Posts tagged with: consumer debt

5 Point Plan for Getting Out of Debt

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Debt could be good because it affords you an opportunity to use tomorrow’s money to meet today’s needs. However, debt when not properly managed can cast very dark shadows over your finances and make it hard for you to become financially secure. This article provides five actionable steps that could help you improve your odds of getting out of debt faster and permanently.

Build an emergency savings fund

An emergency savings fund is money you set aside to tide you over during the proverbial rainy days. An emergency savings fund can help you cover unexpected expenses such as a broken faucet or a failed transmission among other things. Experts often advise saving up enough money to cover at least three months of living expenses.

However, it might be impossible for you to save up that much money if you already have a debt burden. Yet, you can still shoot for saving up $1000 in an emergency fund. You can reach the $1000 milestone by doing odd jobs, having a garage sale, or working overtime among others.

Get rid of all consumer debt

Consumer debt has a way of sucking people into the darkest recesses of a debt vortex because you’ll always have more reasons to take on more debt. Student loans, credit cards, gas cards, medical bills, and car loans are some of the consumer debt you should prune off your finances. If you are serious about getting out debt, you should start by paying off the smallest debt with the biggest interest payment. Move on the next debt with the second biggest interest payment work through the rest of your debt systematically.

Leverage the value of your home

A smart way to get rid of consumer debt (see above) is to leverage the value of your home. If you own a home, you’ll find it much easier to get out of limiting debt by taking out a home equity loan. A home equity loan gives you a huge emotional boost by lifting the psychological burden that comes with being saddled by too many loans to different creditors. Debt consolidation with a home equity loan means that you have only one creditor; hence, you’ll find it much easier to manage monthly payments and other parts of your finances.

Invest 15% of your income

One of the reasons you got into debt in the first place was that your expenses was more than your income; hence, you were forced to borrow money to make up the difference. You can improve the odds of your financial security by moving from being a spender to becoming an investor. Ideally, you should invest at least 15% of your income into investments that could bring in some extra money or investments that could provide you with income during retirement. Of course, you can start investing the little money you already have instead of waiting until you have a huge investment capital.

Build a real emergency saving fund

Getting out of debt is not an end in itself, being financially secure enough not to get back into avoidable debt is the real goal. You can take proactive steps to reduce your need for avoidable debt by building a real emergency savings fund. Building an emergency savings fund enough to cover at least three months (and up to six months) worth of your living expenses will put you in a strong position to weather most financial storms.


No More Consumer Debt

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Ha! Look what popped up in my e-mail inbox the other day…

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The 3-year anniversary of the day we first bought my car.

I had several thoughts when I saw this email:

First, I can’t believe it’s only been 3 years! For some reason I thought we’d had the car longer than that.

Second, I can’t believe we paid off over $24,000 in car-debt in under 3 years! (Remember, we paid it off in January.)  This is in addition to all the other debt we’ve paid in that timeframe (See my most recent debt update here). That blows my mind!

Third, nice try Carmax! Ha! We’ll be driving this car into the ground and, even then, when it’s time to buy a new car we’ll do so by paying cash (probably through private sale for a better deal) and we will NEVER EVER be financing through you again! No offense (I mean, Carmax was a dream to work with compared to Navient). It’s just that we’ll never be walking down that road again. Nope. Aside from a mortgage, we will never have consumer debt again. Nothing. Zip. Zilch. Nada. We’re busy at work right now building up a healthy emergency fund so we can be absolutely sure of it.

So best wishes to you as a company, but the odds of getting any business from my family in the future is slim-to-none. We’ll wave at you as we drive by, though. Thanks for furnishing us with a great, reliable car!

Peace out!

Side note: Just as a point of clarification, our original car loan was through Carmax. Once I started blogging here I refinanced through PenFed for a much better interest rate. That’s why the car loan is listed as “PenFed” in my debt spreadsheet. Just wanted to clarify.


Wear, wash, repeat

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I feel like my days are on a serious repeat cycle and this post could pretty much be a duplicate of last weeks, with one MAJOR difference. I am anticipating a check today that will be the last payment towards my consumer debt…July 1st deadline goal met (almost as it hasn’t gotten here yet.) I feel like I should be doing some sort of happy dance or woot, wooting, but really I am just ready to keep plugging along.

I am really enjoying having choices with my money, rather than just looking at what bill is due next. And I really like the idea of not having to fork over a large portion of my money to debt anymore, but I do still have a ways to go. I have picked my next debt goal and am looking at the timeline now so will post that soon.

Now the news from this week…

The housing question is still looming. I have until the 24th of this month to let my apartments know if I am moving out at the end of my lease to avoid any addition fees. I also have the option to go month to month at that time or sign a shorter lease or another year long lease. I know I will not be signing another year long lease, but everything else is still up in the air. So more on that later too.

I’m continuing to do daily chauffeur duties to swim team practice, day camps (this week the littles are at a free VBS,) and gymnastics practice. I feel like I never have a solid block of time at home or if I do it’s at night when I’m exhausted, so not being as productive as I hoped. That is something that I need to change as I continue to try and build my business!

I’ve two extra kids staying with us this week, 8 year old twins. They are from a single mom family and she is really struggling financially so hasn’t been able to afford to run her air conditioner or hire a sitter for them. I just couldn’t stomach the idea of them staying alone day in and day out in a hot house, so voila they are here. They live about 3 hours from us, so she will come on the weekend and we will evaluate the situation for next week. (One of my twins is gone for the week at Ministry and Leadership Training, so it hasn’t been quite as tight as it would have been. Plus, these twins get along like gang busters with Little Gymnast so they are having a blast together.)

