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We Can Make the Minimum Payments But Can’t Get Ahead. – Andy

Over the past few years my wife and I have accumulated over $50,000 in debt. Job losses, attorney fees, medical bills have gotten us in this situation. While my wife has a very good job and we continue to pay all of our bills on time, we are only able to make the minimum payments and cannot seem to get ahead and are scraping by each month. We see no immediate money coming our way to get out of debt. What are our best options since we are not behind in any payments?

Andy

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We Can Make the Minimum Payments But Cant Get Ahead.   Andy
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Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Sean Ryan

    I like what Robert said. My personal experience has proven that the smallest things add up. Most of us can come up with $5/day. That’s nearly $2k a year.

    Looking at typical Holiday overspending, I posted this on our blog yesterday.

    Realizing what you spend and how you can easily change a few habits is the easiest way to bring more money back into your pocket. That’s badly needed cash that can be directly applied to your debts and help you be out of debt.

    Paying off a $1,000 credit card balance in one year will save you about $200 per year interest or about $4,600 over the life of the loan.

    The Soda Test
    1 can of soda = $.65
    1 can of soda per day x 5 days per week = $3.25
    1 can of soda per day x 5 days per week x 50 weeks of work per year = $162.50
    TOTAL SODA SAVINGS: $162.50

    SAVINGS SO FAR $162.50

    The Doughnut and Morning Coffee Test
    1 Cup of Coffee = $1.10
    1 Doughnut = $.80
    1 cup of coffee per day x 5 days per week = $5.50
    1 cup of coffee per day x 5 days per week x 50 weeks of work per year = $275.00
    1 doughnut per day x 5 days per week = $4.00
    1 doughnut per day x 5 days per week x 50 weeks of work per year = $200.00
    TOTAL DOUGHNUT AND MORNING COFFEE SAVINGS: $475.00

    SAVINGS SO FAR $637.50

    The Video Rental Test
    1 Video rental late fee = $2.00
    1 Late fee every week x 4 weeks per month = $8.00
    1 Late fee every week x 4 weeks per month x 12 months per year = $96.00
    TOTAL VIDEO RENTAL SAVINGS: $96.00

    SAVINGS SO FAR $733.50

    The Call at the Wrong Time Test
    1 ten minute phone call during peak time = $3.00 extra
    1 ten minute phone call every two weeks x 2 two week periods per month = $6.00
    1 ten minute phone call every two weeks x 2 two week periods per month x 12 months = $72.00
    TOTAL PHONE CALL SAVINGS: $72.00

    SAVINGS SO FAR $805.50

    The Take-Out Dinner Test

    1 Take-Out dinner per week = $18.00
    1 Take-Out dinner per week x 1 week = $18.00
    (gotta enjoy yourself some times!!!)
    1 dinner per week x 1 week per month x 12 months = $216.00
    TOTAL TAKE-OUT DINNER SAVINGS = $216.00

    TOTAL ANNUAL SAVINGS: $1021.50

    Sean Ryan
    Active-Debt.com

  • Sean Ryan

    I like what Robert said. My personal experience has proven that the smallest things add up. Most of us can come up with $5/day. That’s nearly $2k a year.

    Looking at typical Holiday overspending, I posted this on our blog yesterday.

    Realizing what you spend and how you can easily change a few habits is the easiest way to bring more money back into your pocket. That’s badly needed cash that can be directly applied to your debts and help you be out of debt.

    Paying off a $1,000 credit card balance in one year will save you about $200 per year interest or about $4,600 over the life of the loan.

    The Soda Test
    1 can of soda = $.65
    1 can of soda per day x 5 days per week = $3.25
    1 can of soda per day x 5 days per week x 50 weeks of work per year = $162.50
    TOTAL SODA SAVINGS: $162.50

    SAVINGS SO FAR $162.50

    The Doughnut and Morning Coffee Test
    1 Cup of Coffee = $1.10
    1 Doughnut = $.80
    1 cup of coffee per day x 5 days per week = $5.50
    1 cup of coffee per day x 5 days per week x 50 weeks of work per year = $275.00
    1 doughnut per day x 5 days per week = $4.00
    1 doughnut per day x 5 days per week x 50 weeks of work per year = $200.00
    TOTAL DOUGHNUT AND MORNING COFFEE SAVINGS: $475.00

