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Hi,

I don't post my own personal experiences very often, however, I think that I will start to begin so that I can be held accountable. I have been playing the pay down your debt struggle for over a year. I have paid off my credit cards only to carry a balance on them once again. I have a MC, a Visa, and 2 store cards. The MC and Visa limits are only $1500. I had them reduced once I paid them down. I only use the store cards when they promote a special like an extra 20% off or deferred billing. Once the promotion ends, I usually pay the balance off. However, I have to wonder if carrying a balance on the cards at all is even worth it. I pay way more than the minimum every month, but I do usually carry a balance of about $300 - $600. Here is the situation.

MC - $900
Visa - $179
Store #1 - $700 (on 2 deferred billing cycles due July, August)
Store #2 - $500 (on 2 deferred billing cycles due June, August)

Car Payment - $285 (I usually pay extra on every month)
Student Loan $1200 ($65 monthly)

I have reduced my 401(k) contributions down to 5% from 18% to free up some extra cash to pay down the debt. However, what is keeping me from living a cash lifestyle is beyond me. Any ideas? Why am I struggling to stay on track!

Venting!!!
Sheer
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I have reduced my 401(k) contributions down to 5% from 18% to free up some extra cash to pay down the debt. However, what is keeping me from living a cash lifestyle is beyond me. Any ideas? Why am I struggling to stay on track!

Well, your problem is that you won't cut the cord to credit. What you need to do is to cut up all these cards and then NEVER, EVER use credit again. I guarantee that if you have no credit and don't have the cash you probably won't be buying anything. For some reason or reasons, you keep relying on credit cards as some sort of crutch. If you can replace that crutch, you'll be much more likely to get rid of them.

Another problem that I think I see is that you're not doing much of a budget on your money to keep you from spending more than you make. You have the "yeah, I kinda-sorta know where my money is" attitude. Every month (or week, depending on how anal you are about it), you need to do a budget that leaves you spending less than you make. If you don't have this, you have to start the budget over and try again. It won't necessarily keep you from buying crap you don't need, but it will at least make sure you're not using debt to do it.

Leviathan
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Do you have a good budget...if not you need one.

W
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For the record, I do have a budget and a small safety net. The purpose of the post is to open the discussion on how to change one's mind to the perception of credit. I have the ability to payoff everything except the car and student loan within two months. However, utilizing the deferred billing plans and other what I believe to be useless excuses inhibit me to charge. If I was to take in account my past experiences, I would say that comparatively I am in much better shape than the past.

What my intentions are is to pay the cards off (again!!!) and start a cash only diet. Any helpful hints on the transition would be helpful.

Thanks.
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Hey Sheer --

You sound a lot like me. What you need to do is

1. Pay off all the cards till they are zero. Refrain from paying off the car extra. Tighten your belt. I don't know your income, but you don't owe a whole hell of a lot

2. Keep one CD in your wallet (try this for a while, if you use it for anything other than a real emergency -- ie. paying to get your car towed or something, take it out). Or, get an Amex Charge to keep in your wallet -- you'll be forced to pay it every month.

3. Keep another one at home in a safe place in case you lose your wallet.


4. Cancel the rest.(but see note about store cards)

5. Pay off that student loan -- it's little (in comparison to mine, at least) or pay off your car payment if you owe less than the student loan.

6. Do you have an e fund? If no, make accumulating at least a mini one be the next step after paying the CC's off.

7. RE Store Cards. I fell into this trap a lot. Example. I go into Express with the intent of buying ONE SWEATER to match an outfit. A salesgirl tells me if I get a card I get 20 % off. I get a card. I think, geee, I'm getting 20 percent off. I'll buy a lot of stuff to get savings. I end up with a $400 Express bill at 24% interest taht I can't pay off right away... BAD. Sales and savings are only good when you actually need the sale item. Otherwise, it's money you wouldn't have spent. Think about that with regard to the store cards. If you want to try it, check your cash balance -- say, you have 60 bucks to pay for clothes. Take the store card, charge the 60 bucks to get a discount and write a check that same day and pay off the card.

8. Good luck. I know it's hard, your debt isn't that bad, you just need to stop using cards.

Q
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For the record, I do have a budget and a small safety net. The purpose of the post is to open the discussion on how to change one's mind to the perception of credit. I have the ability to payoff everything except the car and student loan within two months. However, utilizing the deferred billing plans and other what I believe to be useless excuses inhibit me to charge. If I was to take in account my past experiences, I would say that comparatively I am in much better shape than the past.

What my intentions are is to pay the cards off (again!!!) and start a cash only diet. Any helpful hints on the transition would be helpful


The first thing to do is to cut up all the cards and never, ever to take another one out again. After that, you might find it useful to set up as many auto-drafts for bills (mortgage, utilities) out of your account as you can so that the money gets taken from you "behind the scenes" and becomes one less thing to worry about. For short-term savings or for annual payments (insurance, taxes, etc), I recommend setting up a completely separate account and keeping a spreadsheet as to the breakdown of money in it so that the annual payments don't "sneak up" on you.

