My Debt Blog

So the good people at Fidelity informed me that an existing pension plan has rolled into my new IRA. Right now I have $4723.97 sitting in a cash reserve account not doing anything. There’s a number of various investments I could do with this money. The other option would to take a hit and cash it out. There are things to consider though in order to withdraw money from an IRA.

Right now my Bank of America credit card balance is sitting at $3738.50. This left over amount along with a little extra to the minimum payment already due would clear that card completely. I would really like to rid my life of this stupid credit card, but is it worth the temporary sacrifice of an IRA? This is the debt reduction side of the argument though because I have debt on the brain right now.

My other option is to take that money and invest it in something. Right now with the market actually being down over 20% it means everything is on sale! At some point the money put in at a low point will be worth more as the market comes back up over time.

The last option and sometimes best when you don’t know what to do is to do nothing. There are always two options to every decision in life, something or nothing. Nothing would just keep this money in the cash reserve not doing anything. I think this is where I am at this month, but still weighing my options as I described earlier.

Question for my readers: What would you do: clear debt, invest, or nothing?

Comments(18)

I’m not having a very good July even though it’s only been a week. We can’t pay down debt and on top of that it has gone up because the student loans are growing. My wife got in a car accident, she’s okay but the repairs to the car will clear our EF. I am financially and emotionally drained right now and not sure when I’m going to bounce back.

So where do we go from here? I looked at her student loan statements the other day, she refuses to even bother with them, and the payments make me feel defeated. They can go into a forbearance or possibly economic hardship but we still need to find a way to pay them at some point. I guess for now I will put that issue aside since we have so many other fish to fry.

I know I don’t mention it too much but I still contribute to my 401k plan. I’m down probably 1.5k which is a huge chunk of money. At the same time while it’s down at the moment it will eventually go back up. It is still depressing to see the numbers go down so far and quickly, but that is the risk of the market. I’ve also debated the idea of stopping my contribution in order to increase cash flow to pay down debt.

Our vacation is planned here in the coming weeks and I doubt we can afford to go. My parents are picking up the bulk of our cost but the $600 intended to cover our expense may not cut it. With no EF to fall back on I hope the damage to the credit card will be minimal if we have to resort to it at all. If my parents were not involved in paying for this trip, it would be canceled.

Sorry I haven’t posted as frequently lately but I’m trying to keep the funk to a minimum. I’ll come up with a strategy at some point but right now I’m tired. The stress of the situation could very well be leading to depression. It makes me wonder how much more crap I have to do before things will get better.

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With all the panic and recession talk going on, the markets really dropped. Yesterday and today there were massive sell offs and then a surge this afternoon not only balanced but the DOW actually closed positive to the tune of almost 300 points. I don’t think I have ever seen a roughly 600 point swing in a single day.

I was looking at some of the articles online, believe it or not some companies are still reporting profit. With the massive sell off, I think we will see people with money try to find deals out there to help keep the ball rolling. I would like to see the market return back in the 13k area so it will take some time. Slow growth is one thing but a failed economy is another.

Today feels good though and I can only hope that it continues like this. I’m waiting on some more Q4 earnings to come out yet to see where I personally stand. At the same time I am waiting to hear what, if any, kind of bonus I might be able to get half of after the IRS takes half of it. I wonder if that tax rebate will still be on the table now. Only time will tell what happens.

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President Bush Friday spoke about an economic stimulus package that would be about 1% of GDP, it just needs to be approved now. It is funny how both sides work together when money and votes are involved. The problem we’re seeing with the recent up and down ride on Wall Street may not necessarily be a recession.

Recession by definition is when we actually lose economic growth and GDP recedes backwards. Unemployment usually goes up and people work harder to hang on to their jobs. No matter how you look at it, we’re going to be in for a long up and down ride. They can cut rates and give us back our money, it may not make a bit of difference in the overall trend. So if we’re not in a recession, what has happened?

