Hi Guys, New member to the forum here and new stacker in 2011. I started stacking a few months ago however most of my ozs are in modern chinese coins I do have a few bullion peices as well. I would like your opinions on a dilema I am in. I have about $30,000 worth of debt (loans, ccs, etc) I am fortunate enough to earn a relatively good income - $60,000 per year. If I budget and cut a few corners before the end of 2012 I can become debt free but this would mean I could not afford many if any more silver in 2012. What should I do, pay off the debt and then be able to fire $30k+ into silver in 2013 onwards or pay the minimum payments (around $10k for the year) and let the debt run its course and finish in approx 3 years and put the extra $20k into silver in 2012. If it matters the average APR is around 20% on the debt so I guess if silver is going to rise 20% or more before the end of 2012 I would be better buying silver otherwise paying off all the debt? Any thoughts appreciated, thanks!
Depends on what the debt is being used for (for some people debt is not a noose around the neck.) But if you're loading up 30k on personal loans and credit cards (especially the credit cards) I'd roll it over into a consolidation loan, cut up your credit cards (just keep a debit card) and pay the bastard off asap. No matter how optimistic some folks get on PMs, I don't think we'll see Silver 'go to the moon' in the next year regardless of what happens to the global economy. More likely a heavy smackdown in the commodities markets in the near future than a boom IMHO. I'd rather be debt free and having no leverage on my metal than the latter, but that's just a personal preference.
Hi, thanks for the reply I have just re-read my post and I made a typo - if I let the debt run its course it would take 5 years to pay and I would end up paying about an extra $20,000 in interest. Debt does not bother me obviously I would prefer to be debt free than not but its not something that would cause me sleepless nights or anything. I cannot get a debt consolodation loan I have already tried. I am really torn about this I love the thought of collecting and stacking silver (even though I am relatively new in I do have about 200 ozs already in modern chinese coins, a few maple leafs and some junk silver. I know this isnt much to most people but I feel I have made a good start this year. Just dont know what to do lol
If you have collateral you can get a consolidation loan. Maybe not an unsecuritized loan, but definitely if you have an asset of value on the table to back it up you should be able to get something that will give a far more attractive rate than a credit card would. If you are still 100% fubar though, consider transferring your card balances to another CC company on a 6 month interest free arrangement and pay that off first asap. Credit Card debt is a killer because of the interest rates. Just get a debit card and cut the fucking thing(s) up asap IMHO and never get a credit card again. There are some people who can make the credit card system work very nicely for themselves, but the majority of us plebs, they're a sucker's trap. Better off avoiding temptation and get rid of the bastards asap.
Get rid of debt, especially consumer debt. It's the worst kind, and as you said, five years to pay off if you let it run it's course. A $20 lunch on a CC will end up costing you $50 if you don't pay it down. Working to pay double for a lunch you ate five years ago doesn't make sense. Been down the consumer debt path before and gladly got out of it.
Do both. I've been in your position before and was previously on the same income and this is what I did; 10% per week into silver 20% paying off debt Remainder of cash after living expenses into a savings account. I would then decide where to allocate this savings portion at the end of each quarter. I learnt this from listening to Dr John Demartinis audio "secrets of financial success".
Pay of your debt. That said, I remember reading something not long ago that said the average person over 25 has about $3,500 worth of stuff laying aroud the house that they don't need or use. Do a clean out and get rid of your junk. Use your regular income to pay of the debt and use any "found money" you get from selling stuff to buy precious metals. If you don't sell much, you're still making your budgeted repayments on the debt but if you sell a lot you get to buy stuff that's actually worth having.
Have a read of this thread from 2010 - explains the approach I used getting rid of a bunch of debts. http://forums.silverstackers.com/topic-1208-debt-reduction-strategies.html
This is the same advice from the book Richest Man in Babylon. 20% into debt payment, 10% in investments... now whether that's silver is up to you. I think it's a pretty good and realistic strategy.
Pay off the debt and then if you still want to buy silver borrow specifically for metal with an appropriate loan at an appropriate rate. High interest CC debt is a losing proposition.
Rightly or wrongly, over the last several weeks I've sold the vast majority of my stack. I'm holding a fraction of small stuff. No more PAMP 1kg bars. 2012...and for the next few years will be paying down my debt. I'm lucky enough to have a well-paying secure business. I don't see the global economy picking up any time soon. And I see commodities getting smashed next year. When silver gets oversold below $20, and gold down towards $1300, I'll dip my toe in again. Until then, I'm steering clear of PM's, shares and property. Paying down debt. I'm 37, I've got time.
If i was in your shoes, my accountant would tell me to pay off this debt first or consolidate all debts into a lower interest loan. This is the most logical thing to do. Whether you can consolidate your debt or not, i would favour this approach. 1) Firstly stop using your credit cards. 2) For the first 6 months, pay off the first 50% of your debt (eg $15k out of $30k). Make sure that you FIRST pay off all CREDIT CARD debt, as it has the highest interest rate, thereafter all other loans in descending order of debit interest. This will significantly minimise interest payable. 3) After 6 months, depending on what silver prices are, either continue using 100% of your income to pay off the debt or alternatively use 80% of your income for debt reduction and 20% for investment in silver or even a 50/50 split if silver has really dropped. This way you are steadily increasing your stack whilst still reducing your debt level.
Think of paying off your debt as a 20% return, which (for you) it is. That is a GREAT, RISK FREE, rate of return. My answer would be different if you were paying 5% but for you, definitely get out of debt first!
I'll use a bit of history to help answer your question ^^ Silver price per ounce in 1900 : $0.64 Silver price per ounce in 2011 (price now) : $28.79 That is an annual compound interest of 3.49%. This means over 111 years, silver has averaged a rise of 3.49% per annum. If your credit card charges at 20% APR... not saying it's impossible, but the odds will be stacked heavily against you to beat that with silver next year. Just my 2 cents worth.
VERY easy to kick any CC credit to another low interest option for 6/12 months. Even in present day I was amazed how easy my Bank Manager made it. The next day after refinancing paid 60% off with remaining 40% over the next 12 months (all bullion purchase no consumer debit) Point being there is 'good debit' and 'bad debit' as previously posted. I racked up the CC when it suited me,then paid down likewise. To play devils advocate - high inflation you want AS MUCH DEBIT AS POSSIBLE because you pay down the balance with cheaper dollars. Deflation the opposite. Really feel short term deflation before the tsunami of inflation...there debit isn't your friend unless you can ride out the storm
