Dear Vikram Pandit,
Intel Jessica here. So, I read that in the aftermath of Bank of America getting approved to repay TARP, Citigroup is gunning to do the same. Which makes sense. Clearly, you are dying to get rid of that $45 billion, get out from under the thumb of the government, be free of Tim Geithner's terrible yoke, and just live your life. Who wouldn't be? The government's interest rate is so high. Certain people there sometimes go out of their way to make you feel like an irresponsible degenerate. You're worried all the time.
I totally understand. Why? Because I owe you money.
Like you, I have just enough money in reserves that I could probably off my Citibank MasterCard all at once, right now. And believe me, Vikram, I would love, love, love to do that. Because then I could be rid of you once and for all.
But like you, if I paid it all off at once, I would be in a very precarious financial position.
I know. It's funny, you and me, being in kind of the same position, give or take a few zeros.
Anyway, I asked Jill Schesinger, a former financial planner and an editor at large at CBS MoneyWatch for advice. For the both of us. (Don't worry, I didn't mention your name. I know this is embarrassing for you.)
Here is what she said:
"Ideally, what would happen is you pay off the debt, and no problem," she said. "But you shouldn't deplete your emergency savings. If you lost your job tomorrow, what would you do? It should be an easy answer, but it isn't in today's environment."
I explained that it wouldn't actually be savings I would be using, I would have to sell some stuff on the open market, or tap into my 401k plan (much like you might have to sell some stock or a business) in order to pay off my debt. Jill was not impressed that my emergency reserves, such as they are, are not in cash.
"Having your emergency reserve in anything but a safe asset right now is asking for trouble," she said. Oops. In the end, she advised me to grit my teeth, try to negotiate a lower interest rate, and pay off the debt in full when I was better equipped to do so. "Paying off your debt all at once may be a more emotionally satisfying decision," she said. "But paying it off in installments is more prudent."
So we're just going to have to be patient, Vikram. To take it one day at a time, you and me. Together.