Best/fastest way out of debt?

Question

My bf is $40,000 in debt. He makes all his payments on time but only pays the minimum balance or slightly more, his annual income is around $65,000 now. He will never get out of debt just paying so little but he can't afford to pay huge sums on his credit cards. He's a dope for getting himself into this so I'm looking for ways to pull him out. Thanks in advance

Answer 1

With a $65,000 income, why can't he make bigger payments? The reality, unfortunately, is that the minimum payments are going to leave him bogged in debt forever...

He should look for ways to cut his spending. Have him write down every $ he spends and what it was for for a week - then look at the top 5 offenders and find ways to cut down. I did this and found I was spending a fortune on lunches every week!

He should pay his credit cards first, as soon as he deposits his paycheque, so that he doesn't run out of money. I also found this helpful to curb spending: set aside a certain amount for spending every week, like say $100 per week for whatever you want (eating out, entertainment, etc). At the start of the week, take out the $100 and keep it in an envelope so you can pay cash for everything. Don't allow yourself to use your debit for anything, and when your $100 is gone, tough luck! This will help him budget better.

Answer 2

As others have said, he needs to cut back on any "extras" until he has a handle on his debt. Do a budget to plan out how much he can afford to pay towards his credit cards each month. Pay the minimum on all but one card. Apply the remaining credit card budget against the last card. This way all of the "extra" payment will go towards one account. Continue this until that one credit card is paid off. Then apply all of the "extra" payment to another card until it is paid off, and so on until they're all paid. He might want to start off paying down the card that has the smallest balance. This will be the quickest account to pay off. Or, he could start by paying down the account that has the highest interest rate.

When the card is paid off, then he should close the account. Some banks will even let you close the account before it is paid off. Obviously, he'll still have to make payments, but if the account is closed, he won't be able to charge anything else against the account. If he can't close the account, he should at least cut up the card. And make sure that he continues to pay on time!

Answer 3

0) Cut up credit cards and close accounts.

1) Do a monthly budget before he gets paid. Understand where his money is going each month.

2) After looking at the budget, cut out anything that is not 100% necessary (necessary: food, electricity, water, shelter, transportation, health insurance.)

3) Save up a $1000 emergency fund.

3) If a car or house is involved with high payments, sell the offending item. Sell anything else of value.

4) Pay off smallest debt as quickly as possible.

5) Repeat #4 until debt-free.

He should have around $3750 take home each month. Since he's single he should be able to pay at least $1000 towards debt each month. It isn't fun, but works.

Answer 4

I am in India and watch a TV program - the suze orman show - on CNBC (I guess, it is MSNBC or something like that in the US). Its a really good program where suze deals with many such cases. I guess you write to her.

In my opinion, the best way to be financially sound would be to first try and pay all the debt as quickly as possible (even if it means letting go of your favourite things for some time). Debt is a vicious cycle and once you're caught in it then it's difficult to get out.

Please suggest your BF to pay as much as possible. Try and consolidate the debt by taking help from some good agency that consildates your debt at a lower rate of interest.

Answer 5

Quicken can put together a budget that can help him get out of debt faster. If nothing else, it can improve his credit score until he can transfer some of the debt to lower interest debt. Also, credit counseling is good, but you have to watch out. Almost all of them are scams now. Get a recommendation from some reputable counseling service, such as one organized by a church. Look in the yellow pages phone book under social services.

Answer 6

If he is making $65 000 per year he should be able to put quite a bit on his balances by cutting back on the instant gratification. Get a smaller house/cheaper apt, sell the gas guzzler, etc. and put the money down to get out of debt. There is no easy way except to pay as much as you can per month. As for you, are you sure you want to get involved in helping to solve this problem for him?

Answer 7

Have a look here.