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Realistic plan
Old 06-12-2018, 04:55 PM   #1
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Realistic plan

Hello Members,

I am looking to draw a realistic plan and stick to it. Renting now , Debt of 15k due to making some questionable decisions. How to attack and get out of this debt ? At least its a blessing in disguise that it came at 35 and not when I am 50.
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Old 06-12-2018, 05:02 PM   #2
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Pay yourself first.... set your savings to come from out of your paycheck if you can so you never see that money... then spend the rest (in this case spending including paying down that $15k of debt).

Slow and steady wins the race.

If you're so inclined, get a copy of Quicken Deluxe or higher. Plan your future with its Lifetime Planner... then use Quicken to monitor your progress.
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Old 06-12-2018, 05:13 PM   #3
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Personally, I would focus on paying off that debt before focusing on saving. The interest you pay on your debt will wipe out any interest you earn on your savings. Of course, it's still wise to have some money set aside for urgent needs or else you'll end up taking on more debt if something comes up in the future.

Set aside as much money as you can each paycheck. Then direct half of that to paying off your debt and the other half into building your savings. Or maybe 60% to debt and 40% to savings, whatever you feel comfortable with.
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Old 06-12-2018, 05:16 PM   #4
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If the debt is credit card debt, you must make more than minimum payment they require. Here's a simple formula for what your true minimum payment should be: Credit card's minimum payment+ interest charged + all new purchases.

I would strongly suggest paying significantly more than this formula, but you need to be certain to pay at least this formula amount.

And, I'd also suggest not using the credit card for new purchases, but that may be impractical. If you can, use a different card for new purchases, but only if you pay that card's monthly bill in full every time.
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Old 06-13-2018, 09:45 AM   #5
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There's rules of thumb of course.

You obviously want to tackle your debt instead of savings, particularly your high interest debt since you likely can't grow your savings at the same rate.



But the plan needs to be based on what type of personality you have. Can you be fanatical about watching your spend and throwing all you have at your debt? Or do you need to be habit driven and automatically have money going to savings and debt repayment?


IMO, it always kind of starts with understanding your cash flow: How much money is coming in and where the money is going so you can figure out where to make adjustments. Cutting out eating out a few times, eliminating or reducing some monthly service (tv bill, gym membership, etc).
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Old 06-15-2018, 08:24 AM   #6
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There's rules of thumb of course.

You obviously want to tackle your debt instead of savings, particularly your high interest debt since you likely can't grow your savings at the same rate.



But the plan needs to be based on what type of personality you have. Can you be fanatical about watching your spend and throwing all you have at your debt? Or do you need to be habit driven and automatically have money going to savings and debt repayment?


IMO, it always kind of starts with understanding your cash flow: How much money is coming in and where the money is going so you can figure out where to make adjustments. Cutting out eating out a few times, eliminating or reducing some monthly service (tv bill, gym membership, etc).
The problem is I cannot stick to a plan. Last year I saved upto 12k , which was enough to wipe my debt. But due to some circumstances, I held on to it and ended up spending it. I thought I could keep it as an emergency fund permenently, but..... Now its around 4k in hand..
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Old 06-15-2018, 08:37 AM   #7
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I had a similar problem when I was young (20s). My solution was to make it inconvenient for me to get that money... in my case a bank a 1/2 hour away that had no branches near where I lived and I refused to get an ATM card for that account.
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Old 06-15-2018, 10:19 AM   #8
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The problem is I cannot stick to a plan. Last year I saved upto 12k , which was enough to wipe my debt. But due to some circumstances, I held on to it and ended up spending it. I thought I could keep it as an emergency fund permenently, but..... Now its around 4k in hand..
Check out Dave Ramsey. His plan is for people like you. Personal Finance is much more mental than financial. You need to get fed up and change your mindset. Good luck!
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Old 06-16-2018, 06:25 AM   #9
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The problem is I cannot stick to a plan. Last year I saved upto 12k , which was enough to wipe my debt. But due to some circumstances, I held on to it and ended up spending it. I thought I could keep it as an emergency fund permenently, but..... Now its around 4k in hand..

All of the suggestions provided are good ones. But if you don't heed any of them then you won't make any headway. I doubt any of us here can force you to "stick to a plan." That has to be done by you. With that disclaimer, I have 2 possible and practical suggestions:
1) Figure out how much you should be paying your credit card debt to get rid of it in a short window (1, 2, or 3 years). Then, don't wait for the credit card bill. Instead, every paycheck electronically pay the credit card company the proportional amount.
2) Simultaneously, set up a small automatic withdrawal for savings. Paying off debt is a priority, but even a small savings withdrawal will add up, and get you into a hopefully permanent habit of saving.
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Old 06-24-2018, 07:05 PM   #10
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As a Dave Ramsey guy, definitely a model situation to benefit from the Baby Steps. Read Total Money Makeover if you havenít already!
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Old 06-24-2018, 08:48 PM   #11
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As a Dave Ramsey guy, definitely a model situation to benefit from the Baby Steps. Read Total Money Makeover if you havenít already!
Uggggh. Dave Ramsey?

