by Hope
(as of 10/14/17) | |||
|---|---|---|---|
| Car | $10,000 | 7.00% | $308 |
| Credit Card | $5,000 | 17.00% | $36 |
| Summer Camp (2018) | $3,375 | 0.00% | $500 |
| Student Loans | $34,349 | 2.88% | $307 |
| Computer Equipment | $2,738 | 22.90% | $84 |
| Taxes (State) | $6,000 | 0.00% | $100 |
| Self Lender | $1,013 | 10.57% | $97 |
| Collections 1 (Medical) | $618 | ||
| Collections 2 (Apartment) | $499 | ||
| Collections 3 (Ex-husband) | $6,954 | 6.25% | $246 |
| Amazon | $527 | 26.99% | $25 |
| Total | $71,073 | $1,703 |
Credit
Car – I recently wrote a post on this new debt. You can read it here. My goal is to pay this car off in just at two years, by paying $500 per month. My first payment of $400 will be paid this week.
Credit Card – For the last several months, I have been paying this card off every month and then charging everything I could to it…monthly bills, groceries, gas and so on. In doing that, I have paid less than $10 in finance charges. The problem is that I can’t get it to a $0 balance. And this bothers me. I am literally paying it and then using it. I don’t think this is wise and I want to get it to a $0 balance. The nice thing is that I do earn points with every dollar spent that I can convert to cash.
Amazon – this is a line of credit with Amazon that I typically pay off every month. I use it frequently for household items, etc. But now I am at the point that I would like pay it down to $0 and keep it there rather than rolling it every month.
Computer Equipment – I know this was a dumb decision, but it’s one I cannot regret. All three of the kids have new laptops. With me being gone some much, a lot of their schooling is online. It makes it easier for me to track their time, help them remotely and they have Skype classes specifically with a Spanish tutor. And, of course, the majority of Sea Cadet’s 11 college hours are online. This is my personal number one priority to pay off.
Chosen Debt
Summer Camp – I mentioned this in my recent budget update, technically I could stop paying this at any time or wait until next summer and pay it in one lump sum. But paying every month, with a pay off in April makes me more comfortable and assures that my kids have a plan for next summer without me scrambling. The total amount covers 6 weeks of camp next summer.
Self Lender – this is also a “chosen” debt. It’s actually a CD that I will gain access to next September when paid in full. They report to the credit agencies which was my motivation for opening the account. I need massive repairs to my credit and this is essentially forcing me to save (thinking Christmas next year.) Have you heard of it? Thoughts?
Collections
Collections 1 – I will argue to the day I die that I do not owe this debt. This is medical debt from the twins which the state is supposed to pay in full via the provided medical insurance. A couple of years back, the state inadvertently cancelled the twins insurance, and while they turned it back on the next business day, this fill fell through the loop. I have called medicaid, the state, the twins caseworker, and so no to no avail. In order to get it off my credit I may have to pay it, but I definition do not owe it!
Collections 2 – Evidently our apartment charged me for damages to the apartment we moved out of a year ago this past April. I NEVER received any notice of that, it just showed up on my credit report. Two things regarding this…they kept my entire deposit. No problem, we had animals, I respect that. But two, our apartment was as spotless as an apartment can be after people live in it for almost two years. The carpet was clean, the apartment was clean, we hadn’t hung stuff on the walls so there was no wall damage. But as it has been so long and I have no “proof” I am probably going to have to pay this one too.
Collections 3 – Another unknown debt that appeared on my credit report, again from my marriage. It has to do with a line of credit on our old house, which he bought me out of 8 or so years ago. I am working on fighting this one too, but for now, I have made payment arrangements with them and they have removed it as a derogatory statement on my credit report.
Taxes – This is a placeholder debt. With all our moving around, mail is just starting to catch up with me. This state tax debt is from the year my ex and I divorced. While I have filed every year, he may not have. I have arranged a payment plan of $100 per month while I track down tax filings, etc. to defend my “lack of liability” for this debt. We will see how it goes.
With all this on out on the table now, what do you recommend as my plan of action? What should my priority be?
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 3 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
The self-lender account confuses me. Maybe elaborate on it further in a future post?
Aside from that, I feel stressed out just reading about the various collection accounts. I imagine they are a weight on your shoulders as well. If I were you, I’d pay the two lower balance items off first and just chalk them up to more lessons from the school of hard knocks. After that, I would clear up the Amazon balance and then close that account. In my opinion, it’s lower stress to manage one credit card and one payment than to manage multiple. Reducing stress and financial noise should be top priority for you – you have a lot on your shoulders besides that!!