Slower growth in our economy is causing things to start to balance themselves out. People were riding everything so high, in their house, companies setting record profits, and raising the bar another notch always means higher expectations. Welcome back down to reality. Without a doubt the housing market has taken a hit because appreciation went up so fast, anyone could get a mortgage, and the bubble could not get any bigger. Now the individual making $50k is feeling what was once a $300k house on an interest only mortgage is really like. Panic always creates emotion and emotions can put us into a bad situation.

Monday the US markets were closed but the International markets were freaking out. Indexes in major markets were showing crashes, losing 2-7% in a single day! Then this morning when NYSE opened the DOW dropped like a rock 465 points but later came back up. This month alone I have literally watched my 401k drain away to the tune of hundreds of dollars. What goes up must come down, and the band played on. Why should I be concerned so much about my retirement savings right now? The stock market has a level of risk we accept when our money is involved with it. I’m keeping things just as they are because the sun will shine again and it will gain strength.

One positive thing I seem to be hearing about the tax rebate we could get is people want to pay down their debt with it. Getting out of debt somehow became more important than rushing out to spend. I think our economy would be stronger if we didn’t have to use credit as much or at all. In all due time though we will see what is going to happen with our economy.

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There is so much scare out there about the sub prime mortgage lending damaging the economy. What confuses me is why so much blame is being put on the sub prime loans when it should also be shared by the consumer who signed up for that loan. For anyone who has ever bought a house, there is so much paperwork involved and it is a process to get the financing in order. At closing it can be exciting to just get through that paperwork so you can get the house. Did you have a real estate attorney at closing explaining and showing you exactly what you were signing? I did and know exactly what I am dealing with regarding my loans.

If someone buys a house they simply cannot afford, should it become a problem for the government to bale out people using taxpayer dollars? Our government will bale out corporations due to limited liability, sends money overseas as aide for other countries, but can’t help the average Joe save their home? The government is not going to make a person more responsible by helping them save their home. Regulation isn’t going to fix the existing problems of people trying to borrow 500k and pay 1k a month. It all seems fine until the payments adjust out of control and there is no way to handle the new payment.

When I got my house a year and a half ago, my credit was good and the time seemed right because I was getting married. Instead of doing one lump loan for 30 years, I did 100% financing through 2 separate loans. My first is a 80% 7 year ARM at a much lower rate than the fixed loan, lower payment, and no PMI. The second is a 20% HELOC which made up for the difference and structured the loans so I would not have to pay closing costs. This seems stupid to me now to have done it this way when I had 10k sitting in the bank. I did end up paying off my car and going on a completely paid for honeymoon, so what’s done is done.
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I can remember all the way back when the postal stamp was only 22 cents. Then it jumped to a quarter, then 29 cents in the early 90s. By the later 90s and early 01 it got to 34 cents, then seemed to rapidly go up to the former 39 cent rate. Now we hit 41 cents for a stamp, but not just any stamp, a forever rate stamp.

Now think about what the bulk of the mail you get daily that keeps the postal service working the way it does. Most of it is junk mail! I may filter through a bunch of credit card offers, student loan refinance offers, insurance, etc just to find my billing statements. Then if I pay a bill the old fashioned way, writing a check and mailing it, I must throw a stamp on it just to get my payment back to them. They waste money to advertise to me yet it cost me money to pay them.

Now we have come to the great new era of online banking and electronic payment. Why get your statement in the mail and pay by check when you can view the account online, schedule a payment to be made directly at the time you do it, no waiting, no worries, no additional cost. I think it is because of how many use the Internet to pay bills is causing the decline of having to mail letters with stamps. We still need them to ship larger letters or packages though, unless someone figures out a way to do that over the Internet I would suggest getting a patent on that process.

Back to the new concept of the forever stamp, how good of a deal is it? Sure you could invest in a ton of these things at the current rate, but what if we get to a point where there is no longer a need to use them? Give them a few years to see if they pan out, but I am skeptical about this idea of a stamp being good forever at the rate you paid for it. There are better things to invest your money in, stamps are not it.

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