Tuesday, August 11, 2020

What should I do with my money now?
by Scott Bilker
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about and DebtSmart can be found in the online media kit.

Scott Bilker

Dear Scott,

A few months ago, I purchased your books and started reading your newsletter. It has really helped me to get a grip on paying off my debt. Thank you!

Now, I have a big question for you. Through the sale of my previous house, I will soon have just enough money left over ($100,000) to pay off ALL of my loans and credit card debt. I have a good income and look forward to getting into another home as soon as I can. I don't have much other savings to tap for a down payment, but don't mind doing 100 percent financing.

Question: Is it a good idea to pay off ALL of my debt? Or should I, perhaps, keep some on the accounts? Or what? This is my big chance to get financially secure, and I don't want to blow it. Your advice has always helped me in the past, so I really wanted to ask you what you think.

Thank you,


Glad to hear that my books and newsletter have helped! Thanks for letting me know!

It's great that you are in a solid financial position at this time. With $100,000 in cash, you do have wonderful financial options. The key here is to determine what is best. By best, as you know, I mean what is going to capture the most money.

No matter what you decide to do, you should first get that cash in a safe place! Safe, and earning you a good interest rate. I recommend stashing the cash in an INGDirect.com Savings Account! The rate is 4.50 percent APY (Annual Percentage Yield). Nice! Keep it in there earning you money while you figure out what's best.

Since you will be buying another home, you will need money for closing fees and a down payment. By putting down at least 20 percent, you will avoid paying PMI (Private Mortgage Insurance). This will enable you to keep more of your money--money that can go toward paying off debt or paying down the mortgage more quickly.

What about paying off credit cards?

Well, you do need money for the house, so you will have to keep some. As far as the cards go, you must look at the interest rates you're being charged. You're going to be getting 4.50 percent APY from ING and paying a mortgage at somewhere near that same rate (after taking in tax considerations). So then, if your credit card rates are very high comparatively, you should allocate money to pay off, at a minimum, the highest rate credit cards.

Of course, you should transfer as much money as possible from your high interest rates cards to another with a lower rate. This is not a good time to open new lines of credit, however, because you're going to be applying for a mortgage.

Now, if you do hang on to the credit card debt, you can look at getting new, lower rate cards (http://www.debtsmart.com/cards/) after you get the new home.

The bottom line: Do the math for all your options. Look at the rates, look at your tax bracket and calculate your total payments (credit cards and mortgage) for all scenarios. There is a lot to think about, so the first move is to put that money in the ING Savings Account and start earning money while you're working on the plan!


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