The Vine: March 25, 2011
I have debt. Large amounts — enough that I get offers in the mail for debt-reduction services — and I need to do something about it. I have a good job, that pays well, but I still live from paycheck to paycheck and have barely anything in savings. As a single woman in my late thirties, I’d like to set myself up so that I’m not living in brother’s spare room in my old age.
Anyway, I have looked into some debt-counseling services before, but I tend to mistrust anyone who approaches me as trying to sell me something. I don’t want to just walk into a situation where someone is pushing their solution on me because they are trying to sell a product, I want to find the best solution for my situation.
Can the readers recommend good resources or the type of service that I should be looking for?
Wish I’d never opened that first credit card in college
*****
Sars,
I have a question about mattress-buying. Not about the type of mattress, but about the haggling process. I’ve never bought anything that involved haggling outside of a flea market, so I’m not sure where to start or how to go about it successfully.
I think I found a mattress/boxspring set I like, and the store has two prices on it, “List Price” and “Our Price.” I’ve read you can usually negotiate close to 50% off, but I don’t know if that’s off “Our Price” or “List Price.” For reference, the store claims list price is $2100, but their price is $999 ($899 on sale). All I can find on Consumer Reports is basically “mattress prices are very inflated, buy on sale and do some haggling.” Also, no two stores sell the exact same mattresses, making comparison-shopping very challenging.
So, I thought I’d ask you, and the readers because The Nation is awesome and usually full of wisdom. I know you can sometimes get the extras “thrown in” for free, but the only extra I need is delivery and haul-away of the old set.
If it matters, I live in Arlington, TX and will be dealing with a chain mattress store.
Thoughts? Words of wisdom? All are appreciated!
Sleeping on the floor is starting to sound appealing!
Tags: Ask The Readers budget 'n' finance retail
DEBT – InCharge Debt Solutions – http://www.incharge.org/.
This is my second time working with them (I didn’t learn my lesson clearly enough the first time, although I did nip it in the bud a lot faster this time around). I recommend them to anyone who asks, and I have at least one friend who also signed up with them and has been really happy.
They’ll work with you; they don’t make you feel like a moron for being in debt, and they help you feel like you’re getting on top of the problem without being overwhelmed by it.
I know how you feel and I wish you all the best! I’m still working on it myself!
On the mattress…. if you have an Ikea close by, check that out. MUCH less expensive than the chain stores and the quality is high. You may not get the full 10 years out of the mattress like you would from a chain store brand, but the savings more than makes up for it.
I am very happy with my $250 Ikea mattress.
@Floor: I stood in the Sleepy’s showroom and called 1-800-Mattres (Leave the last S off for savings!) on my cellphone. That worked pretty well ebcause the two salesmen were then in competition with each other and they essentially did my haggling for me. One tricky thing: The exact same mattress will have two different “model names” at the two stores. For example, the 1-800 guy asked me what was the name of the mattress I was standing in front of and then said “Ah, yes. We call that the Napoleon”
Mattress Haggler,
I’ve had good luck bargaining at the chain stores just by pricing something comparable online at, say, Macy’s. I’ve done this three times now. I just say something like, I checked this out at Macy’s– it was $400 less there, so what is the best price you can offer? Or, I bought the XYZ Model mattress from you three years ago and need one comparable for my spare room. I paid only $950 for it; what deal can you give me on this very similar mattress?
That’s worked for me. I’ve never gotten as good a deal as 50% off either price, but I think the store price is about 2/3 of the list price, and I’ve gotten an extra few hundred off the store price just by showing I was a somewhat informed buyer. (It’s possible someone who actually comparison shopped would get a deeper discount, but, eh, I’m also a little lazy.)
Good luck!
For the first poster:
We found ourselves in a similar situation after moving out of the country for a few years and then back to the US. Most of the debt consolidation services are scammy and are making money off of things you can easily (well, not if you have anxiety like I’ve got) do yourself. Perhaps a better use of your money would be a financial planner/accountant-type person, who would help you identify savings goals and work out a schedule to pay things off? I ended up just doing it all myself, and we turned our credit around in about two years. Something I had trouble with (and I realize how dumb it sounds), is that I was always fixated on the TOTAL amount we owed, and how we didn’t have that. And that kept me from realizing that people just want their money, and you want to give it to them, and sure, while they would prefer to get it all at once, they’re going to be happy they’re just getting SOME of it, with a plan to pay it all off.
