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Confounding Factor fucked around with this message at 16:06 on Feb 8, 2017 |
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Oct 8, 2016 21:11
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You've taken some great steps at this point and your financial situation is stable and moving in the right direction - focus on that instead of wasting so much energy on feeling bad about the past. You are doing well with expenses and you have the right idea to trim that cell phone down as much as you can and ditch the fancy coffee. Couple things jump out at me - one, your income is low and getting more would help a lot. Have you thought about this or looked into options? And, you can have relationships while you're dealing with your finances. Don't let this paralyze you in the social domain, it's perfectly fine and good to have fun and relationships with people at the same time you're managing your own poo poo. Finally, get some cash savings for when stuff breaks. An emergency fund. Take a couple months of your free cash for that instead of paying down cards - it will make a big difference when something goes awry, you'll be able to avoid using the credit cards. Oh, and do you have guitars or computers or poo poo you could sell?
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Oct 8, 2016 21:37
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You should definitely look into getting a better job. At your current income you are looking at 6-7 years to pay this off assuming you can put all $400 into the debt. How much savings do you have built up now? I think bankruptcy might be the way to go. IANAL but a quick Google search shows you are way below the minimum income to file for Chapter 7. Even if you do not qualify for Chapter 7 you can get Chapter 13. I would talk to a lawyer. It looks like you own your car outright so none of your debt is secured. Your student loan is probably non-dischargeable but it should not take long to chip away at that if you can clear everything else. You probably also want to pay off the personal debt for moral reasons but we do not have any data on this. I do find it odd that your personal debt has an interest rate. Is this a loan from a friend or family? Downside of bankruptcy is credit problems in the future but you are nowhere near needing to buy a home on that income and while you will probably want a credit card you should stick to one in the future and pay it off every month. I would talk to a bankruptcy lawyer.
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Oct 8, 2016 22:23
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I agree that bankruptcy might be the way to go with such low income. Start over with a clean slate and DON'T get back into debt. Also let's figure out a way to get you more income - what skills do you have besides "boring office" stuff? Even office managers get paid more than that, so keep applying to other jobs to see if you can hop your way to a pay bump. Getting an emergency fund built up with savings is your first step, before paying off debt. Oh, and stop beating yourself up so much. You made mistakes in your twenties, who doesn't? Now you're owning it, which is great - focus on the future. And you can date, just don't go on expensive dates... think: hiking and picnic lunches instead of dinner and a movie. I helped my husband go through bankruptcy a few months after we met and it was not a big deal, even though he had a similar attitude to you (I believe the phrase he used was "hitching yourself to my poo poo wagon"). As long as you're willing to do what it takes to get back on your feet, you'll be fine. Don't feel depressed, you're on your way out of this mess!
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Oct 9, 2016 00:19
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Does your employer offer a 401k - and if so, do they offer matching? If so - how much?
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Oct 9, 2016 04:31
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I disagree with the others. You should beat yourself up over your mistakes. Many people have not made such mistakes in their 20s, and in any case, it is not reasonable to imply that just because many others have done wrong, it is therefore fine to do wrong. If you do not confront your past, how can you move forward? That being said, I think you have confronted it enough and am very self-aware presently. So, move on. I agree that you should cut the coffee. Consider bringing the coffee powder and brewing it yourself at the office. Or just home brew it and bring it over in a thermos. I agree you should keep your internet. You have so little left, it would be cruel to cut out the little you have when things aren't quite that desperate yet. No comments on the bankruptcy since I do not understand the laws on this. But if you do decide to pay off your debt, certainly do not do the snowball method. You need to pay off the highest interest loans first. Snowball method is to give your motivation when you see the loans being knocked off, but is not interest-efficient. If you still have unused credit for your credit card, I would consider keeping only a very small emergency fund. Reason being that for most emergencies, you can still retort to your credit cards as most companies don't demand actual cash. The high interest from credit card is worth avoiding. That being said, this is a judgement call. Can you take on extra work doing poo poo work? Like the unwanted disliked midnight shifts or overtime? poo poo that nobody likes and you can get comparatively well paid for if you suck it up? IF you can, then do it.
