Thoughts on Debt
June 13, 2010 9 Comments
I’ve been putting together a new budget for my new job and new salary and I can’t help but notice how long it is going to take me to pay off my debt. At my current position I get 10% of my salary to retirement with a 0% matching contribution on my part. This has been nice and in the past 2 years I’ve gotten about $10,000 in retirement benefits.
At my new position I will be given 3% retirement without a contribution, but they’ll match up to 6%. And since I’m not one to throw away free money I will make sure that I put in my 6% to get my matching.
I also know that my car is pushing 8 years now and realistically I need to start saving up money now for repairs and eventually a replacement car. I’m looking for my car to last another 5 years, but there will definitely be repairs that need to be done to make that happen.
The moral of the story is that this debt is holding me back significantly.
With the budget that I’m looking at, I’ll be paying $750/month towards my credit card debt. This will be another year and 8 months to get this debt gone. This is just unacceptable. 100% unacceptable.
For those of you who follow my net worth, I have about $7,000 in investments that aren’t retirement. Around $1,300 in stocks and $5,900 in mutual funds. One reason I haven’t sold these investments is because I got them as insurance benefits from my mom and my brother passing away. In some way I feel that when these are gone, so will some part of them will be too.
However, this is money that I could use to pay down my debt. The $7,000 in these investments would reduce my credit card balance from $11,000 to $4,000. Then paying $750/month it will only take 6 months to get rid of the debt.
I have a few fears about this:
- I’m afraid of these stocks and mutual funds being gone because they serve as a mental safety net
- I’m scared of losing the memory of my relatives that exist in these funds
- I’m concerned that now isn’t the best time to sell my investments as the market isn’t strong
- I’m frightened about taking this money out to pay down my debt and then racking up more debt in the future and being stuck with debt and no “safety net” of these mutual funds and stocks – though – based on how much I’ve grown financially in the past 2 years, this seems unlikely
However, the benefits of being able to be gone with this debt, start building an adequate savings, know that I’ll be able to pay for a new car outright when I need to, to get an emergency fund to an acceptable level and be able to start saving for IRAs would be nice. All of these are things I can’t do as long as this debt lingers on.
Another idea is to pay down my debt until these funds equal my debt and then use it to pay it off. This may not be the best in terms of interest, but it could give the market time to rebound and in 6 months from now I’ll have the debt paid down to ~$8,000 using my current budget.
We’ll see… these are the thoughts I’m mulling over right now… It is a scary idea, but the freedom in my budget by getting rid of my credit card debt is exceptionally tempting. I hate this debt. I hate it so much.