My income is 78K to 80K after taxes and insurance.
I pay $1,500 for rent+utilities, $150 for phone bill, $450 for auto loan, $300 for auto insurance (for two people; I am helping a friend who can't pay auto insurance), $750 for a personal loan and $750 to $1,000 for credit card. I also need to send $100 to $200 to my home country. Total monthly expenses are $3,950 to $4,200.
I have a $16k auto loan at 7%, $32k of credit card debt at 20-22% and a personal loan of $18k at 17%. Total debt = $64k.
After the above expenses I need money for groceries, clothes, gas and other monthly needs.
I want to be debt free or at least decrease my total debts from $64k to $10k.
You have dug yourself into a hole. Luckily you have a shovel, and the hole is only 3 years deep.
Time for a concrete budget and savings plan.
Reduce your utility costs. Raise the AC temp by 3 degrees. Lower your heating by 3 degrees. Turn off your lights religiously. This could be $10-$25. So $1475 cost.
Trim your phone bill. Unless you are buying your phone in installments (which cell companies call "get a free phone, just sign up"), you should have a < $50 phone plan. No home line. $100 saved. $50 cost.
Tell your friend you are sorry, you can no longer cover their auto insurance, because you owe 10s of thousands of dollars of debt and need to pay it off. Give them 1 or 2 months warning. $100-$150 saved, $200 cost.
Keep sending the home country money. I am assuming this is a lifeline for one or more people. $150 cost.
$1000 credit card, $450 auto loan, $750 personal loan.
Total: $2200/month debt servicing.
Income after taxes: $6500/month.
Annual interest on debts: 16000*.07 + 32000 * .22 + 18000 * .17 = $11220, or just over $1000/month. Note that this is lower than your servicing.
Grocery: Get a small freezer. Buy some protien you like in bulk, freeze it in freezer-safe bags, raw. Cook batches, spice it. Freeze some. Add a cheap starch. Selection of vegtables (including freezer veg). Buy the "cheap option" (Ie, organic or not? Not.), and go to the cheaper grocery store.
Have a weekly meal plan. Always eat what you cook. Always. Eat it all, and only it. Bring lunches and snacks to work. (Eating out comes out of your $50 a week spending money, which doesn't go far.)
Note, this can easily consume 5 hours a week in food prep. Budget for that. It'll probably eat in into your existing hobbies and socialization, but cooking can be a hobby, and you can even socialize by inviting friends over to have your home-cooked food once you get half-decent at it. (Feeding people this way isn't free, but is much cheaper than going out to socialize usually)
Unless you are eating ridiculously fancy food, you can manage less than $200/week this way even in an extremely expensive city, and probably under $100.
Gas; I'll say $100/week. Work out what you are spending, make it accurate. Keep receipts for at least a month.
Spending money; give yourself an allowance, say $50/week. Any money left over at the end of the week goes into the "I win" jar. Record how high you can get your "I win" jar.
Clothing and misc budget; Start with $50/week. Yes, this means you don't get to buy new clothes for a little bit.
$300/week, or $1300/month.
1875 + 2200 + 1300 = $5375/month.
You'll note I pinched pennies. This is on purpose; $100 is only 1/65th of your income, but it is 1/10th of the money you need to pay off your debts.
Put $125 into a rainy day fund; a different bank account. The remaining $1000 goes against your debts.
After 1 year, you have a $1000 rainy day fund (example use: your car explodes), $500 capital expense (new freezer), and have paid off another $10000 of debt. You haven't added any debt.
In addition your debt servicing has reduced your debts.
$1000 CC - $587 interest = $413 against principle, * 12 = $5000 paid off
$450 auto - $93 interest = $350 against principle * 12 = $4200 paid off
$750 loan - $330 interest = $420 against principle * 12 = $5000 paid off
And another $10,000 in CC debt paid off. So after the year you'll have
- CC: $15000 (32 - 5 from principle portion of payments, -12 from debt clearing)
- Car: $12000 (16 - 4 from principle portion of payments)
- Loan: $13000 (18 - 5 from principle portion of payments)
- Savings: $1000
I'll assume your servicing remains the same, and you continue another year.
