Put Up or Shut Up
Posted by Gail | Filed under Credit Wise
Here’s a letter I received recently. This is an example of why we’re in such a mess financially, and how our compulsive spending is ruining our lives.
Gail, you say that our debt repayment should take no longer than three years or else debt fatigue will set in. We have been paying over $1000 per month in debt payments for over 3 years already and if we completely stopped having any form of a life, we would still have at least 3 years left to pay down all our debt. We are drowning in the $35,000 we owe and it is impossible to see the light at the end f the tunnel. I am still in school and my husband is angry over not having any money. We are extremely irresponsible with money and although we are in a huge financial mess, I still am thinking about the sale at the store downtown and how I really need some new clothes. We talk about money and our finances often but can’t manage to stick to a plan. I graduate in December and will be looking for work immediately after but I am afraid that no matter how much money we make we will always have spending and debt issues. We need help desperately. We have been to a credit counselor and their only suggestion is bankruptcy which we are completely against. I have already had my car repossessed a few months ago and would like to keep my husbands credit in tact if we can. Sorry for the long question but we are in trouble. Any suggestions or ideas would be greatly appreciated. Thanks
When I tell people about debt fatigue, they only half believe me. They think, “Hey, those payments aren’t so bad.” But here’s the problem with just making the payments as opposed to actively paying off the debt: you eventually run out of steam. Just making the payments means you’re willing to settle for the amount of debt repayment that fits into your budget. Actively paying off the debt means you decide how much it’ll take to get to debt free and then you do whatever you have to. Just making the payments is what most people do so they end up frustrated, angry and depressed. Paying off the debt is what it takes to make a different life.
At the crux of this young lady’s issue is an unwillingness to do the really hard thing: put up the money to get out of debt. Equally hard: to stop spending money. Yes, it’s easy to talk about, but as a consumer-driven society with temptation around every corner, Not Shopping is really, really hard.
Continuing to do what you’ve always done is harder in the end. Ruined credit histories, ruined relationships and ruined lives testify to the fact that our inability to Stop Shopping will end badly. And our unwillingness to take the bull by the horns and get the fricken’ debt paid off no matter what it takes means we live in Debt Hell for eons.
At some point this woman has to draw a line in the sand and say, “Enough!” She and her partner must make a debt repayment plan that sees them out of the hole. She cannot spend a dime on anything that isn’t an essential expense until the debt is gone. And while they are tightening their belts until they squeek, they must, as a couple, find the things that they love to do together, so they can still laugh, have fun, and feel like they have a life.
Getting to debt free isn’t rocket science. But it does take gumption. You can whine about how hard your life is, or you can decide to take responsibility for the mess you made and do whatever it takes to clean up the poop. You didn’t need any help getting into debt, and you’re going to have to rely on your own resources to get yourself out. The question is: Are you up to it?
September 24, 2009 at 7:14 am
This is a sad story. Sad in that to accumulate that much debt without any insight is akin to being a drug addict or alcoholic.
You can handle things at first, but the behaviour simply increase until you are unable to handle things. You are in denial and hide things from other people. Your partner is angry but you are unable to stop spending!
Trying to hide that you are out of money or trying to shop your way to feeling like you do have money (credit, albeit) just leads to more debt and anxiety.
This couple needs therapy.
Are there spending interventionists? Oh, yah…..Gail!!
September 24, 2009 at 8:29 am
I hope that the couple does sit down and make a real debt repayment plan. If they do that, it might give them enough energy and confidence to work hard enough to get it paid off.
Living on a budget can be a fun challenge if you approach it right – you see this with some of the couples on the show, who work hard but also work as a team. They come up with creative ways to have fun and in some cases go even above and beyond what Gail suggests they do.
I think this is really important too:
“they must, as a couple, find the things that they love to do together, so they can still laugh, have fun, and feel like they have a life.”