Sorry, but I got into a rather extended discussion on another forum. At first, I thought, OK, DR is probably good for someone starting out who needs to be spoon fed. But as we got more and more info from the pro-DR guy, and looked in more depth, the more and more negative we became. It went something like this, over the course a few months:

1) OK, DR is OK for saving and spoon-fed info.

2) Hmmm, he doesn't seem to "teach a man to fish", it's all do this, do that.

3) Hmm, some of his advice is really questionable (all debt is bad, don't use credit cards, ignore those rewards).

4) Wow, some of his advice is just flat out wrong, and uses clearly bad numbers. Numbers that no financial guy should get wrong, or if he did, someone on his staff should have pointed it out.

5) Wow, he seems to be making money through affiliate links based on his bad advice with those wrong numbers. Co-incidence?

Nope, not a fan at all. I'd say steer clear of any/all things DR.

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Old 06-25-2018, 03:57 AM   #12
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Agree to disagree on that.
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Old 06-25-2018, 04:11 AM   #13
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Personally, Dave is not for me. It's likely the same for most folks on this site. However, for the poster, Dave could be exactly what is needed. The objective is not to do everything in the most financially efficient manner, but more importantly to learn, develop, and stick to good habits. This is the bigger problem poster exhibits.
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Old 06-25-2018, 04:20 AM   #14
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Agreed. Thatís why I recommended to the OP. This is a lifestyle, spending, budgeting issue - not an investing one. DR has helped millions in that situation.
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Old 06-25-2018, 04:22 AM   #15
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In order to both pay down debt and generate savings you must have control of your spending first. Or perhaps you could set up an automatic monthly payment to the debt, and then later to an investment account.
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Old 06-25-2018, 04:29 AM   #16
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Originally Posted by ERD50 View Post
Uggggh. Dave Ramsey?

Sorry, but I got into a rather extended discussion on another forum. At first, I thought, OK, DR is probably good for someone starting out who needs to be spoon fed. But as we got more and more info from the pro-DR guy, and looked in more depth, the more and more negative we became. It went something like this, over the course a few months:

1) OK, DR is OK for saving and spoon-fed info.

2) Hmmm, he doesn't seem to "teach a man to fish", it's all do this, do that.

3) Hmm, some of his advice is really questionable (all debt is bad, don't use credit cards, ignore those rewards).

4) Wow, some of his advice is just flat out wrong, and uses clearly bad numbers. Numbers that no financial guy should get wrong, or if he did, someone on his staff should have pointed it out.

5) Wow, he seems to be making money through affiliate links based on his bad advice with those wrong numbers. Co-incidence?

-ERD50
We had just started attending a new church and they were doing a couple month class to teach his methods. I kept my mouth closed for the most part, at that point in our lives we had been through excessive spending and debt already. We didn't have any debt except mortgages. I look at him as good advice for those that can't or won't control your spending. Like AA for those that can't control drinking, so just no alcohol at all.

For OP, I was getting cash advances to pay the minimum payments. Figured I had plenty of time to pay back the debt I was building up. Finally stopped that and paid off the cards. My turning point was when I purchased a car and financed it with Pentagon credit union. I had money from my check sent to credit union to make the payment (I was in the Army at the time, they setup automatic payments from your check.) When the car was paid off I kept the deduction going to my account to get some savings. I couldn't go on-line back then, and I wasn't stationed near them, so any withdraws had to be call and have them mail a check. That forced me to leave it alone. I have increased the monthly deduction from my retirement check now, and have had savings going there for must be 35 years now. After buying that car, I had $$ to pay cash for the next car (my first new truck) and only time I ever borrowed money for a car was in 2007 when they offered a 4 year 0 interest.

It is a process to put in place some steps like forced savings to a remote location, that allow you to control the spending. It is many months or years of small steps like savings or 401K/IRA contributions to add up. Spending is one big item that draws from those years of saving from each check. Another forced discipline with me is I never never touched my retirement savings. Of course, in 2 months when I retire I'll have to break that rule but will have to find another rule or 2 that I can use to not spend too much of it.

Good to have caught your moment at 35 and not 50 like you said. Just get sick and tired of money controlling you and put it under your control. Takes time to see the gains and get confident you can live below your means.
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Old 06-25-2018, 07:38 AM   #17
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Uggggh. Dave Ramsey?

Nope, not a fan at all. I'd say steer clear of any/all things DR.

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Agree to disagree on that.
Fine. But you've been warned. Proceed at your own peril.

For others, I'll give a few specifics.

DR tells listeners its easy to get 12% market returns. Listen closely, and that is 12% average returns. If he is dealing with noobs, he needs to explain what that means:

1) If my investment returns - 50% one year, and +74% the next, I had an average return of 12%. (0.5 + 1.74)/2 = 1.12. Yeah!