I hadn’t heard of them before but found this: https://www.nerdwallet.com/blog/finance/self-lender-credit-builder-loans/ . It’s an interesting idea. I commend you for continuing to blog after all you have been through. Hopefully you can get back on the right track now that things are more settled.
I was also thinking you could use the self-lender to pay off a debt or a big chunk of one when it’s done. I’m not an expert by any means but I think the best way to repair credit is just to pay off those debts!
Thanks, Kate. I’ve been reading alot about credit repair and the Self Lender loan kept popping up.
I’ll keep the BAD community posted once it hits my credit report (supposed to be November) on how it affects it.
I like the idea of “less” all the way around at this point.
Thank you for your feedback. I am definitely taking everything under consideration as I plan my next move.
I may have made a plea before, but I’ll do it again. Can you re-finance that car loan with a credit union? That interest rate seems really high to me, even for a used car.
Hi Katie,
I would LOVE to refinance the car and get a better interest rate; unfortunately due to my credit situation that I am digging out of, that is not an option. Hopefully by early next year I will have made enough progress that I can explore refinancing it and getting a lower rate. Believe me, I shopping ALL around.
Aww, Hope, I just feel badly reading about all your collection agencies. It isn’t right — especially the twins’ medical issues. But I know how long it takes to fix any bureaucratic mess up . UGH.
I have no suggestions, just want to say I think you are handling it all better than I would. Keep up the good work.
Thanks, Ann. I have learned that I work best under pressure; although, it would sure be nice to have the pressure off…even just for a short while.
I’m glad that your work has stabilized for now. You have a lot of work ahead of you! I don’t believe you have made any progress on your debt since beginning this blog. I hope you put a good plan in place.
I do indeed. And I am very grateful to have more stable work and adequate income. I’m grateful for this blog and community. As a single parent, I don’t have someone to bounce my plans off of, this community really helps keep me on track.
I’d recommend you use the extra you are paying on the car for the higher interest debt you have. That car is not going to get paid off quickly anyway, so eliminate the smaller, more expensive debts first.
This is a good idea. If you knock some of the them out your credit score might improve too, allowing you to refinance the car at a better rate.
My goal is to refinance the car as quickly as possible, and my thoughts are the lower the balance, the easier that task will be once I have gotten my credit score back to a decent level.
Can you afford to send your kids to camp for 6 weeks next summer? I’d aim for 3 or 4 weeks for now, and use that 500/month to pay off the loans at over 20% interest, ie Amazon and the computers.
I second. that $3375 in payments could go towards the computer and self lender and that would free up another $181.
At this point, the camp is not optional for me. I don’t like leaving the kids alone so much, especially during the summer when their older brother is gone. This past summer I hired a “fun facilitator” to get them out of the house. And next summer, I imagine they will both be working.
Therefore, for this coming summer, summer camp for them is a priority for me. I fear and am grateful for the fact that it will probably be the last summer that this cost will be part of my budget.
I’m guessing the camp is childcare so not really optional. I know I have to send my child somewhere during the summer as I can’t just stop working and I don’t have any family that can watch her. For one child it does cost me a few thousand… if this is just “for fun” camp then I agree with cutting it down a week or two and putting the rest toward debt.
Joanna,
While the kids will be 13 and 14 next summer, and they could stay home alone. I do not like leaving them alone so often. This past summer I hired a “fun facilitator” to compensate and get them out of the house some. This commitment for camp will break up their home alone times.
I also think this will be their last summer at camp since they could both reasonably work summer jobs the following year. It makes me sad to think that my babies are growing up, but we are really on the cusp of all the “kid” stuff being a thing of the past.
It seems to me that rather than pay down your car quicker that financially it makes sense to instead use your extra money you would use for that purpose to get your amazon and credit card down to zero since both carry a higher interest rate than that car. With the almost $200 a month extra(since you said you were increasing the payment to $500(or an extra $192) you could have the amazon bill with a 26.99% interest rate GONE in around 3 to 4 months and then budget for your amazon costs as a monthly expense like you would like(192 x 3 = .577 or 20 less than your balance).
Your credit card situation sounds a little confusing to me with a 17% interest rate and a balance of $5000 I’m confused on how you only have had a $10 finance charge. Are you on an interest free promo period? It sounds to me like your budget should include line items for amazon and the credit card if you want them to eventually be a line item you zero out monthly(and it sounds like it might be advantageous for you to use the card if it gives you rewards for spending with the caveat that you pay it off monthly instead of carrying a balance on a card with a 17% interest rate.) For example, I’m using my credit card for groceries so instead of saying $35 groceries weekly for groceries I’d say $140 monthly to card. I’d do likewise for amazon. If I were using it for pantry needs I would say my monthly cost to amazon is x dollars to cover those costs.
