Suze Orman and CC Question

iVillage Member
Registered: 10-25-2005
Suze Orman and CC Question
8
Tue, 05-23-2006 - 5:25pm

Does anyone like Suze Orman? I am listening to an audio tape, Financial Freedom. She talks about how being in debt is disrectful to ourselves and how we need to not be ashamed. She makes a good point. She says (not verbatim), "We talk about sex like it's no problem, but debt we are ashamed of."

I don't carry cash. She makes me think I should! She said always pay with paper bills - NEVER with change. She said if you get 50 cents back, put in your pocket. It's a guarantee by the end of the month you will have $30-$60, then get a cashier's check and send it into your credit card.

OK, off Suze Orman, question for you all.

I always pay more than the minimum. I am trying to pay off my largest card, which is finally down to $7200. I pay $200 a month on a $145 monthly payment. Sometimes I can send $300. I pay more than than the min. on ALL my cards. However, I pay $60 total difference for all the cards and min. Should I be paying min on all the others and increase my payment from $200 to $260 and then pay that one off faster and then snowball the full $260, do it that way???

Thanks for your ideas.

Avatar for 2locachicas
iVillage Member
Registered: 05-14-2003
Tue, 05-23-2006 - 6:44pm

I do like Suzy Orman some...I am not crazy for her. I am more a Dave Ramsey fan...

What I would suggest? List out all your cards smallest to largest. Take all of your extra $$ and put it on the first smallest card. When that is paid off take ALL the money you were putting on the first card put it on the second and until it is paid off. Carry on that way until you are out of debt.

But if you really want to pay off the largest first then ALL of your extra $$ should go to whatever your "target" card is. Pay only minimums on everything else....

It is a snowball effect which is why people talk about snowflaking their way to a snowball at the end of the year...mine is 10k this year!!

Welcome to the board. Probably more articulate members will chime in;-)

iVillage Member
Registered: 10-25-2005
Tue, 05-23-2006 - 7:25pm

I have actually been on the board for awhile, just under different names and don't post too much :)

I think what I am going to do is pay off my Citi card quickly (at about $800) and then transfer MBNA over there (about $2200) because MBNA is the highest card and I can get 0% with the Citi. Either way, I am still paying down debt, and the high card I paid about $1500 in the past few months and dropped the finance charge and everything, so I think that would be a good idea.

Avatar for endomagazine
iVillage Member
Registered: 11-09-2004
Tue, 05-23-2006 - 9:20pm

Hello,


I too am a Dave Ramsey fan, although I've certainly read several of Suzy Orman's books. There's really nothing *wrong* with paying with cash. Anyway, regarding the credit cards, you'll be able to zero out your credit card balances *quicker* by paying off the smallest balance first, (while sending minimums to your other debts) and then *adding* that amount to your next smallest debt payment. Not only will you see those smaller balances zero out quickly (at which point you can cancel the paid off credit cards), but you'll also have a larger "snowball" (previous amounts you were sending as minimums to those paid off cards) to send to your next largest debt. When you finally get to the biggest balance, you'll have a large payment to send every month because you won't have any *other* payments to worry about!


Sincerely,
Lindsey Schocke

Geeks on Tap: Mission Accomplished

iVillage Member
Registered: 01-25-2006
Tue, 05-23-2006 - 10:33pm

The general sentiment of members of this board and much of the online debt reduction community follows this thinking that you pay off debts smallest to largest. This is fine but really the most cost effective way to pay off your debts is highest interest rate to lowest interest rate. The fact that you think you can move your debt over to a lower interest rate if you pay off the little card would influence my decision too and I would probably do what you are doing. I recognize that for some folks the mental boost they get from paying off little bills is a really important thing but it isn't the most financially efficient and if you have cards at a very high rate, the difference could be substantial.

The way I opted to do it was to consolidate all of the cc debt onto one low rate card and I am working on that. When I'm done there, I'll move on to the car loan. After that, I intend to boost some savings and then start working on my student loan. Eventually I'll work on paying ahead on my mortgage but it is a much lower priority. I'm really just hoping to have that paid off by when I am 60 so I can retire. My retirement savings will be a higher priority than paying off the house. Anyway, that is all a combination of paying non-deductible unsecured before secured, paying non-deductible secured before deductible unsecured, then paying deductible secured debt.

Hope that makes sense. :) There are some nice calculators out there to mess around with to figure out how different scenarios will play out and what they will cost you.

Peg

iVillage Member
Registered: 03-27-2003
Wed, 05-24-2006 - 1:22pm

I'm by NO means a mathematics whiz, so I probably can't explain it very well, but it happens that depending on various factors, it CAN actually be *mathematically* more efficient to pay off some of your smaller accounts first, even if the interest rate is lower. This has to do with the fact that the minimum payment can then be applied to the larger rate card sooner than if you were paying off the larger card first--sometimes this turns out to be more efficient than leaving the small balance alone (and hence not freeing up that minimum payment to apply to the larger card). But the actual math involved in figuring out whether that is the case in a particular instance is far beyond my meager abilities.