Next, stop writing checks for things at the store. It may be that you still have to mail checks for certain item that can't be auto-drafted. That's okay, but instead of using checks at store locations, use cash. What I do is to budget for the month and then take cash out in the amounts specified in my budget. I only spend the "clothing" cash on clothes and the "groceries" cash on groceries. This way, I know that if I have cash left I'm still within the budget and when I run out I have to stop spending.

Leviathan
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However, what is keeping me from living a cash lifestyle is beyond me

Here's your answer. You said it yourself...

I have paid off my credit cards only to carry a balance on them once again

The ONLY way to live a cash lifestyle is to use CASH... Not CC's.

Make a budget if you haven't already and track every last thing you buy for a month or two. That should help to identify the holes.

Louise
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Have you tried the "out of sight, out of mind" option? I tried this for a while when I first started getting out of the credit habit and it worked wonders for me. :)

1: Take ALL credit cards out of your wallet and leave only the essential items: license/ID, blood donor card, car ins. card, etc. Remove credit cards, rental cards (bye, bye Blockbuster!), membership cards that require you to spend $$ to use them, etc. You can keep your ATM card.

2: Now that you've cleaned your wallet/purse/satchel/fanny pack/ whatever, put those items in an out-of-the-way place. I put my cards into a sealed envelope underneath my plastic drawer organizer in my desk. If I wanted to use them, I needed to go to my desk, open the drawer, remove the plastic drawer organizer, get the envelope and tear open the envelope. Often, I just didn't want to do the effort.

3: Pay what you've already spent and send the bills out the day after you get them...not the day they are due. :) It seemed that the sooner I sent my payments, the less strapped for cash I became.

4: Give yourself an allowance. This is where you can use that ATM card you kept in the wallet. Force yourself to take out $20 of fun money every pay day. That's your spending cash for the week. Anything left over can be saved for the next week or put into a money jar. I still use this method, but take out $40 now that I make twice as much as I did when I started paying down my debt...and I get paid bi-weekly. My wife and I use the money in our "Wuv Munny" jar to do laundry.

5: Purchase essentials with cash only. My wife drives me up the wall on this count because she insists on buying groceries (when it's her turn) with her CC. Gah! I think I need to tickle some sense into her again. :) She's Foolish in other ways, though, and she pays her CC's. Guess I can't complain too much...

But I digress. It may be a little tough at first, but I usually end up with $5-$10 after 2 weeks of spending my $40 allowance. Some weeks more and some weeks less. You just need to be serious about paying your debt, find a plan that works for you, and stick to it. If you can't stick to it, change your plan.

Good luck!
--skb
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I did the old 'hide your cards trick' and it really worked for me. It just forces me to pay cash, which makes me think twice about certain purchases (like do I really need the latest Dave Matthews CD right now or can I wait for it to go on sale).

just my two cents..

-bigML
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Sheer,

I have started using my debit card instead of credit cards.

Then when the money's gone, it's gone.

The only drawback is that it's harder to balance your checkbook.

I started using the Wells Fargo Online banking and that helps a lot.

I hope that helps.

Bret
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<<3: Pay what you've already spent and send the bills out the day after you get them...not the day they are due. :) It seemed that the sooner I sent my payments, the less strapped for cash I became.>>

Here's an idea: I've taken this one step further. Whenever I charge something, which is only when it's something that can only be ordered w/ a CC (such as something over the internet or an airline ticket), I send the payment to the CC Co. in the exact amount of the charge, on that very day. That way my statement looks like this:

Purchase 15.70
Payment -15.70
Purchase 217.08
Payment -217.08
etc...

So far I've stuck to this with no slip-ups since implementing this strategy. :)
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I pay off my credit cards every month, using them for gas and groceries. However, I've found when I use them for anything else I am surprised at the end of the month at how much more I spend. Using my checkbook and seeing the balance go down reminds me to think about whether I really need something. But when I just charge everything my mind seems to forget and I give in to getting something because I want it rather than need it. When I'm really strapped for cash (I just started my own business and some months are slower than others) I go to all cash for everything so I won't go over budget-- even though I have a healthy (one year) emergency fund. I used to have a 3-6 month emergency fund (started when I found TMF) and increased it before I started the business on my own.

Hope that helps you figure out how not to overuse the cards. Whenever I find the credit cards starting to be a problem I stop using them altogether. I've been debt free for several years but at one time had $8000 on a credit card. I paid it off before I found TMF. And you know, its funny, I used to feel perfectly fine with a high (for me) credit balance and now cringe at the thought of giving them one extra cent of my hard earned cash. So I pay in full every month or I don't use them at all.

