Getting out of debt

[SirEarl]

So I have recently made the decision to get out of debt. I know it's a long, hard road. That's just the price you have to pay for being an idiot and wasting a few years of your life, I s'pose.(at least it is for me!) Currently, I owe a collection agency 2.9k and I have a current credit card that is near maxed out at 2.7k. I also have a year left on my car payment. Recently, I figured out that I actually may be at risk to be homeless in a few weeks. Needless to say, I started freaking out. With the bill collectors hounding me, tuition due soon, and the fact that I may not be able to put a deposit down/pay first month's rent; I quickly hiked up my pants for ultimate big boy action.

I am currently in the process of selling anything I don't need. This wasn't hard at first, until I realized that anything I owned that had any actual monetary value were my instruments. It was hard to choose, but I have made my decisions and put my things on the selling block. I have also started hunting for part time jobs so I can work when I'm not in school and leave the songwriting to my free time. Also planning on sending some money to my parents because my dad is very sick and they need the help.

I'm fairly confident that I can now pay both tuition and rent/moving. Just need to sell one or two more big ticket items, or almost all of the small stuff.

So what now? I'm quite lost and the internet has so many different answers. So I figured I'd ask a bunch of intelligent nerds! I think I'm going to pay off the debt collector and then work on paying off the credit card and not use it until I can pay it off in full on a monthly basis.

[Kahuna]

I don`t have an advice, but this guy on this blog may have some, do you know : http://www.iwillteachyoutoberich.com ,Ramit has some numbers and comparsion on how to deal with debt, the way to pay them off, in which order, just search a little.

[Strawberry Squatcake]

As far as the collector goes, are you still accruing interest? Is the collector impending you from doing things you need to do? It might make more sense to pay off debt you are accruing interest and can get late fees on (if you're late on that by paying on the collector's debt).

Generally a rule is to pay off the highest interest rate first (Dave Ramsey says pay biggest dollar first, but in this case your debts are all similar).

Congrats taking the first steps! It sounds like you are/were in a tough spot, and it's commendable to be taking control!

[Pat G]

Pay off whoever is going to hurt you more first. Whether that be highest interest rate or worst debt collectors.

[d00slip]

Go check this out bro, maybe it will help. Also do a couple of searches on frugal living, a cool little budget system I've found and started using is the envelope system. Hope it helps

[WizardTrip]

All good advice here.

As for the collection agency, see what they would be willing to accept to "settle the debt". A lot of collection agencies are given a number they are able to take that is less than the total debt owed, such as 80% of the owed debt. Ask a lot of questions or do some research to see how this will play into your credit report, but it is certainly something to look into.

As for the current credit card. As long as you haven't been late on payments, etc; call them up to see if they can give you a lower interest rate. A lot of people don't realize you can do this. This primarily works only with bank credit cards and not so much with store specific cards (Best Buy, Macy's, etc).

Also, congrats on taking these steps. I know from experience that this is a hard thing to do. I personally lived well above my means for way too long.

[SirEarl]

Thank you for all the information! And all the support!

I've definitely been noticing how much everything costs me lately. I've always kept a budget, but the budget was more like "bills/rent/tuition" and then "free spending money". Kind of ridiculous how all of your money goes away in the tiniest amounts.

[jeffstarke]

For me, getting out of debt was all about writing down expenses, and getting in contact with the people I owed money to and setting up payment plans. All but one of them was more than willing to set up plans, and they even gave me a bit of leeway as to when I can pay it during the month (as opposed to some other bills, which have to be paid by X date no matter when I get paid and am able to pay it). I pay them out month by month, and before the end of the year, I should be debt free. I was about 2k in debt at the beginning of the year, and now it's only about 900 bucks, so I'm right on track. When I have a little bit of extra money and I've already put stuff in savings and I don't really need anything, I put that extra money towards the debt. Even if it's ten bucks, it helps.

[tonic]

I will second I will teach you to be rich. Great website, great book. You should grab a copy out from the library. Or if you have a kindle, let me know and I will send you a copy. Another thing you might want to look into is roommates, I don't know if you already have some. I second the calling the collector to see what they would settle on. You also might want to think about an emergency fund, so if something comes up you don't end up charging it and taking on more debt.

Personal Finance is my passion so I will end there, before I start writing a ton, but feel free to message me with any questions.

[gillije]

Two Words DAVE RAMSEY. Check out his book Total Money Makeover, where he teaches you about the debt snowball. Basically pick one debt to go after. Pay the minimum on all other debt and through all extra money at your chosen debt. Once that one is paid off take the payments from the first + all extra money and go after another. After you finish that I would urge you to go to/read Dave Ramsey's Financial Peace University. Good luck.