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I have about 20k in CC debt and they are 0% for now till sometime next year. I recently got a new job making ~105k or so and am trying to figure out the best way to proceed.

Some info:
1. company doesn't do matching on 401k for first year so I can invest 0% if needed...
2. I have roth account with 0 invest in it this year.
3. my current flow out at a minimum per month totaling 2300. Not including normal food/etc spending.
4. I am looking to move to a closer place to metro which would raise cost per month by 150 or so..

Don't want to get into how I got into this situation but a good solution to help alleviate it would be much appreciated!
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Also want to add that my benefits cost etc. is ~2500 annually
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I did a quick tax calculator and bi-weekly take home is ~ 2800 (Virginia tax). So pretty much my first paycheck goes into my required out + food/etc... maybe realistically I can "save" 2k a month? thanks
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I have about 20k in CC debt and they are 0% for now till sometime next year.

Okay, so that would mean that you probably have to put at least $1700 - $1800/month to pay off the debt before the 0% promotional offers expire, depending on the specific terms of the offers.

I recently got a new job making ~105k or so and am trying to figure out the best way to proceed.

Congratulations. Do you understand how much more your new paycheck net is vs. what your prior paycheck net was, on a monthly basis? You have provided some information, but it's not clear that you really understand how much more you are going to have to put toward the debt. If the additional net is not at least the $1700 - $1800/month (at least $20k/year after taxes), you are going to struggle to pay off your debt before the promo rates expire.

3. my current flow out at a minimum per month totaling 2300. Not including normal food/etc spending.

Sounds to me like you really need to understand what your spending is. "minimum per month totaling 2300. Not including normal food/etc spending" is a pretty loose estimation of your monthly spending.

I would strongly suggest that you immediately start tracking every penny you spend on a daily basis, and writing it down. That often helps to make you stop and think if you really need to spend that money, or if it would be better spent on debt paydown.

4. I am looking to move to a closer place to metro which would raise cost per month by 150 or so..

See - that's the thing - if you have a pretty substantial amount of credit card debt (and $20k, is pretty substantial, even on a $105k salary), that would indicate that you were living above your means on your previous income. If you are now looking to raise your expenses, and you don't understand how much you need on a monthly basis just to have enough income to support your current standard of living, much less knowing if you have enough income to increase your standard of living and will still have enough money to pay off your debt in the time frame you want.

Don't want to get into how I got into this situation but a good solution to help alleviate it would be much appreciated!

Well, even if you don't want 'get into' how this occurred, you need to be sure you have fixed those issues. When you want to get out of a hole, the first rule is to stop digging.

In order to stop digging one of the first steps would be to stop using credit cards AT ALL. If you have some obligations that absolutely have to be charged to a credit card (i.e. can't be tied to your checking account, etc.), you should be charging those items to a card that you pay off in full each month, and stop all other usage.

AJ
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Congratulations. Do you understand how much more your new paycheck net is vs. what your prior paycheck net was, on a monthly basis?

I think it will be 800 or so more per paycheck. This is of course no 401k savings.



3. Sounds to me like you really need to understand what your spending is. "minimum per month totaling 2300. Not including normal food/etc spending" is a pretty loose estimation of your monthly spending.

Well the 2300 breakdown is rent+ student loan + utilities so it is a "minimum" in that sense...



4.
See - that's the thing - if you have a pretty substantial amount of credit card debt (and $20k, is pretty substantial, even on a $105k salary), that would indicate that you were living above your means on your previous income. If you are now looking to raise your expenses, and you don't understand how much you need on a monthly basis just to have enough income to support your current standard of living, much less knowing if you have enough income to increase your standard of living and will still have enough money to pay off your debt in the time frame you want.



Well from where I currently live I need to drive to metro (10min) , spend 5$ parking and take metro to work which totals about 100 mins commute a day. Now if I move to a more expensive place next to the metro I save 5$+ gas money a day and save about 30 minutes of commute. The new apartment also provides some amenities like gym etc which would result me in cancelling my gym membership which is 50/month. so I figure moneywise it is 150 + 10hrs of time saved a month....which is not that bad of a payoff?



So how should I budget myself in terms of restricting spending per week/month? Or should I just take out 1700/1800 a month out on the side immediately and what's leftover will be my expenses?
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I think it will be 800 or so more per paycheck. This is of course no 401k savings.

Okay, so do you get paid 12, 24, 26, 52 or some different number times a year? Since credit card and many other bills are based on a monthly period, it's important to understand this difference on a monthly basis.

Assuming that it's 24 times a year (i.e. getting paid twice a month), that means that you have an average of $1600/month ($19,200 annually) more coming in. If you were to spend all of that on debt paydown, you could probably pay off your credit card debt in about a year. But you seem to want to spend at least some of it on other things.

Did you have 401(k) contributions coming out of your paycheck at your prior job? If so, you need to realize that you are basically sacrificing your retirement savings in order to pay down money that you spent but didn't have. That's not necessarily a bad thing, but you need to recognize that and commit to starting to save again as soon as you are out of debt, if not before.

Well the 2300 breakdown is rent+ student loan + utilities so it is a "minimum" in that sense...

Yes, but it's not the 'minimum' that counts. It's how much you are actually spending. You don't seem to have a handle on that.

For instance, if you accumulated that $20k in credit card debt during a 1 year period when you were earning your prior income, and you will be netting an additional $20k in income on your new job, what you have were spending is actually consistent with what you will be making on your new job. In order to just make the minimum payments and not add any debt, you will be spending all of your income.

Well from where I currently live I need to drive to metro (10min) , spend 5$ parking and take metro to work which totals about 100 mins commute a day. Now if I move to a more expensive place next to the metro I save 5$+ gas money a day and save about 30 minutes of commute. The new apartment also provides some amenities like gym etc which would result me in cancelling my gym membership which is 50/month. so I figure moneywise it is 150 + 10hrs of time saved a month....which is not that bad of a payoff?

