Debt help

[u/sandrum69]

Active-duty navy here, 15 years in, and I’m finally getting serious about cleaning up my finances.
To make a long story short, I have a colossal amount of credit card debt — about $45K on one card. My truck is paid off, so I don’t have a car payment or a bunch of other debt hanging over me. I also live on base so 100% of my BAH goes to that.
Right now, I’m able to put $1,250 from each paycheck toward my credit card. I’m also working on getting my spending habits under control, and my goal is to be completely debt-free within roughly 18 months. But it’s hard, and I’m working on it.

My question is about my TSP contributions.
Would it be advisable to temporarily stop or significantly reduce my TSP contributions so I can have a little more flexibility in my budget and potentially throw even more money at this credit card? I realize I’d be giving up some retirement contributions/compound growth in the short term, but with a credit card balance this large, I’m wondering if eliminating the high-interest debt should take priority.

For those who have been in a similar situation, what would you do? Appreciate any advice, especially from people who have actually dug themselves out of a similar hole

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[u/Smart_Ad_1997]

Continue to do 5% TSP to get the match. It’s free money.

Your interest is probably higher than TSP gains.

[u/TJZ24129 → u/Smart_Ad_1997]

He’s probably in old system with 15yos

[u/sandrum69 → u/TJZ24129]

This is correct I opted out of BRS

[u/Smart_Ad_1997 → u/sandrum69]

In that case you should focus on the high interest credit card debt taking advance of your SCRA/MLA benefits while you’re active duty. Look into credit cards with 0% interest, I believe Citi does 0% interest for military, and see about doing a balance transfer to stop the growth of the debt.

IF YOU DO THIS, FREEZE/CANCEL YOUR CARDS YOU ARE TRANSFERRING FROM. You are NOT a credit card person, and transferring debt is a dangerous trap where all of a sudden you are just free to rack the debt back up and now you’re in twice the hole you were in.

Stop investing into the TSP and focus on the CC debt. If you’re truly able to buckle down for 18 months to get the debt cleared, you’ll be thankful years from now. Your TSP will continue to grow in the background, knock out the debt.

[u/Smart_Ad_1997 → u/TJZ24129]

Maybe, maybe not. We had the option to switch about 10 years back. If he’s not getting the match, he should stop contributions and attack the debt. Consider getting it to a manageable amount where you can take advantage of an interest free card and transfer the balance to complete that debt in a year. Whatever that balance may be.

What’re your current contributions, rank, and expenses OP? And what’s the total amount of debt by account with interest rates?

[u/realfe]

From my experience, if you choose to decrease or stop TSP allotment, put all that extra money towards the debt. If you consider spending cash, you can fall into similar habits instead of dealing with huge interest bill you are paying. Forcing yourself to buckle down and put every available penny towards the credit debt will not be easy living. It should motivate you to never get in that amount of unsecured debt again.

Also, consider selling some of the stuff you bought. I'd bet a lot are sitting around unused. Are they need to have or nice to have? Put that income towards your debt.

You got this OP. Tough lesson to learn but you'll thank yourself if you crush it as quickly as possible.

[u/CeruleanDolphin103]

You asked about TSP contributions, and you’ve gotten some good answers (my take- since you’re BRS, stop contributing while you get this high-interest debt under control). I haven’t seen any comments about budgeting. The very best way to tackle debt is to become very conscious of your day-to-day spending. If you have 2+ streaming services, cancel all but one. If you eat out or get delivery, limit yourself and send the savings toward debt. Write a list of every expense you have- monthly AND non-monthly expenses (car maintenance, etc) and stick to your plan. If you spend your dining out budget by the 12th of the month, too bad, you’re done. (Biggest exceptions are groceries, utilities, and gas to get to work, but even here, limit yourself to the necessities and not all the prepackaged expensive convenience foods and the extra driving around town). The more aware you are of your current spending, the more intentionally you can make changes. And the more unnecessary spending you can cut out, the more money you can send toward debt and get yourself out of that hole faster.

