Saturday, January 16, 2016

Stupendously Stupid Persistant Debt!!

Well, it finally happened.  We maxed out our Amex credit card.

Yep, we are now carrying $15,000.00 worth of unsecured, high interest debt.  STUPID, STUPID, STUPID!!

Here's how it all happened:

1. In October we had to replace all four tires on Grump's car.
2. In November Grump strolled into the hospital emergency room, and when he left the hospital two days later his appendix was gone.
3. As soon as Grump got out of the hospital, (as Sweetie was driving him home, in fact!), Sweetie's car broken down, and required ridiculously expensive repairs.
4. Early this month we finally had to replace the roof on our house.

Now bear in mind that all this spending is IN ADDITION TO the normal day-to-day living stuff that two kids and three adults do, and it's not quite as unbelievably stupid that we now have a maxed out a credit card.

Because we don't like to pay the obscene interest rates charged by credit card companies, Grump decided that now would be a great time to cash in some savings and pound down this stupid debt.  Of course, as seemingly happens every time we need some savings, the stock market has been tanking recently.  It looked like we were going to have to take a beating one way or another, either by paying ridiculously high interest rates, or selling stocks when they are losing value.

Fortunately Granddad was able to come to the rescue!  He had convinced us several years ago to diversify our savings into municipal bonds in addition to stocks, and with the current low interest rates the value of municipal bonds is actually UP.  He looked at our bond portfolio, chose one that was a good candidate for selling, (inflated value combined with a low rate of return to maturity), and sold it for us.  Ta da!  Now we have an extra $9,000.00 to use to fight our stupid debt.

The moral of this story, (besides the obvious fact that DEBT SUCKS AND SHOULD BE AVOIDED AT ALL COSTS!), is that it is wise to diversify your savings.  Note that we invest in the actual municipal bond itself, NOT MUNICIPAL  BOND FUNDS!  Also, investing in municipal bonds takes a bit more work than investing in a stock fund, (there are more ways that the corrupt financial industry can rip you off with bonds than stocks), so it helps if you have a knowledgeable Granddad to guide you.

We ain't out of this debt disaster by any means yet, and for all I know more debt may be coming our way, (God forbid!), but at least we have a viable plan to chip away at it without taking a loss on our stock funds, or paying ludicrously high interest rates.

IMHO everyone should look at diversifying their savings into some municipal bonds.  Besides their ability to sometimes gain value while stocks lose value, in most cases they are also tax free!  But remember to buy the bond itself, not the tax fund.  And PLEASE find someone who knows the bond market very well to guide you.

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