With the limited information you have presented, at best, it looks like it might be a breakeven, but you really need to run the specific numbers yourself. How much will you save by cancelling the gym membership? Are there any penalties associated with cancelling the gym membership? How much less will you spend on gas each month? How much less will you spend on parking each month? Are there other ways that you could spend that much less (like biking to the metro, instead of driving, and cancelling the gym membership anyway?) and not have to move to someplace that costs more money? Are there more things around the new apartment that will tempt you to spend money, like more restaurants and bars? If so, how much extra will it cost if you go out 1 more time/month; 2 more times/month;...? Will your insurance rates increase because of your new address? How much are you going to spend on moving? Are you going to have to pay to break your current lease? Will you have to come up with more money for deposits on the new place than you will get back from deposits on the old place?

AJ
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Did you have 401(k) contributions coming out of your paycheck at your prior job? If so, you need to realize that you are basically sacrificing your retirement savings in order to pay down money that you spent but didn't have. That's not necessarily a bad thing, but you need to recognize that and commit to starting to save again as soon as you are out of debt, if not before.

Yes I did at my previous job and since there is no matching first year here there is less incentive to put in 401k but I do agree I am sacrificing future savings for debt.... So should I put some into my Roth or just bite the bullet and try pay off debt in the next year and little bit?

Yes, but it's not the 'minimum' that counts. It's how much you are actually spending. You don't seem to have a handle on that.

Yeah it was accumulated over a few years when I was back in school and now paying back bit by bit. I will try to break my habit of compulsive buying for sure... Probably not to the point of putting my CC in an ice block though...


With the limited information you have presented, at best, it looks like it might be a breakeven, but you really need to run the specific numbers yourself. How much will you save by cancelling the gym membership? Are there any penalties associated with cancelling the gym membership? How much less will you spend on gas each month? How much less will you spend on parking each month? Are there other ways that you could spend that much less (like biking to the metro, instead of driving, and cancelling the gym membership anyway?) and not have to move to someplace that costs more money? Are there more things around the new apartment that will tempt you to spend money, like more restaurants and bars? If so, how much extra will it cost if you go out 1 more time/month; 2 more times/month;...? Will your insurance rates increase because of your new address? How much are you going to spend on moving? Are you going to have to pay to break your current lease? Will you have to come up with more money for deposits on the new place than you will get back from deposits on the old place?


The new place definitely has a better neighborhood and I guess financially it would break even but I think more importantly the time I saved could be used for work and other stuff. There's probably not a better alternative to getting to metro without driving (bus goes every 30 min and sometimes late... and I can't ride a bike....).

In terms of restricting my spending are there any good tricks into doing that?
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Yes I did at my previous job and since there is no matching first year here there is less incentive to put in 401k but I do agree I am sacrificing future savings for debt.... So should I put some into my Roth or just bite the bullet and try pay off debt in the next year and little bit?

I don't know - what do you think you would succeed best doing?

Yeah it was accumulated over a few years when I was back in school and now paying back bit by bit.

Really? So, the debt has not increased at all, and has only decreased since you got out of school? I suspect if you go back and look, you will find that you actually added to the debt for at least some of the years since you got out of school, which means you were living above your means in those years.

In terms of restricting my spending are there any good tricks into doing that?

Yes, but you seem to have rejected or ignored several already:

- Stop using credit cards at all (especially since you indicate you have 'compulsive buying' issues)
- Write down every penny that you spend, so you can track it
- Use the tracking information to analyze your spending and see where you can change your spending habits
- Ensure that you are living below your means by developing and sticking to a spending plan (using the tracking information) that includes aggressive debt payoff and savings for retirement, emergencies and future purchases
- Don't spend money unless you already have cash in your account that's not obligated to any future spending

AJ
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In terms of restricting my spending are there any good tricks into doing that?

The best way to keep expenses low is to not overspend on the biggies-- housing and cars.

Here's what my husband and I do...

+ canceled the cable package and now have high-speed internet and use Hulu Plus and Netflix for TV/movies.

+ read a lot for entertianment, mostly free/cheap online/ebooks. We also take walks in nice places--all free (except the county park system, which is $1 per visit).

+ canceled all newspaper and magazine subscriptions, just pay for the online NYTimes now.

+ I cut my own hair (it's thick, curly, and forgiving!) and my husband gets his cut twice a year at a barbershop. I do my own nails.

+ We eat out once a week, don't go to bars or out for ice cream any more, and rarely go out for coffee. If I had debt, I would skip eating out altogether, except for possibly once a month inexpensively.

+ Conserve water, conserve electricity, in fact generally pay as little as you can for utilities.

+ We share one car, see an independent mechanic for maintenance, and buy gas at Costco.

+ Learn the difference between WANTS and NEEDS, and strictly limit discretionary spending…electronics, clothing/shoes/accessories, entertainment, furnishings, housewares...

+ Avoid placing yourself in the path of personal spending temptations (bars? book stores? eBay? Amazon?)

You might get pumped up by finance blogs such as The Simple Dollar and Mr Money Mustache and books like "Your Money or Your Life" and "The Millionaire Next Door."
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In terms of restricting my spending are there any good tricks into doing that?

One other thing that can help you separate 'wants' from 'needs':
Before you buy anything, ask yourself - "Can I wait until tomorrow to buy this?" If you can, then put it back. Each time, ask yourself the same question and if it can wait - put it back. Lather, rinse, repeat.

AJ
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I did a little more digging down and here's my "recurring" spending per month (food stuffs not included):

1.Rent + student loan already covered from above.
2.Utilities is included in rent so N/A
3. Basic Cable + internet 70$ - I can see if I can get out of cable, not sure though...
4. Hulu plus- 8/month?
5. Gamefly - 30/month I am a gamer and I relax by gaming...
6. Gym membership - 50$/month
7. zumba place - 5/session estimate maybe 120/month. I get more workout here than gym but gym does have weights....I can't stand stationary or repetitive exercises like walking/running/treadmill etc. Zumba varies a bit ...
8. commute - 15/day (train + parking). Can't really reduce this much more than the 5$ parking IF I move to new place...
9. Gas ~120/month
10. Movies(buy tix from Costco) - 3-4 times a month so ~30/month
11.I do eat out a bit with friends etc. but I suspect with new job it will be slightly less.


