34 answers

Financial Choices.....I Need Some Savvy Mama's to Advise Me!

I was laid off from my job at the beginning of this year and although I went on unemployment, the loss of income was so great that I had to make a choice to pay the utilities, food, and mortgage before I tended to our credit card bills. It was the only way I could keep us from losing our home. During this time, I have diligently been looking for a job and I finally got an offer and accepted it today. I will start this new position right away. I have some big financial decisions to make and I need some help from the savvy Mom's out there. This new job will be a huge increase in salary....more than I have ever made in my life. I also found out that my former employer accidentally owes me 2 weeks pay and they are overnight-mailing the check for that compensation to me ASAP. Once I start getting paid from the new job, and receive the back pay owed to me, should I try to fix this credit card mess immediately and try to pay everything off as best I can or should I hold back a bit and be more conservative and continue on the "arranged payment plans" to keep the accounts out of collections for the moment? In total, we have about $8,000 of credit card debt circling the toilet! Many of you might think this is a “no brainer” and that I’d be a fool to not take the money and immediately pay off those delinquent credit cards but you have to understand that with this job layoff that I had, I went through all of our savings and we have nothing in the bank anymore. We live paycheck to paycheck from my husband’s job. My unemployment wages were used for groceries and gas for the car at best. I want to do the right thing here and I’m also still a bit panicky and anxious about the possibility of being laid off again or losing another job. This was the third time this has happened to me in the last 5 years and it’s all due to our tanking economy. I’ve never been fired…..but I have been the American Casualty like many others and it has affected me greatly. So, what should I do with the 2 weeks salary coming from the old employer, the rest of my unemployment dispensation, and the fact that the new job pays a boatload? My credit is already ruined from these credit cards being chronically behind for months so I need a good plan. Our mortgage and all the utilities are up to date and current which is a miracle in and of itself! Our cars are 100% paid off and all insurance payments are current. It’s the damn credit cards that are the problem! UGH! Can anyone give me some good advice?

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My take on it is that you need to have an emergency fund. Now i know that many people say 1000 dollars, but I always err on too much and say 1 months expenses (with this economy, it takes that long to get a new job!), so I would save that 1st. Then I would start in on the debt much like Dave Ramsey suggests.

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Get Dave Ramsey's book, 'Total Money Makeover'. It's an awesome book and has helped so many get out of debt.

First, congratulations on the jobs--it really bad out there and that is great news; and extra money on top of that is also HUGE. The first question I have is: how high are the interest rates on the credit cards? I think if I were you and IF I had a low interest rate on the credit cards I might try and squirrel money away into savings. I would also sit down and budget a way of putting money into savings and paying off the credit cards faster. You would probably feel better about not using the money to pay off the credit cards immediately if you had a sense of when you could pay them off completely.

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I am totally confused one of your other posts said you would be laid off in May and you were trying to decide if you should re-mortgage.

4 moms found this helpful

First off congrats on the new job.

Google Dave Ramsey Financial Planning

I would call your credit card companies and tell them ok here is what happened and I'm now going to be able to pay again. I would only pay the minimum on those for the next 6 months. In the mean time I would sock away at least 1k in emergency money. Get yourself back on track.

4 moms found this helpful

My take on it is that you need to have an emergency fund. Now i know that many people say 1000 dollars, but I always err on too much and say 1 months expenses (with this economy, it takes that long to get a new job!), so I would save that 1st. Then I would start in on the debt much like Dave Ramsey suggests.

3 moms found this helpful

Dave Ramsey says first priority is a $1,000 emergency fund. This allows you to not have to use your credit cards anymore if an emergency comes up. The second step is a debt snowball; pay off your debts from smallest to largest, attacking the smallest one with all you can and paying minimums on all others. Once the first one is paid off, take the amount you were paying on that one and pay it on the second one, etc until they are all paid off. (Cards should be cut up and accounts closed even before you start paying them off). Third step is to increase your emergency fund to cover 3-6 months worth of your household expenses.

His system really works. I recommend getting one of his books or better yet, enrolling in his Financial Peace University, which is a 13 week course with meetings once a week. I think it can be online or you can join a group. The university gives you step by step, easy to understand and follow instructions and paperwork you need to become financially secure. There are a total of 7 steps. This will change your life! Good luck.

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I know it is scary, but I would put at least 50% towards your credit cards. It is terrifying not have a nest egg, but those credit cards and going to cost you more and more the longer you wait to pay them and they are not going to go away!

3 moms found this helpful

Always save some! If I were in your shoes I would put 50% into savings and put 50% towards the credit cards. I would then continue that route until the cards are paid off. However, I would make it a priority to get them paid off as soon as possible.

Julia mentioned Dave Ramsey, but do not buy the books you can get most of them at your library for free. I bought them, had them for 2 months and then returned them because I never opened a book.

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1st, set aside $1,000 for an emergency fund. Then take as much as you can and pay like crazy on the card with the lowest balance 1st. Pay only the minimum payment on the rest. When you've paid off the 1st one, do the same with the one that currently has the lowest balance. You can afford to make larger and larger payments as you start eliminating them and no longer have minimum payments to make on those. Dave Ramsey explains all this in his book, The Total Money Makeover. He calls it the debt snowball. Changed our lives. We had at least $15,000 more credit card debt MORE than you do- we're on our way to getting rid of it. It should be gone in a year and a half.

We got the audio version because my husband and I don't have much time to read. He listened to it on his commute to and from work. He loved it so much, he listened to it twice! We cut up all of our cards, and now only have a debit card, which we only use when we need to make an internet purchase, or when my DH needs to make hotel reservations when he needs to travel for work.

He tells you everything you need to do, and the order of importance you should do things in. He calls them baby steps.

He also has a great radio program which helps keep us motivated. You can listen on his website for FREE (both live and archived stuff). Listen tonight, if you have the time, and you'll get a better idea of what he's like.

Best of luck to you- been there and know how stressful it is. Feel free to PM me if you have any other questions or anything. As you can probably tell, I'm pretty passionate about this because of how much it's changed our lives :)

http://www.daveramsey.com/home/

2 moms found this helpful

Please pay your credit cards....interest is already so high ...people who don't pay them or just bankrupt them, only makes the rest of us pay for your overspending. Not fair, I work toooooo hard. I already feed the poor, pay for their medical expences, support all the illigitimate children, and God knows who else my taxes are spent on.

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