Good luck! It seems insurmountable, but it’s really not!
Go to The Dump.
Not kidding. That store with the annoying radio commercials up on LBJ freeway? I know you’ve heard them if you live in Arlington (I live in Frisco). You won’t need to bother to haggle there. Cash and carry. You just have to hope they have the kind of mattress you want when you happen to go.
Re: debt
The trick is to pay it off slowly and consistently so that you are able to live within your means while you pay down your debt. If you pay it off quickly, you’ll just feel deprived and go right back into debt once you’re out of the woods (like the weight you regain after a crash diet). While you do this, do not incur any new debt. Teach yourself to only buy stuff you can pay for at the point of purchase.
Credit,
I can’t help with debt-counseling services, I’ve heard the same horror stories about most of them being scams that are little better than bankruptcy. However, I can help with suggestions on breaking the debt cycle, paying down debt without using a debt-counseling service, and setting up and maintaining a budget. Changing your spending habits is essential or you will end up in the same place again.
The three things that have worked very well for me with getting rid of credit card debt and setting up and maintaining budgets so I spend less than I earn are using Dave Ramsey’s snowball method to pay off the cards (cut expenses to the bone, pay the minimum on all cards and throw as much as you can at the card with the lowest balance, once that is paid off then roll those payments onto the second lowest card, etc), using the website getrichslowly.org as a resource for money management and support, and using Mint.com to set up and track my budget. I really like Mint and it has made a world of difference to see exactly what I am spending money on–perception and reality were very different!
Good luck, it’s tough but very satisfying to be debt-free!
Dear DEBT,
You will find a ton of advice, good and bad, on the sites like Yahoo Finance. Just follow the common sense! Basic rules are:
1. Communicate with the credit card companies!! They can’t help you if you don’t talk to them. You may be able to get a reduction on your interest rate or something. Keep repeating this in your mind, “It never hurts to ask!” Trite, but true. They will NOT throw shoes at your head for asking! The person you speak with may be unfriendly or snarky; ask to speak to someone else. Don’t be intimidated.
2. Make a list of all your debt, scary, I know! with all the minimum payment amounts, balances and interest rates included. Pick one; highest interest rate, highest balance, whichever you prefer. Pay the minimum on all the rest of the accounts, pay as much as you can afford above the minimum on this one account. When that account is paid off, go to the next one on the list and add what you were paying on the first account to the second account’s minimum payment. And so one with the rest of the accounts. This is called the ladder technique or snowball effect.
3. Stop using debt to pay for stuff! Use cash to pay for almost everything! Continue to use your lowest interest rate card to pay for one small purchase a month, i.e. gas, grocery trip, rental car. Make it small enough that you can pay for it in one or two payments but not so small that your charging a $5 coffee. If you don’t have the cash for a $5 coffee, don’t buy it. Its safer that way.
Do you have a really good friend that you trust who can help you start and figure out a budget? Someone good with their own credit who is a strong enough personality to tell you “No, you own 10,000 DVDs that you never watch! You cannot have $100 in your monthly budget to buy MOVIES!!”
I wish you the very best of luck!!
Debt – we worked with Credability back when we first got married. They were professional, non-profit, and we got done with our “plan” in 3 years instead of the 5 years projected. We have maintained our debt free status and our credit has improved. I can’t recommend them highly enough.
Good luck!
Debt- Try talking to your bank or credit union. A lot have debt consolidation loans. They will give you a loan in the amount that you owe so you can pay off all your debts immediately. You’ll have to pay back the loan of course but they’ll give you much more reasonable sized payments and lower interest than what you would be paying to your credit cards.
Dear Wish,
The non-profit Consumer Credit Counseling helps people like you. My brother used them to his great satisfaction. I also contacted them when my business went under. They charge a nominal fee. I don’t remember how much but I know that it was small enough that I didn’t wonder how I was going to be able to pay that on top of the other $100,000.00. The man I spoke with was very nice, there was a questionaire about my debt and living expenses. The one caveat at the time (before the economy went belly up) was that by using their services, the debt had to be repaid within five years. Because my finances were in a shambles and I had cut my living expenses to the bone, even under what the government guidelines said they should be, I was still not able to pay off the debt in five years and so I was counseled to contact a bankruptcy lawyer. That five year plan may have been changed in the current recession/depression.