Side note, the Zumba/gym costs will be coming down by half because company pays 50% for fitness related items per year (up to 500 total)... I don't think I am going to buy any fitness machines but would it be beneficial if I cancel gym membership and get one of those dial weights? I guess if I do move into new place I probably wont need it....

My routine is a bit simple - work -> workout M-F. Friday usually movie/out with friends. Weekend some shopping and workout and occasional date .
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I did a little more digging down and here's my "recurring" spending per month (food stuffs not included):

Wow, you must be spending a lot on your non-recurring costs and your 'food stuffs', because you've documented the following:

Rent/student loan/utilities       2300
Benefit costs (2500/yr) 208
Cable/Internet 70
Hulu plus 8
Gamefly 30
Gym 50
Zumba 120
Commute (15/day @ 20 days/month) 300
Gas 120
Movies 30

Total 3236

Your gross income is $8750/month. You are having no 401(k) savings taken out of your paycheck, and benefit costs are already accounted for above. SS & Medicare taxes would be $652/month and Federal/state taxes should be no more than $2200/month. The minimum payment on $20k in credit card debt is probably no more than $400/month, and may be as little as $200/month since it's all at 0%. I'll say $300/month. So, here's the monthly spending that's been accounted for:

Rent/student loan/utilities       2300
Benefit costs (2500/yr) 208
Cable/Internet 70
Hulu plus 8
Gamefly 30
Gym 50
Zumba 120
Commute (15/day @ 20 days/month) 300
Gas 120
Movies 30
SS/Medicare taxes 652
State/Federal withholding 2200
Credit Card Minimums 300

Total 6388

Gross Income 8750

Food/other unaccounted for 2362

The stuff that hasn't been accounted for is 27% of your monthly income, which is a huge amount to just say "Oh, that's non-recurring and food." That's why you need to start tracking every penny as you spend it.

Side note, the Zumba/gym costs will be coming down by half because company pays 50% for fitness related items per year (up to 500 total)

At $170/month for Zumba/gym, it will take less than 6 months to run through that benefit, so don't just cut the costs in half when you are accounting for them. With reimbursements, it's generally better to just count the expense as you spend it, and then add the reimbursement to your income in the month that you receive it.

AJ
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8. commute - 15/day (train + parking). Can't really reduce this much more than the 5$ parking IF I move to new place...

Does your employer have commuter benefits, and if so, do you take advantage of them?
Do you use a Smartrip card so you get the lowest fare?

AJ
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It looks like you have several hobbies that cost money (games, workouts, going out with friends). Not a thing wrong with any of these, but I don;t think you can afford it while you're paying down debt. And maybe not all of it later when you ramp up retirement savings, saving for emergencies (eg, job loss), next car, and so forth.

GAMES
Could you skip this for the duration of debt payback?

GYM or ZUMBA
How about doing one instead of both?

EATING OUT
Eating out with friends can be expensive. If you order one of the cheapest entrees--or maybe 2 appetizers instead, and no dessert or drinks (maybe 1 glass of wine?), and cut back on the frequency to say once or twice a month, you'll feel the joy when you see the debt shrinking every month.

GAS
Since you take the train to work, how does gas cost $120/month?!? What do you drive? We have a bottom-of-the-line 7-yr-old Honda CR-V (which I stupidly bought w/4WD, which cuts down the gas mileage!) and spend $25/month on gas at today's prices (much more on a road trip, but I have a separate budget for travel).

And what does your car cost in insurance & annual property tax? Do you have loan/lease payments--which is why cars are one of the biggest expenses. If you move within walking distance of the train station, can you give up your car altogether?

Speaking of budgets…here are my categories (yours will vary for several reasons, including the fact that I'm a married, 65-yr-old, retired homeowner--and you're not ;-)

HOUSING (HO insurance, property tax, HOA; services--landscaper, annual pressure washing, annual termite prevention, maintenance; house-related utilities: electricity, water & sewer, LP gas)

HEALTH (Medicare & supplemental insurance, dental & vision insurance; deductibles & copays; uncovered health services; nutritional supplements, alternative medicine, OTC items)

FOOD & BEVERAGES (groceries, dining out, wine)

INFOTAINMENT (books, music, movies, apps, admission & activity fees; cell phones, internet service, Hulu, Netflix, iPads, NYTimes; electronics repairs & allocation for major purchases such as new computer)

FINANCIAL (income taxes, life insurance, accountant, umbrella insurance)

TRAVEL (our most flexible category…we spend anywhere from $1k to $12k annually in this category…we can afford that because we live below our means and have no debt…not even a mortgage any more)

CAR (insurance, maintenance, gas, license renewals, registration, tax, AAA, tolls, parking, car wash…we save up and buy a car for cash so there's no entry for car loan or lease)

SOCIAL (gifts, charity, entertaining)
 
PERSONAL (services, clothing, accessories, classes, hobbies)

HOUSEHOLD (Amazon prime & Costco membership, soap, shampoo, detergent, paper goods, bed/bath/table linens, batteries, lightbulbs, kitchenware, furnishings…)

And…since this budget is less than our income, and we're no longer saving for retirement and have a generous emergency fund that no longer needs to cover the dire possibility of unemployment, we have extra for things like more travel.
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In terms of restricting my spending are there any good tricks into doing that?

There are many good tricks to restrict spending, and you've already got a lot of good suggestions along those lines. But the most important thing isn't a trick, it's an attitude.

Your debt will go down faster if your attitude is that reducing debt is The Most Important Thing on your financial planning list, and that the financial planning list is more important than the fun things to do list.

