Yearly Archive: 2015

John Cummuta has a formula

John Cummuta has a formula for which to pay off first and uses an accellorator payment that is above the minimum payment per month. The way he tells you make the decision on which to pay off first is this: Divide the total payments by the min payment and figure out how many months to payoff when you have all the numbers the lower the number the higher on paying off first. that allows you to pay off quickly and then take the accellorator money which is above the min payment and apply it to the next debt with including the amount of the first debts min to the new payment on second debt. All other debts get the min payments until they get to the point where they get the accellorator payments.

I was drawn to your posting, as I saw myself there. I was in Debtors Anon. for many years and I remember what they told newbies that really helped me. So here are a few ideas:

  • People in debt generally focus on what they owe, but the focus is best used to look at what you make and how you’re spending it now. There are general guidelines on how to spend the money you earn which may help you get out and stay out of debt.
  • For example, one rule of thumb is that debt repayment for credit cards and unsecured debt would be no more than 10% of your monthly gross income. Anything more is a red flag that you’re spending in a way that will continue your debt indefinately.

Note: If I added right you are paying $369 in payments now without student loan. Earning $3,690 per month gross income would manage these debts according to this rule… To add in your student loan, you’re talking a gross income of $6,690.

Another “rule of thumb” would be to take only about 10 per cent or $150 of your bonus would go initially towards debt repayment, if you want to break the debt cycle. 10 per cent of it would go into savings/retirement and the rest would be up to you, including if you want to pay a little more of it on debt. But to pay it all on debt may actually contribute to your debting cycle.

– Here are the general rules for managing unsecured debt, in a perfect world. Even a good financial consultant would probaby tell you this.

  1. Unsecured debt repayment should not exceed 10% of your monthly gross income;
  2. Take another 10% of your gross for retirement/savings. Even 5% will help in most cases. Having savings has a positive overall effect on health.
  3. Take another 10% for charitable giving if you believe in that. 5. Live on the rest. Adjust your lifestyle to do that. If you do, you’ll eventually eliminate debt completely. This is an age-old formula for financial health.

Obviously, it’s not this simple in anyone’s reality, but this may be good food for thought. Please note that I still struggle with these principals and have recently lost a job and am struggling to remain in my home, so take what I say with a grain of salt. In my experience, living a cash-only day to day life when I’m working and distributing my income even close to this way, seems to make financial dramas disappear from my life.

As for what to pay off first, there’s no easy answer… except to say whichever you pay off, make sure you never charge anything on that card again until you’ve got a year or two’s worth of assets in the bank.

What to pay off first??

Im a newb here so let me first post my debt info:

I have 5 main credit cards that I want to get paid off.

  1. $290 ($900 limit) 0% apr til January $10 payment per month
  2. $1810 ($2000 limit) 22.5 apr $47 payment per month
  3. $5645 ($6000 limit) 22.5 apr $146 payment per month
  4. $6082 ($8400 limit) 6.99 apr $94 payment per month
  5. $4844 ($5500 limit) 0% apr til August $72 payment per month

I’ve also got about $300 a month worth of student loans, but I’m not worried about those right now.

I’ve already heard about the idea of paying off the smallest first to the biggest, but what makes the most sense financially. I get a bonus next week that will be about $1500, where should I put it? I can afford about $300 a month extra to go towards payments, which one should it go to?

Thanks for taking the time to help!

I would still start knocking them out in order, smallest balance to largest. If you have $300 extra to go towards the debts anyway, #1 is going to be gone in a month any way you look at it. Get that paid off and have one less card on your list. Paying the other $1200 of the bonus and $300 extra is going to knock out #2 within a couple months and then you have only 3 cards and $357 MORE to go on card #5, you next smallest.

I envy you. Your snowball is rolling pretty quickly. I have three cards…and my lowest balance is still about $9900.00. Its going to be a long while before my snowball rolls. I just have to remind myself that each month I am getting myself in a BETTER situation, it isn’t getting worse, so even though I can’t yet pay one off, I am improving my situation. That has to be enough for me.

In case you decide to get some quick cash for your emergency expenses – there is a great company named ElcLoans – they offer payday loans online without credit checks. Therefore you can use their services to get some cash and do not worry about your credit score at all.

Apply your entire bonus to debt #2, in Jan. balance transfer debt #1 to Debt #5. Apply extra monthly payment to debt #2 until paid off. Once paid off add the monthly payment to your extra monthly payment and apply to Debt #3. Then once it is paid off, apply all extra monies toward either debt #4 or 5 which ever has the highest interest at that point. The name of the game is to minimize the interest paid out. Do not close any cards once paid off, just leave dormant. Consider appying for other 0% interest cards and balance transfer highest rate balances while paying off debt.

Now is the time to eliminate debt! Do not look at what makes sense ‘financially’, look at what will get you going and keep you going. That is why Dave Ramsey suggests the snow ball method.

Pay off #1 now. Put the 1500 towards #2 plus the extra $300 and you have 2 CCs gone in 2 months.

Take extra $57 you no longer pay towards them, along with the extra $300 and put it towards #5. Even though it is zero interest, get it behind you where the CC cannot change their mind on the zero interest. In less than a year, # 5 is gone.

