This is a blog about debt and my efforts to reduce it. For the past two years I have diligently worked on reducing my debt, but this month, I purposely added over $20K of unsecured debt to my credit card on purpose all on one day. I know that some of you are cringing now, but here is why.As I mentioned a few months ago, I have a tax liability of about $10,500 owed to New York State left over from when I close my business. I knew that I needed to confront this head on this year, and now that I have gotten rid of one student loan, paid off two credit cards, the car, the bed, and all other debt with the exception of 3K on one credit card, two student loans and the HELOC, I thought that now was the right time to address it. By ignoring the tax balance it was accruing interest every single day which did not help.
I also wanted to avoid the government putting tax liens on any property that they associated with me, garnishing my wages, freezing tax refunds and the like. It was simply easier for me to address it now than before when I was literally drowning in debt.
One of my credit cards had a 0% balance transfer offer with the rate valid through the end of the year and a 4% transaction fee ($424). I thought that it made sense to do the balance transfer and commit to paying it off by the end of the year. This means that I have to pay a minimum of $1,000 each month to pay this balance off before the end of the year. I wondered if I could really do it but I realized that I can, and will. What it will take is committing the full amount that I receive from the rental property (currently $525) plus what I would have been paying for the car ($450) and a little extra mad money.
As most of you know, I had intended on getting rid of my tenant from hell when her lease expired in April. Now, I am questioning if I should because:
- A program pays 80% of her rent and the are always on time;
- I will lose at least 1 month worth of income between when I boot her out, fix the place up and get it rented again;
- Readying the apartment for another tenant will have cost me some money out of pocket;
- However, if I do get rid of her I can probably raise the rent to $575 netting an extra $500 over 10 months which would essentially make up for the lost revenue of the one month between getting rid of her and renting it to someone else.
These are serious things to ponder. But then, I said that I added $20K to my debt and I’ve only told you about $11K so far. Remember my gripe earlier this month about my student loans? For those of you that missed it, I was bitching that I’ve diligently paid my undergraduate student loans for 10 years and most of the money that I have paid has gone to interest. In fact, I have paid off one graduate school loan but the undergrad loan seems like it’s not budging and I have $9,400 left on that loan at a rate of 7.20%. It’s not
budging.
Another credit card was also offering me 0% interest until December. You know what I did, don’t you? I transferred $8K from my credit card to my bank account. I plan on using that money to help pay off the student loan while paying off that debt by the end of the year. It will take about $670 per month to accomplish that.
So, between these two bills, I now have to pay out $1,670 per month. My take home pay is $2,400 per month and I have to pay other things. Can I do it? I think that I can if I step up my advertising with this blog, work on selling things on eBay more, get a part-time job at Home Depot, and sell blood. I will kidding about the last part. But I basically plan on grinding it out like I did in my teens. My 32 year old body might not make it. Pray for me.
So, that’s how I added $20K to my credit cards in one day. Granted, I could have obtained a personal loan or taken an additional draw from my HELOC but it would not have been at 0% interest, and I don’t want to secure my debt with the house. I would like to thank Chase and Bank of America for being complicit in helping me add to my debt. I have to say that the customer service person at Bank of America was awesome! I don’t know how often people ever say that, but I was seriously happy with their service. When I called asking them to drop my regular rate down, increase my credit limit, and give me a 0% balance transfer, I really expected them to say, “Are you smoking something.” Alas, they didn’t. Not only did they do all of those things for me, but the customer service person was genuinely nice. I even gave him some advice on working on his debt load.
So, there you have it. Call your credit card companies people! If you are a decent customer making all of your payments on time and you don’t have a lot of unsecured debt they just might work with you. Now pray for me and visit my sponsors in the sidebar. 🙂
This post was included in the Carnival of Personal Finance #297 hosted by Money Smart Life.