Another Debt scenario

**Jluke** · 10-28-2016, 03:49 AM

I'd pay off CC 1 today - take $1309 from your savings. Savings is now $6700.

Next month, I'd take the $1100 extra + ~1900 from savings and pay off CC 2. Savings is now $4800.

the next 4 months I would save $800, and then put an extra $300 towards CC3. 4x800 Savings is now back to around $8000.

Of course whatever you were paying monthly on CC1 and CC2 is there for savings or additional extra on CC3.

List out your expenses. $4800 seems high.

**disneysteve** · 10-28-2016, 04:09 AM

I would immediately pay off CC#1 and #2 using your savings. That leaves you $3,700 as an EF which is fine for now. Get rid of that outrageously high interest. That also eliminates the payments you were making on those debts which can be redirected along with the extra $1,100/month to CC#3.

Buying a house is not something you are anywhere close to ready for. You need to get rid of the credit cards, have a 6-month emergency fund, and have a 20% down payment. That's going to take some time.

**snafu** · 10-28-2016, 12:57 PM

I'm confident you will get the results you want by following the suggestions offered by D Steve and Jluke. 22% interest is hugely punitive; I hope you'll cut up those cards. How many months remain on car loan? If you offer a detailed list of spending, perhaps SA participants can see small chanesg to help reach your goal faster.

If DW is on board, I'm sure you can easily create a cash flow list so that you every dollar has a job and you both know 'where the money goes.' Include repetitive and occasional expenses like vehicle maintenance, tires and gifts for example. With a tiny bit of time and control you will have recaptured emergency savings and begun a savings plan for the downpayment required to purchase a house as desired.

**asb2012** · 10-30-2016, 01:29 AM

I was not expecting for anyone to say use my savings for cc1 and cc 2. Yea i was leaning towards paying off cc#1 first. Im nervous about letting go of my savings some but i trust the advice from these forums. So i will be paying off cc#1 and #2 by Wednesday Then work towards the 4 months of building savings back up and paying down cc#3

**GoodSteward** · 10-30-2016, 05:57 AM

Originally posted by asb2012 View Post

I was not expecting for anyone to say use my savings for cc1 and cc 2. Yea i was leaning towards paying off cc#1 first. Im nervous about letting go of my savings some but i trust the advice from these forums. So i will be paying off cc#1 and #2 by Wednesday Then work towards the 4 months of building savings back up and paying down cc#3

I agree with the advice given as well. The question is how much money do you want to throw away each month? If you had decided to save for a house while paying those interest rates you would be paying a total of 234$ a month (interest) for the privilege of carrying that credit card debt. That's as useful for that money(you are working for) as using it to start your grill or clean a baby's butt.

Also, do not try to do multiple high priority things at once. It will muddy everything up and really distance you from your goals as well. Snowball the priorities. It it more motivating to see progress by marking things off your list than to get them all done at the same time much, much later down the road. Clean up the debt and you can enjoy saving for a house instead of having that looming over your head the whole time.

For me, it isn't just about the debt, it's also about freeing up cash flow. Too many payments can lead to disaster. People file bankruptcy because they can't make the payments, not because they owe a certain amount.

**puck36** · 11-03-2016, 04:31 PM

This is how you should list your debts

CC #1 $1309
CC #2$3000
Auto Loan $12,839
CC #3 13447
Student Loan $24,743

I would take $7,000 from savings and pay off CC #1 & 2 and put $2,691 on the auto loan. Then take any extra money have pay off the auto loan as fast as you can then move to the CC #3.

This is step 2 of the Dave Ramsey Baby Steps.

Dave Ramsey's 7 Baby Steps

http://www.daveramsey.com/baby-steps/?ectid=gaw.daveramsey-babysteps2

Beat debt, save money and plan for the future!

**Jluke** · 11-03-2016, 04:43 PM

Originally posted by puck36 View Post

This is how you should list your debts

CC #1 $1309
CC #2$3000
Auto Loan $12,839
CC #3 13447
Student Loan $24,743

I respectfully disagree with the order after CC2 - that is following ramsey to a tee, BUT the auto loan should be dead last; it will probably be retired with the natural payment plan prior to the student loan.

Specifically, the balance on the auto loan is not much different from CC3 ($600), but the interest rate is 3.5% for auto vs 14% for CC.

**puck36** · 11-03-2016, 05:03 PM

Originally posted by Jluke View Post

I respectfully disagree with the order after CC2 - that is following ramsey to a tee, BUT the auto loan should be dead last; it will probably be retired with the natural payment plan prior to the student loan.

Specifically, the balance on the auto loan is not much different from CC3 ($600), but the interest rate is 3.5% for auto vs 14% for CC.

Who cares about the interest rate. If you pay off the smaller amounts first then you have more money to pay off the bigger amounts.

**Jluke** · 11-03-2016, 05:26 PM

Originally posted by puck36 View Post

Who cares about the interest rate. If you pay off the smaller amounts first then you have more money to pay off the bigger amounts.

Ramsey does: " The smallest balance should be your number one priority. Don't worry about interest rates unless two debts have similar payoffs. If that's the case, then list the higher interest rate debt first."

CC3 wins over auto.

**Petunia 100** · 11-04-2016, 05:55 AM

Originally posted by puck36 View Post

Who cares about the interest rate. If you pay off the smaller amounts first then you have more money to pay off the bigger amounts.

People who grasp elementary school level math.

**GoodSteward** · 11-04-2016, 06:10 AM

Originally posted by Petunia 100 View Post

People who grasp elementary school level math.

Percents don't start until later in grade school, just an FYI.

If your goal is to avoid using the credit cards again do NOT use most of your EF to pay off debt. Use some, but don't let it go down to just 1k, or you will likely break out a card again sometime during the repayment period. Just my .02$

**scfr** · 11-04-2016, 07:37 AM

Originally posted by asb2012 View Post

I was not expecting for anyone to say use my savings for cc1 and cc 2. Yea i was leaning towards paying off cc#1 first. Im nervous about letting go of my savings some but i trust the advice from these forums. So i will be paying off cc#1 and #2 by Wednesday Then work towards the 4 months of building savings back up and paying down cc#3

Good. Scrutinize the expenses to see if there are areas where you are willing to cut back to get that 3rd cc paid off more quickly.

**Petunia 100** · 11-04-2016, 09:24 AM

Originally posted by GoodSteward View Post

Percents don't start until later in grade school, just an FYI.

Grade school is elementary school, so I'm not sure what distinction you are trying to make.

**thestrongprofessional** · 12-06-2016, 12:53 AM

Selling your car?

The advice on this forum has been great. You should definitely focus on paying off your smallest debt first and use some of your savings to pay off the first 2 credit cards. Have you also considered selling your car? Depending on your car's value, you may be able to free up another $5,000 - $6,000 by downsizing your car and buying something more economical. These funds would help you towards your cause and allow you to become debt free much faster.

Raphael

Another Debt scenario