Debt Avalanche is working!!!

[Mykl]

Originally Posted By: dlundblad
I think he recommends going big to small (also depending on interest) but my teacher recommended going small to big. That gives a larger sense of accomplishment. At first interest may seem like a deal breaker, but at the end, they nearly even out both ways IIRC.



There are different ways you can approach it. Mathematically, you end up better off going after it based on the interest rate, as in taking down the highest rate loans you have.

However, I generally encourage people to approach it in whatever way leaves them with the greatest sense of accomplishment. It's that feeling can really keep your motivation up through the process, even if it ultimately costs more money to do in the end.

 

[supton]

Small to big, big to small, depends upon one's emotional bias. Some people are greatly encouraged by seeing progress, while others are more interested in seeing the least paid out. Either is better than doing neither.

 

[supton]

Originally Posted By: surfstar
OP, this isn't directed at you, just an in-general

I find it funny that debt is like drug addiction; as in you get congratulated way more for overcoming it than for never having that issue in the first place!


Problem is, most of us go to college on loan; and then you get out and bam! you need wheels to get to work. In my case I moved a few hundred miles, so car shopping was rough; I didn't have the luxury of time. I still truly wish I hadn't bought new back then. That Saturn was like 13c/m depreciation, dumb mistake.

Quote:
Once its paid off, start max'ing out your retirement contributions! No CC debt, no car payments. Live BELOW your means and you'd be amazed that you'll be just as happy, but sleep better, and not have the need to spend on 'stuff'.


I wish I had taken the various pay raises and put those towards my 401k as I got them; I could have max'd that out long ago. And then on later raises kept that money while still having the 401k maxed out. Live and learn. Made the mistake of saving the money for a house, but that's a different story.

 

[Mr Nice]

I can't understand how some young adults carry thousands of dollars in credit card debt per month and have no worries about it growing.

 

[Kuato]

Big to small vs small to big....usually pretty close, but depends on balances and interest rates. Sometimes it's better to pay off the lower interest debt first, to free up that payment money for the higher interest debt. In some cases the minimum payment on a high interest CC can wash out a good bit of the minimum payment.

 

[hattaresguy]

Mathematically it always makes sense to pay off higher interest rate debt first.

But IMHO it doesn't really matter, guys like DR tap into emotion so pay off whatever you can make a dent and to keep yourself motivated.

IMHO student loan debt is the most dangerous kind even though interest rates are very low. You can go bankrupt and discharge anything but student loan debt.

 

[DBMaster]

I keep seeing articles stating that student loan debt (which exceeds $1 trillion) is going to be the next debt crisis. A much higher percentage of it is in arrears when compared to other types of debt.

 

[mikefxu]

If you are in credit card debt stop using your credit cards, sock drawer them. If you can refinance your debt, do so. I ran my credit cards up twice. Once I refinanced with my local credit union another time I used lendingclub.com. Car loans refinance is pretty low these days, pull the equity out of your car to pay down the loan. We went from a 1.99% and refinanced at 1.49% pulling all the equity out of the vehicle to pay my wife's student loans off. Pulling home equity is also an option but we bought low and prices in our area haven't rebounded much. Today we are debt free with exception of an affordable mortgage at a reasonable rate ($600/mo @ 4.875%) and two reliable low cost of ownership cars at 1.49%.

Now we never carry balance and I only use credit cards to get a percentage return. 2% all Fidelity Amex and Priceline Visa, 5% gas PenFed Visa, 5% Amazon/Dining Citi Forward, 6% grocery Amex Blue Cash Preferred. I feel at some point I will earn back all the interest they charged me.

A part of the process is to evaluate the reason you got into debt, usually living beyond your means. A good place to go to further your financial health is bogleheads.org there is a wealth of information there.

 

[99Saturn]

Originally Posted By: mikefxu
Now we never carry balance and I only use credit cards to get a percentage return. 2% all Fidelity Amex and Priceline Visa, 5% gas PenFed Visa, 5% Amazon/Dining Citi Forward, 6% grocery Amex Blue Cash Preferred. I feel at some point I will earn back all the interest they charged me.

