I have some credit card debt due to irresponsible purchases furnishing my house a couple years ago and from eating out too much. I’m committed to better financial habits now but am wondering how to go about paying off the debt. I’ve still been maxing out my retirement saving but my regular savings are abysmal. I have $28k in a brokerage account and am wondering how to decide which stocks/ETFs to liquidate to pay off the debt. Should I do those at a loss or with gains?

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How much cc debt do you have? You might be able to transfer the balance to a 12-18 month no APR credit card and try to pay it off in that time frame allowing you to avoid liquidating your investment accounts

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Use the $28k you have in savings to clear the debt. Then you have $3k in savings and no CC debt. From there, you can start rebuilding your savings

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What is the interest on the cc debt? It probably makes sense to sell the stuff in the brokerage account to pay it off.

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Just know that reducing 401k contributions is really no different than selling. Having more in 401k may be better

Another option is to take a loan on your 401k. You'll have to pay the interest on it, but the interest goes back to you. Should be able to spread payments over up to 60 months.

Cons:
- money is out of the market, return is fixed at the interest rate
- this likely ties you to your employer until it's paid off. The funds are due immediately upon termination

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Yeah, it's not for everybody. I'm fortunate to be in a spot that I should be here for a while. It was my best option for a $50k down payment on some land we bought (to build on one day). It doesn't cause a credit hit and I should be able to pay it back within 3 years.

I also happened to take it out in January before the downturn, so I'm ahead on return for now. 100% situational decision.

Your CC debt has a rate way higher than you will earn in the market. Stop your 401k contributions except for what you need to get the match and pay them off.

Do you have an emergency fund?

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I have a small 2mo emergency fund. Seems like reducing my 401k contribution is the right call.

I don’t have significant losses outside of my tech stocks (Amazon, Tesla).

How much debt?

Thanks, STM!

How much can you responsibly put towards this debt per month?

See if you can find a decent 12 month or 18 month balance transfer offer. Even if you pay 1% or 2% in fees, it will likely be cheaper than whatever your interest rate explodes to after your current promotional period.

You may also want to see what interest rate you could get on a personal loan. If it’s 5% or less, that might also be an option. But in that scenario, I’d only pull that after paying down the debt as aggressively as possible before the promo period expires.

To help with paying down the debt, you may want to reduce (but not cut completely) your 401k contribution. You can always crank it back up later in the year next year. If your total contribution in 2022 or 2023 drops to $17k or $18k, that’s not going to be noticeable in 20 to 30 years (especially if you already max out any company match).

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