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Dave Ramsey

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Liz Pulliam Weston

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klaychild

Question:i have a lot of debt. if i pay the min on all my bills, i will usually have $500 left for the month. what is a good way to be very frugal and pay more towards my debt?

Asked by klaychild on 7/15/08 5 Answers»
melsrest

Answer:

grab all your bills and write them down. Pay extra on the smallest owed card until it is paid off and then take that entire amount and add it to the next card(while still making the regular payments ,of course). This is the way we got ourselves out of credit card debt, and if you get any overtime or extra money put that toward the cad as well.
We allow ourselves 10% of our take home pay for fun money or allowance as you might look at it. Some weeks we can do alot and some weeks we do nothing and save it to do something bigger the following week.
We also put 10% in a savings account so if emergency arises we don't necessarily have to resort to the cards again. Many times this account allows us to take a small vacation the following year.
We do not go out to eat unless we have fun money left or gift certificates we've requested at holidays.
Our budget is 70-10-10-10. The first 10 goes to the church tithe. If you don't have church find a charity. The second 10 into saving ,the third I mentioned before fun and the remaining 70 is for finances, I take out $40 for grocery and put it in an envelope.. I don't know what size family you have to know if that would suffice . We also put 30 in an envelope for gas. We have enough that we also have a Christmas club so we have what we need at the holidays so we don't use credit card and go into debt all over again.
If I can be of any other help I'd be more than happy to help.

Answered by: melsrest on 7/28/08
melsrest

Answer:

grab all your bills and write them down. Pay extra on the smallest owed card until it is paid off and then take that entire amount and add it to the next card(while still making the regular payments ,of course). This is the way we got ourselves out of credit card debt, and if you get any overtime or extra money put that toward the cad as well.
We allow ourselves 10% of our take home pay for fun money or allowance as you might look at it. Some weeks we can do alot and some weeks we do nothing and save it to do something bigger the following week.
We also put 10% in a savings account so if emergency arises we don't necessarily have to resort to the cards again. Many times this account allows us to take a small vacation the following year.
We do not go out to eat unless we have fun money left or gift certificates we've requested at holidays.
Our budget is 70-10-10-10. The first 10 goes to the church tithe. If you don't have church find a charity. The second 10 into saving ,the third I mentioned before fun and the remaining 70 is for finances, I take out $40 for grocery and put it in an envelope.. I don't know what size family you have to know if that would suffice . We also put 30 in an envelope for gas. We have enough that we also have a Christmas club so we have what we need at the holidays so we don't use credit card and go into debt all over again.
If I can be of any other help I'd be more than happy to help.

Answered by: melsrest on 7/28/08
ChangeHero

Answer:

Dave Ramsey has a very good program. I lived in the same city where he started on local radio long before we went national or wrote his book. I haven't read his book but listened enough to know his principles.

If you don't own a home, I'd keep one credit card to help build your credit rating for a future home purchase. Don't use it until you've paid off all your debts. Afterwards, I'd suggest you use it only for big purchases (no clothes, gas, entertainment) AND only if you know you have the cash balance to pay it off tomorrow. Don't even wait for the bill to arrive.

Factors in credit score rating:
35% is payment history. Don't be late.
30% is amount owned. Keep it at zero.
15% is length of credit history. My reason for above.
10% is taking on more debt. No new credit or store cards.
10 is type of credit is use. Home and car loans are different than credit cards or financing cos.

Answered by: ChangeHero on 7/17/08
SavannahSally

Answer:

I liked the other answer you got, but I would highly recommend you check out Dave Ramsey's website. I took his Financial Peace University course and it made a tremendous difference in my life. He would recommend the budget (which should include the "four" walls -- food, rent/mortgage, utilities, car, gas or transportation) and then list your debts -- smallest to largest. Pay minimum and put money in savings until you have $1000 emergency fund. The pay minimums on all but the smallest. Add extra to that one every month until it is paid off and then go on to the next one until all credit card debt is paid off. The build your emergency fund to 3 to 6 months of income; then start investing. Anyway -- worked for me. I pay cash for everything and do not own a credit card. Took several years but it was worth it.

Answered by: SavannahSally on 7/17/08
ChangeHero

Answer:

Is that $500 after your living expenses--rent/mort, food, utilities, insur, etc?

If so, I'd take the credit card with the lowest balance and pay at least $100 above the min. Once that's paid, move to the next card and pay $150+min. payment. You're young so take the remaining $400 and split it between an emergency savings account and an IRA. Check out several 30-day CDs to stash your savings. Get the highest rate you can find. This will help lock you out from accessing the funds for unnecessary spending. Most emergencies can wait 30 days for cash payments.

If you want to be aggressive, pay $250 above minimums and use the remaining to split btw savings and IRA.

If you need the $500 for living exp, then figure out a budget and what to cut out--cable, coffe, movies, going out, etc. Put your credit cards in a cold dark place where you can see them.

We followed a similar plan and now we're debt free w/ a savings. Took a while but it's very liberating, especially with today's economy. We use cash or debit cards so that we're aware of our balance and expenses. One card is used for travel or big expense but we pay off the balance right away.

Hope that helps!

Answered by: ChangeHero on 7/15/08
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