On November 29th of last year, I decided that I was sick and tired of paying interest to the various credit card companies and being constantly broke before my (substantial to me) paycheck was deposited every two weeks.
I happened upon Fatwallet's Finance forum having been a lurker in FW's Hot Deals for at least five years or so. I did a whole lot of reading here and various PF Blogs, as well as starting to listen to Dave Ramsey's radio show.
I decided to use a Dave's Debt Snowball, but modified for mathematical optimization, since I knew that with my debt load and the money I could throw at the problem, staying motivated would not be a problem.
I started by pulling my credit report and scores. My myFICO FICO score was 677. Nothing great, but good enough to demand better rates than 29.99%.
I started with Chase. I called and demanded a lower rate. They offered to convert my card to a Countrywide Rewards card and lower the rate to Prime + 3.99%, which meant 11.49% at the time. I also had unwittingly accrued $100 in rewards. They sent me a check and transfered my payment history to the new account. Since I had never been 30 days late on the account and this was my second oldest card I thought this was all around a good deal.
I could not get the other companies to budge on their rates, so I decided to open some 0% BT cards. I decided on a Capitol One card and a Chase Disney Rewards card. Between the two of them I got $4k in more credit and transferred $3450 to them.
I decided to make something of a budget. I would pay my bills and $1,600 to my credit cards each month, which would leave me with approximately $1000 per month to live on. Since I jumped in to this budget with almost no forethought, the first two weeks were extremely tough as I had to live on $100. Luckily it was Christmas time and I got a timely $50 gift of cash.
Since then, I have put any extra money I've been able to scrape up towards my debt. I opened a Charles Schwab High-Yield Investor Checking Account to help force me to start saving and investing once I finished paying off my credit card debt. I also decided to open a Charles Schwab Rewards Visa to force my self to become responsible in my use of credit.
As of today, this is my CC Debt Load:
I know that most of FWF won't like it, but I plan to close the Best Buy, Capitol One, HSBC, SST, and Suntrust cards. It will hurt my credit score but I am not planning to take out any loans any time soon.
I pay off the Schwab Visa in full each month and just got my first $50 in rewards directly deposited to my Investor Checking yesterday. The statement balance on this card is generally $1,100.
My only fears right now are a complete lack of an emergency fund. That will be my first step over the next two paychecks to start my $1000 emergency fund. Once I have that, I will split my money between investing in mutual funds with Schwab and putting money in my UFB Direct Savings account. I plan to open and fully fund a Roth IRA at Vanguard ASAP. I will open at the $3k minimum then get it up to $5k as quickly as I can. My only debt currently is a student loan with a balance of $3,300 at 2.65%.
On Jan 1st 2008, I had CC debt totalling $7,375 and a liquid net worth of approximately -$5,200. I set goals of paying off my CCS by the end of April and increasing my net worth to $10k by the end of the year. Currently my liquid net worth is approximately +$1,000, so I am more than 40% of the way there already. My myFICO FICO score has risen from 677 to 739.
I can't even imagine living like I used to. What a waste of my hard earned money! Thank you FWF for helping me learn how to get out of debt, and begin building wealth.
Congrats on sticking to your plan to attain financial freedom. I would suggest that you should build your 6 months of emergency fund before investing in mutual funds.
great job on getting rid of your debt. i agree with the poster above that you should start building some sort of EF. also you can now start to live normally again however if you can stick the way you lived when paying off the debt for few month that EF will grow quickly. good luck.
nicely done fixing your credit. feels nice to have a positive net worth, don't it? why not stick the cards in a sock drawer instead?
NewNole2001
Member
posted: Apr. 16, 2008 @ 12:12a
Thanks so much everyone! I'd like to sit here and say that it was such hard work, but really, it wasn't, I just needed to direct my money in the proper direction.
Hindustani said: Congrats on sticking to your plan to attain financial freedom. I would suggest that you should build your 6 months of emergency fund before investing in mutual funds. Hindustani, I have read many of your posts, so I do defer to your knowledge of the subject; however, here is my argument for going ahead and starting investing:
With the market down, I feel that I can get more bang for my buck by buying in now.
My plan currently is to invest $500 in to Schwab's S&P 500 Index fund on the 15th of each month. I will be putting $800 towards savings/emergency fund each month.
Given my current expenses, in the event of losing my job, I would need approximately $1700 per month to maintain my standard of living. I could easily knock this down to between $1000 and $1100 per month.
So this means that I would need $7000 (let's be generous in this calculation) to have a six month emergency fund. This would take me about 9 months at $800 per month. With my current work situation, I know that my job is secure through at least November 1, and with the contract my company currently has with our client, I would say I'm 75% secure through summer 2010.
Between now and November 1, I can save up $6,400 in my emergency fund with the plan as I have it written out.