    SAVINGS SO FAR $637.50

    The Video Rental Test
    1 Video rental late fee = $2.00
    1 Late fee every week x 4 weeks per month = $8.00
    1 Late fee every week x 4 weeks per month x 12 months per year = $96.00
    TOTAL VIDEO RENTAL SAVINGS: $96.00

    SAVINGS SO FAR $733.50

    The Call at the Wrong Time Test
    1 ten minute phone call during peak time = $3.00 extra
    1 ten minute phone call every two weeks x 2 two week periods per month = $6.00
    1 ten minute phone call every two weeks x 2 two week periods per month x 12 months = $72.00
    TOTAL PHONE CALL SAVINGS: $72.00

    SAVINGS SO FAR $805.50

    The Take-Out Dinner Test

    1 Take-Out dinner per week = $18.00
    1 Take-Out dinner per week x 1 week = $18.00
    (gotta enjoy yourself some times!!!)
    1 dinner per week x 1 week per month x 12 months = $216.00
    TOTAL TAKE-OUT DINNER SAVINGS = $216.00

    TOTAL ANNUAL SAVINGS: $1021.50

    Sean Ryan
    Active-Debt.com

  • Robertplattbell

    I would agree, although what some people think is “trimming expenses to the bone” leaves a lot of fat on the bone.

    A friend of mine came to me saying she had an intractable $5000 Visa credit card balance and no matter what she did, she could not bring it down. She could only make the minimum payments. I reviewed her finances with her and came up with the following:

    1. Cut up the credit card and stop charging on it. PERIOD, PARAGRAPH, END OF STORY.

    2. Call the company and arrange a payment plan, perhaps at a lower interest rate, perhaps with a rollover to a 12 months 0% rate to another card, and then cut that card up, too.

    3. Cut out her cable bill – she paid $75 a month or $900 a year, enough right there to pay off the card (along with the minimum payment) in five years. Go to the library and check out books and free videos instead. Live life instead of watching it.

    4. Cut out the high-speed internet access – $35 a month PLUS a $9.95 a month “virus protector”. She could access the internet for free at the library or at a local internet cafe and several other locations nearby. Free web-based e-mail (Yahoo) has virus protector built in, for free.

    5. Cut the cell phone or the land line (pick one). If you keep the land line, get minimum service and use a calling card for long distance. If you keep the cell, look into a tossable phone or rechargeable plan. I gave her one of my old phones and a $100 rechargable card. Potential savings: $50 a month.

    7. Cut other expenses – they liked to drink name-brand booze and wine and refused to shop at Wal Mart because they were “too good for that” but instead shopped at the local food boutique. Estimated savings: $100 a month – at LEAST.

    8. Cut collision, comp, car rental, and towing insurance on their 15 year old $2000 car. Put the savings into a savings account to buy another $2000 car if they wrecked that one. Savings: $50 a month, or more.

    9. Cut restaurant meals – they were spending $250 a month on restaurant meals and cocktails and – you guessed it – putting it all on the credit card.

    In about a half-hour I came up with about $250 to $500 a month in potential savings, more than enough to make a good start on paying down the debt.

    But, as you guessed it, each proposal was shot down on the grounds that each item was a sacred cow and there was some reason they could not cut it. Cable TV? That’s our window on the world! What would we do all day without it? (Live, perhaps?). Cut the Internet? But my husband spends all day on it playing games! (go walk the dog, instead!).

    And so on and so on. When push came to shove, her real agenda was this: Can you “loan” me $5000 to pay off my credit card? After all, you’ve done well, right?

    Well, yes, but only because I don’t have cable, or collision insurance on my cars or spend money at boutique food stores, etc. My expenses ARE cut to the bone, the raw bone. No fat.

    Now the couple who posted the original message has a lot more debt than my friend – 10 times as much! And perhaps bankruptcy is the only option. But in many cases, people who claim to be “broke” have a Harley parked in the garage or a jet ski on a trailer in the back yard, or a Camaro, or whatever.

    And in many cases, their idea of “cutting expenses to the bone” is not very deep cuts.

