Debt

[William33 110]

Gupt,

Almost time to buy that new PT Cruiser!!!

We have a mortgage and a car loan ... that's it. I'm going to pay off the car loan in the next 6 months.

[w¡n9Nµ7 §£@¥€r 123]

Actually, yeah. My car has been giving me 'trouble' lately so I'm anticipating having to make another auto purchase in the next year or two. Thus the rush in paying off my current car loan. With property taxes increasing approx 5% every year, I want to keep my other expenses as flat as possible.

[William33 110]

I hear you, and not to sound "Un-American", you need a Japanese engineered car. It will outlast the loan. This is an irrefutable fact. I have been there and done that, with domestic models.

Actually, yeah. My car has been giving me 'trouble' lately so I'm anticipating having to make another auto purchase in the next year or two. Thus the rush in paying off my current car loan. With property taxes increasing approx 5% every year, I want to keep my other expenses as flat as possible.

[w¡n9Nµ7 §£@¥€r 123]

My current car is a Honda. Have had issues with it early on. My wife drives a Korean (that's the one with the outstanding lien) and so far it has served us well (better than the Honda did when it was its age). I am inclined to buy Korean again. Absolutely do not intend to buy American, the only nice American cars cost a lot, the affordable cars are all trash.

[babybunny 2]

I will proble be in forever doo doo dog debit.. coz, of my STUDENT LOANS..

[William33 110]

I am suprised to hear that a Honda has not served you well. However, you did not state the age and mileage of the vehicle. All cars have issues over time, as you know. Is there something we should know? Premature failure?

My current car is a Honda. Have had issues with it early on. My wife drives a Korean (that's the one with the outstanding lien) and so far it has served us well (better than the Honda did when it was its age). I am inclined to buy Korean again. Absolutely do not intend to buy American, the only nice American cars cost a lot, the affordable cars are all trash.

[w¡n9Nµ7 §£@¥€r 123]

My accord is a 2000, close to 96,000 miles on it. The drivers power seat broke and became wobbly, then a big fat mechanic sat on it and totally hosed it. I got him to fix it gratis but the 'real' fix would be to replace the entire assembly, over 2 grand. The fix in place now will break again the next time a 400 lb person sits on it. Good thing I haven't gained any mroe weight.

[babybunny 2]

I have a ford explorer its nice.. he does right by me..my car is a "HE"

[William33 110]

Good one.

Other than that item, have you had any other issues? I am more than convinced that a Japanese auto is the best on the market. Having owned many American autos, a BMW and a Saab, I am now convinced that Japanese cars rock. I have an Acura TL, the best car I have ever owned. I lived in Japan for three years, they can build a good car, among other things.

My accord is a 2000, close to 96,000 miles on it. The drivers power seat broke and became wobbly, then a big fat mechanic sat on it and totally hosed it. I got him to fix it gratis but the 'real' fix would be to replace the entire assembly, over 2 grand. The fix in place now will break again the next time a 400 lb person sits on it. Good thing I haven't gained any mroe weight.

[w¡n9Nµ7 §£@¥€r 123]

Good one.

Other than that item, have you had any other issues? I am more than convinced that a Japanese auto is the best on the market. Having owned many American autos, a BMW and a Saab, I am now convinced that Japanese cars rock. I have an Acura TL, the best car I have ever owned. I lived in Japan for three years, they can build a good car, among other things.

My accord is a 2000, close to 96,000 miles on it. The drivers power seat broke and became wobbly, then a big fat mechanic sat on it and totally hosed it. I got him to fix it gratis but the 'real' fix would be to replace the entire assembly, over 2 grand. The fix in place now will break again the next time a 400 lb person sits on it. Good thing I haven't gained any mroe weight.

The transmission crapped out early but they warrantied that. Around 50000 miles or so.

[TracyTN 237]

Addy, this may be a bad question but could you maybe sell some of what you bought on Ebay and put that towards your debt? That might get you started while you find work.

