Budgeting and Debt

Question

I am working on getting out debt (luckily it's not too extreme) that I got into when I was in my 20's. I come from a family that did not provide me with the information on credit and how to avoid debt. Has anyone had to dig themselves out of debt once they were older? What were some of the tips and things you did to do so?

Sabrina Combs · Answer

Dave Ramsey series Financial Peace University helped me. The other thing I did after paying off debt was increasing retirement contributions and living off of 75% a month. I put the other 25% in an Ally savings account.

Anonymous · Answer

Without knowing too much about your situation, I'll give you a little background about me and what I did to clear my debt. I had a student loan in excess of $30K, a mortgage, car payment, and credit cards. What I did was work full time during the day and work nights/weekends at a second job. I applied for an interest free for one year credit card and did a balance transfer to save interest. I lived check to check so I had no money to go out with friends for dinners/drinks. I cancelled my gym membership and worked out at school (free if you're alumni); cancelled cable, and got Netflix instead.  The income from my FT job paid my mortgage and utilities, while the income from my PT job paid for my debt. If I could put in extra hours at my PT job, I always did, just to payoff my debt faster.  Some months, I got 3 paychecks from my FT job, so I used that extra check and any bonuses to payoff debt.  I also shopped clearance racks or the Goodwill for clothes and didn't spend too much on expensive skin care or makeup. As a source of entertainment, or free internet, I used my library card to get audio books, or movies. I skipped holiday gift giving, and was boring for a while but it paid off.  I think it took me about 7 years to get out of debt, but it was worth it. There was some breathing room, and I did still make time and money for fun but I was smarter about it. I hope this information helps...

Maggie B · Answer

I graduated college during the recession and used all five years of forbearance on my student loans, and *still* felt like I wasn't financially able to pay them when the time came.  I worked with my student loan company to move my loans to an 'income-based repayment' plan at first (though I hear that's going away).  At the same time, I was also paying off a car and for my own health insurance.
To get to where I'm at now, I took the following steps:
- got on an employer healthcare plan (not always an option, but a huge step for me)
- paid $50 extra on my car
- held off on putting money into retirement and focused on reducing my debt
- opened an Acorns account and started saving my 'round-ups' in an investment account
- once my car was paid off, I increased my student loans by the amount of my car payment (I was paying it anyway - might as well!)
From there, once I was a bit more stable, I got Serious.  I started an Experian account and check my credit score monthly.  My student loans were bought out by another company, and I was able to drop my old late payments from my record because the old student loan company records didn't exist any more.  I opened a balance transfer credit card and paid off my car and my other credit card on it and saved around $500 in interest by doing that.  
The biggest change I made was that I set aside a day every  month to really look at how much I have in the bank, how much I owe, where my money is going, and if there's any additional money I can throw toward additional debt payments.  I also opened a retirement account with Acorns and that's given me a ton of peace of mind because having an account that's not tied to an employer feels very freeing.

Cyndi Peterson Hash · Answer

I accrued quite a bit of credit card debt in my 20s as well and to pay it off I first paid the minimum payment plus the finance charge, then I moved it to a zero percent interest card so it would stop growing, and at the same time I committed to not using credit until it was paid off.

Anonymous · Answer

Reducing interests will def help in the long run - consolidate debts if you can!

Ruzana Glaeser · Answer

Before you can figure out a plan to pay it off, you need to sit down and figure out a budget. What do you need to spend on housing/gas/food/spending money, then see what's left over and make a plan to put all of that towards the debt. Cash system works really well when you are trying to be on the budget. When you are low on cash, you know you can't spend any more and ration.

Any bonus you get from work should go towards the debt repayment. If that's not enough, then you can figure out what are your options to either refinance your debt or add a second job....Not knowing the specifics it's really hard to suggest anything, but you first have to understand and get a handle on your spend!

Budgeting and Debt

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