Here’s the thing about bankruptcy lawyers: they can also negotiate pay-off plans of debt amount for you so that you don’t have to declare bankruptcy. Just another avenue for you.
Here’s the link to CCC. http://www.consumercredit.com/
Good luck! It’s tough spot to be in but it is solvable. Just remember to breathe.
Debt:
We used MMI at http://www.moneymanagement.org and they were awesome–they got us reduced interest rates on our credit cards, negotiated some of the balances, set us up on a payment plan, and never made us feel inferior or judged in any way. It costs a small amount each month (maybe $30?) but it was a small price to pay for the reduction in stress.
We paid our credit card debts off in about three years and went for a while with no credit cards at all; now we have two (AMEX for the points, Target for the 5% off) and pay them in full every month. I’ve not carried a credit card balance since 2005, and it feels GREAT.
Best of luck–
Debt: Check out Dave Ramsey. He has a few books as well as a radio show that you can listen to online. Paying off a lot of debt is not easy, but he gives you clear “baby steps” to follow as well as success stories to help you keep on track. It’s free to listen to his show online and you can get his books at the library. I’d start here before you start spending more money (that you don’t have). Good luck!
Wish — in general, .org (nonprofit) is a better thing than .com (for profit) so check on any referrals online beforehand
also, I’ve gotten great, down-to-earth information from thesimpledollar.com — written by a regular guy who found himself in dire financial straits who was able to dig out and get on the road to financial security — the site is a great resource for budgets, financial reading recs, easy recipes, suggestions on clearing out/selling your extra stuff — very informative, even entertaining
good luck
Mattress — I bought a great memory foam mattress online at overstock.com — did my research “sleeping around” (heh) beforehand and then took the leap — only problem was UPS guy wouldn’t take away old mattress when he delivered new
I’ll put in another plug for Dave Ramsey. The first time that I ever felt as if I had a grasp of what I should be doing financially was reading his book, Total Money Makeover.
I want to echo Angela in recommending Dave Ramsey for the first poster. His books are really helpful, and I found it dialed back the overwhelming factor to follow the baby steps, instead of feeling like I needed to be doing too many things at once. His books are mildly Christian, just a heads up, since I know that could be a turn off or appealing depending on your background. That is not my background and I found it easy to ignore those aspects. Good luck! And hang in there.
Debt: I’d check out the Washington Post’s personal finance columnist, Michelle Singletary, too. She and Dave Ramsey are both pretty tough love about paying off debt.
I used http://www.debtreductionservices.org/ (sorry not sure how to make it a link), and they were wonderful. There was a small charge that they worked into the consolidation plan, with a small interest rate (6%, I think). I had $10,000 in debt, they consolidated all my credit cards, and using tax returns and bonuses I was able to pay it off early in 2 1/2 years (the contract was four years). The monthly payment was worked into my budget and pulled out automatically on the 15th. I never had any issues with them being disreputable, the contact I had was very nice and helpful, and I highly recommend them. Since then I have drastically curbed my spending habits and only have a small debt that I pay off almost every month. My stress level was greatly reduced, knowing that I was taking steps to eliminate my huge debt.
Oh, it automatically linked! Didn’t realize it would do that, heh.
Debt: I know I’m going to sound very Oprah-y, but I am a total disciple of Suze Orman. She is super practical and her strategies have really worked for me, and for some reason I can really understand her when she is talking about finances, whereas when others get too technical all I hear is Charlie Brown’s mom in my ear. I opened a retirement account, paid down my credit card debt and began saving, all thanks to the Suze and her killer jackets. She has good advice re: paying down debt, and her books are superhelpful. Might be worth a shot to give you a good place to get started.
Debt,
The Federal Trade Commission has a few links with checklists of items to be wary of with debt relief and credit repair orgs. You can find them listed here: http://www.ftc.gov/bcp/edu/microsites/moneymatters/dealing-with-debt.shtml
Also, the Dept of Justice list of approved agencies can be searched here http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm
Good luck to you!
