How did you rebound from a terrible financial decision?

Question

Credit card debt ($10000), student loans ($15000) and upside down (owe $12000 cat is worth $8000) on a car loan. Clearly I am not winning in the game of financial freedom. How did you rebound from poor financial decision making? I feel stuck and don't know where to begin...

Dell Schlabach · Answer

http://www.daveramsey.com/fpu/classfinder/

Gabe G. · Answer

very bad advice to even consider bankruptcy if those are the only debts we are talking about. It's likely the student loans can't be discharged. Those debts can be paid off with a ten dollar an hour job.

I think we are too quick to recommend bankruptcy in today's society. We should pay back the debts we owe whenever possible.

Frank S. · Answer

@Lisa Jones, congratulations! The first step is to acknowledge the problem. Then, you need to seriously look at this situation and analyze how to get out it and how you landed in that situation.

Please, please, spend time reading about personal and family finance.  You need to develop a good budget and control your expenses. There are many online sites that offer free classes, like coursera.org.  Invest in your financial independence.

First of all, you need to see where you stand. You can't wipe student debt through bankruptcy. If you file bankruptcy, you will loose your car and this may affect your job.

What's your credit score?  Get an idea here

CreditKarma.com

Do you have a budget? Get this

Mint.com

The smartest money book you will ever read, Dan Solin. Get it from the library

Don't buy anything. I mean absolutely nothing.

Go to Bogleheads.org/forum and anonymously post  your issues, your income, your expenses including rent, gas, electricity, etc.  They will help you plan a budget.  You can't receive good advice without giving your personal information like income. This is not the way to do so, because your name is listed.

If you have the money, pay a few hundred bucks to get a financial planner review your situation.

Get out of debt, you can do it.

“Rather go to bed without dinner than to rise in debt.”

Benjamin Franklin

Jeff B. · Answer

hmm; Can't encourage you to do this, BUT there is a reason that the Fed wrote the Bankruptcy Laws - - to get your life back.  Doing so is not the death knell to your credit that so many believe.  I'll stop here and tell you seek professional, credible advise.

Gabe G. · Answer

In the big scheme of things, those debts aren't really that bad.

If you have a decent income, you can be out of those in a year or two with some changes.

The only way to recoup, is to make different decisions. Once you see the results of better decisions it will start snowballing and you will be in a better place before you know it.

Step 1

1. Spend less, than you make.  This can be getting a second/better job, or cutting down on spending in other areas, or both

2. Start hitting your highest interest debt. My guess it will be the credit card. Pound that debt down as much as possible, while making minimums on the others.

3.  After the credit card is done. start paying extra on your student loan(depending on interest rate) and start attacking that

On the car, that's tough. I would keep making the payments, if they are comfortable for you, and eventually that difference will narrow, and then you can decide what to do

Bryan Tomko · Answer

Until you have a good grasp on why you are making poor financial decisions do not transfer your debt to a new card. All that will do is free up the possibility of more credit which you will use. You need to become educated in how to either not use credit(have an emergency fund) or use credit wisely and to your advantage(never carry a balance and pay off every month. I personally had over 39k in credit card/personal loan debt from years of poor decision making. After education myself i will be consumer debt free in mid 2016 after 5 years of hardcore repayment. A written budget is key and not going into more debt.

I will have enough saved by 2017 for my first buy and hold rental and I am super excited to start this journey! Good Luck!

Frank S. · Answer

Be very careful.  This could be very bad advice.

Her student debt will remain after bankruptcy.

She will loose her car, and perhaps her job.

Jay Hinrichs · Answer

@Dell Schlabach  I am with Dell in this one for those on a fixed income or w 2 wage I like Ramsey you can't go wrong  with no debt and being smart about credit.

@Bryan Tomko  I admire Bryan attitude and game plan.

if more people actually saved money before jumping into RE or trying to jump into RE we would all be better off

Jeff B. · Answer

Notice, no advice was given???

Anthony R. · Answer

In the grand scheme those debts are not bad!! You can get this in control. The hard part is two fold. You've already seen you have a problem. That's the first part and the hardest! The second is acknowledging that you can't solve this problem in one day. Sit down and make a budget that pays down your debts while also setting a little aside for yourself EVERY PAYCHECK. Your coinfidence will build as you watch the debt decrease and savings increase.

While you wait to get out of debt read these books. They will light a fire in you.

1. The Richest Man in Babylon

2. Rich Dad Poor Dad

3. The Millionaire Next Door

4. Think Big and Kick Ass

Let these books be the drum you walk to and you'll see how fast that anxiety melts away. I'm almost excited for you actually because the discovery of the path and starting to walk it is almost as exciting as being on it. More in some cases.

How did you rebound from a terrible financial decision?

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