Adjust your attitude to be like that, and all of the suggestions given so far will make a lot more sense to you. Of course, you'll want to track every penny you spend; otherwise you won't know whether you're spending on important stuff or unimportant stuff. The very act of tracking will change how you spend, because you'll notice when you're dropping $30 or $50 on something that doesn't give you very much pleasure.

This is where the decision to eat out with friends gets made in the context of, "Do I want to drop $50 for a movie and dinner more than I want to be $50 closer to being out of debt?" The answer won't always be, "No!" But a rational decision will be made, based on what is really important to you. That's where the $50 trip out with friends might get knocked down to $30, because you want that trip out but you also want to be $20 closer to being out of debt.

Another piece of attitude: When you're in debt, every dollar you spend is borrowed. You are paying interest on that night out with friends, because the money might otherwise be put toward reducing your debt.

It's really a matter of priorities. If your top priority is to have a good time Right Now, it will take you a heck of a long time to get out of debt. If your top priority is to get out of debt, you might still have some fun Right Now; but you won't spend nearly as much on having fun Right Now as you would if you weren't paying attention.

So, what do you want most? Don't give up what you want most for what you want now.

Patzer
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In terms of restricting my spending are there any good tricks into doing that?

====================================

I would think you would need to know what you are actually spending first. Some friends of mine took a class that they had to keep track of every penny spent. They were surprised at the money that trickled through their fingers.

I liked the "can I wait to buy this tomorrow" idea someone posted.

Jean
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The stuff that hasn't been accounted for is 27% of your monthly income, which is a huge amount to just say "Oh, that's non-recurring and food." That's why you need to start tracking every penny as you spend it.


Out of the 2362 I think there aren't much more non-recurring costs anymore. I don't really buy clothes unless I need it nor I have any expensive hobbies (I guess zumba is?). I would like to say 2000 is what is remaining.

In terms of non-recurring payments:
car insurance - 750/year - unfortunately I cant give up car because due to different projects I would be working on sometimes I have to take metro or drive my car...but I think it becomes a wash in terms of current calculation costs... If I do move close to metro I can save some money on gas because there are markets nearby so I don't need to drive as much to get stuff.

I do have metro card and company does have a pretax amount I can put in for metro (125/month).

In terms of Gym/zumba I will quit the gym in favor of retaining zumba and if I do move the place will have its own fitness center as well. If I don't move would one of those adjustable dumbbell be a good investment or not?
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Out of the 2362 I think there aren't much more non-recurring costs anymore.

Until you actually start tracking your spending, I don't think you can say this with any certainty. You mention $750/year in car insurance. What about car registration? What about co-pays for doctors? What about car repairs/maintenance? How much do you spend on food, eating out, etc.? If you move, how much will you spend on moving?

I don't really buy clothes unless I need it nor I have any expensive hobbies (I guess zumba is?).

You can justify all you want, but the bottom line is the money you spend for your current activities, vs. being able to use it to pay down your past activities (i.e. your debt):

Cable/Internet                      70
Hulu plus 8
Gamefly 30
Gym 50
Zumba 120

That adds up to $278/month, or $3336/year. Even if you take the $500 reimbursement from your employer for the Zumba/gym, that's still $2836 per year. If you can cut that by 50%, you could put another $1418 toward your debt payoff in the next year. That's 7% of your current credit card debt.

I would like to say 2000 is what is remaining.

So where is it going? You would 'like' to pay $2000 toward your debt each month. Presumably, you haven't been able to do so yet, which is why you are here asking questions.

Therefore, you must be spending the money on something. Unless you understand where you are spending the money and make conscious changes to change your spending, you are unlikely to make nearly that much progress toward paying down your debt.

In terms of Gym/zumba I will quit the gym in favor of retaining zumba and if I do move the place will have its own fitness center as well. If I don't move would one of those adjustable dumbbell be a good investment or not?

I don't know - to go back to Patzer's question - would you rather pay off debt, buy the dumbbell or pay for the gym membership? If you are serious about paying down debt, you need to start making some hard decisions. So far, you seem to want to justify the decisions you are making, rather than pay down debt.

AJ
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shaselai,

Congrats on the new job.

Just move already.

Use the gym provided at your new place. Quit your paid gym. Quit the zumba, whatever that is.

Stop shopping, except for groceries.

Fridays, make your friends come over and watch a movie on Hulu, since you've already got it. And since you're providing the venue and the movie, they should bring you dinner.

Stop calling consumer purchases, such as dumbbells, investments. They are expenses. No no no, it doesn't matter what the definition is. What matters is training your brain to associate spending with a negative instead of a positive. They're expenses. Got it?

xtn
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You are right. I guess I was trying to explain the spending and it looks like I am making excuses. I do want to be debt free so I can start saving towards possible house etc. Since I am single I don't need to buy a house or anything like that but I do have that in mind when I do get married. So when I do get married I don't want to still be paying off my CC debt for sure! So ideally I want to be debt free within 1.5 years. In terms of paying it off - would it be better if I set auto withdrawal amounts of 20,000/16months(for example) so that I will have less money to work with which restricts my spending (while not using CC)? or is that too extreme just in case some emergency occurs? The alternative could be save it in bank and pay it one lump sum periodically?
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Think of your money in envelopes (or buckets).
Don't spend more than you have.

to take this to the extreme:
My paycheck is direct deposited to two different accounts, one checking for daily and monthly expenses; another savings(in a different institution)for quarterly and annual expenses. Visiting the savings account to withdraw money for auto insurance wasn't hard and the account balance helps me plan trips, generally every other year.

I think the best tactic is to write down everything you spend for sixteen days. Some of us will refrain from frittering cash away (even if the only person who sees the list is me).
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n terms of paying it off - would it be better if I set auto withdrawal amounts of 20,000/16months(for example) so that I will have less money to work with which restricts my spending (while not using CC)?

===========================================

This sounds like you can not control your own spending. You have to have the money locked away to restrict your spending.

