I use to try and pay off debt the way you are and let me tell you that is the hardest way to do it

My household switched over to following DR’s Total Money Makeover plan (go to the library and check out the book and really read it) and as a result we have been cc (not cc debt, but cc) free for 4 years, have paid off a huge amount of debt, and will be totally debt free—including two mortgages and retired in less than 2 years.
I argued with the lowest balance debt and ignoring interest rates at first because it didn’t seem logical, and I am a math nerd big time. So when I heard DR on the radio say that the difference in the long run in interest paid out between the two methods was the cost of a Happy Meal I didn’t believe him and ran the numbers myself. He was right. In fact in my case doing the highest interest rate ones first was going to cost us MORE!

The advantages of doing lowest to highest are simple:

1.You see the debt falling faster when you pay the lowest balance first. The mental affect from that is not to be under estimated.

2.Once you pay off a cc you are less likely to use it again. Ideally you should destroy all cards immediately, but that is a hard thing for some people in the beginning. CC are their security blanket. If you haven’t destroyed the cards not wanting to restart a paid off debt is a great incentive and because you are aware of the high interest rates on the ones remaining you are less likely to use those as well.

3.In the beginning you generally only have a few dollars extra per month to throw at debt. So you throw it where you see it doing the most toward a zero balance. $10 on a $1,000 balance is only 1/100 of that balance but $10 on a $100 is 1/10. The mental effect of that is tremendous.

4.Once you pay off that $100, which probably had a $10 minimum payment due on it you suddenly have $20 per month EXTRA to pay on the next lowest bill and that $20 PLUS its normal payment really seems to pack a wallop on that second bill, by the time you hit bill #3 you are on a roll and the total debt is dropping quickly. Most folks find that because of this snowball by the time you are a few bills down the hill their debts start falling off one or two every few months. I know on my own snowball chart I have 3 major what were originally high interest cc/loans that will fall off in a 45 day period in the next few months. That is HUGE. I recommend you download the snowball chart from the group files and see the speed you could be debt free by paying just minimums and snowballing. Then plug in the amount you KNOW you could pay extra every month and see how much even a little bit extra could make in the outcome.

5.You get caught up is pushing toward getting those last few payments made on the “pet” or smallest debt and find you are willing to do without, sell something, get a second job etc just to get it GONE and the fever spreads the closer you get to that goal.

6.Highest interest ones fall quickly once the snowball hits them. I’m paying on my highest interest one right now and the bill that was getting $110 minimum a month is now getting $500 PLUS all I can scrounge up. It will be gone no later than January 2014 and it wasn’t due to be paid off until late 2016 on the original plan. On the highest interest rate plan I would have never been able to more than $150 per month on it because I would have still been paying minimums on the lower bills.

7.Security. Life happens and if you should suddenly have a drop in income or lose it entirely (been there for 18 months after we started snowballing) you will have fewer minimum payments per month to come up wit and more importantly fewer creditors to deal with—that’s HUGE!

8.Like some one said DR recommends stopping 401K deposits if you have several years until retirement (our household is AT retirement age). If you are like us then he recommends only putting in what the company will match and killing the debt as much as possible as fast as possible. Once your are to the proper babystep then you put in 401K what the company will match and then put the remaining of whatever 15% of your income is in IRA it builds quickly.
College, the kids should be saving for it themselves right now if they are old enough to do summer or part time jobs. They should also be doing all they can to get scholarships. Not just grades, but community service, school clubs etc. It all goes toward getting a scholarship. Also don’t push college, it’s not right for everyone. Trade schools can lead to good paying jobs and cost far less. IF they are interested in a trade school job field then skip college altogether and send them to an accredited trade school.
If college is in the future, then have them take courses for free in high school that will give them college credit. Both my kids clepted out of foreign language, math, English, science and some computer skills classes and saved thousands in tuition fees and books—they also bought used books and then sold them to the next class after they were finished with them.
Also, they need to get a college degree with a future. I love my ds deeply but his Music Composition degree isn’t what pays his bills. That degree will have cost nearly $100,000 by the time he finishes paying for it (his only remaining debt) and it’s his $2,000 AutoCad drafting degree from the local community college that is paying off the MC degree.

Dentist? I have, like others, bartered away many a doctor bill with sewing. DD pays with computer skills, ds has written a few songs for special events (his only income from that MC degree to date), dbil did handy man work for part of dsil’s cancer treatment. It can be done. But like it was said, talk directly to the dentist, bookkeeping will get you nowhere.