I hope this didn’t sound too confusing.
I fear I didn’t explain the Amazon and CC well.
Essentially, I have paid them off every month…and then immediately turned around and charge them back up. I do want to get to a place where they are both at a 0%.
I appreciate your detailed reasoning, and will take it into consideration as I make my plans.
So the Amazon LOC is essentially part of your budget for household items, and should be listed out as an expense, not a debt, if you’ve been taking out that amount for purchases, and paying it back without carrying a balance. Why would you put those expenses in your budget, no matter how you are paying for them. I mean, I get the debt/save up method for camps, but this is a revolving line of credit.
I have always read that the best way to increase your credit score is to just pay off debt. With that 500/mo from camp you could pay off Collections 2 in one month and get it off your report, and Amazon the following month.
You have too many loans, better to knock some of the smaller and/or high interest loans off completely than to continue paying small amounts on so many.
Good point.
Your first priorities are to eliminate the debts with the highest interest rates, the computer purchases and Amazon. Make only minimum payments on your other debts until those two balances are paid off. Then pay off the credit card because it has the next highest interest rate. Try to refinance the car after these debts are fully paid.
Dispute all 3 collection items with the credit bureau and say why you think they are not your responsibility. For now, other than filing the dispute, ignore collection items 1 and 2. For collection item number 3, any debt that has been charged off and sent to collections should not be able to charge you interest. Investigate this further before making any additional payments and request paperwork that shows they have a right to collect the debt. Request help from your local Legal Aid office if you need assistance in getting these items corrected.
Are you setting aside money to pay taxes on your 1099 income, or do you have extra tax withheld from your W-2 job to cover? Be certain that you understand your expected tax liability since you’ll have higher income in 2017 than you’ve had in previous years.
I applaud your efforts to payoff your debts while providing an enriching learning environment for your kids. From the perspective of an only child whose mom overspent her entire life, please live within your means. Please get your spending under control, even if the kids have to give up some activities in the short term. Once you live within your means, you will be less stressed and so will the kids. Your children will be happier in the long run if you can support yourself now and after they are adults. I wish my mom would have spent less on me (and herself) and saved more for retirement. My dad is still paying for her overspending and expects to pay off the loan 10 years after her death.
I appreciate your detailed guidance.
As far as taxes go, I have consulted with a tax accountant and am covered between extra with-holding from my W-2 job and adoption tax credit for this year.
I will definitely have to re-evaluate for next year.
Amen to this. All I have ever wanted is for my mom to get her spending under control so I didn’t have to worry. She shows up with little presents every time she comes to visit -$10 here, $5 there and meanwhile I dread the day my father is no longer well enough to support her and I have to take over.
I think the computer loan at 20%+ interest is the one that seems like it should have been avoidable. Nothing to do about it now, but one shouldn’t be paying much more than $400 or so each for brand new laptops these days. Even better, pick up someone’s top of the line laptop from 4-5 years ago for a couple hundred on craigslist and you will have 80% of the speed and 99% of the features of today’s laptops.
The big exception would be Apple products, which I personally feel are worth the extra cost, but which I certainly would never purchase if I was in debt!
That’s my thought too, it’s the one I am honing in on to target right now.
I think you’d be better off putting the extra extra $92 you have in mind for the car payment towards the computer equipment or Amazon account. I definitely support your plan to pay off the car early, but I think you’ll actually be in a better place to accomplish this by paying less interest on your higher-rate debts. Good luck!
This seems to be a consensus. And definitely something to consider. Thank you for your feedback!
As others have said, I would pay off the Amazon first. Small amount so a psychological boost. Then the computer equipment. While doing that, I would pay the minimum on the car and lower the camp payment – does it really need to be paid off in April?
A psychological boost is just what I need right now.
I took a look back at your posting from 9/30, and though some of the debt payment amounts are different, it looks like you could reasonably expect $500 extra per month to pay toward debt beyond the minimums. Since you have a little emergency fund, I’d stop paying toward that for now and take the $500 and knock out Amazon and then the apartment collections, because they’re easy wins. Then I’d put the extra $500 toward the computers for the next 4 months. That should coincide with paying off camp, giving you $1000 per month. In that time, figure out the situation with your ex husbands debt so you know what to plan for. I’d probably knock out the medical debt next. I know it’s not fair but at a certain point, your time and mental energy are not worth it. Is move forward from there (May of 18) focusing on CC and building up a bit more of a savings cushion.
