sell an extra car, pay off debt, and roth iras

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adadandhistruck
Posts: 6
Joined: Sun Oct 01, 2017 1:01 pm

sell an extra car, pay off debt, and roth iras

Post by adadandhistruck » Sun Oct 01, 2017 1:14 pm

Hi. Quick question about credit card debt, cars, and roth IRA. would love to hear opinions. I first should give my situation.

Live in southern california $$$. 2 small kids, married, stable job. really want to buy a house, but it's expensive right now and i have some debt i need to kick.

holdings:
about $40k in IRA/401k
$9k in roth ira
$2.5k in MSFT shares
$2k emergency savings
income around $100k a year (new job)

2004 toyota matrix. paid off. great gas mileage. about 165k miles and it still runs great. i take care of my cars and fine w/ doing my own maintenance.

debt:
2006 tacoma (we love camping and outdoors). Purchased a year ago. Big enough to be daily family vehicle. We owe $9k on this. Not an option to sell because it's a useful tool for us.

2013 toyota rav4. value is $14k, we owe $12k. Payments are $400/mo and insurance about $110/mo. We bought it for my wife when she was working but now she's going to school and raising the kids at home so she doesn't drive it much. And she likes driving my truck more. We are heavily leaning to selling this. I'm having a hard time letting it go since we already paid $10k the past few years to drive it. Pay off and keep, or let it go and bank the money?

Credit Card: $13k debt. I want to pay this off asap. This was a mixture of bad habits, living paycheck to paycheck, and having kids before my income went up. I learned my lesson, am now a boglehead, and will never let this happen again.


Sorry for the long post. My current plan is to sell the Rav4, take about $5k from the ROTH to pay the credit card debt, and throw all my extra money at the credit card. Promise myself to never take from ROTH again and replenish it next year. If i dont pay this debt off asap, i wont be able to contribute to the ROTH next year anyway.

Thoughts?

delamer
Posts: 3095
Joined: Tue Feb 08, 2011 6:13 pm

Re: sell an extra car, pay off debt, and roth iras

Post by delamer » Sun Oct 01, 2017 2:05 pm

Sell the RAV4, sell the MSFT shares, put that money plus the savings on the RAV4 payment and insurance for the rest of the year toward the credit card debt. Tighten your belts and make a plan to pay off the rest of credit cards by the end of next year. That should be doable, especially without the RAV4 payment and insurance.

Don't touch the Roth. You have a very small emergency fund and could find yourself with more credit card debt in an emergency. With the Roth in place, it can act as a back up to the emergency fund. While the credit card debt is a problem, it isn't an emergency.

retire57
Posts: 320
Joined: Fri Oct 28, 2016 3:03 pm

Re: sell an extra car, pay off debt, and roth iras

Post by retire57 » Sun Oct 01, 2017 3:57 pm

delamer wrote:
Sun Oct 01, 2017 2:05 pm
Sell the RAV4, sell the MSFT shares, put that money plus the savings on the RAV4 payment and insurance for the rest of the year toward the credit card debt. Tighten your belts and make a plan to pay off the rest of credit cards by the end of next year. That should be doable, especially without the RAV4 payment and insurance.

Don't touch the Roth. You have a very small emergency fund and could find yourself with more credit card debt in an emergency. With the Roth in place, it can act as a back up to the emergency fund. While the credit card debt is a problem, it isn't an emergency.
+1 :thumbsup

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FiveK
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Joined: Sun Mar 16, 2014 2:43 pm

Re: sell an extra car, pay off debt, and roth iras

Post by FiveK » Sun Oct 01, 2017 5:53 pm

retire57 wrote:
Sun Oct 01, 2017 3:57 pm
delamer wrote:
Sun Oct 01, 2017 2:05 pm
Sell the RAV4, sell the MSFT shares....
+1 :thumbsup
+2

adadandhistruck
Posts: 6
Joined: Sun Oct 01, 2017 1:01 pm

Re: sell an extra car, pay off debt, and roth iras

Post by adadandhistruck » Mon Oct 02, 2017 6:17 pm

Thanks guys. Gonna go that route. Won't be touching my Roth.

adadandhistruck
Posts: 6
Joined: Sun Oct 01, 2017 1:01 pm

Re: sell an extra car, pay off debt, and roth iras

Post by adadandhistruck » Wed Oct 04, 2017 8:56 pm

RAV4 sold. Msft sold. $4500 going to cc debt and the rest is being transferred to 0% bal transfer for 1yr. I'll update in six months

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FiveK
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Re: sell an extra car, pay off debt, and roth iras

Post by FiveK » Wed Oct 04, 2017 9:24 pm

adadandhistruck wrote:
Wed Oct 04, 2017 8:56 pm
RAV4 sold. Msft sold. $4500 going to cc debt and the rest is being transferred to 0% bal transfer for 1yr. I'll update in six months
Good work and good luck!

Olemiss540
Posts: 187
Joined: Fri Aug 18, 2017 8:46 pm

Re: sell an extra car, pay off debt, and roth iras

Post by Olemiss540 » Thu Oct 05, 2017 9:16 am

That was fast! Congrats,

N10sive
Posts: 319
Joined: Thu May 05, 2016 6:22 pm

Re: sell an extra car, pay off debt, and roth iras

Post by N10sive » Thu Oct 05, 2017 9:54 am

adadandhistruck wrote:
Wed Oct 04, 2017 8:56 pm
RAV4 sold. Msft sold. $4500 going to cc debt and the rest is being transferred to 0% bal transfer for 1yr. I'll update in six months
I was going to mention looking at 0% balance transfer cc's. Although it isn't a preferred method of a boglehead, it can help reduce cc debt and paying lower interest. This is how I am getting out of debt. Don't rely on it though. This forum has helped in that regard in curbing impulse purchases and things of such nature.

delamer
Posts: 3095
Joined: Tue Feb 08, 2011 6:13 pm

Re: sell an extra car, pay off debt, and roth iras

Post by delamer » Thu Oct 05, 2017 10:18 am

adadandhistruck wrote:
Wed Oct 04, 2017 8:56 pm
RAV4 sold. Msft sold. $4500 going to cc debt and the rest is being transferred to 0% bal transfer for 1yr. I'll update in six months
Congrats!

adadandhistruck
Posts: 6
Joined: Sun Oct 01, 2017 1:01 pm

Re: sell an extra car, pay off debt, and roth iras

Post by adadandhistruck » Thu Nov 02, 2017 9:27 pm

Olemiss540 wrote:
Thu Oct 05, 2017 9:16 am
That was fast! Congrats,
thanks! yep i figured the best way to act was fast and decisive. Wasn't easy letting the extra car go but now that it's gone we dont miss it. Carmax gave us a little than the highest KBB trade in value so i didnt wanna screw around waiting for private buyer. already made a good dent in the debt in my first month.

also just finished reading "automatic millionaire" and the bogleheads guide to investing. i'm so stoked on saving. Must be getting old

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