$23k credit card emergency

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ursula
Posts: 7
Joined: Thu Nov 09, 2017 7:34 pm

$23k credit card emergency

Post by ursula » Thu Nov 09, 2017 9:53 pm

Hello Bogleheads community!

I am a 29 y/o living in Los Angeles and have a huge $23k credit card emergency. Basically, I was living on a non-existent champagne budget and obviously, lived well above my means and made major financial mistakes. I want to live the life I envisioned for myself growing up and pursue a few goals (MBA, travel, spoil my immigrant mother, save for home, etc) while I am still single with no SO or kids. Sidebar: I feel like nobody would want to seriously date a loser with so much CC debt anyways :(

However, none of this can happen due to the overwhelming amount of credit card debt and high interest rates.

Background
  • Location: LA (live and work)
  • Age: turning 29 in a few weeks
  • Gross salary: ~$60k; about $1,450 net every 2 weeks
  • Part-time job: about $150-300 net every month depending on how many hours I pick up (varies based on full-time job schedule)
  • Employee-sponsored 401k = $23k (fully vested; I contribute up to company match)
  • Roth IRA = $8k (stopped contributing since 2015 since this was a retirement account from a previous employer); 1-year rate of return = 17%

Debt

    CC #1 (department store): APR = 25%; Balance = $2,900
        CC #2 (Chase Freedom): APR = 20%; Balance = $7,000
            CC #3 (Bofa no rewards): APR = 15%; Balance = $10,000
                CC #4 (AMEX EveryDay): APR = 14%; Balance = $2,000
                    CC #5: (Citi Diamond Preferred MasterCard): APR = 0% until June 2018; Balance = $950
                      Total CC debt = $23,500k

                      Total Student Loans: $10k (interest rates varying from 3-6%)

                      Monthly Budget (Budget / % of net income)
                      *Note: I split utilities with my two roommates. The numbers listed below are my individual share.
                      • Rent - $1,050 / 36% (considered a great deal for West LA)
                      • Sprint - $100 / 3% (Includes installment payment for iphone 7. I upgraded this year from an iphone 4 with a broken home button, so noooo I am not upgrading to new devices unnecessarily)
                      • Car Insurance - $100 / 3% ($500 payment every 6 months due in January and July)
                      • Internet (cord-cutter) - $25 / 1%
                      • Utilities (gas and electricity) - $20 / 1%
                      • Braces - $112 (I have $600 left to pay off) / 4%
                      • “Savings” - $200 / 17% (I end up dipping into it to avoid using the credit cards...so sadly, I do not have a savings.)
                      • Student Loans - $260 / 9%
                      • Gas - $150 / 5%
                      • Groceries - 200 / 7%
                      • Netflix - $5
                      • Spotify - $15
                      • ClassPass - $50
                      Monthly Income - Budget = $2,950 - $2,287 =~ $700

                      Spending Habits

                      It used to be out of control about 5 years ago, but I have since learned how to spend less. I don't go shopping or travel. After essentials, most of my spending is on dining and booze since I like to go out with friends. In October I spent $200 on alcohol (drinks are about $15 at bars) because I went out more but In the past year, I've spent $20-50 a month on happy hour and bar hopping. I started cooking most of my meals to save money on eating out and realized it's also a passion of mine. I shop between Costco, Trader Joes and Ralphs depending on what I need.

                      I always pay all my bills on time and pay at least the monthly payment. I allocate about $500 a month from my main paycheck to credit card payments. I picked up an easy part-time job to help with the credit card payments and anything I make from the part-time job gets fully allocated to the credit card. I've had this job for about 5 months but in the last three months I had to use the funds to pay for some car maintenance.

                      I picked up the part-time job to help, but have also been actively searching for a new full-time job that pays more. I've been in contention for higher-paying jobs but have been told that they picked the other candidate because of their finance skills (I'm not going for finance jobs btw), hence why I feel like I am in a never ending cycle. Can't get a better job until I get my MBA, but can't get my MBA until I pay off my credit card debt and perhaps get a better job that will help me get into a better school. I can't live with family either since they are not from here and they are not in a position to help me financially.

                      TLDR: $23k credit card debt; Cut spending and picked up part-time job to help pay it down, but still too overwhelmed and feel like I cannot accomplish my personal goals due to the debt.

                      As a last resort, should I use my retirement funds to pay off some debt? I was thinking of paying off the Bofa and AMEX card with retirement funds and then transferring the rest of the debt over when Bofa / AMEX offer 0% on balance transfers (I'm pretty sure Bofa will offer it). I am confident in my budgeting habits now (I've been using an app that I really like) and monitor my spending a lot. The problem is that the debt is so high I seem to be going nowhere with what I'm doing now. Thoughts? Thank you for your time.

                      User avatar
                      CaliJim
                      Posts: 2725
                      Joined: Sun Feb 28, 2010 8:47 pm
                      Location: San Fran Bay Area

                      Re: $23k credit card emergency

                      Post by CaliJim » Fri Nov 10, 2017 12:06 am

                      Welcome to the forum.

                      Good job on taking responsibility for where you are at, and going out, getting a second job, and starting to get things under control.

                      If you can borrow from your 401k, then do so. Many 401k's will allow you to borrow, and pay back with interest TO YOURSELF!

                      If you can't borrow from your 401k, then it becomes a bit of a math problem, as, I *think*, you may need to pay a 10% penalty for a premature withdraw from the 401k (as apposed to borrowing from the 401k.) 10% Penalty = $2.3 vs. how much interest you pay over the next 2 years as you pay off your CC debt.

                      In either case (borrow or premature withdrawal) - I would not completely drain the 401K - as it is good to have a little there as part of your dire emergency fund.

                      Also - keep contributing to the 401k to get the company match.

                      I can sense the fatigue, but you are on the right track with what you are doing. It's just going to take a while. Some things that might help:

                      1) Establish specific and measurable goals: Make a monthly plan for your debt reduction and track your progress
                      2) Get support: Talk about it with a close friend. Share your goals and progress. Share/Celebrate your success when you meet your goals. (This may take some peer pressure off your shoulders as well.) You may find your friends are in similar circumstances. Instant support group!
                      3) Think of frugality as badge of honor. It is the best of Anti-Consumerism, and pro Environmentalism.
                      4) See also:
                      https://www.reddit.com/r/Frugal/wiki/index,
                      https://www.reddit.com/r/personalfinanc ... t_of_debt/

                      Don't drink to much, and don't drink in bars. A 30 pack of beer costs $25. That would last me SEVERAL months.
                      -calijim- | | For more info, click this

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                      White Coat Investor
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                      Re: $23k credit card emergency

                      Post by White Coat Investor » Fri Nov 10, 2017 12:16 am

                      Boost income, cut expenses, throw everything you can peel off at the debt, refinance what you can at lower rate, listen to Dave Ramsey podcasts in your spare time. You have a lot of work ahead of you. Your spending is > 6 months ahead of your earning and you need to catch up.

                      Stop going to Trader Joe's (food is too expensive). Stop going to Costco (portions are too big for a single person). Stop going out to eat and stop drinking. You can probably clean it up in a year, maybe less if you can figure out a way to boost income. The more extreme you get, the sooner this mess is out of your life. Try to build some momentum.
                      1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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                      BL
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                      Re: $23k credit card emergency

                      Post by BL » Fri Nov 10, 2017 12:27 am

                      You sound like a good candidate for getting advice from Dave Ramsey book or radio program.
                      Work on getting one low amount CC paid off, then the next smaller, DR's "snowball effect".

                      Drinking costs money, and even worse, lowers your resistance to controlling your spending. Perhaps getting some other activity buddies would not be a bad idea.

                      Being aware of the problem is the first step to solving it. You need to work on getting rid of those high-interest CC debts. Just paying the minimum won't get you very far, but put the extra on one at a time to get rid of one, then put the extra missing payment onto the next one, etc.

