I’ve got 3 credit cards adding up to $16k in debt. One of them has $7k with a 25.5% interest rate, the other two are $4k at 18% and $5k at 19%. My yearly salary is $65k before any bonus. This year’s bonus should be around $5k.
After insurance and investments, my take-home pay is $3,300. All my monthly expenses (mortgage, groceries, phone, etc.) come to $2,900, so I’ve got about $400 left to put toward the cards. I’m up to date with all my payments and have stopped using the cards. My plan is to use my bonus to pay off the $4k one first, and if possible, put some toward the $5k balance. I saw this thing about the snowball method (thanks to Dave Ramsey), and I thought it might work.
I’m just wondering… is this plan good enough? Should I be more worried?
@Huxley
Check out personal loans from Discover. I got 7%, but I’ve got an 800+ credit score. Choose ‘debt consolidation’ as the reason. They’ll pay off your cards directly and send any leftover cash to your account. For example, if you qualify for $17k, they’ll pay your $16k debt and give you $1k for your bank. Then you just make monthly payments.
Huxley said: @Remington
Thanks, I’ll look into that. Do you think 690 is too low to qualify? When I bought my house, my score was 810, but that was five years ago.
Try apps like Karma or NerdWallet. They show you loan offers based on your credit without a hard inquiry, so you can get an idea of your chances.
It depends on how serious you want to get about this. Having credit card debt is bad, but it’s pretty common.
If I were you, I’d treat this as urgent and make paying it off a top priority. Every month you keep the debt, you’re delaying your future and hurting your ability to build savings and wealth.
That said, people have paid off worse debt situations than this, but it might mean cutting back a lot.
@Indra
I’ve been trying to pay my mortgage off faster so I’m not stuck paying it when I’m older. Right now, my mortgage will be done just after I turn 38. I’ve also been putting money into my 401k since I was 18 and now have $60k saved. My employer matches my contributions dollar for dollar.
The money for my investments gets taken out before I even see it, so it’s never been part of what I count as spending money.
Devon said:
Hard to say without knowing more about your monthly expenses. How much is your mortgage? It looks like that might be eating up most of your income.
My mortgage is $1,600 (including insurance and taxes). Other bills:
Car insurance: $200
Gas: $80
Electricity: $200
Water/sewage: $75
Internet: $80
Phone: $150
Food: $400
Gym: $20
Household stuff: $40
I also spend about $40 monthly on a volunteer program.
@Huxley
By the way, Dave Ramsey’s advice isn’t always the best. His snowball method works more as a motivation trick, but financially it’s better to pay off the highest interest rate first.
You’re doing okay, and you sound smart enough to handle better financial advice.