[Mr. Big Dog 10,747]

The Dave Ramsey method works. Take your bank account down to zero every month. Basically, you get paid. You pay all payments (house, car, utilities etc) etc for CC and loans. After you have paid all the basic payments, take out your living expenses in the form of cash and then what ever is left pay CC and loans. Pay all the minimums on the higher balance cards first and then pay the most on whatever card has the lowest balance. Then it just snowballs. You pay off the small stuff and then work on the goliath debt last. It is the only way.

Two things:

1) It would seem to make much more sense to contribute the most towards those cards with the highest interst rate rather than towards those with the smallest balance. You need to get rid of balances on which you pay interest out the ####### first. Makes for a bigger snowball forming faster.

2) One can use credit cards for added benefits (example, my CC picks up the $500.00 deductible I have on my car insurance whenever I use it to pay for a rental saving me the cost of purchasing the insurance from the rental company) without sliding into debt. Just make sure to use it in a responsible fashion and w/o additional cost - i.e. you pay the bill in full when it is due and refrain from using the CC if you can't do that. In short, it's not the use of a CC per se that gets folks introuble, it's spending money you don't have.

My $0.02...

[almaty 19]

By George Mannes, Money Magazine senior writer

January 17 2007: 8:47 AM EST

NEW YORK (Money Magazine) -- Until last fall, Jessica Jaquez-Trejo and Willy Trejo seemed to be living an idyllic life. The El Paso couple had good jobs - Jessica, 30, teaches reading at an elementary school; Willy, 32, is a product engineer - and together earned a comfortable $90,000 a year.

They'd recently bought a three-bedroom home near their extended family. Best of all, two years after a doctor told Jessica that she would never be able to have children, the couple were preparing to celebrate their son Willito's first birthday.

Jessica Jaquez-Trejo and Willy Trejo have paid off the plastic and are making progress on other loans.

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Young and nearly retired - the next phase

So it came as a shock to Jessica when Willy, who handled their finances, told her they couldn't afford the $500 party she was planning. Says Jessica: "I thought he was just being cheap."

In fact, he was being realistic.

Only three years earlier the couple had been nearly free of debt, but now they were drowning in it. In addition to the $76,000 they owed on their mortgage and the $30,000 in loans for their two cars, they owed $19,000 on eight maxed-out credit cards and another $9,000 in student and personal loans.

And things were getting worse.

Struggling to pay even the minimums,Willy was late on a Visa bill; his already high interest rate of 18 percent was jacked up to 32 percent as a penalty. In the end, Willy reluctantly agreed to a scaled-down party for Willito.

But the following week, when Jessica needed money to buy shoes for the baby, Willy, upset, told her that they didn't have any. "Put a balloon on his feet for socks," he said, "and cake on his chest for a shirt."

There they were, earning nearly six figures but unable to spare $20 for baby clothes. The debt is "really overwhelming," says Willy. "I feel like I'm carrying a very big load."

35 most outrageous fees - and how to avoid them

It's a burden more and more Americans share. Since 1990, average credit-card debt has more than doubled, to $9,159, according to CardTrak.com. And it's not just young couples like the Trejos, buying their first homes and starting a family, who are in over their heads.

The amount owed by people of retirement age has nearly doubled over the past few years as well. Blame easier access to credit, sure, but also today's "I want what he's got, gotta have it now" mentality.

There's no shortage of repayment plans, but you'll never dig out unless you also change the attitude toward money that contributed to your getting into debt in the first place.

These strategies should help.

Admit that you're the problem

Sometimes the reason you piled up debt is big, obvious and out of your control, such as a medical emergency or a layoff. But often it's a series of smaller expenses that seem like reasonable indulgences at the time but eventually add up to trouble.

The Trejos, for example, charged the furniture for their new home. Then there was the trip they took to Phoenix in 2005. And the takeout food or restaurant meals (nothing fancy, mind you) that they eat a few times a week.

Suddenly they were nearly $20,000 in the hole. "Little things got out of hand," says Jessica.

The bottom line: It's probably not your luck that's at fault, it's your Disneyland ideas about the lifestyle you can afford. "People are still trying to keep up with the Joneses, but they don't know how much in debt the Joneses are," says Gail Cunningham of Consumer Credit Counseling Service of Greater Dallas.

