vania-janet/multiturn-rag-retrieval-data huggingface dataset:
I agree that you need to quit using the cards, but this can also be accomplished by destroying the cards. The consolidation loan is not needed for this. You also mentioned that you are considering adding $3,000 to your debt. I have to say that it doesn't make sense at all to me to add to your debt (especially at 13.89%) when your goal is to eliminate your debt. To answer your question explicitly, yes, the ""cash buffer"" from the loan is a very bad idea. Here is what I recommend: (This is based on this answer, but customized for you.) Cut up/destroy your credit cards. Today. You've already recognized that they are a problem for you. Cash, checks, and debit cards are what you need to use from now on. Start working from a monthly budget, assigning a job for every dollar that you have. This will allow you to decide what to spend your money on, rather than arriving at the end of the month with no idea where your money was lost. Budgeting software can make this task easier. (See this question for more information. Your first goal should be to put a small amount of money in a savings account, perhaps $1000 - $1500 total. This is the start of your emergency fund. This money will ensure that if something unexpected and urgent comes up, you won't be so cash poor that you need to borrow money again. Note: this money should only be touched in an actual emergency, and if spent, should be replenished as soon as possible. At the rate you are talking about, it should take you less than a month to do this. After you've got your small emergency fund in place, attack the debt as quickly and aggressively as possible. The order that you pay off your debts is not significant. (The optimal method is up for debate.) At the rate you suggested ($2,000 - 2,500 per month), you can be completely debt free in maybe 18 months. As you pay off those credit cards, completely close the accounts. Ignore the conventional wisdom that tells you to leave the unused credit card accounts open to try to preserve a few points on your credit score.
Do you turn off your computer when you're not using it? See if you can get the Electric down by 10%. That's $20/month savings. Doesn't seem like much, but it adds up. Gas -- same with gas. Do you have gas hot water? If so, cut shower length. Saves on water too. Food -- this one you didn't list. But as I said, you could be spending $500 or $600 a month easily for a family. Do you guys plan meals, and thus plan shopping trips? If not, do it. You'll be surprised how much you can save. Either way, 10% reduction should be doable. That's $50/month. If you don't plan now, 20% is within reach -- that's $100/month. Ok, that may have added as much as $130 or so. If so, you're now up to $366/month savings. That's like a 15% raise. Simply cutting, however, is only half the plan. You want to improve your situation, so you can get the Directtv back (assuming you'll even want it at that point), and the wife's cell phone, for starters. To do that, you've got to nail down that debt. I figure you've got minimum $567.23/month in debt payments. That's not including your mortgage, and including an assumed $80/month minimum credit card payments. You pay over 21% of your take-home to short term and consumer debt! Yea, that's why you're hurting. Here's what you do In both cases, apply the extra payments entirely to one balance at a time. Pick either the smallest balance (psychologically best because you quickly see a loan & it's payment dissappear), or the highest interest (mathematically the best). Roll each regular payment that's paid off into the extra debt payments. You didn't list total debt balances, but you did say you had $4000 in credit card debt.
Financial problems are often due to budget (income statement) issues, either caused by excessive expenses or too little income. You state your income at $115K (pre-tax?), which is much larger than median income. But you do not supply (all) expenses, other than state that you have debts that require large payments, and that you are doing well budgeting (which is hard to accept based upon the large debt load). Though you do not mention specific card amounts, interest rates, and options you have considered for addressing these balances, you do suggest that you understand the problem, and want to pay the credit cards off. You have a large amount of debt comprised mainly of large credit card balances. There are no easy solutions for high credit card debt. This is a problem that you need to learn how to manage, and the costs that you incur when you allow easy credit to chain you to service to the credit card companies. Rather than sacrifice your future, look to finding ways to fix your present situation, which is tough. Try to find a way to dig out of the debt, which will take several years. Lets put this debt in perspective - consider that a five year (60 months) plan to repay the debt will require paying > $1000/month towards principal (plus the interest on all the cards). Difficult, but not impossible. You also mention two cars, with $375/month on one car, $unknown/month on the other car. Plus you mention $500/month for private school. Since the debt is a balance sheet problem, do you have any assets you can sell to payoff some of the debt? Can you sell your cars and obtain cheaper vehicles that have smaller payments? Can you examine you budget and find areas where you can save? When you were making $75K/year or $30K/year, you certainly had lower expenses and a smaller expense budget - can you reduce your expenses to a more modest level? Can you go on a 'budget diet'? This would be the advice Dave Ramsey (and others) would give. You probably have $6400/month income (net after taxes), which using the LearnVest approach would give you three budget categories.
