Comment by skmurphy | Hacker News Reader

Comment by skmurphy | Hacker News Reader

I would go forward from where you are. Look for additional contract work and look for additional business that can leverage your assets as they are. Tell everyone you know that you are looking for work and are available to start immediately. Go back to all of your old clients and see if there is any basis to consult/contract or support them--that doesn't involve incurring additional expense in advance.

Simplify your life to the point of austerity and pay as you go. Don't "bum" anything from anyone, e.g. find a mutually acceptable quid pro quo for room/board from parents and/or friends. Sell any other assets you don't need for work (e.g. television, videogames, other non-essential and time-wasting items), use the money for food and debt service.

On 30K of credit card debt my calculation is that you owe about $500-600 in minimum payment, use the 6K to continue to make minimum payments. Put your credit cards in your sock drawer and only carry one for bona fide emergencies (e.g. car breakdown). Carry cash and pay cash for everything, it will give you a sense of where you are spending money immediately.

Don't take any contracts that require you to advance any money or risk more than a week's labor until you get your debt paid off. Don't "pay up front and invoice in arrears," get your clients to cover the up front expenses and take a fee for your services and the use of your software platform.

I haven't been in such a situation... but you said, "Sell any other assets you don't need for work (e.g. television, videogames, other non-essential and time-wasting items), use the money for food and debt service."

Is the $500 you're going to get for selling a TV and a video game system going to help that much? It seems that you should keep anything you actually use, to me - you're in enough stress as it is, you don't need to make yourself feel desperately poor.

Or am I missing something?

It's a question of focus. He is desperately poor: he's completely broke. He has talents that he needs to focus on making money. My assumption was that he still wants to be an entrepreneur: he needs to learn how to bootstrap on minimal cashflow.

I think you'd get a bigger payoff from not having the TV and games around to distract you than simply the $500.

Every hour not spent watching TV can be better spent somewhere else, even if all he's doing is reading.

TV is a "two bird stone" in that regard. Videogames as well.

Rather than keep the 6K separate, pay the 6K on one of your cards (the one with the highest rate) and do a cash advance on the card every time a payment is due, this will decrease your interest a bit.

You're probably paying 20% on your cards to, currently you have a yearly income - on paper anyway - so banks will still talk to you, so look at minimizing the interest, some options are 1) get a personal loan for around 5 or 6% (not sure of the current rate in the US) from a bank 2) get one of those cards with a 2% transfer rate for 6 or 12 months and transfer all your debt to one of those cards then stick it in your sock drawer

30K probably seems like a lot now, but it's not much in the scheme of things just do all those unpleasant expense minimization techniques and watch every penny and it will be gone in no time.

He needs that 6K to live on until he can find more income. If you pay 6K on the credit card you still owe the minimum payment next month only now you're broke. At the margin he will have to declare bankruptcy. This is a cash flow budgeting problem: many bootstrapping startups face these kinds of issues.

As for getting a personal loan he's broke and has no assets: I would be cautious about falsifying a credit application.

He needs to focus immediately on income: focusing all of his efforts to earn many times more than $600 (6 months of 20% interest on 6K) over the next six months will be more useful than more debt juggling.

No, if you put the 6K on the card, you're limit is still the same, but you are charged less interest. You can then take money off the card as you need it and you are then paying interest on the current balance. e.g.

Balance = 20,000 Payment of 6,000 Balance = 14,000 - interest is now calculated on this balance next week take out 500 Balance is now 14,500

and so on.

'will be more useful than more debt juggling.' it's not juggling debt it's minimising you're costs. Not minimising your costs is the difference between having enough cash to be a startup for another 6 monts or not

30,000 @ 20% interest = $6,000 p/a 30,000 @ 3% interest = $900 p/a

To maintain the 30,000 debt on a card you'd have to come up with 6,000 a year if it's a personal loan it costs you $900 a year - so fo a couple of phone calls you can change your costs by more than $5,000.

'I would be cautious about falsifying a credit application.' I never suggested any falsification, this is debt management 101.

This can be a a slippery slope: you put the 6K back on and you borrow more than 6K again. For folks who are in debt it's a safer habit to switch to pay as you go.

As to taking out a new loan when he doesn't have a steady source of income and no assets to offer as collateral it can be difficult to be entirely candid on the application and still get the loan. In hindsight your creative writing may be construed as fraud.

So your saying it's a crime to reduce how much money you have to repay?

I was assuming he would be obtaining some sort of income, either a job or some new contracts. If he doesn't the 6K will buy a couple of months, there is no fraudulent intent, the debt still exists, it's merely minimising your costs. As others have said credit cards are a nasty way to fund a startup, but financial institutions make them easy to obtain, likewise they make obtaining lower cost methods of obtainin capital difficult, and who can blame them - 20% versus 3% why wouldn't it be structured as such. I find these comments interesting that there is any resistance to getting a personal loan, it has been made so difficult, the banks buy their money at 1% and sell it at 20% on credit cards, what a game. Personal loans are unsecured and go by the ability to repay and credit history. I'm assuming patryn20 has a credit history by repaying his cards on time and will obtain a method to repay the loan, to keep repaying at credit card rates would be foolish.

It's only a crime to falsify the application. I agree with you that "personal loans are unsecured and go by ability to repay and credit history." In the absence of reliable income it's hard to accurately represent an "ability to repay." He would be much better served in the near term to find new sources of income. Without them he is destined for bankruptcy.

I agree new sources of income are required, but also a debt management startegy is required. As I mentioned before, the debt as it stands is costing $6000 a year or so, it would be very easy to cut that down to $1000 a year or so (that's just the interest), if you can get the interest down to $1000 a year then the other $5000 can go on repaying the principal and hey presto it's gone in 6 years by making a phone call or two with absolutely no change in what you are paying. If you can make the repayments pre tax money then it's even easier.

Good advice about not wasting time on people who want 'credit' - always check before hand how long it will take you to get paid. And don't count your money until the check clears. (though personally I'd wait two weeks, or even a month for a client if I couldn't do better.)

about selling crap:

sure, selling your video game system and TV is fine... if you have systems that are worth more than the time it takes to sell them. Right now it's pretty easy for me to get work at $80/hr... selling, say, the obsolete servers in my garage or my TV won't net me $80/hr.

I guess it might make sense if you have nice stuff, or if you can't find contract work at all. (I've been there, I've made rent by selling obsolete computer parts.

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