I’m hoping someone with a background in finance can offer some advice
So here’s the deal, I will be teaching math at a local college next year receiving only part-time pay, so my income will be lower than what it is currently. To compensate, I’m looking to use my retirement money to pay off some credit card bills. I’ve heard Bob Murphy say that he has no money invested in the stock market right now, and doesn’t believe he will be returning anytime soon given the state of our economy. Thus, do you think it is advisable to pay off credit cards with 10-12% interest instead of waiting for a stock market to return (if it ever does)? There is no early 10% withdraw fee since it is not an IRA or 401k account.
Don’t know anything about finances, but I’ll toss out some thoughts.
I see no reason to have debt when you can repay it. Do you know of ANY investment that will bring you 10-12% [to cover the interest on your unpaid credit cards], especially nowadays?
Your income is already lower than it was. Who knows how much lower it may get in these hard times. Do you want to be stuck with 10% interest on your debts when you are not making any money?
Some may say “Wait till inflation makes your debt meaningless anyway.” But how do you know a law won’t be passed [if one is even necessary] allowing the card companies to raise their interest rate to cover inflation?
As for the stock market, it may go up some because the original bust dropped prices too low. Maybe that’s already been fixed, though. The real q is, which companies, if any, are paying a high enough dividend [10%] to cover your credit card interest? Are they paying that high a dividend because they are in trouble and trying desperately to attract capital [usually the case], or because they are a sound company with competent and honest mangement that knows how to make those big bucks, and is willing to pass it on to the shareholders. Good luck finding one of the latter, Warren Buffet.
Of course, there’s always Peter Schiff, if you want to try your luck with foreign stocks. Not sure if he’s gonna make 10% though.
You might want to take a look at “The Richest Man in Babylon” , a short, highly readable book which I have found to have excellent advice on how to pay off debt and how much money to actually allocate to that specific task.