33 years old … broke with a kid and $25k in debt … what do I do

Hey everyone, I started a new job this year making $82k. I pay $750 for rent and just finished paying off my car. But I’ve got $25,000 in debt, no savings, and I’m not great at handling money. I want to pay this off and save for my family’s future, but I feel stuck. Should I get a debt management plan or try something else?

Here’s some more info:

Credit One - $422, First Premier - $616, Chase - $10k, Amex - $8k, Cap 1 - $6k. Most of these went to collections because I didn’t have a job last year and was living with my parents. My credit score dropped to around 550. Monthly expenses: $750 rent, $1,000 groceries, $600 utilities, $330 car insurance.

You make enough to handle this now that your car is paid off. When I had $70k, I used the snowball method: pay off one debt, then roll that payment into the next. Keep going until it’s all gone. Don’t do debt management plans because they’ll mess up your credit even more.

@Penn
When I paid off my debt, I set up a separate checking account at a different credit union. I calculated my payments, then had half of each monthly payment direct deposited from my paycheck into that account. The bills were then set to autopay from that account.

This way, I never saw the money in my regular account, so I wasn’t tempted to spend it. Plus, since I got paid biweekly, there were two extra paychecks a year, which went toward savings or a bonus payment on the highest interest card. Once I paid something off, I rolled that payment amount into the next debt.

Having no checks or debit cards for the account also made it harder to access the money, which helped me stay on track.

@Merlin
Same here. It completely changed how I handled money. Now I have a paid-off car, $10k in savings, and investments. I still use separate accounts to automate savings and keep it all simple.

Penn said:
@Merlin
Same here. It completely changed how I handled money. Now I have a paid-off car, $10k in savings, and investments. I still use separate accounts to automate savings and keep it all simple.

Wow, can you explain how you did it step by step? I have a toddler and a senior dog, and I get paid twice a month. I feel like I can’t get ahead.

Call your credit card companies and ask for a payment plan. When I did it, Chase gave me 0% or 1% interest with manageable payments, Bank of America gave me 3%, and Wells Fargo was at 10%. Lowering interest rates can make a big difference.

@Mackenzie
This! High interest rates are the reason balances barely move. Call the companies and ask for a lower rate and a set payment plan. It might take a while, but it’s worth it.

Larkin said:
@Mackenzie
This! High interest rates are the reason balances barely move. Call the companies and ask for a lower rate and a set payment plan. It might take a while, but it’s worth it.

Exactly. My average interest dropped from 30% to 5%, which gave me hope that I could actually pay them off.

@Mackenzie
Did you have to miss payments for them to offer a plan, or can you get one while staying current?

Jesse said:
@Mackenzie
Did you have to miss payments for them to offer a plan, or can you get one while staying current?

I missed a payment with Chase, and a button popped up in the app to request assistance. For Wells Fargo, I called them directly. If you can, call before missing payments, but if that doesn’t work, skip one and then try again.

Look into Dave Ramsey’s snowball method. It works well if you want quick wins. Pay the smallest debt first, then roll that payment into the next debt. It’s a great way to stay motivated while paying things off. With your income and low rent, you should be able to knock this out in no time.

@Wolf
I used this too, and it worked. OP, you’re in a good spot to make some serious progress.

It helps if you list out all your debts with their amounts and interest rates. Based on the numbers you gave, it seems manageable. You could pay off the smaller balances first for some quick wins and then focus on the larger debts.

Make a strict budget and stick to it. Your income is good, and your rent is low, so you can get out of this situation if you focus.

Your grocery spending seems high for two people. Try cutting back on extras like junk food, drinks, or anything unnecessary. You could save a lot by sticking to basics and cooking at home.

Keagan said:
Your grocery spending seems high for two people. Try cutting back on extras like junk food, drinks, or anything unnecessary. You could save a lot by sticking to basics and cooking at home.

I agree. Cutting $50 per week could save you $200 a month. Shop at cheaper stores and plan your meals around sales or bulk buys.