OP here. thanks for all the great advice! And thanks for not being too judgmental of me. You are right that we need to live within our means, and I am going to work on that. I know it seems like we are WAY beyond our means, but we really aren't. It's just that we get in a little deeper with each month, and suddenly it's THIS! Ugh. $14K is on 3 different credit cards. they are all 0% until next summer. so maybe we should chip away, at least for now, and make it a goal to pay them all off by next June?

OP, figure out how long you have until your 0% interest rates go away. Figure out what you'll need to put twds those cards monthly to pay before the 0% interest rate expires. I would suggest that you then stop contributing to your 401K for a little while in an effort to pay those cards down before the interest rates go up - they can go REALLY high after that 0% introductory rate goes away. What's your interest rate on your car? Depending on what you're paying, you may want to consider a re fi - Pen fed is offering 1.99% interest rates on car loans - we just switched our car loan from B of A to them; it's a great deal.

agree with PPs that you can sink your savings into digging out of your cc debt, but unless you change your behavior, the cc balances will return.

1) put yourself on a cash system, such as you withdraw $20 in "spending" money for the week and when it's gone, it's gone, no more SBux no more lunches out for the week.

2) pay off any cc debt on which you are paying interest pronto from your savings.

3) agree about selling car, buying a good used car, and ridiculousness of paying car debt.

Sorry, but these replies make no sense to me! Why is everyone telling her NOT to use the savings? i wonder if you read it wrong. She is NOT asking if she should use retirement/college savings. They plan to keep that intact. They have $50K in savings, and only need to use $10K. This leaves them with $40K, which is a pretty decent emergency fund. Isn't this what a savings account is for? I would call this a financial emergency, and it would be smart to dip into savings. It will save the family a lot of stress.

OP, cut up the credit cards. Don't wean yourself - just cut them up. Save one for emergencies though. Use your $10K to pay it down. then come up with a solid plan to "repay" that $10K, after paying the rest of your debt.

With that amount of outstanding debt, you are definitely living above your means. You need to get a handle on your expenses immediately. What you need to do is look at your take-home salary every month. Then look at the inflexible debts, such as mortgage/rent, utilities, minimal for food, any expenses that you have committed go and cannot get out of (say a cable contract). Look at what remains. You need to set up a budget each month that has you paying down a significant amount on the CC debt. You need to cut out any extras that are not necessities: cable (watch shows on-line with Hulu, etc), cut your cell phone service down to basic service, Starbucks, dry cleaning except absolutely necessary (say if your work requires a certain dress level), eating out. Learn to combine errands so that you save money by using less gas. If you have housecleaning, shift from every 2 weeks to once/month or less. Look for ways to cut back.

One of the first things I would suggest that you do is go and get a used car and sell your current car. There is absolutely no reason with $18K in outstanding debt that you should have a car loan of $13K unless you bought in one of those no-money down offers. Having over $30K of debt is way too much to be holding if you don't have a plan on how to pay down those debts.

Second, as someone else pointed out, you need to put the CC's in a locked drawer somewhere and really only use them for emergencies. Emergencies like "the power is going to be shut off tomorrow", "the water heater is going to die in the next few weeks", etc. Other than that, only cash until you get a handle on these debts. Then, line up all of the credit card accounts. If any of them are currently charging you interest, then you need to pay those off, with the highest one first. You should be paying the maximum amount that you can scramble up each month and it needs to be enough to cover the interest and pay down towards the principal debt. Ideally, you should be able to plan that this first debt should be paid off within the year. Then the next highest. After you cover the ones that charge you interest, look at the zero interest debts and pay off the ones that the zero interest period expires soonest.

You are on your way to very dangerous financial circumstances if you don't get a handle on this now. These problems tend to snowball.

Anonymous wrote:There seems to be a lot of financial gurus on dcum, so I thought I'd ask for some opinions. I just got my credit report, and reality has set in. I knew our credit cards had gotten out of control, but I didn't do the math to see just how much debt we actually have. My credit score is good though - 745. So, here's where we are:

credit cards: $18,000 ( all but $4K is 0% interest)
what we owe on car: $13,000 (3 years left on the loan)

So, now I need to figure out how to get out of this, and soon! We do have about $50K in mutual funds.

If we sell $10K and apply it to our credit card debt, we could pay off the rest in 6 months or so. but we wouldn't be able to establish a cushion in our bank account during that time, so I feel like we would just fall back into credit card debt as soon as some unexpected expenses came up.
Or should we get $18K and put ourselves on a strict savings plan so that we can create a cushion?

OR should we sell $30K and pay off cards and the car?! Then we would be able to save up pretty quickly and invest again. Plus we would be saving the interest on the car.

OR should we just chip away at the debt since it is mostly 0%?

Just not sure what to do. We hate having to sell, but I think it has come to that. We do have retirement/college money but I don't want to touch any of that.

TIA!

This is an indicator that you are not living within your means. Start by tracking your income versus your spending - every single dollar. And also agree with potentially seeking out the help of a financial advisor but would focus first on paying down your credit card using your INCOME not your savings account. Where can you cut back and apply to your credit card debt? Cable? Landscaping services? Housekeeping? Dinner out? Expensive clothes? After figuring that out, start determining how you can shrink expenses further (less costly family meals, shopping at consignment stores for things like kids' clothes and toys, and cutting down on the extras). It is hard but it can be done.

1. Freeze the credit cards
2. Start living within your means
3. Create a budget that includes debt service and stick to it
4. Use income to pay off your debt

Do not touch the retirement or college money. You would have to pay penalties for withdrawing either of these early, and this would end up being more expensive than the interest you're paying on your existing debt.

Also - you should probably get a financial advisor. If you can't figure this out on your own, you probably will need some help in the future. Good financial blogs - get rich slowly, bargaineering, i will teach you to be reach. Start reading those NOW.

Google "debt snowball" that will help you to prioritize which debt to pay off first. Your 0% interest isn't going to last forever, by the way. Research what ends when and when your 20% rate kicks in and for god's sake don't do any balance transfers.

There seems to be a lot of financial gurus on dcum, so I thought I'd ask for some opinions. I just got my credit report, and reality has set in. I knew our credit cards had gotten out of control, but I didn't do the math to see just how much debt we actually have. My credit score is good though - 745. So, here's where we are:

credit cards: $18,000 ( all but $4K is 0% interest)
what we owe on car: $13,000 (3 years left on the loan)

So, now I need to figure out how to get out of this, and soon! We do have about $50K in mutual funds.

If we sell $10K and apply it to our credit card debt, we could pay off the rest in 6 months or so. but we wouldn't be able to establish a cushion in our bank account during that time, so I feel like we would just fall back into credit card debt as soon as some unexpected expenses came up.

Or should we get $18K and put ourselves on a strict savings plan so that we can create a cushion?

OR should we sell $30K and pay off cards and the car?! Then we would be able to save up pretty quickly and invest again. Plus we would be saving the interest on the car.

OR should we just chip away at the debt since it is mostly 0%?

Just not sure what to do. We hate having to sell, but I think it has come to that. We do have retirement/college money but I don't want to touch any of that.

TIA!