I would think the goal would be to learn to spend within(or below) your means. It's difficult to do that if you don't know what you are spending.

I still think tracking your spending should be the first step.

Jean
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No. of Recommendations: 8
Over the years a number of people have come to the boards with your same basic questions, and I've also had this conversation with people in person a number of times as well. One all to common occurrence is that a person with debt doesn't feel like they can cut spending and have a bunch of reasons why they can't. I know you acknowledged you need to cut, but that really is the part you need to focus on. Everything else (auto withdrawals vs. lump sum) matters very little in comparison.

Another thing that happens all too often is they go a little too crazy cutting spending. Their lifestyle takes a big hit, so they start to "cheat" and pretty soon they are back to where they were. I've seen that more in real life than on the boards. So don't let that happen to you.

I encourage you to go through your spending line by line, and figure out what you can do without, without killing yourself. For example, you take the Metro to work. That means you car is not a commuter vehicle, and you should get an insurance discount for that. Can you drop comprehensive? If you can, you should. You have Hulu, can you get rid of cable? You have Zumba plus a gym membership. How about working out at home? FWIW, I did P90X at home and got into by far the best shape of my life with minimal equipment. Working out is important, but a gym membership is luxury. Cut it out if you can.

What's next? Gamefly. I like games too and I'd hate to cut them out. I buy older titles on Steam for like $10. Maybe put Gamefly on hold for a year or so and see if you can get the same enjoyment cheaper. Go through line by line and reduce or eliminate if possible. It is okay to have some luxuries, but figure out a way to spend less. Even $10 or $20 bucks a month here and there adds up fast.

Next, pay all your bills including all the new credit card charges every two weeks without fail. Every week is better, but two weeks at a minimum. What will happen is that with all your bills paid, you'll get a much better idea where you your money is going and exactly how much money you have. At that point, you can really make some decisions about the best way to attack debt.

Again, a luxury here and there is okay, but if you are facing your finances every week or every two weeks, it is much easier to cut out extra stuff you don't need.

There have been some amazing success stories on this board over the years. People have started off in much worse positions than you and managed to eliminate staggering amounts of debt in short periods of time. It can be done, good luck.
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So ideally I want to be debt free within 1.5 years.

That would be great, if you really knew that you could put at least $1200/month toward debt. But since you don't really know how much you are currently spending, you don't know if that's realistic or not.

In terms of paying it off - would it be better if I set auto withdrawal amounts of 20,000/16months(for example) so that I will have less money to work with which restricts my spending (while not using CC)? or is that too extreme just in case some emergency occurs? The alternative could be save it in bank and pay it one lump sum periodically?

I think you are putting the cart before the horse. You really need to understand how much you can realistically put toward the debt. That requires you to really understand how much really need to live on. The first step toward that would be tracking your spending; the second step would be figuring out what spending can be cut.

If, instead, you start trying to pay the credit cards a set amount, you will probably end up putting expenses back on the cards, because you were overly optimistic about how much you could pay toward debt.

And if you try to put money away to send lump sums, what is going to stop you from either digging into that money for something you really, really want, or from just not putting the money away?

Either way, if you don't consciously make choices about what you will spend your money on, you are unlikely to succeed in paying your debt off in 18 months. You may not even succeed at paying it off at all, especially if you fall victim to the "I deserve..." syndrome, like "I deserve to move to someplace that will cost me more because it will save me $100/month in parking and I just got a big increase in my salary" or "I deserve to continue my Hulu/Gamefly/movie/nights out with friends habits because I got a big increase in my salary."

Your problem is, at some point in the past, you were living like you had a larger income than you actually did. Unfortunately, as your income has increased, it seems that you have increased your standard of living right along with the income, rather than maintaining your standard of living at a lower level until you had paid for the excesses of the past.

AJ
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Totally agree with you all experts. I have just paid off my main CC and I will take the challenge of monitoring it for 2 weeks to gauge how much I spend "food and etc." since I have already shared my other expenses. I am looking into cable now and I cancelled the gym membership. In terms of getting a new place I am play wait and see on a new complex opening up to see if there are any pre-lease deals available.

On a side note, should I try to decrease my rent? I could room with another to decrease it or even get a double and rent it out - or that's probably not a good idea?
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On a side note, should I try to decrease my rent? I could room with another to decrease it or even get a double and rent it out - or that's probably not a good idea?

At this point, that's a sideshow. The first thing you need to do is TRACK EVERY PENNY YOU SPEND!

Everything else comes later in the process.

When I say track every penny, I mean record spending when you spend it. That means if you're using a credit card, the money is spent when you charge something. When you pay the credit card bill, that's not spending; that's sending money that has been temporarily in your custody to its rightful owner.

Many people spend without thinking and without remembering. Tracking helps the memory, and creates records for later if the memory is still weak. Recording helps with thinking about spending. You might catch yourself deciding not to buy something because you have to record the purchase and that's more trouble than the purchase is worth. You know what? When that happens, you just found something that you formerly spent money on for no good reason. It didn't give you enough pleasure to be worth recording what you were doing.

Recording is also a good defense against marketing. People who don't pay attention end up buying stuff because marketing convinces them to spend money on stuff they don't need and don't really enjoy. Recording brings that decision into the forefront of the mind. You record the purchase, and you think about why you're buying it.

Every time you do this, you should be asking yourself, "Is this necessary? If it's not necessary, do I want it bad enough to pay interest on it? Do I want it bad enough to be that much farther from eliminating my debt?"

Those thoughts need to happen at the decision point. Once the bill arrives, it's too late. Your only choice then is to pay the bill in full, pay it partially and pay interest, or default on it and have other problems as a result.

Stop looking for a magic bullet. Magic bullets don't exist. What you need is an attitude of controlling and reducing spending, in order to be out of debt.

Either that, or an attitude that it's okay to be in debt because you want what you want now, and it's okay to be in poverty when you retire because having what you want now is more important to you.

