Yearly Archive: 2016

Solvency issue resolution

I have my student loans now coming due and today I have a payment of $561.77 due but only have less than $100 in my accounts due to making some more pertinant payments (att bill and a megabook yellow pages bill) that were due yesterday. I am able however to pay the interest that is going to accrue against my student loan for the unpaid amount which will amount to $28.05 so I plan to send a payment of $30 to them and let the bill become wreckage of my past and go unpaid today only to pay it ASAP when cash is available.

Am I still considering myself solvent? I say yes because I have no new debt with paying the accruing interest on that amount of unpaid bill. As for other debts and payments it is one day at a time and today I have 46days without debting.

under Canadian rules an insolvent person is a person who owes more than $1000, can’t pay their bills as they come due and if the person sold their assets they would not be debt free. Is the definitely of insolvent different in the US? Why not put your defer your payments for a few months, until you can make full payments? You can ask for forbearance. Yes interest accrues but at least your credit isnt getting hit constantly and you are not getting charged late fees etc.

There are humans behind this money thing too

Have to remember there are humans behind this money thing too.

We have $50K in student loans (10 individual loans) and they just take our payment and apply it how they want to (Sallie Mae). Looking at a $50K debt go down penny by penny is not stimulating. I decided to pretend that I am paying the lowest first and wrote it up on the refrigerator that way. I won’t even look at the real balances until I think I’ve paid about all of it off. Now, I am looking at the lowest loan ($700) and strategized ways to knock it out of the ballpark today!!!!! $700 is attainable, no matter the interest, $50K is not.

We all got into this mess because we wanted things TODAY, not over time…. Therefore, being the critters that we are, we want to see results TODAY, don’t we? Lowest balance first is the closest we can come to that.

Well I just paid off the $290 and I paid the minimums on the rest, so now my priorities look like this:

  1. $1760 ($2000 limit) 22.5 apr $47 payment per month
  2. $5806 ($6000 limit) 22.5 apr $146 payment per month
  3. $5090 ($8400 limit) 6.99 apr $94 payment per month
  4. $4775 ($5500 limit) 0% apr til August $72 payment per month

I’m not sure what happened to #2 but the balance went up, I’ll have to check with the company. I’ll probably put some of the bonus towards #2 because its less than $200 from being maxxed out. The rest will go towards paying off #1. The way it looks not #1 could be paid off by February.

Thanks for all th input and advice, I know I’ll get there eventually!

UPDATE:

Last night I paid $460 to card #1, and $500 to card #2. So my chart
should look like this:

  1. $1300 ($2000 limit) 22.5 apr $47 payment per month
  2. $5306 ($6000 limit) 22.5 apr $146 payment per month
  3. $5090 ($8400 limit) 6.99 apr $94 payment per month
  4. $4775 ($5500 limit) 0% apr til August $72 payment per month

I am leaning towards paying down the balances to a certain point (50% maybe)so that I can consolidate to a lower interest. I know transferring balances doesnt solve the problem if I just use the old cards again. I still have a couple hundred to put towards one of these, probably #1 as I want to have that one paid off by February. Thanks for all the encouragement and ideas!

The reason the snowball works

The reason the snowball works rather than the “pay the least interest” method is this:

If you have ever run a race or done anything taxing…. when you can see the finish line and you just have a little bit more to victory, your body kicks in full force – it’s emotional.

When you see your smallest debt going away with “just a little bit more” you will find ways to scrape up that “little bit more” money and knock it out. When the extra $300 has you $50 away from wiping out a debt, you find that $50 under the couch cushions, in the car ash tray, your pockets, the used cds you sell….. That extra “burst” kicks in. When you start doing balance transfers and pegging at large debts first, or split your efforts, it all seems to far away that $300 a month is quite content.

Money is not all logic… it is emotional too.

Financially speaking, the best way to do it is apply it to the balance with the highest interest rate. Dave Ramsey’s way is to pay the smallest balance first to give yourself the feeling of accomplishment. It all depends on how you want to ffel about the debts. Do you want small victories along the way or do the small victories not mean that much to you? I would pay off the small one and then apply the rest to the $1800.00 balance. With the extra you have every month, that second will be gone in a couple of months.

I just read all of the various advice given and just like opinions, there are many. Some of the suggestions seemed complicated, almost need a calculator to computer which to pay off first.

Then was a suggestion about not trying to pay them all off. Many of the participants here are under the bondage of debt and want out – completely and forever.

I know there are many schools of thought, but as I keep reminding everyone, FICO a.k.a. Fair Isaac is an I LOVE DEBT score and you can live without one. That is not to say to destroy your FICO while trying to get out of debt, but to let it gracefully die as you pay off debt and close credit cards. If you insist on keeping them, keep on the oldest since 15% of a FICO is for credit history whereas on 10% is for new credit. The 30% on amount if debt is amount of debt as it relates to your max. So if you are at 98% credit limit as I am on 2, then your score is lower than it would be if you were at 30% of your credit limit.

One place I do deviate from Dave Ramsey, is that if you get a windfall and that windfall will retire a single debt with a large min payment, put it towards that debt. That allows you to increase the size of your snowball exceedingly.

You need to start saving an emergency fund. You will have debt and I can completely understand that you want to pay it off as soon as possible. But you need to start put money aside so this way you will never become dependent on credit cards ever again. Your emergency fund by the time its full funded should normally be 6 months of your living expenses. If you don’t have this or even start to work on this, you will always be dependent on credit cards in case of an emergency. My opinion…Put a partial of your money into savings and partial into your cards…If you got any small ones that you can eliminate, get rid of them…it is a mental thing…Then start tackling your highest interest rate cards….but dont forget that you need to have an emergency fund….So save as much as you can pay off.