Play tricks on yourself

The next step, of course, is to stop the behavior that got you into trouble. Don't count on your willpower. Take the credit cards out of your wallet and lock them in a drawer to create a physical barrier between you and spending.

That way you create a cooling-off period during which you may decide that your must-have purchase is something you can live without. For big purchases, save money in labeled envelopes and delay buying until you have the cash required.

Make success simple®

Once you've put a brake on going further into debt, start making a dent in the amount you already owe. You're far more likely to make steady progress if you have a specific game plan to follow, rather than, again, just relying on willpower.

The best strategy, if there's a wide spread in the interest rates on your debts: Pay off your highest-rate debt first, making the maximum monthly payment you can afford on that card and paying the minimum required on the rest.

As the interest buildup on that card goes down, you'll automatically start paying down principal faster. Repeat the process with the next highest rate card and so on.

If the rate spread among your loans isn't big, pay off your smallest debt instead. The results feel more meaningful, and you'll get a psychological boost from paying off a card completely. "It encourages good behavior," says financial planner Scott Cole in Birmingham.

Beware the easy out

To save on interest charges, the Trejos paid off all their cards last December with an 8.39 percent home-equity loan of $32,000. But while the strategy looks good in theory and is working for them so far, you want to be cautious about using low-rate home-equity financing to pay off plastic.

Lower finance charges won't solve your debt problems if you don't also change your behavior. And unlike credit-card debt, home-equity debt puts your house at risk.

If you backslide on credit-card repayment, you'll end up worse off than before, owing money on both your cards and your home.

Get help if needed

Rather than fight the battle alone, get help from a credit counselor, who can provide a firm hand on your shoulder, guiding you, devising a repayment plan and maybe negotiating lower rates with creditors.

To find a legitimate agency, contact the Association of Independent Consumer Credit Counseling Agencies (aiccca.org) or the National Foundation for Credit Counseling (www.nfcc.org) and steer clear of up-front charges of more than $75.

Think outside the debt

Finally, as bad as your debt may be, don't use it as an excuse to ignore the rest of your financial life. Set a little money aside for an emergency fund so the next time life knocks you for a loop, you won't start borrowing again to recover.

Put a token $25 a paycheck into your 401(k) to get in the habit of saving. Willy and Jessica are, in fact, contributing to their retirement plans and setting money aside for emergencies (adding to the $9,000 they have left from their home-equity loan after paying off their cards and personal loan).

They've cut up all their credit cards but one, which is tucked away in a drawer. The tension over the birthday party has given way to new optimism about their finances.

"We're talking every day about expenses," says Jessica. "I think our future looks much better."

[Traviesa 0]

I managed to get myself into serious debt. Credit cards alone are like $15,000. I had to make the decision to sacrifice something, and I decided it was going to be my privacy and way of life. That's why at the end of February (when my lease is up) I'm moving out of the apartment and into my grandma's basement. That will give me about $800 extra per month to use and I set up a spreadsheet with a plan that takes me into August, 2008 during which time I will pay off my 3 major CCs, the 3 store CCs, and my car, plus will have saved a couple thousand dollars, and taken 2 trips to Mexico.

[bebop + rocksteady 0]

Even though I have a relatively low amount of debt (~10,000 including car loan and student loans), I've put myself on a debt diet. I spent a day figuring out how much I could afford to pay towards each of my debt accounts (above the minimum balance). Then, I created calendars for each month, it has listed all my debt accounts ,and the mount I've been allotted to pay. Also, for each month, there is a space for a reward. Craig and I fill in the reward with something silly and small that we want (say, new paint for the living room), and if we pay all the amounts we alloted, then we get to buy ourselves the reward. On the months where a debt account get's paid off (or is supposed to), the reward is larger. The calendars hang in the kitchen so everyone can see.

Sure, we're spending money on rewards which could be put towards debt, but we feel like we need to give ourselves incentives for it to ever work. So far, it's been great.

Cass (bebop the great)

Edited January 18, 2007 by bebop + rocksteady