What I hope the woman realizes is that shopping CAN be replaced by other wonderful things in life! Changing habits is always hard, but it’s easier if you concentrate on what you CAN do, rather than what you cannot. If her and her husband make a list of things they can do that are free and/or cheap (and there are lots if you get creative enough) then getting out of debt will be easier and more conducive to a healthy relationship.
September 24, 2009 at 8:49 am
We only briefly ran up “foolish” consumer debt (Line of Credit) once a few years ago. We unexpectedly had to drill a second well ($10/foot…350+ feet..) Then we agreed to host my sister’s wedding at our not quite complete new home. That meant moving up the last few projects and the extensive landscaping we’d been saving to do 3yrs in the future. We put the thousands we were short on the LOC.
We had put the LOC in place while the house was under construction. We paid cash for a lot of things, but for the big items we put whatever we were short on the LOC, and then quickly paid it off. This last quick run up of debt was much harder to deal with since it wasn’t really planned. We were by this point paying a mortgage (taken to repay the relative who provided the start up capital), utilities, property taxes and all the normal expenses of life. We also had a child in private school which made for a ridiculously tight budget. All that to say, that after many years of carefull planning and fast repayment of all consumer debt, we had still allowed ourselves to slip quickly into debt at a time when we had no room in the budget to ramp up the repayment. That LOC balance hovered virtually unmoved at $20k for 5 years, while we paid barely more than the minimum. After 5yrs the private school era ended (child no longer required specialized small class instruction) and we were finally able to redirect that $1200+ per month and clear the debt. The key through all phases of our life is that, with the exception of the wedding related debt, we’ve always had a clear vision of what we were working toward and put on blinders to any non-essential purchase. We simply don’t buy anything we don’t NEED.
I hated looking at that balance on the LOC sitting there for those years and feeling powerless to get rid of it while we put our child’s education first. By redirecting the school tuition to the LOC and continuing on the same tight budget for 2yrs we finally cleared the debt and haven’t used it since. During those 7yrs of school fees and debt repayment we bought virtually nothing beyond food, gas, haircuts, and Christmas gifts for others (not ourselves). After living in that mode for so long you’d think we’d go a little crazy after, but we’ve found we still live a very frugal day to day existence and save the extra for travel and early retirement. Regarding the writer Gail referenced above, who acknowledges the mess but still thinks she “needs new clothes”… It’s time to do more than talk about fixing the mess. Either you’re committed or you’re not. You got yourself into this mess and you have the power to get out. If you want to. Do you really need new clothes? I figure unless you have had a major body change (pregnancy or weight fluctuation) or you work in a job which is tough on clothes, then most of us could go a couple of years on what we already have jammed in our closets. Really. You may be bored with what you have, or just love the thrill of the hunt shopping gives you. Neither of those things have anything to do with needing clothes. Same goes for eating out vs at home, going to a concert or movie vs borrowing a video from the library or a friend. If you are actually committed, there are likely lots of places to make cuts. Time to grow up and grab the bull by the horns. Short of a lottery win or unexpected inheritance, money will not fall magically from the sky and rescue you from your past.
Our ultra frugal lifestyle wouldn’t suit everyone, but it works for us. We forego a lot of what others think is “basic”. We rarely eat out and haven’t had cable for 15 yrs. We pay cash for used vehicles and drive them until they are towed to the wrecker. The other side of these choices is that we splurge on a big family holiday every other year (a month in Italy, Greece and Germany last summer) and we count down the years to our planned early retirement. I feel like we lived through our own little depression and after that experience we could never again spend money we didn’t have, or couldn’t repay within a month or two. I sleep really well knowing everything is running according to the plan.
September 24, 2009 at 8:57 am
I don’t understand why some people bother to write Gail. This lady says she’s still thinking about a clothing sale! Why doesn’t she want bankruptcy?..because then the creditcards go bye-bye for 7 years??? If she has been paying $1000/mo. for the past 36 months..and still has another 3 years to go at least!, this lady needs a serious reality check. I hope there’s no kids involved with this family : (
September 24, 2009 at 9:40 am
I can’t feel sorry for her. She doesn’t want to do the work. She wants a magic pill or someone to wave a wand over her to make her problems go away. There’s no advice to give her that will work until her attitude changes.
