I woke up a few weeks ago and realized that I’m over my head in debt.
I’m not defaulting on anything – it’s just that with just paying minimum payments, I never have any money left at the end of the month and I can never save for extra expenses so I keep having to charge things. I’ve decided I want to get out of debt as quickly as possible – it’s become a real issue for me.
I joined this website and I also purchased a book by Dave Ramsey, “The Total Money Makeover” (I’m not saying anyone should or shouldn’t read it). In his book, he recommends starting out by saving $1,000 for emergencies, then going to work on the debt. Once that’s done, you can go back and finish the emergency fund.
He does recommend budgeting for every expense and saving for those once or twice a year type expenses as well.
In my case, I’m going against one of his rules – I’m refinancing the house to incorporate the debt. I’ve thought long and hard over this – it’s a way for me to lower my outflow of cash (considerably) and free up that extra cash flow that I need to build up savings and then to be able to budget for all my expenses. I’ll have the emergency fund built up within a few months and can make extra payments on the house.
I’ve already been tracking my expenses and cut out all the unnecessary (almost all) expenses – I kept the internet and cable tv – everything else has been eliminated.
My plan is to not use the credit cards – close all accounts except one – another area he and I disagree on. He says to close them all and not have a single one – I remember my car breaking down a couple of years ago on the way home from vacation – I was far from home and by the time all was said and done, it cost me $450 to get on the road again – I would have been in serious trouble without that little plastic card.
I also plan to be more involved with my finances and accounts – not just pay the bills – I want to read more books and keep up with things a little better.
Okay, enough rambling – sorry.
I am new here too and am just on the start of the same journey as you.
We (dh and I of 13 years) have a personal loan that started out as a consolidation loan 10 years ago with a 5 year term but it keeps getting refinanced by rolling credit cards into it and buying different vehicles. I am just so sick of owing that bank money and I want to start saving for a house deposit (about $10K).
I too intend to keep our credit card for a while as we earn good reward points with it and I also use it to purchase our meat in bulk and things like flour, sugar etc. I am planning to pay it off and then hopefully save up for a good portion of the next bulk purchasing spree before it happens. With 3 children shopping with me at the supermarket there are too many temptations and I am not good at ignoring specials. Not really so special when they make me go over budget every week! So the plan is to avoid the shops and get things delivered in bulk, could be fun!
I would love to also get my emergency fund set up. Lots of planning to do.