I recently got help for my gambling addiction, and now that I’m no longer gambling, I need some advice on how to pay off my debts.
My take-home pay is about $5,500 a month.
- Credit Card 1: $36k, monthly minimum $1,000 @ 29%
- Credit Card 2: $12k, balance transfer with 0% interest until mid-2025, minimum $125
- Loan 1: $14.2k, monthly payment $495
- Loan 2: $12.2k, monthly payment $402
- Mortgage: $1,250
- Utilities/HOA: $550
- IRA contributions: $300
All my bills come to around $4,000, plus about $300 for food and gas.
I feel like I’m drowning and don’t know how to handle this. It feels like I’ve ruined my life, and I’m not sure what to do next. Is a debt consolidation loan my best bet? I don’t even know if I’d qualify. Any advice would be greatly appreciated.
I know what it’s like to feel like your debt is overwhelming you. First of all, congratulations for receiving assistance for your gambling; that is a huge victory. If you qualify, debt consolidation can assist, but start with the high-interest credit card. Your money is being eaten up by that 29%. Consider talking with creditors or looking into balance transfers. Reducing non-essential spending and possibly stopping IRA contributions could temporarily provide you more breathing room. Just move step by step; you have a good income.
Should I attempt to pay the 29% card with about $1500 a month? Will this lead to a decrease in interest in it? and continue to use the 0% card’s minimum payment?
Paying extra when possible is a big help. Your statement will show how much you’ll pay in total if you only make the minimum payments versus what it would take to pay off in three years. If you get paid every two weeks, consider making biweekly payments online, even if it’s just splitting the minimum. This can help pay down your debt faster. You can also find online calculators to play with the numbers and see the impact of biweekly payments.
I’m in a similar situation with around $78k in debt, but with a lower income. Gambling caused my debt too. I’m considering bankruptcy but want to try to get out of it first. I’ve been making slow progress. I created a spreadsheet to track my debt every two weeks when I make my biweekly payments. It calculates the total and the change from the last time, which helps keep me motivated. I also track my salary and upcoming expenses in a text file, so I know exactly what I have left. Doing the math constantly got exhausting, though.
If you contribute to a 401k at work, you might need to pause the IRA contributions. I had to. It’s tough, but I figured paying off high-interest debt was a better investment for now. If you don’t have a retirement plan at work, continuing the IRA may still be a good idea. I’m hoping to start putting a little into mine again soon I really miss doing that.
Take it one step at a time and concentrate on developing a sustainable plan. You’ve already demonstrated strength by dealing with your gambling problems; now, you may apply the same strength to money management.
Honestly, I’d recommend this approach:Get a consolidation loan through Upstart or Best Egg to cover the $36k on your first credit card. Over five years, aim for a loan with a 15-18% interest rate, which should cost around $600 a month. I suggest this because that $1,000 monthly payment is really hurting you! You need more cash flow, and 29% on $36k is just too high. If a consolidation loan isn’t possible, prioritize paying down this debt while making minimum payments on your other accounts. Also, consider opening a balance transfer card or two to reduce your monthly payments and the interest on card one.
Try to save $2-3k and pay the minimum until this consolidation is complete. Put those savings in a high-yield savings account; I use Ally. This will serve as your emergency fund for the next three years. If you dip into it, make sure to replenish it before continuing to pay down your debts.
There’s no easy fix, so line up your debts from the lowest to highest interest rates and tackle them one by one.
Become extremely frugal cut out unnecessary expenses, switch to cheaper insurance, sell items you don’t need, or consider getting a second job. Your main focus this year should be leveraging your ability to work up to 70 hours a week to pay off this debt.
For reference, I’m also on this journey after losing my entire debt payoff due to options trading, which left me with $45k in debt. In the last four months, I’ve paid off $12.5k while earning about the same as you. I’m looking at about 16 months to pay it all off, and even though I’m not super frugal and spend on things I enjoy like a boat I won’t sell I’ve learned that hard work and persistence really pay off. The four months have gone by quickly, and just having control over my debt has significantly reduced my stress, even though I still have some anxiety. I was a mess when I was out of control.
I understand you. My gambling addiction ruined everything and I will be “in prison” by bank for the next couple of years for sure. Please get in touch if you need someone to chat to.
Perhaps you should sell your house, pay off your bills, and save up some more money for a down payment on a new place to rent. Once you have enough money saved, get rid of your credit cards and stop using them.
Is there any way you might reroute your IRA contributions to debt repayment?