Debt Consolidation Questions

alice0422 · June 2015

Hi all, I'm sorta new, I come and read the advice off and on, but have not posted or commented before, but decided to seek out some advice regarding debt consolidation. At the moment we have about 35,000 in credit card debt. This doesn't include are vehicles, but I'm not overly concerned about those at the moment it's just the credit card debt that stresses me out. The debt is spread out on four different cards. I'm trying to decide if I should try to consolidate everything into one lump sum or if I should just snowball from least to highest. My issue is I'm an impulse spender. I'm trying to be better, but unfortunately I'm having to learn the hard way that it STINKS to have this much debt. The breakdowns are as follows:

1st card 7237 at 10.9%-minimum is 140 but usually pay 500-1000 a month (my income fluctuates since I'm a contractor so it depends on that)
2nd card 2565 at 22.24%-also this card I pay a large amount on monthly already as we use it for groceries and gas since it has an awesome cash back program for groceries and gas. minimum is 38 but I usually pay 1200 on it- but use it for groceries and gas which is about 1000 a month and I am trying to cut it down the gas and grocery prices (gas will get better for summer break- we had to drive really far for my daughters charter school this year).
3rd card 2837 at 0% - minimum is 200
4th loan 22353 at 9.99%- minimum is 410

I know, these amounts are terrible and I feel horrible about it and I'm just looking for the easiest way to dig myself out of this whole I've created.

Any advice would be awesome and appreciated. Thanks in advance.

simplyelise · June 2015

Stop using all the cards!!! No amount of points or cashback is worth it in this situation.

You say you're putting 1200 a month towards the 2nd card, but if you put 1000 a month on it in expenses, you're really only paying 200 towards a decent sized debt with crazy high interest. Since you admitted you're an impulse spender, I'd guess that not all of the $1000 is 100% necessary purchases.

I don't have any experience with debt consolidation, but I would imagine in your situation with those three high interest rates, it might be something to consider. I'd just recommend you check out the company with the BBB and see if they're registered with professional organizations.

The thing to remember here is that unless you make a crapton of money, this credit card debt is at an emergency level. Debt consolidation may ease things up a little, but you still need to be figuring out how you can cut your spending and put more money towards the debt. And you absolutely have to stop using the cards, at least until they're paid off.

formerlyGDaisy09 · June 2015

Oh boy. Stop using the cards until you get a handle on your money. you need to switch to a cash system now. (I'm one of the users who pays for everything on credit cards...BUT I pay off the balance in full every month.)

I would line your cards up in this order:

2nd card

4th card

1st card

3rd card

start by paying the minimum on all cards and throw all extra cash at card 2, then repeat with card 4 and so on until you're CC debt free. I lined them up mainly by interest rate, but put card 4 ahead of card 1 because of the significantly higher balance.

I wouldn't play any games with balance transfers until you know you can operate on a cash system. You'll have Card #2 paid in a few months. then I would attempt to transfer cards 1 & 4 to a 0% offer, if you can:

1. find an offer that can accomodate the balance you have

2. can REALISTICALLY establish a plan to pay the balance off before the 0% interest offer expires.

Look at your budget and squeeze all the money you can out of it to throw at these debts. continuing to accumulate debt on these cards is just going to put you in a deeper hole.

formerlyGDaisy09 · June 2015

Better than stop using the cards...cut them up, so you can't slip.

alice0422 · June 2015

I was thinking about starting to take out the 600 a month for groceries but still pay for gas with a card only because it's a pain to run into the gas station and prepay with two littles. Some of the 1000 probably is a little frivolous since I loose track of how much I've spent on groceries for the month. I actually have an awesome budget that I track with a spreadsheet and everything and everything is always paid on time. I think maybe I'll start paying them off before I roll them into one so that I'm not tempted to charge on them again. I think I also don't have anyone holding me accountable. My husband has a stressful job so he kinda lets me pay the bills and he knows we have the debt but he doesnt stress as much as I do because we do put extra every month on them.

Sisugal · June 2015

Honey, it is time to get real. You have been living in financial la-la land.
Cut all but one card(one with the lowest interest rate) and freeze that one in a block of ice - for true emergency use only. Forget loan consolidation. You need to get honest with yourself as to WHY you are being so self destructive - and risking your family's financial security and future?