                      Cut every cost possible, even for a few months. You desperately need to go on a budget diet to get back to zero net worth, so you can go on from there.

                      Many of us have gone through periods of very low income, but managed to spend little and live on beans and ramen noodles, rather than thinking we deserved something and borrowed by CC to get it immediately. You probably need to drop your CC into a bag of water and put it away in your freezer. Anything you charge now gets the same high interest rate as the debt you owe. Absolutely don't use a card you carry a balance on!

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                      FiveK
                      Posts: 3148
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                      Re: $23k credit card emergency

                      Post by FiveK » Fri Nov 10, 2017 12:30 am

                      You might download this Debt Reduction Calculator to give you an idea of how different repayment strategies would work.

                      E.g., are you paying more than the minimum on your student loans? Even with a 6% rate, paying $260/mo would pay a $10K loan in ~3.5 years. If you can redirect some of the $260 toward the higher interest loans you will pay less in the long run.

                      Previous posters have made good suggestions. Another source of advice is How To: Write a "Case Study" - but the general theme from WCI of "boost income, cut expenses, throw everything you can peel off at the debt, refinance what you can at lower rate" will remain regardless of the forum.

                      EHEngineer
                      Posts: 613
                      Joined: Sat Feb 28, 2015 4:35 pm

                      Re: $23k credit card emergency

                      Post by EHEngineer » Fri Nov 10, 2017 12:30 am

                      You seem like a good candidate for credit counseling. If they can help reduce those rates and put you on a payment plan, you might be able to get out of debt much sooner.

                      https://www.nfcc.org/
                      Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

                      JBTX
                      Posts: 1522
                      Joined: Wed Jul 26, 2017 12:46 pm

                      Re: $23k credit card emergency

                      Post by JBTX » Fri Nov 10, 2017 12:42 am

                      While you were definitely going the wrong direction, the situation is manageable, assuming you have "changed your ways" as you have described.

                      You have gross income of $60,000, and take home of $37,700 - so that leaves $22,300 going to federal taxes, state income taxes, FICA, employee benefits contribution and 401k contribution. It would be interesting to see a breakdown of those numbers. You may have a bit of a refund coming back to you, which should go entirely to cc debt reduction. If you know you have a sizeable refund coming, you could have your employer lower your withholding....but I'd want to be highly confident of that before changing your withholding.

                      As to your 401k - how much is going there? How much is the match? It may make sense to lower your contribution until you get your cc debt paid off, but that really depends on how much match you are going to give up. If you have a significant match, I'd probably keep funding that if at all possible. A 401k loan could be a possibility as mentioned earlier.

                      It doesn't seem like you factored your part time income in your numbers - so all of that income could go to wiping out the cc debt.

                      Payoff the 25% and 20% first and ASAP. As you mentioned, see if there are some opportunities to transfer to lower rate debt until you can get it all paid off.

                      I wouldn't worry with the student loan debt for now, other than to make your regularly scheduled payments.

                      You mentioned your bar hopping, including $200 in October, but I don't see that listed in your budget. Does that mean you are going to completely stop that? I guess my concern is that your budget may not be realistic given your spending habits.

                      Agree with recommendation to listen to Dave Ramsey. He is very good at driving home and anti debt mentality.

                      This seems like a one to two year journey for you. It is doable. Good luck.

                      mega317
                      Posts: 1110
                      Joined: Tue Apr 19, 2016 10:55 am

                      Re: $23k credit card emergency

                      Post by mega317 » Fri Nov 10, 2017 1:09 am

                      A bunch of thoughts:
                      JBTX wrote:
                      Fri Nov 10, 2017 12:42 am
                      You mentioned your bar hopping, including $200 in October, but I don't see that listed in your budget. Does that mean you are going to completely stop that? I guess my concern is that your budget may not be realistic given your spending habits.
                      This was the first thing that jumped out at me, too.

                      Where in the budget is clothes, personal items, etc?

                      How many hours do you work at your regular job? I would pick up a whole lot more hours at the second job.

                      If you were out of control 5 years ago and then reigned it in, what was the debt at that time?

                      Stop drinking completely. If you can't do that and still have fun with your friends, you have a bigger problem. I also used to have a cheap healthy meal before going out, then just get an appetizer or something at the restaurant.

                      0% balance transfer is not a bad idea. Make sure the rate after the 0% period isn't outrageous compared with your current rates.

                      You mention dating: not a bad idea to do right now. You'll have to date people with inexpensive tastes and that's not a terrible pool from which to find a partner.

                      Smaller potatoes: Get rid of class pass. You can exercise outside 24/7/365 in LA. Replacing a broken phone is fine but you didn't need an iPhone 7. The 6 is still supported, runs equally well, and is significantly cheaper to buy used. Just an example of a spending habit you don't need right now.

                      You can do this.

                      psteinx
                      Posts: 2646
                      Joined: Tue Mar 13, 2007 2:24 pm

                      Re: $23k credit card emergency

                      Post by psteinx » Fri Nov 10, 2017 1:46 am

                      You show car insurance and gas, but nothing for maintenance or for a car payment. It's nice to have a paid off car - perhaps some old college car or whatever. But old cars need maintenance, and eventually, replacement.

                      As was already pointed out, the budget is also missing entertainment (your drinking outings or whatever) and clothing. I'm guessing it's missing some other stuff, too.

                      Spend a bit more time analyzing what you HAVE been spending on. Dig up the last ~6 months of CC bills - see what the new charges were, and estimate for stuff you paid cash for. Then, work forward from that.

                      FWIW, while I don't know much about West LA apartment pricing, $1050 for an apparent 3 way split of an apartment seems pretty pricey. Perhaps you could either find a cheaper apartment in that area, or move to a cheaper area. The rent is a large chunk of your expenses...

                      User avatar
                      celia
                      Posts: 7099
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                      Location: SoCal

                      Re: $23k credit card emergency

                      Post by celia » Fri Nov 10, 2017 2:30 am

                      Congratulations on having taken the first step of identifying a problem and taking ownership of it. Many people are in a similar circumstance but have not done anything to help solve their debt problem. If you know someone else who is working on getting out of debt (a roommate, maybe?), you might consider being supportive of each other. Find "free" forms of entertainment instead of paid nights out and make this a serious game to pay the debt off as soon as possible so you can then start working on your other goals.

                      I would hesitate in withdrawing or borrowing from your 401K. If you withdraw, the amount will be taxable for that year, possibly pushing you into a higher tax bracket. There will also be a 10% early withdrawal penalty since you are under 59.5. If you take a loan, then leave the company you are currently with, the loan will be immediately due and payable.

                      I would look into getting a loan at a credit union at a much lower rate than what the credit cards are now. Of course, the credit loan rate would likely depend on your credit scores. So keep paying your monthly bills as you have scheduled. If the credit union rate is lower than your education loan rate, you might want to role that debt into the same loan. But education loans are usually already at a pretty good interest rate.

                      For example, a credit union in your area that you might be able to join is the Los Angeles Federal Credit Union. (You should also look for credit unions affiliated with your employer, college, or any groups you belong to.) I don't have any affiliation with or know anything about the Los Angeles Federal Credit Union, but see that they have a debt consolidation program that might also help you. Just refinancing the credit card debt into a loan with a lower interest rate will save you some money. Those current credit card rates are unbelievable and preventing you from making any progress from paying down the debt. But once you set up a loan, do not use your credit cards any more except for things in your budget that you know you will be able to pay off at the end of the month. I would also cut up the cards except for the one with the lowest rate, to make it harder to get into this much debt again.

                      This is not an impossible problem, but you have to make some progress in the debt area each month. Contrary to what a few people have said, I don't see how anyone with a $60K salary will be able to pay off $23K of debt in one year. I think it will take at least 3 years, maybe more. But the important part is that you have already identified the problem and are looking for alternatives to help dig you out of that hole. As long as you stick to your budget and build up an Emergency Fund on the side (from any unspent money in each category?), you will start to see progress.