In the meantime, set up a dental sinking fund in your monthly budget, even if it is a small one and then when the time comes offer that cash for payment in full. You might just get a happy surprise. It saved us over $1,000 on a hospital bill. Most doctors, dentists, hospitals etc have a set amount they will discount for cash payments.
Also shop around and let it be known you are shopping around. Rates have a way of changing if they realize you may take your business elsewhere.

I have to agree with Mark

Forget interest rates complicated routines. Go for the lowest debt and get it paid off first and pay minimums on everything else. When that first debt is paid throw all that dough at the 2nd one plus the minimum you were already paying. The reason DR says to pay the smallest off first and go up from there is that it gives you momentum and builds your confidence as you go.

On retirement, it’s okay to stop contributing if it’s going to take less than 2 years to get debt free (except mortgage).

For the dental work … bartering is a good idea. We have bartered for professional services before. Be sure to ask the decision maker though. In this case, the dentist. His/her office staff usually don’t make those decisions. In our case our dentist agreed that for regular dental cleanings, we would pay regular fees. For anything else, we barter 100% of the fees.

Most of who have gone (or are going)

through the baby steps would say pay the minimum all all your debts except the lowest balance, and throw everything you can at that one. When that one is paid, take that money and anything else you can squeeze out of your budget and throw it at the next lowest balance. Rinse, repeat. Trust me – it works.
And college funding for children is step 5, and you’re still in step 2. How long until the first kid gets to college? Any way they can go to community college and work or get scholarships? I can’t *imagine* trying to pay for college for 5 kids if I was still in debt…
And sorry, I don’t have many suggestions for the dental work. Ask for a cash discount, maybe? Barter for the services? Maybe do some bookkeeping or something in exchange?

Debt payment strategy question

Ok, so I am revising my strategy a bit, and just wanted some opinions. I am snowballing on my debt, stressing paying off the highest balances with the highest interest rates first on the snowball.

Here is my strategy as it stands. I will be debt free when I retire, including my mortgage. I will have a railroad retirement pension that replaces about 60% of my income. I will have 401k savings that will take me to at least 90% of my pre-retirement income.

In terms of getting debt free, right now I am concentrating on revolving debt. To get debt free, at least on the revolving debt, I stopped contributing to my 401k, and instead am putting 10% of my gross towards debt payment. I figure that eliminating debt is just as important as having a retirement savings. Besides, I have a railroad retirement pension which will replace approximately 60% of my income, so I am looking for my 401k to supplement my pension, not be my primary retirement income.

My question is on how to best handle the balances that are not snowballed yet. I don’t think paying the minimums is a great idea. I was looking at using the federally required minimum payment warning amount. I am thinking that using the three year minimum payment as a minimum payment is the best level of payment until that debt is in the snowball phase. What do you think?

The next target will be my student loans, then finally I will work towards paying off my mortgage in full. All this while helping my five kids go to college!

I’d also be interested in hearing some other strategies that worked for others. My primary interest right now is to reduce or eliminate money going towards interest.

I also am wondering how to pay for some urgent dental work that needs to be done that will cost about $15,000 in total. We don’t have the cash for that, and I think it needs to be done in the next 12-24 months, or it will be too late.

Who knew you’d be rooting for our competition!

I would love to find some tickets to the blow out of the year.. when the Saints fry some dirty birds from Atlanta! Seriously, if you know where I can get 3 tickets for about $300 or less that are not in the nosebleed section, let me know. I know 3 tickets are hard to come by, they are usually even numbers. Dh isn’t crazy about football but would go along as our body guard. LOL

Hey, I had to add in the closest thing I could to black and gold.. hence the black letters and yellow highlighting. LOL

I hope your morning is going well

We are up and at ‘em today. Dd had to have a minor procedure on a toe nail yesterday so is pampering that today a bit. We will be going to my grandma’s house to see her today and probably see my dad as well.
I do have some FUN AWESOME news! Some of you know from previous posts that I am a huge New Orleans Saints fan. Well, dh called yesterday and said he had access to tickets to this season’s pre-season opener on Friday, and … how many do you want? I asked, how much? Nada, nuttin’ honey, FREE. We decided to get 4 so that dd can bring a friend. Dd is as huge a fan as I am and having a friend along will make it more fun for her as well. So we are very excited! Open-mouthed smile. We will have to pay for parking and food of course but that cost is offset by FREE tickets! Yeah! Oh dh is going to see if he can get a couple more for another couple to go with us.

I will be setting some goals for the rest of the week for my business but will post more on that later today so we can get out of the door.