Sounds like you do not have a budget - time to make one. A budget is basically a spending plan - all spending is accounted for in your budget. Start by tracking EVERY DOLLAR spent - and it will be eye opening as to where you are leaking money unnecessarily. Sorry, but STAY OUT OF THE STORES and DO NOT SHOP ONLINE.

Go thru your closets - I am sure you have more than you need - sell what you are no longer using, does not fit etc and apply that to your debt. Sell things that your kids no longer wear, use or play with.

All new purchases must be for NEEDS - not wants --- and you DO know the difference.

STOP eating out - or limit it to no more than once a week. - You will save a ton (assuming you are like most people in debt - take out and eating out are budget wreckers.)

Do this until you have no more debt.

Then put what you have been applying to your debt to an emergency fund - building it to 6 months worth of expenses.

Read Dave Ramsey's Total Money Makeover - very motivating to get out of debt and also read
David Bach's Smart Couples Finish Rich.

Debt is debt - so that does indeed mean you need to look at your cars -- (will they be paid of within 3 years of purchase? ) If not - you really do need to consider selling them and getting something that is more affordable.

Own a home? Are your total housing costs (mortgage+PMI+insurance+taxes+HOA+utilities) no more than 25-28% of your TAKEHOME pay (30-35% in a HCOL area)? If not - might be another "living beyond your means money mistake.

Keep coming back . Hang in there as there are people who have gotten out of a good deal more debt than you have. This IS doable, but you MUST do something different if you want a different result. We KNOW YOU CAN DO THIS!

als1982 · June 2015

alice0422 said:
I was thinking about starting to take out the 600 a month for groceries but still pay for gas with a card only because it's a pain to run into the gas station and prepay with two littles. Some of the 1000 probably is a little frivolous since I loose track of how much I've spent on groceries for the month. I actually have an awesome budget that I track with a spreadsheet and everything and everything is always paid on time. I think maybe I'll start paying them off before I roll them into one so that I'm not tempted to charge on them again. I think I also don't have anyone holding me accountable. My husband has a stressful job so he kinda lets me pay the bills and he knows we have the debt but he doesnt stress as much as I do because we do put extra every month on them.

Unless your daughters are teenagers $600 for groceries is really high. I'd recommend you post your full budget here for some honest analysis.

simplyelise · June 2015

als1982 said:

I was thinking about starting to take out the 600 a month for groceries but still pay for gas with a card only because it's a pain to run into the gas station and prepay with two littles. Some of the 1000 probably is a little frivolous since I loose track of how much I've spent on groceries for the month. I actually have an awesome budget that I track with a spreadsheet and everything and everything is always paid on time. I think maybe I'll start paying them off before I roll them into one so that I'm not tempted to charge on them again. I think I also don't have anyone holding me accountable. My husband has a stressful job so he kinda lets me pay the bills and he knows we have the debt but he doesnt stress as much as I do because we do put extra every month on them.
Unless your daughters are teenagers $600 for groceries is really high. I'd recommend you post your full budget here for some honest analysis.

Totally agree with the above. Also, do you not have a debit card to use at gas stations? Debit cards work just fine to pay at the pump.

And as much as your husband may be stressed out at work, one person can't be the only sole financial manager. You can take the lead, but your H needs to help with budgeting to some degree. Does he know how much credit card debt you have? Does he know what you owe on cars? It's not like this has to be an everyday think where he asks to see your receipts. You just need to sit down once a month for 30 minutes to go over the plan together. Then you need to track your transactions on a shared system. We use everydollar.com, but a shared google spreadsheet works great too.

ETA: I don't understand how the bolded can both be true. If you track all your expenses, how do you lose track of what you've spent? Sometimes DH and I use up a little too much of our grocery budget in the first half of the month and we see that on our budget, so we buy less expensive food, maybe cut back on milk and buy less meat to make up for it.

alice0422 · June 2015

Thanks for all the great advice. By not worried about the cars I meant at the moment they aren't the loans I want to focus on. Once the four things are paid off the plan is to put all of the extra towards the cars so they will be paid off. They have very low interest rates thank goodness, 2%. We do own a home and were lucky that when we moved the price to build was very low, so it is actually about $400 a month cheaper than renting; plus we are military and made sure we stayed within the housing allowance the military gives us monthly which is awesome because anytime our housing allowance goes up (yearly) then it is more that we can put toward our debt.