I just wanted to add two pretty good cards (IMO) to this. Sallie Mae Barclay's 5% gas and groceries on the first $250/month in each category (other than the limit/month it beats the Penfed and Amex Blue for us) and Discover, especially for the Shop Discover feature if one shops online, it's often double the cash back that can be found through Ebates or Fat Wallet.

That Fidelity Card is good, just wish their customer service was better.

 

[mikefxu]

I was going to edit my post but it said I exceeded the time limit. Here is my continuation.

You don't have to keep up with the Joneses. Max out your 401k and IRA(s) and then evaluate if frivolous spending (trips, boats, etc) will contradict your goals (early retirement, financial independence, etc).
Originally Posted By: 99Saturn

I just wanted to add two pretty good cards (IMO) to this. Sallie Mae Barclay's 5% gas and groceries on the first $250/month in each category (other than the limit/month it beats the Penfed and Amex Blue for us) and Discover, especially for the Shop Discover feature if one shops online, it's often double the cash back that can be found through Ebates or Fat Wallet.

That Fidelity Card is good, just wish their customer service was better.

I have the Discover but I only listed the ones that get used consistently. I finally got it for the 5% cash back for online shopping during the holidays. I'll have to check out the Sallie Mae card, I thought it was only cashed back to a Sallie Mae loan. I use fatwallet cash back every chance I can even for work. I will check how it works with Discover.

 

[Mykl]

Originally Posted By: mikefxu
You don't have to keep up with the Joneses.


I think this is the absolute key.

It seems as though one of the most difficult things people struggle with is freeing themselves from the idea that they need other people's approval for how they spend their money.

Identify what actually makes you happy and focus on that. Then work to trim the fat from your budget, as in the things you consistently spend money on that aren't actually enhancing your personal sense of well being.

As soon as I get my house in order... as in I just got married and purchased a larger house, and am planning children... I'll have a savings rate of about 50% of my take-home income. My house will be paid off in about five years.

 

[99Saturn]

Originally Posted By: mikefxu
Originally Posted By: 99Saturn
I just wanted to add two pretty good cards (IMO) to this. Sallie Mae Barclay's 5% gas and groceries on the first $250/month in each category (other than the limit/month it beats the Penfed and Amex Blue for us) and Discover, especially for the Shop Discover feature if one shops online, it's often double the cash back that can be found through Ebates or Fat Wallet.

That Fidelity Card is good, just wish their customer service was better.

I have the Discover but I only listed the ones that get used consistently. I finally got it for the 5% cash back for online shopping during the holidays. I'll have to check out the Sallie Mae card, I thought it was only cashed back to a Sallie Mae loan. I use fatwallet cash back every chance I can even for work. I will check how it works with Discover.

There's a statement credit option in $25 increments on the Sallie Mae, I never had a student loan with them. Someone else here actually recommended it after Penfed changed their terms last year on some of the cards - the Penfed card I have now actually still pays the 5 points for ever $1 of gas but uses there rewards mall or whatever it is which is not 1 point = $.01.

(Not directed towards you just a general observation as some may not know.) The thing I like about the Shop Discover option is you can sometimes pull 10% to 20% total cash back as some stores we frequent. I've seen AAP at 10% for a select period, and was then able to stack that with the promotion for that quarter which was 5% online shopping. Home Depot was either 10% or 15% and stacked with either online shopping or home improvement when they were 5% quarterly categories. And you can stack those with the AAP or HD coupons you can find online too.

Sears, Kmart and Walmart are a couple of other good ones too.

 

[supton]

Originally Posted By: Mykl
Originally Posted By: mikefxu
You don't have to keep up with the Joneses.


I think this is the absolute key.

It seems as though one of the most difficult things people struggle with is freeing themselves from the idea that they need other people's approval for how they spend their money.


Perhaps not approval but sometimes it's nice to avoid disapproval. Plenty of disapproval on this site for bad spending. Besides, in this thread, are we not attempting to keep up with each other--paying off debt, saving like mad, trimming the fat? Same thing, just a different direction.

 

[Mykl]

Originally Posted By: supton

Perhaps not approval but sometimes it's nice to avoid disapproval. Plenty of disapproval on this site for bad spending. Besides, in this thread, are we not attempting to keep up with each other--paying off debt, saving like mad, trimming the fat? Same thing, just a different direction.


