Tuesday, January 2

Last Year's Only Resolution Accomplished

So far this year I have no New Year's Resolution. I did have one for last year that I managed to accomplish on 20 December. That was to pay off all credit card dept.

I am not sure exactly how it happened but around the time that I got married in 2002 I started to accumulate credit card debt. The interest rates were low and the interest-free for a year cards made it that much more attractive. Within a year I had accumulated close to $40,000 in credit card debt.

Now that sounds bad but in actuality I had over half of it in the stock market. The highest interest loan I had was a car loan and I was concentrating on paying that off first, as it was a previous year's resolution. At one point in 2004, I had over $65,000 in debt between car, student loan and credit cards. I managed to pay off the car a full year early. Next came paying off the credit card debt. (On second though upon reading this, it was bad, perhaps even insane.)

As I managed to sell stock I would transfer a part of the proceeds back out of the trading account to pay off part of the debt. That worked well but it seemed that there was always some big purchase, like plane tickets to Finland or a repair needed for the car that would push the goal ever farther away.

The first real push to pay off the debt came in 2005 when the initial free rate on one card ended and the interest rate moved up to 9%. Then Chase bank purchased the company where I had this card. I was sent two notices. One informing me of the change to Chase Bank and of the great things that would come by being a Chase customer. The second one was notification that my interest rate was going from 9% to 18%. I called asking for an explanation and was told that my level of debt made me a 'risky customer' so my interest rate was raised. (and no it could not be reduced.) I informed them that I would cancel the card where a polite laugh was heard from the other end as he checked my current balance due. Three days later I had paid off the card and closed it. Of course this is much easier if you have the funds to pay what you owe, and thankfully I did as I was planning to pay it off anyway as the free interest offer was over.

Paying off that card felt good, so I immediately started on getting my main card paid off. After a year of working to pay it down, I finally managed to get to a zero balance at the end of December. Currently, the only debt I have is a student loan. I am not concerned about that one as the interest is only 3.85%.

Now I would like to concentrate on increasing my return from the stock market. I have been doing well but I really need to do more research to better take advantage of some of these market swings especially when stocks drop due triggering yet more sale orders and margin calls. At least I will no longer have the additional cost of interest payments on the outstanding balance of the credit cards as a cost of investing.

I do plan on staying away from Real Estate. I think a train wreck is still coming down the tracks. Just take a look at this poor fool Casey Serin who managed to get over $2 million in debt in less than a year while attempting to flip houses. I am sure that there is money to be made in real estate but I am against trading on margin and house flipping does require a massive amount of borrowed capital that is even worse than a margin account. At least with a margin account your stock will be sold to pay back the loan leaving you with whatever is left over. Fail to sell a house and maintain the payments and you might end up with nothing after the lender forecloses on the property, other than more debt such as whatever you accumulated at Home Depot trying to fix up the house.

1 comment:

Anonymous said...

RE: Casey Serin:

Some similarly business-minded folks from the old country also run into tough times, due to their own innovative ideas for creating wealth, just like Casey:

Uzbekistani immigrants await discussion of entrepreneurial methods