More suggestions for getting out of debt

Shockingly, it appears that some of you out there are still in debt!

Oh, wait. So am I.

I guess that's not so surprising, after all.

But I am a bit surprised by the continuing stream of questions I receive on debt and savings issues.

One came from Clyde, who wrote that he is trying to get out of credit card debt.

"Thankfully I only have one credit card that as a family we use," Clyde wrote. "However, the balance owed is over $7,000. I'm able to make the monthly payments, but as you would guess it doesn't bring the balance owed down very quickly.

"I do have funds in 401(k) accounts and also a couple of other investment accounts. Does it make any sense to take a loan out on one of those accounts or sell some stock to help eliminate some of my credit card debt?"

For help with Clyde's question, I contacted Mike Peterson, spokesman for American Credit Foundation in Midvale.

Mike says the first thing you need to do, Clyde, is make sure you don't add to the credit card debt you already have.

"That's rule number one to get out of credit card debt, is to stop adding to it," Mike says.

Next, he recommends that you consider your current minimum payment as a fixed expense. Mike guesses your minimum now is about $175 per month. If you pay that minimum today, your bill next month will have a slightly lower minimum.

"If (Clyde) continues to follow the downward trend on (minimum) payments, it will take approximately 26 years to wipe that debt out and cost $12,000 in interest" assuming a 20 percent interest rate, Mike says.

But if he keeps paying $175 every month, even as his required minimum declines, he could be out of debt in five years and five months, paying about $4,000 in interest, Mike says.

As for the possibility of taking out a 401(k) loan, Mike added his voice to those of others in this column who have advised against it.

"Our view for the retirement funds is that those funds are sacred," he says. "I'd rather people not mess with those funds. Leave them alone and let them compound."

A sale of stock outside of a retirement fund is a different issue, Mike says. If, for example, your credit card's interest rate is 20 percent and you're making 10 percent on investments, it would make sense to sell the investments to pay off the debt.