If you suddenly got some money that could pay off your debt. what would you do?

[genericname85]

please read the scenario:

you have credit card debt that is roughly equivalent to 2-3 months of your brutto income and you have a running monthly installment payment for that, wich you can handle easily.
you unexpectedly get money that would theoretically let you pay all of your credit card debt at once and you'd still be able to pay the bills for the ongoing month without problems.

What do you do?

I would pay my debt in full

i would spend the money to get something nice for myself.

i would use a part to pay back some of the debt but also get something nice for myself.

i would not spend the money but also not pay back the credit card debt (wtf?)

Updates

+1 y

Man i'm positively surprised how long term thinking people on here seem to are when it comes to finances :D

Updates

+1 y

seem to be***

[virtue2332]

That's not enough information. Is the person a homeowner, are they putting money into savings What's the rate of the interest on the debt? Also how old is the person? Are they close to retirement age. The ideal goal would be to put that money to work for you. That way you could pay down your cards and keep the principle and of the money but if you were getting ready to retire soon it may make sense to lower you monthly expenses by paying them off. One thing to look at is let's say your payment is 100 bucks a month to pay off a 1500 credit card in2.5 year's roughly it would all be dependant on the rate and minimum pay%. There are calculators online that would be exact. So paying it off now would save you the 100 a month right. If you saved 100 a month it would take you 15 months to recoup the 1500 dollars. So from that perspective you have to look out at least that far and find out what would benefit you having the money available or the 100 dollars available each month.

[genericname85]

In their 30s, not an Home owner, interest rate of roughly 14% annually, with currently not much money to put into savings but that is something that will soon change, as I'm finishing my education that head lead me to the situation where my budged is quite tight to begin with. I plan on paying more monthly than my plan is, so I'm done with debt quicker. My plan has no upper limits on what I can pay back in every given month.

[WindAtMyBack]

If you can afford to pay the debt, that is always the way to go. If there is anything left over, save it and invest it. It's straight math and has been proven to work with millions and millions of people. That's how people get rich. Once you reach a certain point, then you can loosen up a little. It doesn't take all that long to get there either.

[genericname85]

my goal isn't getting rich. my goal is enjoying my life.

[WindAtMyBack]

You have to set your own priorities. But for most people taking the long term approach works out best. You sacrifice a little now for a lot more later. It's not for everyone, but for most people it works best that way.

[genericname85]

well i certainly agree with your argument in terms of the general idea you have. however looking at credit card debt per capita speciallly in the USA, i don't think your argument that for most people that works best can be defended :D i think most people choose the "in debt" lifestyle even though they don't have to.

[TheSpaceGnome]

@genericname85, again, here, if you even so much as want to rent an apartment or mortgage a house, they check your credit score, so if you never used credit, you have no score, so most landlords won't rent to you. a lot of stuff is like that here. so its not that people here want credit, it's that vendors and property owners force most people to need good credit scores instead of having no credit score.

[TheSpaceGnome]

weird, my phone glitched and put this under the wrong comment

[genericname85]

@TheSpaceGnome this credit system you have going over there seems rather fucked up to be honest...

[TheSpaceGnome]

its designed to keep us in debt longer to drain interest funds

[WindAtMyBack]

"looking at credit card debt per capita speciallly in the USA, i don't think your argument that for most people that works best can be defended "

I said paying it off works best. Having credit card debt is one of the worst things a person can do financially. The interests rates are horrible. Credit card debt is a big problem. One side of the problem is that people have no self control. They spend too much money they don't have. The other side is credit card companies handing out cards to people who really shouldn't have them. The CC companies KNOW that a certain percentage of those high risk card holders will go bankrupt. They do it anyway, especially with young people, like college age or younger. They want to get young people hooked on credit cards. They are like drug dealers hoping to get people hooked, but ruining many lives in the process.

