If you've got $13,000 in bad credit card debt, ask for help!

Or at least stop adding to it :) One of my friend's bf had been going slowly under in credit card debt for years now, and finally decided to do something about it.

My friend (the same friend who thought she got $300 extra on her stimulus check) told him it was about time to clean it up so he can stop stressing and worrying about it. Smart!

At first he wasn't too happy about hearing that stuff from his girlfriend (who would?) but it eventually sunk in and he knew it was all in the spirit of love. I guess his family and friends were all in the same boat, so he considered it "the norm" and didn't realize how bad it actually was.

He was $13,000 in credit card debt, spread across 3 cards with interest rates at 22%, 28% and then another that i can't remember right now...but it was equally high. His payments were a good $500/month, and almost all of it went entirely to just INTEREST alone! It seriously made me want to vomit when i heard that...can you imagine? it's one thing to have a lot of debt, but it's entirely another to have a lot of debt with high a$$ interest rates.

My friend asked me for some advice, and i told her exactly what i'd do if i were him:

1. Call each company right away and ask to have your rates lowered. Play the loyalty card if you can, and say you're thinking of leaving if they say no right away. Throw in a sob story if you have to, i don't care as long as you get each one lowered. You can do 3 calls in less than 30 minutes and save hundreds, if not thousands, easy as that.
2. Consolidate! This won't work for everyone as your options depend on your credit and such, but I find it much easier to pay off one balance than 3 scattered about. You might even get lucky enough to stumble upon a 0% card offer for 12 months, or even a personal loan around 10% or so. Unfortunately it's a little hard to do these days, but it's worth asking around.
3. Talk with your bank or financial advisor. Especially if you can't consolidate on your own. They have a handful of ideas and plans they could line you up with, or at least offer you suggestions. Start with your own bank or advisor if you already have one, and then go from there.

She relayed them over ASAP and he surprisingly worked on them right away! WOOHOO! Unfortunately i celebrated a bit too early though. His credit wasn't low in the dumps, but it wasn't up to par either - more in the lower middle range, thus making consolidation and 0% interest cards harder to come by.

He did, however, get a cple of the cards' rates lowered (by 5% on one, and 6ish on the other) so that helped, but he still needed a better plan. Somehow in his research he came across one of those shady "fix it all" companies who said they'd get rid of it all for him, and even increase his credit! They said all he had to do was stop paying his payments on all cards, and pay this company $400+ each month which, over time, would pay off the entire balances over 3 years....plus the credit help, of course. The alarms were ringing when i heard this, but he went for it anyways.

Long story short, the creditors were on to the game and started calling non-stop for 2 months straight. He started getting worried and eventually cut the company (losing only $150 in the process), and started making the payments again. Whew!

This time, he decided to confront his parents and explained the whole situation to them. Not only were they not upset, but they loaned him enough money to pay it all off in one huge swoop! Awesome! He probably should have done that sooner...but i don't blame him, us guys like to handle things ourselves. But now all c/c debt is paid off, and he now makes the payments to his parents each month with a minimal interest rate (i think like 5% or maybe even 0%, i can't really remember). Not too shabby.

So the moral of the story, besides don't go in debt? When you find yourself going deeper in the whole, commit yourself to a gameplan and actually DO SOMETHING about it. That, and always listen to your girlfriend ;)

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You mean if i have a Porsche I'm not rich? Ahh, come on.

So I started reading this book "Your Money or Your Life"and I just about shot myself.

Maybe it's because I'm reading the older edition (remember how i got this book for "Free" since they shipped me the wrong one?), but my damness it's so B-O-R-I-N.... zzzzzzzz. It's so sad because i was really excited to read it! Maybe i just haven't gotten to the good parts yet?