I think a big issue is I'm the type of person that I want to instantly feel like I'm seeing a difference and then when I don't I get discouraged. NO MORE EXCUSES though because I'm really sick of the debt!

alice0422 · June 2015

The 600 for groceries includes all items for the house such as laundry detergent, toilet paper, and toiletries. I just started getting a frugal meal plan from a website though and if I follow it is not over 400 a month including breakfast, lunch, dinner and desserts.

alice0422 · June 2015

I loose track of the amount I spend on groceries because we put it on the credit card instead of using cash. Kinda out of site outa mind I guess. I know that sounds awful but I think I get into the mental thought of "oh its okay just this once," but then it doesn't turn into just this once and adds up, if that makes sense.

simplyelise · June 2015

alice0422 said:

I loose track of the amount I spend on groceries because we put it on the credit card instead of using cash. Kinda out of site outa mind I guess. I know that sounds awful but I think I get into the mental thought of "oh its okay just this once," but then it doesn't turn into just this once and adds up, if that makes sense.

My question was that right after you said you lose track, you said you have an awesome budget where you track everything and I didn't understand how that tracking worked if you were able to lose track of spending. The way we budget and track, we set an initial allocation and then each time we spend from that category we input the expense so we can see how much we have left in the category.

It sounds like you have come to terms with the problem, so I encourage you to stick around and report your progress on the Monday Accountability Posts. Even though we all come from different situations with vastly different incomes and expenses and different strategies, it's very helpful to hear from people who are all working on improving their finances and progressing towards their individual goals.

cbee817 · June 2015

als1982 said:

I was thinking about starting to take out the 600 a month for groceries but still pay for gas with a card only because it's a pain to run into the gas station and prepay with two littles. Some of the 1000 probably is a little frivolous since I loose track of how much I've spent on groceries for the month. I actually have an awesome budget that I track with a spreadsheet and everything and everything is always paid on time. I think maybe I'll start paying them off before I roll them into one so that I'm not tempted to charge on them again. I think I also don't have anyone holding me accountable. My husband has a stressful job so he kinda lets me pay the bills and he knows we have the debt but he doesnt stress as much as I do because we do put extra every month on them.
Unless your daughters are teenagers $600 for groceries is really high. I'd recommend you post your full budget here for some honest analysis.

I hate to say it, but I have a 3 and almost 5 year old- we spend at least $160/week on food. We don't eat out very much (maybe 1-2 times a month) and I only buy organic produce/meat/dairy also make a lot of food from scratch. $600/month for family of 4 is perfectly reasonable as long as you aren't spending $100's on eating out as well.

als1982 · June 2015

cbee817 said:

als1982 said:

alice0422 said:
I was thinking about starting to take out the 600 a month for groceries but still pay for gas with a card only because it's a pain to run into the gas station and prepay with two littles. Some of the 1000 probably is a little frivolous since I loose track of how much I've spent on groceries for the month. I actually have an awesome budget that I track with a spreadsheet and everything and everything is always paid on time. I think maybe I'll start paying them off before I roll them into one so that I'm not tempted to charge on them again. I think I also don't have anyone holding me accountable. My husband has a stressful job so he kinda lets me pay the bills and he knows we have the debt but he doesnt stress as much as I do because we do put extra every month on them.
Unless your daughters are teenagers $600 for groceries is really high. I'd recommend you post your full budget here for some honest analysis.

I hate to say it, but I have a 3 and almost 5 year old- we spend at least $160/week on food. We don't eat out very much (maybe 1-2 times a month) and I only buy organic produce/meat/dairy also make a lot of food from scratch. $600/month for family of 4 is perfectly reasonable as long as you aren't spending $100's on eating out as well.

