If you make $120k, you need to live like you make $80k a year… then you would able to pay down that debt in about 2 years. After that you need to throw more into 401k. At your age, you’re about $300k behind in there
She literally cites depression, previously unaddressed behavioral issues, and poor financial literacy. No need to try and make her feel worse Mr. Bongwater
It's not like she's made that much for the last 20 years bud. Just because someone gets paid a decent amount now doesn't mean they did even 5 years ago. By the way even making $120k a year for 20 years and living well below your means will not get you enough to retire at 40 unless you made some wild bets on the stock market and got lucky.
Idk about that, living on 50k and saving 70k, thats 1.4m principal, at 7% APR over inflation thats almost $3m. Even calling it 2m after taxes etc, drawing 4% off that annually is a handsome retirement.
You'd have no kids and a pretty boring life in most area of the US, but still, possible...
You forgot about taxes and any benefits you pay for like health insurance.... Out of a $120k a year salary about $28k would be taxes. That's if you live in a state without a state tax. So take home is about $92K before any benefits are deducted. That's all IF you start out making that much which almost nobody does and if you did I'm sure by 40 you'd be making over $200k and probably have a lifestyle that $50k a year would never buy.
Thank you, I've cut my costs so that I barely spend anything now aside from paying my bills and putting anything extra I have towards my cards. Eating soups, lentils, rice, beans, eggs, canned tuna with greens.
Should I put $3K of my emergency fund that's in a HYSA towards one of my cards?
Yeah I really need to focus on 401K once the debt is paid off.
People on here always say never touch your 401K (which is mostly true). But I make about double what you do and have pulled loans out because you're paying yourself off. The interest rate is lower than what you'll pay on the CC fees and it's going back to you. The bigger issue is stop letting the CC get that high.
I’d pull everything but $1,000 out of HYSA to pay off any CC debt at higher than 20% interest. And raiding the 401k should be considered, especially if any of the CC debt is at like 25% interest.
You can sometimes take a loan out off of your 401k. It's not early withdrawing, so there are no penalties. There is interest accrued, but you're paying the interest to yourself! Probably won't see the gains you would without the loan, but it's better than some of the alternatives.
Also, depending on your credit score and available balances, try to bounce balances between cards offering 0 percent transfers. They aren't as plentiful as they were 2 years ago, but they are still out there. Careful with getting new cards to score a 0 percent deal. I get a card, immediately transfer as much as possible to it, then lock the card up in my safe as well as the ones I moved balances to. Out of sight, out of mind. I've got a couple cards I've never used for purchases. Just transfers.
Plug all your numbers into this free online calculator:
https://www.calculator.net/credit-card-payoff-calculator.html
This calculator will provide you with an amortization based on paying your debt with the goal of minimizing interest (avalanche method).
Since interest is calculated on average daily balance, send you payments as early in the month as possible.
Another way to pay debt is the snowball method. In this method you disregard the percent interest and list your debts from highest balance to lowest. Pay the minimum on all but the smallest debt. Put the rest of your repayment budget on the smallest debt. Throw every penny you have at it. Live as frugally as possible and never use your cards.
Once you slay the smallest debt, take whatever dollar amount you had been paying on it and add it to the minimum payment you were paying on the second smallest debt. Continue paying minimum on every thing else. Continue going up the ladder towards your highest balance. This method ends up costing you more interest, but it doesn’t have to.
Once you have 2 credit cards with a zero balance, those 2 banks will lust for your money. They will start sending you balance transfer offers. They will say it’s zero interest, but it’s not. It’s 3 to 5percent paid up front, in the form of a balance transfer fee. The rate might be good for 12 to 15 months. Never trust the time frame Always pay it off(or transfer again) at least 30 days before the offer ends.
This is known as credit card arbitrage and it requires strict attention to detail. Check every account weekly. Don’t do this until you completely free up at least 2 cards so you can always have a card empty.
Before deciding if you are disciplined enough to do credit card arbitrage, carefully study this extremely long archived thread from Fat Wallet. The author managed to get ALL his debt onto zero interest balance transfers, so at that point ALL his payments went to principal.
https://web.archive.org/web/20171009083350/https://www.fatwallet.com/forums/finance/227686
I followed his method successfully and have been debt free for years.
great advice and it's what I did, I kept a low interest and small balance CC at 8 percent (today's rate) to keep my credit score up, over 830, just checked, 846...shit way to validate myself
Thank you, good advice! I have $8K of the debt on a 0% balance transfer card and will look into more to get the interest down while I work on tackling this. Congrats on becoming debt free.
