My week of planning...

[CraigThor]

Well my wife and I started off the week with alot of planning here is where we're at:

Life insurance 500k for me and 250k for her $64 month for 20 yr Term my insurance guy is paying my first month of coverage.

Roth IRA for me at T.Rowe Price $50 month to start with Retirement 2045 no 401k at my job (brick layer/ construction)

401k for my wife the company she works for goes through Wells Fargo Retirement plans. Putting 20% of here pre tax pay as its part time and the money won't be missed after a few months her company matches 6% should be around $200-250 month. We picked a variety of stuff securities, bonds domestic, international and new prospect for her portfolio.

We owe $268 on one credit card, 0% intrest till June 07, as a corespondence class I was taking that I found their material to be not useful and I decided to quit instead of paying the $1000 to finish so I was responsible for $368 and they offered if I payed in full to drop to $279.

Now the dilema that the wife and I are facing, going rounds about. She will retire in 2030 as she is 15yrs older then me and has no retirement started I am starting small but have time to add extra when I can. I have a personal loan with a balance of ~$7K at 22.89% intrest, I was dumb a couple of years ago and didn't read all the print . What were going around about is I think we should put in for retirement and she thinks we should not worry about retirement and put all the money into the loan. Now my goal is to have that loan paid off before the end of 2007. I should be getting my christmas bonus next Friday for around +/-$1k and will put that money towards it. I am going to have about 2-3 weeks off of work for the holidays be fore returning, 1 week vacation and 1-2 weeks unemployment for temporary sesonal lay-off. I do have $2k in savings to make sure all the bills get paid but would it be wise to once I go back to work take what is left of my savings and my christmas bonus and use it to pay most of my loan off and finish the rest before the end of the year? And still put into retirement.

Sorry for the long winded post but I could use some advice/ encouragement before we strangle each other

Craig

[kv968]

I think I'd have to agree with your wife Craig. My suggestion would be to definitely use your bonus to pay down the loan. I wouldn't touch the 2K you have saved for bills but would stop your wife's 401k for now and put it all towards the loan. You might as well stick with the T Rowe account for now. It sounds like your plan is to keep on investing the money yet you'll still have enough to pay off the debt by year's end. So I'm assuming if you use your wife's 401k contributions you could pay off that debt maybe 3-4 months earlier? If so, then you could go back to contributing towards the 401k. You HAVE to get rid of that loan. Is there anyway you could get another loan to pay that off at a lower rate or use the cc (if it has a lower rate) to pay it off?

[kv968]

One other thing...Is there a reason you need such a high life insurance amount? I'm not an insurance expert (nor an investment one for that matter), but that seems like that might be a little too much coverage for a 20 year term on someone your age.

[LivingAlmostLarge]

Pay off the loan, put retirement on hold. I don't forsee that happening for a bit. Perhaps you should run the numbers of what you'll need in retirement and how much you need to save to get there. And then maybe it'll motivate you to cut back on spending now. Your wife probably should work full-time because of the lack of savings. No hard feelings, just trying to make viable suggestions.

[CraigThor]

I choose the 500k for myself as my work can be somewhat dangerous at times and we plan on building a house in the next 5 years and at this time to build it would cost 250k. also I could have got 250k coverage but the 500k was only $2.00 more a month. I just got off with the place that I have my loan they said if I wanted they could rerun my credit to see if I would be approved for a lower rate, but my wife doesn't like the idea of us getting another loan to pay this one off I've tried to talk to her about doing that but she doesn't want to hear it. I currently don't have a CC with enough credit to pay the loan off and really have worked hard to get rid of them. We've paid off 10 cc's this year. I still think she needs to put into her retirement though so for now I want to get her a little nest egg.

[CraigThor]

My wife works 2 jobs one part time that she gets 22.5hrs a week where her retirement is coming from and the other she is a massage therapist so her hours vary from 0-15 a week and makes between $35 and 65 an hour doing that. She is also trying to get out on her own and start her own business which has started off decent just no money into the house at this time, it all is going back into the business to pay expenses.

[LivingAlmostLarge]

You need to be debt free more than you need investments. The loan is 22% there are very few investments that you wouldn't make 22% on. Just a thought.

[CraigThor]

Well sat down after the wife got home and here is the solution we could both agree on. As soon as her 401k info becomes available here is our plan:

Drop wifes 20% investing to 10% for 4 months use other 10% for loan

After the first of the year make a large payment of $2k or more if I have it and keep $500 for EF

Use all extra monies I receive towards loan

I've contacted my banker about loan rates and getting another personal loan to pay this one off IF not I can talk to CitiFinancial where I have the loan and they said I should qualify for their Premier status and get a much lower rate.

Any other advice? I know some will say ditch the retirement all together till the loan is paid but I think I can have it paid off by mid year with this approach.

Craig

[scfr]

I do not agree completely with those who say you should forgo retirement savings until the loan is paid down, especially since there is a company match. But what if you reduced her contribution just a bit more, to that 6% level and get the full match? Then, use the extra to pay down the high-interest loan earlier. Just my 2-cents.

[kv968]

If you feel you can pay the loan off by mid-year or so with that approach that's good. I know I said before to nix the wife's 401k contributions until the loan is paid off but if you can do it that soon by your plan then I'd say go for it. I know people would say (me included) that it would be very hard, if not impossible, to make an investment that would equate that interest rate but if you're going to pay it off in the very near future and you feel more comfortable saving and paying at the same time then I think that's the way to go. I know with my own situation that I'm, at the moment, hedging a fully funded emergency fund in order to max out my Roth IRA. Although it's not the same situation you're in, I understand the feeling you have of the urgency to get rolling with some retirement savings. I have a decently funded 401k and I'm still feeling the urgency because I don't have a Roth started. Just don't stray from your commitment to pay off that loan. And no more loans at that rate. Read the fine print

[Aleta]

I agree. You should invest until the company match and then work on the loan. That is a high interest rate.

[safari]

I suggest you find a credit card offer with 0% on balance transfers for a year and use it to pay off your $7K loan. Then pay off the credit card balance within a year.

[CraigThor]

Originally Posted by safari

I suggest you find a credit card offer with 0% on balance transfers for a year and use it to pay off your $7K loan. Then pay off the credit card balance within a year.

Already tried that, was denied as I don't have sufficent lenght of credit history, and they said my revolving balances were too high (only owe $268 out of 8k in misc cards- mostly small 500 ones and my home depot card 2k)

[Broken Arrow]

I'm a little late to the party, but first, let me just say that I applaud you for taking the financial bull by the horns here. I also think that you have the proper mindset regarding retirement accounts. It's a shame that the general population does not give it enough consideration.

Still, I'm a numbers guy. So, my decisions are usually based on whatever will get me the farthest with my money. Until your wife's 401k kicks in, it appears that you would get farther by paying off your high interest debt first before contributing to a retirement account. Once the 401k kicks in, you can re-evaluate the situation based on how much the company is willing to match. At least that's how I would approach this if I was in your shoes.

[creditcardfree]

I think your final plan is a good one. Will you still be continuing yor Roth contributions while paying off the loan?

Keep looking for those low interest rates, extra work, and ways to cut your budget to the bone. Your debt will be gone in no time. Best of luck to you.

[CraigThor]

yes I will keep putting 50 a month towards my roth ira. as soon as the loan is gone I want to jump it to 200 month.

[Ima saver]

I agree with maxing out the 401 to get the match. Keep putting money into your roth too. You are so young, that compound interest will make a big difference in your financial life. Just try and find extra money each month to pay on your loan.