Given that information do you think I am okay to go ahead and start investing 1 month from today? Thanks for the advice.
To the people begging me not to close the cards, I would be willing to keep them open, but having to remember to use them every once in a while would be a pain for me. The Suntrust and SST cards I don't believe I can set up automatic bill payments with Schwab's Bill Pay. At the very least I want to close the SST card. It was originally a Providian card but my crappy way with my finances got it sold to SST. Everything I have heard about SST tells me they are a worthless company.
s1235
Member
posted: Apr. 16, 2008 @ 12:22a
NewNole2001 said: To the people begging me not to close the cards, I would be willing to keep them open, but having to remember to use them every once in a while would be a pain for me. The Suntrust and SST cards I don't believe I can set up automatic bill payments with Schwab's Bill Pay. At the very least I want to close the SST card. It was originally a Providian card but my crappy way with my finances got it sold to SST. Everything I have heard about SST tells me they are a worthless company.
Why not just not actively close them and see what happens? I have some cards that don't see activity for years and haven't been closed. As long as you're not paying any fees, there's really no harm.
NewNole2001 said: Thanks so much everyone! I'd like to sit here and say that it was such hard work, but really, it wasn't, I just needed to direct my money in the proper direction.
Hindustani said: Congrats on sticking to your plan to attain financial freedom. I would suggest that you should build your 6 months of emergency fund before investing in mutual funds. Hindustani, I have read many of your posts, so I do defer to your knowledge of the subject; however, here is my argument for going ahead and starting investing:
With the market down, I feel that I can get more bang for my buck by buying in now.
My plan currently is to invest $500 in to Schwab's S&P 500 Index fund on the 15th of each month. I will be putting $800 towards savings/emergency fund each month.
Given my current expenses, in the event of losing my job, I would need approximately $1700 per month to maintain my standard of living. I could easily knock this down to between $1000 and $1100 per month.
So this means that I would need $7000 (let's be generous in this calculation) to have a six month emergency fund. This would take me about 9 months at $800 per month. With my current work situation, I know that my job is secure through at least November 1, and with the contract my company currently has with our client, I would say I'm 75% secure through summer 2010.
Between now and November 1, I can save up $6,400 in my emergency fund with the plan as I have it written out.
Given that information do you think I am okay to go ahead and start investing 1 month from today? Thanks for the advice.
To the people begging me not to close the cards, I would be willing to keep them open, but having to remember to use them every once in a while would be a pain for me. The Suntrust and SST cards I don't believe I can set up automatic bill payments with Schwab's Bill Pay. At the very least I want to close the SST card. It was originally a Providian card but my crappy way with my finances got it sold to SST. Everything I have heard about SST tells me they are a worthless company.
Good luck OP, and thanks for the post. P.S. I love the red of poo in the evening. (Not so much on the morning.) P.P.S. I think you should try for a Hooters card.
You seem to have everything worked out. Nice to see people taking control of their financial lives and not blaming the government or the economy for it. Best of luck with everything.
An EF is not so crucial if you have plenty of available credit on unused credit cards. This is another reason to not close the cards. Obviously, you don't want to have to go this route, but I think the OP has a pretty good handle on his finances, and could weather the storm if he needed to.
PerkGetter
Senior Member
posted: Apr. 16, 2008 @ 8:11a
Congrats - I feel your achievment. I was in a similar boat - but with $43,500+ in debit and similar high interest rates. It took me years and years of 0% balance transfers, budgeting, and motivation to pay that off. Like you, I had no emergency fund. Well, now it's 7 or 8 years later, and I'm way past building that emergency fund - have years of expenses saved up. I live the FW lifestyle now, and I have more money saved than I ever imagined.
Congrats OP. I echo others who are applauding your honesty and willingness to change for the better.
s1235 said: Why not just not actively close them and see what happens? I have some cards that don't see activity for years and haven't been closed. As long as you're not paying any fees, there's really no harm.
This is excellent advice, FWIW. I don't know anything about SST, but assuming they are a "subprime exclusive" lender, that might be the one exception. If you close it, it might be removed altogether from your credit reports over time, particularly if you dispute it. That will help remove any "subprime stigma" from your profile.
Congrats! I'm copying your message here and posting it on the forum that my friends have set up. I know that they are in a similar situation as you were, and they seem to be at a loss at what to do. Hopefully your story will be an inspiration.
Great job, its amazing what a little planning and budgeting can do for people. You've now gone from credit working against you to being in the position to make it work for you (next stop AOR).
NewNole2001 said: Just wanted to toot my own horn for once.
On November 29th of last year, I decided that I was sick and tired of paying interest to the various credit card companies and being constantly broke before my (substantial to me) paycheck was deposited every two weeks.