If you have 2-3 months debt, that's not too bad. Some people have 2-3 years of wages in CC debt. Some have much more. When it gets to the point that they can no longer pay the interest, that's when they go bankrupt because they have no choice.

CC debt is the worst kind, or at least it is here in the states. Interest rates of 12-18% or higher should be paid off as soon as possible. With something like a low interest house mortgage, it might actually be better to keep the debt.

You say you don't care about getting rich. But you should care about retiring, and that takes a lot of money.

[DarkCarousel]

I'd probably pay of 80% of the debt and then do something fun with the rest.
It also depends on where the money is coming from and the intended purpose for it. For example, if a family member gifted me some money for the purpose of paying off the debt, I'd pay it off in full. If it's a tax return or something similar, I'd do the former scenario.

[Apple1996]

I'd pay off that debt. That shit makes me paranoid. Never have had a credit card but did have a car bill and that drove me nuts and paid it off as fast as possible

[TheSpaceGnome]

I would pay it off completely before the interest rate goes up any further, that way a can use the monthly payments that were going toward it in stuff I want. Granted, Thats my answer in your scenario, In real life I wouldn't get the credit card to begin with.

[TheSpaceGnome]

I* not "a"

[genericname85]

well i always thought like that as well. though i noticed most people (myself included) got the contract going for their smartphone, where they massively overpay for the device they're getting. so since i was doing that anyway, i decided to by my phones using credit card, cause then i still have to pay the interest but at least i'm not scammed with usury prices for the hardware.

[TheSpaceGnome]

@genericname85 Ah ok that makes sense, but yeah I use prepaid codes for my phone so I can cancel or switch at any time, I refuse to do contract plans.

I also use older gen phone models and I don't upgrade unless it breaks to the point of not turning on or connecting.

Not for poverty reasons mind you, this is just 90s mentality of lack of interest in it, I'd do this regardless of income level.

It took a while for me to even bother with a smart phone, I think for what they are, they are way overpriced, so I won't spend more than $180 on a phone, all those 1k phones? nah, I could buy a kickass gaming pc with all that money (and I did), and I'd rather buy 100 gaming pcs at that price than 1 current gen smart phone.

[genericname85]

dude i'm older than you :D a tiny little bit maybe but i am older. so no need to tell me about 90s mentality :D i was there. and isn't it the fact that actually most americans have credit card debt? even the older semesters like us?

i also turned back to go for budget phones, cause the expensive ones are only so marginally better, that paying 3-5 times the price isn't worth it. and i am right now working towards getting my credit card debt done and over with.

i have however gone back to school, doing a bachelors and then a masters degree (which is where this debt came from and i'm right now in the position, were i have been living on an extremely tight budget for a few years that i personally prefer in this situation to keep a bit for myself so i can get a few things for myself...

you know for example i have not bought a single piece of clothing in the 6 years my education took... besides maybe a few pairs of socks or boxers xD the only thing i was forced to get in 6 years was a new phone. i didn't get anything for myself besides that. so i think from that perspective it's much more understandable to worry about other things but paying off debt first.

i'm sorry i'm telling you all those things :D you don't care XD i clearly lack social life thanks to covid...

[TheSpaceGnome]

@genericname85 I know but I mentioned it because of how contracts usually come with free or discounted phone upgrades as the lure, but to me its still not worth it.

I love getting new stuff, I just prefer how it was before where tech wasn't smart and worked and was durable, so when buying tech today i have more demands of it's uses to make up for the poor quality.

As for credit cards, I hate getting ripped off, and interest is a way thats done. In the US people hate credit but have to build credit because they are dumb with their money and can't buy a house outright.

[TheSpaceGnome]

most places here check your credit to let you use them, like renting, so it becomes a requirement if you want certain things and aren't willing to do workarounds.

[genericname85]

yeah i heard there's actually a very good strategy to cheese the credit system. just get as many different credit cards and transfer a few bucks back and forth every month. that piles up your credit score fast.