                      PS. If you have bought anything recently that you have not yet used, return it immediately. That will automatically give you credit on the credit card that was used or cash that you can apply to a cash-paid expense. I have heard of people who buy things, talk about how they wish they hadn't purchased the items, but then don't do anything about it. It is so easy to return an item and just say I changed my mind about it. There is no excuse not to get in the habit of doing this. (In fact, a home improvement store we use frequently suggests buying both sizes if you are not sure which is correct, then return the unused one at a later time, even if the package has been opened. This is more efficient that buying an item, taking it home only to see that it is the wrong size, return to the store to buy the other one, then continue the project.)

                      Edit: To add tax consequences of 401K withdrawal
                      Last edited by celia on Fri Nov 10, 2017 12:07 pm, edited 2 times in total.

                      MrJones
                      Posts: 49
                      Joined: Sat Mar 18, 2017 2:23 am

                      Re: $23k credit card emergency

                      Post by MrJones » Fri Nov 10, 2017 2:40 am

                      Nice job on thinking about this.

                      A drinking tip. Buy an alcohol flask. Buy some good liquor, which would cost about $15 for 18 shots worth. Drink from it (of course, safely, and in moderation) before entering bars or clubs or wherever. Of course I'm not suggesting becoming an alcoholic or being otherwise unsafe, but simply a way to avoid spending a fortune on drinks.

                      ursula
                      Posts: 7
                      Joined: Thu Nov 09, 2017 7:34 pm

                      Re: $23k credit card emergency

                      Post by ursula » Fri Nov 10, 2017 2:57 am

                      MrJones wrote:
                      Fri Nov 10, 2017 2:40 am
                      Nice job on thinking about this.

                      A drinking tip. Buy an alcohol flask. Buy some good liquor, which would cost about $15 for 18 shots worth. Drink from it (of course, safely, and in moderation) before entering bars or clubs or wherever. Of course I'm not suggesting becoming an alcoholic or being otherwise unsafe, but simply a way to avoid spending a fortune on drinks.
                      Yes! I've started doing this in the past year when going out which is how I've been able to cut back on alcohol spending. I just have a drink or two at home with friends (we all do this together to save money) and then we go out to continue the festivities. I'm certainly not an alcoholic, but drink prices add up! I try to limit my happy hour / bar hopping related events to 1x a month (but in October it skyrocketed). I'm also trying to get into shape too so limiting (or even eliminating) my alcohol intake will also help with the waistline.

                      ursula
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                      Joined: Thu Nov 09, 2017 7:34 pm

                      Re: $23k credit card emergency

                      Post by ursula » Fri Nov 10, 2017 3:07 am

                      White Coat Investor wrote:
                      Fri Nov 10, 2017 12:16 am
                      Boost income, cut expenses, throw everything you can peel off at the debt, refinance what you can at lower rate, listen to Dave Ramsey podcasts in your spare time. You have a lot of work ahead of you. Your spending is > 6 months ahead of your earning and you need to catch up.

                      Stop going to Trader Joe's (food is too expensive). Stop going to Costco (portions are too big for a single person). Stop going out to eat and stop drinking. You can probably clean it up in a year, maybe less if you can figure out a way to boost income. The more extreme you get, the sooner this mess is out of your life. Try to build some momentum.

                      Thanks for your input! I've heard of Dave Ramsey's method but never listened to his show. I just downloaded his app to listen to his podcasts. As for groceries, I go to Costco for certain items like protein (divide into portions and toss into freezer) and a bag or two of veggies usually does the trick. I don't really eat frozen / processed food and on the rare occasion that I get the cravings for it, I'll buy it from Ralphs or TJs. I don't buy organic either because its more expensive.

                      Miriam2
                      Posts: 1748
                      Joined: Fri Nov 14, 2014 11:51 am

                      Re: $23k credit card emergency

                      Post by Miriam2 » Fri Nov 10, 2017 3:21 am

                      ursula wrote: I try to limit my happy hour / bar hopping related events to 1x a month (but in October it skyrocketed).
                      Ooohh - take the reins now, ursula, and keep a tight hold - looks what's coming down the road: Thanksgiving!! and the December holidays!! Office parties !! Extra time for snuggling up in a warm bar!! :shock: :annoyed

                      ursula
                      Posts: 7
                      Joined: Thu Nov 09, 2017 7:34 pm

                      Re: $23k credit card emergency

                      Post by ursula » Fri Nov 10, 2017 3:32 am

                      CaliJim wrote:
                      Fri Nov 10, 2017 12:06 am
                      If you can borrow from your 401k, then do so. Many 401k's will allow you to borrow, and pay back with interest TO YOURSELF!
                      Thank you for reading my post and giving advice! I am qualified to borrow up to $10k from my 401k at 5.25% interest. I've been thinking about doing this to pay off one credit card and then transferring the next highest interest rate debt to the one that I just cleared up as I'm sure they will offer 0% balance transfer. The only issue with this is that I need to confirm what the repayment policies are once I separate from my current employer. Since I'm also on the hunt for a new job, it doesn't make sense for me to borrow from my 401k if they require I repay the entire loan upon leaving the company. If I touch my Roth IRA, I have to do a full withdrawal so I don't want to do it.

                      ursula
                      Posts: 7
                      Joined: Thu Nov 09, 2017 7:34 pm

                      Re: $23k credit card emergency

                      Post by ursula » Fri Nov 10, 2017 3:41 am

                      psteinx wrote:
                      Fri Nov 10, 2017 1:46 am
                      You show car insurance and gas, but nothing for maintenance or for a car payment. It's nice to have a paid off car - perhaps some old college car or whatever. But old cars need maintenance, and eventually, replacement.

                      FWIW, while I don't know much about West LA apartment pricing, $1050 for an apparent 3 way split of an apartment seems pretty pricey. Perhaps you could either find a cheaper apartment in that area, or move to a cheaper area. The rent is a large chunk of your expenses...
                      I drive an old car and it does have trouble which is why I moved closer to work. The 3 hour daily commute was not worth the wear and tear on my car. My rent is cheap for this area. I could move further away to more affordable places, but I don't think its worth it because of traffic, wear and tear on the already old car and safety. The more affordable areas are not as safe and I wouldn't feel comfortable living there. Also, my part-time job is really close to my apt / work which is how I'm able to do my full-time thing and dash to my part-time job if I picked up a shift that night.

                      Miriam2
                      Posts: 1748
                      Joined: Fri Nov 14, 2014 11:51 am

                      Re: $23k credit card emergency

                      Post by Miriam2 » Fri Nov 10, 2017 3:45 am

                      ursula wrote: I want to live the life I envisioned for myself growing up and pursue a few goals (MBA, travel, spoil my immigrant mother, save for home, etc) while I am still single with no SO or kids. Sidebar: I feel like nobody would want to seriously date a loser with so much CC debt anyways :(
                      I am confident you are not a loser - I believe you can hold your head up proud. You are not a loser.

                      Yes you have credit card debt, you have trouble controlling your spending. You like to shop and go out and have a good time and charge the whole fun time on plastic - like so many people :D

                      But you clearly have a good grasp of your situation, you understand basic personal finance, you've done a super job investing your income (I say "super job" because so many young people save n-o-t-h-i-n-g :( ), you have your debts outlined for attack, you understand budgeting and you're implementing your strategies, you understand you need help and are actively seeking help, and hey!! you found the Bogleheads!!

                      You are not a loser. Let that image of yourself go. Put your plan of attack in action.
                      ursula wrote: The problem is that the debt is so high I seem to be going nowhere with what I'm doing now.
                      You're going nowhere because you're just now getting serious. Line up your horses and men and attack that debt and that good-time fun on plastic life. Review your progress perhaps monthly or so - and you'll be surprised how slowly but surely you'll see movement in that mountain of debt.

