#DebtFree #FinancialFreedom #BreakFreeFromDebt
Are you feeling overwhelmed by your super high debt and desperately trying to break free? 🚫💸 You’re not alone! Many people find themselves buried under a mountain of debt, but with the right strategies and mindset, you can start working towards financial freedom. Let’s dive into some actionable steps that can help you break free from debt and regain control of your finances.
Assess Your Debt Situation
First things first, take a close look at your current debt situation. Determine exactly how much debt you owe, to whom, and at what interest rates. This will give you a clear picture of your financial standing and help you create a plan to tackle your debt effectively.
Create a Budget
Creating a budget is crucial when trying to break free from debt. Take a close look at your income and expenses, and identify areas where you can cut back to free up more money for debt repayment. Allocating a specific amount towards your debt each month will help you make progress towards becoming debt-free.
Explore Debt Repayment Strategies
There are several strategies you can use to repay your debt more efficiently. Consider options such as the snowball method, where you pay off your smallest debts first to gain momentum, or the avalanche method, where you tackle debts with the highest interest rates first. Choose a strategy that aligns with your financial goals and stick to it consistently.
Examples:
– Negotiate with creditors for lower interest rates or payment plans.
– Consider debt consolidation to combine multiple debts into one manageable payment.
– Look for additional sources of income to accelerate your debt repayment.
Focus on Building an Emergency Fund
Having an emergency fund in place can prevent you from going further into debt in case of unexpected expenses. Aim to save at least three to six months’ worth of living expenses in a separate account to provide a financial safety net.
Seek Professional Help
If you’re struggling to manage your debt on your own, don’t hesitate to seek help from a financial advisor or credit counselor. They can provide expert advice tailored to your specific situation and help you develop a personalized debt repayment plan.
Breaking free from super high debt is a challenging journey, but with determination and perseverance, you can overcome this obstacle and achieve financial freedom. Stay focused on your goals, track your progress, and celebrate small victories along the way. Remember, every step you take towards becoming debt-free brings you one step closer to a brighter financial future. 🌟 #YouGotThis
Sort your credit cards by APR and pay down the highest APR cards first. Also stop contributing to your Roth IRA to pay down this debt.
Man… uh you a bonehead but at least you’re here. The quicker you get out from under this the better. The savings you are getting in your Roth are not worth carrying the additional debt to enable that.
> It’s obvious. I’ve been absolutely garbage at managing my finances since forever.
I mean, yeah. I won’t rub too much salt in your wounds but $120k card debt is madness. The good news is that you have $180k salary.
You’ve got to slash expenses and put everything toward your high-interest debt. No more subscriptions — you watch YouTube with ads, you listen to Spotify with ads. No more money on entertainment.
No more kids savings accounts for now. It’s sad but they will thank you later.
$1,800 in groceries is a lot even for a family of 5. Is there a Costco or Sam’s Club in your area? Here we have WinCo for cheap groceries, there might be other discounted supermarkets in your area. I’m sure you could economize on groceries quite a bit.
Not sure what wife’s car situation is like but I mean, if you can sell it and downgrade to a cheaper car you might have to. Your CC debt is an emergency. Sell everything that isn’t bolted down, then use a wrench to remove the bolts from everything else. Sell the bolts and the wrench.
Skip on the Roth IRA for now. It sucks to miss out on growth but your 25%-30% APR debt sucks even more.
Your income is pretty powerful here and your fixed expenses are not so big. If you budget carefully I bet you could get out of this debt in 1-2 years. You don’t need bankruptcy, you can actually pay this stuff off with some discipline.
You need to look at the balances of each card and their APR. Then decide if you want to go for mental wins or mathematical wins. Mental wins you pay the cards off from lowest balance up and if you want mathematical wins you pay based on APR. I’d stop contributing to your Roth IRA and apply that extra 500 bucks too. Your two drastic options are 401k loan or HELOC (depending how much equity you have), but I wouldn’t do that unless your family was struggling greatly and you figure out your overspending.
Already from 180k to 120k is awesome! If you stop the Roth contributions (and you definitely should while paying 20%+ CC debt) and finish the private school, that’s another $1,100 a month to throw at this, which is huge. And with the big raise next year, you can get out of this quickly if you stay diligent. With your income and your apparent motivation, I’d agree that bankruptcy isn’t your solution.