[genericname85]

in germany, if you want a credit for a house, they don't care about credit score. they'll look at your monthly income vs your monthly spendings in the last few years and calculate if you can affort taking a loan. :D i actually have a friend who was single and just spending all his money. he could easily afford a loan for a house but cause he always spent his money for stuff he didn't need, he now won't get a loan from the bank for a house for another few years XD

[genericname85]

and for rent they don't care about your income at all. at least i was never asked to show my income for a place i was renting.

[TheSpaceGnome]

yeah here we aren't so lucky, here you need good credit in most places or you don't get to rent or mortgage.

[genericname85]

hmm. interesting. to me it seems like that could be a good explanation as to why the crime rates are so crazy high in the US... i mean if you're litterally stranded on a barren island with no way of getting off financially speaking, what are your choices? ... that is appalling.

[TheSpaceGnome]

economics in the US rewards those who are born with enough money to buy mansions outright, the rest are drained to death from constant fees and debt. so my goal is become super rich via no debt through loop holes.

[TheSpaceGnome]

the only way to avoid debt here is to have a parent or spouse have all the debt, become rich by starting a company, then pay off their debt while still being rich after. other paths just lead to endless debt

[genericname85]

i mean here you can't avoid debt if you're going for university education. otherwise you can. and the debt you ahve from university education is capped at 10k. which i think should be easy enough for anyone with a degree to pay off rather quickly.

[TheSpaceGnome]

this is of course assuming you want a good life anyway

[TheSpaceGnome]

here the poor can get free education, and technically everyone else because most courses on free online now, and plenty of videos explain how to do things faster than courses for a lot of jobs.

[TheSpaceGnome]

its everything else that rapes the wallet here

[genericname85]

i heard they fuck you over with text book costs though. is that right? here you basically get most stuff for free.

[TheSpaceGnome]

granted we also don't have caps on how much you can owe anyone for anything here

[TheSpaceGnome]

in the 90s it was free, not anymore, so yeah now they do fuck us over with textbook costs

[TheSpaceGnome]

and the snobby "high end" colleges tend to price a lifetime of debt worth in scholarship fees for most

[genericname85]

yeah and then basically if you studied at a "dirty peasant university", the well paying jobs won't even invite you to a job interview xD that's what i heard. that is not the case here.

[TheSpaceGnome]

yup, that's definitely an annoyance here.

[TheSpaceGnome]

unofficial caste systems here run rampant with damn near everything

[genericname85]

yeah. you know the more i learn about American culture, the more i find American culture has way more in common with poor 3rd world muslim countries in this world than all the other first world countries... and they are the ones condemning those 3rd worlds countries the most xD it's quite hilarious.

of course there's always some individuals that see the shit that's going on and are just helpess in the mass of idiots that defend the system they're being enslaved under.

[TheSpaceGnome]

Most people in the US do not share opinions with any political figure here, most of us think a lot of our laws are retarded, and most of us have no interest in voting because we know it's rigged and only the electoral college and rich asshats get to actually pick who their new puppet is. Americans are very different from America and its perceived/intended culture. we are basically ran by a government who is nothing like the public it runs.

[TheSpaceGnome]

Our banks own everything here. And our politicians are just lap dogs for them

[genericname85]

i don't think your estimation is true. because i thought the same was true for the people in the country i live. but the more i grow politically interested in recent years, the more i learn that the people are actually that dumb. even here. and it's onlya minority that seven sees the scam that our country is.

[TheSpaceGnome]

most people are dumb yes, but other aspects of our culture promote freedom over authority, so even the dumb people think its rigged.

[TheSpaceGnome]

you still have outliers, but most if us don't even vote, i would say only the middle aged and older people tend to vote, and out if them, maybe about 35% bother voting.

[NathanDavis]

always settle your debt given the chance, not only saves money on the longer run but is also very certain, and prevents the unexpected of life of business getting in the way.

[Tyrael]

Pay part of the debt and get myself something. It's worth paying most of it off if possible.

