Gail Vaz-Oxlade answers readers' questions and gets to the bottom of the issues. In today's column, Gail asks a reader to re-think his money.

Dear Gail: I am about $125,000 in debt. My partner is recovering from breast cancer so therefore not working. I am self employed and not extremely busy. I have property that I can sell that would bring out $100,000 but my conflict is it brings in $1,000 profit a month. What should I do? We have no savings.

K.

Dear K.:

I want you to switch how you're thinking about your money. You see the property as bringing in a profit of $1,000, but what is the debt costing you to carry? You haven't given me any interest rates so I'll just use an example to explain what I mean. Let's say all your debt is consolidated at 9%. That means the annual cost of your interest is $11,250 or $937.50 a month. So your actual "profit" on that property is just $62.50 a month. If your interest rates are in fact higher than 9%, you may be making no profit at all. And if you were to be working even less, your budget would be squeezed even further by your debt repayment amounts. If it were my decision to make (which it is not, it is YOUR decision to make) I would sell the property and pay off as much debt as I could. Then I'd bust my butt to get the rest of the debt paid off, and start saving for a fresh start. I'm sorry about your partner's health, and hope things get better and she gets stronger. In the meantime, try to strengthen your financial foundation so that you guys are dealing with less stress.

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