I happened upon Fatwallet's Finance forum having been a lurker in FW's Hot Deals for at least five years or so. I did a whole lot of reading here and various PF Blogs, as well as starting to listen to Dave Ramsey's radio show.
I decided to use a Dave's Debt Snowball, but modified for mathematical optimization, since I knew that with my debt load and the money I could throw at the problem, staying motivated would not be a problem.
I started by pulling my credit report and scores. My myFICO FICO score was 677. Nothing great, but good enough to demand better rates than 29.99%.
I started with Chase. I called and demanded a lower rate. They offered to convert my card to a Countrywide Rewards card and lower the rate to Prime + 3.99%, which meant 11.49% at the time. I also had unwittingly accrued $100 in rewards. They sent me a check and transfered my payment history to the new account. Since I had never been 30 days late on the account and this was my second oldest card I thought this was all around a good deal.
I could not get the other companies to budge on their rates, so I decided to open some 0% BT cards. I decided on a Capitol One card and a Chase Disney Rewards card. Between the two of them I got $4k in more credit and transferred $3450 to them.
I decided to make something of a budget. I would pay my bills and $1,600 to my credit cards each month, which would leave me with approximately $1000 per month to live on. Since I jumped in to this budget with almost no forethought, the first two weeks were extremely tough as I had to live on $100. Luckily it was Christmas time and I got a timely $50 gift of cash.
Since then, I have put any extra money I've been able to scrape up towards my debt. I opened a Charles Schwab High-Yield Investor Checking Account to help force me to start saving and investing once I finished paying off my credit card debt. I also decided to open a Charles Schwab Rewards Visa to force my self to become responsible in my use of credit.
As of today, this is my CC Debt Load:
I know that most of FWF won't like it, but I plan to close the Best Buy, Capitol One, HSBC, SST, and Suntrust cards. It will hurt my credit score but I am not planning to take out any loans any time soon.
I pay off the Schwab Visa in full each month and just got my first $50 in rewards directly deposited to my Investor Checking yesterday. The statement balance on this card is generally $1,100.
My only fears right now are a complete lack of an emergency fund. That will be my first step over the next two paychecks to start my $1000 emergency fund. Once I have that, I will split my money between investing in mutual funds with Schwab and putting money in my UFB Direct Savings account. I plan to open and fully fund a Roth IRA at Vanguard ASAP. I will open at the $3k minimum then get it up to $5k as quickly as I can. My only debt currently is a student loan with a balance of $3,300 at 2.65%.
On Jan 1st 2008, I had CC debt totalling $7,375 and a liquid net worth of approximately -$5,200. I set goals of paying off my CCS by the end of April and increasing my net worth to $10k by the end of the year. Currently my liquid net worth is approximately +$1,000, so I am more than 40% of the way there already. My myFICO FICO score has risen from 677 to 739.
I can't even imagine living like I used to. What a waste of my hard earned money! Thank you FWF for helping me learn how to get out of debt, and begin building wealth.
You are my hero. Seriously. My wife and I have managed to pay off several thousand dollars worth of CC debt (no interest for 2 years crap), and we now have 1 cc bill left. I was stupid and bought a motorcycle on a yamaha CC. I was smart--in that I bought one of the least expensive models...but I was stupid for not realizing, or not caring, that I was basically putting it on yamaha's credit card.
We have since transferred it to a low-interest US Bank card with no transaction fee and sending in $500/month. We'll have it paid off in about a year.
Then, we're debt-free.
We have some savings, but we are also building up an emergency savings account every month with an automatic payroll deduction.
lray said: WTF, this thread doesn't help anyone or anything.
And how was your post "helpful????"
Nice job OP! Been there myself. You don't have to use those cards once they hit a zero balance, just keep them tucked away safely.
I wound up using a card I hadn't touched in a year last month after they offered me $100 back as a credit for spending $500. I was going to spend that anyway for a workshop, why not get back some of it? Paid it off, and back to the "sock drawer" it goes until the next offer (for something I was going to spend responsibly anyway.)
indo79
Member
posted: Apr. 16, 2008 @ 3:35p
Congratulations OP!
I was in a much worse position than you 3-4 years ago, and had cc bills of $18k, credit scores of 500-520, decided to clean myself up and now have $8000 in cc debt at 0%, $97k in available credit, and a credit score in the mid 700s
max210
Member
posted: Apr. 16, 2008 @ 3:50p
lray said: WTF, this thread doesn't help anyone or anything.
Oh it's very helpful.. gets me pumped up to do the same with my student loan.
I hope to re-join you in the debt free club in a couple weeks. Wife and I paid off about $58k in the last 20 months...and were debt free except the house for all of 2 days. We didn't do the EF because of high revolving limits available...we just decided to go straight after the debt. Two days after paying off the last CC, the dog got sick with canine pancreatitis. That was a $500 vet bill. Then the wife booked a Disney trip. Then came a dental bill. Then we got some hellacious storms last week in Dallas. Anyway, we'll be back on track in two weeks. Its one thing to get there, another to stay there. Sounds like you've got it well planned out!