Anyways, so I decided to pick up a non-personal finance book this time for a nice change of scenery. And funny enough it brought me right back to finance. It's not THAT crazy i guess cuz money plays a part everywhere in life, but it def. caught me off guard and got me zoned right back in again :)

The book is called "The Pleasure of My Company" by Steve Martin (yeah, THAT Steve Martin). It's a fiction/comedy about the musings of this super smart/obsessive compulsion type guy. At one point he's looking out his window at these apartments for rent, and he relays the following to us:

"...twenty minutes later i saw a couple in their thirties, Porsche-equipped,pull up and park half in the red zone. Oh, I can read them like a book: too much money in the Porsche, not enough left over for the rent. This is a young hotshot three years into his first good job, and the one thing he wants is a Porsche. Sort of the boyhood dream thing. Finally he gets the car and has a strong attachment to it. The wife came later, but dang, he still loves his Porsche. So they think they have plenty of money for rent until they start checking into prices and find that their affordable number of bedrooms has shrunk by 1.5"

I love these types of generalizations because that's all they really ARE - generalizations. This one happens to go against the common thought, but it really depends on who you ask. You'll have some people saying/thinking "oh yeah man, that guy is LOADED! look at that hottie car and that blonde bombshell next to him", while others, mainly those in the PF mindset, will think "No way, that guy's totally in debt - what an idiot! Doesn't he know that if he invested that $60k in XYZ stock at 9.3456% he would have $82.50 right now?!"

I, personally, take a little reasoning from both sides and formulate my own little mix. It goes a little somethin' like this, "Wow that's a hot car! He must really like it cuz he just blew alotta money on it. You'd never find me driving it, but I can appreciate his choice of style...I just hope he's not in debt! Maybe he just won the lottery? Or maybe he just lives on the edge?" I never like to say one way or the other whether someone's an idiot or not without knowing the facts ;)

The beautiful thing about this stuff is that it fosters such great discussion. Everyone has an opinion and can back it up with a million reasons and experiences, but there's never a clear cut answer. So everyone wins! I guess you could always walk right up to the person and flat out ask what's in his bank account, but even then i doubt you'd strike the total truth ;) It would certainly add more fuel to the fire though!

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My 4 Favorite Pieces of Financial Advice E-V-E-R.

Every now and then a bloke or two will ask me for my best financial advice, and while I wished I could refer them to a single post of mine, unfortunately I never could....until today!

This post encapsulates my all-time favorite "words of wisdom", jotted down in one simple place.

There's a bazillian of things I'd love to share with everyone, but there are 4 main biggies I repeat over and over again - whether on this blog, or when talking to friends, family, or strangers. They aren't new, but they sure do work! And I follow each and every one of them personally, even if I do slip at times ;)

I truly believe that these will improve anyone's finances, regardless of age, occupation, or net worth. Your wallet will thank you, your peace of mind will thank you, and you'll find yourself feeling sexier than ever! So here they are - my all-time favorite pieces of advice:

1. Pump up your 401(k)
If your company offers it, jump in as hard and as fast as you can! Contribute AT LEAST as much as your employer matches. if they match 100% of 6% invested, invest 6%. If they match 25% of 3%, invest 3%. Whatever the case may be, their portion is FREE money baby! Aka 100% guaranteed profit before it even gets invested! And if you have the means to put even more in? Then you, my friend, qualify for the Bad A$ of the year award ;)

Not only that, but Uncle Sam will hate you for it... at least for now (that's a good thing). The more you invest, the mess taxes you pay out that year. Say your annual gross income is $50k. Well, if you don't put anything in at all, you pay taxes on that $50k. BUT, say you contribute $10k towards your 401(k) in that year, well now you're only taxed on $40k! (you pay the taxes later) So yeah it may suck initially "being out" of a little money each paycheck, but over time you'll get used to it and maybe even forget since it's all automated. Either way, those amounts pile up BIG time over the years, and you'll be thankful you jumped on this money train when you did!

*if your company doesn't offer a 401(k), OR they don't match, consider picking up a Roth or Traditional IRA instead (or in addition to). There's a pretty cool breakdown of the differences and benefits here.

2. Track your spending for 3 months
This is the one thing you can do to learn EXACTLY where your hard-earned money goes to. Think of it as an E-True Hollywood Story based on Your Financial Life - you think you know, but you have noooo idea! haha...okay, well maybe it's not that drastic, but you'd be amazed at the things you'd find if you actually sat down and sorted through it all. Even if you do it just one time, and one time only, it'll give you a better over all picture of your finances.

