The worst part about my credit card debt is that I have never used them to purchase anything really big. Several years ago I was facing unemployment and had to use the cards to pay some bills and to get by.
The Problem
The mistake I made was sitting on the interest while making the minimum payments. Couple that with the use on a few vacations to pay for accommodations and gas and my credit card debt is around $20,000 on four different cards.
The Solution
My first task in becoming debt free is to remove that credit card debt. I have a 403(b) annuity account that I will be able to borrow against in a few months. The advantage to this is that I will be able to borrow from myself and pay myself back with interest.
Generally you don’t want to go into debt to erase debt but in this case borrowing against myself will be beneficial for three reasons. First, even though I will be repaying my annuity with interest it will be at a much lower rate than the credit cards. Secondly, my monthly payment back to the annuity will be less than a payment to a credit card. Thirdly, the interest paid back to my annuity will eliminate any interest lost by not having that lump sum in my account.
In essence what I am doing is eliminating a high interest debt for a lower interest loan against myself and increasing my monthly cash flow by not making such a great payment each month.
My goal is to attack my credit card debt one card at a time beginning with the lowest balance and working up to the highest. My commitment is to pay off the annuity loan as quickly as possible in order borrow again. I’ve also stopped the use of credit cards.
The Problem
The mistake I made was sitting on the interest while making the minimum payments. Couple that with the use on a few vacations to pay for accommodations and gas and my credit card debt is around $20,000 on four different cards.
The Solution
My first task in becoming debt free is to remove that credit card debt. I have a 403(b) annuity account that I will be able to borrow against in a few months. The advantage to this is that I will be able to borrow from myself and pay myself back with interest.
Generally you don’t want to go into debt to erase debt but in this case borrowing against myself will be beneficial for three reasons. First, even though I will be repaying my annuity with interest it will be at a much lower rate than the credit cards. Secondly, my monthly payment back to the annuity will be less than a payment to a credit card. Thirdly, the interest paid back to my annuity will eliminate any interest lost by not having that lump sum in my account.
In essence what I am doing is eliminating a high interest debt for a lower interest loan against myself and increasing my monthly cash flow by not making such a great payment each month.
My goal is to attack my credit card debt one card at a time beginning with the lowest balance and working up to the highest. My commitment is to pay off the annuity loan as quickly as possible in order borrow again. I’ve also stopped the use of credit cards.
3 comments:
I don't think credit cards are bad. I just think you made wrong choices when using them. It's choice. They didn't make you use them. Good luck. Pay'em off.
-Finance ninja
http://financeninja.wordpress.com
Hi, I want to say it looks like you have a good plan, stick with it and you will be alright. Good luck and take care. Bill
Thanks for your comments. I'm obviously a work in progress but am hoping that this blog will also give me some accountability as well.
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