Ok - heres the situation.
Debts.
Credit cards 22k
IRS 25K
loan from work 401k 46K
total 93K
Assets:
House - 175K
401k $105K
IRA $140
Wife's 401K 15K
net $260K plus a mortgage free house.
Clearly the Credit cards are the priority.
card a) 650
Card b) 6,500 @13%
card c) 8,400 @ 23%
card d) 3,400 @22%
Card e) 3,000 @ 0% until Sept 2015
after paying back the pension loan we have a net income between us of about 5,500 am month. the budget has been worked out and I think we can have about 3k a month to put towards repayments of various debts.
I also have shares that I can sell and free up a further 7,500K
The simple option would be to sell the shares and then chunk everything towards the cards. however I have a plan that could maximize an opportunity here and I'd like some thoughts, feedback and pointing out where I'm going wrong!
Just as a note the IRS is getting 500 a month and charging 3% on the balance.
The pension loan is a loan from myself and is charged at 3.5% - to myself!
Plan-
credit card a) - just pay that first - one less to deal with
then sell shares and pay the 6,500 on credit card b
pay 1,000 off credit card c and transfer the balance to credit card b at 0% for 12 months (3% transfer fee).
We can then raise enough to pay off credit card d)
by the end of October we then have just over 10k in balances at 0%
I then want to turn my attention to the IRS loan - however theres a small caveat to this. Any tax refund I get would be offset against the amount I owe them.
So why not put as much as we can into our 401K's and IRA. most of it - if not all - would be tax free. By using our post tax income to boost the amount invested there we would then generate a tax credit to apply against the amount we owe the IRS.
I'd like to throw as much in there now to get the max from this tax years advantage.
then early next year throw the first few months into normal saving so we have enough to cover the Cards when they are payable, then switch back to focusing on the IRS loan.
Does this seem like a feasible strategy? Why wouldn't I use the tax free amounts that I'm not currently using to offset against the amount I owe while increasing our savings?
additional questions then arise - as in how much can I add?
what are the limits?
is there a problem in putting it all in my IRA instead of the 401K?
is it worth setting an IRA up for the wife (I have no idea how her money is allocated in her 401K - I'd rather it went to an IRA though)
Is there something blindingly obvious that I've missed?