Susan
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Yeah,

I got to agree with Levi. To be hnest with you I am one for concrete clarity and I dont even read those 2 billing cycle questuions or any oif that stuff anymore. What I do know is 18% is > than 2.9% and dont se my credit cards at all.

Dont worry about the struggle. We are in this together. Since I have prticipayted on this board many great ing have happened. I would advise nott using the cards.

Sean
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SKB has a some great points.

What I do is hav my traspnortation money deducted from paycheck and placed in a checking account. I take out the money I need each week for traveling. For m other expenses I have estimated my avag monthyl amount and hav started payroll deductions into those accounts. ie. $10 each paycheck is despoisted into an interest bearing savings account for car expenses. This week is the first week that I actually have $20 left over. Instead of spending that money I decided to keep $5 per paycheck in my checking account and use the remaining $15 to fund my other expense accounts.

Stop using the CC's!!! I aint perfect because I still spend too much money on Misc Food Expenses.

Sean
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<<3: Pay what you've already spent and send the bills out the day after you get them...not the day they are due. :) It seemed that the sooner I sent my payments, the less strapped for cash I became.>>

Here's an idea: I've taken this one step further. Whenever I charge something, which is only when it's something that can only be ordered w/ a CC (such as something over the internet or an airline ticket), I send the payment to the CC Co. in the exact amount of the charge, on that very day. That way my statement looks like this:

Purchase 15.70
Payment -15.70
Purchase 217.08
Payment -217.08
etc...

So far I've stuck to this with no slip-ups since implementing this strategy. :)


I have to agree here. Since becoming Foolish last June I have used both strategies. The only CC I use is my Amex platinum rebate Costco card. I pay it off every month - haven't paid a cent in interest since getting the card because I send payment the same day I make a charge. Usually the payments clear before the charges! ;)

But, I have 3 cards left from my foolish days which I am snoballing. I have set them all up to close around the same day each month so I get the bills all in the same week. I send the payments the day I get the bills. No late fees for me, no sir!

Fool on!

Fluteboy

P.S. Look for an update soon after I've caught up on reading 400+ more posts. Geez, but you guys are prolific! :)
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However, what is keeping me from living a cash lifestyle is beyond me. Any ideas? Why am I struggling to stay on track!

Hey Sheer,

Self-discipline and money management are gradually learned skills and debt is old and familiar. Knowing yourself (abilities and failings) and adjusting personal habits to suit are the first step in taking control of one's finances. MarkOYoung's posts on getting around himself to accomplish his financial goals are among my favorites (he's one of my Foolish heroes - silly as that concept may be).

Car Payment - $285 (I usually pay extra on every month)

Is it possible that you switched from paying down the CCs to paying down the car loan when you paid off the CCs before... and forgot to readjust your plan when the CC bills came back? If so, you need to pay more attention to your finances, measure against a set goal, and adjust plans when necessary.

I have reduced my 401(k) contributions down to 5% from 18% to free up some extra cash to pay down the debt.

I'm going to suggest something that may not be popular. If you freed up all this cash, and find you are just racking up the cards again - impose some reality on yourself. Re-institute your old savings levels. If you need the extra money to pay off those deferred billing cycles (rather than just putting back your 18% to the 401K), then put the whole extra (18%-5%) towards them in a separate savings account by automatic deposit until fully funded. Then put your 401K back to 18%. Sometimes a little pain is the only way we learn. Even if it takes you LONGER to pay off your current debt, you'll be building towards your future, and perhaps learning a valuable lesson.

That said, I use a few tricks that might help you. I have three rules that I self impose.

1. No purchases on a card when you are carrying a balance.
2. When I do purchase on a card, I can't use it again that month. For store card purchases, I add the condition that I HAVE to be getting an extra advantage by using the card (discount otherwise unavailable, etc.).
3. I rotate between major credit cards. Say January I have to make a purchase on card 1. Then not only can't I make another purchase on card 1 until it's paid off, I can't use card 2 until February. That way IF there is a true emergency that the E-fund can't handle, I have a clear credit card to put it on and can deal with the regular purchases as planned, notwithstanding the emergency. Say there was an emergency and I had to carry a balance on card 2. Then February comes and wow, I can't use card 1, since there is a balance on card 2.

It works for me, but then I'm me. What do you think might work for you? Try it out. Measure your success. Change as necessary.

A wee comment on deferred payment plans (sorry for the length). Not only is it necessary to read the fine print, but to have a specific plan on having the money when needed. This should go into immediate effect once the purchase is made. Either the money you already have for the item goes into a savings account, or you make specific monthly payments toward having the money at said time.

foolwizard
who uses her cards with discretion, occasional delight (when the purchase missed a statement date and I have an additional month to pay it back) and just a little bit of fear :)

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