Debt –
You can use a service, or you can do it yourself. I tend to think you end up with a better understanding of finances if you go the do it yourself route.
A well-written and amusing saga of how one family got out of debt can be found here – http://boards.fool.com/long-stop-think-plan-do-19721194.aspx (that is the last part of the story, but all previous parts are linked). The rest of that board is, occassionally, helpful for paying down debt ideas. You can also check out this board – http://boards.fool.com/credit-cards-and-consumer-debt-100145.aspx. People will argue; some will spout mathmatically impossible theories, but someone levelheaded will come along and set things straight. One person will get all high and mighty about how awful it is that their neighbor bought name brand cheese for their kids’ lunches and someone else will write about how great it is that they consciously saved up for and spent thousands of dollars on a comic book. Being exposed to a large group of people, all of whom are talking about money and saving and have their own philosophies on what is “worth” spending on and what isn’t, will help you sort out your own attitude towards money and what makes sense for *you* in your particular situation.
DEBT: If you truly feel you can’t manage your debt without outside help, I would look for a non-profit provider, that DOESN’T mail you a flyer. A LOT of for profit debt settlement services are scammers. Stay away from anyone who promises to do things like “eliminate your debt” or “repair your credit.” No one can do that, except by paying the debt off over time and developing good credit habits. At best, what these places do is look for legal loopholes or bury your creditors in multiple requests for documentation that will just piss them off more. Anyone promising instant or near instant results is a scam. IF IT SOUNDS TOO GOOD TO BE TRUE IT IS!!!!!!!!
I am also very skeptical of people who want you to write the check to them and then they will pay your creditors. My partner got burned by such a service-he was making the payment to them faithfully every month, thinking he was doing the right thing and would be able to avoid bankruptcy. It took about a year before he found out that the debt settlement company was pocketing his payment and paying his creditors late if at all. Then the company promptly went out of business and he was ten times worse off than before. Eventually he did have to file bankruptcy.
re: mattress-buying–I didn’t actually know about mattress haggling when my mom & I were shopping almost 7 years ago. I think our budget was $500, & I fell in love with a pillowtop that was $490. when we went to buy it, we realized that it was $490 for the mattress *only,* & that the box spring was another $450.
I was all bummed out that I wouldn’t be able to get the only bed I liked, when the salesman was like, “enh, it’s been a slow day; I’ll give you both for $490.” & after we left my mom was like, “now that I think about it, I’ve heard that you can haggle on mattress purchases…” (my parents have a waterbed so they’re not in the mattress-buying demographic.)
so, in conclusion, I guess my advice is to play dumb? hey, if it worked for us…
Regarding the debt — been there. I can’t recommend Dave Ramsey enough. Get the book The Total Money Makeover. We went from minimum payments and paycheck to paycheck — to our dream home. So grateful!
He’s a little right-wing for my taste in terms of politics, but Dave Ramsey gives smart, detailed, compassionate advice for getting out of debt, and has some great tools and tips for making it happen.
He has a number of books that break down the whole budgeting process and make it manageable and less scary, and a big part of this is getting out of debt and staying out of debt–under his model, plastic simply isn’t part of the personal-finance landscape.
When I was getting out of debt, the best thing I discovered was not Ramsey’s books, but his podcasts. For $10/month, you can join his online community and have access to (among other perks) his radio show as a podcast. Listening to the show every day and hearing him take calls from people much worse off than me was a big source of hope and encouragement. It also helped keep me on track to hear good financial advice every day, to reinforce the habits I was developing.
For DebtDiva,
Single and 38, I found a couple of ways to pull myself out the the funk and bring myself around. First things first, believe it is possible.
* Figure out your budget. Track every penny for a couple of months.
* Cook for the week. Saves you time, money and cuts down on the urge to go out to dinner. Turn it into a social thing, I cook once a week for the week and invite a friend over for dinner (they bring the wine).
* Organize your finances. For me, that included opening up a new checking account with my monthly “allowance”, and an online savings account (without an atm card) that has a 2 day cooling off period before money arrives in my normal bill account.
* Automate. Automate your savings, your emergency fund and use bill pay every chance you get. When your bills comes in, figure out how much you will pay and set it to come out of the next paycheck before the bill gets lost.