Hmmm, but when I do the math in a meaningful way, 0.5 * 1.74 = .87. Wait a minute, I lost 13% of my money with that 12% average return! Dave, where's my money??!!

2) Then he provides links to pros who will get you into one of these great average return funds. Those pros tell you you need to buy funds with front end loads.

3) He says don't use credit cards, don't take those rewards. Bad advice. Learn to use credit responsibly, and those rewards, and the float and convenience of credit cards will help you gain financial freedom. But he makes flawed arguments against them. When I see flawed arguments, over and over, I smell a rat.

RetireBy90 just made the analogy between debt and alcoholism. I get it, I've thought that for those who just can't handle a credit card, maybe it is best to just avoid it, like an alcoholic needs to avoid alcohol.

But I just realized the flaw in that. It is feasible for an alcoholic to avoid alcohol. But adults must deal with money. Best to learn how to use it wisely. A better analogy would be someone who eats too much, and is reaching an unhealthy weight. Well, they can't just avoid all food. They need to learn how to use food wisely.

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Old 06-25-2018, 08:41 AM   #18
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Fine. But you've been warned. Proceed at your own peril.

For others, I'll give a few specifics.

DR tells listeners its easy to get 12% market returns. Listen closely, and that is 12% average returns. If he is dealing with noobs, he needs to explain what that means:

1) If my investment returns - 50% one year, and +74% the next, I had an average return of 12%. (0.5 + 1.74)/2 = 1.12. Yeah!

Hmmm, but when I do the math in a meaningful way, 0.5 * 1.74 = .87. Wait a minute, I lost 13% of my money with that 12% average return! Dave, where's my money??!!

2) Then he provides links to pros who will get you into one of these great average return funds. Those pros tell you you need to buy funds with front end loads.

3) He says don't use credit cards, don't take those rewards. Bad advice. Learn to use credit responsibly, and those rewards, and the float and convenience of credit cards will help you gain financial freedom. But he makes flawed arguments against them. When I see flawed arguments, over and over, I smell a rat.

RetireBy90 just made the analogy between debt and alcoholism. I get it, I've thought that for those who just can't handle a credit card, maybe it is best to just avoid it, like an alcoholic needs to avoid alcohol.

But I just realized the flaw in that. It is feasible for an alcoholic to avoid alcohol. But adults must deal with money. Best to learn how to use it wisely. A better analogy would be someone who eats too much, and is reaching an unhealthy weight. Well, they can't just avoid all food. They need to learn how to use food wisely.

-ERD50
DR's value isn't in providing financial advice, it's in providing behavioral advice. The person who racked up $35k in credit card debt, living paycheck to paycheck, and not saving a dollar has a financial problem because of their behavioral problem(s). DR's system does a good job of taking the "normal" person with such behavioral problem(s) and getting them to change their behavior(s).

Once they've changed their behavior, THEN it would be prudent to give them better financial advice. However, giving the best financial advice in the world is useless if the behaviors that cause poor financial decisions are addressed first. For some, they'll never get fully "reformed" into people who are responsible with their money and credit. For some, they'll be amazing with their money and credit later. For people with little-to-no financial self-control to start with though, changing their behavior is the first priority and DR's methods have a great track record in bringing about sustainable changes in financial behavior.

So yeah, saying "don't take advantage of free money from companies because you use a credit card to get that free money" sounds stupid to those of us who are responsible with our credit cards. To the people who can't keep themselves from running up debt they can't pay if they have a credit card in their wallet, however, "just say no" is a valid and helpful suggestion.
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Old 06-25-2018, 09:14 AM   #19
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DR's value isn't in providing financial advice, it's in providing behavioral advice. The person who racked up $35k in credit card debt, living paycheck to paycheck, and not saving a dollar has a financial problem because of their behavioral problem(s). DR's system does a good job of taking the "normal" person with such behavioral problem(s) and getting them to change their behavior(s).

Once they've changed their behavior, THEN it would be prudent to give them better financial advice. ... .
Yes, I was previously OK with him based on the first part. But the second part is what has me negative on him. Not only does he not give them "better advice" when they've changed their behavior, he gives them bad advice. Not only bad, but self-serving advice. That became the real deep-red flag for me.

I happened to catch his radio show in the car once. His 'get out of debt' mantra just goes to such extremes, with no thinking to it. The people he featured got out of debt alright, but man did they make some bad decisions along the way, ones that really hurt them, all because it was a single focus of 'get out of debt at all costs'. Things like selling their home at fire-sale prices, because they were just so eager to get out of that mortgage. What's the rush, if downsizing makes sense, then go about it rationally. All sorts of other things that didn't take rocket science or any huge behavioral changes - just stop and think a bit. But no, the goal is to shout out his no-debt cheer, at any cost.

-ERD50
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Old 06-25-2018, 09:56 AM   #20
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Sell stuff you don’t use, literally everything we own is money and if your not using it it’s dead money. I can think of my own junk that I can sell right now for several thousand, if I was in debt I would be dumping that stuff.
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