How is your credit? What I did was get a loan from my credit union and consolidate everything with that loan. If you can do that you should you can get a low rate and just make the monthly payments. It’s good you have a well paying job if your expenses are low then it would be feasible to make additional payments.
It’s not the end of the world you don’t have to stop dating let alone bring it up right away. Surprisingly you’re in the majority of the American population who has debt not the minority so no need to be ashamed we all make mistakes.definitely focus on the 401k too. You already know this but you’re a little behind on that. But still relatively young and still have a solid 20 years to invest. Keep that at the back of your mind and you’ll be alright.
Godspeed.
Thank you! It's in the low 600's, I always pay on time it's just my utilization is so high on a few of them so it's dropped my score down. That's a good idea to look into a lower interest personal loan from a credit union. I have $8K of my cc debt on a 0% balance transfer card (I was approved for $10K for that card just recently so hoping that means I could get a loan).
Chase has a wonderful online tool where I create six month “goals” for myself…I’ve paid off $15k debt this year this way and I was at below 600 for a minute. I’m just TWO points away from 700 (I’ve got late payments that are ruining my credit) and I’ve got about $7k of debt left to go. I love the Chase app/goals because it’s like playing a fun game with myself full of rewards! Haha. As soon as I get above 700 I’m going to apply for a balance transfer CC and enjoy 0% for 18 months while I pay off the rest of it. I’m the same age. I had long Covid and was sick for a while but all is much better now. I make less than you — about $80k anyhow. Hope this helps :)
I normally point people towards Debt Management Plans (DMPs) because they give you an arrangement where you pay off your debt in full at **greatly reduced interest rates**. Because you pay in full you get no long term ugly effects on your credit. The reduced interest means you actually make progress paying the debts instead of a bunch of interest.
You can find a provider for a DMP starting with the national organization for the Credit Counseling Agencies who administer DMPs. You'll be able to choose your own. https://www.nfcc.org/
No car, no mortgage. I do have student loan debt that I pay $500/month on. I will have made 25 years of payments (consolidated my federal loans on the save plan - had a tiny amount from bachelors left but by consolidating with the loan for Master's, the payment count will go back to when I started paying on the undergrad loan) so the loans will be forgiven in a few years so the CC debt is my big priority.
Thank you, that makes me feel a little better. I have $8K of cc debt on a 0% balance transfer card. Will look into the other options like a low interest loan from a credit union.
Is moving a possibility to cut your housing costs? Baltimore is cheaper than the DMV areas closer to DC but still has an airport and train station for easy access to NYC and other major cities.
Maybe consolidate your cc into 1 loan .. sofi or something with lower interest rate or find a cc with 24 months no interest and transfer between cards. It’s a good way to buy time for now. I grow up poor just like you but I managed my finances better. I’m 33 F , making between 250-300k between my main job and some rentals . I was at 0$ 6 years ago…I now have 3 houses ( worth about 1.2mil) 200k in 401k and some savings ..I’m also a single mom
This does not work with most people. I had a girlfriend (ex now) with high cc debt and a very high interest rate 24%. I took her debt to a my lower cc interest rate (3%), when the card offered 0 cost transfer fees. She free up a lot of money and paid down the debt quickly. She signed everything she had to me for collateral . When the debt was gone she got all her stuff back. Do you have someone in you life that trust you that much.
I would have a consult with a nonprofit credit counselor like [NFCC](https://www.nfcc.org). They can get your interest rates cut often to zero and get any fees waived. They aim to get you out of debt in about 3 years.
No. She makes enough money that she can realistically pay it off, and she should — when she manages it, there will be more options open for her on the other side.
OP — if you are in DC, it matters a lot WHERE you are in DC. As you know it’s cheaper living on the Maryland side, and cheaper still if you live in PG County — also has the benefit of being on the train line when you have to go to New York.
If location allows, Philly and Baltimore are also cheaper COL than DC — closer to NY. So they could be an option as well, depending upon your social network.
It seems like you have a good plan, from reading comments. Decide on whether you want to avalanche it or snowball it; stay on track for student debt forgiveness and there’s a way through. You can do this.
If you make $120k, you need to live like you make $80k a year… then you would able to pay down that debt in about 2 years. After that you need to throw more into 401k. At your age, you’re about $300k behind in there
need to live like you make $40k per year, it's how i paid off 30k in debt with a 80k income
I live like I have a 40k income because I have to if I made 120k like this lady I'd be retired by her age. How do people fuck up so bad?
She literally cites depression, previously unaddressed behavioral issues, and poor financial literacy. No need to try and make her feel worse Mr. Bongwater
No need to worry she wasted everything? Ok
Okay mr bongwater
God you sound insufferable.