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Oct 9, 2016 05:10
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I can help with the phone part: You likely have a 2-3GB plan with Verizon (a 3GB plan is $65, which after tax is $70ish, so it lines up with your phone payment). So we will say your plan is $65. Personally, with what you have going on, you could lower your bill going to say, cricket, but you would have to okay the balance on your phone. I would ride out the remaining bit so you aren't overwhelmed, when your payment plan is over switch to cricket. Your phone is unlocked so it will work on cricket, which would be $35-40 a month. Only disclaimer is cricket is on ATT, which I assume works in southwest Pennsylvania. I've driven through the turnpike through PA and remember it working decently, but I don't live in your area. FYI if you are on a 3GB plan, they launched a new 2GB plan for $55, so you could save $10 or more if you can stay under 2GB. Also check and see if you get a discount through work.
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Oct 9, 2016 13:24
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You're in way over your head and most of your debt is credit card debt, so bankruptcy sounds like the way to go for me if you're confident you won't just immediately go back to old bad habits.quote:They were helpful in that besides pointing out a few things I overlooked per month (like laundry) they also suggested I take a look at annual expenses as well, like new shoes and put aside money each month to cover it. The reasons I didn't do that for this budget is because I already have enough clothes and shoes that should last me a long time as I always keep them in excellent condition.
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Oct 9, 2016 19:08
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Don't bother cutting out the coffee, it's a completely negligible expense. Bankruptcy is pretty much your only option here, other than getting a raise. Have you tried looking for other, higher paying work? Only real downside of bankruptcy at this point, is check to see if it triggers any kind of default on your student loans for any cosigners.
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Oct 9, 2016 19:36
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Confounding Factor fucked around with this message at 16:08 on Feb 8, 2017 |
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Oct 10, 2016 00:19
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A job that grosses 42k and makes you happy is nothing to sneeze at. Your instincts are solid there. So, maybe weekend work is the main thing you might consider. I see what you said about that - just let the idea percolate in your mind a bit. It doesn't have to be huge, any little bit helps. Your previous lifestyle was out of line with your income but I think your current lifestyle is not. If you can really get rid of the majority of your debt in three years, you're on the edge of whether you should bother with bankruptcy or not (in my opinion). It would reduce your debt a lot, but it would also reduce your financial flexibility for the following 8 years. Might not have much effect on rental approvals - landlords are going to weigh your previous rental history pretty highly.
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Oct 10, 2016 00:36
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I would prioritize the 401k match before paying extra on your debt. That right there is 100% return on your money that you're leaving on the table. Emergency fund, then 401k, then paying off extra debt. One thing you could do that would help with the depression is volunteering on the weekends. You can build your skillset in different ways, you can always leave if you get bored, and it's a routine. Helping people will make you feel better about yourself. And if you're good at it, it can lead you to part time work or possibly a job that you would like even better, even though you said you're happy right now. It's never a bad idea to keep an eye out for other opportunities that can help you grow. You've been with your employer a long time. When was your last raise? If you're open to expanding your responsibilities (like training new hires), then you might be due for a raise. You said it's a small company, and so it should be easier for you to suss out how doable a raise is. But keep in mind that it's easier to ask for a raise when you've got another better offer to fall back on - read the negotiating thread on tips for how to get more money. I agree that bankruptcy is only an option and you're an edge case. Definitely look into it, but I don't think you absolutely need to - however, if it would make a big deal in your mentality to get out from under that debt load, that might be something to consider as well.
