Here’s a heartbreaker for you. It’s a posting from the Personal Finance SavingAdvice forum :
I have about $13K in credit card debt with approximately 9.2% APR. I recently got approved for a credit card with 0% APR on balance transfers for 15 months. I got approved for $7,500 only. If I call the credit card company, can they increase my credit limit to $13K? I would really like to transfer all my debt into that new credit card and pay off as much as I can before the 15 months expire.
I have $2,500 that I can use to either use to invest or pay my debt with. I am also expecting $3K from my work stock in May. What should I do with the $2,500 and $3K? Should I invest them or just use them to pay off my debt?
This post reminds me a lot of my own bad money situation a few years back. I too had some money, but not enough to pay off my credit card debt. I also considered investing it instead of paying off the debt. I figured that I could not pay off all the debt in one shot with this money, but if the money grew in the stock market I could use it then to pay off the debt.
Then I realized that it would have to grow at about 50% per year in the stock market before I could pay off the debt, and that the debt would only grow while I waited for the stock market to rise. Besides, if the market took a tumble I would be even further behind.
But here’s the truly sad part of this story -it appears further down the thread, when the user posts a reply:
Thank you all so much for the response. I make $2,330 a month net. I pay $600 for my car, $500 for rent, $60 for cellphone bill, $110 for car insurance, $110 for student loan, $140 for gasoline, $10 – Netflix, $15 – XM radio subscription, $400 credit card. The rest is my budget for food and entertainment. I have $1,000 in emergency fund. I have around $3K stock option which I’m planning to cash out in May. I have $10K in 401K which I will never touch.
Check that out – this person pays more for his car than his rent!
I never paid that much for my car, but that’s probably because I had a 5 year loan and stretched the payments out. I may have paid more over the term of the loan than this person, but it’s the rest of his expenses that hit home for me – $60 cell phone bill, $10 Netflix, $15 XM radio and $400 in credit card payments – per month!
That $400 is paying for things he didn’t need, as well as some spending while unemployed (I edited that out of the quote for the sake of brevity). I too spent a little bit here and a little bit there on things I didn’t need, while paying for the things I already bought (and didn’t need).
The thing is that we get in the habit of looking at $10 here or $15 there and thinking it’s chump change. “It’s not enough to matter,” we tell ourselves. But look at the bigger picture:
If he cut Netflix and XM totally, and switched to a Tracfone (for example), he could save about $80 a month with that alone. Here are some other ways to look at that $80:
- An extra $960 over a year.
- Over 7% of his 13,000 in credit card debt.
- An additional 20% of his $400 month credit card payment.
This forum posting illustrates perfectly that it’s the big picture that matters, and that small actions can make a big difference.
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