Yeah, but you're buying organic. Most people on a tight budget don't and not doing so you could easily save significantly on your grocery bill.

smerka · June 2015

$600 for groceries is not unreasonable, but you could probably do better. When we first got married, DH had $50,000 in debt between credit cards and student loans. It took us 18 months to pay it off. And we went to 7 weddings (the majority were out of state) during that time. It can be done. We lived off one income and used the other for debt. Does that 0% rate expire? If it does, I would try to get that paid off before the rate skyrockets. Read Dave Ramsey. I disagree with him on things, but his plan works. Listen to his radio program or podcasts if you don't have time to read. If you don't want to use a debit card for gas (I get the not wanting to go inside with the kids), get a prepaid credit card and load your monthly gas money on it. You could do the same for groceries. Once the money is gone, it's gone for the month. Your husband needs to get involved in this. Even if it is just once a month to look over the plan for the month. You shouldn't have to deal with this all yourself. If you feel comfortable, post your budget. People here will give you tough love on where you can/should make cuts.

Erikan73 · June 2015

What you have to do isn't going to be easy and it will take time to accomplish your goal. But as you pay things off and seeing the balances go down, it will feel good. Trust me, I've been there & still going through it. Between my husband and myself I've put us on a 5 year plan to have everything paid off. I know 5 years may sound like a long time, but it's a realistic goal. Chances are it will be sooner though. Like other PP you first need to create a budget and take those cards out of your wallets. You need to look at the card you use for rewards and see if the interest you currently being charged off set what you are being charged in interest. If not, stop using it and use your debit card for food & gas. Lock up your credit cards in a place you can't get to them easily. This way you have to think twice about using them for shopping, but have them available if you have an expected emergency, like sudden car repairs or water tank or fridge breaks (I'm assuming you don't have an emergency fund). But just keep at it, once you get yourself on a budget & start paying down those debts you will a change and it will feel great. Just don't give up.

als1982 · June 2015

Do know that you can also call and ask the credit card companies to have them close your accounts/stop allowing additional charges. You'll continue to accrue interest and make payments but the cards will no longer work. (At least they did this six or seven years ago when I had CC debt.)

brij2006 · June 2015

1. Cut up the credit cards.

2. Call the ones with interest and negotiate a lower rate. Sometimes it works, sometimes it does not. But it's worth a shot.

3. Read Dave Ramseys' Total Money Makeover or take his Financial Peace University class. You need to get a hold of your finances!

4. Pay cash for everything! Debit is okay for at the pump. But sit down and work up a budget WITH your husband and allocate every extra penny toward the lowest balance card first.

5. Never ever use credit again. Not for points, not for emergencies, nothing. Get yourselves set up to give your 2 children a much better future than this.

Xstatic3333 · June 2015

To answer your original question, I would not consolidate in your case, especially since you say you like quick progress. I don't agree with DR for every situation, but if I were you I probably would read Total Money Makeover and just follow that plan to the T. I'd pay off 2nd card as quickly as possible, then 3rd, then 1st, then settle in to work on the 4th.

I agree with PPs that you are not someone who can use credit cards right now. I would freeze your card with the highest limit (literally, in the freezer in a block of water) to use in life or death emergencies, and then close all the rest to new charges. Use your debit card for situations like the gas pump where swiping is convenient. Get a budget together with your H/SO and follow it. It might be helpful to use the envelope system, where you take out the cash you can spend on each category for the month and put it in physical envelopes so you can't overspend.

The biggest trick will be changing your mindset away from feeling like CC debt is "normal." This can be hard when carrying debt is so, so common. Just last night I had dinner with a friend who told me she just booked a trip to Europe. I was excited to hear about it, and mentioned that H and I want to go sometime next year, but don't have the money saved yet. Her response was, "Oh, me neither! I just put it on my credit card." I smiled and changed the subject-she didn't ask for my advice on the matter-but I thought that was a classic example of how living without CC debt is not necessarily the norm in our society. Just know that it is so, so worth it.

