Advice on Selling Stocks to Pay off Credit Card Debt
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Should I sell stock to pay off debt?
Should I sell stock to pay off debt? I have a well funded 401k and save a small amount every month. I do have a fair amount of stock laying around for a long time worth nearly 15,000. This would pay off all my debt and then some. Would it be wise to sell this stock and be completely out of debt? The reason I ask is, this stock could also be used as a home down payment or emergency fund. I rent now and plan on renting for the near future. I figure the amount saved my being completely out of debt will offset the sale of stock?
First, make sure you have enough money readily available (cash, CDs, sometimes even unused lines of credit) to pay your expenses for 3-6 months (the longer it's likely to take to replace your income, the more you need to have available). You state in your question that you enough money to pay off the credit card debt and you also that you will have some money remaining. I suggest that you as much as you need to pay off the credit cards and then save the rest.
The only investment account you should leave money in when you have a credit card debt balance is your retirement account, such as a 401k or IRA. The reason is simple; you'll end up with more money if you take that money out of the stock market and put it into your debt. With the stock market, you can only reasonably expect to make around 9%-15% per year, based on the historical performance of the market. When you pay down your debt, you are guaranteed to save yourself whatever interest rate you are paying. Therefore, if your choice is maybe 9%-15% gained on the stock market, or paying off your 14%-29% APR credit card debt, go with the guaranteed win and pay off the card.
For more information onthe Bills.com debt help options page.
I hope the information provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog
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Debt statistics
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Auto loan debt was $1.62 trillion and credit card was $1.12 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in Oregon, 16% have any kind of debt in collections and the median debt in collections is $1563. Medical debt is common and 5% have that in collections. The median medical debt in collections is $599.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.