For real though, if you make 6 figures you really have to try to throw that away and then some
It's not like she's made that much for the last 20 years bud. Just because someone gets paid a decent amount now doesn't mean they did even 5 years ago. By the way even making $120k a year for 20 years and living well below your means will not get you enough to retire at 40 unless you made some wild bets on the stock market and got lucky.
Idk about that, living on 50k and saving 70k, thats 1.4m principal, at 7% APR over inflation thats almost $3m. Even calling it 2m after taxes etc, drawing 4% off that annually is a handsome retirement. You'd have no kids and a pretty boring life in most area of the US, but still, possible...
You forgot about taxes and any benefits you pay for like health insurance.... Out of a $120k a year salary about $28k would be taxes. That's if you live in a state without a state tax. So take home is about $92K before any benefits are deducted. That's all IF you start out making that much which almost nobody does and if you did I'm sure by 40 you'd be making over $200k and probably have a lifestyle that $50k a year would never buy.
Thank you, I've cut my costs so that I barely spend anything now aside from paying my bills and putting anything extra I have towards my cards. Eating soups, lentils, rice, beans, eggs, canned tuna with greens. Should I put $3K of my emergency fund that's in a HYSA towards one of my cards? Yeah I really need to focus on 401K once the debt is paid off.
Definitely leave the $3k in a savings account. When life hit it hits hard and you’ll be thankful you stashed that little bit for it!
People on here always say never touch your 401K (which is mostly true). But I make about double what you do and have pulled loans out because you're paying yourself off. The interest rate is lower than what you'll pay on the CC fees and it's going back to you. The bigger issue is stop letting the CC get that high.
Also max out your 401K and just stop thinking about the money going in.
I’d pull everything but $1,000 out of HYSA to pay off any CC debt at higher than 20% interest. And raiding the 401k should be considered, especially if any of the CC debt is at like 25% interest.
You can sometimes take a loan out off of your 401k. It's not early withdrawing, so there are no penalties. There is interest accrued, but you're paying the interest to yourself! Probably won't see the gains you would without the loan, but it's better than some of the alternatives. Also, depending on your credit score and available balances, try to bounce balances between cards offering 0 percent transfers. They aren't as plentiful as they were 2 years ago, but they are still out there. Careful with getting new cards to score a 0 percent deal. I get a card, immediately transfer as much as possible to it, then lock the card up in my safe as well as the ones I moved balances to. Out of sight, out of mind. I've got a couple cards I've never used for purchases. Just transfers.
Plug all your numbers into this free online calculator: https://www.calculator.net/credit-card-payoff-calculator.html This calculator will provide you with an amortization based on paying your debt with the goal of minimizing interest (avalanche method). Since interest is calculated on average daily balance, send you payments as early in the month as possible. Another way to pay debt is the snowball method. In this method you disregard the percent interest and list your debts from highest balance to lowest. Pay the minimum on all but the smallest debt. Put the rest of your repayment budget on the smallest debt. Throw every penny you have at it. Live as frugally as possible and never use your cards. Once you slay the smallest debt, take whatever dollar amount you had been paying on it and add it to the minimum payment you were paying on the second smallest debt. Continue paying minimum on every thing else. Continue going up the ladder towards your highest balance. This method ends up costing you more interest, but it doesn’t have to. Once you have 2 credit cards with a zero balance, those 2 banks will lust for your money. They will start sending you balance transfer offers. They will say it’s zero interest, but it’s not. It’s 3 to 5percent paid up front, in the form of a balance transfer fee. The rate might be good for 12 to 15 months. Never trust the time frame Always pay it off(or transfer again) at least 30 days before the offer ends. This is known as credit card arbitrage and it requires strict attention to detail. Check every account weekly. Don’t do this until you completely free up at least 2 cards so you can always have a card empty. Before deciding if you are disciplined enough to do credit card arbitrage, carefully study this extremely long archived thread from Fat Wallet. The author managed to get ALL his debt onto zero interest balance transfers, so at that point ALL his payments went to principal. https://web.archive.org/web/20171009083350/https://www.fatwallet.com/forums/finance/227686 I followed his method successfully and have been debt free for years.
great advice and it's what I did, I kept a low interest and small balance CC at 8 percent (today's rate) to keep my credit score up, over 830, just checked, 846...shit way to validate myself
Thank you, good advice! I have $8K of the debt on a 0% balance transfer card and will look into more to get the interest down while I work on tackling this. Congrats on becoming debt free.
Watch that timing on that one. Seen way too many people get caught not paying it off in the zero interest period and getting hammered.
Yeah…like the previous cards these balances were on. We know.
