Thread: losing my mind
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Old 04-14-2015, 12:36 PM
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DavidBibby DavidBibby is offline
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Join Date: Jun 2010
Location: Palm Bay, FL
Posts: 415
Default Re: losing my mind

Hi Varoz,

Thanks for being patient with me. I've run the numbers and the situation is not hopeless, though it may not be super exciting either.

If you didn't pay a penny more than you do now on a monthly basis, you could be completely out of debt - including your house in about 19 years. Which is 11 years FASTER than your mortgage company would have you do it. You'll also save at least $55,000 in interest that you would otherwise have to pay.

But if we work together and get a handle on expenses and things... we could make it happen a lot faster and save you even more in interest charges.

By and large your biggest enemy here is the MasterCard charging you 20.5%. Your mortgage and your bank loan, though they have large balances, aren't raping you with their interest rates. The master card, on the other hand is public enemy #1.

I would advise you to attack the mastercard with everything you've got... except that you also have a $5000 from your friend.

How is your relationship with your friend right now? Is he/she expecting to be paid back immediately? are they charging interest? and would they take payments or do they want the $5000 back with no due date and you pay back whenever. How long ago did you borrow it and what is the due date if there is one?

Here's my thoughts. If your relationship with this friend has changed in any way because of this loan... then this MUST be your 1st priority over and above the MasterCard. Money has a way of ruining friendships... and if you value this friend and want to pay them back first... I suggest paying the mastercard ONLY the 72 minimum payment.. and start paying your friend the difference of $125 a month.

So we have two possible payoff orders... depending on whether you want to payback your friend first... or the Mastercard first.

If you decide to pay your friend back first... the order is:
1.Friend - $125
2.Mastercard - $72
3.Bank Loan - $540.46
4.Mortgage - $1000 (or $500 twice monthly)

or if you want to pay the Mastercard First and your friend is ok with waiting a while, then do this order.

1.MasterCard - $200
2.Friend - $0
3.Bank Loan - $540.46
4.Mortgage - $1000 ($500 twice monthly)

Ok.. The KEY to paying off debt is to focus your emotional and financial energies on ONE debt at a time. You should only be focused on the FIRST item in you list. So whether that is your friend first... or the mastercard first... this is the ONLY debt you focus on and you pay the minimums on everything else.

It's the same if you have 4 debts or 14 debts!

So let's say that you decide to pay your friend back first. That means during this time you do NOT pay $200 towards the mastercard... just the $72 minimum payment.

You do what ever you can to pay your friend back as much as you can and as fast as you can. At $125 a month it will take 40 months to pay him/her back... some months will be better than others.. and you may be able to pay them sooner than that. I'll help you find extra money in your budget to make this happen faster.

Let's now say that you were able to scrape together an additional $100 to pay your first debt off each month. Now you're paying $225 a month to your friend instead of $125. You're friend gets paid back in 22 months instead of 40.

In this scenario.. you'll get your friend paid back somewhere between 22 and 40 months. Once that debt is gone however... you don't stop. You now have $125 to $225 a month to now put towards the NEXT debt in your list.

So you already were paying $72 towards the mastercard...now you'll ADD the $125 to $225 you were paying to your friend. You've already been used to paying this so.. keep doing it now until the 2nd debt is gone too! You'll be paying $200 to $325 on the master card each month... it won't take long to finish it off.

Then... roll that payment into the 3rd debt on your list.

You'll be able to put $740 to $860 towards the bank loan... each month... it will disappear right before your eyes.

Then... do the same thing with your mortgage. Paying $1740 to $1860 on your mortgage will KILL it and save you a ton of interest.

I wish I could say that we could eliminate ALL OF your debt (including the house) in 7-9 years. That would take some EXTREME changes. But it is absolutely do-able that you could have your Friend, the MasterCard, and your 56k bank loan paid off in 5 years time. The house could take another 10 years... but you could slow the pace down a this point and fine tune it.

I know that this seems like it's going to take forever. The average person or couple doesn't pay attention to their debt until they reach their 50's and 60's... and THEN it's dangerously close to being TOO LATE. There folks would LIKE to retire... but they can't!

It's not too late for you and your wife though. Even if you don't go aggressive with your debt payoff...and just work at a serious level... you'll still have paid off house and at least 15 years to save for retirement before you turn 65. That is much better than the average couple can say.

So before we continue... please let me know if you think you'll be paying your friend back first... or the mastercard.

Also... what is your monthly NET take home pay. After taxes and deductions what's left of your paycheck each month?

This will help me give you more accurate numbers and I will give you a .pdf file of your debt-elimination plan. There's no charge for this.

Please let me know if you have questions.. I'll be happy to talk about anything.

David
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