Annual Salary = $56k & Credit Card Debt = $10k

June 13, 2008

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This is part of Ask The Money Mender series

Dear Cindy,

Jewelry for DebtI am recently divorced and just purchased a house. My problem is this. I make an annual salary of approx. $56k. I currently owe approx. $l0k in credit cards and am just paying the minimum amount. I have $20k in retirement and also have a piece of jewelry that I would like to sell that is worth approx. $10-$15k. What would be the best approach in ridding myself of debt? Should I suffer the loss of liquidating a portion of my retirement, sell my jewelry or would the bank make a loan against the jewelry or retirement? I am 48 yrs. thank you for your help. I feel I’m working to pay interest. ~ Nancy

Hi Nancy, the most important thing for you to do is to really sit down and get a clear picture of all of your debt including minimum payments, balances and interest rates (you can use my Debt Payoff Spreadsheet).

Next, determine what your true, after-tax income is and your total expenses including those that don’t happen every month like Property Taxes, Insurance payments, Gift purchases, Home and Car repairs, Medical, Vacation, etc.

When you have determined what your true situation is, you will know whether or not you can pay more on your credit cards.

Selling the jewelry would be preferable to liquidating your retirement. Banks will probably not make a loan against the jewelry and cannot against the retirement (although if it is a 401(k) you may be able to take out a loan). If you liquidate your retirement there will be penalties and taxes to pay and you will be “eating your seed corn”.

If you do take out a loan, getting clear on your real expenses will be even more important so you don’t end up in this same situation a couple of years down the road.

Another thought is to see how you can turn a hobby into a business (which may also be tax deductible). Is there anything you do well that you could charge others for?

Hope this helps!

Warmly, Cindy

Posted by Cindy Morus | Filed Under Savings 

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