Question: All advice greatly appreciated . .
I owe about $15,000 (credit cards and 1 personal bank loan).
I’ve no mortage (house purchased for $217,000.00 in September of 1999) and recently paid cash for my car ($20,570.85 after a trade-in allowance of $3,256.00).
I’m considering re-financing my personal loan (about $3,000 o/s) and paying everything off. I’ll keep one credit card for emergencies (and get the limit cut back to $1,000.00), get rid of all my department store cards, include enough in my new loan to pay cash for all X-Mas gifts then start fresh and really get my finances in order.
(I’m single – separated for 11 years, actually – and supporting a 16 year old son. My annual salary is approx. $50,000).
Thoughts/advice/words of wisdom, please.
Answer: If you had a $100,000 mortgage most reasonable people wouldn’t consider that you were over your head in debt. I’d think most people would say you’re in pretty good financial shape, having a total indebtedness of only $15,000. Presumably, besides what you’ve told us, you have some savings, a retirement plan, a 401-k, some investments, some assets of some kind in addition to the house and car.
Pay off the personal loan and the cards and you’re as completely in the clear as anyone could hope to be.
If it’s the loans that bother you, borrowing *more* for holiday shopping isn’t going to make you feel better. Contrary to what you say, you wouldn’t be paying “cash”, you’d still be taking out a loan, it just wouldn’t be on a credit card. If you want to be completely debt free, don’t borrow more and pay off the debt you have. Rolling high interest debt over into low interest debt can be worthwhile – corporations and governments do it all the time. It sounds like you have your priorities in order though. Some people may have used the extra money for vacations, cars, furniture or other things that depreciate. It also sounds like you know how to save – it takes discipline to save for a car for 6 years. I wish I had started saving when I stopped my own car payments 10 years ago – even a paltry monthly amount would have made a difference by now.
I think shopping should be like eating. If someone wanted to lose weight, the best way to get & keep a goal is to exercise and eat healthy, NOT to just stop eating carbs, or chocolate, or whatever else people do when they restrict themselves. If you enjoy shopping, great. Do more window shopping and less of coming home with stuff. Make it a point to look around for a similar item & see if you can find a better price (if you leave the store w/out something that was an eyecatcher, it will most likely be there the next week).
I found that I really cut my impulse catalog buys by marking the page and then putting in a folder called ‘catalogs’. (I still feel stupid doing this – as if such a trivial item warrants space in my filing cabinet!). Every once in a while I check it out and sometimes have said “what? THAT hideous thing!” It’s funny how desires can change like that.
Have patience, try to pay off just a little more than you think you can – even $5 or $10 more is something towards that CC balance. There’s nothing wrong with transferring the balance to a lower-interest cc but do all the math: when does the introductory offer expire? What is the interest rate after that? Are there any fees involved?
It sounds like you’ve been through some rough times, and have pulled out of it. Congrats on leaving an abusive marriage – that can be enourmously difficult. I’m sorry to hear about the death in your family, and I’m glad that you’re able to honor them by putting the money into a good investment.
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