Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Ok guys/gals, I need some help. My new years resolution is to become debt free and live the rest of my life frugally. I know the basics of paying down debt but need some suggestions. My debts are $900 at 18.99%on credit card which I am vigorously paying off and should be done by the end of February. I have 2 auto loans 1st balance is $10392.96 at 5.95% with 4yrs 6months to go at $219/m, the second is $6253.89 at 5.9% with 3yrs at $189.33/m. I was thinking, the best way to do this is focus on the lowest balance car payment 1st and pay that off, then take that payment and start paying off the other. Is this the best way to do this or should I pay off the higher one 1st. If you need more info please ask and help. Thanks.
The general rule is to pay off the highest interest rate loan first. That means getting rid of the credit card debt first, which you are wisely doing. And that amount you owe there is not that great in any case. You're in much better shape than the average person.
With respect to the car debt, your interest rates are virtually identical. Paying off that debt, which is non-tax-deductible, means an effective after-tax return of around 10%, which is very attractive in this interest rate environment.
Since both car loan rates are the same, I don't think it matters which one gets paid off first. Psychologically, it might be better to put all your firepower toward one of them, since getting rid of one will be a big milestone. Whether it's the bigger or smaller one is really a matter of personal preference. If you start throwing chunks of money at the bigger one, it will take you longer, but you'll be closer to the finish line once it's done. It's all a matter of how soon you need the psychological boost of getting rid of one of the payments.
Paying off the smaller car loan will cost you a *tiny* bit more in interest, but it's a safer financial plan because you'll have one less monthly payment and at least one paid off car that can't be reposessed if anything happens to your job(s).
Ok guys/gals, I need some help. My new years resolution is to become debt free and live the rest of my life frugally. I know the basics of paying down debt but need some suggestions. My debts are $900 at 18.99%on credit card which I am vigorously paying off and should be done by the end of February. I have 2 auto loans 1st balance is $10392.96 at 5.95% with 4yrs 6months to go at $219/m, the second is $6253.89 at 5.9% with 3yrs at $189.33/m. I was thinking, the best way to do this is focus on the lowest balance car payment 1st and pay that off, then take that payment and start paying off the other. Is this the best way to do this or should I pay off the higher one 1st. If you need more info please ask and help. Thanks.
IMO the best way to accomplish your goal is to focus on one bill pay it off then take that money and pay off the next bill and so on. The key is do not spend the money that you free up until you are debt free.
If done correctly you will pile each paid off bill's money on top of the next bills payment paying each bill off ever faster. Much like a snow ball of ever larger paid off money to work with.
Ok guys/gals, I need some help. My new years resolution is to become debt free and live the rest of my life frugally. I know the basics of paying down debt but need some suggestions. My debts are $900 at 18.99%on credit card which I am vigorously paying off and should be done by the end of February. I have 2 auto loans 1st balance is $10392.96 at 5.95% with 4yrs 6months to go at $219/m, the second is $6253.89 at 5.9% with 3yrs at $189.33/m. I was thinking, the best way to do this is focus on the lowest balance car payment 1st and pay that off, then take that payment and start paying off the other. Is this the best way to do this or should I pay off the higher one 1st. If you need more info please ask and help. Thanks.
Financial Peace University Baby Steps1. Make only minimum payments. Squeeze your budget until you have $1000 cash. This is the start of your emergency fund.
2. Snowball your debts, smallest to largest.
3. Save a full emergency fund of 3-6 months’ expenses. (I recommend ING for this account.)
4. Fully fund 15% of your gross pay into pre-tax retirement plans and a Roth IRA (if you’re eligible).
5. Fund your kids’ college.
6. Pay your home off early.
7. Build wealth, and give it away!
no need to reinvent the wheel. Just follow the tried and true plan and you will succeed.
I definitely would start with the smallest loan first and continue from there.
If you haven't already cut out any extras, make sure you cut your cable to the minimum, cell phone, any magazines, can you tranfer your cc to a lower interest card?
I'm gonna give you some solid advice. Before I give this advice to you I want you to know the following about myself. My wife and I have one debt and thats our house. We have a 30 year mortgage that we pay almost triple the payment on every month. We will have our house paid off in 10 years or less at this rate(and its a very nice house..some of the dallas cowboys live in our neighborhood) We have 2 honda accords (2005) that are 100% paid off, we have a TON of money in the bank and buy everything with cash and never use credit (because we don't have to anymore).
1. Pay off the credit card as fast as you can. Even borrow money from your parents or friends to pay it off fast. The interest on there is killer. This won't be a problem for you because its only $900.00.
2. Pay off the smaller car loan first. Once its paid off, pay every single cent you have to the larger car loan.
3. Worry about your emergency fund once you pay your second car off. Put every single cent of money you can on that second car loan until its paid off.