I was in a very similar place 10 years ago. I was in my mid 20's with 45K in combined school + personal/business related debt and working in IT for not very much. I already had 10-15K in debt when my college loans first came due and it was the first time I really had to come to terms with the hole I had dug myself and I spent weeks at a time obsessing over plans that would help me get out of debt. It effected my health and my relationships. I felt like I was never going to come out from under it. My family was very much lower middle class (&lt;30K household income) and I wasn't going to get or expect any help there so I went to work and made it a point to make sure every personal and professional decision I made was conducive to my long term goals and before I knew it they became short term goals. Find out what your basic monthly need is, be brutally honest, cut back on things like cable tv ( I still don't have it ), reduce your phone plans, borrow things when you don't have to buy them and send that money to your debt. Pick up some hobbies that don't cost much. These are all minor sacrifices. I got back in to playing the piano and spent a lot of time at the beach in the summer and caching up on books I'd always meant to read in the winter. I ran a lot of numbers in a spreadsheet but you can play with the numbers with online loan calculators to put some real numbers behind your goals. Here is one that I just tried out http://loan.bizcalcs.com/Calculator.asp?Calc=Loan-Early-Payoff You'll probably be surprised how much effect a little bit of extra towards a loan can make in the long term. Put your current college loan details in to it and then see what the effect of an extra 150 a month is. I know you've implied that you really don't have anything extra each month and that is fine. Figure out an amount that gets you moving towards your goals and then start working on a way to make it.
"It can be difficult when all your disposable income is spoken for.  Your options depend on how good your credit is and how flexible your expenses are.  I don't have all the answers without more details (possibly not then).  However, couple of points of advice: Paying off that credit card debt (and not adding any more to it) is your #1 priority.  You should make minimum payments to every other debt until you have done that because the interest on it will kill you in the mean time.  It is always optimal to pay the maximum to your highest interest debt and minimum to all other debts. 11% doesn't sound very good on your house loan.  You may want to consider refinancing.  That is, if you can get a lower rate.  You may also want to get a longer term loan (if you have enough discipline to use the extra income to actually pay off your credit card and then the put it toward the house when the cards are paid off). Look at options to increase your income, at least temporarily.  Second jobs and such.  When your finances are more in order, you can back off. The debt ""trap"" is behavioral.  We humans tend to increase our spending until we can't any more.  But the reason we can't spend any more is that we have increased our debt until we have no flexible income.  Then we are stuck for a long time and have few options. The only way out (long term) is to change our habits so that we don't increase spending each time we pay down a debt or get an increase to our income.  Financial discipline is the only way to have financial security.  Almost always the first step is to pay off credit cards and stop maintaining a balance (always pay off every card at the end of each month).  Then start paying off other debts from highest interest rate to lowest. This is a hard challenge and one most of us face at some point in our lives.  Good luck!"
As someone in the very same position as you here is what I suggest: Have $1,000 for each possible large expense you currently have. For example, house, car, pregnant wife, etc. As someone who only has a car (living at home still) I only have $1,000 in my eFund (emergency fund). The ABSOLUTE rest of my money goes to paying off the loans as soon as possible. I mean ever single dollar. There is no point for investing unless you have a really good return on investment. I am not too sure how common returns of 6.8% are, but that seems above average. If in fact you're just stashing it in a bank account at ~1%, you're doing it wrong.  Getting out of debt is not only just about the financial benefits but the emotional benefits too. It feels really nice to not owe anybody anything.  Good luck man!    P.S. Try using a tracker like ReadytoZero to show how much you're losing a day by remaining in debt. This will better help you understand if your investments are making you money or losing your money.
Since you are considering dumping your savings into your student loans when they are equal, you should go ahead and do it now.  You will immediately reap the benefit of paying less interest per month.  Also, your minimum monthly payments will decrease so if you had unexpected expenses pop up, you could shrink your payments for a limited time.  If you don't have emergency expenses, more of your regular monthly payment will go toward the principle of your loan and pay it off faster. Make a goal to get your savings back up as soon as you can after your loans are paid off.  In the mean time, see what other things you can cut back on like eating less expensive food or switching to a less expensive phone plan.  If you have stuff you don't need anymore, try selling it on Craiglist or eBay.  Or just focus on doing more at work so you can get a raise.  These things are not necessary, but it's a good feeling to be able to shave another month or two off paying a debt.