As for the shopping, she sounds like Becky Bloomwood from the Shopaholic series, whose popularity baffled me to no end. Everyone thought she and her “addiction” were cute, while I wanted to reach inside the pages and slap some common sense into the heroine. To save my sanity, I stopped reading halfway through the second book.
September 24, 2009 at 9:41 am
The person in the article is not unlike most of us many moons ago when we found ourselves in similar situations. it stems from an inability to say No and mean it, I think. SQ posted a while ago that getting to debt-free is a lifestyle change, much like a diet, intervention for addicts, or rehabilitation centers. Becoming debt-free is the rehabilitation for poor money management, and the steps are difficult, often require complete behavioural changes and personal desire to not be in that situation any longer.
The surprising things is, at one point or another, we have all, will all be addicted to spending.
Having just completed a study on Gail, Suze Orman and Patricia Lovett-Reid, the biggest thing that I found was that all these wonderfully helpful woman start with one basic idea. GET HONEST WITH YOURSELF. We been able to lie to ourselves for a long time – we learned young and it has stuck with us. Being completely honest with yourself in everything you do is difficult since we all have an inner conscience that drives us to do things we wouldn’t normally accept from others. The woman above needs to get honest with herself about truly wanting to be out of debt. Another great quote (and I believe it has resonated throughout history… ACTION EXPRESSES PRIORITY. REgardless of the words coming from your mouth, your ACTIONS will give you away EVERY time.
The ACT of paying off the debt, and doing whatever it takes to not have it, the ACT of purposely changing the shopping behaviour, of speaking with your partner HONESTLY about finances and then ACTIVELY making a plan living by it are the ACTIONS to back up your EXPRESSION of the PRIORITY in your life.
Though I have found that being honest with yourself and being honest with others has become difficult for lots of people. Can you go a day without lying at all? Try it, and see how often you’re presented with opportunities to bend the truth, dodge your true feelings, “let someone down easy” or the like. Perhaps this is the behaviours we need to start with that will snowball down to our finances.
September 24, 2009 at 9:54 am
There are 2 people in this story…I feel for her husband. No pitty for her.
September 24, 2009 at 10:23 am
IMNSHO, this lady would do well to consider WHY she wants to be debt-free, and what sort of vision / dreams / goals she has for her life. Being debt-free because of fear (Great Depression II is on its way!) or because an expert (e.g. Gail) says so, may not be enough to keep her on track. But seen in other terms: I want to buy my dream home by age x; I want to be able to stay home with my future kids for x years; I want to have the freedom to only take work I am passionate about; I want to travel the world, etc.–it becomes clearer what the interest payments on the debt are costing her.
It’s really about being proactive vs. reactive. Make a plan for your life, clarify your goals, and proactively work towards that vision, instead of reactively being buffeted by the winds (and Sale! Sale! Sale! signs).
September 24, 2009 at 11:35 am
definition of addiction:
being abnormally tolerant to and dependent on something that is psychologically or physically habit-forming
It’s difficult to find sympathy for people who still think only of themselves despite a family’s financial crisis: “I still am thinking about the sale at the store downtown and how I really need some new clothes”?!
Priorities people, priorities.
And action. You got yourself into this mess, you can surely get yourself out.
September 24, 2009 at 11:49 am
@Pam I really liked your comment. I’ve always thought that words were just words.. always look at the actions. That’s where the truth is…
and it’s true – until I got honest with myself, nothing would have gotten me out of debt. One day I just got so fed up with it that I refused to allow it to continue one more day. That was the day I started on the road to being debt free. I found Gail and the show and other financial blog sites but until you are ready yourself for that change; you really can’t see what everyone is talking about. I swear I was on auto-pilot. Eyes glazed over when I saw a for sale sign and would just hand over my CC without a second thought! I seriously shudder when I think of how I used to be.
September 24, 2009 at 12:13 pm
Well, here’s another take from a recent graduate that might have everyone hating me, but still.
