I am going start with the disclaimer: Yes I realize the mistakes I have made to get to this point.
As a results of a departure from a job and lifestyle I did not enjoy, and things "not going as well as forecasted" in my early 20s it appears I have accumulated a large debt on a credit card of mine. The minimum payments are manageable, however don't really get me anywhere, too large of payments are over extending myself since I do have other financial obligations.These obligations are normal ones are in mostly good standing but don't occasionally get way sided by this larger debt I am desperately trying to pay . It's already had a pretty negative impact on my credit. Basically any financial goal I set - business loans, business credit, getting a house, saving up some good cash and paying off any other bills seems to be hampered by this account.
Now I know settlement is not the same for everyone and credit companies don't offer to everyone, but does anyone have experience or insight on this? Take one big hit so I can stop overextending myself, fulfill my other financial obligations, be free of it, and let my other accounts pull my score back up? What terms should be avoided at all cost? OR just suck it up, tighten the bit a little more for a little longer?
IMHO, here's what tends to happen. Person finally starts making a few bucks, and the just can't wait to get more goodies. Plastic was too easy to get, so folks get a couple (or more cards) "just in case", use card, overspend, use another card, and it's off to the races.
The old rules of thumb were that an honorable man paid his debts, and a provident man made some provision for the future.
I think everything started to go totally awry during the period between the Arab oil embargo (OMG, gas went from 36 cents/gallon to 75 cents/gallon!) and the Savings & Loan crisis in the early Reagan years. That's when mortgage interest and credit card interest rates were both around 20% in places.
Bottom line, pay what you owe. Credit problems are almost always your own fault because you wanted too many too fancy toys.
And for that, I'm "Been there, done that."
It certainly happens that way to many people, but I'd refrain from painting the entire picture that way. There are as many reasons as there are people.
Let's not forget that this country's economy is built on managing debt. Every business, government and bank in the world uses debt and there wasn't a single financial adviser before the crash who didn't tell people to leverage the value of a home using other people's money. Also, there's no way to buy a home in some parts of the country with cash. Even if you landed a high paying job in a place like that you'd need a mortgage to live, then if the value of the home drops you're dead.
If you're a hard working entrepreneur and run a successful business you still need a friendly bank with a line of credit and probably an SBA loan which had a second mortgage on your soul which you used to grow the business. I could also talk about student loans, divorce, frivolous law suits and medical bills.
My point is that these are all valid and honest ways that people find themselves in debt that's out of control through no fault of their own. It's not just spoiled Americans wanting shiny new toys although that happens too. Those who created the bubble and eventually caused it to burst were greedy bankers who were basically running a gambling operation on Wall Street, not individuals who tried to do the right things. It's not always possible for people to claw their way out of a deep hole and it's quite possible that they're down there in spite of the fact that they're responsible people.
Wow. Thank you. I've read sad statistics on repeated individual bankruptcies, but I've also read statistics on how very often medical bills (and/or extended disability) are the major factor in individual bankruptcies.
However, here in the second-highest housing market in the country, it's people with $x00,000 in cash driving up prices. Some of that is from IPOs, but some I think is people saving for a few years. Not too hard when salaries are also mid-to-high six figures. For the rest of us, I could live well below what AoM would consider a reasonable standard of living, and never save up 20% of $x00,000.
Every business, government and bank in the world uses debt and there wasn't a single financial adviser before the crash who didn't tell people to leverage the value of a home using other people's money
This. Remember when I said I read all the wrong advice? This was it.
ROFL, same here, but that was the ONLY advice there was. I was amused to see the very same people back pedaling after the crash. Of course that's how all great fortunes were made too. Names like Trump, Helmsley, Walton and Buffett come to mind.
Not quite correct. Back in the early 2000's, Dave Ramsey and Suze Ormond sure weren't giving that financial counsel. Different approaches, slightly different advice, but neither of them counselled leveraging your house to the hilt and then some. Absent some sort of personal disaster, i.e., extremely serious illness or suddenly becoming Job, most personal financial crises come from living too high on the hog. I've seen too many folks who simply figured the ever increasing gravy train would never stop, and managed to leverage themselves out of their house and into a small apartment.
And they were minor players back then. I'd never heard those names until after I started looking around trying to get out of the mess I'd got myself into. Conventional wisdom was, leverage everything while you're young, pay it back when you're old.
I watched Suze back then and she didn't say to mortgage to the hilt, but she always said that home investment was the safest and wisest thing to do and getting an affordable mortgage was a sound way to manage it because the interest was 100% deductible meaning that the government was going to help finance it for you. True that many people went overboard, but few people ever bought a house or started a business without assuming debt. So long as there is a relatively predictable playing field things work out, but when banking shenanigans brought the planet to a halt taking down many of their own kind with it, I can't blame the people who made reasonable investments.
Blame ordinary borrowers if you like, just don't moralize about home ownership in the same breath. When a 20% down payment is two times the region's median annual income, you'll take as long to save up for a down payment as you'll take paying off the mortgage.
Yeah, it's a dificult calculus, with more than a bit of witchcraft/tea leave reading in it.
20% down is a nice rule in a TYPICAL housing market, but the arc and trajectory of real estate values, buyer income, and buyer debt have to be factored in. If it would take an eternity to save up the 20%, and you're in a limited market like San Francisco Bay or Manhattan, the property would appreciate quicker than you could earn the down payment.
Plus, you're on track to be one of those $800 an hour lawyers, and you're married to an investment banker that's soon to be a substantial stakeholder in the Swiss diamond banks....
The financial calculus is as easy or simple as one wants to make it, like all investing calculus. Personally, I stop at the level where mortgage+HOA fees are so much higher than rent, the mortgage interest deduction can't make up the difference. My husband considers whole-family asset and human capital diversification - for example, if the California service/professional economy dives, both real estate and my job prospects would take serious hits.
But there are people who prize home ownership for reasons beyond convenience and money. There are tropes about "not investing in our communities" or "avoiding commitments." Those are the ones that get my goat.