But remember, it isn't mathematics or reason that got us into debt. For most of us, it is emotion. And good psychology can often help us get back out of debt again. That's the biggest reason to pay down those small debts first. That psychological boost can often mean the difference between sticking to a plan or not.

Compare it to a food diet. Everyone knows the technically scientific way to lose weight--consume fewer calories, burn more calories. But very few people can stick to a diet based purely on those principles. We need tips, techniques, and skills for getting our emotions in line with our heads so we can stick with it.

The same holds true for a money diet. If we just look at the figures and say, "Yeah, we just need to spend less money, and/or earn more money," that doesn't get us very far. We need skills and techniques for getting our emotions in line with our heads so we can stick with it.

One very basic technique used in most successful learning experiences is the concept of "early success." People need an early success or two in order to buy into a program. Again, go back to the food diet--if you go on a diet that promises you'll lose 20 pounds in six months, but in the first two months you've only lost one pound, will you stick with it? What if you go on a diet that promises a 20 pound loss in eight months, but you lose two pounds in the first week, and continue to lose a pound a week for the first six weeks, and a pound every two weeks thereafter? Which diet will you stick with? One gets you to your goal more quickly, but the other gives you early results? Logically, the first diet makes sense, but realistically, the second diet is more likely the one people will stick with.

Same goes for debt. Those early, relatively quick successes give you the energy and motivation to keep going. Even if it adds a few weeks or even a month or two to your total debt repayment, it's more likely going to be the successful way to go.

Good luck anyway, and, to answer the original poster's main question--yes, it's a good idea to pay a minimum payment only on each of your cards but one, and apply the one large payment to the one you choose to target. This really will pay your debt faster, and gives you a psychological boost to boot. You don't have to recalculate every month though--for instance, if your minimum payment on a card this month is $25, but next month it's only $23, you will continue paying $25 to that card until it's paid off. Again, mathematically this may not be the "best" method, but it is much simpler and won't have you so bogged down in details that you give up!

Blessings,

Heather

iVillage Member
Registered: 03-27-2003
Wed, 05-24-2006 - 1:56pm

I just wanted to comment on the being ashamed of debt thing. I disagree with Suze. She says we shouldn't be ashamed. I think we should. And that is precisely why people don't talk about it as much, because they are ashamed. Just because "everyone is doing it" (being in debt) doesn't mean there is nothing to be ashamed about.

To explain why I feel that way I am going to just say "my" instead of phrasing it in general terms which someone might take offense to. If you can relate, that is great. I understand that there are certain debt situations that are nothing to be ashamed of, like major medical bills, or funeral expenses for a loved one who was uninsured, or whatever. That is not my situation personally and I don't want to offend someone whose situation that is.

But the credit card debt and stuff, yeah, you're darn right I'm ashamed of mine. Dave Ramsey has this phrase about "spending money you don't have to buy things you don't need to impress people you don't like". Guilty. Or spending for emotional reasons, as in "I'm sad, so I'll go blow $100 at Victoria's Secret" because a new bra will make me feel better. For about 30 mins. Or here is a good one: telling myself that I just downright *deserve* it for being such a swell gal/mom/worker/friend/daughter, whatever. A lot of my debt out there is created simply because I was convinced that I was somehow entitled to live above my means, whether it is overspending on clothes, shoes, buying a house before I should have, or charging groceries because I overspent on all of the other stuff.

Yes, I am ashamed. And thank God I finally realized that, because without that shame I would not have been motivated to change. As a result of being ashamed I can probably change the course of my life so that I can help my DD with college and teach her not to make the same mistakes I made. As a result of being ashamed I will not leave my family with a bunch of debt to be paid off if something were to happen to me. I am ashamed of the debt. I'm proud to be making steps to get out of it.

Heather (very wordy today, even for me!)

iVillage Member
Registered: 10-25-2005
Wed, 05-24-2006 - 3:07pm

Oh Heather, thanks for your comment. I do agree with you. I just like how she put it. Trust me, even though she said "Shout it to the world" I am NOT because I am ashamed. I think once I do pay it off, THEN I may have no problem talking about it. YOU GUYS ARE MY WORLD TO SHOUT IT TOO. I think that is enough. I just see what Suze is saying how sex used to be such a taboo subject yet we talk openly about that, but won't with debt.

I think it is wonderful this board exists and we all have each other to talk to about this stuff!

iVillage Member
Registered: 05-17-2006
Fri, 05-26-2006 - 1:35pm

AMEN, SISTER!!! Very well stated! For a minute there, I thought you were talking about me- exact same life anyway!!! I'm ashamed and I am going to fight it! I will get out of this mess and have some PEACE!!! I just want some Peace!! Hang in there, plasticprison! This is a great group!

Jodie