* Leave your credit/ATM card at home. Put $40 in your wallet and see how long you can keep it there. Somehow it’s harder to spend cash than swipe plastic.
* Read personal Finance Blogs, I can’t tell you how helpful they have been. Just knowing others have been there and now are at the other side really helped me.
* Sell your life. I cleared out a lot of things from my home on craigslist and ebay. I found when I lived with less chaos, there was less I needed.
* Find one thing the throw your excess time into. While I was doing my debt reduction, I needed to find something to do that didn’t cost money, I’d cut cable (still had hulu) so I got a 24 hour gym membership. Found when I was bored instead of going shopping I went to the gym. Strange, but worked for me.
* Dave Ramsey in my Hero!! He has a great program to get out of debt, you can listen to his podcasts for free off of itunes and he’s been one of the biggest helps getting me from worrying about getting my next paycheck to barely noticing it’s payday.
Best of luck! Have faith in yourself and know you can do this! It’s not always fun, but financial freedom is the best feeling ever.
Debt,
http://www.cccsstl.org is another non-profit Consumer Credit Counseling Service. My parents used them after my father lost his job and their debt started to spiral.
Good luck!
Debt, I used Consumer Credit Services to get a handle on my debt. It took a few years but knowing I was making regular payments that were organized and professional was great. The day I paid off my last debt was the day I really felt like an adult.
The great thing about the service I used (and I believe others offer it as well) is that you can pay off any debt through them, be it credit cards, the IRS, or parents. I owed my dad quite a bit and got him to send me a total, than added him on my list of payees. As I paid off each debt that amount was added to the next on the list and the payments got expodentially faster. And as an added bonus, I went from credit risk to outstanding rating in like two years. Do your research, but do consolidate and pay down your debts–you’ll never regret it.
Mattress, salespeople in this field are obviously expecting some haggling, but I beg you, do it politely. Nothing’s worse than a buyer getting on their high horse about having to hand over thier precious money for a consumer durable, and it gets infuriating. The salesperson is a) trying to make a living and b)constrained by the rules of his/her employer.
My husband and I used a credit counseling service and had really good luck with it. A few things – make sure the group you use is non-profit and not a “debt reduction” group. Talk to them and research them. One area to be concerned about (and this may have changed), you get a note on your credit report if you work one of these groups. It does not impact your score (the old one), but some banks and credit card companies won’t work with people who’ve been through counseling. We learned that the hard way when we tried to get a mortgage. The way the system we used work was like this – no more credit from day 1. That stops the balance increases from new spending. Then they negotiate with your creditors on rate reductions, fee reductions, and miminum payment reductions. The one we used did not touch the principal balance. Once that is done, a payment plan is established. You look at your expenses and figure out the max you can afford to pay each month – realistically. It is usually the required minimum payment for all the debts each month. Then as one debt after another is paid off, that money is applied to the other remaining debts – either closest to pay off or highest interest rate. I think it is called the snowball effect. It works because your payments are based on your higher balances so each month your balance actually goes down more and more because your payment is not going down at the same time.
If you have been living off credit for a long time or supplementing your lifestyle with plastic, this is really hard. The first few months you have that high of doing something good and right, but then that starts to fade and the reality of learning to live within your means really hits. Not eating out when you are too tired to cook. Being worried about having money to pay for gas or rent because your giant ass credit payment came off the top of your paycheck. It really made me conscience of every dollar I was spending. It was hard for me because I was making a good living when we went through this process and I was not able to “enjoy” it. The flipside of that feeling – for years, we had been “enjoying” a lifestyle we could not afford and had not earned.
Good luck. We still have our “graduation” certificate. And some more debt to work on (kids are expensive), but nothing like where we were.
Debt – I was going to mention both Dave Ramsey and Get Rich Slowly, but K beat me to it. So I’m seconding her advice. I can’t remember which of Dave Ramsey’s books detail the debt snowball method, but if you just Google “Dave Ramsey debt snowball” you’ll find all kinds of info. And Get Rich Slowly has plenty of good advice (especially if you go back in the archives a couple of years to when JD was still paying off his debt and that was the blog’s main focus), and also serves as a gateway to the Personal Finance blog community, which is full of people working to pay off their debt.
