Please note: This post is about the insights I’ve gained through managing my own financial situation. It provides links to financial advice, but it does not provide financial advice.
When I resigned from my high-stress job in May 2008 and began my sabbatical, I thought I could find a new job whenever I chose—when I was rested and the novel was done. Now, 18 months later, with my savings long gone and my credit card debt creeping up, my perspective has changed, and the banks seem to have changed as well... or were they always this greedy? Is a 30% purchase APR even legal?
Until I’m out of debt and can tell the banks to shove it, I have to get through right now. And right now, like many people, I’m having to consider options I previously thought unthinkable, like cashing out my 401k or filing bankruptcy. I’m not quite to that point, but it was time, this week, to do some serious research and make some hard phone calls. I was dreading it, but I feel better after having done so. Here’s what I discovered:
- Cashing out my 401k should be an absolute last resort, since 401k accounts are usually safe from bankruptcy filings, but I’m leaning toward bankruptcy being my last resort. Dave Ramsey’s The Truth About Bankruptcy (and related resources) were helpful to me, as was SmartMoney’s 10 Things Bankruptcy Court Won't Tell You.
- Selling assets and continuing to live (frugally) on credit cards is my best option for now. I’m current on payments (I’ve been paying early and slightly above minimum), so I was able to negotiate lower rates with my credit providers by kindly explaining my situation without blaming, complaining, or meandering. I did use the word “ridiculous” once, but only because a rep suggested I pay off a $10K balance in 800 months. Other than that, I was nice.
- Skipping my car payment in December will help a bit. Interest still accrues, and the payment gets tacked on to the end of my loan period, but if I get to keep my car, I’m happy to pay a smidge extra.
- Since my COBRA coverage ends this month, I’ve been researching health insurance options. I started with CoverageForAll.org to see if I qualify for any special-case plans in my state (I don’t), then compared insurance plans at eHealthInsurance.com. I found a plan with Aetna that includes dental coverage, which I desperately need, at about half of what I was paying for COBRA.