Take the $329 and go after #3, and then #4. Any more bonuses or extra cash go towards the lowest.

This method gives positive incentives quickly and helps keep you going and not quit. Taking on the biggest mountain first tends to get discouraging.

Debt Management vs Debt Settlement

When working full time, I was able to reduce my credit debt from 16,000 to 13,000 paying $395.00 a month (using a debt management program). My job ended and I have not been able to get full time employment only contractual opportunities. Two of my three cards are 60-90 days late. As I work on regaining financial footing, I’ve am trying to decide between rejoining debt management or doing debt settlement. I know if I do debt management – paying $395 a month-it will take me 4 years to pay it off. If I do debt settlement, I will pay $307 (including fee) for 23 months. What is the better choice? Thanks.

I imagine that both will make for NEGATIVE information being reported to your credit reports, which will cause future derogatory actions (higher interest rates, more fees, etc.), plus the late payments, which creditors will definitely not look at kindly.

If you settle, get the amounts in writing FIRST, well before making a payment. Keep copies of everything. Mail the bank checks and a copy of the letters to the creditors, and make them SIGN for the receipt of the payments. Document, document, document.

Then, send copies of the checks and the letters from the creditors clearly showing the amounts to the Big 3 credit bureaus so your paperwork is updated promptly.

Take care & good luck!

I am in almost the exact same situation. I’ve been on a Debt Management Plan for 1 year. I lost my job because the business just closed and have missed two payments on most of my cards.

I just got hired for another job but haven’t started training yet. I know that if I had a month I can get back on track once I start getting paid again. But I’m not sure if they’ll even let me back into a DMP. I owe about $8,000 total so I don’t want to file bankruptcy for something so small. I am thinking of calling them individually and trying to settle. If they don’t agree, I will tell them that I am contemplating bankruptcy. its better for them to accept some rather than nothing at all. I definitely won’t go with a Debt Settlement Company because I don’t trust them.

What I’ve learned (tracking strategies too)

Okay, so I thought I posted this here, but it was another group I’m in. Apologize off the bat for the length, but I got carried away with responses (that actually may be relevant to some of us) and some tips based on a year of making plenty of mistakes and finally figuring out what works…….

Also, can’t post my Excel spending tracking chart, but there’s a good descrip of it below:

First, on cards. I didn’t close my unpaid-off cards because I don’t want my credit score to drop (to save on my insurance premiums, etc). However, I don’t carry them. If you carry them, or even keep them, you always have a need to use them.

It’s scary to get rid of them when they’ve been a crutch for so long. But if you are truly serious about making a change in your life, you need to actually make the change. I was on the fence for a while – wanting to make a change and stop debting, but never doing it. I started telling people, “I can’t afford to [go to lunch, etc] this week. Can we go next week?” Or, in some cases, I flat out said that I didn’t have the money to do some expensive activity a friend proposed. And when I started dating my boyfriend, I told him about my situation.

As soon as I started admitting to others that I had a problem, I felt like I’d been freed from this horrible, dirty secret.

I also started watching Suze Orman every Saturday (well, recording it, and watching it later). I started watching Dave Ramsey every day. I started reading as many books as the library had to offer in the world of personal finance. Some were great. Some were eh. Some were a complete waste. But I started learning. And making changes.

Oh, and probably the most effective thing I did was to create an Excel sheet with a few columns (month, date, $ spent, overall category, smaller purpose, location, and deductible y/n). I wrote down EVERY single penny I spent in this Excel chart – from $57 at dinner to $.60 library fine. Wow. I started spending less. And I really knew what happened to my money and where my budget categories weren’t realistic (for example, my $20/mo for pets was actually $25 in real spending). I was also ashamed for the first two months at how much money I wasted. Money I didn’t have.

I also created a “debt watcher” chart. Made columns with the name of each debt and below that, the amount I started with. I listed out each pay date, and each pay date (I pay everything twice a month to reduce the avg daily balance), I write down the new debt amount. The farthest right column is a debt total. I can watch my total debt (which is a bit overwhelming) go down every time I make payments. I feel like a success because of this.

Despite a fency year, I paid off $4K. This next year, I plan to pay off $15K. That will still leave me with about $36K in a loan and a CC. It was much faster to get into this mess than to extricate myself from it. But I’m sick of it. I’m finally sick of it.

What will make you sick of it?

A couple good resources:

  • Suze Orman – anything but esp “9 Steps to Financial Freedom” and “Women and Money”
  • Mary Hunt – anything. Plus, she has a free daily e-newsletter and a (CHEAP – maybe $26/year?) subscription web site with great tools, including a debt repayment calculator that tracks your repayment plan and is the best one I’ve seen by far. http://www.debtproofliving.com/
  • Dave Ramsey – Total Money Makeover

If you have weight problems too, it’s not surprising. You’re filling a void with money and food. Trust me. I am a Weight Watchers lifetime member – 3 years at goal and counting. Tracking what you eat AND what you spend every day is really successful.

People who get out of debt aren’t any smarter or more capable than the rest of us. They just mean it. Every day, they wake up with the intention to follow through.