I've been where you are-H and I paid off $10,000 in CC debt right after we got married. Most of it was accrued while our incomes were much lower than they are now, and all of it was stupid and avoidable. No emergencies or medical issues-just lifestyle inflation. My wakeup call came the week that the minimum payment on my cards was just barely payable. I knew right then that I had to stop or I was going to get into serious trouble. Paying it off was the biggest feeling of relief. We still do low-interest car financing and have SLs, but CC interest was the biggest suck on our finances ever and now we are able to save, give to retirement, etc. with much less worry.

alice0422 · June 2015

smerka said:

$600 for groceries is not unreasonable, but you could probably do better. When we first got married, DH had $50,000 in debt between credit cards and student loans. It took us 18 months to pay it off. And we went to 7 weddings (the majority were out of state) during that time. It can be done. We lived off one income and used the other for debt. Does that 0% rate expire? If it does, I would try to get that paid off before the rate skyrockets. Read Dave Ramsey. I disagree with him on things, but his plan works. Listen to his radio program or podcasts if you don't have time to read. If you don't want to use a debit card for gas (I get the not wanting to go inside with the kids), get a prepaid credit card and load your monthly gas money on it. You could do the same for groceries. Once the money is gone, it's gone for the month. Your husband needs to get involved in this. Even if it is just once a month to look over the plan for the month. You shouldn't have to deal with this all yourself. If you feel comfortable, post your budget. People here will give you tough love on where you can/should make cuts.

The 0% does, but by paying the 200 a month on it, it will be paid off before it expires. I believe the minimum is $150, but I'm paying the 200 so that we have it paid off before the interest all comes back to it.

alice0422 · June 2015

Thanks again to everyone who provided more advice. I do think maybe I should come to the board more often to help keep me motivated. Before we moved we were so close to having things paid down, but I also made significantly more and went about a year without working due to the high cost of daycare here (1500 a month for two kids). I'll get our budget together and post, I do know we pay a lot for our cars because we rolled over negative equity, but due to the negative equity on them it is not possible to get rid of them at the moment for something cheaper. I'll also look into Dave Ramsey's products. My friend currently uses it for a lot of medical bills they are trying to pay off so I'll just have to bite the bullet and start the cash system and try to find cheaper meals. We do have a fun money budget which is $200 monthly, not sure if that is a reasonable amount of if I should try to cut it back too.

hoffse · June 2015

I would cut back the "fun" budget to $100/month until you get this under control. That's plenty for a couple meals out a month to make the stricter budget tolerable.

I would keep paying the $200/month to the 0% interest card so that it's paid off before the promo period expires, but for everything else I would go in the following order:

card 2

card 1

card 4

Once the 0% card is paid off, also be sure to send that $200/month to whichever card you happen to be working on.

Cash back and points are only great if you pay cards off in full each month and aren't paying interest. The fact that you guys ARE paying interest means that you are paying for the points program for people like me who do not pay interest. Forget working cards for points, because it's costing you guys too much.

Spend some time investigating free things you can do with your kids - visit the library, visit a park. There's tons of free stuff in the summer. Heck, all weekend our city's symphony orchestra will be hosting free outdoor concerts. H and I are going to a couple of them. There will be things like that in your community too.

Another suggestion is to go through your online accounts and remove any credit cards from those accounts (Amazon comes to mind). That way you can't mindlessly spend without your CC in hand. I would also suggest de-enrolling from store emails. They blast you constantly with the "ONE DAY SALE!!" type emails, and those absolutely work to sucker people in to spending more money. I used to have a hard time resisting online shopping, and getting off those email lists helped me tremendously.

Xstatic3333 · June 2015

alice0422 said:

Thanks again to everyone who provided more advice. I do think maybe I should come to the board more often to help keep me motivated. Before we moved we were so close to having things paid down, but I also made significantly more and went about a year without working due to the high cost of daycare here (1500 a month for two kids). I'll get our budget together and post, I do know we pay a lot for our cars because we rolled over negative equity, but due to the negative equity on them it is not possible to get rid of them at the moment for something cheaper. I'll also look into Dave Ramsey's products. My friend currently uses it for a lot of medical bills they are trying to pay off so I'll just have to bite the bullet and start the cash system and try to find cheaper meals. We do have a fun money budget which is $200 monthly, not sure if that is a reasonable amount of if I should try to cut it back too.

Kudos for being open to advice and new ideas! You can do this!