[genericname85]

yeah that's how i feel too. it seems to be a good balance between long term financial stability and short term gratification.

[exitseven]

Pay off the debt and avoid 20% interest charges on the debt.

[genericname85]

it's like 12% annually in my case which is like 1% monthly interest. which in my case is like 10 bucks a month.

[exitseven]

It has been so long since I paid credit card interest I have no idea what it is now.

[Likes2drive]

Pay off the debt, interest is very high on credit cards

[genericname85]

yeah that's true. but my current interest rate is like 10 bucks a month. that's not "that" bad. i mean considering i will be able to pay off my debt within the first couple of months in full anyway.

funny thing is: i have the amazon credit card and they even advise against using their credit, cause it's expensive to most other sorts of loans.

[genericname85]

*within the next couple of months

[Likes2drive]

I guess if you can pay off the debt in full every month then it’s no big deal using a high interest credit card but I don’t like having any debt and so for them like that I have right now is a car loan since I recently got myself a new car finally

[genericname85]

yeah man i don't like it either. but i guess i got used to it, being that i'm still paying off my student loan... i guess that's how they get you.

[genericname85]

you didn't get a "brand new" car though, did you?

[Likes2drive]

Yeah student loans are really long to pay off, my daughters will be paying off theirs for years after they get a job, they just graduated after 4 years and continuing more school

[genericname85]

yeah. i kind of made the decision to study later in life xD so for me that loadn will probably still be with me till well in my 40s xD

[Likes2drive]

Hopefully you can pay it off sooner

[genericname85]

thanks man. hoping for that as well. what about the car? did you buy a "new" used one or litterally factory new?

[Likes2drive]

Almost new , a 2020 Toyota RAV4 with 12,000 miles

[genericname85]

you see that's a "huge" financial decision xD cause just for there being a previous owner, even if they didn't put miles on the car, you pay like 50% of the "new" price... i think buying a factory new car is financially speaking pretty much one of the worst decisions you can make.

[Likes2drive]

They literally only had 3 brand new ones left of the base model only and not the color I wanted either so I got the last year one, seems like car production stopped almost completely last year

[genericname85]

my next car is definitely gonna be a fully electric one. cause my government is killing combustion engines right now.

[Likes2drive]

We will always need some gas engines around since you can’t charge everywhere and if the local power plant goes out awhile then what? Need more solar panels installed to cover some of those situations

[genericname85]

yeah i know man. with diesel engines from the 80s, you could even be 100% co2 neutral using sunflower oil or oilseed oil... but my government is on that trip where "electric is the sustainable future"... at the same time they're killing off nuclear power generation which is litterally the most co2 efficient power generation that exists. and coal generation too. they plan on replacing all of germanies energy generation with wind, water and solar. volatile energies with no storage slutions...

my government is litterally retarded. i don't know what to tell you.

[Likes2drive]

With no storage technology there will be no power at night and there is no wind at night normally and of course no sun so they certainly are not thinking ahead. Every time we get a new president they reverse what the previous one was trying to do so we just go in circles over here

[genericname85]

well rather go in circles than going at full speed in the wrong direction. of course we're in the middle of Europe. so the solution will be that we have to buy energy from other countries... so then our government will rightfully boast with germanies crazy low co2 emissions... just cause the co2 is emitted in another country... it's pure eyewash and the moronic people in my nation even cheer for them.

[Likes2drive]

Yeah I guess it’s ok if it’s not in their backyard

[genericname85]

yeah. so smart. at the sime time we're financially supporting china with funds that they use to build airports and coal power plants xD

[Likes2drive]

Yeah, lol

[Anonymous]

I don't have any debt, so Id spend all the money on hookers and blow. 😂.

[loves2learn]

Pay your debt dude! Best decision by a long shot.

[JesseJayNeak]

I'd pay it off in full

[es20490446e]

I usually don't get in debt.