I often felt very much like this girl while I was in school. School was cycle of building up debt through the school year and paying a bit of down over the summer. Just to build it up again come September. I wasn’t a huge shopper but I always felt like I must be very irrisponsible to be in debt and I beat myself up every time I spent money on fun.
But when I graduated, I realized that I wasn’t being that irrisponsible, I just put myself into an impossible situation by starting school with little to nothing saved for it. I now understand that I have a pretty low-maintenance lifestyle (and always did), and I just wasn’t physically able to earn enough to cover it in school.
In the 2 years I’ve been done, my husband and I have paid off $23,000 in student debt, and built $40,000 in savings. We haven’t done anything differently except that we stopped paying for our full-time jobs, and started being paid for them.
I guess the point is that without specifics about what this couple is actually spending their money on, and getting into debt with, we should consider that her guilty conscience might be writing that letter. Thinking about shopping isn’t the same as actually shopping.
September 24, 2009 at 12:59 pm
I don’t think it is that bad to admit that even while in a huge mess, you can still *think* about the sale down the street and how much you need (ha ha, want) new clothes.
There is no ‘get out of jail free’ card though – and that is sort of what the letter writer is wishing for. Yes, it will suck to keep paying at that rate for the next three years – but that IS the light at the end of the tunnel. In three years, it will be done. And those 6 years of intense debt repayment will be a test of character, determination, and their relationship . . . for better or worse . . . and it will hopefully make both of them think twice before getting into debt again.
September 24, 2009 at 1:19 pm
I think this woman needs Gail’s interactive budget. That thing can do wonders if you stick to it and see it as a challenge. Who doesn’t like a challenge? But remember, when you are making up your budget, if you are in that much debt you should try to stick to the barebones. You may even realize that you have money left over at the end of the month. Apply that to your debt. I think aggressive repayment is the best option if it is an option. It can save you hundreds or thousands of dollars!
Like Gail said, find things to do that are fun that don’t cost a dime. Look in your local and school newspaper for activities going on that are free. There are often quite a bit! Go for a walk, to the park, exercise together, play a board game at home, plan a budget (hmmm fun for some)…good luck!!
September 24, 2009 at 1:52 pm
great post Gail, and comes at a good time for me, thanks as always
September 24, 2009 at 1:56 pm
” I graduate in December and will be looking for work immediately after ”
If you wish to finish your degree now instead of postponing until you can afford it… suck it up for 4 months and once you begin your new job the DAY after your last final PUT EVERY CENT OF YOUR NEW PAYCHECK towards the debt. Once you are done with the debt (that will be soon because your are probably not earning much as a student) and have an emergency fund, then rebalance your budget for a fun life. You are about to have a huge change in income. The end is near… if you want it.
Have fun job hunting!
(BTW a lot of store are looking to extra temps during the Christmas rush.)
I said it before…
If you have time to go shopping, you have time to…
1- have another part-time job
2- do a budget that balances
3- find cheap entertainment
4- spend time with your siginificant other (fun stuff, budgeting, goal setting…)
September 24, 2009 at 2:00 pm
Gail,
That was a great post. I think it really highlighted the “I got myself in trouble and I want someone else to fix it” attitude of many consumers. My wife and I are doing really well with the debt repayment. Only a few more months to go before we are completely debt free. That said, we are recommiting to paying this off quicker then we ahve and we are looking at ways to speed up our debt repayment. no category will be left un-looked at. No Jar will be left full of money and every bill will end up under the microscope. I think you did a great job with this post.
regards,
Jason
September 24, 2009 at 2:03 pm
@Omzig – I agree that it’s not bad to think about the sale and what not. Here is the issue though. Thought becomes Things. Things become Actions. Action become Behaviours. Behaviours become Habits. Habits are hard to break.
