One thing to be aware of, you may or may not be on the hook for the 25k (sounds right to me that the corporate veil would protect you at some point, but I suspect your corporation would have to go bankrupt to get out from under that piece of the debt).
However, I can assure you that there’s a tax principle involved here as well. When that debt goes unpaid, at some point there is 25k of taxable income that results, either to the corporation, or its sole owner (you) due to a little rule we call “forgivedness of debt”. The IRS will want that action.
Motley fool forums, Money Saving Expert Forums (very much a UK site though) have boards where you can offer up your spending/ debt details to be torn apart, in a good way, by others in same situation. Helps alot to have anonymous community supporting one another.
I do not use my high percentage rewards card at mom and pop stores or other businesses I believe deserves every cent that I give them. Rewards cards charge shop owners extra fees, and I it doesn’t feel right to me to fuck my favorite businesses over for a goddamn percentage.
I’ll gladly use the rewards card at chain restaurants and Walmart, though.
Whatever actual decisions you make, my best advice is: 1) organize with a spreadsheet, reminders on your calendar, and whatever else you need to help prevent you from forgetting any details; and 2) keep your eyes on the prize. Remember why you are undergoing the austerity or the second job or the whatever else and look forward to the day (soon!) when it will be over and you will be a better man for it. Attitude matters, pal.
I was going to say you were wrong, but apparently in aught-seven they changed their rules to charge different rates for “Enhanced Value” cards (which are, loosely, reward cards). Their rate structure is sort of interesting, actually. A lot more complex than I had thought.
To save small businesses money, the best thing you can do is pay cash. The second best thing you can do is use a debit card, which unless they’ve changed things charge a fixed rate instead of a percentage. When I was working in the card processing industry, debit was a flat 5 cents per transaction - at least at the processor I worked for. All credit cards run on a percentage of total sale, with no maximum. AmEx and Discover cost a merchant more than Visa and Mastercard, in general.
Nothing other than my own peace of mind. I really detest owing anything so paying it off quickly ensures I don’t amass too much debt and what I have in my bank account is far more accurate to my actual situation.
Paying the credit cards bimonthly gives no financial benefit. They can’t charge interest until after the due date. The reason you do a bimonthly on your mortgage is to cut down on the interest being charged, since it is constant. It’s a small help in the short term but adds up over the long haul (pretty substantially, actually).
This is sound advice. I know many people who talk about wanting to eliminate debt but won’t pull money out of investments, certificates of deposit or savings to do it. While I don’t recommend cashing in 401(k) plans that charge heavy penalties for withdraw, it makes no financial sense to continue investing in a money market fund, stocks or certificate of deposit that may only be yeilding 2%-5% annually when your debt is costing you 10%-25% or more.
Debt advisors like Ramsey and Bach will tell you to build an “emergency fund” which is simply a savings account that holds enough money to cover expenses you might be tempted to use credit for, like car repairs or an expensive medical bill. That keeps you from dipping back into credit. Any other assets you have, be they more cash in savings accounts, bonds, investments that do not have withdraw penalties and even hard assets like an extra car or piece of real estate, liquidate that stuff and use the cash to pay down as much debt as possible. The faster you get rid of high interest debt the more money you will have back in your pocket (instead of the bank’s) every month, and you can rebuild your savings/investments with it then.
Ramsey (and others) actually touch on both methods of debt repayment. Paying down the smallest debts first can be an incredible motivational tool. It makes the debtor feel like they’ve made immediate progress and gives them incentive to keep working at debt reduction. It also works well with the “snowball” method in that the money you had been paying towards the $500 balance on that credit card or whatever can now be focused on the next debt in the chain, say the $1500 balance on another card.
On the other hand, sticking to “smallest first” isn’t always wise. Obviously if you have a small debt with a high interest rate, by all means pay it off first. If your small debt is only at 5% and you have a debt twice it’s size at 20%, then start with the 20% as you’ll free up more money every month paying that one off. It should only take a few minutes and some simple math to figure out where to start and how to arrange your debt payoff schedule. Low interest high balance debt like student loans should probably come LAST, unless there is some circumstance that dictates otherwise.
