Comments on: Should You Sell Investments to Pay Off Credit Card Debt?

By: lcpc22

lcpc22 — Mon, 15 Mar 2010 03:25:07 +0000

So, in reading all of this I am still at a loss of what I should do. I have $35,000 in credit card debt, home equity of $35,000 (used 34,000), mortagage of $134,000 but I have stocks worth about 90,000 or more…do I sell stocks to rid the debt (not the mortage) or refinance at abouy $210,000? That would bring my mortage payments to about $300 more a month than what we pay now but a savings of about $1300 monthly regarding what we pay monthly to credit cards and home equity.

Any suggestions? Do we refinance and put that debt in the house or cash in stocks that I have had since I was a kid?

By: worktoretiredebt

worktoretiredebt — Fri, 19 Feb 2010 04:27:39 +0000

I realize this is an old post and the days of zero credit card rates have past. However, I ran across this when searching for others who are paying off debt. Yes, I have sold investments when I found that I had gone from no credit card debt to having to put many thousands on credit cards because I didn’t have a proper emergency fund.

Here is what I suggest. Make sure you have a small emergency fund to start, say 1k-2k. Sell everything else, including any “toys” that are money hogs, like a boat or a fancy imported car that is too expensive to maintain. (I was lucky and had no car payments because I drive them till they have over 200k miles as a rule and that usually takes me about a decade.)

Pay down as much as you can by getting rid of the toys and replace any car that you owe lots on with an older car you can buy with cash from the proceeds of the sale and ideally have money to spare from the sale). Don’t ever purchase a depreciating asset on credit again. Then create a good spending plan that is realisticly based on your income. Make sure you aren’t spending more than you make. Target your smallest loan or revolving debt and throw any money you can at it, then target the next biggest and so forth til they are paid off.

After that, create a real emergency fund. A fund that is liquid and that takes into account the risk of loosing a job for 6 months. After that you can begin investing again but only for retirement. Use cash that you’d like to put in investments to pay down your house. I know everyone says mortgage debt is “smart debt” but no debt is much smarter. Why spend all the extra thousands on interest on your home when you could pay it off and be truly able to invest those thousands that would have gone to the banker?

I did this once in the 90′s but the reason I failed to remain debt free was that I didn’t think I would need 6 months salary or at least 6 months of expenses set aside and I also didn’t change my spending. As my income went up I convinced myself I could buy “things” that I “needed” or just pay a few thousand dollars on camps for the kids each year. My money ran through my fingers like water and when the hard times came my plan was shown as being incomplete. Set the emergency fund up and then you can really begin to invest and get rich. Most rich people pay cash…at least those that stay rich. They may set up a company and have others pay them interest but they generally avoid that pitfall themselves.

If you pay off your debt and pay with cash you really feel like you are in control of your life instead of working for someone else. It’s tough, so it’s not for the person who simply looks for a quick fix. Businesses will try really hard to get you to open credit, but cut those credit cards up instead. You’ll be amazed at how great you feel at the other end of the rainbow. There is light there, and peace. The first time you take a dream vacation and really enjoy it because it’s been paid for instead of getting the bill for it when you get back, “IS priceless” .

By: 3d7r5g0

3d7r5g0 — Thu, 26 Feb 2009 16:26:35 +0000

Well, it’s now February, 2009, and I think we all know what should have been done back in August of 2008. Then the Dow was at 12,000+, and nobody knew what was about to happen. If the writer had taken $40,000 out of his funds back then, he would have paid off his debts, and been done with it. The best strategy is using the market to your advantage and knowing when to use that money while it is there, because as we all know now, it can be evaporate almost overnight in a crash.

By: Llama Money

Llama Money — Fri, 05 Sep 2008 15:18:59 +0000

As long as you can keep floating the debt at 0%, I say stick with it. I would personally chuck the funds to pay it off, but I’m uncomfortable with any credit card debt. It sounds like you’re ok with it, as long as it makes numbers sense.

At 8%? I’m out. Pay that stuff off ASAP. But at 0%…. no rush to pay it off really.

By: DR

DR — Fri, 29 Aug 2008 10:00:42 +0000

Scott, as happy as I am to be putting $1k a month toward my debt, it will still take a long time to pay it down. But the debt was for work on our home, so I shouldn’t expect to pay it off quickly.

By: Scott @ The Passive Dad

Scott @ The Passive Dad — Fri, 29 Aug 2008 07:29:45 +0000

You are fortunate to have the option to utilize your home equity. Many don’t have this option or have exhausted the heloc resource. Plus you would get a tax break as well. I would sleep better at night with paying off the debt completely. The fact that you can put $1k a month towards debt is fantastic and you should feel pumped about that.

By: Moolah

Moolah — Mon, 25 Aug 2008 20:56:43 +0000

Toughlove is right, you should never risk your money in investing if you have to pay off debt. You should pay down you debt, and then start investing.

By: DR

DR — Tue, 19 Aug 2008 21:35:59 +0000

Jim and Toughmoneylove, let’s assume you have $100,000 in mutual funds in taxable accounts, and you want to remodel your kitchen at a cost of $80,000. Would you sell your investments to pay for the remodel, or take out a home equity line of credit? Jim, this may fall into your category of mortgage debt, but with different numbers, this is the situation my wife and I faced last year. We took out a home equity, much of which I have now financed on 0% credit cards.

By: jim of Blueprint for Financial Prosperity

jim of Blueprint for Financial Prosperity — Tue, 19 Aug 2008 19:55:56 +0000

I’m with Toughmoneylove, you have to pay off your debt before you even think about investing unless it’s student loan or mortgage debt.

By: DR

DR — Sun, 17 Aug 2008 22:57:02 +0000

ToughMoneyLove, great questions. First, I do have cash flow to pay down the debt. Right now I’m paying the debt down at a rate of about $1,000 per month. My goal is to keep the debt on 0% offers (if possible) until I can pay it off. I suspect that my $1,000 per month pay down rate will go up in the next year to perhaps as much as $2,000 per month.