George wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.
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“Hi Steve,
Im finally on the right financial track since I am starting to pay off my $20,000 credit card balance since I stopped using the card and am now paying more than the minimum due. Also, I just started contributing to the retirement plan at work as well and also started putting a little in a savings account. Doing all this is pretty much maxing me out and not giving me much spending money but at least I feel like I am heading in the right direction.
However, heres the problem: my house needs a new roof. I have been putting it off for over 5 years. Now It absolutely must be done in a few months when it gets warm. That will be between $5K-$7K. Obviously I don’t have that money but if i want to have a house, it must be done. I also have some other things that need to be done as well. Do you have a suggestion about the best way to pay for this?? So here i thought I was heading in the right direction but now I will be in worse shape and more debt.
Thanks Steve”
The Answer:
Dear George,
Don’t feel dejected just yet. It sounds like you are doing the right things but the problem here is that you have not had enough time to save up the money to pay cash for the needed repairs.
This is one of those times that credit can be beneficial. When you enter into a credit agreement you use the money of others for your purpose, and pay a fee to do that. The fee is charged as interest.
If you are working with an established roofer you could ask if they work with someone to finance a new roof. Otherwise, check with your local bank and see if a home improvement loan might be available. If you have some equity in the house this might actually be a good time, while interest rates are low, to refinance the home and take out enough cash to pay for the needed repairs and pay off the credit cards, as long as you don’t run the card back up.
Outside of that, you might find yourself having to use the credit card to pay for the new roof. That roof is pretty important. If you let it go too long without repair it could wind up costing you a lot more in damage than just the cost of replacing the roof.
Once you get over this hurdle, I want you to focus on how much you are saving. You might need to adjust the balance of your savings so you can put more into a savings account right now to build up an emergency cash reserve to use for things just like the roof.
In order to do that you might have to return to just paying the minimum on the credit card for a bit. Paying more than the minimum but not having emergency cash just erodes the progress people make since emergency expenses tend to wind up back on the plastic.