Also, I don’t know if you’ve gotten an offer from Discover for their debt consolidation loan program, but last year we took them up on the offer and it’s worked out pretty well. It’s not transferring your debt to a lower interest credit card, it’s actually a fixed interest loan with a fixed time period to pay it off. We opted for the seven year plan, so we have an affordable fixed monthly payment, and as long as we can manage to avoid racking up any more debt, in six more years we’ll be debt free.
And to Floor – we got our mattress from Overstock.com. They have some good deals and super cheap (if not free — be sure to search for promo codes) shipping. We got a king size memory foam mattress for around $500, shipping was only two dollars, AND we found a promo code online that knocked 35% off of the total. We’ve been sleeping on this mattress for a year now and we love it so much that we actually include “and thank you, Lord, for our awesome mattress” in our prayers.
I want to second the recommendation for http://www.thesimpledollar.com/. Trent writes a pretty fantastic and down-to-earth mailbag section in addition to regular posts and reviews.
I second purchasing a mattress at Overstock.com. Also, look for promotional discount codes (google) and use those as well. You obviously won’t get haul away, but the Salvation Army and/or Goodwill do pick ups.
Re: The Dump
There is also a location in far North Irving on 161. I second the recommendation to check them out.
Adding to the recs for the following:
Dave Ramsey: You can get an hourlong podcast for free from iTunes. It’s not his complete daily show–that you have to pay for–but it’s a free hour five days a week. Total Money Makeover: Also awesome and necessary. Yes, his politics can irk, but he gives great, levelheaded advice, and he’s very kind to people who need it.
Your Money or Your Life: Another good one that set me on the right path in my mid-30s. Wish I had read it sooner.
Simple Dollar: Read it every day. Also, Get Rich Slowly at http://getrichslowly.org.
Good luck. Doing a written budget and changing my thinking about money really improved my life. Definitely feel like I control my money, rather than it controlling me!
Forgot to mention, check the reputation of any company you use for debt settlement with the Better Business Bureau.
Debt: This is more general personal finance advice, but I use Mint.com to track my spending and keep budgets. Once you’ve entered all your income and debts, it’s great because everything is laid out in front of you – you’ll be able to see how much you owe on what, how much you have liquid, etc. You’ll also be able to see what you’re spending, which should make it easier to cut some things out. You can set it up so that you get an email or text when you go over budget (and it takes this seriously – I get an email if my cell phone bill is $1 over) or if your account balance dips below a certain amount.
I don’t have consumer debt, just student loans, but in general I’m a fan of the Suze Orman strategy of paying debts according to the interest rate (unless you have some very small debt that you can knock out of the way, like an old utility bill or something).
And depending on how good your credit is, you can see if your creditors will lower your interest rates. They might, they might not, but it doesn’t hurt to ask. I think I remember seeing a script for how you’re supposed to ask creditors to do this but I can’t remember where – Google “ask for interest rate reduction” and I’m sure you’ll find it.
Also: I had no idea you were supposed to negotiate for mattresses! I bought mine when I got my first post-college “real job,” so it’s about eight years old. I’ll totally negotiate when it’s time to buy another one!
For Debt-Diva,
I would also recommend Gail Vaz-Oxlade. She has a website – http://www.gailvazoxlade.com/ that has a lot of common sense tips and resources you can use.
Also, Debt, a personal anecdote that may help you–when I ran up my debt (curse you, Amazon.com!), my credit score suffered, though thankfully it wasn’t too bad because I was still paying on it. After paying off the consolidation debt (which included all my credit cards, the company’s fee, and interest), and staying almost debt-free for another two years, I have excellent credit. I was originally low 700s, and now I’m in the 800s, and had no issues with refinancing my home. So I don’t know if my experience will help motivate you or not, but if you’re concerned about your credit score, it will repair itself once you do get clear of your debt and stay as debt-free as you can.
Debt, I am going to suggest something that sounds counter intuitive, but might really help you. Start saving, even if you have debt. Even if you can skim only a little bit off each month, save SOMETHING (ideally in a 401k that your employer will also contribute to).
Also, do get to work getting your debt under control and as you pay off debt start slamming that money into your savings.