If it is available in your state, this dental coverage is really helpful

Thankful to my dear sweet daddy, God res his soul, who suggested I look into some type of supplemental policy when we needed to get some expensive dental work done. We have dental insurance through my hubby’s work, and it pays 100% for preventative treatments, like cleaning and xrays, but only pays about half for major things like crowns. And half is still very expensive. This coverage may say Assurant EMPLOYEE Benefits (I am not sure why it is called that) but you do not have to be employed by them or any certain company to buy and use it. You simply have to have it available in your state and choose one of their member dentists. Just make sure you have a dentist in your area that you can use before you purchase. Ours was already on the list when we got it. You sign up and pay for the coverage online and you print your card that day. However the way it works is that the coverage goes into effect starting the 1st of the next month or something to that effect. It does not matter that you already had the condition when you purchased, you just cannot be in the middle of the treatment for it. In other words, you have to start the treatment for the crown or root canal or whatever after the coverage goes into effect. You can call them to ask for more specifics. Customer service was great when I called. This combined with our dental ins saved over $800 on each crown plus over $2000 on my child’s braces. It will vary for different states but family coverage costs us $28 mo. Hope this helps you or someone!

Executing a “Deed-in-Lieu-of-Foreclosure”

agreement with your lender will allow you to turn in the keys to your home and avoid the foreclosure process. This process is a voluntary joint agreement that gives your lender complete ownership and control of your property. The lender will then sell the property to satisfy the defaulted mortgage balance. However, in some cases the lender will seek to get a deficiency judgment against you to recoup their losses resulting from this agreement. The losses are the difference between your mortgage balance and the amount the home is sold for.

Wow, this is an awesome question, and a heckuva challenge

Um, can I think about this and go on record with what I’m going to try with the rest of the year, after I’ve had my second cuppa? Believe it or not, yes I am guilty of this. Just this morning I was debating (again) whether to open up some new fields with new-to-us farming implements, to plant some new crops, given that I’m trying to go back to work too. So, no experience with the particular equipment or process of using them, no experience with the particular crops, no idea if I’ll have time, and no idea if all that effort will result in anything. I’ve been debating this for a darn month and I need to make a decision. Another cuppa, and I’ll let y’all know what I’ve decided.

I saw this on another e-mail list:

“What would you attempt if you knew you could not fail?”
Motivation wise, it was defined as deciding what you want, getting after it, and cutting yourself off from retreating.
Starting a new business(or improving an old one)?
Healthy weight?
Education goals?

The year is more than half over. What can we accomplish in the 5 remaining months of 2013?

We had 25 here last night and a couple of weeks ago

it was warmer in Anchorage, Alaska than it was here! As to the answer to your question. You could let someone lease purchase your house, or rent it out (let a property manager handle it).

Even if you were behind in your payments – I am not sure BOA would let you do a short sale — they seem to be notorious for not working with people —- BUT — some new regulations are starting to go into place from the Make Homes Affordable plan — so that may soon change.

Next house

You will probably not be able to buy the next house for quite some time if you just walk away. I would at least rather fight my way through it and do a short sale. The bank will sell eventually for probably less than a short sale, which to me is stupid on the bank’s part because they could just take the short sale and make a few more dollars. I would assume the “walkers” might have to rent when they move, but anyone pulling up the credit report might think twice.

I was reading an article a while back about mortgage companies and the economy

They had a phrase called “jingle mail”. That’s where the homeowners simply mailed the house keys to the mortgage company and said “Here. It’s yours. We’re out of here.” The homeowners couldn’t sell it, couldn’t afford it, couldn’t refinance it, so they walked.
Now, I don’t recommend this. It’s against everything I believe and VLC believes, and I’m sure you believe. But it does happen. I have no idea the consequences, although I’m sure you have no credit rating afterwards!

While I was on the VLC (Florida) site looking for another answer

I found this post on one of the discussion boards:
“We own a home but would like to relocate to a different area. what are the consequences of letting our home fall into forclosure since its value has fallen beyond expectation?”

That piqued my curiousity. How DO you relocate if you can’t sell your existing house? At some point if I’m able to talk my dad into leaving Jacksonville, I want to move to someplace warm. But since my house is worth less than what I owe, I can’t get enough out of it. I certainly can’t afford a mortgage payment in Jacksonville, and rent in AZ or GA at the same time. And I’m sure the bank won’t take a short sale since I’m still making the payments for payday loans. So realistically, how would I handle that situation? Would I have to stop paying so they would be inclined to accept a short sale? Would I just be stuck in Michigan?

Its been awhile since we had a good Leon visit

not that he is ever a welcome guest. We had put hubby’s motorcycle in for a 250 repair that would save us more in the long run. It was only 247 in reality, we had put a 250 or call us authorization on it.
But hubby’s clutch went out while driving, luckily we were able to get off the highway & onto a side road before it went out completely.