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Oct 10, 2016 01:21
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Building up an emergency fund so that you can pay for "unexpected" expenses such as car maintenance etc, is a priority. One of the most important things you need to do is to stop using your credit cards and only make payments on them. Every card with a limit is floating at the limit and you need to change that. With respect to repayment method I recommend snowball method as your cash flow is tight and each card with a small balance you pay off will free up more money each month. Cards 8 and 11 wouldn't take much to pay off and would free up an extra $46 per month. It will take years to free up substantial cash flow but it is possible. There is another benefit to paying off the cards with small balances; you will have less debts to administer and payment dates to meet which will lower your stress. At this point you have more accounts to manage that what I deal with for my own business. I have stayed away from talking bankruptcy above but I agree that this is an option worth considering given that $670 per month is the minimum payment just for your credit cards. Although you're not in a completely broken situation yet as you still have $400 of savings per month. Devian666 fucked around with this message at 03:43 on Oct 10, 2016 |
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Oct 10, 2016 03:36
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1. You need to stop using credit and switch to debit or cash to break your previous habit of deferring your obligation to repay on spending. 2. I agree that you should build up an emergency fund for car repairs or medical expenses before aggressively attacking the various debts. 3. I think you said you had cable TV & internet. You spent 50 paragraphs understandably justifying your need for internet access, but nothing about TV. Call your provider and downgrade your package to whatever lowest tier internet you can reasonably handle across your weekly needs, with no added TV or phone. 4. I agree with the snowball method in this case rather than the more numerically optimal avalanche method. The reason for that is you are really getting in your own head over the desperation of your debt emergency and how badly your past mistakes have penned you in. Closing out small debts will take away some of the stress of having so many different debts starting you in the face. And because some of your smallest debts have comparable (awful) interest rates to your highest interest debt, then at least for the first couple months of augmented payments there won't be a big difference between the two methods. After that you can consider switching methods. 5. Reconsider how you can make extra money on the weekends like other posters said, or even if there's additional shift or side opportunity within your company while you still keep your usual responsibilities. Obviously that really depends on the company, but repayment at $400 will feel excruciatingly slow, and that assumes zero emergencies come up in ~3 years' time. Something always comes up. If the problem with your weekend routine (which does sounds like depression) is that you don't have a routine, then an additional job would be a good way to add routine and also reap financial benefit. That assumes it won't leave you too tired or frazzled to continue performing well at your day job which you seem to enjoy. By contrast, you said you don't have any friends anymore, and it can be really hard to maintain your composure and discipline without a social outlet. Bear in mind that many activities with friends will lead to spending, so look at things like game nights or pot luck dinners to keep that down. Most cities of reasonable size have lots of free things to do - look at parks and libraries especially. 6. I don't want to minimize your problems, but you should evaluate whether your new budget is truly realistic. Will you be prone to splurges whenever the tension from resisting spending builds to be too high, and it snaps back like a rubber band? Edit: 7. As someone else recommended, get that full 401k match if you can swing it. You mentioned it was up to 4%, but is that dollar for dollar (you withhold 4% and they match), or a different scheme such as 50% matching (you have to withhold 8% and for them to max out the 4% match)? If it were me, I'd limit the withholding to maximize the annual match and wouldn't withhold any more than that or contribute to an IRA until I had all the >20% debts covered at the very least. Maybe someone else can come in with a more mathematically reasoned limit than the 20% number I pulled out of my hat (I was trying to stick to somewhere in the range of marginal tax rates when considering paying off debt vs. making tax-advantaged retirement contributions). SpelledBackwards fucked around with this message at 11:27 on Oct 10, 2016 |
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Oct 10, 2016 05:16
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Practicing mindfulness meditation is a very good no money solution to working on both your finances and depression. It'll give you the tools not to get so down on yourself, and keep you alert to any harmful life and spending practices you may be doing. http://forums.somethingawful.com/showthread.php?threadid=3773224
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Oct 10, 2016 20:12
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If it was me I would work extra odd jobs on the weekend and use that money solely to pay off the credit card debt (Uber, mowing lawns, getting a job at Home Depot, etc). If you can an extra $600 a month in addition to the $400 you are already saving, you could pay off all your high-interest debt in three years. That would be a preferable option. It will be harder than bankruptcy but I think you could develop some great life skills from the experience. That price you paid working 6-7 days a week for a few years means you will be financially solvent the rest of your life because you understand value, costs, budgeting, etc. I know it's not a sexy or easy path but (cliche incoming) nothing worth having ever is.
