Financially irresponsible and don't know how to change

[Anonymous]

I know I'm going to get a lot of negative comments for this, but if they could be productively negative, or actually offer advice, I'd really appreciate it.

I have about 7,500 in credit card debt. From nothing really legitimate. I started amassing it last year when I thought I'd get a tax return and didnt (I usually had before). I started a new professional job and did legitimately need work clothes. But I feel like I just spend money and say I will pay it back later. I was at 10 k and only paid some down because I got a grant, so I put it towards that. I never really learned about money or being responsible , and my parents didnt discuss with me much.

I make about $56 k now, although lose $300 a month for grad school - over in may, although then I'll have to start paying back my under grad student loans.

I'm not so much looking for specific advice about budget.. Although maye I should be...

But more, how do I break my pattern? How do I become responsible? And change my attitude. I do not know what to do. I think I should maybe stop using the cards entirely. I want to change.

Please let me know if you have any advice

[Anonymous]

Only use cash from now on. I did this when I graduated from college, had my first grown up job, and went a little crazy. I quickly racked up credit card debt. I went to cash only and was AMAZED by how much I saved. I use credit cards now but am still much more frugal. And I pay off all credit card debt each month, including my Christmas shopping debt. If I'm unable to pay off my credit card and it wasn't for an emergency use (example I just spent $1300 on a last minute plane ticket because a close friend passed away and I wanted to attend her funeral) then I know I need to be careful the following month.

I also use mint.com

[Anonymous]

It's not insurmountable, but you need to commit to a plan. At some point you have to face the fact that this is your income, and you're not going to win the lottery, so you need to learn to live within your means...

When would you like to have the $7,500 in CC debt paid off? That will tell you how much you need to cut your spending each month.

How much will your student loan payments be per month when you graduate? You also need to work toward finding that in your budget to avoid going further into debt.

Are you saving for retirement? Do you have any emergency savings? These are other important things to think about.

What is your monthly budget now? Is the 56K gross or net?

[Anonymous]

OP here. Thanks for the responses.

16:34- I think I've known I need to do this for some time. Do you mean literally cash only, or cash/debit?

:39- 56 k gross, though I lose almost half with taxes, deducTions, my transportation taking out, and retirement/TDA. I don't contribute enough- about maybe 240 per month, TDA and retirement combined. I am a teacher so pension eligible, not sure what will happen if I stop teaching though.

I have $1800 total in savings and save $200 a month. My take home pay is about $2400 a month. I occasionally get extra salary from working after hours, about $300 a month (varies) with some extra around te holidays.

[Anonymous]

OP again. I guess I don't have a goal yet with the debt - so that's a problem. I just want it gone. Haha.

I am not sure how much they will be. They were 150 before, but they were supposed to restart and they're in forbearance due to grad school - I paid one month and they had gone up a lot, over 200... I need to figure out what's going on with them.

[Anonymous]

16:34 here. Cash only. It is more effective to see that $100 in your hands and think "do I REALLY need those shoes? " than it is to just see another card and not make the association.

Another thing I did was to only take a set amount of cash wherever I went. So to work I might take $10. Stopped me from hitting the the coffee shop on the way to work and from buying lunch at the cafe. But it was enough so that if I needed a bottle of Advil or Tums or something like that I could purchase it.

Going to the mall with friends? Take x amount. Enough so that you can do something with them (get a drink, grab a bite, etc) but not enough so that you buy a pair of shoes you don't need.

[Anonymous]

I like those suggestions. Also, about 3 k is on 0% credit cards. One needs to be paid off my march, the other August. So I want those paid off on time. The other 4 k is at higher interest :/

[Anonymous]

Definitely the "cash economy," as my friends and I called it. It really hits home when you have to pay cash for a pizza versus using the debit card.

Part of what worked for me was to save a little bit from every check for true emergencies, like car repairs. I started with $25 every check automatically put into savings. The idea was to save for an emergency versus throwing up my hands and getting out the credit card. Once that fund got to $500, I would put the extra toward my cards.

