Dear Quintin,
I don’t live extravagantly by any means.
I have $68,000 in debt on four credit cards and I make minimum payments. Payments total $1,800 per month. My salary is $55,000 and my take-home pay is about $3,300 a month. This is my only income. At best, I can get my salary to $70,000 in the next few years. I don’t have high income potential. I can not do it; I dig into savings, of which I have about $75,000, and put more on credit cards each month to pay my bills.
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I’m divorced, 57 years old, and I moved in with my 95-year-old mother because she was alone. I am her main caregiver. She has no money or assets. She has a small Social Security benefit from which she gives me a few hundred dollars for our monthly food and gas bills. She recently qualified for home help during the day, but it’s me at night and on weekends. This, combined with my full-time job, has taken its toll on me.
I would love to eliminate all that credit card debt with my savings, but that would leave me with practically nothing. Due to a possible emergency with my mother or my health, my house or other unknowns, I am paralyzed by the thought of not having cash, so I continue using the cards. There is about $225,000 equity in my house, but my interest rate is now 2.85% and my mortgage is $250,000 with 27 years left. I only have $50,000 in a 401(k).
I would have to do it. I don’t want to come back here. This is all very stressful and it’s all I think about. Fortunately, there is a light at the end of the tunnel. I am the future beneficiary of my father’s life estate after my stepmother’s death. She is 85 years old. It will be real estate, a stock portfolio and other regular income with a current market value for my stock of approximately $2 million. That is, if the economy maintains itself.
Can I live off my salary if I don’t have to worry about credit card payments?
Looking for assistance
Related: ‘We, her children, do not trust her’: My elderly father was recently widowed. His new girlfriend pressures him to get married. What can we do?
Dear search engine,
Let those who have never ordered a package on Amazon AMZN or used a credit card cast the first stone.
But it’s also time for tough love. You’re borrowing from Peter to pay Paul. Or, put another way, he is borrowing money from these credit card companies to pay for his purchases and his mortgage. You have the solution in sight. You just need to do it. It’s time to take action and pay off your credit card debt. Do what is necessary. But get rid of it. If you continue to cause a catastrophe, you risk making an already difficult situation impossible.
First of all, you actually have a lot going for you. You and your mother have a roof over your heads, you have food on the table, you earn $7,000 more than the average annual salary in the United States, and you have a mortgage rate of 2.85%. And there’s a good chance you’ll receive a $2 million windfall. This is much more than many Americans have. Plus, you have a $75,000 war chest for a rainy day. Here’s the Moneyist weather forecast: It’s raining.
So here’s what you do: pay off your credit cards (all four of them) and split them up. That will leave you with an emergency fund of $7,000. Create a monthly budget of your income and expenses (utilities, property taxes, home insurance, mortgage payments, groceries and gas) and instead of paying $1,800 each month for credit cards that have an interest rate of 22% and you risk ruining your credit score. , save $500 a month.
Assuming you had a 10% down payment, your current mortgage, excluding property taxes, shouldn’t be much more than $1,100 a month. With a net income of $3,300 you should be able to make it from the first to the last of the month with money to spare. This $68,000 credit card debt has become a monster that seems to embody all of your fears and insecurities. It’s time to defeat that dragon, and that day is today.
It’s time to do some soul searching
Your mother is lucky to have you and I’m sure you are lucky to have her too. In the absence of long-term care insurance, you can look to Medicaid (keep your accounts separate), state and federal financial assistance as described in this AARP guide, and community support from organizations like Caregiver Action Network and the National Council on Aging . Family caregivers perform $600 billion a year in unpaid work, a figure that does not include lost wages.
You also need to do some soul searching, in addition to making a budget. Why did you invest so much money in this plastic, the most dangerous type of credit? Did you have emotional and/or financial difficulties after your divorce from her? What has led you to this state of financial paralysis? Sometimes, if we are familiar with chaotic and challenging emotional life, that is what attracts us. It’s time to break that cycle.
It is not my intention to psychoanalyze you, it is my intention to encourage you to ask yourself these questions and find the answers for yourself so that you can (a) understand how you found yourself in this financial “crisis” and (b) feel empowered to change it. , given that you have the means to do so. Unless we recognize that our emotional life and our financial life are connected, we are doomed to repeat the same mistakes again.
Christine Wilson, writing on the wellness blog Live Well and Fully, says: “Chaos addiction refers to a pattern in which people often find comfort and familiarity in disordered or chaotic situations. This pattern may originate from past experiences of instability or trauma, leading individuals to unconsciously seek out similar environments later in life. Unlike traditional addictions that involve substance abuse, chaos addiction has more to do with emotional patterns.”
We can have chaotic relationships with other people and, yes, we can also have a chaotic relationship with money. It can take many forms: from the impulsive buyer who uses credit cards to momentarily escape the real world to the gambler who will risk his entire livelihood by rolling the dice. Given her homeownership and clear ability to care, it is very likely that there was another underlying issue that led to $68,000 in credit card debt.
Here’s a fascinating nugget about impulsive buyers and what (and why) they do what they do. Your purchases don’t have to consist exclusively of luxury items like jewelry or designer clothing; “Shoppers” can enjoy the same pleasure by purchasing everyday items like Clorox or Tide Pods. This study, published in the Journal of Consumer Research, suggested that the process of shopping (and escaping) can be as stimulating as the package that arrives in the mail.
The complexities of impulse buying
“Consumers who experience a loss of control are more likely to purchase products that are more functional in nature, such as screwdrivers and dish detergent, because they are generally associated with problem solving, which can enhance people’s sense of control.” “the authors wrote. Another theory: It could be that they are well-known family brands and simply remind you of your childhood. It’s not a judgment: we all do it to one extent or another.
The study found that buying even the most boring household items is enough to satisfy the cravings of compulsive shoppers. In one study, participants were asked to remember a situation in which they felt a great sense of control after purchasing; They ended up buying more practical products at the supermarket, such as cooking ingredients and household cleaning products. This research may or may not resonate with you, but it shows that our psychological relationship with our finances is complicated.
You’ve shown a lot of strength and have already come a long way – believe it or not, not everyone would dedicate themselves to taking care of your 95-year-old mother or father when they are under so much financial pressure. We need to alleviate the shame and guilt around credit card debt and start asking the hard questions: not only how to pay off the debt, but also why we got into debt in the first place.
The good news is that after using your emergency fund for this emergency, your credit card balance will be zero. The same can’t be said for the average American household, which owes nearly $8,000 in credit card debt, according to the most recent data from the U.S. Census Bureau and the Federal Reserve Bank of New York; In fact, there were an estimated $1.12 trillion in outstanding credit card balances in the first quarter of 2024, up 13% from a year ago.
We are all guilty of overspending from time to time, but we must face it and take corrective action when we do.
More columns by Quentin Fottrell:
I sold my business for $130,000. It’s the first time in my life that I’m not living paycheck to paycheck. That I have to do?
‘My husband and I have 8 children’: We have $200,000 in a high-yield savings account at 3.75%. Are we beating inflation?
‘I’m getting divorced after a lot of pain’: Should I suggest my husband keep his $200,000 401(k) so I can keep our $360,000 house?