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Oct 11, 2016 04:16
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I usually agree with BFC's advice, but I find myself disagreeing with a some of things here. I don't think bankruptcy is your best option. Unless you have a major unplanned expense in the next year, you have the ability to get out of this and will be better for it. To add a different perspective, here's what I would do in the next 12 months: Month 1 - Eliminate coffee expense. (+$20/month) - Cancel phone or internet/cable. (+$80/month) - Why do you have car insurance and a transit plan? Can one be reduced or eliminated? - Get a part time job. Available cash = $400 + $100 = $500/month Emergency fund = $0 + $500 = $500 Reasoning: - Some have said the coffee is negligible, but the amount you spend on it is roughly equivalent to five of your minimum card payment amounts that are nickel and diming you to death. Every little bit counts, and it all adds up. - You don't NEED the internet. If you're 30, it hasn't even existed for half of your life. That said, if you WANT the internet, fine. But consider that if you only use your phone to make calls/texts and have wifi at work, your 6GB cell plan is redundant with your internet. You could get a dumb phone for around $10/month. You could cancel your internet and use your phone as a hot spot with the 6GB. It seems like keeping your internet and downgrading your phone would be more appealing to you. Either way, you should be able to save a good chunk of money without really affecting your lifestyle. - Don't worry about job skills. Think about jobs that high school/college kids go for...retail, food service, pizza delivery, etc. It's not going to be glamorous, but if you can work 1-2 nights during the week and 1-2 shifts on the weekend (don't do too much and burn yourself out), you should be able to get at least an extra $300/month after tax. This is huge for your budget. Plus, this will force you to get out and interact with people. That may not sound desirable, but it is better than being depressed at home. Month 2 - Part time job income. (+$300/month) Available cash = $500 + $300 = $800/month Emergency fund = $500 + $500 = $1000 Pay off Card #11 ($300...I'm rounding numbers here) Reasoning: - Yes a 401k match is "free money", but it's money you can only (reasonably) access in the future, and you need the cash now. You can't afford to divert your income just yet. - Normally I don't like the "debt snowball", but in this case you need to free up some cash flow. The quickest way to do that is to knock out some small minimum payments. I think this is important because it is another hedge against emergencies. For example, if you were to spend $3,000 to reduce Card #6, your monthly minimum payments don't change. If you were instead to use $2,650 to eliminate Card #s 3, 4, 8 and 11, you reduce your monthly minimum payments by almost $100. Therefore, you could now absorb a $100 unexpected bill without missing a minimum payment. I'm not saying it should be a habit, but the ability to redirect funds if absolutely necessary makes me feel more secure. Month 3 - Card #11 was paid off. (+$20/month) Available cash = $800 + $20 = $820/month Emergency fund = $1000 (no change) Pay off Card #8 ($330) Pay down Card #3 (remaining balance = $510) Month 4 - Card #8 was paid off. (+$26/month) Available cash = $820 + $26 ~= $845/month Emergency fund = $1000 (no change) Pay off Card #3 ($510) Pay down Card #4 (remaining balance = $665) Month 5 - Card #3 was paid off (+$28/month) Available cash = $845 + $28 ~= $870/month Emergency fund = $1000 (no change) Pay off Card #4 ($665) Pay down Card #2 (remaining balance = $1575) Month 6 - Card #4 was paid off (+$21/month) Available cash = $870 + $21 ~= $890/month Emergency fund = $1000 (no change) Pay down Card #2 (remaining balance = $685) Month 7 Available cash = $890/month Emergency fund = $1000 (no change) Pay off Card #2 ($685) Pay down Card #5 (remaining balance = $1730) Month 8 - Card #2 was paid off (+$53/month) Available cash = $890 + $53 ~= $940/month Emergency fund = $1000 (no change) Pay down Card #5 (remaining balance = $790) Month 9 Available cash = $940/month Emergency fund = $1000 (no change) Pay off Card #5 ($790) Pay down Card #10 (remaining balance = $2015) Month 10 - Card #5 was paid off (+$58/month) Available cash = $940 + $58 ~= $1000/month Emergency fund = $1000 (no change) Pay down Card #10 (remaining balance = $1015) Month 11 Available cash = $1000/month Emergency fund = $1000 (no change) Pay off Card #10 ($1015...find the extra $15) Month 12 - Card #10 was paid off (+$40/month) Available cash = $1000 + $40 = $1040/month Emergency fund = $1000 (no change) ??? Profit!!! I've obviously rounded numbers and made some simplifying assumptions about life and interest rates, but I also didn't account for the fact that you could get a raise or $300/month from a part time job is super conservative, so I think it all evens out. There may be some math errors, but I hope you get the idea. At this point you would have paid off roughly $8,500 of your debt. If you continue the same process for less than 3 more years, you could be debt free with a pristine credit score (as opposed to bankruptcy nuking your credit for 7 years). If you wanted, after the third year (of four total), you could probably afford to scale back and take advantage of your 401k match or other retirement investing. At that point it would just depend on whether you care more about sprinting to the finish or slowing your payments a little to start to take advantage of the future potential of your money. Just my (very long) $0.02.