The choice is yours.

Patzer
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I have just paid off my main CC and I will take the challenge of monitoring it for 2 weeks to gauge how much I spend "food and etc."

==================================

The only spending you do is with CC? No debit card, no checks, no cash?

"Monitoring" it sounds like looking at it after it's spent.

The decision to spend needs to be before the money is spent. Do I really need this...If the answer is no. Don't buy it.

Whatever you do buy write it down. Every day! Keep a list.

Some friends (Don) of mine (over 60 years old) went to a budgeting class with a younger couple (in there late 20s) that needed to get a handle on their spending. The older couple paid for the class.

One of the things they had to do was to write down every thing they bought for a month. Don was surprised at how much his wife and him spent...trickling through their fingers. A coffee here, a book there, stop for pizza. He hadn't realize how much it added up.
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The only spending you do is with CC? No debit card, no checks, no cash?

Yeah I have 2 main CCs (besides the one with the 0% debt). My primary CC is for any spending that accepts CC - plus it is a great rewards card (Barclay arrival +). The other CC is for Costco because they take only AE and I had a great promotional deal so I still have it. Also have a corporate where I would charge my exercise charges so I can get subsidized.

Main reason I don't use debit is I don't get points for spending... Also I ran out of checks and haven't seen a reason to pay the money to order new box. Also I recently moved to the area and my bank is a more local chain so I get charged whenever I take out cash (I almost never do).

I downloaded an app that tracks all the spending I make and I will use that in conjunction with my CC statement for next 2 weeks for review. At least in the upcoming month I don't foresee any big spending coming up (trips etc.)
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same song, same verse - but we are all repeating the same things because those are the ones that make a difference.

I downloaded an app that tracks all the spending I make and I will use that in conjunction with my CC statement for next 2 weeks for review.

Does the app require manual input, or does it scan receipts?

Unless it requires your input, the app & the review are passive.

HOW you spend/how many cards you have is up to you (credit/debit/cash - doesn't matter)- but looking at it later is not what is the first step.

Fist step is for the first 2 weeks at the very least ACTIVELY tracking spending.
If you want to do it all on your phone, fine, open up a Memo/Notepad/file and manually type in the item and the amount spent. (unless this is what the app requires, in which case, carry on)

Otherwise, carry around a pen and the back of an envelope, a moleskin whatever and write down every penny you spend.

Just the act of interrupting the process to write it down before you make a purchase is enough to make an unconscious decision a conscious one.
Scanning a receipt with an app isn't going to help you change your spending habits.


peace & low tech
t
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the app requires manual input. I will be religiously tracking all purchases on it. Naturally it might not capture monthly purchases that has already been covered. But I should gather enough data for some analysis...
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the app requires manual input.

That's good. What input does it require? Actually typing in the transaction, or just checking a box to acknowledge the transaction? If it's not actually typing in the transaction (amount, merchant and what was purchased), then I would still strongly suggest that you use another way to track things.

I will be religiously tracking all purchases on it. Naturally it might not capture monthly purchases that has already been covered.

See, this seems to me that the app is actually capturing the transaction and you are just acknowledging that it was captured. That's probably not the type of tracking that will help you a lot.

But I should gather enough data for some analysis...

There is more than one purpose for doing the tracking. It's also to make you stop and THINK about the purchase, not just to be able to analyze the spending. Go back and read Patzer's post http://boards.fool.com/on-a-side-note-should-i-try-to-decrea...

Then, also do as I suggested, and ask yourself, before you commit to the spending - Can this purchase wait until tomorrow? If so, don't make the purchase! Keep asking yourself that every day, every time you pull your credit card out.

AJ
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I recently got a new job making ~105k or so

Congratulations - for the DC area you're still below median household income - and that's why you ain't got no money. The only way to get out of credit card debt and student loan debt, and save up for a downpayment to eventually by a place, and start saving for retirement in the DC area is if you start living below your means. That means tracking your spending, and no longer looking at "shopping" as a weekend hobby. If you want to live closer to a metro in a building with lots of amenities, you might want to live with a roommate for a year or 2 to cut your rental costs.

A lot of people think a six figure salary is a lot of money because of what it used to buy, or because they don't live in a high cost of living area. But around DC, it only puts you in the middle..
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My primary CC is for any spending that accepts CC - plus it is a great rewards card (Barclay arrival +). . . ,

Main reason I don't use debit is I don't get points for spending...


No, no, no!

Cash back is nice, and points may (or may not) be as good as cash back. But it's not the main thing. Cash back is a sideshow with chump change. The real money is in controlling how much you spend.

As long as you're focused on getting 1% or 3% or 5% back, you're not looking at the right measure. You should be looking at what you spend, not what you get back.

Which is the better deal: Buy milk for $2.39 per gallon where I can use a card that gets me 2% cash back, or buy milk for $2.17 per gallon at Aldi, which only accepts cash or debit? When you focus on what you get back, you don't see whether you're paying for the privilege of getting money back. Sometimes you are, and even when you aren't you may be spending more than you need to. That's the incentive the points or cash back are intended to create. They get you to spend.

You have let your spending incentives get out of control, and you are responding to marketing messages designed to make money for someone else. That's not the best way to manage your own money. Yes, use the cash back cards *IF* you have the cash to pay the card in full at any given time. If you don't have the cash to pay the current balance on all cards plus what you're charging, you're spending money you don't have. That will cost you a lot more than the cash back benefit.

Disclaimer: Yes, I use credit cards for most purchases. Yes, I get cash back. But you know what? I don't look at the cash back very much. I look at budget categories to control the spending. That's far, far more important. Also, I not only pay the cards in full each month; at any given time I have the cash to pay all my cards in full in however much time it would take to process ACH transactions. I feel pretty good about being able to stop doing business with all credit cards at any time they change terms and conditions to my detriment. When you carry a balance, you have a much weaker negotiating position for credit card terms and conditions.