                      Here's what another Boglehead did for motivation:
                      atlantaguy123 wrote:Let me share a little encouragement with you. In 2007 I graduated law school with just over $200k in debt. At my first job I made $37k. I wondered whether bankruptcy was an option worth considering. My wife and I made a paper chain with each link of the chain representing $1k in debt. Slowly but surely we chipped away at the debt as we could. Today for the first time in many years I am debt free! I threw the last link of that debt chain in the trash this morning. For anyone out there who may be depressed about their debt load, you may think it is impossible, rest assured it is not impossible. Pay whatever you can each month. Use raises and any unanticipated money that comes your way. Pay the high interest stuff first. It can be done, DON'T GIVE UP. There is light at the end of the tunnel!
                      Debt free!

                      Daryl
                      Posts: 352
                      Joined: Thu May 22, 2008 9:34 am
                      Location: Malvern, PA (I like to sleep near my money!)

                      Re: $23k credit card emergency

                      Post by Daryl » Fri Nov 10, 2017 5:53 am

                      ursula wrote:
                      Thu Nov 09, 2017 9:53 pm
                      my immigrant mother
                      Any possibility your mom could help out? A lot of children can "refinance" credit card debt with the bank of mom and dad @ 0% fixed for life! Another option, you could offer to pay her half the rate of the credit cards. She is unlikely to earn a higher return elsewhere and she will have the opportunity to continue investing in her family!

                      mouses
                      Posts: 2324
                      Joined: Sat Oct 24, 2015 12:24 am

                      Re: $23k credit card emergency

                      Post by mouses » Fri Nov 10, 2017 6:26 am

                      Daryl wrote:
                      Fri Nov 10, 2017 5:53 am
                      ursula wrote:
                      Thu Nov 09, 2017 9:53 pm
                      my immigrant mother
                      Any possibility your mom could help out? A lot of children can "refinance" credit card debt with the bank of mom and dad @ 0% fixed for life! Another option, you could offer to pay her half the rate of the credit cards. She is unlikely to earn a higher return elsewhere and she will have the opportunity to continue investing in her family!
                      No, don't ask your Mom for money, There are so many reasons why this is wrong, even if your Mom could afford it. For example, you don't have your spending under control yet, so you could sink your Mom too if that doesn't happen or if you become unemployed.

                      It's not clear to me why (expensive) alcohol plays such a big part in your social life. I've always heard that there is peer pressure to drink, but I don't drink because alcoholism in my family is a big warning flag, and no one has ever acted like I was strange or pressured me to drink even when everyone else was. There's also a whole world out there of interesting stuff to do that doesn't involve alcohol and bars.

                      Diogenes
                      Posts: 510
                      Joined: Sat Mar 03, 2012 3:58 pm

                      Re: $23k credit card emergency

                      Post by Diogenes » Fri Nov 10, 2017 7:04 am

                      Ursula, welcome to Bogleheads!

                      First, congrats on finding this place and sitting down to write such a complete post. You’re not a “loser” just because you have debt, because you have taken a good step to straighten things out. Don’t think that no one would want to date you just because of this money issue. It’s not true.

                      Second, cut up the first three credit cards. Now. They are your enemy with high balances and crazy interest rates.

                      Third, you need more income. Can you get a second job in the evenings/weekends that pays more? Anything really to generate $2000 a month. Dedicate the entire amount to your credit card debt. Another job will also cut down on the social spending. Pay off those higher cards first of course. With that kind of CC debt it would seem likely there was much more than dining out. Do you shop? Some people shop for therapeutic reasons. Bad idea. Buying “stuff” when you shouldn’t is bad for us all. If you have, substitute working out instead.

                      Good luck, you will get there.
                      Keep us posted!

                      Jack FFR1846
                      Posts: 5766
                      Joined: Tue Dec 31, 2013 7:05 am

                      Re: $23k credit card emergency

                      Post by Jack FFR1846 » Fri Nov 10, 2017 7:27 am

                      I have a few non-traditional suggestions.

                      Get a 2nd part time job. This gives you an "excuse" for not going out with friends and blowing your money on drinks. You win doubly because you don't blow money on expensive drinks and you make some more money.

                      Increase your with holding to 0 exemptions, with held at single rate. This gives you a bigger refund. When the refund comes, apply 100% of it to a credit card bill. Not seeing the money in your paycheck is one of the best ways to not spend it.

                      I would not recommend taking a 401k loan. Why? I don't think you have the discipline yet to apply it to credit cards and not rack up more cc bills. It's too easy. This needs to be felt. I'd even say to increase your 401k contributions.

                      Sell some stuff. Everyone has something that can be craigslisted. Find something and sell it.
                      Bogle: Smart Beta is stupid

                      User avatar
                      djpeteski
                      Posts: 275
                      Joined: Fri Mar 31, 2017 9:07 am

                      Re: $23k credit card emergency

                      Post by djpeteski » Fri Nov 10, 2017 8:01 am

                      ursula wrote:
                      Thu Nov 09, 2017 9:53 pm
                      goals (MBA, travel, spoil my immigrant mother, save for home, etc) while I am still single with no SO or kids. Sidebar: I feel like nobody would want to seriously date a loser with so much CC debt anyways :(
                      People date losers with CC debt all the time, they may be losers with CC debt themselves.
                      However, none of this can happen due to the overwhelming amount of credit card debt and high interest rates.
                      The key is your desire to change that is what differentiates a loser from a winner. We all have made mistakes in your life, you only lose when you get knocked down and stay down. Get up, dust yourself off and kill this debt. It sounds like you are angry at it and yourself for getting into this mess which is an important first step. That passion will help carry the day.

                      As others have said, get on the Dave Ramsey plan. It was tailored for people like you.

                      If I was in your shoes this is what I would do, and I mean it because I was and did exactly as I outline.

                      1) Increase your income by cutting your budget. Get rid of ClassPass and Spotify. I would look to reduce my phone bill. You can buy a Galaxy S4 on ebay for $30, so yes you did upgrade unnecessarily. There are many cheaper alternatives. Stop contributing to retirement. You can exercise by working 80 hours or more per week.

                      2) Increase your income by earning more. Your goal for your part time job should be about 1000 per month.

                      3) Stop borrowing. No more credit cards, use cash instead.

                      4) Budget is a plan to spend money, make a fresh budget each and every month. It helps if you can find someone good with money as an accountability partner. They can help keep you on track.

                      5) First Goal: Save 1,000 as a starter emergency fund. Most emergencies can be solved with less than 1K. A sale on something you want is not an emergency, nor is Christmas or regular car repairs. A tire blowout is an emergency.

                      6) Pay off your bills smallest to largest. That would be CC #5, the zero percent interest one. Why? Because of momentum. As you stated, you have about 700/month in free cash flow. In month one you target CC #5 which you can pay off with $950. If you are truly motivated to get out of debt you will do just about anything to make up that $250 to kill this CC. Work extra at the part time job, go through the neighbors trash to find things to sell, eat on $50 for the month whatever. If you target CC#1 that motivation just does not exist as strongly.

                      Make it your goal to kill CC #5 the first month after you save your starter emergency fund. Then to kill CC#4 in month three.

                      Beyond that I would make it my goal to be out of debt in 15 months. That includes the student loan which should also be paid off smallest to largest.

                      Fifteen months to be done with everything. No more student loans, no more CC debt, no more ortho payments. Is it worth it? Hell yea. Interest rate is not your problem it is behavior. Borrowing money from your 401K or a zero percent CC is ill advised and will not make a material difference. Working extra and cutting your budget will turn this around much, much faster.

                      Once you are done with the debt, I would only contribute to your 401K up to the match. With extra income save a full 6 months of expenses in your emergency fund.

                      I say 15 months to get this all cleaned up, but I bet you could do this in as little as 12.
                      Last edited by djpeteski on Fri Nov 10, 2017 8:14 am, edited 2 times in total.