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Oct 11, 2016 04:56
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I am assuming this is pittsburgh. You might want to look at getting a roommate. Depending on your neighborhood, 600/month for a 2 bedroom isnt unheard of.
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Oct 11, 2016 05:33
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It can be done! This was me in June 2015. Mostly car and student loans. Debt would have dropped quicker, but I started charging things instead of using cash.  Granted, I began living at home again last year, so that is $685 extra a month to work with, but I started out with 20k more than you have now. I work two jobs to make about $3,800 a month ($2,800 FT plus some OT/ $1,000 PT) e: After taxes. What's killing you is that interest compounding. While you could dig yourself out as I did with some more money coming in, the balances aren't going to come down as quickly. To make a case for bankruptcy, look at it this way- it ruins your credit for seven years to ten years, but it's not like in either scenario you were going to be buying a house or a car any time soon. I suppose the consequence is in certain situations you will be asked if you ever filed for bankruptcy, and that will cause a rejection, but I don't know enough about that to say. So it's either a real uphill battle that will take years, or a giant black mark on your credit. In your case, I would consider the black mark, and take the next few years to fix everything else. Once the bankruptcy is off your report, you should hopefully be much better off. If there is any piece of advice in this thread that can help you the most, it's please don't start driving for Uber. I'd deliver pizza before I went that route. Moneyball fucked around with this message at 19:58 on Oct 11, 2016 |
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Oct 11, 2016 06:12
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RogueLemming posted:- You don't NEED the internet. If you're 30, it hasn't even existed for half of your life. I realize this is an unimportant detail, but haha what? Even SA has been around for more than 15 years now, startling as that is.
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Oct 11, 2016 17:03
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You need some form of entertainment, and a modestly priced internet connection allows you to connect with the world effectively. Confounding Factor sounds pretty depressed so he needs something to keep him engaged with life. He says "Well if the internet access is taken away I fear I'm going to spiral too deep in a depression, it's the only thing I have to look forward to when I get home" and I think it's probably a fair assessment. However, internet used too much can also be depressing and sap your energy. Free active, creative entertainment, like walking or sketching or playing music would probably help him get out of the dumps and with more energy to make a bit of spare cash to dig out of his debt hole.
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Oct 11, 2016 17:28
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That is a lot of credits cards. Part time job or better job to get your income up, or file that debt away and start fresh. Do not live like a monk else you actually want to be a monk.
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Oct 11, 2016 19:21
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He's making well over median individual income, close to median household income, at a job he's happy in and with a cheap as hell apartment. He can declare BK and move on with his life like any sane person would do. Yes, it'd slow down buying a house and make it more difficult to buy another car, but it doesn't appear those are concerns he has.
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Oct 11, 2016 19:49
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It's very rare for me to think this, but bankruptcy may be your best option here.
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Oct 11, 2016 22:11
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Kirios posted:It's very rare for me to think this, but bankruptcy may be your best option here. My only other opinion is this could very well be the case, but this is definitely a scenario where OP should likely consult a professional (aka Lawyer) vs just internet advice. Internet advice on timeframe to get out of debt is one thing. Bankruptcy, while def not a bad option, is probably an option that just needs to be looked at by a professional.
