Credit Card Debt Advice

[suzie02]

Originally Posted by TurtleCreek80

This is crazy! Unless your $10k in debt (or whatever the real number is) is all on 0% interest cards, you are LOSING money every year by not paying those suckers off! Your sense of financial security is warped. Say your debt is at 8% interest- you are going to lose $800 in the next year paying interest you would not owe if you paid them off today. That's $800 more that you may need if you do lose your job.

Also- if you are seriously concerned about losing your job, start networking and putting a Plan "B" together NOW, rather than waiting until the shock of the pink slip hits.

No it isn't crazy in today's economy. In the old days you could count on cc to help you get by during an emergency. Today they will probably close the card as soon as he pays it off.
What is crazy is to have run 10k in debt.

Originally Posted by ambient

Everest209 raises a valid point here. Yes, normally it is preferably to pay down the debt as quickly as possible in order to avoid future interest payments - but only if you have a sufficient cash cushion already set aside. You should have at least three to six months (probably closer to six) of monthly expenses set aside in cash. Do not - I repeat, DO NOT - raid this cash cushion to accelerate your debt repayment. The reason should be obvious: what are you going to eat if you lose your job? You can't pay for groceries and rent today with $800 in future interest payment savings. You will be in a world of hurt and end up worse off than if you had deferred accelerated repayment of your debt for a while and ensured that you had appropriate near-term liquidity for this economic environment.

Actually Suze Orman recommends a 9-12 months emergency fund because it can take that long to find another job.
And yes and emergency fund is only for true emergencies like a job loss or the roof caving in.

[RowingMunkeyCU]

First things first... you MUST have a small emergency fund to get you started.

1. Put $1,000 in a separate bank account that you don't have easy access to. Don't touch it except for emergencies (birthdays, valentines, christmas, etc are not emergencies).

2. Put together a debt snowball and aggressively pay off your debt. This includes making, and sticking to a monthly budget. Making a budget is critical to being able to successfully pay off debt and staying out of debt. You can't pay it off if you spend more than you make. This means you have to figure out where every penny of your money is going every month, don't omit anything. Include a line item in your budget called "Splurge Money" and take that amount out in cash every month, use it for things like "needed mcdonalds, didn't have enough time to make dinner".
Snowball debt calculator - Become debt free at WhatsTheCost.com

3. Put aside 3-6 months net pay in savings if you are married (and both reasonably employed), 6-9 months if you are single (or you're married but only one of you is reasonably employed).

Do these things in this order, and you'll be debt free sooner than you ever imagined.

Along with this, since you're looking at how to spend your refund, I would strongly suggest taking $100 of it and spending it on a Dave Ramsey Financial Peace University course. It is designed for a wide audience of people, from those who are buried in debt and receiving collections calls, to those who are debt free and trying to figure out how to most wisely invest their money. It also incorporates every learning style (auditory, visual, hands-on, reading, etc) so you're guaranteed to find an option that you benefit most from (unlike your standard college course where a professor dictates out of a textbook and says 'good luck').