Starting from a mostly clean slate

Over the past week or so I’ve been playing with my finance spreadsheets to figure out a way to try and start over with a clean slate. I’ve come up with a way to get the freshest start possible and give me some peace of mind with only 1 account to pay down at a low rate.

Roth IRA – Gone!

Yesterday I called my Roth IRA company and withdrew the entire account, ~$4k. Over the past year and a half I’ve invested close to $5000 into the account. Since I’m only withdrawing my principal, there are no penalties or taxes on this distribution. It’s not the “right” thing to do but, again, I’m looking for a fresh start.

Investment Account – Next!

I plan on liquidating my investment account sometime next week as well. This will give me another $4k or so of cold hard cash to put towards. My investment account has been around since I was a child and I believe it has served its purpose for now (down payment on my first apartment). The leftover money since then has been mostly stagnant with the current market situation. I’ll be selling these funds as a long term loss, so I’ll get back some of that in my tax refund next year.

One Last Balance Transfer – Last Step!

My Citi credit card which currently has a balance of just under $14k at 3.99% for the life of the loan has offered me another balance transfer at 1.99% until July 2010. I plan on taking out $4k with this offer. Since credit card payments pay the lowest rate first, my 3.99% balance will not be paid down but I’m ok with that considering the rate. The key here will be to repay the 1.99% balance before it resets to a higher rate. At that point my payments would then go towards the 3.99% balance and I’d be paying a high interest rate on the balance of the original $4k loan. I don’t see this as a problem though since I’ll be making monthly payments of at least $500 towards this card since it will be my only card with a balance at this point.

Results

These transactions will give me approximately $12k, just about the balance I owe on my credit card which is about to reset from 0% to 15.99%. I will not pay off my 401k loan just yet but these moves will still leave me with ~$8k in my savings account. Good enough for an emergency, or in case I get laid off and need to pay back my 401k loan immediately. I’m still up in the air about exactly when to payoff the 401k loan. For now, I’ll wait on that decision to sometime early next year when I will owe less and have some extra savings buffer. I’ll also have a nice tax refund which will help too.

Overall, my net worth will not change much with these decisions. Again, I’m looking to consolidate for ease and peace of mind to pay off my debts as quickly as possible. Once my debts are gone by the end of next year I’ll have a new investment plan in place to start over again, but this time debt free!