The thought process we go through often dictates the actions we take in life. so while thinking about it isn’t overly bad, the person in this letter has said that they are irresponsible with the money they earn and have, and I can see how the thought of the sale can quickly turn into a purchase at the sale. I believe this is where everyone is getting that gut *tsk tsk* from. How do cravings start – we think that we “could really go for a hamburger right now.” Then we think it again. Then the next day again. then we finally “go for that hamburger” but because we’ve thought and thought and thought about it, we end up eating two, or three. The more she thinks about that sale, the more she’ll want to go to that sale. The more thoughts going towards that sale and no action, the more her brain is going to be programmed to find that sale and achieve the shopping. And chances are the more thoughts about it the bigger the damage to the account is done at that sale. Put something out of your mind and you are not going to achieve it. Continue to think about it and the brain will allow you to go shop, then shop more than you should.
Think about your own behaviours about some things and understand those to understand why the thought of a sale for this person is a negative to begin with, and a bigger negative waiting to happen.
September 24, 2009 at 2:30 pm
I know what I’m going to say will not be popular with Gail or many others, regardless it’s a fact. We are humans and do get tired doing the same thing over and over and not seeing the light at the end of the tunnel, especially when it comes to repaying debt. Knowing this, I can see why many individuals in the industry have recommended to apply the Debt Snowball Repayment Plan to their strategy. I know Gail disagrees with an individual focusing on paying their smallest debt off first regardless of the interest rates on all other debt, but the reality is that people feel a sense of accomplishment when they are able to pay off the entire balance on debt they owe. YES, cost wise it doesn’t make sense to pay off the smallest balance with the lowest interest rate when you have debt that has a higher interest rate, but the fact of the matter is that people like to feel as though they accomplished something.
Very curious to hear different responses in regards to what I’ve said.
September 24, 2009 at 2:38 pm
Money Coach:
I don’t agree with the snowball approach because it takes something that takes a LONG time to get rid of and makes it even LONGER and more costly. With debt fatigue setting in…
This is why celebrating milestones is important!
The old themometer approach is great at reminding you that you are making progress. This needs to be charted in order to be reminded. Celebrate every time the debt drops 20% (that is 5 celebrations over 3 years).
September 24, 2009 at 3:02 pm
People need to do what will work for them.
Maybe being incredibly non-rational and paying more money needlessly on interest will get them out of debt, and being rational and paying the highest interest rates first won’t. In that case, whatever works – go for it.
But creating your own milestones would be much, much smarter.
September 24, 2009 at 3:10 pm
Money Coach,
I guess instant gratification got most people into debt, so why not get that same instant gratification by using the snowball approach. For the generation that only know to “buy it now”, instead of saving for it, this plan, may be the one they could stick to. IMHO.
September 24, 2009 at 3:17 pm
Pam- I thought about Subway the other day, and everyday since…I am trying my best not go, because it will become a habit again! I mentioned it to my husband and he wanted to go out too…but then I checked the bank balance and he had already went out for lunch and didn’t say anything!! Oddly enough he had even went out to Subway.
So now we are trying to think about board game Thursday’s again…and make it a habit for our kids
September 24, 2009 at 3:55 pm
I agree with Jay. The lady doesn’t say the $1000 repayments monthly and the $35000. grand total debt is strictly from schooling debt. If she has 10 creditors, maybe 2 of those creditors are owed $750 each. In her situation, the debt is so ridiculously out-of-control already that if she can pay 2/10 creditors off in 2 months as opposed to the 36 mos. span-out plan then she’s better off. In her situation, the SOONER THE BETTER. I know it’s not smart to spend more on interest here or there, but in her case the sooner she can eliminate that debt the more positively she’ll see that this is working. She owes $35000.00, I doubt she cares about interest rate % at this point.
The point is to get out and stay out of debt, regardless of why it was racked up in the first place.
September 24, 2009 at 4:00 pm
Erin – I here you there! Board-game Thursday’s are way better than Subway hands down! (Though truthfully you’ve made me hungry for Subway. Good thing I’m making crab ceasar salads for dinner and will get that out of my mind)
September 24, 2009 at 6:17 pm
So many good comments on this post today! I know for myself, it took a long time but when I finally got fed up with being broke all the time and constantly paying bills, after 43 years, I finally said enough was enough and cut up the credit cards. I put shopping out of my mind and constantly tell myself, I already have everything I need, which is true. I will have my debt paid off in 2 years, 8 months and 11 days, hopefully sooner if I get bonuses at work in the coming year.