Once you know EXACTLY how much you spend, you can then figure out how to move forward - whether it's to remain on the same route you're currently taking, or move to a newer one. I went back through 3 months of checking and credit card statements to figure out my habits, and boy was i surprised! It wasn't so much in seeing the items purchased, as I remembered them all, but it was the grand total of the expenditures that hit me. I had a guestimated a budget of $500 for my credit card each month, but in reality i was spending between $800-$1200! Woops. I then created a more realistic budget ;)

3. Create an Emergency Fund
Simply for a great peace of mind! There's something to be said in having a pile of cash in your account for whatever it is you'll need it for. I really don't know what constitutes an emergency, exactly, but for me it's more of a stash to keep myself out of trouble ;) As for how much to put in there, I personally shoot for 3 months, but it really depends on what you're comfortable with. It can be 2, 3, even 6 months, whatever you feel would make you sleep better at night. Once you reach that point, you're all set! You can then go about using your money as you wish, knowing you have that safety net.

4. Pay off all Bad Debt
Get rid of it! Whether it's credit cards, outstanding loans to friends or family, or whatever - it's not great to have. This is much easier said than done, of course, but my goodness if it's not true. It effects everything from credit scores, mortgage rates, car loans, and even worst - your overall happiness :( What would you do if you had $0.00 in debt?! How insanely awesome would you feel! It's not gonna happen overnight, and it certainly won't be easy, but it's definitely imperative to work it all out. Whatever you need to get rid of it, just start.

And that's it! Those are my Top 4 all-time favorite pieces of advice I give out. Some are easier to follow than others, but they all work magic on your financial health!

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Wanna know what it feels like to have ZERO credit card debt?

It feels GREAAAAAAAAAAAAAAT! (in the voice of Tony the Tiger). I know this because the Mrs. and i JUST paid off all 3 outstanding credit card balances today. That means no more interest charges, no more budget fenagling, and especially no more annoying bills to pay ;)

While it doesn't feel all that *different* per se, my brain does feel a bit more organized and clearer. I think it's just nice overall knowing that the only debt we have left right now is our mortgages and car loan. Unfortunately this will only last through August when Mrs. Budgetsaresexy starts grad school - yikes! The word on the street, though, is that it falls under "good debt"! haha...i agree it's def. better than c/c debt, but it's still not fun .

Either way, you need a solid game plan when it comes to defeating those evil credit cards.

Don't get me wrong, I'm a HUGE fan of credit cards in general - i charge everything i can to them, and then *usually* pay the balance off in full each month using my c/c budget - but what i'm NOT a fan of is recurring balances and the fees/charges assigned to it. When I find myself in this nasty territory, I set up a game plan and get the F outta there!

Here's the 4 steps we followed to sneak outta credit card hell this time:

1. We set up a time frame. It's hard to reach a goal without a marked finish line, so we decided that we wanted to be c/c debt free in 1 year. This started last November for us when we picked up our new iMac, and continued as we added a little more debt along the way. (most at 0% financing, but it's still debt)
2. We took a look at our budget. I knew there was no way in hell we were gonna pay it all off until we figured how where this money would come from. Since I already had a sexy little budget to rely on, i pulled it up and started re-working it until I couls squeeze an extra $100 a month out of it. This Benjamin, matched w/ the Mrs.', would be enough for us to reach our 1 year goal.
3. We applied the alotted money efficiently. The trick is paying off the highest interest cards first, and paying the minimum on all others. Some prefer paying off the smallest amount first to get quicker accomplishments along the way, but it didn't make sense for us. So we paid $30 or so towards minimums, and then $170 to the card with the highest interest rate...which at the time was only 5% ;)
4. We applied unaccounted for money towards the cards. This was the final killer! We used a good portion of our $6k wedding money to pay off all remaining balances, despite the urges to refurnish our house or pick up a sexy new pair of Dolce and Gabbana shades!

So after some re-budgeting, patience, and good fortune, we are now c/c debt free and ready to start saving that extra money! That is, after we take a month or so to enjoy the spoils first :)

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