How to really be debt free?

Question

ok well me and hubby have been married almost a yr..

well we went to try to get our own house.. i was so happy!! but then when we got his report there was alot of bills on there that his ex wife "paid" and said that she was paying insurance and they had it but he has over 2,000 in medical bills.. how can we really get out of debt so we can get a house.. total it was like 10,000 with EVERYTHING.. bills and medical... anyone know??

Answer 1

You and your hubby should consider taking temporary part time jobs to help you get out of this mess faster. $10K sounds like a lot of money, and it is, but you should be able to knock this out in less than a year with some concerted effort.

1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make.

2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :

Debt #1 (highest interest): minimum payment+ extra payment

Debt #2 (middle interest): minimum payment

Debt #3(lowest interest): minimum payment

Debt #1: paid off

Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment

Debt #3: minimum payment

Debt #1: paid off

Debt #2: paid off

Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money. Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

5c. Start saving for the down payment on your new house. You need to put down at least 20% so that you don't have to pay PMI (private mortgage insurance).  Make sure that when you buy your house that your payment (principal and interest) is no more than 25% of your takehome pay or 30% if that includes principal, interest, taxes, and insurance.  If you get a larger payment than that, you will be "house poor" and you will be a slave to the house payment.  You need to give yourself room in your budget to actually have a life and some fun.

5d. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.

Answer 2

You want two things: to be debt-free and to have good credit.

1. Keep your current bills paid on time, especially the ongoing ones like utilities and rent.

2. If there are any small debts you can just pay off, get them out of your way. Things like a $35 bill, where you can get it off your back in one payment.

3. Tackle the big debts by prioritizing them. Pay at least the minimum on all of them each month, but make it a priority to pay the ones charging the most in interest and fees first. Otherwise, they just nultiply their total amounts.

4. If you need smaller minimum payments, call the creditors, explain that you were left with a lot of bills and ask to arrange for a smaller monthly payment for a while.

5. As you pay off some bills, put those payments towards the others.

6. Know that you do not have to be debt-free to buy a house. You want to have it at a manageable level, and you want any bills you do have to be current (to not have gone bad).

Answer 3

keep working and pay the bills, you must have married an idiot, if he didn't know about the outsanding debts when he got the divorce settlement signed off.