gutshot said:
So yeah, me and the wife pretty much screwed ourselves by charging for a bunch of stuff the first couple years of our marriage. Even though I'm making more money at my job now then when I first started, the credit card bills are making it so we have next to zero disposable income. Basically I make JUST enough to stay afloat each month, but I know that it is going to take a LONG ass time to pay off the credit cards at the minimum rate each month. Add in to this mix the fact that we are going to have our second kid in Sept. and I'm feeling like I might be in serious financial trouble.
So what is the best thing to do at this point? We've been doing the balance transfer game for a little while now, but that isn't much of a long-term solution. I keep hearing these commercials for debt relief agencies that will broker a settlement with your creditors so that you don't have to pay your full balance. This sounds like a good idea, but there has to be a catch right?
The other option I guess would be to declare bankruptcy. I don't really know how to go about doing that (this reminds me of that Office episode, I DECLARE BANKRUPTCY!!!) What does becoming bankrupt entail? Doesn't it pretty much ruin your credit for the rest of your life?
So I turn to you, FinanceGAF. What should I do?
EDIT: Nice catch DiscoNaldo.
Go buy this book :
First of all, cut up your credit cards. I don't care if you take a dump on them, poor gas on them and light them on fire.... STOP USING THEM!
If you pay your bills with credit cards for skymiles, stop.
if you pay your bills with credit cards for points, stop.
if you pay your bills with credit cards to pay off other credit cards, stop!
The problem with debt is that it roots you. You are now a slave to Chase, Citi Bank, Bank of America,Master Card or Visa because of your purchases however big or however small.
So the question you have to ask yourself is how much debt do you actually have? $15k in credit card debt--- how much in auto loans? student loans?
Ramsey's books and DVD has changed how I treat my money and how I live. Me and my wife didn't live off a budget for the first couple years of our marriage.... (we're at year 3 now) but now we do.
After you've cut up your cards, make sure your debt cards are at the ready as the
ONLY plastic that you
SHOULD be using will be your debt card.
It sounds like you need to start a budget.
Get together all of the bills you have and that you pay on a monthly basis.
Add all of them up. JUST BILLS at first, we'll get to the CC stuff in a bit.
Now if you're working and living off one income, take your
income - bills = total available cash on hand after the bills are paid.
From the sounds it though, your monthly payments are moving up and so is the interest you're probably paying.
By your model, it probably looks something like this:
Income - bills - CC - what I want = $10 bucks left over each month.
If your car payments for one car... or two cars are MORE than $600-700 bucks a month, sell them. You can't afford them. Put them up for sale on Craigslist or Autotrader ASAP and then buy a used car with
CASH and skip the car payments.
So now that we've progressed on and you're starting to get a feeling on what you can and cannot afford, look at it a couple of ways....
Do you need all the crap you bought (meaning TV, electronics, car, stereo etc)? Chances are no. If it's other things such as furniture or a gas BBQ grille that you put on the credit card, sell it! Chances are you couldn't afford ANY of the above things at regular price... what makes you think you could afford it at the regular price + 11% interest?
Re-filter what your priorities are and re-shape what you need vs. what you want.
Lastly,
In true Ramsey fashion; Your credit score is going to suck for a couple years. Get over it and don't cry at night about it. Credit scores are an f'ning joke when people like me pay cash for everything we want. Who cares about credit scores? Its' a lie that the credit card companies lure you into trying to play when really, even when buying a house, if you have 20%+ downpayment, you're not a risk to the lender.
So... if you can ditch any luxuries you have such as High Def cable/Sat. TV/ DVR, XM, Sirius, etc... things that are NOT basic life essentials, then ditch them. Drop to basic cable and get 12 channels a month. I mean really, how much TV do you need? Other bills, as Ramsey has said, don't pay them for a couple months if you cannot pay them.
I'm dead serious about this. If you budget and you can't pay your cell phone bill for 3-6 months, so be it. They won't disconnect you if you eventually pay them $20 bucks or something you CAN pay them when you get a chance, but there are some bills that you just can't pay.
Again, DO NOT WORRY ABOUT YOUR CREDIT SCORE!
Start paying off your lowest credit debt first, then snowball that money you used on that to pay off the other one and then the other and then the other.
I can tell you there is light at the end of the tunnel as we're about 9 months into this process and it's really hard, but right now I'm siting on about $10,000 cash that is going to be going towards a 2010/2011 M3 or Evo depending on which car I want and guess what.... I'm going to pay cash for either car.
It's doable and you can do it, it just requires some restraint and determination to beat the Credit Card companies at their own game.
Best of luck.
VoG