Also, make sure you aren’t spending on the cards while you have a balance on them. New purchases will accrue interest right away, even if you think you’re paying the new transactions off “on time”.
Kids savings accounts and subscriptions can probably go too? Once you’re out of debt, you can backfill the kids savings account much quicker without having to carry the high interest debt..
Stop putting money in a Roth and Kids savings. Pull all liquid cash except enough to cover a couple months expenses (if your job is secure you could go down to 1-2 months expenses). I would include all previous Roth contributions. Sell anything you can that could contribute. And put all of this into the CC debt immediately. Cut any and all expenses possible.
This is an emergency. Making minimum payments you’ll be paying that CC debt off pretty much indefinitely. You need to put everything you possibly can into it. Immediately. Any savings like for your kids are moot.
Great income and semi reasonable expenses ($1,800 on food, household, kids? Feel like that could be halved). If you treat this like an emergency you can do it and in reasonably quick time.
Step 1 cut the cards into little pieces and throw them away. Try to get a new card with 0% balance transfer and xfer over as much as you can on that card. Then repeat when the 0% runs out
Are you still using the credit cards? If you are, you need to stop. Cash or debit only. If you’re using a card that already carries a balance, you are continuing to dig the hole you are standing in
If you have a card with no balance, you may use that one as long as you are keeping your budget and paying off the statement balance before the due date each month
Personally, I’d ditch the contributions to the children’s savings accounts and the Roth IRA.
You can catch up on savings very easily once you kill some of the balances on these credit cards.
Figure out how to payoff credit card with the lowest balance. Take that money and add it to the payment s on the next lowest balance. Keep feeding up monies and you will start seeing progress. Also maybe a balance transfer to a 0% card for 12-18 months.
Pretty sure you can withdraw Roth contributions (not gains) tax free, although there may be some limit on this. I would look into withdrawing as much from your Roth as possible to pay down debt. I don’t know how much you’ve contributed/able to pull, but I personally think it would be worth it to do a one time withdrawal to lower your principals (maybe enough to knock out your Amex?)
Rip up the credit cards, you no longer should use them. Debit or cash only. You don’t get credit cards anymore.
When the pre-k payments stop, I would recommend not thinking of that as money that goes into the regular ‘pool’. Isolate that $614 as soon as it’s in your account and transfer that immediately to your debt each month. Can’t spend if it’s not there and will avoid any lifestyle creep.
Do the same thing with the $500 that’s been going to Roth IRA and the $200 in your kids savings. 614 + 700 = another $1314 you can put towards debt each month. Once again, transfer this to debt ASAP – do not think of this money as going to the normal ‘pile’. You’re giving your wife 1800 – see if she can get creative and work with 1500 or 1600. If possible, you could get to a point where you’re adding another 1500 a month to get out of debt.
You are in a lot of debt. You didn’t even mention the total amount of student, car, and mortgage debt. Don’t sell the wife’s car. You need a van for 3 kids and interest rate is low. Keep it well maintained and drive it into the ground.
Good luck! 👍
There are two simultaneous things you have to do:
1. Get your cost of debt to zero or as close to zero as possible as soon as humanly possible.
I read about half your debt is at 0%, but that means that the other half is probably costing an average of 20%. That’s $12k/ year in interest. Open one or more BT cards if you have to. If you still have good credit you should be able to get most if not all your cost of debt to zero.
2. Drop all other savings/investments/private school payments to 0 and put every penny towards the debt. The bonus, tax refund, every discretionary dollar possible.
Between your minimums ($4k), reallocated investments ($1.3k) and discretionary comp ($1k) that’s $6.3k/month toward debt. Add your bonus ($10k) and tax refund ($8k) you’re at $93.k total debt payoff in the next year. Add in your post-raise net take home of $30k and you could literally do this in a year.
Start with highest cost of debt cards first. Then go to zero cost of debt expiring first.
And don’t ever use the credit cards again.
Your wife should probably look into any opportunities to generate income. I cannot overstate how severe this situation is – you two ought to be in an “all hands on deck the ship is burning” mindset. She simply cannot afford to be a SAHM. Similarly you should also look into any and all opportunities to generate extra income. You have a deep hole – you need a big shovel.
