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Start listening to Dave Ramsey and go to his sponsered seminars. Get a budget and a 2nd job and knock down that debt. Can you borrow against your Roth through work?
Get those 25% interest CC's paid off and tear them up.
Agree. This person is a good candidate for the Dave Ramsey program.
Well I haven’t put anything into it for about 3 years. That’s more then a 5% return on my money, doesn’t sound that bad. I may have earned closer to 2500, didn’t do exact numbers. I also have not done a real budget because my income is so up and down but I have gave myself an amount per if I e it.
It's a terrible return. Stock market returns have been very strong over the past 3 years, and your balance has barely budged. Why is that? How are you investing this money? You need to learn the basic principals of prudent investing so your money can grow.
Pulling out Roth monies to pay off 0% consumer debt is a great way way to stay poor all of your life. Don't do that. Instead, get yourself a written budget. Start living below your means and using the excess to get out of debt.
Start with the big expenses, such as housing and transportation. What are you spending? Is it too much for someone who makes 40k per year? If so, how can you reduce expenses? Examine every expense, but definitely start with the big ones.
Do NOT declare bankruptcy and do NOT take money out of your Roth. Best answer is to go on a tight budget and try to find a 2nd job and throw all that money at the cards with the highest interest rates. You may want to start putting some of what you're saving toward this debt too, especially if you have higher interest rates than what you're making in returns on the Roth. But keep what you have in there because it has many years to work for you and that's the best gift for yourself in 40 years. Second best is to get creative on making more money to pay down your cards now.
Best advice here. I would add that you need to get rid of most of those credit cards. In the future, you'll be less tempted to play a shell game with debt by switching it between cards, and you'll cut down on the risk of having a CC compromised and having to deal with fraud issues. Nobody needs 20 credit cards.
Take the 8k that you put aside, and pay the cards that will soon hit a high interest rate. If interest remains small across all your cards for a while, tackle the ones with the biggest debt to limit ratio.
Consider the Roth money your emergency fund, until you get back in shape. Hopefully there will be no real emergency...
Of course, forget solution 2 (bankruptcy). It's not just bad for your credit, but also for your psyche.
Also, as Electrician4you and others have said, see if/where you can cut expenses.
Good luck, you can do it. Hopefully you learned from this, and you'll never let yourself get in a similar situation. Next time might not be that easy to get out of it without long lasting damage, simply because you'll be older. Now you're still young, and time is still on your side
I agree, do NOT file bankruptcy ( it'll take you 7 to 10 years to get back your credit standing), do NOT borrow from your Roth ( as noted it will continue to grow if you find a greater investment in it, and you'll never get that money back).
DO develop a budget, write down EVERYTHING by category and DO go to a cash based spending. You will see where you are spending what, and will be surprised how much you do actually spend as your cash goes down. Find out what you can save on, keep heat at 62f and wear sweaters, sweat a little in heat and save on a.c.. cut your electrical consumption by unplugging anything NOT in use, except rebooted things. Cut cable except net and phone if it's through them, you'd be surprised at how you WON'T MISS having 3689 channels of nothing to watch.
Once you get to a bare bones budget, use cash to pay bills, write checks instead of auto pay, so you actually see your cash dwindling.
DO get a second and or third job. Even 20 hours at McDonald's flipping burgers at $8/ hr bring in $160/ week, or probably $125/week after taxes, that's $6,500 a year to devote to debt repayment. Coupled with budget savings should be at least $8k or more to devote to debt repayment.
You already explored bankruptcy and don't like it, good. Ive neber done bankruptcy, but my OH did, it was torment to restore OH s credit. I HAVE developed just where you are, once, and apparently haven't learnsd ny lesson as we are now in the same boat, please OH please be sure you HAVE learned your lesson!!! We bought a house and while we had cash to do the remoremodelling and updating, we instead paid down the principal and CHARGED the doings and furnishings, we didn't see it until damage done as it was all smaller amounts, but it all added up quickly. So now it will be 3.5 years before we get out if the hole! I am disabled, and CAN earn in addition to my SSDI, so I've returned to work, I am in a period where I can earn as much as I want, so I am getting a second part time job. My OH has had two jobs, but it only approximated a full time job, and now has taken on extra hours at one job. We are funneling and snowballing to clear it faster than 3.5 years! So i guess I DID NOT learn my lesson!!! I'm back where I was when I was your age!
When you get a budget, cut back where you can, and list a your debt, then you'll know where yo are, and seeking a second job will help you attain your goals. Then your second/third job/s will help you apply to it.
Post back here when you have a full budget as it exists now, so we can help you cut cut cut. Then post your debts and well help you design a snowball. Then with your additional job/s, we can help construct your new pay down budget, if you'd like.
