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
On Mattress haulaway: Per JR’s comment, many charities won’t pick up used mattresses. I recently had to clear out my deceased mom’s apartment, and none of the big three (SA, Habitat for Humanity, or Goodwill) would take the bedding. It might be a state-by-state health code thing, so be sure to check.
The very nice people at the local HfH recommended another local guy who would take the bedding — basically a one-man operation who supplied stuff for relocated battered women and the like, so if you’re checking the big charities and they won’t take it, ask if they know anyone who will.
Debt:
The biggest difference between Suze Orman’s and Dave Ramsey’s approaches to paying off debt is that Ms. Orman encourages you to pay off the debt with the highest interest rate first (to save money on finance charges) and Dave Ramsey encourages you to pay off the smallest debt first (so you can see the progress you make). Generally speaking, there usually isn’t much difference in how much you actually pay out – it’s a personal preference. Both methods have their advantages.
No matter what route you decide to take to get out of debt, I beg you to NOT borrow the money. In doing so, one debt is being traded for another, and you can end up with more debt than you ever imagined (I speak from personal experience here). You didn’t get in debt overnight, and the problem won’t be solved overnight.
One more comment about the mattress… it’s true that GW or Salvation Army won’t take it away, but you can post it on Craig’s List or Freecycle… someone will want it! We got someone to buy ours and take it away for $20… he had an out of town guest coming in and it was cheaper than an air mattress..
Mattress:
I got a Serta mattress at Big Lots for $190, and that included a box spring. It’s what I use for a guest bed, and although the store manager warned it was a little “low-end,” my guests have all told me it’s very comfortable.
I also got a Serta mattress that I sleep on (which is *extremely* comfortable) for about $400 at a local furniture store. That’s what I’d recommend as a goal number for you – I personally wouldn’t pay a penny over $500. If I were ever in the market for a “higher end” mattress, I’d get the tempurpedic (which is not something you can haggle on…)
As far as The Dump goes, I think it’s ridiculously overpriced myself.
For the first poster, I would recommend one of two plans. First, the “debt snowball” popularized by Dave Ramsey. Basically, you pay the minimum on every account except for the one with the lowest balance, and you put all of your extra money towards paying off the smallest account. When it’s paid off, you move on to the next lowest balance, and so on. He advocates doing things that way instead of attacking the lowest interest rate first, because you will pay off the smaller accounts sooner and remain motivated to continue to work at the debt. I also second the replies of those who said to talk to the creditors directly; especially in the current economic climate, they are often willing to lower interest rates or settle outright for a fraction of what you owe (although settling debt requires lump-sum payments, which may not be an option for you.) If you can get some of your interest rates lowered and work the debt snowball, you should be making headway soon.
The other option I would investigate is Consumer’s Credit Counseling Service. They charge a nominal fee to negotiate with your creditors to lower interest rates, then set up a payment plan with you to get the debt paid off. You submit payment to them monthly and then they divvy it up according to your payment agreement with the creditors enrolled in the plan. It is some work to set up initially, but once the plan is in place it is so easy to stick to. Your credit will take a hit initially as the credit bureaus record the fact that your debts were negotiated, but you won’t be incurring new debt anyway and it will recover within six months to a year of the time that you complete the plan. Your credit would also take a hit if you negotiated the revisions to your interest rates on your own, and in the second scenario CCCS does that work for you.
I agree that there are a LOT of skeevy, fly-by-night debt counseling services out there, but CCCS is well respected and the fees they charge are tiny (it is less than $100 initially and a tiny administrative fee monthly to cover the costs of them submitting your payments.) They send regular correspondence and maintain a website that allows you to see the progress you are making in paying off your debt. (Confidential…my husband and I enrolled after becoming frustrated with the slow progress we were making on our own, and one year later have paid off a quarter of our debt. There is no way we would have come that far so quickly on our own.) Good luck whatever you choose…it feels good to make a plan and work on getting that debt gone. :)
I recommend reading Ramit Sethi’s I Will Make You Rich. Obnoxious title, yes, but some very common sense advice about how to manage your finances in such a way as to allow you to (mostly) forget about them. Because you’re paying yourself first, you can then throw the rest of your money into paying off bills, debt, and fun. Because you’ve automated the process, you don’t have to worry about whether you’ve got enough to do whatever.
MATTRESS: It’s actually illegal to sell used mattresses on Criagslist in most states (health code issues), but plenty of people still do it. Personally I’d find it worth paying a bit more so that I can get my mattress hauled away. (See: single mattress moldering in my garage because I couldn’t get anybody to take it for FREE.)
DEBT: One question is whether you are drowning in debt or just somehow never quite getting out of it. If you have high interest rates and seem to get a bit further behind each month and it all seems like too much, then a credit counseling service might be a good way to pull you up and out of that. Sometimes you just need an external push. But if the debt isn’t that overwhelming (as opposed to persistent), you might want to try dipping your toe into the personal finance blogosphere and reading/listening to a couple of the more popular personal finance pundits.
If you want to try the snowball effect, I’ve even seen free online calculators which will show you the difference in interest costs between following the Ramsey (smallest balance) vs. Orman et al. (largest interest) approach with your debt.
We’ve been working on our debt issues recently, so this really struck a chord with me. My in-laws gifted us some money to pay down one credit card which had a 24% interest rate. In return we had to jump through some hoops, one of which was to watch the Suze Orman Show and Til Debt Do U$ Part (on CNBC). Well, I had to tell the MIL that there was no way in hell I was going to watch Suze Orman after my first two tries (I like her books, but her show is like watching Glen Beck, Rush Limbaugh, and….well, I dunno, somebody really reactionary and really angry/scoldy), but I *love* Gail Vaz-Oxlade and Til Debt do Us Part. Granted, this is maybe a bit of schaudenfraude, but she also has some really good advice. I like her book and her website a lot. Like many finance/debt gurus, her big thing is to live with zero debt. What I like about her, though, is that if you can afford it without going into debt, then it’s a good purchase. Want to eat out every night? Fine, as long as you are paying your bills and not selling short something really important to you. (I’m not really doing justice to her concept.)
However you handle your current debt, I think an important part of getting debt truly under control is to have an adequate savings cushion. I don’t know about you, but I have spent too many years saving up to $X and then having an emergency (tire blowout, leaky radiator, landlords foreclosing and requiring us to move) which just happens to use up exactly that amount. If I’m lucky. This sort of expense is the major reason I keep using my credit cards (well, that plus running overbudget because I was too lazy to cook and then turning to the cards to get me through the last few days of the month). This time around we’re putting 2/3 of our debt & savings money into savings until we reach our emergency fund goals.