Somewhat Z related...

polarity

I'm always interested. I'll give you some back story aswell since you were so polite as to share. My wife and I started out with me doing IT and her working in a physical therapy clinic, she was doing office work/pt tech (therapist assistant type stuff), between the 2 of us we made maybe $40,000 a year.

All of the sudden we hit the jackpot, I landed a job making over $100k a year. I worked for 2 years then got her on, so we bumped to over $200k a year. Going from having no money to lots of money we went nuts, bought anything and everything we wanted. Took spur of the moment vacations, etc. We were independant contractors so taxes weren't even held out of our checks. So checks were coming in for just short of $20k for a month. My first couple years and her first year we went retarded and blew through cash like it was nothing. Then come tax time realized what we had done. Took us 2 years to correct that mistake (as well as other mistakes we made before the job with dumb credit decisions).

After about 3 or 4 years in we got smart, decided it would be a good time to buy ourselves a home, get the cars we wanted, plan a budget for when this work ended and we did. Another year goes by and we decide to quit the work and move back home (this was 7 days a week, 12 hours a day and constant travel, literally you didn't go home for a year at a time or so). So we move home, I go back to IT, she goes back to work at the hospital.

Now we have our house payment, and our 2 cars (she drives an 08 accord and I drive the Z). We pay our bills just fine, we have some savings and we go about our lives, but looking at the paychecks coming in getting debt free just doesn't even seem realistic at this point.

For the record I'm 26, most of the dumb things I did were years ago I've had every type of bad habit imaginable and lots of money went to those things. I don't claim to be smart these days, just smarter than I was before. People sharing experiences in my opinion is the single best way to learn. If I told you that bears and kill you, you file it in your mind and move on. If I talk to you about a friend who was eaten by a bear and give such detail that it burns in your mind, you will damn well remember forever that if you hear/see a bear it's time to hit the highway. No, I don't have such a story, it just seemed like a good way to get the point across.

chief_Roka

It doeant hurt ur credit to close an account until a bitter credit card company decides to misfile it.
It happened to me 5 months ago. I closed an old credit card an they called the debt left on it unsettled/delinquent. I got it fixed but... I had to dispute with the credit card and write the 3 agencies n it took 3 months to fix. Of course the company had no proof I was delinquent. But u just hav to be so persistant for things to keep moving and its a pain.

polarity

I could be wrong on this but in my study of credit over the last few years I've learned that closing ANY account (unless it's one of your newest) will hurt your credit score. Part of what helps your credit score is based on average age of accounts in good standing. So if you have a credit card you got when you were 30, a house when you were 35, car when you were 36, and a new credit card you got when you were 36 and you're now 37, and all are in good standing your average credit age is 2.75 years. If you close that first account obviously your number would go down, since you lost your oldest credit account.

This could be wrong, feel free to correct me.

-William

kannibul

At 26, you're ahead of me. At 26, I was still racking up debt, and floating by. I'm 31 now...

Give yourself some time, use those tax returns to knock out debt...and seriously, track what you're really spending your money on outside of paying bills and debt.

The little ****, literally was like a 1" hole in a 5 gallon bucket for us.

When I bought the Z, I thought that would kill our debt payoff plans. At the time, I had figured that I could spend, including insurance, $750/mo on a "midlife crisis-mobile" - lol. At the end of the month that would leave around $250 to float us by. I was going to depend on our tax return this year to knock down debt for a bit of breathing room. Stupid, I know.

I bought the Z. My payment is 642/mo. My insurance went up $85/mo. Pretty much nailed that target.

3 months later, and a lot of discussion with the wife about how much we should really be spending for groceries and cutting out extra ********...and I'm chucking $1K/mo at credit debt - IF NOT MORE, depending on when our checks hit.

Some people think it's odd to not have cable. To be honest, I'm sort of missing it. Mostly the DVR, but the jitter bugs me sometimes. I almost signed up for AT&T U-Verse ($250 rewards, $95/mo...) - but then thought, why? I'm paying $19.99/mo for internet, and the other crap is FREEEEE - sure I don't have the channels, but when is there anything on worth watching? Not having it also does something else strange...I've been talking/spending more time with my wife and plotting and planning more. Amazing!



Basically the plan is something like this.

Cut out unnessicary expenses. Think "ramen and kool-aid" - ie, what you need to survive. Keep an inventory of what you eat for the week at home...so when you get groceries, you're only restocking, not buying.

Take your highest interest rate item. Pay it off as fast as you can, make minimum payments on everything else. Rinse and Repeat as needed.

If you can refinance something, consider it only if you can knock out another debt (or two), and get a lower rate than both of them, and have a lower payment, which frees up money NOW, to use to pay off yet another debt.

Be aggressive about it...plan it out to where you can see the end in sight for each milestone...to the point where you debate going to Subway for a $5.00 sammich, because it might throw your whole plan off track, and you'd have to recalculate everything to find out when each debt will be paid off in time...