Like I said before, don’t treat Dave Ramsey, David Bach or any of the debt system books and seminars (or websites) as gospel. There is no “plan” that is all-inclusive, and the best plan for you is going to be one that you put together using information from as many sources as possible. Nobody understands your debt and your budget better than you do, so it all starts with sitting down, looking at the numbers and being honest with yourself. You can find a challange in finding ways to free up even small amounts of income every month to put toward your debt plan, and once you start debt payoff snowballing that amount becomes larger and larger. At the same time you’re doing this, you’re learning to live with less, meaning that at the end you’ll have a lifestyle you’ve become accustomed to and suddenly, when the last debt is paid, you’ll also have a huge wad of money every month that was paying off debt and is now “free” to do whatever you like with. That’s some powerful motivation.
I have $250,000 in student loans, mostly owed to Uncle Sam, thanks to my four-year dual-degree professional program. And no job coming my way after graduation! Damn you, law school! I’m at a top-14 law school and about half my class has no job.
I will probably end up teaching high school or something so I can discharge the federal debt in ten years thanks to public service loan forgiveness. If you don’t work for a fed/state/local agency or a 501c3, federal loans can sap you for up to 25 years, with the last year’s unloading causing imputed income too.
I was mildly pleased, though, when I realized that I owed so much to the government that I could borrow still more without ever having to pay it back, assuming I do end up working in the public interest (cuz it’s not like my friends who graduated last year are happy working at big firms).
Of course, it would be one thing if I could be a lawyer working in the public interest, but given that I have no background or class work in it whatsoever, they’d never hire me, so it makes much more sense not to be a lawyer at all.
There are plenty of NYC 501c3s in the startup phase that’d take you on on a nominal salary if you’re willing to go for it. Lawyers are handy for cutting through red tape and figuring out the rules for setting up a foundation, so they’re the one bit of personnel that people are willing to lay out for if they can afford to do so. Especially if you have any experience whatsoever with grant proposals or accounting; that helps a ton!
If you’re in the area and interested in charity work, I’d be willing to work the contacts on your behalf. No promises that I can find something, money is tighter than, well, something vulgar and tight, but I know a few that might be interested.
Yeah, my total debt is pretty small compared to some (25k student loans, 6k credit card). I graduated with no credit card debt, but low and/or non-existent income for the last 5 years plus depression and being an idiot has saddled me with that debt. I’m treading water right now, but at my income level, if I were to really dig deep to pay off the credit card debt… I’m looking at nearly a decade to pay it off (not even counting my school debt).
That sucks about the law school student loans. I have some student loans too but they’re a relatively small amount of my total debt, and at least here in Canada the interest I pay on them is tax deductible so I’m not too worried about them. It’s the credit card and corporate line of credit (which I believe is guaranteed by me, to answer a question posed) that are killing me.
I’ve traded some information with a non-profit credit counseling group, and they want to put me into a Debt Management program. All of my debts aside from the student loans and corporate debt combined into one payment. The main disadvantage is that my credit rating would be a R7 for three years. I could accept that if I had a stable place to live, but I’m intending to move soon (mostly to reduce my monthly housing costs) and I need a good credit rating to get past apartment rental checks. So that would have to wait until I can anticipate a stable living arrangement. In the meantime, I’m going to see if my bank can offer me a consolidation loan for the credit card debt, and start slicing down my expenses.
The books look interesting too – I like the snowball debt approach. I know that making tangible progress on debt really does feel good.
Interest paid on student loans is deductible here too. However, a lot of people in the U.S. don’t itemize their deductions, since they won’t go over the standard deduction anyway.
I advise Jason’s plan. The more you spend on lottery tickets, the more likely you are to win!
