Wednesday, February 26, 2014

Financial Pain - Time to Deal

I am an extremely debt shy person. We've made some huge (huge!) mistakes with debt over the years, and it took us a long time to get clear of it all.

These days we are battling with a credit card debt that just won't reduce. I throw every cent of disposable income we have at it each fortnight, and we spend about 3 times that each fortnight back again.

It's killing me. I was so proud to reach a debit free position last year (not counting the investment mortgage), and this is making it clear to me that real financial freedom is still a ways off for us.

I understand that alot of what we are experiancing right now is short term pain. Once husbands $5,000 worth of dentistry is done, he will be in good shape for many years (knock wood), the same goes for Madeleine's $7,000 worth of braces.

The $1,100 in car repairs came as a bit of a shock, as did the $200 for a new mattress to deal with Madeleine's back pain. 

You see what I mean? All that, plus more, PLUS our regular big bills means I am just going around in circles. While I actually have a pain account to deal with big unexpected expenses, so much all at once is a little more than I can cope with.

I can, (and have) organised a payment plan with the orthodontist, but this is going to significantly reduce our disposable income, and our ability to resolve that credit card debt.

We have 2 choices.

1. Wipe our pain account in full to clear the credit card debt leaving us with no balance in the pain account, no balance on the credit card, but unfortunately still a fair amount owing to dentists and orthodontists.

This is pretty scary since I am always afraid of tomorrows unexpected expense. What if I have no money left in the pain account and something bad happens?

Maybe I can meet part way.  So 2. Reduce the owing money in part by the pain account, leaving a balance for emergency, but look at refinancing the credit card into a short term personal loan. Even though a personal loan feels so much more pemanent than a credit card, it will come with a lower interest rate which over all is going to mean we get to the bottom of it that much faster.

Rationally this feels like the right decision for me, but emotionally it's a tough one. I don't want to borrow money, but wallowing in credit card debt is the stupid choice.

There are times when borrowing is the right choice. When the alternative is neglecting your health, major bills, and basic neccessities is one of them. When paying a silly high interest rate on a credit card is another. Have you ever found yourself in my position?

This post was partnered with RedStar Finance who specialise in personal funding of all kinds including personal car loans & low interest car loans. This brand happens to have crossed my path right at a time when I need to consider taking out a loan. While cash will always be king, the fact is, sometimes we need that extra financial help in life to make the important things happen.

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