Wise or Foolish financial move?

[JonC]

I guess what I'm trying to say, John, is that every dollar has an opportunity associated with it. When you go into debt then you give away that opportunity. The wise thing to do with that $400+ a month you'll be paying on the computer for the next 3 months would have been to pay off the IRS. You said you owe 1k, a bit less than the computer. Pay that off and then reassess your situation. But if you can't pay the IRS 1K then it doesn't make sense to finance a 1200 computer.

That said, the only reason I'm saying this is you asked for our feedback. I think it was a foolish decision. But it is your decision to make, not mine. I certainly don't mean to belittle you for making that decision....I've made enough financially foolish decisions in my lifetime to know better (and to recognize one).

The borrower is indeed slave to the lender. I truly hope that you are one who does not get in trouble with debt. Experience is the best teacher, but it is sometimes best when that experience is not your own.

 

[Rolfe]

I'd like to pay it off ASAP without depleting my emergency fund.

I would suggest that if able, you should not run down your emergency fund, but build it up. It may be needed later. If you cannot pay your computer off before the interest kicks in, then raid it. I think that there is something legitimate about feeling the oppressive burden of debt. If it bothers you, or if your wife is feeling it, pay it off with the fund.

Look at this episode as an educational experience. Learn to say no. Toys are not worth the headache of unsecured debt.

 

[InTheLight]

What if I had a real emergency? Are you saying I should just make min payment on the CC? I don't think so as I want to pay off the laptop debt ASAP.

I don't know the terms of your offer. If it is a 0% credit card, those typically have a deadline on them, say "0% through June 2016 on all purchases". If this is the case:

1. Stop using the credit card for anything else.

2. Take the number of months of 0% interest and divide it into the purchase price of the computer. In my example (above) that would be $1,272/12 month or $106 per month. Make sure you pay at least $106 per month. The idea is to use the free money but pay off the entire amount before the promotional rate expires.

3. Stop using the credit card for anything else.

My IRS debt I won't be able to pay off as easily so that debt I just make min payment, but the laptop debt is doable with my income.

Wait a minute...you have a debt with the IRS? Typically they charge interest, and it's at an exorbitant rate. Am I correct? If so, that debt is your payoff priority. You still need to make your 0% credit card payments, but you need to pay off the IRS debt in bigger chunks than a minimum payment. If you had the cash for the computer and your IRS debt is $1,200 or less I'd pay off that IRS debt in one payment. Otherwise it will bleed you with accumulated interest charges as bad or worse than a credit card.

This is one reason Dave Ramsey is wrong. He says no credit cards, no credit cards!!! But without one I would not been able to handle the IRS. Its unfortunate they had to bomb me, but I am glad their debt is on a Credit Card verses owing them money directly.

Can't speak to Dave Ramsey, haven't listened to him. I will say that he's wrong to say "no credit cards ever."

So, you put your IRS debt onto a credit card? Is that right? If so, that affects my previous advice. Please tell me that credit card interest rate is less than the interest rate if you were making payments directly to the IRS.

Are there two credit cards in play--one at 0% with your computer purchase on it, and another one at X% with your IRS debt on it? Or are they both on the same card?

If there is only the one credit card being used, it complicates the problem. If you make only the minimum payment the credit card company will apply your payment to that part of the balance with the lowest interest rate. If you make more than the minimum amount they are required by law to apply that amount to the balance with the highest interest rate. (This was one of the few laws passed during the Obama administration that was worthwhile.)

I can't help you unless I know the full story of your credit card debts. PM me and I'll help you out, or if you don't mind, post it here.

 

[annsni]

My IRS debt I won't be able to pay off as easily so that debt I just make min payment, but the laptop debt is doable with my income.

This is one reason Dave Ramsey is wrong. He says no credit cards, no credit cards!!! But without one I would not been able to handle the IRS. Its unfortunate they had to bomb me, but I am glad their debt is on a Credit Card verses owing them money directly.

You bought an unneeded computer when you have credit card debt with the IRS???????? I guess you never really listened to Dave Ramsey.

 

[Rolfe]

Wait a minute...you have a debt with the IRS? Typically they charge interest, and it's at an exorbitant rate. Am I correct? If so, that debt is your payoff priority. You still need to make your 0% credit card payments, but you need to pay off the IRS debt in bigger chunks than a minimum payment. If you had the cash for the computer and your IRS debt is $1,200 or less I'd pay off that IRS debt in one payment. Otherwise it will bleed you with accumulated interest charges as bad or worse than a credit card.

Missed the IRS bit. Changes things. I would advise what ITL suggests.

 

[InTheLight]

Missed the IRS bit. Changes things. I would advise what ITL suggests.

I did too. He might have two credit cards, one with the new computer and one with the IRS. Or it could all be on the same card. Hard to give advice until all the parameters are known.

 

[Rolfe]

I did too. He might have two credit cards, one with the new computer and one with the IRS. Or it could all be on the same card. Hard to give advice until all the parameters are known.

Plus any other debt...

 

[annsni]

Plus any other debt...

I know there was medical debt and auto debt (for some reason, took out an auto loan then put that debt on a credit card instead) and 3 years ago, that was $6,000.

http://www.baptistboard.com/showpost.php?p=1848641&postcount=30

 

[evangelist6589]

I do not use this one CC for anything and since it is maxed out I cannot use it for anything. I got this CC to transfer 2 other CC's to it and that I did. The promotional rate of 0% on balance transfers and purchases expires May 31st 2016 and after that up to 16.99%. Counting the other CC's, my wonderful IRS debt, and this laptop the card has been maxed out at $6,000. However the good news is instead of paying debts to 3 different credit cards, I know only pay to 2 different creditors and the other card has been closed. Perhaps I should close this card as well to prevent any further charging to it. What say you?