Sure, but which activity is more toxic? Buying a BMW to impress your neighbors and project a certain financial image, or trying to keep up with other people's savings rate and paying off debt?

I don't mean to say that buying a BMW is always an inherently bad decision. If it brings you joy and adds value to your life, then you're probably buying it for the right reasons (this is an auto enthusiast forum, clearly we enjoy cars for whatever reason). But so many people plop down the cash for one when it doesn't add any value to their life beyond with a Honda Civic would add.

I get that it is a good general policy to not do things solely to impress other people, but if you're going to do so anyway, aggressive debt reduction serves a good purpose. Seeing if you can fill your garage with a bunch of [censored] from Wal-Mart on credit faster than your neighbors.... not so much.

 

[supton]

Originally Posted By: Mykl
Sure, but which activity is more toxic? Buying a BMW to impress your neighbors and project a certain financial image, or trying to keep up with other people's savings rate and paying off debt?

I don't mean to say that buying a BMW is always an inherently bad decision. If it brings you joy and adds value to your life, then you're probably buying it for the right reasons (this is an auto enthusiast forum, clearly we enjoy cars for whatever reason). But so many people plop down the cash for one when it doesn't add any value to their life beyond with a Honda Civic would add.

I get that it is a good general policy to not do things solely to impress other people, but if you're going to do so anyway, aggressive debt reduction serves a good purpose. Seeing if you can fill your garage with a bunch of [censored] from Wal-Mart on credit faster than your neighbors.... not so much.


Not disagreeing, just pointing out that, when we approve of such a lifestyle (or seek approval for doing), it's the same "keeping up with the Jonses". It's still seeking approval from others, or attempting to give approval. The fact that it's the "right" thing to do does not change that.

 

[Mykl]

Originally Posted By: supton
Not disagreeing, just pointing out that, when we approve of such a lifestyle (or seek approval for doing), it's the same "keeping up with the Jonses". It's still seeking approval from others, or attempting to give approval. The fact that it's the "right" thing to do does not change that.


Personally, I think there's a difference between using stuff to project an image of prosperity and seeking positive reinforcement for a healthy lifestyle change.

One is seeking approval, while the other is seeking support.

Just my perspective.

 

[hattaresguy]

Originally Posted By: DBMaster
I keep seeing articles stating that student loan debt (which exceeds $1 trillion) is going to be the next debt crisis. A much higher percentage of it is in arrears when compared to other types of debt.



Its a mess, the problem with student loans is they follow you until the day you die.

If the government got out of student loans and let private lenders deal with them their would be far fewer student loans, and as a result the country club colleges would have to cut back to keep enrollment up.

 

[fdcg27]

A BMW can be a very economical and practical car.
You just have to write a check for the right BMW.
Mine has been as cheap to own as any Civic, gets about the same fuel economy and is certainly more entertaining to drive.
Nothing wrong with the 41K in entertainment I've gotten out of my old 318i 'vert.
I can also probably sell it for close to what I have in it after four summers of daily driver use, which ain't happening with any Civic.

 

[fdcg27]

Originally Posted By: hattaresguy
Originally Posted By: DBMaster
I keep seeing articles stating that student loan debt (which exceeds $1 trillion) is going to be the next debt crisis. A much higher percentage of it is in arrears when compared to other types of debt.



Its a mess, the problem with student loans is they follow you until the day you die.

If the government got out of student loans and let private lenders deal with them their would be far fewer student loans, and as a result the country club colleges would have to cut back to keep enrollment up.


THIS^^^

Very much as insurance has driven up the cost of medical care, the availability of cheap and easy debt has driven up the cost of higher education.
Trim back loan availability and institutions would have no alternative to cutting their total package rates.
Tenured staff might actually have to start teaching undergraduates again!

 

[hattaresguy]

Yep, its absurd the amount these colleges are blowing on everything in an effort to stay none profit. Since the kids can get the notes they just keep raising the prices; capitalism 101 folks!

If Uncle Sam said everyone has the right to a new car and we will insure $30k car loans to anyone who will sign...overnight the cheapest Kia would start at $30k!