Debtor's Prison

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Debtor’s Prison

debtors-prisonI added the picture, but – given the title of this post – I could not resist 🙂

I think that Diane is running the home as a rental, so I’m hoping that the rents will at least cover the costs (now … or, soon), and that the student loans still have time to run and are locked at low interest rates (?) …. then there’s the scary ‘Credit Card Monster’ …


Owing money is no fun;  stress levels increase when you miss a deadline and have additional finance charges and late fees.  This is debtor’s prison.  But at least we’re no longer locked up where we can’t earn money to pay back the debt.

Today I have debts that include a home ($130k), student loans ($30k), and credit card debts ($22k), plus a monthly obligation that is around $1k (and becomes the worst kind of debt when it’s not paid).

My plan is to continue paying the monthly obligation, pay down the CC debts – have them paid off this summer – and if I am not having income that allows me to pay off the rest, have the monthly obligation and the student loans put on hold.  With the tax season upon us, I also need to make my obligations to the government even, so that for the next couple of months, my future is not easily forecast until this reckoning of accounts completes.

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Reader Comments

Diane, I certainly know what you are going through. Money Making 101 can be a real struggle to work through and my wife and I certainly went through the hard-knocks as we struggled through it ourselves for a few years. Keep up the good fight, it is well worth it!

@Diane – I’m sure tings will turn around. We all hope it is sooner rather than later.

@ Diane – Right now, from what I can gather, you are not earning an income? If that’s not correct, we’ll pick it up in the next post ….

If so, you have money in a retirement account that you can move from the left hand side (ie asset) of your NWiQ statement to the right hand side (ie liability).

However, you will see no immediate change in your NetWorth!

Longer term, of course, you will see a return as the income from your 401k is likely to be offset by the interest that you are paying on the loans and you can then accumulate the net savings.

So, what to do … what to do?

No more 401k, Adrian – it’s all in IRAs now.

I’m also withdrawing the funds in the IRA to pay the debts mentioned above. So, the NetWorth is actually decreasing.

With the need to pay taxes next, I expect a huge decrease and then a re-evaluation of where that leaves me for that final question of yours (picture the hands to the sides of the face): What to do, what to do…

But that is when the question needs to be revisited – once the reckoning has been done with the IRS for 2008 and 2009-to-date.

No worries, eh, mate?

@ Diane – That’s actually not the case; try updating your NWiQ profile by, say, taking $10k from your retirement account and reducing one of your debts by the same amount … you’ll see that your Networth does not change.

What will change is that you will earn less in your retirement account, but you will save more interest on your debts. You have to decide which of those two changes put more money into your pocket ….

… it’s what you do with THAT money that will dictate what happens to your future Net Worth!

So, the real issue right now, is that you are doing nothing to increase your Net Worth … simple solution, mate: add income. No worries. 🙂

Hey! Thanks for that math lesson, Adrian…and to think I used to be a whiz at math…we are too computer-dependent and I art guilty as the rest.

I made $20 bucks last week that I a quite proud of. It’s like making the first $1 in a new venture. But I am still spending money in pursuit of that $20 becoming $20k and then more…another lesson here – where I spend it to increase the worth…

Thanks, Adrian!

@ Diane – My pleasure!

BTW: I think I’ve turned this ‘math lesson’ into a post, because it’s a common error … you get top billing – it’s the cost of ‘doing business’ with me 🙂

[…] Diane asks: I’m withdrawing the funds in the IRA to pay [some of my] debt. So, is my Net Worth actually […]