Should I cancel my Roth IRA? Help!

**jIM_Ohio** · 10-31-2007, 11:53 AM

You need to get the CC paid off. You are questioning cash flow vs investing.

What are the minimum CC payments each month? What do you pay on CC each month? What is total amount owed on each CC? What are the interest rates?

Does your fiancee work? What is amount in Credit union savings account?

Make sure you are spending less than you earn each month (cash flow positive).
My basic advice is pay down the debt, then contribute to credit union account.

$33 to Roth is not the problem... any little bit helps, just watch the fees associated with all this.

**sweeps** · 10-31-2007, 11:57 AM

Generally speaking if no one relies on your income, you don't need life insurance.

Does your 401k include a match? If so, you probably want to take advantage of that. Ideally you'd contribute to both a Roth and a 401k, but if you must choose, a 401k with a match usually trumps a Roth.

Every little bit counts. Even $33/month makes a big difference over the long-term.

Are the 3 credit cards under the debt consolidation plan? What interest rate are you paying?

**skydivingchic** · 10-31-2007, 12:35 PM

It sounds like you need to take a serious look at your budget and spending. Sit down and figure out how much the bare necessities cost you - rent, groceries, minimum payment on all debt, utilities, etc. Then compare that to your income. Hopefully your income is greater than your spending. If not, that problem needs to be addressed immediately - cut spending or increase income. Once you have positive cash flow, use any excess to pay off the credit cards, debt consolidation, and car loan.

As for the Roth contribution, I would look into the 401(k) matching as well. If there is matching available, put the $33/mo into that instead. The 401(k) has the added advantage of being pre-tax, so a contribution of $33 will only decrease your take home pay by about $25 (I used 25% tax bracket, adjust according to your situation).

Jim and sweeps both asked good questions regarding credit card balances, rates, savings, etc. If you are willing to disclose this information, we can try to help you come up with a workable budget to get those debts paid off. Once that is done, you shouldn't have a cash flow problem any more.

**Hypersion** · 10-31-2007, 04:41 PM

What's the interest rates on the loans and CC?

Do you have an emergency fund?

**godsgrace** · 11-01-2007, 10:14 AM

Thanks to all for your input!!! Here are the answers:

Dell Credit Card (laptop)
balance $1,407.19 - mimimum payment $44 - interest rate 29.99%

Shell Credit Card (closed-trying to pay off)
balance $216.45 - minimum payment $80 - interest rate 31.74%

Chase Credit Card (supposed to be overdraft protection)
balance $434.00 - minimum payment $13 - interest rate 29.99% purchases, 13.99% overdraft protection

The 401K would match $2 for every $3 I put in.

There is only $80 in my savings...I just started putting the $20/paycheck to try to start an emergency fund a couple months ago...

The loan payment is killing me! It is $222.95/mo. The balance is a little over $7,100...not sure of the interest rate. That is more than my car note!

I tried to get the montly payment reduced and the loan refinanced, but they wouldn't b/c I am not delinquent! (So much for being proactive...)

I am just barely making ends meet with my income. I quit my second job b/c it was wearing me out. My fiancee does work and tries to help me with gas and groceries when I get low or have an unexpected expense.

I just want to get ahead of the game, have a savings, and not have to choose whether to put gas in my car or eat for the week!

**jIM_Ohio** · 11-01-2007, 10:20 AM

more specific advice will lead to more specific responses.

I would enroll in 401k for 1% contributions (because more than likely enrollment is limited to 1 time per year). Forget contributing more to retirement or EF until those CC are paid off. 30% interest rates are killing you.

Stop using all cards immediately.
Get the shell card paid off. Easiest balance to pay off.
Then apply all extra money to Chase card- pay that off.
Then apply all extra money to Dell Card and pay that off.

More than likely the interest rates are that high because of late and missed payments. You need to change your behavior. My estimate would be you could pay all these off within 12 months. Then increase your 401k to around 6 to 10%. Make sure you are spending less than you earn, and setting aside between 10-20% of what you make.

**shizane101** · 11-01-2007, 04:47 PM

Regarding the 401K vs Roth...

Rule of thumb says invest up to the employer match in your 401k. Then if you still have money left to invest, put it in your Roth next.

Of course, I'd agree with everyone else on here. Get the CCs paid off first.

Good Luck!

**anonymous_saver** · 11-03-2007, 03:18 PM

Originally posted by godsgrace View Post

Thanks to all for your input!!! Here are the answers:

Dell Credit Card (laptop)
balance $1,407.19 - mimimum payment $44 - interest rate 29.99%

Shell Credit Card (closed-trying to pay off)
balance $216.45 - minimum payment $80 - interest rate 31.74%

Chase Credit Card (supposed to be overdraft protection)
balance $434.00 - minimum payment $13 - interest rate 29.99% purchases, 13.99% overdraft protection

The 401K would match $2 for every $3 I put in.

There is only $80 in my savings...I just started putting the $20/paycheck to try to start an emergency fund a couple months ago...

The loan payment is killing me! It is $222.95/mo. The balance is a little over $7,100...not sure of the interest rate. That is more than my car note!