$1000 CC - $375 interest = $725 against principle, * 12 = $8700 paid off
$450 auto - $70 interest = $380 against principle * 12 = $4500 paid off
$750 loan - $185 interest = $565 against principle * 12 = $6800 paid off
- CC: $0 (15 - 9 from principle portion of payments, 6 from debt clearing)
- Car: $7500
- Loan: less than $1000 (13- 7 from principle portion of payments, 6 from debt clearing)
- Savings: $2500 (1+1.5)
You just freed up your CC payment. Your personal loan is almost gone. You are now saving $1000 (debt reduction) +$1000 (cc payment now debt reduction) +$750 (personal loan now debt reduction) = $2750/month, or $33k a year.
$0 CC - $0 interest
$450 auto - $44 interest = $400 against principle * 6 = $2400 paid off
trivial interest on loan.
Car: $0 (7.5 - 2.5 principle portion of payment - 5 debt clearing)
Loan: $0 (1 - 1 debt clearing)
Savings: $12000 (2.5+750 saving +10 leftover debt clearing. 1250 capital expenditure)
And that is that. You are financially stable. You have enough savings that if your car dies, you can buy one with cash. (Note: all car loans are bad deals; their interest rates are lies, buying a car with cash gives you a lower price)
Savings: $28000 (12k + 750 saving + 16k debt clearing leftover - 750 capital)
Now you can buy a cheap car with cash and still have an emergency fund.
This is where you want to be. At this point you can consider supporting a friend with car insurance, retirement funds, saving up for a downpayment on a house, buying a fancy phone, etc.
You'll still want to budget. But your budget horizon should now be 40+ years long.
If you followed this budget you'd actually pay things off faster, because I charged you the interest you owe at the start of a year for the entire year, even though it is decreasing as you pay it off.
About 1 year into this process you might be able to renegotiate your personal loan for a lower interest rate.
Sticking to this will be hard. It will feel like you are living like a pauper. But keep your eye on the light at the end of the tunnel.
Depending on your job, you might not be able to keep your clothing budget down that low. Reassess every 6 months.
Ideally build a spreadsheet that lets you enter your current debts and tells you how long until credit card $0 is. That is the key point; once you have cleared that pile of high-interest debt, you can redirect the servicing costs to the next pile of high interest debt. And then you are home free.
Right now, your debt servicing is twice as big as the money you can "free up" to clear your debts.
As you clear your debts, your debt servicing will plummet, which means you get more money to clear your debts, which makes the debt servicing costs go down, which gives you more money, etc.
This is called a "virtuous cycle" -- if you can make serious moves towards clearing that debt you can shockingly quickly get out of it.
The bad news is that the cycle works the other way too. Right now, you can make your lifestyle modestly cheap, and have the space to quickly pull out. Increase your debts by another 50% and you will be forced to have a modest lifestyle to tread water, and it would take a decade or more at that rate to pull out. Another 50% and you'll be in an emergency situation, unable to make your bills.
Here is a spreadsheet that does month-by-month calculations of your current debt. It is set up so that you pay off debts from right to left. Negative values indicate remaining money owed against that debt. Positive values indicate money leftover (that month) after all debts are paid, and are automatically "cascaded" into the debt on the left (the same month).
Each column as a min payment, which is put towards that debt until the debt reaches 0. The "debt clearing" one has a 0 debt, so its money automatically flows to the left (into credit card column). Finally, money left over flows into savings.
By charging monthly interest it more accurately reflects the payoff schedule.
You should make a spreadsheet like this, and check if you are on-track periodically, create new versions to reflect reality, and use it to diagnose errors.
Note that in it, your last debt is actually cleared at the 24 month mark. Then over the last year, you accumulate savings. I assume this is due to the fact that the interest payments I calculate for some of your debts is higher than the result of monthly calculations. That adds up (and compounds), especially on the higher interest debts.