But that’s gonna be abou 1617 in repairs we had not planned on. Since we used the auto repair money for the motorcycle, we have to use the BEF plus dig the other 617 out of other accounts.

But the good news is that there were no accidents involved, and we managed to cash flow ALL of it. In the past it would have been a credit card without even thinking about it.

Now this happened to the truck on Sat, hubby was out of the US for almost the entire month of July and had just gotten back on Fri…lol, great timing huh? And my mom had been visiting, we had taken turns paying but we had gone to the Space Needle, out to lunch a few times, out to supper once and to Crystal Mountain to ride the gondola. It was cash flowed instead of putting money into the sinking funds, but it was fun. An no guilt since its been forever since we did anything remotely like that.

I know we will be able to buckle down a little more and rebuilt the BEF and replace the other money soon.

I find I actually prefer my Saturday morning classes

AND there have been less attendance problems or dropouts in both. My last two have been Saturday mornings 10-Noon. And that’s when my next one will be as well.

My first class was a Thursday night, all other classes where Sunday afternoons at 1pm.

I’ve worked N/S for 26 years, so night classes really don’t work for me. The first one I actually took 4 hours of leave every Thursday night to facilitate the class. It was important enough to me to have the Church try the program that I agreed to the weeknight. Once we’d had a class and they saw how successful it actually was, I’ve been able to pick my days and times to suit me.

Makes sense, and I can’t fault you (or anyone else!) for that

You’re feeling that way is no different than me not hounding the people who miss a FPU class and/or drop out.

I truly believe that following the steps has to be a personal decision and desire. Therefore, if they miss a class, I’m not about to call and try to talk them into returning.

We can’t make others want what we think is best. We can only set the example and Live Like No One Else. 🙂

Just don’t get discouraged, ’cause there really ARE people watching and learning from your example. It just takes some people longer than others to act on it.

My mom had this book – Secret Life of a Dollar?

It showed what saving one dollar could do. They need to teach that in schools. And I continue to be amazed at the number of young people who don’t know what a 401K is.

Biggest funny today:
Bus driver told somebody he had to pay fare, he couldn’t just walk off.
Young person behind me yells “The money isn’t going into your pocket. Why you gotta be like that?”
Me (silently): You obviously don’t know much about where paychecks come from….

There is also a mind-set that is being taught to our kids –

that there isn’t anything else than car payments. My daughter had the assignment (in high school) to write up a budget for herself when getting out of college. She had to investigate what car payments would be for her chosen car. There were no lines for “life insurance” or “retirement”. There were lines for “going out on the weekend” and “clothes” and “entertainment”….

She got a bad grade because she refused to fill out the car payment line. (They wanted her to figure interest and so forth). She wrote down in her budget the price of a bus pass and a savings account for the said car. No interest needed there.. And no line for “student loan” either.

She also added lines which was apparently un-authorized. (Good girl!!) She wrote in “401K” and “life insurance” and “medical expenses”…

The teacher was extremely puzzled… She explained how much car payments really cost (ala Dave) and really confused him. And that she was not going to take out student loan because her parents are STILL kicking Sallie Mae out of the back bedroom. Sallie was not going to live in her house…

People do not realize what the actual cost of a dinner out is. It seems so small. Surely that money couldn’t put my kids through college? What’s the difference between paying a car payment to the dealer or to your savings account? They just don’t know the math…

How did your Saturday morning class go?

That was another thing we were trying to decide when we start our next class. It is so hard during the week because of getting kids homework, baths and stuff. And then my husband doesn’t get home until 6 or just a little after on most nights. So that was putting us starting each class at 6:30 if we do it during the week. The last class we had was on Sunday evenings from 4:30 to 6:30, but we really don’t want to do Sunday’s again. There is just too much going on.

I’ll agree with you here

but I’m guessing you missed what was the origal point, and that being, I no longer pass out TMMO books to people whom I clearly see need the information. I want to bang my head up against the wall at times, but as Eldred can attest to, it’s generally a waste of my (and his) money and time. If someone wants to know more, then I’ll share, but otherwise, I’m not going to expend the energy. I’m sick of hearing people driving new cars telling me that they’ll always have a car payment, or those that I know go out to dinner two or three times a week, telling me that they can’t afford to fund their children’s ESAs (this one makes me so angry I want to spit). What? Dinner out is more important that giving your children a paid for education? That’s what it comes down to plain and simply for those who feel entitled to dinner out all the time. This is my point in this discussion: I feel people are too lazy to change their lives for their betterment and find it easier to moan and groan about their circumstances when they have the means to actually do something.

