How did you come out of your debt?

Only people who has been in debt or know somebody. Rest stay away ;)

[Habtom]

Have you ever been in debt?

How did you come out of it? I could have told you mine, may be a fascinating story {cough}, but need to hear other people's stories in WW first.

[briggidere]

I have some debts. Got a mortgage and a couple of credit cards as well as a car loan. About £45k in total now, so it's not bad considering the average house price in the UK.

We work with a debt management company so i know a lot about the debt industry and how many people need help every month. It's an ever increasing number.

There are a few different solutions for debt, depending on the amount. A re-mortgage can be ok for people who havn't got a large amount, but a debt management plan, IVA or bankruptcy are the other ones which can get you out. IVA's and bankruptcy need to be carefully considered if you own your own home as this is considered when you go down these routes.

There are forums out there that have ex-debt people giving moral support and experts helping by giving advice as well.

[LifeinAsia]

1) Completely changed spending habits. EVERY purchase had to be justified to myself (well, and my wife :) ) as being needed (instead of wanted) and needed imemdiately (instead of being able to wait a little longer). (One exception- if there was somethign we would be needing fairly soon, but it was on sale now, we would take advantage of the sale.)
2) Used coupons religiously. Also watched for sales. Took advantage of the supermarket's loss leaders, but refrained from buying other things that weren't on sale. Learned which stores had better prices on which items. Bought generic instead of name brand. Waited until major sales to buy clothes. Ditto for other major purchases (when we moved to a new apartment, we managed to get our couch, TV, and bed on sale AND at 0% interest.)
3) Took advantage of several 0% interest rate credit cards and transfered the balances from any credit cards with a balance. Then always paid in full each month the cards that charged interest.
4) Severely limited entertainment expenses (yet still had fun). The rare dinners out were at a restaurants where we had a coupon. Drank water isntead of paying for drinks. And NEVER ordered alcohol, which is usually a 200-400% markup (or more). Instead of spending $10/ticket for movies, waited a few months and got them through Netflix. Read books borrowed from the library (or from other people) for free (or buought them used) instead of buying them at retail.
5) Okay, getting a new job that paid more money also helped. :)

And the most important things is that after you pay off your debt, continue with your frugality! Take the same amount you were paying monthly to debt and put it into some sort of safe savings/investment vehicle.

In terms of results, in 18 months went from about $60K in personal debt to being able to buy a house in Southern California with 10% down. (And the house was about 30% more than we realistically thought we could afford just a year earlier.)

[edited by: LifeinAsia at 3:51 pm (utc) on Aug. 22, 2007]

[bcc1234]

I had a little over $34k of credit card debt at one time (max total balance on all cards at any given moment).
After looking at my register when I finally had 0 debt, I saw that from 1999 to 2004 banks charged me $38k as finance charges, over the limit fees, late fees, cash advance fees, and other payments. So all in all, I paid back around $72k from the moment I was in the worst shape financially. I still don't have a clue why the fees got so high, but it's amazing how little things add up.

One time, my minimum payment for one card was $1200 :) That's after not paying them (and accruing all kinds of penalties) for several months. That minimum payment was around $250 of the actual minimum payment for that month, and the rest are unpaid minimums + penalties from previous months.

It really sucked at times, but at some point, my business took off the ground, income increased substantially and I paid it all off in full without settling.

The worst thing I did was cancelling the cards. I actually called the banks and told them to close my accounts. So once I paid everything off, my length of accounts and available credit was basically 0, so I had to start from scratch.

The most annoying thing part of the experience is a constantly full voice mail box and $200/mo phone bills because, as it turns out, the phone company charges per voice mail per day for storage. That didn't make things easier. I didn't even listen to voice mail any more, just kept hitting delete. And 5 hours later, I would have the voice mail box full again.

It's also amazing how much easier it is to manage $10k of debt than it is to manage $20k than it is to manage $30k...
So when the amount you owe decreases, you end up paying the rest off quicker and quicker. And soon, you realize that you just made a payment that zeroed the balance on a card, and hey, that was the last card that had any debt on it. That's a nice feeling.

Now I have one credit card with $4k limit (opened a year and a half or so later) and not really using it and not applying for any more cards or any other kinds of loans.

Just paid $43k all in cash for a car a couple of weeks ago :) No more credit or financing any kind. Not that I'm against taking on debt, I just figured out how to live without it.

The only time I might take on debt, would be for a short-term business operation where I'm certain I'll make profit quickly enough to return the borrowed money right away.

[Wlauzon]

It was actually much easier than I thought.

I simply stopped buying things that I did not really need. If I saw a new toy that I could not live without, I would wait 2-3 days and 99% of the time I found that I really *could* live without it.

I got rid of all my credit cards. Since 1990 all I have had is a debit card. Today I have one credit card that I never use that I keep around just in case of emergencies. I make one token purchase a year on it.

That was 17 years ago, and today I owe nobody anything for anything. About 4 years ago I paid the final 8 years left on my mortgage off in cash.

As others above have noted, the single most important thing is to change your spending habits.

[edited by: Wlauzon at 7:16 pm (utc) on Aug. 22, 2007]

[Essex_boy]

I know a guy who owed $60k on credit cards and had recently lost his business, no income and no hope.

So he changed his name by Deed poll and walked, 6 years after the last contact the finance firms have to write the debt off by law.

Oh and he still owes me £300.

[edited by: Essex_boy at 8:31 pm (utc) on Aug. 22, 2007]

[D_Blackwell]

LifeinAsia is on the right track.

Had $25K on seven or eight credit cards at 18% - 26%. (You don't want to do that math:))

PERMANENT LIFESTYLE CHANGE

One day it was like flipping a switch. Starting pouring every nickel into debt. There's no halfway fix that I know of. One has to take the full dose of a bitter medicine. Poured almost $1,500 a month directly into debt.

Never got any credit rating negatives, because I was always in 'good standing'; just digging a deeper and deeper hole to stand in. Got rid of all but two credit cards; two that I have had for many years. And I use them both. And I almost always pay them both off immediately. If I leave a balance, it is deliberate, then quickly paid off. No credit activity can wreck your rating, because you'll have no rating.

Credit cards are evil if you lose control of them.

BTW - Fun does not have to cost a dime.

Although - First goal after getting clear was to take my mother on a vacation. Had never done anything really BIG for her before. Set up the trip so that it was probably 95% prepaid. She never saw what it cost, and I didn't care.

Now I'm back to saving what I can - and launching little niche enterprises that will give me some longer term security.

[skibum]

Had college loans, car loan, just buckled down and paid them off. This is the best way to get out of debt. [danwho.net] and for the most part, it really is that easy.