    ALSO PLEASE NOTE that Attorney’s fees (what for, again?) and medical bills are very elastic, to say the least! Call the hospital or doctor and work out a payment plan. Never put a medical bill on a credit card! In many cases, they will let you pay the bill, interest-free, over several months. I did this with an MRI scan recently, paying a $1200 bill over six months in $200 installments. Better than paying 25% interest on a credit card!

    And they may reduce the amount of the bill if you claim hardship.

    And to those of you who don’t have insurance, a simple $10,000 deductible plan (like Blue Cross has) can cut medical bills in HALF, as you get the insurance company negotiated rates on services (the MRI would have been $2400 without it!) and still provide co-pays for doctor visits and a prescription plan as well. Mine was $99 a month when I started at age 45.

    Lawyers bills are also VERY ELASTIC (I am a lawyer, and no, we are not all rich, in fact, few of us are these days). Suing your own clients for fees is messy business. If the client is at all unhappy with your services, they can file a complaint with the State Bar and cause untold amount of grief for the attorney (and tens of thousands of dollars in fees to defend himself). Any attorney who sues his own clients for fees finds it very hard to get malpractice insurance.

    So call the attorney – particularly if they didn’t successfully represent you – and get them to cut their fees AND arrange an interest-free payment schedule. Don’t threaten to complain to the state bar (that would cross the line) but do ask for their State Bar registration number. That will raise the hair on the back of their necks.

    I hope some of these ideas are of use to your readers. Even if they have to go through bankruptcy, when they start over, they might want to cut expenses and start saving and living on a cash basis. It rocks!

    Getting rid of Cable TV is the best, though. The average American watches 4-6 hours a day (!!!) and the messages it sends are all bad. The TeeVee preaches that debt is good and your credit score is God’s own branding of your worth as a human. Once you unplug from the nightmare of modern television, you can eliminate the background chatter and actually think for yourself.

    Good Luck!

  • Steve Rhode

    OK, so here’s the issue. Unless some part of this equation changes, it will remain the same. The two parts that feed a financial situation are income and expenses. Either income needs to be increased or expenses need to be lowered. For the most part, by the time people reach out to me here they have already trimmed expenses to the bone. So some type of intervention is going to be required to forcefully reduce expenses. The best tool to do that when you are up against a wall is the legal fresh start of bankruptcy.

    Bankruptcy gives people a second chance, protects them from being sued, discharges the debt quickly and is the least expensive solution.

    I would suggest that you find a local bankruptcy attorney and go talk to them. Once you have, come on back and let me know if you think that fresh start approach makes sense for you.

    Steve

  • Sanjeff4083

    I would also like to know what the answer is for the vicious cycle Andy mentioned about paying the minimum due on CC bills, but getting nowhere close to paying down the debt.

  • Sanjeff4083

    I would also like to know what the answer is for the vicious cycle Andy mentioned about paying the minimum due on CC bills, but getting nowhere close to paying down the debt.

    • http://GetOutOfDebt.org Steve Rhode

      OK, so here’s the issue. Unless some part of this equation changes, it will remain the same. The two parts that feed a financial situation are income and expenses. Either income needs to be increased or expenses need to be lowered. For the most part, by the time people reach out to me here they have already trimmed expenses to the bone. So some type of intervention is going to be required to forcefully reduce expenses. The best tool to do that when you are up against a wall is the legal fresh start of bankruptcy.

      Bankruptcy gives people a second chance, protects them from being sued, discharges the debt quickly and is the least expensive solution.

      I would suggest that you find a local bankruptcy attorney and go talk to them. Once you have, come on back and let me know if you think that fresh start approach makes sense for you.

      Steve

      • Robertplattbell

        I would agree, although what some people think is “trimming expenses to the bone” leaves a lot of fat on the bone.

        A friend of mine came to me saying she had an intractable $5000 Visa credit card balance and no matter what she did, she could not bring it down. She could only make the minimum payments. I reviewed her finances with her and came up with the following:

        1. Cut up the credit card and stop charging on it. PERIOD, PARAGRAPH, END OF STORY.

        2. Call the company and arrange a payment plan, perhaps at a lower interest rate, perhaps with a rollover to a 12 months 0% rate to another card, and then cut that card up, too.