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Oct 11, 2016 22:47
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Confounding Factor fucked around with this message at 16:07 on Feb 8, 2017 |
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Oct 12, 2016 00:34
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Just FYI if your phone is Verizon it's already unlocked. Def wait to for whenever you are able to pay it off, but at that point you can take it wherever.
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Oct 12, 2016 00:54
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Duckman2008 posted:Just FYI if your phone is Verizon it's already unlocked. Def wait to for whenever you are able to pay it off, but at that point you can take it wherever. Oh really? Even if I got a Verizon exlusive phone (Droid Turbo)? I just need to find a carrier that does CDMA or no? But that's awesome I can take it wherever, I thought I had to get them to unlock it for me after I got it paid off.
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Oct 12, 2016 00:59
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Confounding Factor posted:Ok I wanted to ask you what is realistic for an emergency fund? How much should I have in there? Obviously building up 6 months worth of expenses with putting $400/mo in savings is going to take like a year and a half, and who knows what emergencies would come up then. Six months of expenses is the ideal to allow for job loss and finding another job. This is a luxury that you cannot afford at this time due to debt servicing cash flow. Build up $1k to $2k. Once you have $1k at least you can cover the car expenses you haven't budgeted for, etc. Spending a few months building that up is fine and will remove your dependence on your credit cards for "emergency" expenses. If I was in your position I would save $1k then switch to paying off those low balance credit cards. For unexpected expenses that will require you to resave your emergency fund, well that's just a part of this process. It starts out really slow at first, but at least you will have an emergency fund and can meet the minimum payments at all times. Don't forget that the minimum payments will slowly reduce while you are saving your emergency fund as the credit card balances will be slowly reducing. The reduction in total minimum payments will only be in the order of a few dollars per month but you need every spare dollar. So remember that you will always be making progress provided you don't ever spend on your credit cards. It's not usual to feel like your only purpose in life is to be a debt slave but that feeling is made worse by crushing debt with high interest rates. What we are doing with our advice reverses that and once your debts are eliminated you can use your savings to invest and have some financial security.
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Oct 12, 2016 01:10
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Confounding Factor posted:Regarding a second job or finding an increase in income. I remembered a conversation I had with a co-worker awhile ago who has a sister that started up some catering side thing and she was looking for extra help on the weekend. I asked her about it today and I could potentially get an extra $200 a month but its not steady because a lot of the events they do are weddings which normally occur in the summer, and a few Christmas parties where I could make more. It sounds decent but maybe I should go after a retail weekend gig. I told her I'll think about it because in my mind I was leaning towards filing for bankruptcy. quote:I was reviewing the Bankruptcy thread in BFC but I wasn't sure if the OP was still active or not. Are there any laywer aggregate sites like a Yelp for lawyers? I just have no idea what I should be looking for in a good attorney that could represent my case (or who would even take it on in the first place). http://www.palawhelp.org/resource/a-guide-to-bankruptcy?ref=whj5P http://www.palegalaid.net/resources/clients Most bankruptcy lawyers offer a free consultation so there's no harm in calling a few and seeing what you can get. A flat fee for preparation is better than hourly.
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Oct 12, 2016 03:10
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I'd have to disagree with the people advocating an emergency fund. Yeah, that is a good step in Personal Finance 101 but paying down credit card debt is easily more important. Reducing the principal by a few thousand dollars is going to be much more valuable than setting aside some "just in case" money. Your one and only focus right now should be to reduce the $6,000 in interest you are paying annually.
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Oct 12, 2016 03:39
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A cash emergency fund is the only way to avoid running your expensive credit cards back up when you have a critical and unexpected expense. And that's assuming your bank doesn't cut you off, which is a thing that happens.
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Oct 12, 2016 03:41
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With the money from that emergency fund, he could pay down his cards even more. Putting aside bankruptcy, paying down the cards is always better than having an emergency fund assuming that the credit card interest is higher than the savings account which is a pretty drat good assumption. Worst case scenario, you run into an emergency, put more on the card, and still end up better off than if you held some emergency fund in a 1% account I have no idea why you guys are advocating for an emergency fund in this scenario. No way his cards will all of a sudden cut him off while he's paying them off.
