- March 29, 2024
- Posted by: legaleseblogger
- Category: Related News
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# Seeking Advice on Tackling Debts
I am seeking feedback or advice on the best strategies to address my current debts, which include credit card debt and student loans.
## Credit Card Debts
My credit card debts are noticeable, but this year, I received a $5050 tax return that I intend to use to pay off the balances on my three cards.
## Student Loans Progress
I have been making progress with my student loans. Starting with $114,500 in 2017, I have managed to reduce the balance to $64,930 currently, with loans from Earnest and Navient. While I am proud of my progress, I believe I could accelerate it further by addressing my credit card debts.
## Financial Overview
In addition to my debts, I have $10,000 in savings earmarked for my wedding in September, which I cannot touch at this time. Furthermore, I have $11,000 in my checking account, including the $5050 tax return for 2023, and $1,650 in a new investment account that I recently opened.
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What are the interest rates on the credit cards and your student loans?
I feel like the first thing you need to figure out (or tell us) is what is happening to all your money? Is your table saying there should be 3.6k left after your expenses?
The second thing is that you really don’t have a lot of savings. You can’t afford your wedding and you have less than 3 months of emergency savings…50% of which is a tax refund.
I think some missing info for you to consider is your future partnerÔÇÖs (congratulations btw!) income and debt.
Personally, if the 10k is for the wedding then itÔÇÖs probably nearly spent. ItÔÇÖs not ideal, but I get it, itÔÇÖs gone, moving on.
Some things to think about:
1. What are you doing to avoid racking up CC again?
16k in CC isnÔÇÖt nothing. If I were you IÔÇÖd consider thoe cards closed (mentally) immediately. And not temporarily. With a 5k tax return you likely make decent money, so consider them unavailable and cut them up until you have a plan later. Until then, $16k in cards says you canÔÇÖt use them correctly right now. And thatÔÇÖs okay.
2. WhatÔÇÖs your spouseÔÇÖs income? Under a year until the wedding, and regardless of how you want to handle finances, this conversation should be had a year ago, but the 2nd best time to have it is now.
3. What are your spouseÔÇÖs debts? Is that 80k of yours about to get with 2 salaries, or is it about to turn into 160k between the two of you?
4. Buget buget budget budget, and when itÔÇÖs set, budget it again. And every month after that, revue the budget. Based on the limited info we have your problem is spending. So fix that, and make sure you an your spouse are on the same page.
So it doesnÔÇÖt seem like IÔÇÖm picking on you, my wife and I skirted through the first few years of our marriage and weÔÇÖre *fine*. Once we got serious about paying down debt and saving things got tight for a year or two. But IÔÇÖll tell you, thereÔÇÖs nothing like financial peace of mind. Being able to pay emergencies in cash, being able to pay for cars without needing a 5 year loan. Having savings!!! ItÔÇÖs such a weight off our minds since we got serious.
Do your future selves a favor and get serious now. And congratulations again!
I feel like thatÔÇÖs a lot of debt to be having a wedding for 10k ƒÿ¼
If you have $3640 in money left at the end of the month, use ALL of that to pay off those credit cards, paying the highest interest rate one first, and the minimum payment on the others. Once the highest rate card is paid off, repeat. Once all the cards are paid off, pay them off in full monthly. The, start saving and investing the remaining money.
I like using bullet points for clarity so apologies in advance.
1. Congrats on paying down so much, you should be proud. You’ve come a long way and are actively working to improve it even more. You’re on the right track.
2. Tax Refunds are not additional income. The gov’t is returning the interest free loan we give them from money we already earned and paid taxes on.
3. When paying down debt include your loan interest % in your budget/bills sheet. It’s relevant info to stay aware of & helps stay/get motivated on payoff. You’re less likely to increase that balance when you think about the 22% interest that CC has.
3. You have $0 in savings. I don’t have all relevant info but typically people build an “emergency fund” 1st. It’s hotly debated but ultimately you want to ensure you have access to capital if a life event occured. Cash is obvious but also consider your access to cash through things like CC’s and Lines of Credits you could tap into. Reality is there are few expenses in modern life we can’t put on a CC, maintain enough cash you can sleep without worry.
4. Investments: At minimum, always max out your employer matched retirement contributions. I would always max out contributions to any tax advantaged retirement plan before paying debt. After that, throw every additional dollar to your debt and leave additional investments for after debt payoff.
5. Debt: I’m sure you know all this but will mention. There are [2 primary debt payoff strategies: ](https://www.investopedia.com/articles/personal-finance/080716/debt-avalanche-vs-debt-snowball-which-best-you.asp)l 1.Avalanche(. highest % first). 2. Snowball (lowest balance first). Mathematically, Avalanche is the faster & saves the most $$ but Snowball keeps us motivated with small wins and visible progress and is my recommendation.
Other options: Transfer CC balances to 12-month 0% interest cards, consolidation etc.
6. Other:
– I paid my student loans off with CC points. I treated the points like a savings account, they didn’t buy me more stuff.
– What’s your checking and savings account pay in interest, .1%? You can use a Fidelity cash management account for checking with the benefit of getting 5% interest in your money. They also have a simple, flat 2% cash back CC and debit card. One can play the points game and come out better (maybe & with lot of work), but best return for simplicity.
– Reduce your Big 2Expenses (housing transportation) somehow.
Sorry for length. I’m a personal finance dork and can’t sleep. Good luck.
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