You are definatly doing the debt repayment the hard way

You need to ignore the interest rates for now and just look at your balances. List all your debts smallest to largest. Pay minimums on everything but the littlest one. Throw everything you have at the little one and get it gone. Then move onto the next one on the list and throw all you have at that. As your pay off small debts your snowball (what you have to throw at it will grow and you will gain momentum.

ie.. MC mim. payment %25 Snowball $50… total payment is $75

WHen MC is paid off that $75 total is now added to the $25 min you were paying on your Visa. For a payment of $100.. .Then that is paid off the $100 is added to the Discover $50 minimum for a payment of $150 etc…

You will also want to really look at the budget and lifestyle choices and see if you can make some cuts that will increase what you have to throw at debt. It may mean selling some things, cutting out cable or smart phone plans etc… It may mean cutting your grocery budget to bare bones and eating more economical meals for a while.

It could also mean that someone in the home gets a part time 2nd job to throw the money at the debt (or perhaps to take care of that dental work that needs to be done so that you can do it without adding debt and still making headway on exhisting debt).

Again, pay things off smallest to largest (not including mortgage).

Once that is done focus on increaseing your retirement savings (seen a lot of folks loose pensions and companies decide to stop doing them, including my dh, so don’t count on it being there).

Then save up 3-6 months of living expenses… Then focus on college.

If all you can do is help a little, then help a little. We were only able to give our son a total of $20,000 for college. It wasn’t much but it was what we figured we could afford. Our greatest gift to our son is that we be debt free and have financial integrety going into retirement, so that he not have to worry about us being able to pay bills, keep heat on or pay for medications or doctor bills.

Then focus on paying off the house early.

This is what worked for us. We are now debt free with only a mortgage left. Paid cash for my car (used), The college funding is done, we save 15% into retirement accounts, Have a 4 month and growing emergency fund, are saving for things like attending our son’s wedding in the spring, rehearsal dinner etc… home repairs (new roof etc…) and a new to us paid for car (which we shouldn’t need for another 5 years or so. We also are paying extra towards principal to lower the term on our mortgage. It will be paid off before retirement.

We don’t make much. Dh answers phones working in customer service. I work retail for $9 an hour, averaging 30 hours a week.

My husband and I have only done 1 class so far

So it was a learning thing for us as well. I had this feeling that maybe I was not doing something right, you know? But those that completed the course told me that we did great and have thanked us. I have tried to keep up with everyone via a monthly check in email. Hoping that would keep people motivated, but I normally only have about 2 or 3 that will respond. We have mentioned to the church that we are waiting for the fall to start back up and if they took it last year that they might want to come back through to hear the updated info. So we will see.

As for the 10 week, I feel it will be really helpful. My church advisor was telling me that they had a lot of input on it from coordinators and most felt that 13 weeks was just too much. So I checked out the schedule and the classes that they will be watching at home are Credit Sharks in Suits (normally week 5), That’s Not Good Enough (normally week 8) and Of Mice and Mutual Funds (normally week 9). If people will actually watch the lesson at home, I think it will work well.

No the DR way definitely isn’t the easy way

And it WOULD be wonderful to see the same hope, aspirations and dreams from people who renounced debt. I think it’s up to US to be avenues that help bring that H/A and dreams to people by being an example. Whether we realize it or not, there ARE people watching us as we go through our journeys, there really ARE people who are paying attention. THAT is what’s important in addition to our own success.

Actually I don’t disagree with you at all

There ARE many people who are exactly what you describe below. They choose not to take the ‘hard’ road and make changes in their lives.

But I wouldn’t necessarily call them lazy or complaining….well let’s correct that, LOL! They CAN be complainers, but don’t have to be lazy.

It IS much easier to sit around and feel sorry for yourself, but do they actually do that, or do they just ‘act’ like they do that. 🙂

There are plenty of people who will never take responsibility for their actions, until or unless they are forced to by circumstances outside of their control.

Their choice….thankfully WE know better. 🙂

I’m going to respectfully disagree with you

People don’t want to change. They don’t want to cut out dinners once a week or take the time to use coupons and shop for sales. They really don’t want to change their lives. They still want to smoke their cigarettes or have a beer with their buddies after work. They don’t want to live on a budget. It’s not fun changing your life, and Lord knows it’s not always easy, that’s why people don’t follow through. They want a magic pill, they don’t want to hang in there and get an education and face the reality that their lives need to be evaluated. It’s easier to sit and feel sorry for yourself than it is to look for solutions to make necessary changes.