Thank you for all the great responses! Seems like most of you have suggested not to pay off my debt using my Roth, mainly because you believe I will have not learned anything by taking the “easy” way out. Instead I should be working hard and paying the debt off slowly as I watch the experience unfold going from my debt currently to 0. I fully understand that, also be assured I have definitely learned my lesson and I will never be in this scenario again. And I definitely know how I got into this situation. How I got into this situation was by using zero interest rates credit cards and saying “oh I’ll pay them off slowly”. 2 huge transactions I can account for right away was a vehicle I paid off onto a credit card for approx 6k. Another was a bad investment buying a diesel truck and investing 9k into it trying to fix it and keep it running, thinking, “it will have to work sometime, it’s running on almost brand new engine” that happened to not be the case and it kept breaking down. I had to eventually call it and say enough is enough, so I sold it. So I can account for 15k off the top of my debt right away, the rest was paying for insurance (because of not working enough hours, insurance is supplied through my employer), traveling, and bad spending habits.
With that said, many of you have also stated I should get a second job to tackle debt. I actually have 2 good jobs, both part time. I choose not to be full time because of personal plans and career choices I hope to accomplish in the near future. However one of the jobs is I bartend on the strip in Vegas, so my income is VERY flexible. I can make much more then my stated income or I can make much less. Working 5 days a week for the full year like a full time person does equates to a little less then 40k before tips and before taxes. I just need to work! Being part time I find myself always passing on shifts instead of accepting and working them. My other job is flexible, I choose my shifts online as little or as often as I choose. So I have the ability to work as much as I want. I plan to change my habits of not working as much to working a lot to hopefully pay off a lot of this mess by the end of next year.
As far as budgeting, I definitely need to get better at budgeting. Right now I ball park my expenses that I give for myself, $300 a month for all expenses including restaurants, groceries, etc. $300 a month for gas (3 vehicles, 2 I own, only one car loan) and I’ve been trying to strictly stick to that. I know before I get asked, “Why 3 vehicles?? Sell some of them, and put the money toward the debt”. Well they have all different purposes and I don’t plan to sell any of them at this time. The reason I budget that way is because I don’t have exact numbers of my income, but an idea. My jobs are both very flexible with my income. This is the good news to my situation. I have the resources in place, I just need to execute them now!
Also after thinking it through and listening to what you guys said, I have decided I will not take the money out of my Roth. I will take my time and pay my debt off. My goal is to have it paid within 2 years, time to buckle down! I will work as much as I can and be more frugal. I have decided this mainly because I am not in any rush at the moment to pay off debts as they are still 0 interest rates, even if I have to balance transfer a few more times to save on interest rates. With the max I can put into a Roth at $5500, it would take me 5 years to replace the $30k I would have taken out. Having debt is more flexible. I can pay off lump sum if I have the cash, I cannot do the same if I had a lump sum and wanted to replace my Roth with the 30k. I would have to put the cash into it slowly maxing it at only $5500 a year over 5 years.
I also may have to research for some better investments as many have mentioned I do not have the best return on my money currently.
Thank you all again for all your constructive criticism, suggestions and support, definitely greatly appreciated!!
Thank you for all the great responses! Seems like most of you have suggested not to pay off my debt using my Roth, mainly because you believe I will have not learned anything by taking the “easy” way out. Instead I should be working hard and paying the debt off slowly as I watch the experience unfold going from my debt currently to 0. I fully understand that, also be assured I have definitely learned my lesson and I will never be in this scenario again. And I definitely know how I got into this situation. How I got into this situation was by using zero interest rates credit cards and saying “oh I’ll pay them off slowly”. 2 huge transactions I can account for right away was a vehicle I paid off onto a credit card for approx 6k. Another was a bad investment buying a diesel truck and investing 9k into it trying to fix it and keep it running, thinking, “it will have to work sometime, it’s running on almost brand new engine” that happened to not be the case and it kept breaking down. I had to eventually call it and say enough is enough, so I sold it. So I can account for 15k off the top of my debt right away, the rest was paying for insurance (because of not working enough hours, insurance is supplied through my employer), traveling, and bad spending habits.
With that said, many of you have also stated I should get a second job to tackle debt. I actually have 2 good jobs, both part time. I choose not to be full time because of personal plans and career choices I hope to accomplish in the near future. However one of the jobs is I bartend on the strip in Vegas, so my income is VERY flexible. I can make much more then my stated income or I can make much less. Working 5 days a week for the full year like a full time person does equates to a little less then 40k before tips and before taxes. I just need to work! Being part time I find myself always passing on shifts instead of accepting and working them. My other job is flexible, I choose my shifts online as little or as often as I choose. So I have the ability to work as much as I want. I plan to change my habits of not working as much to working a lot to hopefully pay off a lot of this mess by the end of next year.