Call the credit card company. Sometimes they will provide a 0%interest for some time. Or at least get a reduction in interest..
With 120k in cc anything helps.
Btw i get you.. currently im paying off about 45k in cc.. now I still have 27k.
I agree with what others have said—get rid of Roth and kids savings contributions.
And if you’re contributing above a match to a 401k, cut that back too. Same reasoning as the Roth IRA. You’ll benefit more from paying off your high interest faster.
I highly recommend that you try out YNAB. It’s helped me stick to a budget and account for true expenses. It also has some helpful debt payoff tools. They have a free trial, but I think the subscription is absolutely worth it.
Ohh my, that unsecured debt is bewildering. First step is to accept this is a real crisis, and face it head on. Don’t “kid glove” it with yourself or try and rationalize it. 120k in unsecured debt at a high APR is a serious predicament. It sounds like you have an income to support getting out of it over a course of years. But you will have to make some deep, immediate cuts to your lifestyle to make any progress.
Stop using the cards.
Drop private school, Roth, and kid’s savings for now. Throw every penny from them toward the credit cards, along with the extra $1000/mo you say you can pay.
That’ll be $2314/mo extra toward the cards. (120000 -8000 tax refund -7000 bonus)/2314 = 45 months to having them all paid off, less if you get more bonuses.
Also, change your tax withholding at work. If you’re getting $8k back, you could be throwing most of that toward the cards over the course of the year. Change your withholding to reduce what you’re paying in taxes by $400/mo. Throw that $400 at the cards, too. It’ll bring you down to 38 months. That’s a lot of interest savings.
4 years of the ROTH won’t have nearly as much impact on you financially as getting rid of those cards.
*The following applies ONLY IF you are not going to use the cards for anything other than the transferred balance. If you think you’ll use them to make purchases, don’t get any new cards:*
In 3 – 6 months, once your balances have dropped significantly get a card with 0% interest on balance transfers, and transfer your highest interest rate card’s balance to it. Keep paying the same amount toward that new card that you paid on the one whose balance you transferred. It’ll get paid off that much faster, since it’ll be all principal. Repeat once every 6 months with the other cards. Get cards with the longest 0% window possible, preferably with no or very low transfer fee.
There are a few options that I didn’t see mentioned, you can call all your CC companies and negotiate lower interest rates and payment options. Also, look into a credit counseling organization at http://www.nfcc.org. These are non profit organizations that will negotiate lower rates and possibly reduce the amount owed for each card. The short term downside is your credit may take a hit for a year or two but if you don’t need a loan and it gets you out of debt sooner and cheaper, it could be worth it.
Bankruptcy isn’t an option as you can make your payments and you make too much to file chapter 7. You’d have to file chapter 13 and still have payments and ruined credit for a few years.
Once you have all the debt taken care of, build up a 6 month emergency fund, then resume investing as much as possible. The emergency fund will keep you from having to use your cards again.
You’ve gotta be able to get some 0% balance transfer offers and put as much as you can on those. Or get a personal loan at a lower rate. Or cash out refi, yeah interest rates suck but 7% beats the shit out of 27%.
Stop the Roth IRA, stop the kids’ savings accounts (nice thought, but nicer would be saving for your retirement so they aren’t supporting you in your old age, and you can’t do that with this much cc debt). Pick one subscription a month and rotate them, or just watch less TV and start using the library.
At this point. Can’t you just call them and negotiate? Tell them I am becoming insolvent and cut them a deal? They would have to sell it to collectors for pennies on the dollar.
Its gonna be cheaper to start from scratch.
$4000 on minimum payments is absurd.
That 1800 spend you need to scrutinize the hell out of it. Are you buying Pampers or target brand up and up when they have the gift card deals? You need to get frugal as fuck. Ever single penny saved goes towards saving you nearly 2 in debt. And yeah stop the Roth and kids savings.
Are you sure 12.5k is you after tax take home? The math doesn’t seem accurate based off 182k income
Someone else mentioned calling your cards and trying to negotiate 0% on some of them, definitely do that on the high balance high interest ones. I just did it last year on one of mine. Once the 0% ends they’ll start charging whatever ridiculous rate at the entire balance, but with the rest of your plans you should be in a good spot by then.
Snowball and avalanche methods are the two most frequent. See what 0% you can get, open up excel and figure out how to get them all cleared while spending the least amount on interest.