Posting your budget will really help you get some great new suggestions. Without seeing the rest of the budget it is hard to say if $200 is too much. I know many on this board have much smaller fun budgets than that and do fine. At the same time, you don't want to set yourself up for failure, either. I know for us, keeping a fun budget around $300 total ( with more going to H than me) is essential for keeping H motivated. If he feels too deprived he kind of shuts down.

MommyLiberty5013 · June 2015

Just curious, where do you spend the most with your CCs? Clothing? Home décor? Beauty products? Stuff for kiddos? Amazon? eBay? PayPal?

Examine where you spend the most and then figure out a way to alter your life so you don't put yourself in places to be tempted.

For example, if buying clothing and accessories is your yucky spending place and you shop at Super Target for groceries that is ALSO full of clothing, shoes, and accessories...start shopping for groceries at a store that solely sells food. NO temptation to buy non-food items.

If your thing is online shopping, then you need to figure out a way to disentangle your CCs from the online sites...

1. Remove shopping/store apps from your Smart Phone.

2. Stop getting coupons emailed to your email addresses (each email has an unsubscribe link at the bottom of it).

3. Call catalog companies you get in the mail and have them cancel sending you their catalogs.

4. Make lists before you go to the store and stick to the lists. Or, if that's too tough then have someone go for you who can buy what you need and only what you need.

5. Do not save your CC information on online stores. The one click shopping without having to reenter CC data is too easy...Amazon, eBay, PayPal, etc..

alice0422 · June 2015

MommyLiberty5013 said:

Just curious, where do you spend the most with your CCs? Clothing? Home décor? Beauty products? Stuff for kiddos? Amazon? eBay? PayPal?
Examine where you spend the most and then figure out a way to alter your life so you don't put yourself in places to be tempted.
For example, if buying clothing and accessories is your yucky spending place and you shop at Super Target for groceries that is ALSO full of clothing, shoes, and accessories...start shopping for groceries at a store that solely sells food. NO temptation to buy non-food items.
If your thing is online shopping, then you need to figure out a way to disentangle your CCs from the online sites...
1. Remove shopping/store apps from your Smart Phone.
2. Stop getting coupons emailed to your email addresses (each email has an unsubscribe link at the bottom of it).
3. Call catalog companies you get in the mail and have them cancel sending you their catalogs.
4. Make lists before you go to the store and stick to the lists. Or, if that's too tough then have someone go for you who can buy what you need and only what you need.
5. Do not save your CC information on online stores. The one click shopping without having to reenter CC data is too easy...Amazon, eBay, PayPal, etc..

Honestly its just whatever, like maybe I want something different for dinner or want to go out for lunch. I have stopped going to target so much and have found it makes a huge difference and try not to surf online for clothing.

formerlyGDaisy09 · June 2015

hoffse said:

I would cut back the "fun" budget to $100/month until you get this under control. That's plenty for a couple meals out a month to make the stricter budget tolerable.

I would keep paying the $200/month to the 0% interest card so that it's paid off before the promo period expires, but for everything else I would go in the following order:

card 2
card 1
card 4

Once the 0% card is paid off, also be sure to send that $200/month to whichever card you happen to be working on.

Cash back and points are only great if you pay cards off in full each month and aren't paying interest. The fact that you guys ARE paying interest means that you are paying for the points program for people like me who do not pay interest. Forget working cards for points, because it's costing you guys too much.

Spend some time investigating free things you can do with your kids - visit the library, visit a park. There's tons of free stuff in the summer. Heck, all weekend our city's symphony orchestra will be hosting free outdoor concerts. H and I are going to a couple of them. There will be things like that in your community too.

Another suggestion is to go through your online accounts and remove any credit cards from those accounts (Amazon comes to mind). That way you can't mindlessly spend without your CC in hand. I would also suggest de-enrolling from store emails. They blast you constantly with the "ONE DAY SALE!!" type emails, and those absolutely work to sucker people in to spending more money. I used to have a hard time resisting online shopping, and getting off those email lists helped me tremendously.

I missed where OP said what their fun budget was. but less than $100 is totally do-able. H and I are not working at agressivly paying anything off right not, and most months our "fun money" is $25 for me, $25 for H, and $50 for eating out/entertainment. we don't feel like we're missing out on anything.

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