Speaking of Little Gymnast, today is his birthday. Now that’s something I can get excited about. When he found out he would not be getting his iPad screen fixed for his birthday, he gave me a revised frugal list…he’s getting everything he asked for: 1 gallon of grape juice, silly string, Reeses Pieces and a new blanket. (His Thomas the Train comforter is on it’s last stuffing!) We will go out to dinner tonight with his dad to celebrate…he’s chosen Golden Corral for the unlimited food and chocolate fountain!

So I’ve got lots of news, but nothing definite. Expect detailed posts coming on:
1. The next payoff goal and timeline.
2. A new, maybe not so extreme budget…maybe. We’ve gotten used to this one and it really hasn’t been that bad.
3. Details on our new family car.
4. A decision on housing as soon as I make one, lots still going on around this so can’t even hint to what the outcome will be.

I hope you are well and enjoying your summer and staying cool. The heat has been stifling and these last few days have been our first break from 90+ degree weather, so I’m dreading seeing what my electric bill will be. But I am oh, so grateful to be a in place where I can run it without worrying about being able to pay the bill. And run it to my comfort. I know that many people can’t do that. We have much to be grateful for, even on our strict budget.


Bad With Money

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This is a guest post by Purchase Baby who has recently started the Mickey Mouse Debt blog.

I’ve always been bad with money. Well, I call it binges really. At times I can be the most organised person – full of financial control. I can put my mind to things and save, save, save. And then something happens in my life and – BAM – I go back down the spiral road of debt.

Here’s my story: It started when I was a teenager. I used credit cards and loans to ‘keep up with everybody’. I come from a working class background, no airs and graces. My parents worked hard and saved hard for whatever they needed.

I landed a good job in advertising. A marvellous achievement for my age at 19 years old! Soon I got into the self-belief that I could keep up with everyone on the social scene. The trouble was, these people were middle-class and HAD money, while I didn’t! Anyhow, the credit cards balances started to pile up, and the loans. It took 10 years to get rid of the lot. If you asked me what I spent it all on, for the life of me I really don’t know!

Fast forward to 12 years ago. I bought a house with my partner. He was already £5k in debt as he wanted to help with the ‘deposit’. Within a year we (and I say we as it was my decision as well as hiss when he suggested it to me) wanted to get rid of his £5k debt, and I wanted to help him out. So we added £10k onto the mortgage (don’t ask why the extra £5k, we just did!) Within 2 years we did it again! We changed mortgage providers and added another £10k. Now, all of this time I was paying for the mortgage with the partner, as a partner when he could! Fair? Well, again I put up with it, so I’m not going to grumble – it was my fault in letting him get away with it in the first place.

The decade of 2000 was a very strange one. Everyone thought they were RICH. I had been in negative equity in the early 1990’s and so put my foot down in not putting anymore money onto the mortgage. I always believed in a mortgage should be 3 times your salary and capital/repayment. I’m glad I stuck to that guideline. However, I bought a second-hand car, and 3 years into my car loan financing debt I then took on the partner’s debt because “he couldn’t cope with it” (yes, he got himself into about £15k more debt). What a idiot I was, but hey, I could handle it because my salary was growing while his salary was, well, going nowhere. And that’s also my problem. I always look to help out others who are more in need than i am, and always put them first.

Roll on to 2008 and 3 more years until I would be debt-free. I had a serious knock-back. There was an unexpected bereavement in the family. It hit me HARD. I’m still not over it. And my relationship was beginning to show serious cracks. He couldn’t understand the pain I was going through, and the support I was giving to my family at this emotional time. And I couldn’t understand why he wasn’t “supporting” me. We slowly stated to become distant from each other. I needed things around me to feel happy. I decided to take out another loan, but this time to revamp the kitchen to cheer me up.

As a precaution, I took out credit cards (just as a back-up in case the loan didn’t get approved – which it did). it wasn’t long before I started to spend on my cards… and spend… and spend. I had to get the best of everything. I had to “keep up with everyone” and spent a fortune on business class flights to far off places like my work colleagues did. I was buying bracelets and fancy bags. I was doing things I had never done before – starting to live – starting to spend like I was middle class and not working class! It was the beginning of the recession / credit crunch, and instead of keeping my 1 loan debt in control, I added an extra loan plus credit cards! I was depressed and these “materialistic things” were making me feel happy, at least immediately. It took away the pain of feeling sad, lost, lonely and losing my family member.

Then the defaults started kicking in last July. I was not making the minimum payments on everything. I was getting phone calls from the credit card providers. I was not getting regular money from the partner (which wasn’t anything new, but now it was really affecting my cash flow). This has been going on and off until now. I decided in 2012 and I need to sort out this crap – and fast.

So, that’s my story. Here’s where I am in my life. Fortunately I do not have any children, so it makes it that little bit easier to concentrate on me, and me alone! No more bailing out other people’s debts. No more helping out people because they want something, but don’t have the means to pay for it themselves. The buck stops HERE and I’m determined to be debt-free within 2-3 years — tops.

With this in mind, I started my blog. It’s all mickey mouse money which we as consumer owe. It’s about all crap that we have accumulates. We all have to start taking control of our lives and get out of the debt cycle we’re all in. feel free to follow my journey and goal of becomming debt-free, and most importantly, having FREEDOM! I don’t want to be rich — I just be free of all of the stress and financial strain which millions of us are going through. We need a revolution, people.

Do you have a debt story that you believe others could benefit from reading? We are always interested in finding stories that touch on a variety of aspects of personal debt. Your previous writing is of little concern to us. Wehter you’re a long-time debt blogger or your story will be the first time you have written anything, we’d be interested in sharing your experience. If this sounds like something that is of interest, feel free to contact us.