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Old 08-24-2005, 05:51 PM   #1 (permalink)
Insane
 
Location: PA
sell stock to pay down debt or just bite the bullet with interest?

Hey,
About a year ago I had a job for six months. During that six months of work, I put some money in the stock market. I bought index and industry funds since I'm a little scared with individual stocks. Anyways, over the 6 months I bought a total of about $2000 in securities.

Then the job ended and I went back to school. I saved and stashed away enough money to last me 6 months til school was over and when my new job started. I thought I had allocated enough money, but things here and there caused my projections to be off by about a month. I don't start my new job for another month and I'm running low on money for bills and such.

I know my securities aren't worth much to affect me long term. Would it be a good idea to sell any of the ones I've lost money on to get me by for the next month? Or would it be better to just get hit with the credit card interest rates (9%). I haven't owned the securities for over a year, but it shouldn't matter since I didn't make a profit right?

Thanks,
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Old 08-24-2005, 06:18 PM   #2 (permalink)
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Sell the stock, Now. Using credit cards is a game you can never win, in fact that's the way the "minimum payment amount" is set up - it's the American way (be in debt!) of placing you into an invisable "servitude".

Ever notice when you owe they send new cards with higher minimums....hmmmmm?

Trust me, been there, done that. It wasn't pretty & I won't ever go there again. I carry one (1) card and only use it in extremely dire emergencies. (And I pay it off in 2 to 4 weeks.)
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Old 08-24-2005, 06:24 PM   #3 (permalink)
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Location: PA
Thanks for the input. I estimate that I'd have maybe $400 on my credit card max that I'd have to not pay back for one month. My new job is definate so I will be able to pay it back + interest pretty easily. Only thing preventing me from selling the stock right now is the $15 processing fee for selling and the fact that I would have wasted the $10 commission fee buying that stock. But I guess lossing money on the fees is better then credit card interest rates.
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Old 08-25-2005, 03:58 AM   #4 (permalink)
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Yep, avoid credit card debt (unless 0 apr) is definately the way to go!

I disagree with some here, who say you should not use credit cards unless you have to. I use them, just make sure I pay them off always at the end of the month! If they will give you points / rewards for what is spent, why not get something back for spending.
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Old 08-25-2005, 11:06 AM   #5 (permalink)
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Location: Ontario, Canada
Work out the costs of each operation.

Sell the stock + buy the stock back = 25$ cost.
Carry 400$ in credit card debt for 6 months = 17$.
Carry 400$ in credit card debt for 12 months = 36$.

Exactly how certain are you about your upcoming income stream? Can you give it a percentage?

Treat credit card debt as something dangerous. Because it is. If you ignore it, it will burn you. Do you have a problem with ignoring problems? If so, don't get credit card debt.
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Old 08-27-2005, 06:57 AM   #6 (permalink)
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Agree with all the above, pay off the credit card debt. The next time we have a serious recession in this country, credit card debt is going to eat a lot of people who've just been making the minimum payments and letting the principal build up. Don't be one of them. Especially under the new, more severe bankruptcy laws.
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Old 08-27-2005, 08:38 AM   #7 (permalink)
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Location: Greenwood, Arkansas
Quote:
Originally Posted by Xazy
Yep, avoid credit card debt (unless 0 apr) is definately the way to go!

I disagree with some here, who say you should not use credit cards unless you have to. I use them, just make sure I pay them off always at the end of the month! If they will give you points / rewards for what is spent, why not get something back for spending.
I agree with that. I use my credit card for convenience--easier than writing checks, but I pay the balance IN FULL each month. If people had to fill out an application for a loan each time they used a credit card, the point would be driven home better: IT'S A LOAN!! PAY IT BACK!!
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Old 09-10-2005, 09:35 PM   #8 (permalink)
Riiiiight........
 
I would stay away from using credit cards.

One question though. Are your stocks in tax-advantaged accounts such as a Roth-IRA or a 401k? Once you take out your contributions, you can never put it back in again. (you can put in more new money, but those are subject to annual contribution limits)
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Old 09-11-2005, 11:01 PM   #9 (permalink)
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I'm going to go against the flow here and actually recommend you go with the credit card, on two conditions :

1) the stocks you bought seem like a good option to rebound from the loss. Depending on how the money's invested and what sort of stock it is this is more or less likely, so that's a call you'll have to make on your own. The general wisdom is that when dealing with securities the best option is to buy and hold and just let the stock climb in value, but if the company goes insolvent than that doesn't get you very far.

2) You are 100% certain you can pay off the remainder on the card next month and will do so. Credit cards are a sort of instant rainy day fund, best saved for an emergency. Well dude, it's pouring out. If you don't have to carry the balance then one month's interest isn't likely going to cause you that much grief and keeping the other financial assets is more likely to benefit you in the long run under the right circumstances (see 1).
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