There is debate about the order in which one should pay off their debts, but the fact of the matter is that the order is not as significant as the intensity at which you pay them all off. Dedicate yourself to getting rid of the debts as fast as possible, and it won't matter much which order they get paid off in. Finally, to answer your question, I recommend that you attack the card debt one at a time instead of trying to pay them off evenly. Not because it will optimize your credit score, but because it will help you focus your debt-reduction energy as you work on resolving your debt emergency. Fortunately, the credit utilization portion of the credit score has no history, so once you pay all of these off, the utilization portion of your score will get better immediately, and the path you took to get there will be irrelevant. After the credit cards are completely paid off, and you have resolved never to spend money that you don't have again, it is time to work on the student loans....
With your windfall, you've been given a second chance. You've become debt free again, and get to start over. Here is what I would recommend from this point on: Decide that you want to remain debt free. It sounds like you've already done this, since you are asking this question. Commit to never borrowing money again. It sounds overly simplistic, but if you stop using your credit cards to spend money you don't have and you don't take out any loans, you won't be in debt. Learn to budget. Here is what is going to make being debt free possible. At the beginning of each month, you are going to write down your income for the month. Then write down your expenses for the month. Make sure you include everything. You'll have fixed monthly expenses, like rent, and variable monthly expenses, like electricity and phone. You'll also have ongoing expenses, like food, transportation, and entertainment. You'll have some expenses, like tuition, which doesn't come up every month, but is predictable and needs to be paid. (For these, you'll can set aside part of the money for the expense each month, and when the bill comes, you'll have the funds to pay it ready to go.) Using budgeting software, such as YNAB (which I recommend) will make this whole process much easier. You are allowed to change your plan if you need to at any time, but do not allow yourself to spend any money that is not in the plan. Take action to address any issues that become apparent from your budget. As you do your budget, you will probably struggle, at first. You will find that you don't have enough income to cover your expenses. Fortunately, you are now armed with data to be able to tackle this problem. There are two causes: either your expenses are too high, or your income is too low. Cut your expenses, if necessary. Before you had a written budget, it was hard to know where your money went each month.
JoeTaxpayer mentioned a budget. Staying on top of your spending will be the result of getting out from under this debt. You may have Excel on your PC now, if not Open Office is free which has a program that handles finance applications. There is budgeting software for free out there. Youneedabudget.com is a lot better but cost a little. It keeps me from spending money I don't necessarily have as I can see a result month to month from having outflow of cash. As Joe mentioned - no more lattes in the near future which will help you pay off this debt which will be a bigger relief than a fashion statement. Having used budgeting software and attempted to stay in budget has been useful. I still over spend a little on food and can see the ramifications immediately. In short, try creating and sticking to a budget no matter the urge. As far as insolvency is concerned I'd struggle with paying it down before I do that. The thought passed my mind but I bit the bullet. DO NOT walk away from the debt however. That isn't a good idea Either. Budget and bite.
You would move daily spending to somewhere that isn't accruing interest no matter what. You would use a HELOC to pay down your CC debt in a lump or make a large purchase in a lump. Your morning coffee should never be spent in a way that will accrue interest immediately, ever. Stop spending on the CC(s) that are carrying a balance. (period) Generally credit cards have a grace period before interest is charged. As long as a balance isn't carried from one statement period to the next you maintain your grace period. If you spend $100 in the first month you have your card, say the period is January 1 to January 31, you'll get a statement saying you owe $100 for January and payment is due by Feb 28. If you pay your $100 statement balance before February 28 you won't pay any interest, even if you charged an additional $500 on February 15; you'll simply get your February statement indicating your statement balance is $500 and payment is due by March 31, still no interest. BUT. If you pay $99 for January, leaving just a single dollar to roll over, you now owe interest on your entire average daily balance. So now you'll receive your February statement indicating $501 + interest on approximately $233.14 of average daily balance ($1 carried + $500 charged on Feb 15) due by March 31. That $1 you let roll over just cost you $3.26 in interest ($233.14 * 0.014). AND. Now that balance is continuing to accrue interest in the month of March until the day you make a payment. It typically takes two consecutive months of payment-in-full before the grace period is restored. There is no sense in continuing to spend on a CC that is carrying a balance and accruing interest even if you intend to pay all of your current month spending entirely. You can avoid 100% of the interest related to your regular spending by simply using a different card, and no rewards will beat the interest you're charged."