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                      djpeteski
                      Posts: 275
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                      Re: $23k credit card emergency

                      Post by djpeteski » Fri Nov 10, 2017 8:02 am

                      delete

                      Helo80
                      Posts: 436
                      Joined: Sat Apr 29, 2017 8:47 pm

                      Re: $23k credit card emergency

                      Post by Helo80 » Fri Nov 10, 2017 8:18 am

                      ursula wrote:
                      Thu Nov 09, 2017 9:53 pm
                      Sidebar: I feel like nobody would want to seriously date a loser with so much CC debt anyways :(

                      You would be surprised.

                      sophie1
                      Posts: 51
                      Joined: Thu Apr 18, 2013 1:58 pm

                      Re: $23k credit card emergency

                      Post by sophie1 » Fri Nov 10, 2017 9:05 am

                      Ursula, you are not in any way a "loser". Just by writing that post I'd say you are way ahead of the game, in fact. Your friends who are drinking $50 worth regularly are probably even in worse shape with credit card debt, but you're the only one who has owned up to it. Why not talk to them about it?

                      A lot of good suggestions have been made but here are a few practical to-do items that you can start on right now:

                      - If you can do it without paying too much of a penalty, get out of that Sprint deal, take your iPhone 7 and get service through Airvoice, Google FI, or other low-cost cell provider. Use Google Voice via your computer to make phone calls at home over your home internet.

                      - Go ahead and join your friends in local bars, but buy a glass of sparkling water instead of an expensive drink. If your friends are going out to eat, skip the main meal and join them for dessert. Suggest alternatives that are zero or low cost. If you're in West LA, there are wonderful hikes nearby in the Santa Monica mountains for example. Or invite friends over for a potluck dinner and Scrabble or a poker game.

                      -. Cancel the Classpass immediately. You're doing a good job with everything else in your monthly budget, but start tracking ALL your spending including eating out, random impulse purchases, clothing items etc. Simply recording each purchase will help you to be more mindful of those things.

                      - Go through your apartment and find things you can sell on ebay, amazon, or to a second hand clothing store. Dedicate this to paying down debt.

                      - You didn't list the minimum monthly payments on the credit cards, and between that and the bar tabs I suspect you have very little money left over and thus little wiggle room to make the extra payments needed to get out of debt. Because of this, I'm in favor of your taking the 401K loan. Be aware though that don't have a lot in there and will need to prioritize retirement saving as soon as you've cleared out the credit card debt, and also if you change jobs you will have to pay back the 401K debt within a limited time period.

                      - Can you do balance transfers to the 0% Citi card for free? What's the interest rate on the Citi card after June 2018? For sure balance transfer anything over that rate to that card. As you get close to next June, consider applying for another 0% intro rate card with balance transfers. The longer you can push off interest payments the better!

                      - I would tackle debt as you've listed it, starting from the highest interest rate and include the other debts like the one for braces and student loans. Thus, the 25% $2,500 debt is the first to go. While you're working your way down the list, minimize all other payments. I agree that you could probably be paying less toward the student loan, and you may be able to defer or at least reduce payments on the braces (call and ask).

                      Be aware this is going to be a long haul and it may be a couple of years at least before you get clear. Good luck!!!!!

                      JBTX
                      Posts: 1522
                      Joined: Wed Jul 26, 2017 12:46 pm

                      Re: $23k credit card emergency

                      Post by JBTX » Fri Nov 10, 2017 9:10 am

                      Put tournament credit cards away and use either a debit card or cash for expenditures.

                      Also, every time you spend a discretionary dollar, multiply it by 8. That $15 drink, look at it as a $120 drink. Why? Because at 15% cc interest rate your balance doubles every four to five years so in 10 years it quadruples. And if you had saved it it is possible over 30-40 years invested in a tax deferred account your money could multiply by a factor of 4 (give or take). 4+4=8. Do you REALLY want that $120 drink now?

                      tedgeorge
                      Posts: 30
                      Joined: Thu Oct 03, 2013 8:29 pm

                      Re: $23k credit card emergency

                      Post by tedgeorge » Fri Nov 10, 2017 10:20 am

                      I'd agree with djpeteski and that entire post. Get an early win and get things going.

                      The only thing I'd add it to write it all down in a list, calendar, drawing or something. Something visual that you can look at and mark things off when they happen. It's key to know you have a plan and you are executing on it. Put that somewhere you see everyday to keep you focused. That way you'll know you're making progress. Tell yourself, I'm going to pay that credit card off in X months and this is how I'm going to do it!

                      Also, since you're going to be freeing up some time when you cancel some services, you can do some research on careers. An MBA is not the only gateway to a better career.

                      Nate79
                      Posts: 1353
                      Joined: Thu Aug 11, 2016 6:24 pm
                      Location: Portland, OR

                      Re: $23k credit card emergency

                      Post by Nate79 » Fri Nov 10, 2017 12:54 pm

                      I think you have gotten a lot of great advice. You are a perfect fit for Dave Ramsey advice so I will list a few key details here:

                      1. You need to be intense to get out of debt like this. You are broke. You have dug a big hole, luckily you have a decent sized shovel. But to be intense you need dedication and really cut cut cut - everything should be on the table. Sell stuff - as much as possible. Eat beans and rice. No going out to drink. You can not just walk your way out of debt. Sorry, you will fail at the rate you are going. That you think you can still go out drinking, just on a less budget is crazy.
                      2. Do a monthly written budget, cut up the credit cards, pay cash/debit. Use the envelop method. Every monthly expense should be itemized. Cut to the bone.
                      3. Stop investing in 401k. Yes, you will lose out on the match but maybe only for 2 years. You need to be INTENSE! This is 90% behavioral. This is not about math.
                      4. Do not take out any more debt! Getting a loan from 401k is just shuffling around the debt and makes you think you actually did something. Your interest on your cc is only going to cost you about $3k/year or less if you really get intense and pay it off. Interest rate is not your problem. The interest, while painful isn't the reason this isn't getting paid off.

                      Baby steps:
                      1) $1000 emergency fund --> yes this is painful. It's meant to be painful!
                      2) Pay off all debt (cc, student loan) except house, from smallest to largest. All money that doesn't go to your budget get's thrown at the debt
                      3) Once all debt except house is paid off then you build 3-6 months emergency fund.
                      ....... and on thru the steps.

                      Live intense, be out of debt in at max 2 years and don't do it again.

                      User avatar
                      FiveK
                      Posts: 3148
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                      Re: $23k credit card emergency

                      Post by FiveK » Fri Nov 10, 2017 1:06 pm

                      Nate79 wrote:
                      Fri Nov 10, 2017 12:54 pm
                      3. Stop investing in 401k. Yes, you will lose out on the match but maybe only for 2 years. You need to be INTENSE! This is 90% behavioral. This is not about math.
                      One component of behavior is understanding, and then doing, things that make financial sense. Giving up a 100% (or even 50%) match on 401k contributions to pay more on a CC bill that has "only" 25% interest is a money loser. In this case, OP's decision to invest up to the match max in the 401k is something to be applauded.

                      Yossarian
                      Posts: 131
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                      Re: $23k credit card emergency

                      Post by Yossarian » Fri Nov 10, 2017 1:36 pm

                      How's your credit score? Consider getting a Chase Slate or similar for 0% balance transfer.

                      What are you driving? What's your insurance? Consider raising the deductible and dropping unneeded coverage, like collision on a beater.

                      As others have pointed out your spending is still too high. Your cell phone bill is ridiculous. You don't need an iPhone 7.

                      Drop Spotify, Netflix, and go to a cheaper gym.

                      Don't touch your retirement funds.

