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#3 appeals to you because it's the quickest way to get rid of the pain. That's a natural reaction. But is it the best plan?
Don't rush to pay it off just yet. I think what you should do first is take a moment to figure out how and why you got that far into debt to begin with, because it would be foolish to wind up there again later on.
The general perception seems to be that it's a budgeting issue, but those of us who get seriously into debt usually do so because we are trying to make ourselves happy or supply what is lacking in our lives. In 2003, I was in debt to the tune of just over $100,000. I had often spent money on luxuries because they made me feel good. Too many times I had volunteered to pay for meals or hotels or purchases when the man I was involved with would step back -- it just seemed easier to pay rather than start an argument. In short, I was making poor decisions based on emotion and avoiding conflict. And I wasn't getting much sleep because of worrying about the debt.
Your situation is different, I'm sure, but you really need to do some self-examination. My debt was erased by a kind person who didn't want to see me suffer. After that, I went for a long period without using credit cards at all, until my "angel" said he was sure I would be safe using them. I know how lucky I was to have that person in my life, I know what I did wrong and I haven't had a problem with debt since.
If the OP got into debt in the first place, killing off investments is likely to result in another equivalent debt and no investments. "I'm disciplined and I'll never do it again" = you weren't disciplined, and you haven't demonstrated you won't do it again.
I recommend starting with the debt snowball. IF that doesn't work consider going to #2. "Work" here is defined as in a year, are you in less debt than you started this process with?
I understand. I'm giving the benefit of the doubt that OP will become the epitome of frugality and saving.
Do NOT declare bankruptcy and do NOT take money out of your Roth. Best answer is to go on a tight budget and try to find a 2nd job and throw all that money at the cards with the highest interest rates. You may want to start putting some of what you're saving toward this debt too, especially if you have higher interest rates than what you're making in returns on the Roth. But keep what you have in there because it has many years to work for you and that's the best gift for yourself in 40 years. Second best is to get creative on making more money to pay down your cards now.
If the OP got into debt in the first place, killing off investments is likely to result in another equivalent debt and no investments. "I'm disciplined and I'll never do it again" = you weren't disciplined, and you haven't demonstrated you won't do it again.
This is my concern about using the investments to pay off the card as well.
Do NOT declare bankruptcy and do NOT take money out of your Roth. Best answer is to go on a tight budget and try to find a 2nd job and throw all that money at the cards with the highest interest rates. You may want to start putting some of what you're saving toward this debt too, especially if you have higher interest rates than what you're making in returns on the Roth. But keep what you have in there because it has many years to work for you and that's the best gift for yourself in 40 years. Second best is to get creative on making more money to pay down your cards now.
This is what I think, too.
Most people would consider it the harder path in the short run. No guarantees, but the harder path in the short run usually leads to better results in the long run.
Cod3Red, if you keep that 31k invested for the next 30 years and manage a conservative 6% rate of return (well below the stock market's long term average), you'll have $178,000 in the account at age 58 and over $267,000 at age 65. At a still conservative 8% those numbers are $311,942 and $534,614, respectively.
I also think fluffythewondercat also gave some great advice on self reflection. You really need to figure out what drove you to run up this credit card debt. Otherwise, you'll just repeat the same pattern over and over again.
Suck it up and: cut expenses / find a 2nd job / get a better paying job / get promoted. It won't be forever and it will make you stronger as a person. Looking for quick and (seemingly) easy solutions is a trap.
One quick and easy solution is to take a chunk of that 8k in emergency savings and pay some of the debt off right now. The idea is you don't want to have so much money in an emergency fund when your credit card debt is the real emergency.
Dave Ramsey recommends keeping only 1K in a savings account in this situation. I'd say it might be ok to go as high as 2k. But savings accounts can serve as a false sense of security to a lot of people with debts. They look at their savings accounts and it makes them feel better about the debt they have, which allows them to avoid treating their debt like an emergency--I have seen this first hand many times. Taking the savings account down to a minimal level puts the pressure on--but you need to keep the heat on if you want to get rid of this debt. Your debt is an emergency. Treat it as such without looking for a quick fix, "get out of jail free" card. As I've shown above, there are no get out of jail free cards!
It wold be tragic to see you blow your retirement savings on paying off credit card debt when you've already won 1/2 the retirement savings battle (ok, maybe only 1/4 of the battle, but that's still pretty amazing at your age).
Last edited by mysticaltyger; 10-21-2017 at 01:00 PM..
Well I haven’t put anything into it for about 3 years. That’s more then a 5% return on my money, doesn’t sound that bad. I may have earned closer to 2500, didn’t do exact numbers. I also have not done a real budget because my income is so up and down but I have gave myself an amount per month.
My Roth is personal, not through work, I’m not sure if I can borrow from it or not, may have to look into that. However I also mainly want to eliminate his debt not consolidate it
I missed you addressed the budget. You've got to do that. That's the start to everything you can make your decisions months after budgeting
Last edited by Lowexpectations; 10-21-2017 at 12:56 PM..
I personally like the idea of getting a second job to pay off the debt. Not only will it leave your investments intact, but it will also serve as a kind of "punishment" for your prior behavior. Every time you clock in to that second job, you can tell yourself "I'm doing this because I'm an idiot". When the debt is paid and you quit the second job, you will have a greater motivation to never do that again. FWIW, when I was your age and living in expensive Los Angeles I almost always had a second job to get by.
Well I haven’t put anything into it for about 3 years. That’s more then a 5% return on my money, doesn’t sound that bad.
Yeah, actually 5% is lousy in this current environment. Your next order of business is to let us know what you have it invested in. Just to give you an idea, a conservative balanced fund (40% stocks / 60% bonds) like Vanguard Wellesley Income has returned 6.88% annually over both the last 5 and 10 year periods, and 7.39% over the last 15. Something more aggressive like the Vanguard S&P 500 Index fund had a lot more ups and downs, but returned 14.78% annually over the last 5 years, 8.07% over the last 10, and 10.16% over the last 15.
Quote:
Originally Posted by Cod3red
I also have not done a real budget because my income is so up and down but I have gave myself an amount per month.
You need to do one. Actually, instead of a budget, I would WRITE DOWN EVERY PENNY YOU SPEND FOR AT LEAST A MONTH. Most people blow money on stuff they don't even remember. The first step is to identify all the leaks in your spending. Cutting spending may not be enough, all by itself, to get you out of your mess in 2-3 years, but it is the low hanging fruit and it will take you further than you think.
Last edited by mysticaltyger; 10-21-2017 at 01:01 PM..
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