Two bill paying related questions

[Matthew Greco]

Good morning BP,

Just got done listening to podcast #200, was recommended for a noob like myself. The talk about getting you life in order before making a deal, struck a cork with me.

So I have a $6k credit card bill at the moment. I've been making a little more than the minimum payment every month.

I have about 20k invested in the stock market at the moment.

The question is; do I pull $6k out of the market and just pay this debt? Or take less and pay down some of it?

My second question is about my car. I've been leasing a car since about the time I got my license. My lease is up in 5 months time. I don't drive nearly as much as I used to. I drive about a quarter of what I once drove. 

So I've made the decision to buy my next car, used. Do I also take money out of the stock market to pay for the car in cash?

Thanks a lot for the help. These questions have been bugging me.

Matt

[Edmund Ricker]

Its hard to give truly sound advice without knowing your full situation, so I will speak in generalities.

In general, paying off a credit card is instant savings or instant return.  If you have a 15% interest rate on a 6k balance your monthly interest expense is approximately $75 per month. So in general, yes I would withdraw money from the stock market fund and payoff the credit card.  This assumes that these are not retirement funds that you would incur penalties and taxes to access.

HOWEVER, I would make a detailed budget and identify where I could squeeze extra money out of your cash flow from employment to take down this debt first.  Also, paying the credit card off is of no use if you don't control your spending.  Otherwise, you zap your investment account to pay off the debt and then find yourself in the same position down the road.

Another thing I would try to do is generate more income.  Either a side job or more hours at your current gig, if possible.  I am a true believer that you can't cut your way to prosperity.

As far as the car goes, most people finance cars and it is a horrible idea.  They depreciate and eventually fall apart.  Look for an inexpensive used car that will fit your needs or as @Amit Kal suggested, ditch the car if possible.  If you must have a car, try to pay cash or finance for a low interest rate.  I would not necessarily sell stocks to fund this purchase.

Hope this helps.

Ed