Case Study: Student Veteran with Hair On Fire Debt! Should I balance transfer?

[T-Rex]

UPDATE: Nevermind the balance transfer stuff in this initial post- I wanna sell my stock and reduce expenses to dig myself out.

Single student veteran in SF. No reportable income (have VA Disability and work under the table) Got hit with thousands in VA debt after dropping classes due to PTSD/TBI. I did not qualify for GI Bill this semester, that’s a done deal. I want to balance transfer to Slate. I have under the table work lined up for Christmas, expecting to earn $300 a week for a few weeks. I’ve been going hungry this month.

Please be gentle, I got knocked out a couple years ago and since then things just haven’t been the same. I find it much more difficult to track and make sense of this stuff. If you have any advice on making it easier to manage budget & finances with that kind of challenge, please share.

CHECKING $900 (paying that much in rent in a couple days) 😥
E FUND $500
INCOME $1500
EXPENSES $900 rent
Minimum $100 transportation
$200 groceries
$100 supplies for school
$200 medical costs
...not sure what else
DEBT $9000 on Credit Card (with interest...)
$3000 owed to dentist (begged them to stop asking for money)
$300 owed to school
Amount <$1000 owed to IRS
INVESTMENTS $50,000 (all that is in Retirement accounts except $14,000 in one stock I’ve been holding to buy a house one day, $850 in 2 stocks)

What should I do? My budget is ultra tight right now, I’m skipping meals every day because I’m afraid to touch E fund since there isn’t much in there, and my housing situation is already questionable. The plan I’m thinking of is:

1. Sell $850 in stocks for cash cushion. 2. Then balance transfer to Chase Slate, because next semester I will definitely be able use my GI Bill benefits ($4000/mo)  to more comfortably pay down the credit card. 3. Then write a new broke budget & try to earn a little money to help until next semester’s GI Bill comes in (probably February).

Can  you help me figure it out, here? What’s your advice, Mustachians? Does anything add up better than that?

[MustacheAnxiety]

I don't know anything about Veteran benefits. Hopefully someone esle will chime in with advice on who to go to to make sure you are getting what you should and where you can get help with PTSD.  Using GI benefits to pay down credit cards doesn't seem like something you can do.  Even if you can

Take a look at the investment order: https://forum.mrmoneymustache.com/investor-alley/investment-order/
Based on this good general guidance consider:
1) Paying off your high interest credit card debt with your investments. This is a guaranteed 10+ percent return on your investment.
2) Negotiating a payment plan you can stick to with your dentist and see if you can get low or no interest (they should prefer that to not getting paid)
3) The IRS likely already has you on some sort of mandatory payment plan
4) Are the VA debts in addition to these?  What kind of interest rate, payment plan are you on?  We need to know this to provide sensible advice.
5) increasing your emergency fund as you suggested or higher.

Make a budget for you $1500 income that avoids going hungry.  A single person should be able to live on 18K a year without worry about food or shelter.
1) That means you need a new place to live.  You cannot spend 900 on rent out of a 1500 income.  Get a place with roommates. Move somewhere cheaper.
2) Buy cheap staples in big bags from the grocery store.  You may not want to live on potatoes, rice, beans, onions, and lentils, but it beats the hell out of being hungry.  If you buy food in 20 pounds sacks you should be able to not go hungry on even a $100 a month.  Then supplement with eggs, milk, and the veggies on the best sale that week.  My favorite discount grocer is Aldi, but any place should be able to sell you 20 pound sacks of staples for <30 cents a pound.
3) After a place to live and meals, prioritize your mental health.  It sounds like the VA already recognizes that you have a disability from your time in the service.  Please make sure you are getting the help you need.  If medical costs are related to your military disability, shouldn't these be paid for?  Someone with experience, please help.
4) Transportation?  I can't tell what your current situation is with a minimum of $100 per month spend.  If you are already going without a car, great.  If not, can you?  Can you at least minimize car use, while not working?

[reeshau]

Step 1:  sell the stock and pay off all your debts.  If this is not in a retirement account, then the IRS for sure, and perhaps the collection agency the dentist sells the debt to, will find it anyway.

I can understand your emotional attachment to this, since you include its intended purpose.  But you are a long way from a house, and cannot afford either credit card interest, nor legal representation for defending against the IRS or other collectors.  Save yourself further emotional pain and complications, and simplify your life.

[Telecaster]

My budget is ultra tight right now, I’m skipping meals every day because I’m afraid to touch E fund since there isn’t much in there,

1. Sell $850 in stocks for cash cushion. 2. Then balance transfer to Chase Slate, because next semester I will definitely be able use my GI Bill benefits ($4000/mo)  to more comfortably pay down the credit card. 3. Then write a new broke budget & try to earn a little money to help until next semester’s GI Bill comes in (probably February).

Definitely use the efund to pay down the debt immediately.  If an actual $500 emergency comes up, you can always simply put it back on the credit card.  In the meantime you won't be paying credit card interest.  Do this today.

Personally, I'd cash in your investments and hit the debt right away as well.   Balance transfers can work, but you have to be extremely disciplined, and you are basically just kicking the can down the road.   If you kill the debt when the GI Benefits come in you can use them to repay yourself, instead of paying interest on debt.   

[frugalfoothills]

If you are going hungry you are a loooong way from buying a house. Take that $14K and pay off your debt yesterday, especially the high interest CC's. Then find a new place to live ASAP. Your rent is currently 60% of your monthly income! I like the 30% rule of thumb, so I'd be looking somewhere around the $450-$500 range. If that means roommates for a while until you get your feet underneath you, so be it. It's not forever, it's just for now. You might even find that having roommates helps alleviate some of your other burdens... if you're struggling, it's nice to not be alone all the time.

