About My Credit Card Debt
Newer readers may be alarmed by my high levels of credit card debt. In short, I’m borrowing money for free and keeping it in safe investments while earning me 5-6% interest. Along with other things, this helps me earn extra side income of thousands of dollars a year. Recently I put up a series of step-by-step posts on how I do this. Please do check it out if you are curious. This is why, although I have the ability to pay the balances off, I choose not to.
Commentary
What a crazy month July was. Saying goodbye, packing up, visiting family, celebrating a marriage, moving, saying hello! In the meantime, our net worth dropped, again! What happened?
» Stock Market Blues. With everything that’s been happening, I haven’t been keeping up with this wild stock market ride. Losing 5% in one month in our investments was a surprise. Sub-prime loans are either a real factor to worry about or mainly just a cover-up for the fact that people really don’t know what to think right now. I certainly don’t, but I never try to understand the short-term movements of the markets.
» Moving Chaos. Moving cross-country really throws off a budget. We ate out a lot. We paid for travel costs. We had to pay for movers, but are waiting to get reimbursed by our employers. We bought some new furniture. We only had to pay for rent for a part of July, but we’re still waiting for our security deposit back.
» New Jobs. We’re both in our new positions and faced with new co-workers and bosses, bigger (upcoming) paychecks, and a whole new set of challenges. I have to decide on investments and contribution levels for a new 403(b), as well as other benefits like health insurance, dental insurance, and disability insurance. Lots of stuff to talk about in August!
Quick summary time… We are still saving cash, with our non-retirement funds now add up to $72,699, and total cash is $67,294 (+$2,573 from last month). Read about our mid-term and long-term goals and take a look back at our previous net worth updates.
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You had all those moving expenses, haven’t been reimbursed or paid for you new job and still saved almost $7k last month. Wow.
Yeah I kind of agree. It seems unreal but way to go 🙂
FWIW, my funds also took a hit this month — it leaves me a little gloomy when I see them drop. When I try to second guess what I should have done to prevent this — I really don’t know. My retirement was somewhere around $208K last month and as of today is worth $200K. That really sucks! It’s spread across many different funds — but mostly stocks, I don’t even know where I would have moved it. And should I move it out of the way now? I’m really confused.
We felt the stock market pain this month too. Oh well, gotta hold on for the long term.
Appreciated your entry on your dads/moms(?) 403(b) with TIAA/CREF. I signed up for TIAA/CREF last week with my new employer and tried to stay with the mutual funds and none of the annuities. They have some pretty good options and I’m pondering rolling my old 401K there instead of a rollover IRA with TRowe. Is your new 403(b) going to be with TIAA? Any thoughts?
I’m dreading reconciling my investment accounts– this month will have been brutal for me too. But congratulations on saving so much cash!
Folk, I hope you don’t have too much dread and gloom about recent market action. No one controls, let alone predicts, the short-term market moves. (Some people get lucky and attribute it to skill — others get unlucky and blame the guv’mint or other large faceless entities.)
If you’ve invested with long-range money and do so on a routine basis, logic says to cheer down market action so that you exploit the perceived benefits of the much-hyped Dollar Cost Average. Paradoxically, it’s the down action that enriches you in the long run. (if this was golbguru’s blog, I’d quote the Tao Te Ching at this point 😉 )
Got to keep in mind that he was able to save so much since they don’t pay off their credit cards every month. The actual savings was closer to $2600 (Cash minus Credit card). Still impressive, but also more realistic.
Hi Jonathan, is the increase in the credit card line item due to a new balance transfer or is it just due to moving expenses?
I’m not too worried about my investments because I consider myself at an early stage and was uncomfortable buying at a peak. As William Bernstein points out: where you are in your savings cycle determines your market outlook; it’s personal.
About big transitions, I’m also facing one right now and am doing my best to keep things orderly and under control. Transitions can eat into gains from a new job, living situation etc. if one is not careful.
Sounds like you are quite the busy fellow lately. Cheers for putting forth the effort to keep up the quality posts lately!
Jonathan,
How much did movers cost you to move cross-country? How much stuff did you have?
Thanks!
I wanted to mention for those folks here, who didn’t see the diff from last month….(Ted/Shak)……
Looks like Jonathan took on a little more CC debt to pump that cash # up a bit. (looks like that’s where it went anyway).
So, don’t think the deposits into ‘cash’ just climbed even higher last month w/o help. 😉
Still, the interest on that money s/b free, so nothin’ wrong w/ that.
Looks like Jonathan was at/around $5K deposits into cash w/ CC debt staying steady before last month, so I’d expect #’s to return to that amount (or increase slightly) once the new jobs start payin’.
Yes, much of the cash increase ended up on the credit cards. The net cash total was +$2,573 from last month. We had a few “leftover” paychecks in July for work done in June, as well as the cashing out of some vacation time (not much though). No new balance transfers this month.
Moving costs a few thousand dollars, and was the big expense. However, we did get full-service movers since we were getting it reimbursed. They actually require you to let them pack for you for insurance purposes. Otherwise, we might have tried to do a lot of it ourselves.
—
I try to keep my stock market discussion restricted to the monthly update. I’m more of an amused observer. It’s always a bit sad to see the numbers go down though.
Of course, some people would say “The market is on sale!”. I would just say it’s par for the course. The markets go up, and the markets go down. As long as you have a long-term plan, I wouldn’t change anything.
It seems like you are still making excellent progress, even with the drop in the market. Keep up the good work. I am ready to see the affects of the newly combined salaries!
What 529 plan do u have?. How much do u contribute to it monthly ?.
Maybe it’s best not to watch those short-term swings in the market, and stay focused on the longer term. LOL.
529 is he California 529 plan, and the money is from a combination of free money from bonuses and credit card rebates from my 2% back Fidelity card (now only 1.5% to new users). I don’t contribute regularly.
Muckdog – Perhaps it’s best to leave it to the pros 😉
Hello,
What do you think about these freebies?
http://finance.yahoo.com/banking-budgeting/article/103323/Fabulous-Freebies
They are not major discoveries but when the writer lines them up in this organized manner, I can’t help to go down each item to see if I have taken advantages of each freebie as part of my frugal living.
Jt
Jonathan…perhaps you have explained this before, but to me your credit card borrowing seems penny wise and pound foolish b/c you will face a less favorable credit profile when you go for a mortgage… max level of ccard borrowings typically factors into the mortgage score card.
Have you found a way around this?
First off, I’m new to your blog and love the posts. There so much you’re commenting on that was timely for me (I was opening a Zecco account, trying to figure out proportions of savings in Roth/401k/Traditional Savings, putting together short/mid/long term financial goals, etc.) Keep it up!
One question I had on your net worth posts. Why do you even include this credit card scenario in your outstanding debts?
The way I understand it you have all that cash earning interest – if so, why consider this a liability? You could cash out at any time?
Can u post the link to the fidelity_card. Thanks…
What’s in my wallet? My favorite rewards credit cards
Mitch B – I list it as that because that’s where the money is, really no better explanation than that. Yes, all the of cash is earning interest, and I can pay it back at any time.
Hello Jonathan,
Cash savings? 5% return right? Wouldn’t you be better off investing in equity market for long term since that’s your goal?
Regards
I have multiple goals, not just long term ones 🙂