        3. Cut out her cable bill – she paid $75 a month or $900 a year, enough right there to pay off the card (along with the minimum payment) in five years. Go to the library and check out books and free videos instead. Live life instead of watching it.

        4. Cut out the high-speed internet access – $35 a month PLUS a $9.95 a month “virus protector”. She could access the internet for free at the library or at a local internet cafe and several other locations nearby. Free web-based e-mail (Yahoo) has virus protector built in, for free.

        5. Cut the cell phone or the land line (pick one). If you keep the land line, get minimum service and use a calling card for long distance. If you keep the cell, look into a tossable phone or rechargeable plan. I gave her one of my old phones and a $100 rechargable card. Potential savings: $50 a month.

        7. Cut other expenses – they liked to drink name-brand booze and wine and refused to shop at Wal Mart because they were “too good for that” but instead shopped at the local food boutique. Estimated savings: $100 a month – at LEAST.

        8. Cut collision, comp, car rental, and towing insurance on their 15 year old $2000 car. Put the savings into a savings account to buy another $2000 car if they wrecked that one. Savings: $50 a month, or more.

        9. Cut restaurant meals – they were spending $250 a month on restaurant meals and cocktails and – you guessed it – putting it all on the credit card.

        In about a half-hour I came up with about $250 to $500 a month in potential savings, more than enough to make a good start on paying down the debt.

        But, as you guessed it, each proposal was shot down on the grounds that each item was a sacred cow and there was some reason they could not cut it. Cable TV? That’s our window on the world! What would we do all day without it? (Live, perhaps?). Cut the Internet? But my husband spends all day on it playing games! (go walk the dog, instead!).

        And so on and so on. When push came to shove, her real agenda was this: Can you “loan” me $5000 to pay off my credit card? After all, you’ve done well, right?

        Well, yes, but only because I don’t have cable, or collision insurance on my cars or spend money at boutique food stores, etc. My expenses ARE cut to the bone, the raw bone. No fat.

        Now the couple who posted the original message has a lot more debt than my friend – 10 times as much! And perhaps bankruptcy is the only option. But in many cases, people who claim to be “broke” have a Harley parked in the garage or a jet ski on a trailer in the back yard, or a Camaro, or whatever.

        And in many cases, their idea of “cutting expenses to the bone” is not very deep cuts.

        ALSO PLEASE NOTE that Attorney’s fees (what for, again?) and medical bills are very elastic, to say the least! Call the hospital or doctor and work out a payment plan. Never put a medical bill on a credit card! In many cases, they will let you pay the bill, interest-free, over several months. I did this with an MRI scan recently, paying a $1200 bill over six months in $200 installments. Better than paying 25% interest on a credit card!

        And they may reduce the amount of the bill if you claim hardship.

        And to those of you who don’t have insurance, a simple $10,000 deductible plan (like Blue Cross has) can cut medical bills in HALF, as you get the insurance company negotiated rates on services (the MRI would have been $2400 without it!) and still provide co-pays for doctor visits and a prescription plan as well. Mine was $99 a month when I started at age 45.

        Lawyers bills are also VERY ELASTIC (I am a lawyer, and no, we are not all rich, in fact, few of us are these days). Suing your own clients for fees is messy business. If the client is at all unhappy with your services, they can file a complaint with the State Bar and cause untold amount of grief for the attorney (and tens of thousands of dollars in fees to defend himself). Any attorney who sues his own clients for fees finds it very hard to get malpractice insurance.

        So call the attorney – particularly if they didn’t successfully represent you – and get them to cut their fees AND arrange an interest-free payment schedule. Don’t threaten to complain to the state bar (that would cross the line) but do ask for their State Bar registration number. That will raise the hair on the back of their necks.

        I hope some of these ideas are of use to your readers. Even if they have to go through bankruptcy, when they start over, they might want to cut expenses and start saving and living on a cash basis. It rocks!

        Getting rid of Cable TV is the best, though. The average American watches 4-6 hours a day (!!!) and the messages it sends are all bad. The TeeVee preaches that debt is good and your credit score is God’s own branding of your worth as a human. Once you unplug from the nightmare of modern television, you can eliminate the background chatter and actually think for yourself.

        Good Luck!

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