For example, our credit cards are done, March 12, 2010. That's not including our tax refunds, which will go to her Civic (next highest interest rate). Once that's gone (approx August, again not including the tax return), the Z is next.

Once that's gone, house - though, more than likely, I may get a new vehicle around then (replace 1997 Ranger w/ new small-sized truck)


Also, my wife an I have an easier time coming up with money to pay a bill, than we do to save money. I basically created a "bill" that we have to pay. It works for us.

Lastly, you are ahead of me in one aspect - you have savings, and might have retirement stuff you're contributing to - that I am not (yet) doing - but, all things considered, you could leverage your 401K for a low interest loan that you could use to pay off a higher interest debt. I think the interest you pay on your 401K Loan is added to your 401K, not a banker's pocket...

Anyhow...

kannibul

Closing the account and continuing to pay it off, doesn't hurt it...at least as I understand it. Plus it locks the interest rate. As far as maintaining a credit score, if the end result is that you want all your debts paid off, and pretty mcuh go to a cash-only method, then it doesn't matter.

That said, we closed both of our credit cards before I bought the Z, and was able to secure a 5.8% APR, without hitting a credit union. I was able to get 6.25% APR through my regular bank.

Lastly, there are two types of credit. Loan Credit, and Revolving Credit.

Revolving Credit is what credit card companies look at for a history of making payments on time for an open-ended loan. This is what affects your APR and credit limits most initially, well, that and your debt/income ratio.

Loan credit is for car financing, bank loans, and mortgages - anything with a set end-date. This is for determining APR or approval for a given loan, and what they'll loan you for, as well as your debt/income ratio.


Now, if I tried to open a credit card RIGHT NOW, I'd probably get a craptastic offer, but, since my intended goal is to NOT HAVE a credit card, I'm well on my way.

polarity

Thanks for all the information, my wife is always better about the spending than I am honestly. So this is something she will understand fully. I do agree that the idea would be to go cash and get away from credit, but for me I think keeping good credit will be mandatory even if my goal is to be credit free. I learned long ago that just because you don't have the money for something doesn't mean you won't need it. You always need to be able to deal with unexpected financial emergencies, if that's from savings that's great, but if not your credit needs to be good enough to get a loan with an interest rate that isn't going to throw your entire financial plan out the window.

Just a thought.

-William

kannibul

Following that thought, my desire is based on getting rid of credit cards, not nessicarily get away from using credit.

Loans are one thing. They cover mortgages, financing, and personal loans (secured and unsecured). These (typically) have a fixed term to them, where a regular payment is made X number of times. Unless you agree to something nutty, your terms won't change. Interest rates can be higher or in some cases lower than credit cards, and limits comparatively.

I have **great** credit in that area. I could walk into any bank and walk out $5K richer right now, and the bank wouldn't bat an eye.

What I'm getting rid of is revolving credit, ie, credit cards. They have no fixed terms to them. APR's are adjustable, at the discretion of the credit card company, a payment is due as a small percentage of your debt to the credit company, to where if you made only the payment they invoice you for...it'll take 30 years or more. The only advantage a credit card has over a bank loan is sometimes you can get a new credit card with a 0% APR for X months. As long as that balance is wiped out before the X Months are up, you're fine, if not, you get nailed for all the back interest. Also, they like to catch people on not making any payments over that intro-rate. Just because it's a 0% APR at the moment, does NOT mean that it's $0 payment over that time period - in fact, they can end that "promotion" because of non-payment during the 0% introductary rate. It's crap like that, that just has me saying that credit cards are pure ****.


The second goal is to get rid of any other debts as quickly as I can. It's money I'd be paying out over the long term, and by paying it off early, I'm skipping a lot of interest. Some people are fearful of paying off a debt early because you skip all the interest - sure, it hurts a TINY bit, but having an account paid/closed and done with - is much better.

Anyhow.

polarity

Ahh I'm following now, thankfully I only have the 1 card and I never use it. I do agree credit cards suck. That is actually what originally screwed my credit when I was 18. I mean, it was my fault but they didn't help. They sent me a card, YOUR APPROVED BLAH!, so like an idiot I went out and bought a tv with it (was like $120 or something then). I didn't read the fine print, apparently they had tacked on some fees that I didn't notice. Membership fee, annual fee, processing fee, I dont even know what other fee. Just lots of them. Which of course put the credit card over it's limit. So I got hit with a penalty. Then I paid the money for the TV (within the month) but still had all the other crap on it. I was 18 and stubborn and thought "Well, I'll show them. They can't make me pay it". And I didn't.

I went on about my life. 6 years later I start trying to use my credit and it's not happening. So I look and there it is, haunting me. Being a little wiser now I call them up. "Yes sir, no problem we can get rid of that for you, all you have to do is send us $3,000." I had the money, wanted to fix my credit so I sent it, as promised they actually removed it completely from my credit. But here I am years later now and can tell you for absolutely certain, that they will get their money or you will regret it. I have been a credit nazi ever since then, constantly checking it and watched it to go up/down.

-William