September 24, 2009 at 6:32 pm
Tara:
I once read someone’s saying: “Irritation is motivation”.
Whether irritation is the trigger or something else is, my guess is that goals are the motivation that will make the journey complete.
So set up three columns:
1- Debt (list each creditor, the amount, the interest rate)
2- State your goals (list the goal, the timeline, the costs IF there is a cost associate with the goal)
3- List that for which you are grateful (this should help you illustrate your value system)
September 24, 2009 at 7:08 pm
No aspersions from me. I live in a glass house so won’t be throwing any stones.
I have been actively trying to pay down our LOC. Every little bit helps and encourages me. It took time to accumulate the debt and I know it won’t go away overnight. I had some pretty stupid years till I found Gail. Found it interesting with the bank lady yesterday saying that she herself not only had a LOC, but a mortgage. Hm….
I think that the letter writer has more time than I do to correct her mistakes. Yes, and we all make mistakes. Retirement probably seems very far off (but is just around the corner for everyone) She still has the instant ‘gimmees’ and I have more than learned my lesson and am on the wagon, the straight and narrow as it were. So wake up and smell the coffee girl! This is your light bulb moment!
@Money Coach – I think if I had many debts (instead of one)
I would be tempted to alternate repaying them. First the lowest to give myself the boost and incentive to keep going, then the one with the highest interest rate…etc.
I wish the couple luck in making their 180.
September 24, 2009 at 8:30 pm
I think this is key to keep in mind:
“…if we completely stopped having any form of a life, we would still have at least 3 years left to pay down all our debt. ”
So, by their calculations, no matter what their intensity, they have a long way to go. In cases like that, I think it is worth paying a little more in interest in time to come up with something that is SUSTAINABLE for THEM. Otherwise, they ARE going to run out of steam no matter how much they want to get out of debt. It’s easy to stand back and say that they should just suck it up and not buy ANYTHING but necessities for the next three years, but that’s unrealistic for 99.9% of people. What they need is to find BALANCE so that they can keep going in the right direction.
I speak from experience here. My husband and I tried to just “stop spending” but we weren’t ready. Heck, we still aren’t ready to stop buying everything but necessities — and I don’t think we will ever be ready to do that, not for YEARS, at least. So, we’d try for a little while then end up feeling frustrated and go on a shopping binge, getting further into debt.
Now, yes, we are still in debt. And we will be for a few years at our current rate. However, we have an emergency fund, we’re putting a significant portion of our income towards the debt, and, most importantly, we are HAPPY with our lives NOW (which, by the way, means MUCH LESS “retail therapy”). That doesn’t mean that we don’t look forward to being out of debt. We do — VERY MUCH, in fact. However, we aren’t putting our lives on hold. Fortunately, we have found a lot of ways to cut costs as well as a lot of free and cheap ways to make our lives better so that we can achieve our goals without being miserable and still enjoying those indulgences that really do matter to us. And, as time goes by, we’ve learned new ways to be frugal and so are continuing to pick up steam.
Plus, another great thing about our pace is that I can truly see us keeping our current lifestyle long term, helping us build wealth after we’re out of debt instead of getting us back into debt. That’s perhaps the greatest benefit of finding a sustainable balance!
Bottom line, when you have BIG debt to tackle, what matters most is sustaining it till the end — not how intense you are over the short term. Slow and steady wins the race!
September 24, 2009 at 10:11 pm
It took me two years to be debt free and in that time I bought no new clothes and only one pair of shoes. Why? Because the sense of freedom and relief from having no debt was stronger than any desire to buy a piece of material (and I live in Hong Kong where shopping is a ‘national’ pastime!).