Agree with the other posters about making sure your mental health is taken care of. I know virtually nothing about service benefits or the VA, but there are tons in this forum who have served and should be able to give you guidance to make sure you're getting what you're owed. I'm sorry you've had a rough go of it... your health definitely needs to be a priority (and skipping meals is not something you can make a habit of if you're focusing on your health!)

But as far as immediate action goes... use the $14K to pay off your debts, reduce housing costs ASAP, bulk up your EF, and then keep chugging down the investment order. Your situation sucks right now, but you're super lucky in that you have funds available to you right this minute that can improve your life x100. Use them!

[calimom]

$900 for rent is a deal in San Francisco. Keep it. As others have said, use stock to pay off debt and don't incur more. Don't juggle credit cards to do so. Use the money you were paying monthly to pad your EF.  Don't skip meals/go hungry. Check out ways to optimize your $200 month food budget.

And can you find a Veteran's  organization to work with you on your budget and find out what additional services you might be eligible for? Can you have no taxable income beyond your disability payments? If so, look into part time jobs that might work for you after your holiday gig is up. How much schooling do you have left and what's your major and future job prospects?

Wishing you well. Home ownership, especially in the Bay Area might be a long way off, but you can still enjoy a rich, financially stable life.

[T-Rex]

If you are going hungry you are a loooong way from buying a house. Take that $14K and pay off your debt yesterday, especially the high interest CC's. Then find a new place to live ASAP. Your rent is currently 60% of your monthly income! I like the 30% rule of thumb, so I'd be looking somewhere around the $450-$500 range. If that means roommates for a while until you get your feet underneath you, so be it. It's not forever, it's just for now. You might even find that having roommates helps alleviate some of your other burdens... if you're struggling, it's nice to not be alone all the time.

Agree with the other posters about making sure your mental health is taken care of. I know virtually nothing about service benefits or the VA, but there are tons in this forum who have served and should be able to give you guidance to make sure you're getting what you're owed. I'm sorry you've had a rough go of it... your health definitely needs to be a priority (and skipping meals is not something you can make a habit of if you're focusing on your health!)

But as far as immediate action goes... use the $14K to pay off your debts, reduce housing costs ASAP, bulk up your EF, and then keep chugging down the investment order. Your situation sucks right now, but you're super lucky in that you have funds available to you right this minute that can improve your life x100. Use them!

Okay I want to sell the stock! I would have to pay capital gains tax right? My initial investment was like $2000, with profit of $12000. Do  I need to set a certain percentage of the money for taxest? 🤔

I told one of friends about my unsafe housing situation, and they offered me a room at their place for $750/month. (That’s $100 less than current rent, impossibly cheap for SF, would reduce transportation cost by $50.) I should mention that GI Bill payments are based on location. My emotional reason for being here is that it’s my hometown, and financial reason is it pays out the best benefits by a long shot. I’m not quite ready to leave school half finished and leave my entire support system behind.

Moving pros: $150/month cheaper, safe, school in walking/biking distance
Moving cons: I’m worried and lack knowledge of how to handle tax on capital gains...

My plan: 1. Sell the $14K stock 2. give notice 3. arrange moving 4. Handle taxes correctly (How?)

[reeshau]

Good decisiveness!

Assuming this is a long-term gain (held more than 1 year) the federal capital gains rate is 0% for a single with income up to $38,600 in 2018.  After that, the rate is 15%.  Add your gains to your other income this year to get total income.  (I do not know if disability is counted or not)

You also need to check for State income tax.  My income is different than yours, but I hardly ever had to make an estimated payment of Federal income tax for stock sales.  For the State, though, (Michigan in my case)  I had to pay the full amount ahead:  the State gave few income deductions, and had a low bar before applying penalties for not making quarterly estimated payments.

[T-Rex]

Oh that is great news about taxes, I have been holding it for years. Tomorrow, all of my stocks not related to retirement are getting sold. I’ll prioritize E fund and moving, and I’ll pay off as much debt as I can ASAP. I think money may still be tight, but I feel much better now that I know I will definitely survive the winter.

[nessness]

Your plan sounds like your moving in the right direction. A couple other things to consider:

- You could try petitioning the VA to waive your debt given that you dropped classes due to your PTSD/TBI symptoms. This would probably not be an easy process but it might be worthwhile to at least go to your local VA office and discuss your options.

- If you're not attached to the school that you were going to, you could consider moving out of SF - the whole SF Bay area is covered by the same GI bill rate which extends as far as like Walnut Creek (or at least this was the case when my husband was using his GI Bill about 6 years ago). You could also consider a blended online/in-person program, which would mean less commuting and might be more manageable with your symptoms.

[Dr Kidstache]

I know how tough things are after a TBI. I think you need to get some better fundamental safety net in place or you're going to keep struggling.
Do what others have recommended to get out of debt. Get safe housing that is good for your TBI/PTSD. Eat every meal - you need to eat more regularly after TBI. Do you qualify for food assistance? Are you eligible for SSDI/SSI? Have you checked with the county you reside in to see if they have any assistance programs? The Brain Injury Alliance of California www.biacal.org may have some resources for you. @joonifloofeefloo wrote a book that you might find really helpful. If you need to drop out of school for a while to save the cognitive energy to get more soundly on your feet, then do it. Likewise the under the table work. That time and energy might actually earn you a lot more through using it to apply for additional assistance benefits. Having too much to think about + stress = constant muddled brain fog.