For the selling of stuff, someone mentioned that Memorial Day is a big time for yard sales, so keep that in mind and start trying to gather stuff up and get organized. It’s almost 2 months away.
And yes, assuming the kids are all young, stop the Roth and kids savings for the time being. In a year or 18 months you’ll be able to backfill those accounts with all this money you won’t be spending on the cards anymore.
You got this!!
With the kids being home schooled soon, is there a reason the wife needs a car? Its eating up 515 a month. It will suck in the short term but that extra money too throw at the debt is enormous if that gets freed up, Also on the days she might need to run errands she can drop you off and pick you up from work.
I agree with cutting up the credit cards.
I would also suggest the snowball method for the credit cards. List out all your cards smallest balance to highest. Pay minimums on all except the smallest balance, smallest balance one throw everything you can at it until paid off. Once paid off move to the next smallest balance one, keep doing that until they are all paid off
Also can you pick up extra hours or work some over time
You dont have to tell your work why but easiest way to bring in some extra income
Also for items like shampoo, body wash, detergent etc or staples like bread consider the dollar store to reduce expenses
Something that just occurred to me is wife gets rid of car and an emergency happens and she needs the car to go to the hospital do you all have family close by to help in that situation if car is gone
Just file for bankruptcy and pocket the 120k
You already have a house…. pretty sure you can live off cash with a 180k income for the next 5ish years while credit fixes
Minimum payments to lower rate cards,Amex hammer this down.
Have you considered trying to shift some of this debt to lower rate card.
Also be mindful of the 0% thing some cards it’s only for purchases / transfers made within 60 days of opening card, you also fail to make the minimum payment it reverts to standard rate
In reality you have two real options.
Shift balances to a lower rate cards and/or Generate an extra income.
The more nuclear option (which is what i did)
Stop paying all cards at ONCE, (The quicker you do it the better it will be and you have to treat all creditors fairly) remember this is unsecured debt it will hurt your credit rating but your aim is to no longer be tied down by credit/debt so it doesn’t really matter if another lender won’t lend.
The balances will be sold to collectors, meaning interest usually stops and if you ignore them long enough this is where the debt settlement offers come in usually with a very meaty discount! They buy these debts for $ on the hundreds The money you saved on monthly payments will meet this.
All this talk about cutting grocery bills, stop paying children’s savings is neither here nor there all it is doing is putting extra burden on your family by making them suffer to service debt and interest! You need that interest to stop the only way that will happen is by defaulting on payments and the creditor selling off,or moving to 0% cards lower cards (under no circumstances any new spending you want those shackles off)
Your future transactions should be cash/debit only make a note of account/card numbers then destroy all credit cards to remove temptation.
Being credit cards, they are an unsecured debt do not and i mean DO NOT ever take out a loan secured on your home to pay off an unsecured debt, this would be putting yours and your family’s roof over their head at risk, its stupid advice often dished out by creditors those with a financial interest!!!
Your creditors will make all kind of threats, that’s all they are remember it’s all UNSECURED, that great rating on your credit score you’re paying 4k a month for that 🙂 and in 6/7 years time will be back to normal.
What have you been buying with your credit cards? Your budget categories could be extremely underreported for incurring this much debt.
You need to slash spending and send every extra dollar you have at the debt. Cut up the cards so you’re not tempted to use them until your financial habits have improved. Do NOT apply for loans or incur more debt.
This amount of debt is an emergency. Your family needs to drastically drop its standard of living until this mess is cleaned up. No going out to eat. No vacations. Way scaled back Christmases and birthdays. The good news is that you recognize this is a problem, you want to change, and you have a high income that can help you break these chains. It’s going to come down to discipline and cutting spending.
Are you ever able to take vacations or have hobbies, or does this debt and payment schedule pretty much take all you have?
How is 120k in cc debt possible? What was that spent on?
You could live like one of us for one year and pay it off in full, I reckon
You’ll be able to recoup $3100/mo if you get rid of the wife and kids.
Pure curiosity, what were you spending so enormously on if it wasn’t a car or the mortgage..?
Public school and your wife gets a job until debt is gone.
How are you able to drop your PMI insurance? I’ve been told that requires refinancing out of the original mortgage, but you’d lose whatever the original rate was if it was lower.