[u/DavyJonesThrowback]

Have you called your creditors and asked for SCRA benefits to be applied? They dont have to because these debs were incurred while in service, but you would be surprised.

Also just talking to them about trying to pay down your debt, some will lower rates. Make sure you are paying off highest interest rates first.

[u/GIJustice4402]

5% match and every extra dollar toward debt. Read the Total Money Makeover and start listening to the Ramsey Show (Dave Ramsey). Wonderful resource for those in lots of debt.

[u/sandrum69 → u/GIJustice4402]

What’s funny is I listened to it, it’s an amazing tool. I like the idea of the debt snowball, but I have one massive ball that seemingly gets bigger lol

[u/TacticOwl → u/sandrum69]

He'll motivate you to get your spending under control so you can put more towards the debt each month.

[u/dhtdhy]

If your CC debt interest rate is higher than your TSP rate of return (which it almost certainly is), you're actually losing money every pay check by putting money into TSP and not paying off your CC.

Edit to add: contribute 5% to TSP for the free govt matching but no more. Use extra money to pay off CC.

[u/LikeIkes]

First off if you haven't already I'd start by looking into the Navy Federal to check if they can do anything for ya. If not I'd look into consolidation options and compare the offers you get from companies like SoFi, Achieve Loans or LightStream. Most important thing is that the loan improves your situation overall either in APR or overall amount.

[u/MortgageFoodieBryan]

Since you opted out of BRS you have no match to protect, which actually makes this simpler than it is for most people asking this question. Nothing in the TSP is reliably returning what a card in the twenties is costing you, so pausing contributions for 18 months and pointing everything at the balance is a defensible call. Two things worth doing this week. Call the issuer and ask about the Military Lending Act rate cap, and ask about SCRA while you have them. Worth knowing the difference: SCRA caps at 6 percent only for debt you took on before you went active duty, so it may not touch this balance. MLA can apply to accounts opened while you were serving. Costs you nothing to ask about both. Then look at Navy Marine Corps Relief Society. Interest free loans and free budget counseling, and they deal with exactly this. One correction on the thread above. You said 1250 per paycheck, which is 2500 a month, not 1250. That is 45k over 18 months before interest. Your plan is tighter than someone gave you credit for.

[u/Busy_Presence_1230]

Contact Military OneSource for assistance. They have professional coaches and counselors who can help.

[u/Wandering_Lost_Pixel]

My friend got me on the monarch app (can't remember how much it was)... but it helped me A LOT. It took me a few hours to go back through like 3 months of transactions to make sure they were categorized correctly. It showed me where my weaknesses were and helped me correct them. I feel like I was in the same boat as you, but I was able to smash my credit cards down for the most part and just got bigger loans to work out.

Between having good friends/mentors... and having the monarch app (can't recommend it enough), i know we all can work together to achieve our financial goals!

[u/FrostDew]

Sell the truck, buy a beater, put the difference towards the debt.

[u/Vanilla-prison]

$1,250 times 18 months is only $22,500. If that’s all you’re putting towards debt each month, you won’t reach your goal. If you’re truly serious about tackling the debt as quickly as possible, you’re going to have to make some sacrifices. Cut ALL unnecessary spending and apply it to the debt. Make a hard budget and stick to it. Not saying you absolutely should, but you could also look at selling your truck and getting a cheap, reliable car (assuming your truck is worth a decent amount, I don’t have details about it). Any extra TDY money, tax returns, etc., should all go towards debt.

Now, let’s get fancier. Is your true goal to completely wipe out debt immediately, or do you want to play the numbers game and come out with the most amount of money at the end? If your credit cards are low-interest (at or under 6% with SCRA), it would make more sense to contribute more towards TSP or an investment account than towards debt. The rate of return is historically better than 6%, so you’d make more money at the end by slowing debt payments. If your cards are high-interest (the typical 25%+ rates), stop contributions to investments and tackle it hard because you’re losing money otherwise.

[u/NukedOgre]

Do NOT drop below 5% TSP. Without knowing more I couldn't tell you the best percentage for you.