As far as budgeting, I definitely need to get better at budgeting. Right now I ball park my expenses that I give for myself, $300 a month for all expenses including restaurants, groceries, etc. $300 a month for gas (3 vehicles, 2 I own, only one car loan) and I’ve been trying to strictly stick to that. I know before I get asked, “Why 3 vehicles?? Sell some of them, and put the money toward the debt”. Well they have all different purposes and I don’t plan to sell any of them at this time. The reason I budget that way is because I don’t have exact numbers of my income, but an idea. My jobs are both very flexible with my income. This is the good news to my situation. I have the resources in place, I just need to execute them now!
Also after thinking it through and listening to what you guys said, I have decided I will not take the money out of my Roth. I will take my time and pay my debt off. My goal is to have it paid within 2 years, time to buckle down! I will work as much as I can and be more frugal. I have decided this mainly because I am not in any rush at the moment to pay off debts as they are still 0 interest rates, even if I have to balance transfer a few more times to save on interest rates. With the max I can put into a Roth at $5500, it would take me 5 years to replace the $30k I would have taken out. Having debt is more flexible. I can pay off lump sum if I have the cash, I cannot do the same if I had a lump sum and wanted to replace my Roth with the 30k. I would have to put the cash into it slowly maxing it at only $5500 a year over 5 years.
I also may have to research for some better investments as many have mentioned I do not have the best return on my money currently.
Thank you all again for all your constructive criticism, suggestions and support, definitely greatly appreciated!!
I would quibble with you on some of the details (3 cars? Really? Can't you rent one if you need a different type?), but you are on the right track with not taking from the Roth, not declaring bankruptcy, and being willing to work more and spend less.
The investment piece is pretty easy. There is definitely more than one good option. But the short list is Vanguard Funds. They offer a lot of funds. People will give you different advice as to which one(s) you should invest in. It sounds like you really need to learn the basics of investing. It isn't that hard. Just take the time. I still recommend a fund like Vanguard Wellesley Income for someone like you because you really don't know what you're doing yet. You can get a little more aggressive once you have a better understanding of stocks and bonds and how they perform, especially during stock market downdrafts.
Well I haven’t put anything into it for about 3 years. That’s more then a 5% return on my money, doesn’t sound that bad. I may have earned closer to 2500, didn’t do exact numbers.
You should figure out what amount you actually put in from your brokerage. Remember if you take out any of the interest or growth, you will pay a penalty on it as you're under 59.
You might be surprised at how much it's actually grown. 5% over three years is actually a very low return for equities.
I just checked my brokerage account and it says my earnings/gains are up $4100/27.82%. I guess I didn’t have correct information in the past posts with Roth. I have 12k not invested in anything and the balance of that invested in which it’s gained 4100. The reason why 12k is not invested is because I don’t know what to buy. Sorry about that misinfo, that explains why I thought my gains were so low. Can you guys provide me with some examples of some good buys right now? I read someone mentioned the vanguard s&p 500, it looks like it’s at its high right now, still a good purchase?
Also someone mentioned vanguard wellesley. That is not available for purchase for me. Could it be because I am not with vanguard as my broker? Which brings me to my next question, I’m currently which scottrade (who is currently being bought out by td ameritrade). Should I stick with them or which brokerage company do you recommend?
I just checked my brokerage account and it says my earnings/gains are up $4100/27.82%. I guess I didn’t have correct information in the past posts with Roth. I have 12k not invested in anything and the balance of that invested in which it’s gained 4100. The reason why 12k is not invested is because I don’t know what to buy. Sorry about that misinfo, that explains why I thought my gains were so low. Can you guys provide me with some examples of some good buys right now? I read someone mentioned the vanguard s&p 500, it looks like it’s at its high right now, still a good purchase?
Also someone mentioned vanguard wellesley. That is not available for purchase for me. Could it be because I am not with vanguard as my broker? Which brings me to my next question, I’m currently which scottrade (who is currently being bought out by td ameritrade). Should I stick with them or which brokerage company do you recommend?
The S&P 500 Stock index has been reaching all time highs. It's going to fall at some point. No one knows when that will be. The problem with being 100% in stocks is that a fund that's 100% stocks WILL go up and down a lot, and it's nearly impossible to predict the timing. The key to getting good results is BEING CONSISTENT. Put money in a reasonably diversified vehicle like the ones I list below, keep adding money, and leave it alone (i.e. don't move from fund to fund).
I would recommend moving your assets over to Vanguard.
However, there are other good balanced funds that are worth considering if you don't want to do that.
Berwyn Income (rough equivalent to the conservative Vanguard Wellesley Income).
Somewhat more aggressive balanced funds that are also worth a look:
Dodge & Cox Income
Vanguard Wellington (I think you have to have an account with Vanguard only for this fund).
Oakmark Equity & Income
Fidelity Balanced
Mairs & Power Balanced
Any one of the above funds will do.
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