At what point should I go into credit card debt?

Question

This may be a stupid question, but I will ask anyway. At what point should I stop using up my cash savings and start accumulating debt on a credit card? When I try to Google for advice about going into debt, I only get seem to find pages about getting out of it.

Some background: The last few years I've been dealing with a combination of job loss, mental health stuff (mostly depression), existential crisis, etc., that have left me rather unmotivated and directionless. I've mostly been living off my savings (starting with about $50k). To further stretch out my savings and try to shake things up, I moved out of the U.S. to Latin America and have been mooching off family members here for a few months.

Financial situation (all amounts USD):

• Current costs: I'm being charged $220/month to eat at home, $0 for rent/utilities, I have a $77/month cost for my storage unit in the states, plus whatever I spend on junk food and food out, going out, toiletries, transportation, replacing my worn-out shoes, medical expenses, non-bank ATM fees, etc. (a quick estimate looks like I've been doing ~$150/month on all that).
• Current assets: $2635 in checking; $6788 in a Vanguard bond fund from when I used to invest, but I've been trying not to use it just to see the lower amount in checking as motivation to get off my rear. I also have 150K frequent flyer miles to help me out w/ moving around, especially since I'm on tourist visas. (And I have ~$100K in a 401k, but I don't think that counts since I think I can only take from it as a loan?)
• Other stuff to know: I'm 35, I have no debt (and have never had CC debt, just student loans which are now paid off), no dependents or anything, I'm better than most at being frugal, I'm not really worried about my credit score (no plans to buy a house or whatever), and am not hankering to get back to the U.S. The family members, however, are getting rather annoyed with my lack of progress in life and seem to want me to either move out (in which case I might be able to rent a room around here for ~$150), or possibly pay them more to keep staying. My professional background (web design) should theoretically allow me to work remotely.

Yes, I do know that the correct answer is something like Get a #$%@&* job already*, but considering that I haven't made progress in quite a while (we're talking basic things like writing a resume), despite even quite a bit of therapy, I'm worried that I may run out of cash soon. And I'm wondering if it wouldn't be better put what I can on credit cards (my total limit is $12k), stop paying in full every month, and only doing a partial payment for a while. Given my state (mental and financial), is that totally idiotic? Should I have a cash-on-hand cut-off point? Is there something I'm not considering about CC debt that might scare me into being a responsible adult?

(*And who knows, maybe some answers in that vein might be helpful anyway, just like simply writing this question out is helping me get some more perspective on my situation.)

Answer 1

Financially, it simply doesn't make sense to go into debt here. It may be that living on credit cards for a while gives you a chance to recover psychologically, but financially, it doesn't make sense.

But, let's consider the larger picture here. You are unmotivated and directionless, and may be suffering from depression. That sucks; very many of us have been there. I'd write in great detail, except this site is about finance, so let's limit the scope a little.

You've had therapy. It hasn't produced meaningful change. Stop with that therapy; it's not cost-effective.

Financially speaking, your goal should be to get back on your feet. You should only be willing to take on credit card debt if it is very, very directly helping you accomplish this. Maybe that means a different therapist. Maybe that means paying for medication, which can often be breathtakingly effective. Heck, maybe that's a suit, something you put on each morning for a couple of hours to focus on getting a job. Maybe that means some other approach. But you should only be willing to take on debt that directly helps you get back on your feet.

Should you be willing to continue as you are now, taking on credit card debt for your living expenses? No, definitely not. Credit cards charge obscene amounts of interest, and the evidence is that your current approach is not working. Going into debt in this case makes as much sense as it did for me to continue working for an employer who wasn't paying me. That is, none at all (financially).

All that said, I strongly encourage you to get whatever help will work for you. Your finances are important, but they aren't everything.

Answer 2

Credit cards are a reasonable if relatively expensive tool to gain liquidity. If you have $50k in liquid cash, you don't have a liquidity problem for credit to help you solve. You have 100 months of expenses in cash. I suppose you could see a balance as a motivational tool, but it's all stick and no carrot.

Take the next part half seriously in the spirit of "what if" talking therapy: If you feel you need to be motivated to get back to work by the true risk of running out of cash, and take such advice from strangers on the internet, the traditional midlife crisis purchase is a sports car. At least have some fun in a (depreciating but resellable) asset instead of paying a financier's bonus in evaporated interest! If there is a luxury car tariff in your country, you may even be able to exploit a personal exemption if you drove in from the U.S. I suppose this advice could possibly get you booted from the family house as it'll probably come across as a seriously "ugly American" move though...

Answer 3

You're situation is actually pretty solid except for the job part. I definitely understand the existential meltdown in your 30s. Luckily you're in web design and have an in-demand job. Maybe go to a code school/design immersive to add some new skills and reinvigorate yourself. If mental health needs to be addressed above all, then definitely make that a priority.

Avoid credit card debt like the plague. If you think you're stressed now, just wait.

Answer 4

Borrowing money to pay living expenses will not last long. Also, banks and credit card agencies are very expert at detecting people who try to live off of debt (as you might expect) and they will cut you off completely as soon as they figure out what you are doing. As a general rule, if you go six months without paying a credit card or bank loan, you will be totally cut off from all sources of borrowing for at least 10 years and all your debt will be sold to collection agencies that will then start harassing you. Some collectors will sue you in a court of law and try to seize any assets you have, like a car.

It is critical you find a source of income immediately.