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Oct 12, 2016 04:55
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The first step to paying down debt is to not accumulate more debt. Which an emergency fund really helps with.
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Oct 12, 2016 05:13
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potatoducks posted:paying down the cards is always better than having an emergency fund
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Oct 12, 2016 05:20
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sparkmaster posted:The first step to paying down debt is to not accumulate more debt. Which an emergency fund really helps with. No the first step to paying down debt is paying down debt. Paying down a 10k debt to zero, running into a major catastrophe, and having to put 10k back on your card is way better than building up an emergency fund and paying off the 10k from that while leaving the cc debt intact. Sure if you don't have any credit card debt then have an emergency fund. I have one too. It's great. But this guy already has a ton of cc debt. Paying off the cards is mathematically better. Like by a lot. It's not even close. slap me silly posted:I will never understand why people say this. They have had good luck in their own lives, I guess? Credit card expenditures are at the discretion of the bank. Just to make sure I understand, you're not arguing that paying down the card is the better move by the numbers right? Instead, you feel like it's not worth the risk of not being able to access additional credit in an emergency? If not getting my cards denied all the time means that I have good luck, then I guess I do. But I bet that most of the people in this forum also have the same good luck. slap me silly posted:Merchants who don't take credit Who doesn't take credit anymore other than people on craigslist, drug dealers, escorts, and the occasional local diner? Even taco trucks have Square now. slap me silly posted:transactions that get denied You mean temporarily for some fraud alert? How often is this happening? And what is the likelihood that it will happen at the one instant that you desperately need this money? Keep in mind that the person in this scenario is making on time payments to all their cards. He's their best customer, not some deadbeat. slap me silly posted:cards closed by the bank to new charges Ok I guess this could happen. But this guy has a billion cards. They're not gonna all get closed at once.
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Oct 12, 2016 06:26
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potatoducks posted:you're not arguing that paying down the card is the better move by the numbers right? Instead, you feel like it's not worth the risk of not being able to access additional credit in an emergency?
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Oct 12, 2016 06:29
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One thing that you aren't considering is that when you run up new charges on a credit card any payments to that card go towards the interest free portion first. That's how you maximise the interest. An emergency fund of $1k is not a big deal. The big deal is not charging more to the credit cards, not just for interest rate purposes but for behavioural change. Everyone who runs up large sums has an issue with tracking how much money they have available to spend. We haven't even talked about freezing the credit cards into a block of ice. Encouraging continued use of these near maxed out cards is dangerous advice. Especially when there's a risk of running over the limits. If you exceed the credit card limit higher penalty interest rates apply as well as additional charges that push the effective interest rates into loan shark territory. You also shouldn't be discounting the cash flow problems that the OP has. That's what the emergency fund helps to smooth out, especially without having a comprehensive budget.
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Oct 12, 2016 06:35
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potatoducks posted:Who doesn't take credit anymore other than people on craigslist, drug dealers, escorts, and the occasional local diner? Even taco trucks have Square now. I can't pay my gas or electric bill with a credit card. I don't think I would have been able to pay my mortgage with a credit card. I also believe many landlords won't take credit. Also, I wouldn't be able to negotiate a better rate with many contractors by offering them actual cash for jobs (e.g. how about $800 cash instead of $950). Maybe understanding that you still need the ability to essentially write a check sometimes in life is one of those full-blown adult things that you don't really experience until you are one?
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Oct 12, 2016 06:44
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I think the "conventional wisdom" (like Dave Ramsey level stuff) would be to save up around $1000 for an emergency fund before aggressively tackling debt. That seems right to me. It not only establishes a resource for emergencies besides credit, it sets a pattern for saving and discipline that will encourage good habits that can last a lifetime. If you can't learn to save $1000 and keep it for emergencies, you're likely to fall back into bad habits after you pay down your debts and end up right back where you started. The emergency fund seems like a good place to start to me, and shouldn't have a significant impact on the timeline to be debt free.
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Oct 12, 2016 06:45
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