots of regular letter sized paper) grab some markers and make an easy to read progress chart (maybe even a line from your beginning debt position to 0, or your net worth position to a positive one). If you're using a bunch of papers, just put them up onto a wall and tile them together and then make your chart. This helps in a few ways. One way is reinforcement. Keeping this chart on a wall that you look at often keeps reminding you what your goal is what you're working towards (you might consider giving yourself a little treat once you're out of debt, to add a little bit of motivation). Another way is that it keeps you motivated becuase you'll see how much you've reduced already and how much you've got left. If you want, it can be a simple line with an arrow, going from your debt amount to 0 and make a line and write how much debt you have left every month.

I hope this helps. BUDGET!

[wolfgang]

Originally Posted by Caveman Joe

It seems very, very obvious, but a lot of people fall foul of this: being in debt, while still having savings.
If you have savings, use them to pay off your debt. Your savings are accruing a far smaller rate of interest than your debt - if you have savings while you're in debt, they're costing you money.

Would you say the same thing for contributing to 401ks? Like, would you say stop contributing to retirement and shift that money to pay down debt (except for any matching the company might have)?

[dmauder]

Originally Posted by dgorila1

I am looking for real world, proven ways to get out of debt (over $40k worth). This is all credit card and loan debt. Doesn't include the mortgage, as this is a monthly "living" expense that we would have regardless. I have read about many of the ways (the envelope method, pay smallest debt off and add that to the next one and so on, etc). What tactics worked for you guys and still allowed you to have a "normal" life as far as spending for family expenses? This is the most debt I've ever been in, and I don't intend to do this again once its paid off. I just need to figure out how to pay it off first. The thought of going to cedit counseling to consolidate the payments into one set amount and have them negotiate a reduced % rate crosses my mind, but I know it'll end up ruining my credit (which I don't intend to rely on much after I pay everything off, but its good to have it if needed). Same for bankruptcy.

No offense dgorila1, but if you're not willing to give up a "normal" life for a while, then (IMHO) you're really not serious about getting out of debt.

Almost every approach works - IF you do it. There is no secret, there is no magic formula. It's common sense. John Wesley summed it up nicely - "Spend less money than you make." I would add to that -- "Stop spending money you DON'T HAVE." In other words, stop creating more debt - no excuses.

The best possible advice I can give you, besides what John said, is:

1. Go to your library and grab a copy of Total Money Makeover by Dave Ramsey.

2. Read the book and DO WHAT IT SAYS - step by step. Don't skip anything, and don't try to improve on the system.

3. Prepare yourself to give up the "normal" life for a while. As Dave says, "Live like nobody else, and soon you can live like nobody else!"

I hope that helps.

Dave

[GoalGuru]

I recommend in addition to all the other great resources mentioned here, find a mentor. Utilizing a coach and mentor can help you reach your goals faster.

Here's another resource- MillionaireMentor.com | Millionaires Mentoring Millionaires

Be prepared to set positive goals, create a new plan, take consistent decisive action and make changes within yourself.

Live Your Dreams,

-Jill

[RT Wolf]

Steve is fantastic in the way that he's already blogged about the major problems we face.

Anyhoo, perhaps you might benefit from this entry?
http://www.stevepavlina.com/blog/200...ke-action-now/

I know, more reading. The point is this. GET UP! DO IT! NOW!

[Love]

Wow, got to love all the positive energy on this forum! Definitely go for this, you can totally tackle it down. But you need to decide what's really necessary. After that, take all the money you have left over and pummel into your debt. If you don't have any money left over, a good question to ask yourself, is like Steve says: How can you create more value?

Once you have some free money, this is what you can do.
If you don't want to consolidate, get a lower interest rate credit card (if you don't want to leave your own I'm told you can up your card company and say you'd like to go with another company, but first you want to see if they can best their offer). A good one would be a 0% interest if you can get that... make sure the normal rate after that is not too high. Then switch your balance over to that card. You probably won't be able to get everything on there. But you can make high payments on the low interest card and low payments on the high interest card. Once you finish the low interest card, keep transferring your high interest card money to there.

Good luck! It's definitely, definitely doable.

[Que]

When I went broke last year and had to pay some debt. I talk with my boss and for help. She lent me some money which I paid by working on weekends doing extra projects and running errands. It took me over a year to recover. If you need some help, ask around. Good luck.

[ÜberDan]

I'm currently working my way through £20k of debt so I know how you feel. It's tough adapting to a lifestyle of saving and clearing debt from a spending spree lifestyle, but you have to do it some time so start asap. These might help:

Debt Reduction
Earn More Spend Less
Ten Percent Rule
What I Want
Killing Time

[Rin]

I am one of those dinosaurs who has never been tempted to get into debt, so I don't have much advice to offer (except perhaps "don't get into debt in the first place!") but I am really pleased for you to see all the practical solutions that are being given here. Wise words have been spoken. There is no easy road out of debt, so think of it as a life challenge, one that will help you develop your creativity and problem-solving skills. All of my friends did it, and so can you. Don't feel overwhelmed ($40,000 isn't that bad, after all), you just do whatever it takes to pay it off and keep plugging away. The time will go by faster than you think, and before you know it, you'll be out of debt! You'll be free.

I wholeheartedly wish you all the best, and everybody else who is dealing with this issue too.

[rene_stpierre]

If you want to get out of debt, you will have to do some sacrifices for a while. How fast you get out will depend on what you are willing to do.

There are 3 main things you need to do ... reduce expenses, automate debt payment and increase income. More specifically, here's what I suggest:

1- Do a budget and eliminate any non-vital expenses (restaurants, home improvement projects, new furniture, etc). Non-vital means anything you don't need to survive while you pay your debt.

2- The money you save from # 1 should go directly to pay your debt with the highest interest rate. Once you eliminate one, you put the additional money on the next debt.

3- Automate your debt payment. Once you have figured-out how much you pay every month, automate it. That way, you will be able to spend your energy on #4.

4- Find additional income stream(s). Get a 2nd job, offer your services as a consultant, etc. All extra money generated obviously goes to paying the debt.

Good Luck!
René

[dmauder]

Here's something you might want to check out... I just found it today -- Wesabe: Take Control of Your Money

I haven't started using it yet, but it looks very cool and the writeups about it are pretty darn positive. Basically, they're saying it's like Quicken on the web.

If anyone is already using this, please post back here and let us know what you think of it.

Dave

[neuronicone]

Originally Posted by ispf

dgorilla 7 Steps That Made Me Debt-Free

Here is a quick summary:
1. Stop adding any more debt (This one is self explanatory)
2. Know your personality (You need to know how much you are willing to push yourself without breaking down and giving up)
3. List your debt and sort it (Do you want to pay the least amount in interest or have the best psychological advantage?)
4. Negotiate lower rates or transfer balances (The debt will not go off overnight - so minimize the amount of interest paid)
5. Plan the attack strategy (based on 2, 3 and 4, determine what is the best way to go forward)
6. Implement the plan (Make as much of it automated as possible, so you dont have to keep worrying about debt - psychologically this was very helpful to us)
7. Periodically re-evaluate (Every now and then, return back and repeat 4 and check if 5 and 6 need to be modified)

Good insight! In addendum to everybody's ideas, is to focus on things that earns money so you can pay your debts. This is one trial that you must face, and look for better ideas, and not think of going away with these debts, after all, you have enjoyed it sometime in the past. If you think debt consolidation will help you better, so you will only be paying a lower interest rates, then, go for it. Last remedy would be apply bankruptcy, unless, you have other rich strategies to implement and make money in a spur span of time.

Good luck, and just believe. YOu will make it.