Patzer
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Patzer writes: As long as you're focused on getting 1% or 3% or 5% back, you're not looking at the right measure. You should be looking at what you spend, not what you get back.

Good point. Credit card companies don't give cash back because they're just so generous that way. They do it because it makes money for them.

Guess who that money comes from?
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Congratulations - for the DC area you're still below median household income - and that's why you ain't got no money. If you want to live closer to a metro in a building with lots of amenities, you might want to live with a roommate for a year or 2 to cut your rental costs.

Yes you are correct - the salary is not that much in the DC area but since I don't live in the hear of DC it is not horrible but still not great. The new place I am thinking of moving is 300 more than current place but I am waiting for a pre-lease deal on the new complex they are building. One of my friends jumped on a pre-lease deal for 1300/month and now those places are ~2k/month. If the doubles are decently priced I might get that and a roommate to rent out - but that is another story all together.

In terms of the app - it lets me select the category (food, /movies etc.) then manually enter the cost and a description. I could select food-> 2$ and leave "coffee" as a note. so I think it is pretty nice tool.

I do look out for prices when shopping so i get best deal but i rather use a payment that gets me something back (points) as opposed to nothing (debit/cash)...
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In terms of the app - it lets me select the category (food, /movies etc.) then manually enter the cost and a description. I could select food-> 2$ and leave "coffee" as a note. so I think it is pretty nice tool.

Sounds good to me.
I was never able to carry a notebook around and pencil things in as they occurred. What works for me is always getting a receipt, and then at the end of the day putting the amounts into my spreadsheet before filing the receipts. DD, however, finds paper receipts cumbersome and unnecessary, and has some other method (maybe similar to your app). Whatever works for you is fine.

Btw, congrats on your new job, and excellent salary.

Also, congrats on tackling your debt now, before you move, and before you have an SO. A lot of people have problems because they:
- move to more expensive housing, and then find months later that they're really in over their heads, and/or
- have a hard time cutting back their spending because they get distracted by cut-backs that their spouse could be doing instead; or, worse, do cut back their own spending but have a spouse who sabotages the program.

You're in a very good position to take control of your finances. Good luck!
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If the doubles are decently priced I might get that and a roommate to rent out -

=================================

To me, roommates are hard. What happens if they don't pay the rent? Mostly it's not worth it to me.
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shaselai --

You and I are neighbors; I live across the American Legion Bridge in Maryland. At a salary of $105k, you are now making about 10% more than I made when I started paying off my debt, and are similarly placed against the area's median income. Mine was not credit card debt, but was rather various other forms of debt that all arose from the costs of an ugly breakup and custody battle. In 2006, I had more than $60,000 in debts because of that situation (we broke up in 2003 and I had been paying things off for a while when I got here; it started out more than that). About half the debt was a loan against my 401(k), while the other half was a loan from my father.

It took me until 2011 to pay off those two debts. Dad asked me to pay the loan he had given me forward to my daughter, so all of that money ended up in her 529 college savings account.

Unlike you, I had a house, a mortgage, a baby, and a host of expenses. Life was tough for a while there, and not just because of the debt. The debt was just the thing I had the most direct control over, so I put energy there that I could not use to control other things. I did also learn to breathe, and to choose peace over chaos -- hence my username here.

That's a bit about me. Now, a bit about this particular board. It's been quiet. Really quiet. Sort of ever since FaceBook and phone apps ate people's screen time. So when someone shows up with a real debt issue, people here are really eager to provide thoughts and support. You're getting the brunt of that -- sort of like being the only grandchild in a big family. It may seem a bit intense sometimes.

That said, you're getting pretty solid financial advice. I will add only a couple of things. First, one advantage to using your credit card for all your purchases is that there is data available. All of your credit card statements will show how you're actually spending your money. Many credit card web sites will even do some analysis for you on a monthly or annual basis. Better than that (because I'm a numbers nerd) is that you can usually download your transactions to a spreadsheet where you can do some categorizing and analyzing of your own. If you know how to do a pivot table in Excel, a lot of your information will appear pretty quickly if you can get a decent chunk (a year would be ideal) of information. That said, even just sitting down and going through three months' worth of bills with a pencil and calculator will be very helpful to you.

Also, although I agree with everyone who says you need to figure out your expenses first, keep track of every single idea you have for reducing costs. From having a roommate to getting rid of zumba, they are all worth considering. And when you get to considering them, consider them in order from largest to smallest. A roommate or shared place is a huge savings and is a great way to live below your means. Are there risks? Of course. But I shared housing many times when I was pre-kid, and it worked out well every time. I didn't always become great friends with my roommates, but I also wasn't looking for great friends. Just a way to share expenses.

ThyPeace, never got so desperate that she had to take in a boarder with a baby and toddler in the house, but thought carefully about it.
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shaselai,

You wrote, My primary CC is for any spending that accepts CC - plus it is a great rewards card (Barclay arrival +).

OUCH! You do know this card has an $89 annual fee? Sure, it's waived for the first year, but still... I never pay credit card fees - they are often as much or more than the value of any perks. And if I wanted to buy those perks, I could do it myself with the cash.

Also the perks on this card are travel related. In other words, it's mostly airline miles. To spend those miles suggests you fly places. And probably a lot or $89/year would have made you balk. That means regular, recurring (at least annually) personal travel expenses - beyond the airfare. I don't remember seeing that in your budget; but clearly you must have a fair amount.

If not, you are not using the air miles. If you're not using the air miles, these rewards are worse than pointless - they're an attempt to trap you into giving Barclay's $89/year just to keep the miles in the hope you might be able to use them some day. That's because they aren't air miles provided by a major airline - they're just a promise by Barclay's to reimburse you for your ticket purchases as long as you maintain the account. (It looks like they give you a statement credit of one penny per mile flown. Redemption must be applied for flights purchased within the past 120 days.)