It will not hurt your score to pay off your debt.  It will allow your score to start healing as you plug the holes in your report. What is CRUCIAL is how you pay off the debt.  Make sure you get, in writing, that paying $X amount will fully satisfy the debt and will close the matter as in Pay-To-Delete.  If you try to do a settlement, this is very important. Also, the moral brigade will not like my answer, but if you are close to seven years out on your debts, you might as well not pay them since they will fall off of your report after 7 years.  If you pay any part of the debt however, it will often reset the clock on those 7 years, so tread carefully.
"First of all, congratulations on admitting your problem and on your determination to be debt-free. Recognizing your mistakes is a huge first step, and getting rid of your debt is a very worthwhile goal. When considering debt consolidation, there are really only two reasons to do so: Reason #1: To lower your monthly payment. If you are having trouble coming up with enough money to meet your monthly obligations, debt consolidation can lower your monthly payment by extending the time frame of the debt. The problem with this one is that it doesn't help you get out of debt faster. It actually makes it longer before you are out of debt and will increase the total amount of interest that you will pay to the banks before you are done. So I would not recommend debt consolidation for this reason unless you are truly struggling with your cashflow because your minimum monthly payments are too high. In your situation, it does not sound like you need to consolidate for this reason. Reason #2: To lower your interest rate. If your debt is at a very high rate, debt consolidation can lower your interest rate, which can reduce the time it will take to eliminate your debt. The consolidation loan you are considering is at a high interest rate on its own: 13.89%. Now, it is true that some of your debt is higher than that, but it looks like the majority of your debt is less than that rate. It doesn't sound to me that you will save a significant amount of money by consolidating in this loan. If you can obtain a better consolidation loan in the future, it might be worth considering. From your question, it looks like your reasoning for the consolidation loan is to close the credit card accounts as quickly as possible. I agree that you need to quit using the cards, but this can also be accomplished by destroying the cards. The consolidation loan is not needed for this. You also mentioned that you are considering adding $3,000 to your debt. I have to say that it doesn't make sense at all to me to add to your debt (especially at 13.89%) when your goal is to eliminate your debt. To answer your question explicitly, yes, the ""cash buffer"" from the loan is a very bad idea.
Set up budget categories. Earmark your income as it is paid, for your budget categories. Pay your bills and expenses. For debts, pay the minimum on everything. There will be an amount left once everything is budgeted. That's the 'extra'. Then focus on, in order of priority, the following: So, when your emergency fund is up to an appropriate level (3-6 months of living expenses as a rule of thumb, adjusted according to your comfort level). Once you have your emergency fund started, budget at least enough toward your 401k to capture any matching offered by your employer. Then use the snowball plan to pay off your debts. (From what your post says, this does not apply to you, but you may have some small credit card debts taht were not discussed). Earmark the 'extra' for the smallest debt first. When that debt is paid, the 'extra' grows by the minimum payment of the smallest. Thus the snowball grows as you pay off debts. Once the debts are gone, reward yourself, within reason (and without going into debt). Now shift your extra into fully funding your retirement savings. Consult a financial advisor to help you plan how to distribute your retirement savings across the available retirement savings types. They can explain why it's good to have some of your retirement savings funded from after tax income. They can help you find the balance between pre- and post-tax funded accounts. Eventually, you may come to the point where you're putting the max allowed into your tax advantaged retirement accounts. At your age, this is a significant achievement. Anything left over after retirement savings is funded can be used for whatever you want. If you choose wealth building, it can lead to financial independence. The first two should be a one time thing. You can/should do more than one at a time. The fourth one is optional, and should not be considered until 1 and 2 are completed, and 3 is maxed out. What you achieve is up to you. Look up FIRE, or Financially independent, retire early. There are groups of folks striving for this. They share advice on frugal living and wealth building strategies.
I'd be tempted to pay off the 35k in student loans immediately, but if you have to owe money, it's hard to beat zero percent. So I don't think I would pay it all off. Maybe cut it in half to make it a more comfortable payment. Currently, you are looking at $6K a year to pay them off, which is about 20% of your income. Cut that in half and you will sleep better! Definitely pay off the medical and credit cards. You're probably paying 20% on that. Clean it up. If you need a car, buy yourself a car. You have no savings, so I would put the rest in some kind of money market savings account. You are at an age where many people go through frequent changes. Maybe you get your own place, and you'll need to furnish it. Maybe you go back to school. Maybe you get married or have kids. Maybe you take a year off and backpack through Europe or Asia. You have a nice little windfall that puts you in a nice position to enjoy being young, so I would not lock it up into a 401k or other long term situation.