NewNole2001
Member
posted: Apr. 16, 2008 @ 4:40p
Thanks to everyone for the well wishes.
I will update the original post from time to time to keep up with my progress, if people would like.
Seems like there are some great trolls over at The Consumerist. Sucks for them that nothing can make them happy.
Also, what a surprise to have this posted over there unsolicited. Hopefully people will take my story for what it is: If you are in debt, the simplest way to get out of debt is to cut out all the stupid, wasteful spending and put that money towards your debt. Every little bit helps. Even if it's only $20.
I definitely had an easier time of this than most, but I don't think that is the point.
To celebrate, I will be playing basketball with friends and then going out for oysters at my favorite dive. Basketball = free, oysters = special price tonight, and the owner might give me some free ones to celebrate!
Since I jumped in to this budget with almost no forethought, the first two weeks were extremely tough as I had to live on $100.
And THAT is why you succeeded. The path to succeeding in your financial goals is to stick to it, regardless. It is too easy to succumb to temptation, to tell yourself that it is ok to break the rules because of XYZ (ie, it's only the first week so it doesn't count, or it's Christmas, or I really want a new toy, or whatever.) You set your goals. You made your rules to live by - and you lived by them.
Congrats - you are my hero for the day.
ArbolLoco
Tired Member
posted: Apr. 16, 2008 @ 4:57p
NewNole2001 said: Also, what a surprise to have this posted over there unsolicited.Ever since I posted the "Secrets of CC CSRs" story over here there has been a bunch of spam going both ways, from here to Consumerist and back again. I'm sure someone from here suggested this story... since they're what you could call... "bereft" of good content lately.
chocoruacal
Cranky Member
posted: Apr. 16, 2008 @ 7:08p
Okay, get ready to skewer me but...
If you had at least $1,600 of disposable income each month to throw at the credit cards, how'd you rack up $9,000 on them in the first place? You seem to indicate that after paying your monthly bills and paying $1,600 to the CC, you still had $1,000 a month to "live on." I think it's great you paid down your debt, but using an extra $1,600 a month instead of [twinkies, strippers, champagne, xbox 360 games, what?] doesn't seem like such a great feat
NewNole2001
Member
posted: Apr. 16, 2008 @ 7:25p
chocoruacal said: Okay, get ready to skewer me but...
If you had at least $1,600 of disposable income each month to throw at the credit cards, how'd you rack up $9,000 on them in the first place? You seem to indicate that after paying your monthly bills and paying $1,600 to the CC, you still had $1,000 a month to "live on." I think it's great you paid down your debt, but using an extra $1,600 a month instead of [twinkies, strippers, champagne, xbox 360 games, what?] doesn't seem like such a great feat
I racked up about $7k of it while being a stupid college student. The other $2k came last year just wasting money.
I honestly don't think what I have done is any great feat. I constantly tell my friends that I have had it easy in this little journey.
When I have some time later I will add to my original post to explain the various fits and starts I went through over the past three years before I finally buckled down and did it.
For me, the most important thing is that I in a month or two, I will stop caring what day payday is.
Honestly, I probably could have put even more than $1600 per month if I had buckled down even harder. I moved in to a cheaper apartment during all of this, so my bills have actually gone down. I now live well below my means, and am planning to keep it that way as long as possible (that doesn't really make the girlfriend happy, but she's learned to deal with it). I, by no means, live an uncomfortable life because of it, but I am trying to be an example of how well one can live on $1700/month after taxes. Granted, being single and without kids helps, but still, the biggest problem facing people in this country is the fact that they want to live either at or beyond their means. *Screw the Joneses*
Like I said in the first post, I'm just wanting to toot my own horn a bit, but my main goal is to get at least one person to see the light and get themselves out of debt.
Now, everyone! Skewer me Consumerist style!
kilacam19
Senior Member
posted: Apr. 16, 2008 @ 7:31p
Can you post an exact breakdown of you month to month budget?
Skipping 38 Messages...
mryan
Member
posted: May. 7, 2008 @ 10:00a
i too am a recovering CC idiot. going from 32k and paying it down to 9k over the last year and a half. Currently now I pay atleast 2k a month off of my card as I've got a good paying job and waaaay better spending habits. I hope to pay off all of it by Sept. this year and finally start using my money to invest/buy a house. Lesson learned from terrible CC usage in my late teens/early 20's.
went from 8 active CC'S to now just 3.. 2 of which with no balances. Did not want to kill my credit score even more by closing all of them. sitting at a 740 and dreaming of someday getting 800.
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