Personally I'd never apply for such a gimmicky card. My own cards give me anywhere from 1-5% cash back (no so-called "air miles"). My primary card gives me 2% cash back on all purchases. Yours gives you about 2%, but you pay a fee for it and the credits are restricted to travel - something it sounds like you can't afford right now. And then the 2% gets reduced by the need to pay the $89/year.

FWIW, the only reason I tell people to get rid of a credit card is if they're paying an annual fee. I make the same recommendation here even if you have accumulated miles - as long as you're in debt, they're really worth next to nothing because you can't afford the other expenses associated with travel. But in your case, you might ought to find a replacement card before you close the account ... some time before the next annual fee is due.

Also, The other CC is for Costco because they take only AE and I had a great promotional deal so I still have it.

You are aware that Costco has plans to ditch Amex next March? http://www.wsj.com/articles/american-express-to-lose-costco-...

And, Main reason I don't use debit is I don't get points for spending...

I rarely recommend debit cards. Debit is a bigger security risk than credit. With debit you can run into similar overspending problems as with credit and wind up with multiple overdraft fees as a result. Debit has a small advantage by showing up a more immediately in your bank account, so you know about your mistakes sooner. But the banks tend to hit you harder, sooner with fees, so I'm skeptical that they provide much of a real advantage.

If you're overspending and can't track everything, you may need to switch to (mostly) cash and the occasional check (with an associated journal) so you at least know whether or not you have the money on-hand. The theory being that if it's not literally in your wallet (or in the checking account balance in the journal), you can't spend it...

Also, Also I recently moved to the area and my bank is a more local chain so I get charged whenever I take out cash (I almost never do).

There is no reason you can't open another checking account. There is usually some local bank or credit union willing to give you good terms. For instance, I live in the Seattle area. BECU (formerly Boeing Employee Credit Union) has almost no minimums and no fees and lots of local ATMs. If you need need to keep other accounts open, you can usually find a way to link them through ACH transfers. This gives you free, relatively quick access to cash - assuming you have it in the account.

Finally, I downloaded an app that tracks all the spending I make and I will use that in conjunction with my CC statement for next 2 weeks for review.

There are account integration sites like Mint.com that can pull information from all of your accounts. They will scrape all the information currently present on the account's website, which you can then categorize. This might give you a fairly immediate idea of your spending patterns based on your recent history. Mint will also attempt to auto-categorize transactions - though that doesn't always do well. You would need to track cash manually (or at least manually enter it).

And FWIW, I agree with everyone else - you need to figure out where your money is going before you worry about how to cut (or juggle) expenses.

- Joel
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A few points about your posts to add to the other comments.

Investing while paying off debt.

I am in the process of paying off six figure debt and am only a few months away from financial freedom. Despite being in six figure debt I had a really hard time not putting something away for retirement and my kids college savings. Since I first started working at age 16, I have always put something away for a rainy day. I also have seen too many people struggling through retirement to not put something away. I started seriously tackling debt the summer of 2013, and started by increasing my income- I sold tons of crap and picked up more work. Once I ran out of things to sell, I started to reduce expenses. Some stuff was easy to cut, others not so much. Only after I got on this board April 2014, did I actually consider not saving for retirement and college savings. I started by reducing the savings and in January of this year, temporarily suspended the contributions. The contributions were taken out of my paycheck and required a trip to HR to change which is located literally in the bowels of the building adding to my procrastination. I have to say I am glad I did, doing so will shave two months off my payoff day. If I had done it earlier I probably would be debt free by now. Just something to consider.

About the credit cards and tracking spending. I use mint and was able to perform historical trends to help me figure out my leaks. I don't think I would have been very successful tracking my spending without it. Also I stopped using credit cards altogether. This from someone who has >13 cards. I was desperate to pay off the cards and saw every dollar in my account as a dollar closer to financial freedom, then I would get a credit card bill. That $500 that I was going to use to reduce the Amex bill had to go to pay off the costco shopping spree two weeks prior. Converting to all cash allowed me to get away from the ghosts of purchases past. Once the purchase was done, it was paid for and truly a thing of the past. If I am making it sound easy, don't let me mislead you. I was terrified of running out of money that I kept one in my wallet as "backup" and even considered using it even when I knew I had the cash, "just in case". Not using credit cards was essential to help me curb the impulse spending, the "oh this is cute" spending or the " I always wanted something like this" spending, and the "the hubby could use this" spending. If you honestly feel that using the credit card doesn't make you spend more, then more power to you, but I suspect based on your posts that you are more like me. I do miss the rewards, esp since I just spent $600 on a dishwasher recently, but in reality they do not amount to that much. I got an iPad Mini with my Amex points and a few $25-50 gift cards here and there, but nothing that was more valuable than my peace of mind.
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Thanks for the great advice! I will be keeping track of my expenses for the next 2 weeks then come back and post the results.
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Thanks for the great advice! I will be keeping track of my expenses for the next 2 weeks then come back and post the results.

I would do this for a full month or more. There is no such thing as a typical month. Every month has its non recurring or quarterly expenses including travel, weddings, birthdays, Membership dues, Car registration, car insurance, dental appointment, medical copays, postage stamps refill, etc etc.

Also take this time to look at your big expenses to see what can be reduced. You've already discussed housing and transport, but also consider things such as insurance -car, life etc. and other items that are monthly recurring expenses such as subscription services. See if there are any services you can cut out- personal grooming for example.
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Personally I'd never apply for such a gimmicky card.

It may be gimmicky to you but there are some benefits to the Barclay card worth having if you are traveling to Europe. The Barclay card is a chip and pin card unlike most US cards which are chip and signature. It can be used in unmanned kiosks where the chip and signature cards cannot be used. It also has zero foreign transaction fees. We got a joint card for my daughter who is spending a semester abroad and my wife. We'll be traveling soon to visit my daughter. Yes, there is an $89 annual fee after the first year but we'll close the account before then.

PSU
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Great to read
>>>Thanks for the great advice! I will be keeping track of my expenses for the next 2 weeks then come back and post the results. >>>
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