Be careful of debt consolidation companies – even the non-profits can be scammy. Do your research – this article is a decent place to start: http://money.howstuffworks.com/personal-finance/debt-management/non-profit-debt-consolidation.htm
Here’s why I’m suggesting you start saving before paying off your debt. I am a little older than you are, but when I was a little younger, I came to the conclusion that I will probably always have some debt because I’m just built that way (a little impulsive, sometimes delusional). I decided to put my energy into working around my flaws, rather than continuing to try to fix them.
So, I implemented some fun frugal habits (yes, frugality can be fun)started saving, bought a house when I had enough saved and then used equity from the house (very conservatively, before the crazy house bust) and an increase in income plus bonuses to get most of my debt (student loans, ancient cc debt, car payment, etc.) under control.
Today I have my (right side up) mortgage and an ever-expanding and -contracting debt on one credit card. I’ll carry a high balance for a few months, then pay it off with a bonus, or by buckling down on my spending for a while.
Sure I waste some money on finance charges but because I put saving first, my debt-to-net-worth ratio is tiny, I have enough surplus income to pursue my interests and I have savings in the mid-6 figures. I’m sure those who are very doctrinaire would be horrified about the finance charges, but for me, the ‘good-enough’ approach has worked really well. If I had maintained the attitude that all was lost if I had any debt, I might have just kept clawing my way through every month, servicing the debt, but never building any wealth.
Since you say you have a high income, you can totally get it together and you should do it now, because if you let yourself stay addicted to the high income, you will lock yourself into working forever and when you can’t work any more, the contrast between the high-income, high spending lifestyle and poverty will make you really miserable.
I recommend Mint too, although I dont’ look at mine very often, it is helpful to let it track your expenses because you will find out pretty quickly where all that money is going and then you can adjust accordingly.
Good luck! You can beat this.
Debt, one more thing – it’s small, but it makes a difference. If eating out, or eating carry-out has been a big expense for you, try this: at the moment when you decide you want carry-out tonight, stop and think through the food you have at home and really, truly evaluate whether the food you would pick up will taste better or save you any time. I got in the habit of doing this and started to realize that often I had something at home that I could make in the time it would take me to stop off for carry-out (um, nachos anyone?) that would taste just as good.
Once you start thinking this way about your meals, you can start applying the technique to other things, e.g.: do I really need that widget, or do I have something at home that can serve the same purpose, easily, and not cost me extra? Do I need cable TV or can I enjoy enough shows on free hulu to keep me entertained? Do I need a gym membership, or can I enjoy walks and bike rides with friends supplemented with free weight workouts at home?
You’re human, and sometimes you will just want to go out for that meal, or buy the shiny new widget, and that’s fine, but if you apply a bit of thought beforehand, it will stop you from spending money just out of habit and then when you DO spend money, you will really enjoy the experience.
I second the Ikea mattress recommendation. I got a full-sized foam mattress there 6 years ago. It cost $99, I still have it, and I still love it. And the added bonus: because of the way it was packed, I was able to fit it in the backseat of my Corolla. No delivery charge.
Re the finances, for me, the blog Get Rich Slowly was really helpful as a resource. I also used thrive.com (similar to mint) to track my expenses. I think educating yourself first is the first thing to do and then decide if a non-profit will be useful to you.
Mattress retailers are so squirrelly. Usually every store has a different name for the same product, so you can’t comparison shop, and they also usually change the product names every year, so when you see “last year’s model” on sale, you can’t figure out the corresponding version in “this year’s model” at the showroom. If you know this, though, you’ll realize that any two mattresses of the same brand that have similar product descriptions are probably the exact same thing.
When I bought a new bed last year, the hubs and I came up with our general criteria (queen size, no pillow top, firm) and looked to see what was out there. We decided to go with a Stearns and Foster mattress because it seemed cheaper than Serta/Sealy for the same general quality level. We checked out the showroom at a few stores, found one we liked, and then went online to look for deals. Sears.com was selling “last year’s model” of our favorite mattress for half the price, so we nabbed it, plus the cheapest box spring they had (we figured the box spring wouldn’t matter as much for our sleeping experience…). We saved hundreds of dollars.
You can also try to go shopping a few weeks before a holiday to see what’s out there, then actually buy the mattress during a holiday sale (Memorial Day is probably the next one coming up).
