Author Topic: Sell Stock to Pay Credit Card Debt?  (Read 4297 times)

eljefe-speaks

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Sell Stock to Pay Credit Card Debt?
« on: March 06, 2015, 08:29:20 AM »
Hello everyone!

MMM got my life turned around and I am atoning for past spendypants blunders. I am now hell-bent on getting debt-free.  All I have left is credit card debt and the balance is somewhere between eh and oh-damn.

My question is this: should I sell stock to pay off my credit card? Here are the deets: I have money coming out of my paycheck for stock purchase and my employer contributes 15% on top of this. If I sell this stock, my employer will cut off the 15% contribution for 6 months, thereby ending an instant 15% return. My credit card is currently at a very reasonable rate 5.24%.

Am I missing somethign obvious? I realize the 15% is great and much larger than 5.24%, but after my cc is gone, I can begin investing in earnest. Also, are there tax issues concerning the withdrawal that I am not considering? What factor does the ROI on the stock play (and, uh, how can I figure out what ROI I am getting on the stock). I would LOVE to kiss this cc goodbye so there is an emotional factor as well.

Thank you all so much in advance for your wisdom and expertise!

I realize I am new here and this is my first question, but I am MMM-fo-LIFE and I will be happy to help in the future when I have the knowledge instead of the question.


frugaliknowit

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #1 on: March 06, 2015, 08:36:31 AM »
When you refer to "sell stock..." are you talking about stock within a 401K plan?

Also, how much money are we talking about?  If you are talking about your 401K, what is your balance?

Retire-Canada

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #2 on: March 06, 2015, 08:40:38 AM »
My question is this: should I sell stock to pay off my credit card? Here are the deets: I have money coming out of my paycheck for stock purchase and my employer contributes 15% on top of this. If I sell this stock, my employer will cut off the 15% contribution for 6 months, thereby ending an instant 15% return. My credit card is currently at a very reasonable rate 5.24%.

Am I missing somethign obvious? I realize the 15% is great and much larger than 5.24%, but after my cc is gone, I can begin investing in earnest. Also, are there tax issues concerning the withdrawal that I am not considering? What factor does the ROI on the stock play (and, uh, how can I figure out what ROI I am getting on the stock). I would LOVE to kiss this cc goodbye so there is an emotional factor as well.

I'd keep rocking on the investment the employer is matching at 15%.

Then find places to save in the rest of your budget and use that to pay down some of the CC debt.

-- Vik

Kris

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #3 on: March 06, 2015, 08:41:03 AM »
I would not do this, given the ROI of 15% from your employer.

Find other ways to cut back to pay your debt.  The "hurts so good" aspect can actually work in your favor. 

How much debt are you talking about, by the way?

hunniebun

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #4 on: March 06, 2015, 08:42:48 AM »
I'd suggest leaving the investment where it is and working your tail off as per MMM's Your Debt is an Emergency post.  I think there is a valuable lesson in working hard and sacrificing to pay off debt, rather than just doing a lump sum payout.   Make a plan to get it gone in 6 months/year or whatever is reasonable for the amount and then just do it whatever it takes. When that time period is over you will be so glad you did it and you will still have your investments.  Just my two cents :)

JLee

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #5 on: March 06, 2015, 08:43:22 AM »
I wouldn't it either, given 15% guaranteed return vs 5.24% interest rate. If you can qualify for a Chase Slate, they may still be doing 0% for 15 months with no fees for balance transfers.  At your current payment ability, how long will it take to pay off the credit card(s)?

forummm

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #6 on: March 06, 2015, 08:44:05 AM »
Just save as much as you can from your income and use it to pay off the CC. The 15% instant return (which you will eventually take at CG tax rates) is far too high to justify losing it just to avoid a 5.24% interest charge. By paying off your CC, you are investing--in an asset with a guaranteed 5.24% return (or higher if they jack up your rates).

eljefe-speaks

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #7 on: March 06, 2015, 08:47:17 AM »
When you refer to "sell stock..." are you talking about stock within a 401K plan?

Also, how much money are we talking about?  If you are talking about your 401K, what is your balance?

It's a stock option, totally seperate from the 401(k). It's just good old-fashioned shares of stock.

eljefe-speaks

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #8 on: March 06, 2015, 08:50:03 AM »
How much debt are you talking about, by the way?

$5500. (Embarrasses me to put that in black and white - but that's all part of the process. Make that sucker semi-public!)

eljefe-speaks

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #9 on: March 06, 2015, 08:51:42 AM »
At your current payment ability, how long will it take to pay off the credit card(s)?

I should be able to knock it out in 9 - 12 months. Sooner if I couple up my badassity.

eljefe-speaks

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #10 on: March 06, 2015, 08:54:15 AM »
If you can qualify for a Chase Slate...

I will look into this, thx!

And thanks to everyone for responding! It looks like we have concesus already!

zurich78

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #11 on: March 07, 2015, 08:38:33 AM »
How much debt are you talking about, by the way?

$5500. (Embarrasses me to put that in black and white - but that's all part of the process. Make that sucker semi-public!)

$5,500?  That's it?  I would not cut off an incremental 15% employer contribution on the stock plan over $5,500 especially at 5% interest.  Even if you were to get that wiped out, that isn't a ton of additional money you can put back in to your stock plan.  And certainly not, IMO, worth sacrificing that 15% for.

To me, it sounds more like you're trying to find the fastest way to get rid of that $5,500.

Kris

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #12 on: March 07, 2015, 09:38:50 AM »
How much debt are you talking about, by the way?

$5500. (Embarrasses me to put that in black and white - but that's all part of the process. Make that sucker semi-public!)

$5,500?  That's it?  I would not cut off an incremental 15% employer contribution on the stock plan over $5,500 especially at 5% interest.  Even if you were to get that wiped out, that isn't a ton of additional money you can put back in to your stock plan.  And certainly not, IMO, worth sacrificing that 15% for.

To me, it sounds more like you're trying to find the fastest way to get rid of that $5,500.

Agreed.  You should be able to shift into hair on fire mode and kill this debt in 6-9 months, at the latest.  No more restaurants, no money for entertainment, cut out everything non-essential, and the debt will be gone in a few months.  And you will have built up your self-discipline muscles in the process.

kib

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Re: Sell Stock to Pay Credit Card Debt?
« Reply #13 on: March 07, 2015, 01:11:58 PM »
At your current payment ability, how long will it take to pay off the credit card(s)?

I should be able to knock it out in 9 - 12 months. Sooner if I couple up my badassity.
Three cheers and two thumbs up vote for badassity!  Unless you're actually suffering, shredding a debt in that amount of time feels sooooooo good.  By Thanksgiving, kick that sucker to the curb and bask in your ever-increasing stock shares.