Try to chart your cc debt--for me it was very motivating to see how it was going down month to month. You can even add up all the cards and just do a running total on your wall or somewhere you can see it.

Good luck. It's hard but definitely can be done. My husband and I paid off over 50K in credit cards.

[Anonymous]

I agree with the cash only approach. When DH and I had -- believe it -- over $40k in credit card debt, I was beginning to lose sleep and knew it would be impossible to pay it off unless we did something drastic. I ended up taking some cash from a large insurance policy to pay it off completely. Now I only use credit cards to buy very small purchases like gas and similar purchases. With the cash, it forces you to pay attention to what you are buying and spending. I realized a lot of the spending I did was mindless and needless. I may not have the latest clothes but that's ok, I have little credit card debt and a healthy amount in savings. If you can get a family loan, pay the debt off and start saving and paying cash for purchases as much as possible. I know it's hard but I am trying to stick with the program. I sleep better at night. Good luck!

[Anonymous]

16:37 again. So you need to pay off the $3,000 by August? That's $333/month, but I'm not sure that's the best plan. How much is the interest rate on the $4K? I would normally pay off the highest interest rate debt first because that will save you money.

[Anonymous]

OP here. I have to pay off 1600 by march and 1700 by August or the 0% expires. But maybe I should focus on the other ones I'm already paying interest on now.

[Anonymous]

OP,

I like this woman's approach:
http://www.gailvazoxlade.com/resources/get_out_of_debt.html

(She used to have a show called Till Debt to Us Part about finances and married couples on Canadian tv, which I found interesting.)

The best thing is that you're not in denial.

[Anonymous]

Here is what you need to do:

1. set a goal to pay it off, what is the maximum you can put toward in paying if off monthly, do it!

2. set that recurring payment to match your payroll arch/bank deposit.

3. live on that income until you pay off your debt.

When you get there...you will be "more" responsible with your $. Trust me, it works. It works because it'll take you more than 1 year to pay it off and when you do, you will feel so happy and proud and you will want to be better with your finances from now. You are already 50% there, you just need to have a plan

[Anonymous]

Don't buy any more clothes until you have zero debt

[Anonymous]

I am also irresponsible by nature, but married a man even more irresponsible than me, so that forces me to be the responsible one in order to keep a roof over our heads and food on the table. It is not easy, but financial problems won't go away by burying your head in the sand. Here are the steps I've taken, which are a variation on Dave Ramsey's baby steps.

1. Create a budget. I use an excel spreadsheet, but there are plenty of tools online. Figure out how much is left after you pay your bills, then set an amount for groceries, household items, etc. Don't forget to allocate some for occasional expenses. We almost always have something additional that costs about $400 a month - this month glasses, next month Christmas, the following month car maintenance. Your budget should account for every penny you bring in, including savings and debt payments. Track your expenses and adjust your budget as needed - I use mint.com for this.

2. Establish a small savings account. It seems like you've done this. For us, we were ok with $1000 for now because we have plenty of access to credit if we need it in an emergency. You might feel more comfortable if you have at least 1 rent/mortgage payment in savings. But remember every penny in savings is money that is not going to pay down debt. Use this savings for unanticipated expenses that don't fit your budget instead of using credit cards. Replenish the savings if you spend it, but otherwise once you hit the savings amount you decided on, start using the money you were putting in savings for #3.

3. Start paying down debt using the "debt snowball" method. Usually(but not always) it makes sense to pay the highest interest first. Google debt snowball Excel spreadsheet and fill it out. It will tell you how much you need to pay each month and for how long to pay off your debt. Mint.com will do this for you as well, but I prefer Excel.

4. Use any extra money (tax refunds, bonuses, etc.) to establish/replenish savings if you haven't yet and then to pay off debt. Never "reward" yourself and blow a windfall when you have debt.

That is as far as I've gotten. I'm also a grad student and have a goal of paying off our credit card debt before the student loans hit so that we aren't so strapped for cash.