Hope, did you get a full accounting of how your deposit was used? They need to send you a line item account, and provide proof that they actually spent the amounts they allege. If they did not send this to you, you are owed your entire deposit back.
Apartment complexes routinely inflate these numbers, such as by charging you for a new carpet, rather than the depreciated value of the carpet. Or for painting, which is not chargeable to you since it’s routine wear and tear, which they can’t bill you for.
It is worth sending them a demand letter, saying that since they did not send you a list of itemized deductions, you want your security deposit returned in full. You don’t need proof, *they* need proof for keeping your money and charging you more.
Also, do NOT pay your ex husbands debt. If you pay it, you are voluntarily assuming that debt, and you will then owe it. Seriously, don’t just give them 7000 bucks. Make them prove you owe it first.
I hope you don’t take this the wrong way,but do you have a trusted friend that has a good grasp of financial and legal matters? You need someone to run these decisions by, before you get yourself in trouble. This blog is a good resource, but can’t be helpful if you don’t get advice *before* entering these agreements. Perhaps a friend would work better for you.
I think this is generally good advice. As for now owing the husband’s debt it might not be that simple. As a consumer rights/bankruptcy attorney I see this often in situations of divorce. One spouse (let’s say husband here) gets awarded the house in the divorce. The loan is in both parties names. H starts paying on the home loan and then defaults. It was never refinanced (for whatever reason-bad credit, the bank refused to remove the W’s name, etc.). W name is still on the loan. When H defaults W is still liable for the debt as a full cosigner even though she may no longer even be on title to the home. Happens all the time!
I did not get anything from the apartments; however, I have sent a dispute letter. We will see how it goes.
Unfortunately, I do not have any friends who are legal/finance gurus. And to be honest, I think it would be awkward sharing so much private information with an intimate. Perhaps that’s the single mama in me.
I appreciate your input, truly!
In your letter to the management company, you don’t need to dispute the debt. You need to tell them that since they have failed to provide an accounting within the statutory limits, you are demanding the return of your security deposit in full. There are lots of example letters on the internet, and you can also look up the statutes to reference.
I get that its hard to talk to people in real life about finances. You want to look strong and self-reliant, not needy to your friends. But sometimes I think that sort of false pride, where we put up a front gets in our way. Others do love to help when we need help. Good luck! So glad you are doing so much better.
Hope, didn’t the apartment complex also keep your entire deposit because you moved out without paying your last month’s rent? I remember that being a controversial decision here on the blog.
I hate that after 8-10 years you are still so financially entwined with your ex. He’s still abusing you, just financially. it’s got to feel like he’s a bomb of financial destruction periodically going off and laying waste to your life.
Hi Kerry,
I actually paid the full month’s rent before the end of the month was up when we moved out. But yes, that was not one of my brightest moments.
I do not know why they kept my deposit, but assumed they would as that was par for the course during my single years. My concern was they kept it and then added so much more on it as owed.
Yes, agreed. Definitely doing my best to untangle myself.
That’s how I remember it too, Kerry. The money owed is most likely bank fees from the stopped check, late fees, owed rent, etc
https://www.bloggingawaydebt.com/2016/04/why-i-decided-not-to-pay-my-rent/
There’s some great advice here and I agree with getting some solid professional advice before you take on a payment plan with the IRS. Regarding the twin’s medical collection, call your state representative’s office and see if they can help. Since it’s a fairly small amount of money, they may take it on for the good press.
I understand why you wanted your kids to have laptops, but I agree that it could have been done with used ones for far less money. Maybe in the future, you ask the BAD community before you take on new debt?
At least you’re really providing solid numbers and getting a handle on things. Keep up the good work!
Thanks, Constance! I am definitely a work in progress!
Check your states landlord-tenant law, but in many states they have to send you proof of damages with a certain period of time (30 days, typically). If they don’t send this, you don’t have to pay, and can take them to court. However, if you didn’t provide them with a forwarding address, they can send it to your last known address and that’s usually good enough for the court.
However, I don’t see why you’re playing the victim about being charged. You posted an entry entitled “Why I Decided not to Pay My Rent”, which laid out why you wouldn’t be paying rent. You stated your intention to pay this rent (and fees) at a later date. You even stated in your responses to the comments that you were hoping they’d apply your security towards your remaining rent. This means your deposit went to rent, which isn’t the purpose of a security deposit.
You put a stop payment on a rent check, and effectively skipped out on rent. You ticked off your landlord, and thus they aren’t going to be nice or give you the benefit of the doubt when it comes to drawing up that repair list. And you stated that you don’t have the notification for WHY you’re being charged this money—for all you know it’s all the fees that are the result of you not paying on time.