                      User avatar
                      Alexa9
                      Posts: 403
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                      Re: $23k credit card emergency

                      Post by Alexa9 » Fri Nov 10, 2017 1:47 pm

                      #1. Drink/cook at home with friends. Do not go to bars/restaurants at all!
                      I would put all your credit cards in a safe deposit box or block of ice in the freezer.
                      Use cash/debit for necessities only (food and bills) and ration your spending daily.
                      Do not shop online (remove saved credit cards).
                      Do not buy any Christmas presents this year. Send customized e-cards.
                      I would cancel Spotify (free music online: youtube) temporarily but Netflix is reasonable (movies not as easy/legal to get free).
                      Plan to be debt free within X amount of time.

                      bradpitch92
                      Posts: 2
                      Joined: Fri Nov 10, 2017 1:50 pm

                      Re: $23k credit card emergency

                      Post by bradpitch92 » Fri Nov 10, 2017 1:58 pm

                      Withdraw all your Roth contributions. Why hasn't this been mentioned here yet?

                      Also look into a credit card where you can balance transfer with no fees and a zero APR for 12-18 months. Although this could be difficult to qualify for.

                      stan1
                      Posts: 4979
                      Joined: Mon Oct 08, 2007 4:35 pm

                      Re: $23k credit card emergency

                      Post by stan1 » Fri Nov 10, 2017 2:08 pm

                      Seems like you have too much left out of your budget on "little things" that add up:
                      - gifts (unlikely to be zero)
                      - dining out, coffee, entertainment, clothing (unlikely to be zero)

                      Also I don't see the minimum monthly payments on the credit cards as part of your budget although you say you are putting $500/month towards them.

                      I'd probably stop the 401K contributions. The thought of giving up free money (matching contributions) hopefully will help keep you focused on paying off the bills quickly.

                      Career: not having finance background for non-finance jobs is an excuse employers are giving you because they don't have anything better to say ... but you do need to have good analytical skills for any business job. You need more income. My suggestions:
                      1) Do you have a mentor at your current employer? Someone who can give you career advice? Find one. Have him/her review your resume. Make sure your resume states results and outcomes not just job duties.
                      2) Talk to your supervisor about adding new skills and duties. Specifically if your current job duties don't include a lot of analysis work with your boss to add that in to your duties and learn the tools your company uses (e.g. Tableau, Excel). Volunteer for hard assignments that others don't want to do. Your boss and their bosses will recognize you for that and it will get you visibility you need for internal promotion opportunities.
                      3) Look for employers that offer tuition assistance.
                      4) Practice interviewing. Write a 500 word script that describes your successes and strengths. Memorize it but don't repeat it verbatim, learn how to tell a story and line it up with what a potential employer is looking for. In short learn how to sell yourself.

                      Have to also say consider moving to a lower cost of living area especially if you want to go to grad school. I live in a HCOL area and have many people in their 20s working for me in professional jobs at about the same salary you make. Most are here because they have family connections. Many get a lot of help from their relatives (such as living at home or they go on vacations with family).

                      User avatar
                      TNL
                      Posts: 304
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                      Re: $23k credit card emergency

                      Post by TNL » Fri Nov 10, 2017 2:32 pm

                      Great advice, Dave Ramsey is great for your situation. If you are looking for another job and plan to leave your company do not touch the 401k.

                      Can you get an unsecured loan from Sofi or BestEgg? The interest rate will be much lower than what you are paying on your current cards and you can consolidate into one payment. Sofi/BestEgg is usually 9-11% percent. I also agree with the 0% balance transfer if you can get it.

                      See you if can call any of the credit cards and find out if you qualify for lower interest. Tell them you are thinking about canceling the card.

                      Your monthly expenses need to be tracked. You are still spending too much money. Cancel the gym membership and and see if you can get out of your phone contract.

                      TravelGeek
                      Posts: 1174
                      Joined: Sat Oct 25, 2014 3:23 pm

                      Re: $23k credit card emergency

                      Post by TravelGeek » Fri Nov 10, 2017 2:37 pm

                      Lots of good answers with helpful replies. I won’t rehash what’s already been said. Just one quick thing:
                      ursula wrote:
                      Thu Nov 09, 2017 9:53 pm
                      • Spotify - $15
                      Did they stop broadcasting free music on FM frequencies in LA? ;)

                      It is “just” $15, but if I were you I would cut things that aren’t truly necessary out of my budget until I can afford them. Same for the gym and probably other items not itemized. If you consider your situation an emergency as the title suggests, treat it like one until it is resolved.

                      mouses
                      Posts: 2324
                      Joined: Sat Oct 24, 2015 12:24 am

                      Re: $23k credit card emergency

                      Post by mouses » Fri Nov 10, 2017 3:20 pm

                      bradpitch92 wrote:
                      Fri Nov 10, 2017 1:58 pm
                      Withdraw all your Roth contributions. Why hasn't this been mentioned here yet?
                      Possibly because it's a bad idea. Losing tax protected money, hmmm, why didn't I suggest that.

                      N10sive
                      Posts: 319
                      Joined: Thu May 05, 2016 6:22 pm

                      Re: $23k credit card emergency

                      Post by N10sive » Fri Nov 10, 2017 3:31 pm

                      mouses wrote:
                      Fri Nov 10, 2017 3:20 pm
                      bradpitch92 wrote:
                      Fri Nov 10, 2017 1:58 pm
                      Withdraw all your Roth contributions. Why hasn't this been mentioned here yet?
                      Possibly because it's a bad idea. Losing tax protected money, hmmm, why didn't I suggest that.
                      You would only be taking out the contributions. I wouldn't take all of it(IDK even if you can without a tax penalty). Id imagine since the OP stopped contributing in 2015 a significant portion is gains(I guess it depends where it was invested). They also have 30-35 years and currently look like they will have most of those years to contribute to a roth.

                      I think its more about getting the debt paid off ASAP and establishing good spending/saving habits. From there you could max out retirement accounts a lot faster than before(and are most likely more willing too if you establish those spending/saving habits). Also 3k cc at 25% interest! The forum always talks about returns. That's a 25% return!

                      neilpilot
                      Posts: 1033
                      Joined: Fri Dec 04, 2015 1:46 pm
                      Location: Memphis area

                      Re: $23k credit card emergency

                      Post by neilpilot » Fri Nov 10, 2017 3:44 pm

                      Your budget includes $150/mo for gas, and that seems like a lot. I realize gas is expensive in LA, currently averaging $3/gal (I just filled up in Memphis at $2.16/gal). But if you are getting about 25mpg in your older car, that's still 1250 miles/mo. You say you moved closer to work to cut your 3 hour daily commute. Is that $150/mo gas bill what you expect to pay in your current location?

                      User avatar
                      FrugalProfessor
                      Posts: 61
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                      Contact:

                      Re: $23k credit card emergency

                      Post by FrugalProfessor » Fri Nov 10, 2017 3:56 pm

                      You have a spending problem, not an income problem.

                      1.) Slash living expenses.
                      Find a roommate if possible, saving $500/month.

                      I pay $1/month on cell phones. You should not pay more than me. https://www.frugalprofessor.com/phones/

                      Groceries: Slash your budget by 50%. Eat only oatmeal, banannas, rice, beans, eggs.

                      Spotify: Nope. Try Pandora for free. Don't like commercials, install this plugin: https://chrome.google.com/webstore/deta ... chli?hl=en

                      ClassPass: Nope. Try pushups, planks, pullups, unweighted squats, running, biking.

                      Gas: Bus pass? Move closer to work? Bike?

                      2.) If I were you, I'd liquidate the Roth yesterday, at least the principal portion (leaving interest in tact). There is no investment on the planet that will yield a tax-free, risk free return of >20%.

                      3.) If I were you, I'd further borrow form the 401k.

                      Doing the above, you'll defeat your credit card debt. But only if you incorporate lifestyle changes will you reap meaningful long term gains. Absent living below your means, you'll simply raid your retirement accounts today and be back in the same situation in a few years. You have a spending problem. Fix it.

