Credit Card Debt vs College savings

[disneysteve]

We're going to give the same answer we gave last year. You earn too much to be this broke.

You need to list your income, expenses and debts for folks to review. Something is seriously out of whack in your spending if a couple earning over 100K/year could only manage to save 5K in a year's time. My wife and I make a little bit more than you and save at least 25% of it each year. If you list everything here, we can point out where you can cut back to free up cash.

I don't think you should abandon the credit cards to save for college. What you need to do is abandon the overspending to pay off the credit cards. Without seeing your budget, though, I can't give any more specific advice than that.

[it99]

A year later

It's almost a year(in August) when I originally posted the below question about paying down credit card debt. Someone suggested I try to pay off as much as I could on the credit cards to possibly pay it off it 3 years. Then I can start saving for college( my son would be 12). I just wanted to update people on my progress and ask for suggestions. My 40k of CC debt is now down to 35k, so I paid off 5k this year. I think to get it paid off in the 3 years suggested I would have had to pay down 13k a year. In another 2 years from now my car will be paid off and i'll have an extra 400 to use each month. We've had a ton of unexpected expenses this year with things on our house or car breaking. Given the slow progress of paying down the debt what are suggestions beyond just trying to pay it down as quick as I can. At this rate, my son will be close to college age before the debt is paid off. I have an IRA with 9K in it. I know that's I shouldn't touch it, but I'm gettin more desperate with the credit cards. When should I abondon paying down CC and start saving for college???? Thank you.


Last years post:

I'm wondering if I should try savings for my childs college in 9 years(I have 10k so far and want him to go to a private school0 or concentrate on paying off credit cards. Currently been saving $75 a month.

Have 131k mort, 42k 2nd mort, 17k auto, 40k credit card debt(12-16%). Income 112k.
We've been just doing min payments on credit cards because money has been tight.
It scares on the credit card statements how much you end up paying if your just doing min payments.

Should I even be bothering with college savings right now until I get a good chunk of credit card payed off?

[disneysteve]

I would take the $10k from the college savings account and pay down my credit card debt

If I take out college savings won't I get penaized with taxes?
It a NY 529 plan

Yes. You will be penalized if you withdraw money from a 529. Leave it there. Just don't add to it right now.

[it99]

college savings

If I take out college savings won't I get penaized with taxes?
It a NY 529 plan

[Cassius King]

My emergencey fund is prett low just 5k.
But I have contemeplated just using it to pay down the Credit Card debt, which will help make it easier to pay quicker and then I'll be able to replish it pretty quickly when the debt is paid off. If I need emergency funds, I can just get it from the credit card. But in the mean time I'm saving interest on that 5k that I paid off on the card. Does this make sense? In 3 years thats probably hundreds of dollars.

I would leave the EF of $5k alone right now. I would take the $10k from the college savings account and pay down my credit card debt. I would then attack the credit card debt with avengence and then build up the EF to a more proper level.

[James00]

This is very good way to express the views about the credit card debt vs college savings both the opponents are inversely related to each other.

[it99]

using emergencey fund money

My emergencey fund is prett low just 5k.
But I have contemeplated just using it to pay down the Credit Card debt, which will help make it easier to pay quicker and then I'll be able to replish it pretty quickly when the debt is paid off. If I need emergency funds, I can just get it from the credit card. But in the mean time I'm saving interest on that 5k that I paid off on the card. Does this make sense? In 3 years thats probably hundreds of dollars.

[Ana72]

A lot of things here have I learned because this is not a simple matter. It's something that everybody should know.

[jpg7n16]

What I hope is clear is that we are not ignoring your questions about debt vs college savings.

We are trying to help you find a way that you can have ALL of the following.

• Debt reduction
• College savings (for public or private school of your choice)
• Retirement savings

The best way to help you get all 3 is to create/evaluate a solid budget. That way we can help you free up the cash to achieve ALL these goals.

[snshijuptr]

I have 10k so far and want him to go to a private school

Just had to address this. Especially if your child is 9-10 years old, you should have very little idea of where that child will go to college. Remember that it will be their decision as to where they will attend. I know that in many states "public university" = "crap", but you don't know what the university situation will be like in 9 years. You also don't know if your child will want to attend college. I have a friend whose mother "knew" she would be a computer scientist, and after suffering through 2.5 years of college, the girl dropped out and is now a successful chef. Any college money you set aside is ultimately a gift to your child to use however he wishes.

So, get your own house in order, then set your children up for a hazy future. If anything, you are saving your child from having to support you in your old age.

[disneysteve]

I think I know the answer to this question but would it be worth stopping retirement investing and for a few years until debt is paid off?

The answer is probably no, but you need to address these two comments:

What I don't get is you make 110k and you are broke.

1) list income
2) list expenses (detailed list)
3) list debts

You earn enough that you should be able to maintain your retirement contributions and not miss out on the company match and still take care of your debt. In order to do that, however, you need to get control of your spending issues. Some people have income problems. Most have spending problems. You earn plenty of money. You just need to get control of where it is all going.

[it99]

retirement

My current retirement you put in 5% and company matches 10%.
I think I know the answer to this question but would it be worth stopping retirement investing and for a few years until debt is paid off? I'm thinking no but not 100%

[littleroc02us]

What I don't get is you make 110k and you are broke. Where is all your money going? You do have 57k in liabilties. You owe 173k on your mortgage. If you continue to try and put money away for college it won't help anyone. You need to get on a written budget and try to figure how you can pay off all of your debt. You make way to much money to have such high debt. Your mortgage payment is very small, so you have to ask yourself "where is all the money going"..

Goodluck.

[jpg7n16]

May I suggest you and your family use one of these budget templates:

Family Monthly Budget Planner - Templates
Personal Monthly Budget Spreadsheet


They are free to download and can give you a good idea of some things to keep in mind as you budget. If you know you pay the item sometimes, but not every month - then take what you expect to pay total for the year, and divide that by 12. Include it every month in the budget, and after 12 months, it will average out.

[disneysteve]

I keep asking myself where our money goes.

The first step is knowing the answer to this question.

You and your spouse should keep a spending log for a month. Write down every penny that you spend on absolutely anything. Then add to that list one month's share of any expenses that aren't paid on a monthly basis like insurance premiums, car registration, magazine subscriptions, job-related fees, etc.

Then sit down and review the information you've gathered. See what is a need and what is a want. Then you can start cutting back and freeing up money for debt reduction and savings. Putting 5% in the 401k is a good start but it isn't nearly enough if you ever hope to actually retire.