The letter writer should realise people survive just fine not buying new clothes. And that a brief high from shopping is nothing – and I mean NOTHING – like the long-lasting high from that final payment.
And I would like to share a new word with people; actually it’s an old English word.
Fornale: to spend one’s money before it has been earned.
May you only have to use it when referring to others.
September 24, 2009 at 10:27 pm
It took me one year to get consumer debt free (the mortgage got paid off in that period too so it helped as I redirected what I had been paying on the mortgage to the debt). I could have done it faster, but I wasn’t smart about it, and didn’t put myself on a budget. For some reason, long after I got debt free, I decided to try out Gail’s budget, worked all the numbers properly (it helps when you have a software money management program) and began tracking all my spending, including cash. Amazingly enough, I began saving close to 25% of my gross income and if I stick with the budget I can move leftover money into planned spending (like xmas shopping, and those darn new tires I need for the car in a few months). I guess I’m making up for lost time. But now that I see the savings growing, I don’t want to go back to old ways. And that’s the key I guess.
I set my first financial goal after becoming debt free of 6 months of expenses in an emergency fund by the end of 2010. I’m 20% there…
September 25, 2009 at 2:13 am
[...] Gail Vaz-Oxlade puts it all nicely into perspective with Put Up or Shut Up, I really like the way Gail writes in her blog, a little grittier than her TV show, Testify [...]
September 25, 2009 at 12:32 pm
When we started towards our debt freedom we didn’t have a clue what we were doing and Til Debt was still almost two years away from its first broadcast. So we winged it and now that I have learned a lot I can see how we could have done things better and saved money in the process – but we got it done.
The first thing that we did of course was to stop all spending. Then we got caught up on the “living” bills that were behind -mortgage, hydro, phone etc. – while paying only the minimums on all the other debts. Nothing to the bank of Mom and Pop at first of course since they were the only ones not sending threatening letters – only doing that heavy sighing and rolling their eyes thing.
When we got caught up (and boy was that a relief and a sense of accomplishment) and started following a budget we started to pay off the other debts. We did what I have now learned is called the snowball plan. We paid the minimums on everything except the smallest debt and for that one we put as much on it as we could. When it was paid we moved on to the next smallest debt.
In the beginning it really never occurred to me to check out the interest rates. All I saw was the balance line and wanted to get something paid off as soon as possible so the smallest amount seemed the way to go.
We did this snowball thing until we had 3 debts paid off then I discovered Til Debt and learned not to be even stupider than I had been.
The first thing we did was to try to get a low interest consolidation loan but were refused because the Bank basically said that we had all the loans they were going to give us and that we had blown our chances. Condescending gits.
So then we transferred as many of the high interest credit cards to the lowest interest card as we could and I started calling the others asking for lower rates. Thanks Gail but da! why didn’t I think of that?
I was quite successful and got one lowered to 5% until the entire balance was paid off.
From that point on we paid the higher interest debts aggressively and paid the minimum on the lower ones.
I have to say that using the snowball method (pay of the lower balance amount debt first) was much more satisfying because we actually saw progress – and fairly quickly – however – the smart way is to pay off the higher interest debts aggressively because of course every month you are getting wacked with huge interest.
The high interest card that I eventually got down to 5% had $12,000 on it and the original interest rate was 24% so that was about $240 every month in interest. At 5% it was $50. We had another card with the same interest rate and we could not get them to lower it so they got all of our attention.
We used both methods of debt payment and both worked with different benefits. We all have to tweak our plans and go with what works and what keeps us motivated.
We took a long time to get debt free but never wavered (because I was just sooooooo scared about what we had narrowly avoided) but it was HARD and BORING so I have to agree with Gail – faster is better.
September 25, 2009 at 1:22 pm
@ Money Coach
I totally agree (for me) with the Debt Snowball! I love it. Its great to see debt by debt disappearing and being deleted from the total I owe. And the difference in interest for me (total over repayment time) is about 1/4 of the amount I pay monthly on the debt to have it gone! Having said that I don’t have any really high interest debts so for me its not so bad.