4. After you pay that off, take the money you were paying to the credit card, small car loan, and big car loan and make that payment directly to your savings account. (Now, I want you to re-read number 4 again. Really let it sink in because its extremely important). I don't want you to pay off these things and then think to yourself that you freed yourself of all your debt and now you have enough money to buy another car, or boat, or motorcycle, etc. You want to live frugal? Then do exactly what I'm telling you. You still have those same payments and you will have them for a long time... KEEP MAKING THEM TO YOUR SAVINGS ACCOUNT.
5. Drive your cars until the wheels fall off. Don't buy anything else with credit unless you absolutely positively HAVE to.
6. You will build a REAL emergency fund the way I'm telling you to do it. A 3 month or a 6 month "emergency fund" is a joke in todays economy. A 3 month "emergency fund" is the old way of doing it.
7. TAKE MY ADVICE, I HAVE BEEN IN YOUR SHOES AND KNOW WHAT I'M TALKING ABOUT.
follow ufc's advice... pay them off as fast as you can so you can start saving. All of those loans are small amounts so at the rate you're going you'll end up paying around $2,500 in interest, which isn't that bad. When you get in a habit of saving you will be surprised how fast it builds up and how easy it is. Keep your cars maintained and drive them until they are done, then pay cash for your next vehicle.
Most people who know what they are doing with their money buy cars 1 or 2yrs old and let someone else take the massive loss of buying a new car.
Ok guys/gals, I need some help. My new years resolution is to become debt free and live the rest of my life frugally. I know the basics of paying down debt but need some suggestions. My debts are $900 at 18.99%on credit card which I am vigorously paying off and should be done by the end of February. I have 2 auto loans 1st balance is $10392.96 at 5.95% with 4yrs 6months to go at $219/m, the second is $6253.89 at 5.9% with 3yrs at $189.33/m. I was thinking, the best way to do this is focus on the lowest balance car payment 1st and pay that off, then take that payment and start paying off the other. Is this the best way to do this or should I pay off the higher one 1st. If you need more info please ask and help. Thanks.
Five simple pieces of advice.
1. Pay cash for the next two years. Nothing is better that causing one to pause of purchases when they they physically hand over cash. Otherwise pay with cheque. Do not use credit cards.
2. Unless you need two, sell one car. And I mean need. Use the cash to paydown the other.
3. Really take into account cash flows. Back-of-the envelope guesstimates almost always underestimate outflows.
4. Always be on the lookout for free balance transfers to 0% provided that the rate following the teaser rate is also no worse than what you are paying now. Must be free and post-teaser cannot explode to something immoral like 40%.
5. Try to examine your lifestyle and why you ended up in this position in the first place.
Rule number one: Buy only what you need or have to have and not what you want. Our landlord told me this when we first got married and moved in and I still remember it.
Is that cell phone really necessary. Those things are so expensive and I have lived 64 years without one. Brain tumors are up 25% too. Not having a cell phone may help with medical expenses.
Basic cable only. No movie rentals. If it is not necessary, you don't need it.
Buy groceries that are fresh and not processed. You will be more healthy and eat better on less.
I used to buy a lot of meals out, but since we have retired I find that I prefer to eat my own cooking. The food you get in restaurants, even expensive ones, is not as good as you prepare at home. I can prepare at least two meals at home for the price of one meal out and sometimes I think I can prepare three or four. Invest in a good 30 minute meal cookbook.
Do you have space for a small garden in your yard. My father-in-law called my first garden a sheet garden because it was about the size of a king sized sheet. We ate a lot of food out of that garden and a hoe was the only tool I needed. Tomatoes and cucumbers are so much better fresh out of the garden. You can also plant corn for corn on the cob together with halfrunner green beans and the beans will use the corn as stakes. Green beans are much better fresh too. Plant marigolds around the garden to keep bugs away.
When you start saving, be sure to check the interest rates of all the banks around and choose the highest that is safe. Interest rates count when you are borrowing and saving.
I know sometimes things happen to cause a person to have to make credit card purchases, but any time I start to make a purchase with a credit card, I think, "If I cannot afford to pay 100% for this, can I really afford to pay 120%. I would rather wait on things that are not necessary and save that 20% to purchase something else or maybe save it.
I read a book once on how to be more financially free. It suggested that cutting back is not the only way to deal with this situation. I don't know your circumstances, so I have no way of knowing what your options are about this, but the book suggested a second job or a private at home business. You are the only one that knows whether this will work. My son got a job helping out a neighbor who had an overflow of record keeping. He did this on Saturday morning for 1/2 day only when he would usually be watching TV and not doing anything anyway.
Last edited by NCN; 01-27-2010 at 10:47 PM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