Also, as a piece of general advice, I recommend not buying anything with a built-in pillowtop or memory foam top. If you buy a plain mattress and a separate topper, you can replace the topper when it starts to get all squished and/or lumpy, without having to replace the whole mattress. When I was looking for on mattresses, most of the complaints were about models with a built in pillowtop that felt great in the store, but developed “troughs” after a month or two.
For the mattress-buyers: This is a little bit off-topic, but several people mentioned that Goodwill and Salvation Army will do pick-ups if you end up using a discount mattress dealer or purchasing online, and you need your old mattress hauled away. Unfortunately, this is not true – for health reasons (mainly bedbugs), companies are not allowed to accept donations of mattresses. However, when I got rid of mine, I was able to call the city’s trash bureau and schedule a bulk pick-up. They emailed me a date, I enlisted a friend to help me haul it to the curb, and it was picked up the next morning. I live in Columbus, OH, but I imagine that a city as sizeable as Arlington, TX would have a similar thing. So it makes life easier if the place you buy the new one from will haul off the old one, but it’s not going to be impossible to unload if you buy from someone who doesn’t do that.
Just a bit of a caveat–a debt consolidator isn’t non-scummy just because it’s nonprofit; an .org TLD isn’t a guarantee that a place is nonprofit; nonprofit doesn’t mean free (and the fees can be pretty steep for what you get); the customer needs to be sure to monitor what’s happening even with a good one because if the company screws up in paying a creditor it’s still the consumer who’s in trouble, and these things happen.
That being said, CredAbility, formerly Consumer Credit Counseling Services, has one of the better reputations in the field; if you’re not going to your own local bank/credit union, stick with an established name like that.
As is implied upthread, though, you can do exactly what they do. You can get rates changed and payment plans altered with creditors too, and you won’t charge yourself any fees. Obviously the problem for a lot of people is that even if they can they don’t, and I can see why for some people going through a service is more effective. But don’t assume that you need a service because they have some magical ability that you lack.
Mattress: I successfully negotiated down the price for mine by trying out a bunch of mattresses, finding one I liked, then asking the salesperson what kind of sales or discounts she could offer me for that mattress. She offered me about a hundred dollars off the given price. I then said that was still outside my budget (which I never gave a number for) and that I was going to go look around at some other stores before making a decision, but I offered to give her my phone number so she could call me if she thought of any more discounts she could offer. It was like magic – that’s when the book came out with the lowest price she was contractually allowed to offer. I wrote down all the information (and did give her my phone number), got her name and quoted price, and told her I’d think about it. I did the same thing at another store, then I picked the mattress I liked best. If they can’t offer you much off the price, ask if they can include anything else with that price – mattress protector, free delivery, etc. If you buy a true platform bedframe you can avoid buying a boxspring – that’ll save you several hundred right off the bat (though making sure buying without the boxspring won’t void the warranty). Oh also, check for discounts for the store online before you go in person – and if there’s a difference, get them to match it.
Debt: one thing to think about is that, depending on the way your debt consolidation is done, it could ding your credit. If it’s the type of service that just helps you figure out your budget and come up with a plan to pay off your creditors, that’s one thing, but if it’s a program that negotiates with creditors on your behalf to take a reduced settlement or something like that, there will be a ding on your credit for the charged off/bad debt.
So, if you’re really in over your head and can’t pay it down without some kind of consolidation loan/reduced rate/reduced principle, it may be worth it to go that route, because it will certainly be less of a credit hit than bankruptcy, but if you think you can do it on your own I’d recommend trying that way first.
I think everyone else has already said everything I would, but I’ll second the Ramsey “snowball” approach, as well as the recommendation to start saving in your 401k even while you pay down your debt. Lots of reasons for that, including the effects of a few extra years of compound interest on your savings, as well as the way that nest egg is somewhat protected from creditors, if it ever comes to that (check with a CPA or lawyer).
Good luck! Starting is the worst part, but it really starts to be fun once you start seeing the results!
Debt – two more things to consider. 1- Debt charged off/written off outside of bankruptcy can be considered taxable income. 2- If bankruptcy becomes an option, savings in 401k and IRA accounts are protected.
Good luck!