Quote:
Originally Posted by Avondale Red Rage
We need to get out of debt in a marriage where we both avoid the pain of budgeting and sticking to it like the plague. It will be a matter of working together to get debt free so we no longer worry about being one bad illness or lost job away from disaster.
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Dave pretty much advises to zero out your credit score, personally I'm not a fan of that one, if you have the discipline not to have credit you have the same discipline not to use it IMO.
One great way to make an easy impact is to pay cash for everything you can.
Using debit cards leads to easy come easy go thinking, actually shelling out the cash for stuff is physical and tangible, and it hits home a lot harder.
Try that first, as you watch the stuff flee your hands it begins to dawn on you where you're wasting money or spending when you wouldn't otherwise, just try it with $500 bucks at first, it's fun and bizzare at first but after a while it'll grow on you.
My wife and I did that, she went from spending whatever to being able to save surprising amounts of money, all because it was real money not just debit/credit cards.
She of course spent it later on but only on stuff she really wanted, and she did put back half what she saved which was nice
One key is what income do you have?
Not the amount but is it steady?
Steady income is very important because it gives you an idea of what you can actually count on, most of the people I see with debt problems can beat it if the income is steady and it's enough to work with, if not then like Dave says you have to start selling stuff and or making more income to beat it.
A couple of rules of thumb to live your life by also.
Make sure your housing expense is no more than 29% of your income, that's top end, higher than that causes you generally to be house or rent poor.
Also make sure your total debts including your house/rent payment are no more than 36% of your income.
Again that's a goal to shoot for and a measuring stick to live by, more than that will cause you problems more often than not.
Those percentages are calculated as follows.
Rent/house payment divided by your gross combined income.
Don't count overtime or bonuses unless they are rock steady and regular.
So if you make 20$ an hour thats 40 x 20 * 52 /12 = 41,600 / 12 = 3466 per month.
If your rent is 1000 a month that's 1000 / 3466 or 28.85% close enough.
Now if on top of that you have credit payments, "don't count light bills or water bills, only debt payments" of say:
30 credit card
150 loan
500 car payment
that's 680 + 1000 for house or rent / 3466 or 48.47, way too high for comfort.
That's the more important number, if you're a tad high on the house but ok overall, you're probably going to be ok over time as a rule of thumb, but if the overall is too high, that's bad.
Now what I layed out is not going to assure you won't have problems, there are a ton of variables, if you both work then one person losing your job is going to crush you more than likely.
Run the numbers on just one or the other of your incomes, plan on the worst happening, that's why I wouldn't go to the very edge, because things happen all the time.
You should be striving to save enough like Dave says to get 6 months income liquid cash put back for rainy days first, then work the debt down from there.
The first step is to never borrow AGAIN, then work the debt down.
The debt paying down thing is simple, you pay all you can on the smallest debt first, say you pay 300$ extra on a 1k debt and in about 3 months it's gone, now you take the 300 you paid on that, add it to the payment of the next debt in line and pay that on that one, say it was 100$, when that debt is done, you take the 400$ and go to the next one up and so on.
Dave really says common sense stuff, if you have a car that is busting your budget, sell it if you can and then buy a beat down car for cash, use the savings to payoff debts or build your emergency fund.
The key here is both people have to be a team, if one isn't buying in it won't work.
Hope that helps.
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