I don't know the terms of your offer. If it is a 0% credit card, those typically have a deadline on them, say "0% through June 2016 on all purchases". If this is the case:

1. Stop using the credit card for anything else.

2. Take the number of months of 0% interest and divide it into the purchase price of the computer. In my example (above) that would be $1,272/12 month or $106 per month. Make sure you pay at least $106 per month. The idea is to use the free money but pay off the entire amount before the promotional rate expires.

3. Stop using the credit card for anything else.



Wait a minute...you have a debt with the IRS? Typically they charge interest, and it's at an exorbitant rate. Am I correct? If so, that debt is your payoff priority. You still need to make your 0% credit card payments, but you need to pay off the IRS debt in bigger chunks than a minimum payment. If you had the cash for the computer and your IRS debt is $1,200 or less I'd pay off that IRS debt in one payment. Otherwise it will bleed you with accumulated interest charges as bad or worse than a credit card.



Can't speak to Dave Ramsey, haven't listened to him. I will say that he's wrong to say "no credit cards ever."

So, you put your IRS debt onto a credit card? Is that right? If so, that affects my previous advice. Please tell me that credit card interest rate is less than the interest rate if you were making payments directly to the IRS.

Are there two credit cards in play--one at 0% with your computer purchase on it, and another one at X% with your IRS debt on it? Or are they both on the same card?

If there is only the one credit card being used, it complicates the problem. If you make only the minimum payment the credit card company will apply your payment to that part of the balance with the lowest interest rate. If you make more than the minimum amount they are required by law to apply that amount to the balance with the highest interest rate. (This was one of the few laws passed during the Obama administration that was worthwhile.)

I can't help you unless I know the full story of your credit card debts. PM me and I'll help you out, or if you don't mind, post it here.

 

[evangelist6589]

I did too. He might have two credit cards, one with the new computer and one with the IRS. Or it could all be on the same card. Hard to give advice until all the parameters are known.

I have another credit card that was closed some time ago and of which I am paying off the balance. Fortunately I only pay $9 a month in interest on that card.

My wonderful IRS debt, the laptop, and my 2 other credit cards were transferred to this one Credit Card maxing it out at $6,000.

 

[InTheLight]

You built a PC with 16MB Ram so you know all about eBay. I can't figure why you need to run Windows 3.11 or Windows 95 but you must have old apps.

You want models? Mac Performa 6360. Mac Quadra, Mac LC 475,etc.. We have some 68K and PPC units here.

My bad. My computer has 16GB RAM, not 16MB. LOL! Sorry for the mistake. I'm running Windows 7.

 

[evangelist6589]

I know there was medical debt and auto debt (for some reason, took out an auto loan then put that debt on a credit card instead) and 3 years ago, that was $6,000.

http://www.baptistboard.com/showpost.php?p=1848641&postcount=30

My total Credit card debt these days is $6,000 for this card and $2,600 for another closed card.

I was doing well and paying down my balances until the stupid IRS got me and I had to charge allot to my credit card to pay them the money I owed them. After that I got depressed and defeated and made this laptop purchase. I lost my confidence.

But this year I have not made the same mistake in withholdings after each check as I selected the zero option so they will withdrawal correctly.

 

[InTheLight]

I have another credit card that was closed some time ago and of which I am paying off the balance. Fortunately I only pay $9 a month in interest on that card.

My wonderful IRS debt, the laptop, and my 2 other credit cards were transferred to this one Credit Card maxing it out at $6,000.

OK, and how much of that $6,000 balance is at 0% interest?

 

[evangelist6589]

My bad. My computer has 16GB RAM, not 16MB. LOL! Sorry for the mistake. I'm running Windows 7.

I thought so. Who would run Windows 95 in this day and age?

 

[evangelist6589]

You bought an unneeded computer when you have credit card debt with the IRS???????? I guess you never really listened to Dave Ramsey.

I sure hope I can sell my present MacBook for $400 or more and apply it to the balance.

 

[evangelist6589]

OK, and how much of that $6,000 balance is at 0% interest?

100% is zero percent interest.

 

[InTheLight]

But this year I have not made the same mistake in withholdings after each check as I selected the zero option so they will withdrawal correctly.

Well, if you selected zero on your W-4 that means your employer will withhold the maximum amount from each paycheck. Which means the IRS will be overpaid a little bit each week, which means you'll get a refund next year when you file your taxes. Ideally, if the withholding is set up correctly you want to neither owe them or get a refund.

 

[evangelist6589]

Well, if you selected zero on your W-4 that means your employer will withhold the maximum amount from each paycheck. Which means the IRS will be overpaid a little bit each week, which means you'll get a refund next year when you file your taxes. Ideally, if the withholding is set up correctly you want to neither owe them or get a refund.

Which would be what option? Getting a refund will mean money to savings and money against my CC debt.

 

[InTheLight]

100% is zero percent interest.

OK, that makes it a lot easier. How long does the 0% rate last? When will it expire?

 

[evangelist6589]

OK, that makes it a lot easier. How long does the 0% rate last? When will it expire?

I mentioned this in a previous post but may 31st 2016. So what shall I pay? I plan to make big payments to pay off the $1200, but that may deplete my ability to save.

However ultimately my BIG problem is my income. I make a little less than 30K a year, and my wife whom makes 40K does not help me pay off my credit card debts.