More financial advice sought

[jmac]

Thanks everyone for the advice. It gives me lots to say and I will give the Zone the credit.
btw...dont stop now.
Keep it coming !

[15fan]

Here are a few of my faves that I haven't seen above:

Never, ever, ever pay a fee to get cash from an ATM. Never. $2.50 to get your own money? No sir. Plan ahead, so that your route takes you by an ATM from your financial institution. Can't do that? Buy a pack of gum at the grocery store and get cash back. But don't pay the fee because you're at a different bank's ATM.

Also, understand & utilize pre-tax spending plans that might be offered through your employer. If you know that you are going to spend $X per month on prescription co-pays, and $Y in doctor's office co-pays, have that withheld from your paycheck pre-tax. You'll save yourself from forking over some cash to Uncle Sam. That's money that can be spent on other things - like retiring debt.

[OldRightHander]

Use a debt snowball. I know this sounds counter-intuitive, but start with the item with the lowest balance, not necessarily the item with the highest rate. Assuming you're making minimum payments on everything else, put extra money toward the small item until you knock it out, then take the amount of that payment plus the extra you were paying and put that toward the next item on the list. Work your way from smallest to largest. Each time you eliminate one item, you're applying that money plus what you're paying extra to the next item. By the time you get to the large items, you're throwing a good amount toward them.

Here's how it's working in my case. Our three main debts are the car, the van, and the house. We owe $9000 on the car, $36000 on the van, and $90000 on the house. The payments are $300, $1200, and $600 respectively. We're going to throw everything extra we have at the car and try to pay it off in the next few months. Then we will take that extra we have been putting toward the car along with the $300 we were making as the regular payment and put all of that toward the van. For the sake of simplicity, let's say we're making an extra $200 a month toward the debt. That would put us paying $500 a month toward the car. When the car is done, we take that $500 and add that to the $1200 payment on the van. That comes to $1700 toward the van. When the van is done, we add the $1700 each month toward the house.

Now I don't know all the math, but for some reason, doing a snowball that way will save you more interest charges over the long haul than attacking everything simply with the largest rate first. I used to be a financial adviser and according to all the computer models we used to run, that scenario always came out ahead.

Now of course the other important thing is simply to live within your means, or as Dave Ramsey says, "Act your wage." Don't finance anything you can't pay cash for. My wife and I use credit cards quite a bit, but what we do is make the purchase with the card and then pay off the balance in full at the end of the month. It's just a way of trying to build the credit scores, and undo some of the damage I did during my single days. We have a Meijer card and sometimes we will go there for groceries and pay for them with the Meijer card and then walk over to the service desk and pay off the balance as soon as it shows up.

[Boston Red]

Now I don't know all the math, but for some reason, doing a snowball that way will save you more interest charges over the long haul than attacking everything simply with the largest rate first.

No, it won't. Some people just see a psychological benefit in seeing things get paid off. You pay for that benefit in higher interest rates. But if that's the only way you'll actually stick with the plan, it's better than nothing.

[Rojo]

All good advice, but honestly, I'd look hard at bankruptcy. It was the best thing I ever did and don't regret it for a second. It feels like a defeat at first, but you get over it. My financial picture turned around over night. Hell, rich guys do it all the time.

We live in a system that makes a lot of folks broke, if the man gives you an out, you're crazy not to take it.