Reader Elaine wrote me the following:
I have a lot of debt. I'm a crazy spender. I love purses mostly. Lately
I've been trying to control my spending. I have $35k credit card/loans, and $51k student loans.
Needless to say I hate life. I feel overwhelmed with by debts. I've been holding off paying on my student loans (deferment), but that will end in December 2010. I am no good with credit cards. Should I close out the credit card when I pay off a card? I know it will hurt my FICO score, but that's messed up anyway.
Any guidance you could offer would be appreciated.
I don't know if the following will help advise you or guide you, but the following is what I have done and am still continuing to do for my debts and for me, it seems to be working out for me ok.
I know EXACTLY how you feel and have been right where you have been, and to a degree still am. BUT it does get better as time goes on, even though you may think it very frustrating. If you can keep at it, your debt will go down. May take awhile, but the results in the end will be awesome for you when you see that big light at the end of the tunnel. I kept at it, and believe me it was frustrating and stressful, but I now see a good light at the end of my tunnel.
As far as closing out your credit cards and it hurting your FICO score, it does hurt your score, but temporarily. It usually adjusts back within a few months to a year. Mine did. I have closed out all my credit cards for stores and major credit cards EXCEPT for three. I have two major credit cards for emergency use only such as major medical, air fare, or car repair if needed, and a Dept Store card. And I dropped the limit at my request to where I can better control that limit. (They thought I was a little crazy or something, but they did it for me.) I use that once a year for Xmas gifts. They are all paid in full and I have them in my ice tray in the frig' frozen in ice so I can not get tempted and get them so easily. And I always try to pay cash for things first. I have found out that is all that I really need in cc's. For me, that is very easily handled and controlled. AND also, I still am working on my other cc's and loans that I still have, but it is now controllable and I shred those cards and close those accounts as they are paid off EXCEPT the three I have kept and are in the ice.
And as for your student loans, when the deferment ends, you can set up with them an automatic payment system where it will come out of either your savings account or checking account each month, and won't have to worry about it. And I am sure that you could do that with your other loans and credit cards as well, so this way all will be easily controlled. The best option is to talk to your bank, and see if you can set up where they can send your payments for your cc payments and loans each month. I would advise going in and talking to them about that since your cc and loan debt is $35K and your student loan is $51K. And also, your bank more than likely can offer you counseling and advice about your debts.
Last, IF you are still a crazy spender, please try to get counseling as to why you spend so much and help to control that spending. In the end, you will have much more peace inside yourself and be much happier in the long run, finding that you do not need those purses or other crazy expenditures, but instead finding yourself putting money into your savings and letting it grow. Even if you put a couple of dollars or so in your savings each payday, it adds up. That in itself, will give you a bit of a satisfaction and help you to want to continue to work on your debts, and as you continue, you will see that go down. It won't happen overnight, but you will see an improvement. When you see that, you will feel better about yourself too.
Here are some sites that you may wish to check out to further help you:
Credit Info Center
I Just Can’t Live Within My Means!
PFBlog.org - Find blogs about debt reduction
Also check with your bank for financial budget help.
Photo courtesy flickr/cc: Amy Loves Yah
Readers: If you have suggestions, please pass them along. Thank you.