No. of Recommendations: 1
This is my first visit to the message boards here, I am a new member. My husband and I built a new house last year. We are young both 26. We had all sorts of student loans, and a few other payments spread out all over the place so we went to our bank to see about a consolidating loan, just to make things easier and all in one spot. What we ended up with, on advise from our banker was a line of credit(20,000 credit) with a balance of $15,000 once everthing was combined. We started with 9% interest and it is now at 12% 1 year later. Our monthly payments are around $500 (canadian) and by my calculations it will take much longer than the 3 years our banker stated to pay this down. Everything I find about investing, especially here, talks about "getting your ducks in a row first" getting rid of credit card dept before you invest. I feel like we will never get out of this one. We as well have a department store card balance of 500.00 I'm embarrased to say I don't know the interest rate on that one. We are young, but I'm afraid we got off on the wrong financial foot. Big mortgage, big credit card dept. My husband brings in a good salary and we would like to start saving for the future and investing but this card takes up a lot of our monthly income. Can anyone give advice on the best way to get this paid off? Can we still put a little aside(and it would be a little) for investing each month, or should it all go to getting rid of this CC. What a happy day that will be. Thanks

Hi Carrie!

First, welcome to the board and to The Motley Fool! We're glad to have you, and glad that you've found us here. You'll find that everyone here is very supportive, and you'll get lots of great ideas to help you along the way.

It doesn't sound like you have it that bad. If you read through the posts here, you'll see that lots of people have dug out from under much more debt than you have. What it takes is a firm plan, and determination to stick to it.

Now that you've consolidated all of your debts into one, you want to work hard at paying as much as you can above the minimum with each payment. Of course be sure to always--always--make the payments on time. By sending in more, you'll be knocking down the principle, and saving yourself money in interest along the way as well as decreasing the life of the debt.

Except for contributing to any employer matches on a 401(k) that you or your husband might have, you'd be better served to wait on investing until the debts are gone. By paying off your debts, you're already getting a guaranteed return on your money by not having that interest to pay.

Be very, very careful to not add to the debts. There's no way to truly become debt-free unless no more debt is building.

Sit down and make a very careful budget to determine exactly how much is coming in, and where every penny is going. Do this on paper or in a spreadsheet, but do it. It's very important to have a clear picture of where the money is being spent so you can then determine where you'd be able to cut back. Then, with your husband, make a plan on where you can trim (dining out, cable channels, etc.)--don't leave out anything, keeping only those items that are true necessities. Once the debts are gone, you can then make changes in the budget.

Look around the house to find items that you no longer use and consider selling them at eBay or half.com. As you'll see in lots of posts here, many Foolish people are finding extra money (lots of money!) through this means.

Consider taking on an extra part time job during some hours of the day or night. That money can be earmarked to go directly toward debt.

As you're working toward the debt, allocate some portion to go into an emergency fund which can be a lifesaver by keeping you from having to resort to credit cards when the unexpected arises. There's no specific amount, just put away whatever you can--it can only help.

As far as that department store card of $500, that's small right now, so try to knock it down as soon as you can. Department store cards have notoriously high interest, they don't do anything to benefit you, and they're more of a nuisance than anything.

Finally, click on the "Dig Yourself Out of Debt" link on this board, as well as visiting the Living Below Your Means board for more ideas on cutting back and saving. As I said, with determination, you'll find yourself reducing that debt in no time, and have all that money you're currently paying out working FOR you instead of against you.

Good luck, and let us know how it's going!

Tony
...but I still am...

Off2Aruba
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