                      This is a good read: https://www.mrmoneymustache.com/2012/04 ... emergency/
                      I blog. My effective (not to be confused with statutory) MTR is 45% (fed + state, excluding payroll). I save $30k/year in taxes by maxing out deferrals. Taxes are the lowest hanging source of alpha.

                      ursula
                      Posts: 7
                      Joined: Thu Nov 09, 2017 7:34 pm

                      Re: $23k credit card emergency

                      Post by ursula » Fri Nov 10, 2017 4:00 pm

                      neilpilot wrote:
                      Fri Nov 10, 2017 3:44 pm
                      Your budget includes $150/mo for gas, and that seems like a lot. I realize gas is expensive in LA, currently averaging $3/gal (I just filled up in Memphis at $2.16/gal). But if you are getting about 25mpg in your older car, that's still 1250 miles/mo. You say you moved closer to work to cut your 3 hour daily commute. Is that $150/mo gas bill what you expect to pay in your current location?
                      We would love to have that gas price here! CA just imposed new taxes on gas prices too so our gas recently went up. I fill up at Costco since it's the cheapest around here at $3.07 / gallon but sometimes it's not convenient to drive there so I just fill up at the cheapest place nearby ~ $3.20 / gallon. I drive a 8 year old toyota.

                      I don't drive a lot during the week but on the weekends (like 2x a month) I'll visit my family and friends about 40 miles each way. I usually drive around a lot since I take my mom on errands (she doesn't drive). Especially with LA traffic, it can take a toll on your gas. I guess $150 is a bit on the higher end. Currently, it's about $30-35 to fill up my gas tank so I guess I can bring my gas budget down to $100.

                      ursula
                      Posts: 7
                      Joined: Thu Nov 09, 2017 7:34 pm

                      Re: $23k credit card emergency

                      Post by ursula » Fri Nov 10, 2017 4:09 pm

                      N10sive wrote:
                      Fri Nov 10, 2017 3:31 pm
                      Id imagine since the OP stopped contributing in 2015 a significant portion is gains(I guess it depends where it was invested).

                      I think it's more about getting the debt paid off ASAP and establishing good spending/saving habits.
                      For my Roth, I stopped contributing late 2015 and have gained almost 2k since then. I'm not sure if that's a lot or a little...and yes, I just want to get rid of this debt asap so I can move on with my life and save for school and other goals.

                      User avatar
                      ray.james
                      Posts: 856
                      Joined: Tue Jul 19, 2011 4:08 am

                      Re: $23k credit card emergency

                      Post by ray.james » Fri Nov 10, 2017 4:23 pm

                      A few years older and have been through the process like you(you can look up my first posts on the forum), I have few thoughts.
                      There are 3 ways I worked through it and I am happy I did it that way.

                      1)Reduce expenses: You can cut netflix etc all you want, but sharing with a roomate is the cheapest way to save a LOT. Plus internet/electric and utilities get cut in half. The best deals are on 3 bed room sharing with 3 people. That alone saved me $600-700 between utilities and rent. I used that to pay off high interest debt; one card at a time.
                      Among others, I think you can reduce cell charges by using MVNO. I didn't see item lines for car registration, health insurance, purchases like toiletries, home essentials like plates, ikea, target stuff, items etc that add up over the year. Be aware of misc expenses.

                      2) Use all means to pay down high interest debt: I liquidated roth and got myself out of 14% debt. I am happy with that decision then and I still think it was the right choice. People say it is a bad idea and I get where that comes from. But for someone to dig out of debt and see bank balances raising is a mental step to great financial success in future. I traded car to old car, sold junk, hopped on parents cell plan, 0% cards, personal loan at 9% to pay off 26% card(sweet talk the bank lady) among others.

                      3) Increase income: This happened to me in 2 ways. I started around the same income as yours in sacramento. After a job hop and promotion, I am making double. This took 5 years to happen. Married someone who is not spend thrift and combined we are saving more than my first real world salary! Focus on how to increase income, look around in departments and what job skills are in demand. Check what competitor companies are paying. Slowly work on what skills you need to acquire this year for that raise for next year.

                      You are on a great start at a right time! There are a lot of folks who are not even mindful of what is happening in their personal/financial life. Good luck.
                      When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

                      runner540
                      Posts: 401
                      Joined: Sun Feb 26, 2017 5:43 pm

                      Re: $23k credit card emergency

                      Post by runner540 » Fri Nov 10, 2017 4:45 pm

                      ray.james wrote:
                      Fri Nov 10, 2017 4:23 pm
                      A few years older and have been through the process like you(you can look up my first posts on the forum), I have few thoughts.
                      There are 3 ways I worked through it and I am happy I did it that way.

                      1)Reduce expenses: You can cut netflix etc all you want, but sharing with a roomate is the cheapest way to save a LOT. Plus internet/electric and utilities get cut in half. The best deals are on 3 bed room sharing with 3 people. That alone saved me $600-700 between utilities and rent. I used that to pay off high interest debt; one card at a time.
                      Among others, I think you can reduce cell charges by using MVNO. I didn't see item lines for car registration, health insurance, purchases like toiletries, home essentials like plates, ikea, target stuff, items etc that add up over the year. Be aware of misc expenses.

                      2) Use all means to pay down high interest debt: I liquidated roth and got myself out of 14% debt. I am happy with that decision then and I still think it was the right choice. People say it is a bad idea and I get where that comes from. But for someone to dig out of debt and see bank balances raising is a mental step to great financial success in future. I traded car to old car, sold junk, hopped on parents cell plan, 0% cards, personal loan at 9% to pay off 26% card(sweet talk the bank lady) among others.

                      3) Increase income: This happened to me in 2 ways. I started around the same income as yours in sacramento. After a job hop and promotion, I am making double. This took 5 years to happen. Married someone who is not spend thrift and combined we are saving more than my first real world salary! Focus on how to increase income, look around in departments and what job skills are in demand. Check what competitor companies are paying. Slowly work on what skills you need to acquire this year for that raise for next year.

                      You are on a great start at a right time! There are a lot of folks who are not even mindful of what is happening in their personal/financial life. Good luck.
                      OP already shares with 2 roommates. Expenses shown are OP's share.

                      Ursula, I would focus on eliminatig all expenses that aren't groceries, gas, or basic utilities, and on doubling your income from the second job.
                      Definitely immerse yourself in the Dave Ramsey podcasts - get his voice amd mantras in your head to help you tackle this.

                      RDHlooking4FIRE
                      Posts: 64
                      Joined: Tue Mar 14, 2017 11:27 am

                      Re: $23k credit card emergency

                      Post by RDHlooking4FIRE » Fri Nov 10, 2017 7:42 pm

                      +1 dave ramsey debt snow ball.

                      I went from $50k debt to $50k net worth in 3.5 years. Difference if 100k. Making only $60k/yr.

                      Debt was $20k car, $20k student loan, 10k cc. Now debt debt free and loving it.