How is your credit? What I did was get a loan from my credit union and consolidate everything with that loan. If you can do that you should you can get a low rate and just make the monthly payments. It’s good you have a well paying job if your expenses are low then it would be feasible to make additional payments. It’s not the end of the world you don’t have to stop dating let alone bring it up right away. Surprisingly you’re in the majority of the American population who has debt not the minority so no need to be ashamed we all make mistakes.definitely focus on the 401k too. You already know this but you’re a little behind on that. But still relatively young and still have a solid 20 years to invest. Keep that at the back of your mind and you’ll be alright. Godspeed.
Thank you! It's in the low 600's, I always pay on time it's just my utilization is so high on a few of them so it's dropped my score down. That's a good idea to look into a lower interest personal loan from a credit union. I have $8K of my cc debt on a 0% balance transfer card (I was approved for $10K for that card just recently so hoping that means I could get a loan).
Chase has a wonderful online tool where I create six month “goals” for myself…I’ve paid off $15k debt this year this way and I was at below 600 for a minute. I’m just TWO points away from 700 (I’ve got late payments that are ruining my credit) and I’ve got about $7k of debt left to go. I love the Chase app/goals because it’s like playing a fun game with myself full of rewards! Haha. As soon as I get above 700 I’m going to apply for a balance transfer CC and enjoy 0% for 18 months while I pay off the rest of it. I’m the same age. I had long Covid and was sick for a while but all is much better now. I make less than you — about $80k anyhow. Hope this helps :)
You are bankrupt, just look into it. They can't touch your 401k.
Dumb
Not dumb, smartest thing most people can do but are to ignorant to know.
I normally point people towards Debt Management Plans (DMPs) because they give you an arrangement where you pay off your debt in full at **greatly reduced interest rates**. Because you pay in full you get no long term ugly effects on your credit. The reduced interest means you actually make progress paying the debts instead of a bunch of interest. You can find a provider for a DMP starting with the national organization for the Credit Counseling Agencies who administer DMPs. You'll be able to choose your own. https://www.nfcc.org/
Any other debt like student loans or car payment, if not, you can conquer this. Your debt is inferior to your gross income
No car, no mortgage. I do have student loan debt that I pay $500/month on. I will have made 25 years of payments (consolidated my federal loans on the save plan - had a tiny amount from bachelors left but by consolidating with the loan for Master's, the payment count will go back to when I started paying on the undergrad loan) so the loans will be forgiven in a few years so the CC debt is my big priority. Thank you, that makes me feel a little better. I have $8K of cc debt on a 0% balance transfer card. Will look into the other options like a low interest loan from a credit union.
Great plan! You got this!!
I would, this CC debt is a killer. Good luck to you. If there is any card that you could payoff, I would choose that one.
Is moving a possibility to cut your housing costs? Baltimore is cheaper than the DMV areas closer to DC but still has an airport and train station for easy access to NYC and other major cities.
Thank you for your vulnerability. I’m in a similar situation as you. I get this.
Maybe consolidate your cc into 1 loan .. sofi or something with lower interest rate or find a cc with 24 months no interest and transfer between cards. It’s a good way to buy time for now. I grow up poor just like you but I managed my finances better. I’m 33 F , making between 250-300k between my main job and some rentals . I was at 0$ 6 years ago…I now have 3 houses ( worth about 1.2mil) 200k in 401k and some savings ..I’m also a single mom
This does not work with most people. I had a girlfriend (ex now) with high cc debt and a very high interest rate 24%. I took her debt to a my lower cc interest rate (3%), when the card offered 0 cost transfer fees. She free up a lot of money and paid down the debt quickly. She signed everything she had to me for collateral . When the debt was gone she got all her stuff back. Do you have someone in you life that trust you that much.
I would have a consult with a nonprofit credit counselor like [NFCC](https://www.nfcc.org). They can get your interest rates cut often to zero and get any fees waived. They aim to get you out of debt in about 3 years.
File Chapter 7!! That is alot of debt.
not with that income, if she was flipping burgers at 25k per year maybe
No. She makes enough money that she can realistically pay it off, and she should — when she manages it, there will be more options open for her on the other side. OP — if you are in DC, it matters a lot WHERE you are in DC. As you know it’s cheaper living on the Maryland side, and cheaper still if you live in PG County — also has the benefit of being on the train line when you have to go to New York. If location allows, Philly and Baltimore are also cheaper COL than DC — closer to NY. So they could be an option as well, depending upon your social network. It seems like you have a good plan, from reading comments. Decide on whether you want to avalanche it or snowball it; stay on track for student debt forgiveness and there’s a way through. You can do this.