I tried to get the montly payment reduced and the loan refinanced, but they wouldn't b/c I am not delinquent! (So much for being proactive...)

I am just barely making ends meet with my income. I quit my second job b/c it was wearing me out. My fiancee does work and tries to help me with gas and groceries when I get low or have an unexpected expense.

I just want to get ahead of the game, have a savings, and not have to choose whether to put gas in my car or eat for the week!

(1) Contribute up to your employers match in your 401(k). Do this no matter what! This is free money and it is the best deal you can ever get. Stop your contributions to your Roth IRA now and contribute to your 401(k) instead, once you have all of your debt paid off, then go back to increasing your Roth IRA contributions. By the way, where do you have your Roth IRA?

(2) Find out the interest rate on your loan payment. Also, what is the interest rate on your car loan? Once you figure these out. Put your CC and these loans in order of highest interest rate to lowest interest rate. Pay the minimum on all loans, and put any extra money you have towards the highest interest loan until it is paid off. If the highest interest rate is for your Shell credit card, then that card would be paid off relatively quickly since the balance is "only" $216.45. Do not close any of your other cards, unless they charge you an annual fee.

(3) Think of some random things you can sell around your house. I recently did this and got about $600 (mostly from selling books, but I did get $40 from selling an old NON-digital camera!). This could at least help you pay off your Shell card in one swoop.

(4) Off the top of my head I usually would say put that $80 in savings towards debt payments. However, if it would make you feel better, go ahead and keep that as your current emergency fund, but I would suggest opening up an account with EmigrantDirect or another high interest savings account instead. I would still personally put the $80 towards debt, but I guess it's your own choice.

(5) Tell us some details about your car. I'm wondering if you could sell it (even if you upside down on the loan), and get a cheaper car, or better yet, do you live in a metropolitan area with good public transit. Trust me, it's very worth it. I only pay $45/month pre-tax on a bus pass where I live! Plus, it would help you pay off your debt extremely quickly!

Hope to hear from you soon.

**godsgrace** · 11-06-2007, 07:10 AM

Thank you all again for your input! I will put this advice to work.

- I will sign up for 401K. The Roth IRA is through CitiFinancial...who my debt consolidation loan is also through. They are getting enough of my money! (That's another reason why I was considering cancelling that...)

- I have stopped using all my credit cards. I like the stair-step method to paying them off...

- I have been trying to sell old CDs. I have one more bunch to try and sell, so maybe I can get extra money that way... Still trying to cut costs wherever possible!

- I wish I could use public transportation, but I live too far from my job! I was thinking of trading the car in...maybe I could get something with a lower payment... Right now I have a 2002 Dodge Stratus that is giving me a lot of problems (partly why I'm struggling right now, having to pay for repairs).

Hopefully I can get these cards paid off sooner than later. Thanks all for your help again!

Your advice is much appreciated.

**anonymous_saver** · 11-07-2007, 10:22 AM

Your plan seems pretty good. I'm glad that you are signing up for your 401(k). I would however, transfer your Roth IRA to a place like Vanguard, T. Rowe Price, or Fidelity (my personal preference would be Vanguard). These have low fees, tons of options, and aren't a company that you also have a loan from. Overall, I think it would be a very good idea to switch.

As far as selling your old CD's, I would suggest using the proceeds to either use as an Emergency fund at a High Interest Savings Account like EmigrantDirect, or to help pay off your highest interest debt.

That's too bad about public transportation. I think your idea for buying a cheaper car is a great plan, particularly if you are having problems with your other one.

Good job!

**Ima saver** · 11-07-2007, 02:04 PM

She really does need an emergency fund as her first option.

**Knows Money** · 11-07-2007, 02:27 PM

I've been there

Sista, I have been there and by godsgrace, I can see the light - its not hopeless.

First, take all the suggestions here and work out the plan that works for you. Different combinations so you can see what money is available if you do XYZ as opposed to ABC.

I sense that moving in with your fiancee is out . . . but you two can discuss how you might be able to better help one another out for the long run. If you can't discuss money openly now, it won't magically happen later. So don't hide anything. Everyone put it out on the table. I see that you're selling some things . . . keep looking for things or services you can sell. Put a pause on your Roth contributions and enroll in the 401K plan. Even a little bit of money.

Take the life insurance payment and the $20 to the savings and put it in a high yield savings - ING or Emigrant are great.

Don't close any more accounts - keep the credit history but don't use them. Right out of college, I tutored here and there which provided gas money. I went without cable, took my phone down to basic. While, I understand the hassle of a second job - try something that might only be once a week or only on Saturday's and Sundays. When I get the name, I'll post it, but call some of the builders (if there is a booming real estate development in your area) and find out if they need "schedulers" or "weekend appointment setters" or "weekend sales assistant." My mother has been doing this for 3 years now. She does almost nothing. Show the people the house, or the condo . . . give them an information brochure, answer the phone and get a great pay rate for a part time job. AND, get a chance to sit in some beautiful homes. Ryan Homes, Caruso, McWilliams Ballard are some builders off the top of my head . . .

. . . that could take the edge of some things like gas and groceries without stressing you out. Hope that helps.

Should I cancel my Roth IRA? Help!