                      TheAncientOne
                      Posts: 67
                      Joined: Wed Jul 19, 2017 8:53 pm

                      Re: $23k credit card emergency

                      Post by TheAncientOne » Fri Nov 10, 2017 8:28 pm

                      One thing to add is, just like when you need to lose weight, you want to get your friends helping, not undercutting you. Let all your friends and your coworkers know that you need to get the credit card debt monkey off your back and that you need their help to encourage you to slash your spending. They'll see you brown bagging it to work. Arrange for pot luck dinners and board or card games at your place rather than paying West LA prices for dinners and clubbing. As previous commenters have said, take the credit cards out of your wallet and pay only with dead presidents (preferable) or your debit card. Nothing like having to say goodbye to Hamilton and Jackson to reduce the pleasures of spending.

                      skjoldur
                      Posts: 124
                      Joined: Thu Sep 25, 2014 3:11 pm

                      Re: $23k credit card emergency

                      Post by skjoldur » Fri Nov 10, 2017 8:47 pm

                      TheAncientOne wrote:
                      Fri Nov 10, 2017 8:28 pm
                      One thing to add is, just like when you need to lose weight, you want to get your friends helping, not undercutting you. Let all your friends and your coworkers know that you need to get the credit card debt monkey off your back and that you need their help to encourage you to slash your spending. They'll see you brown bagging it to work. Arrange for pot luck dinners and board or card games at your place rather than paying West LA prices for dinners and clubbing. As previous commenters have said, take the credit cards out of your wallet and pay only with dead presidents (preferable) or your debit card. Nothing like having to say goodbye to Hamilton and Jackson to reduce the pleasures of spending.
                      I really like the spirit of this advice. I was a bit worried about many commenters piling on with suggestions to avoid bars and alcohol. It can be very satisfying to socialize with your friends in bars and with alcohol. When I was young and earning a paltry amount, I always felt good that I could at least afford a few beers with friends when I wanted to. So I really like these proactive suggestions about how to keep up your social life but redirect it in ways that could be less expensive but just as satisfying.

                      rb6p
                      Posts: 25
                      Joined: Tue Apr 17, 2012 8:15 pm

                      Re: $23k credit card emergency

                      Post by rb6p » Fri Nov 10, 2017 9:58 pm

                      Quick calculation of your fees per month on the $23k credit card debt is $324 per month. That's a lot of drag.

                      As other posters have pointed out, I'd look into 0% balance transfer as a first step. Obviously, be mindful of length of intro rate, whether or not there is transaction fee, and the default APR after the intro rate. Make sure you have a plan for when the 0% ends. Depending on your credit, you can usually jump from one 0% intro offer to another.

                      ny_knicks
                      Posts: 69
                      Joined: Wed Jan 04, 2017 11:20 pm

                      Re: $23k credit card emergency

                      Post by ny_knicks » Fri Nov 10, 2017 10:48 pm

                      What is your credit score like...do a 0% balance transfer or even a personal loan (my amex offers me one every time I login for up to $25k @ 8%). Increase income (second or third job) 80 hours a week never killed anyone in their 20s. $23k can be paid off pretty quick if you you put your mind to it. I'd avoid "quick fix" solutions like raiding a 410k (unless you can borrow). Let it hurt a bit so you don't go rack up crazy credit card bills again.

                      Slacker
                      Posts: 389
                      Joined: Thu May 26, 2016 8:40 am

                      Re: $23k credit card emergency

                      Post by Slacker » Fri Nov 10, 2017 11:09 pm

                      0% balance transfers are great, but you can do something else -> call all the creditors one by one and be as polite and courteous as possible while you ask the customer service person if there is anyway possible that they can lower your interest rate.

                      6yrs ago, I could have made almost the same post you did. Living in a HCOL area with a similar income and similar debt (most of my money went to child support though, not drinking and eating out). I took a job in a different state with a better salary and lower cost of living and took care of my debt. $18k credit card and $7000 car debt wiped out in 12 months.

                      letsgobobby
                      Posts: 10618
                      Joined: Fri Sep 18, 2009 1:10 am

                      Re: $23k credit card emergency

                      Post by letsgobobby » Fri Nov 10, 2017 11:12 pm

                      ursula wrote:
                      Thu Nov 09, 2017 9:53 pm
                      Hello Bogleheads community!

                      I am a 29 y/o living in Los Angeles and have a huge $23k credit card emergency. Basically, I was living on a non-existent champagne budget and obviously, lived well above my means and made major financial mistakes. I want to live the life I envisioned for myself growing up and pursue a few goals (MBA, travel, spoil my immigrant mother, save for home, etc) while I am still single with no SO or kids. Sidebar: I feel like nobody would want to seriously date a loser with so much CC debt anyways :(

                      However, none of this can happen due to the overwhelming amount of credit card debt and high interest rates.

                      Background
                      • Location: LA (live and work)
                      • Age: turning 29 in a few weeks
                      • Gross salary: ~$60k; about $1,450 net every 2 weeks
                      • Part-time job: about $150-300 net every month depending on how many hours I pick up (varies based on full-time job schedule)
                      • Employee-sponsored 401k = $23k (fully vested; I contribute up to company match)
                      • Roth IRA = $8k (stopped contributing since 2015 since this was a retirement account from a previous employer); 1-year rate of return = 17%

                      Debt

                        CC #1 (department store): APR = 25%; Balance = $2,900
                            CC #2 (Chase Freedom): APR = 20%; Balance = $7,000
                                CC #3 (Bofa no rewards): APR = 15%; Balance = $10,000
                                    CC #4 (AMEX EveryDay): APR = 14%; Balance = $2,000
                                        CC #5: (Citi Diamond Preferred MasterCard): APR = 0% until June 2018; Balance = $950
                                          Total CC debt = $23,500k

                                          Total Student Loans: $10k (interest rates varying from 3-6%)

                                          Monthly Budget (Budget / % of net income)
                                          *Note: I split utilities with my two roommates. The numbers listed below are my individual share.
                                          • Rent - $1,050 / 36% (considered a great deal for West LA)
                                          • Sprint - $100 / 3% (Includes installment payment for iphone 7. I upgraded this year from an iphone 4 with a broken home button, so noooo I am not upgrading to new devices unnecessarily)
                                          • Car Insurance - $100 / 3% ($500 payment every 6 months due in January and July)
                                          • Internet (cord-cutter) - $25 / 1%
                                          • Utilities (gas and electricity) - $20 / 1%
                                          • Braces - $112 (I have $600 left to pay off) / 4%
                                          • “Savings” - $200 / 17% (I end up dipping into it to avoid using the credit cards...so sadly, I do not have a savings.)
                                          • Student Loans - $260 / 9%
                                          • Gas - $150 / 5%
                                          • Groceries - 200 / 7%
                                          • Netflix - $5
                                          • Spotify - $15
                                          • ClassPass - $50
                                          Monthly Income - Budget = $2,950 - $2,287 =~ $700

                                          Spending Habits

                                          It used to be out of control about 5 years ago, but I have since learned how to spend less. I don't go shopping or travel. After essentials, most of my spending is on dining and booze since I like to go out with friends. In October I spent $200 on alcohol (drinks are about $15 at bars) because I went out more but In the past year, I've spent $20-50 a month on happy hour and bar hopping. I started cooking most of my meals to save money on eating out and realized it's also a passion of mine. I shop between Costco, Trader Joes and Ralphs depending on what I need.

                                          I always pay all my bills on time and pay at least the monthly payment. I allocate about $500 a month from my main paycheck to credit card payments. I picked up an easy part-time job to help with the credit card payments and anything I make from the part-time job gets fully allocated to the credit card. I've had this job for about 5 months but in the last three months I had to use the funds to pay for some car maintenance.

                                          I picked up the part-time job to help, but have also been actively searching for a new full-time job that pays more. I've been in contention for higher-paying jobs but have been told that they picked the other candidate because of their finance skills (I'm not going for finance jobs btw), hence why I feel like I am in a never ending cycle. Can't get a better job until I get my MBA, but can't get my MBA until I pay off my credit card debt and perhaps get a better job that will help me get into a better school. I can't live with family either since they are not from here and they are not in a position to help me financially.

                                          TLDR: $23k credit card debt; Cut spending and picked up part-time job to help pay it down, but still too overwhelmed and feel like I cannot accomplish my personal goals due to the debt.

                                          As a last resort, should I use my retirement funds to pay off some debt? I was thinking of paying off the Bofa and AMEX card with retirement funds and then transferring the rest of the debt over when Bofa / AMEX offer 0% on balance transfers (I'm pretty sure Bofa will offer it). I am confident in my budgeting habits now (I've been using an app that I really like) and monitor my spending a lot. The problem is that the debt is so high I seem to be going nowhere with what I'm doing now. Thoughts? Thank you for your time.
                                          https://www.daveramsey.com/show/archive ... how.latest

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