I am thinking about debt all the time...

[FoolFromAZ]

As I have mentioned earlier, I have over $45K CC debt. I have been paying nearly $3000 everymonth towards CC debt. I am not contributing to 401K or roth IRA. we have decided to get rid of CC debt first before saving for retirement and EF. I can take upto $20K on my BoA CC which I can use for emergency. no transaction fee and intrest rate is 4.99%.

it will take nearly 18 more months to get rid for our CC debt if I dont find any hiccups in the next 18 months. I have been thinking all the time about debt and not able to enjoy my regular day to day life and kind of feeling insecured.

If I change the plan to pay only $1500 to cc debt and remaining $1500 towards 401k/roth ira and saving account for EF. Do you think thats a good idea? do you think that would help me concentrate on saving and atleast make me feel better?or should I stick with what I have been doing.. (get rid of cc debt asap)

[tripods68]

I applaud you for paying off your cc sooner. I would do the same thing you do if I was in the same situation. Debt puts a lot of stress on people. After 18 months then you can restart your retirement contributions then.

[maat55]

It would not break my heart to see you go ahead and fund your 401k to the match, then focus the rest on your debt. Foolfromaz, keep it up, your doing great, even if it doesn't seem so.

Your extreme sacrifice will have it's ultimate payday. The sooner the better.

Make sure your EF is at 1k, at least.

[disneysteve]

Did I see you mention in another thread that there is debt you haven't told your spouse about? If so, I think the first thing you need to do is be totally honest with your partner. If you are hiding stuff, that may be part of what is weighing so heavily on your mind.

I agree with maat that if you are passing up matching funds in your 401k, that doesn't make sense. Whatever the interest rate is on your credit cards, I'm sure it isn't 50%. If you pay off $1 of CC debt, you might save $.20 in interest but if you invest $1 in your 401k, you save $.25 in taxes plus get $.50 in matching funds. Clearly, the 401k contribution makes more sense.

I'd also agree that you need to have at least a small cash reserve. You should not be depending on your CC as your EF. Over the next 3-5 months, set aside some money to build at least a $1,000 EF. Start contributing to your 401K to get that match. Put the rest toward the CC debt.

[FoolFromAZ]

Did I see you mention in another thread that there is debt you haven't told your spouse about? If so, I think the first thing you need to do is be totally honest with your partner. If you are hiding stuff, that may be part of what is weighing so heavily on your mind.

I agree with maat that if you are passing up matching funds in your 401k, that doesn't make sense. Whatever the interest rate is on your credit cards, I'm sure it isn't 50%. If you pay off $1 of CC debt, you might save $.20 in interest but if you invest $1 in your 401k, you save $.25 in taxes plus get $.50 in matching funds. Clearly, the 401k contribution makes more sense.

I'd also agree that you need to have at least a small cash reserve. You should not be depending on your CC as your EF. Over the next 3-5 months, set aside some money to build at least a $1,000 EF. Start contributing to your 401K to get that match. Put the rest toward the CC debt.

I am still debating myself whether to tell my wife about that $12 cc debt or not. Currently I am paying only 1.99% intrest on that $12K loan. So I am only sending the minimum payment. I am fine for next 9 months.

We are not contributing to 401k as we both changed jobs 6 months back. We have to wait for another 6 months to get the match from our employers. We rolled over our previous 401K fund to rollover IRA.

[FoolFromAZ]

I applaud you for paying off your cc sooner. I would do the same thing you do if I was in the same situation. Debt puts a lot of stress on people. After 18 months then you can restart your retirement contributions then.

Thanks tripods. next 18 months will be very tough. hope i dont find any emergency situation.

[Ima saver]

I would continue to pay off the debt as soon as you can.

[Like2Plan]

FoolFromAZ,

First off--good for you on making a plan.
I agree with the others that you should come clean with your DW on the extent to which you are in debt. It is difficult to help bail out a boat that is taking on water if you do not know the extent to which it is sinking. You charted a course for the next 18 months for which it will be key to have both partners working as hard as possible to seeing it through.

I think you should have an EF even if it is only $1,000 to start with. In my household, I find it real difficult to touch EF money -even in an emergency I really have to think about using it. It can be a real help should something totally unexpected come up. Since you have such an agressive plan and will be caught up relatively soon, you can start to work on your EF in ernest after you CCs are paid. But, I wouldn't put it off beyond that.

The contributions to the 401, I have mixed feelings. If you are not maxing out your contributions (15,500 for 2008 or whatever ceiling your company puts on you) anyway and there is no company match, you could probably get caught up next year with not too much damage done. However, if you were planning on maxing out your contributions, 2008 will be one year you can never get back. And, if your pay back plan gets extended for whatever reason, you could end up not making contributions for 2 years (and so on)...

[noppenbd]

I am still debating myself whether to tell my wife about that $12 cc debt or not.

You have to ask yourself, how would you feel if you found out your wife was hiding this from you?

If I discovered this on my own, I would be really outraged. It would really make me question what else she was hiding, and whether our marriage was as good as I think it is. If my wife came to me and came clean I would still be upset about the money, but I would not question the marriage as much.

[disneysteve]

You have to ask yourself, how would you feel if you found out your wife was hiding this from you?

If I discovered this on my own, I would be really outraged. It would really make me question what else she was hiding, and whether our marriage was as good as I think it is. If my wife came to me and came clean I would still be upset about the money, but I would not question the marriage as much.

I agree completely. I can't see how hiding 12K of debt (or any other amount) from your spouse is ever a good idea. If there are financial problems, both partners need to know. Certainly, if my wife somehow got into some money trouble, I can think of a lot of things we could change in our spending habits to help get rid of the debt. But I couldn't help if I didn't know about it.

[glock35ipsc]

You have to ask yourself, how would you feel if you found out your wife was hiding this from you?

If I discovered this on my own, I would be really outraged. It would really make me question what else she was hiding, and whether our marriage was as good as I think it is. If my wife came to me and came clean I would still be upset about the money, but I would not question the marriage as much.

I too agree.

I would also agree that you should have your emergency fund in cash, at least $1000 in something like an online savings account. The last thing you need in an emergency is more debt!

[tripods68]

I'm sure I'll get flacks from people for back tracking but I'm allowed to change my mind right.... I know I previously said that he should let his wife know about the 12K debt. I'm kinda iffy now. Assuming you pay it off in 18 months, its something you probably don't have to mention to your wife--after probably years after its fully paid--even especially if telling her the truth, would destroy your marriage. After all, it is your debt and you the one paying it off and not wife right? But what marriage in America that does not keep secret(s) to wifes/husbands right? I'm sure lots so that's exactly my reasoning. It's pretty much a casual affair to keep secrets from partners in these day. Another thing, like most husband and wife like to combined their financial household in shared accounts, many husband/wife also prefer to keep financial household separates so this reasoning is not out of park suggestion either.

[boosami]

You shouldn't hide that $12k debt from your wife. Did you already have it, or did you accumulate it while lying to her about the spending?

It seems like you are rationalizing to yourself that it's OK because of the promotional interest rate and time period you have to pay it off. You should be able to rationalize it the same way to her. Then she'll know about it, and know you are doing your best to pay it down while not drowning in interest.

What happens if the interest rate or minimum payment shoots up abruptly and you can't afford to make the minimum payment without adjusting the rest of your budget? If you already told your wife about it, you could work together to figure it out. If not, you have to compound your lie by changing the budget behind her back, as well as lying to her about the total amount of debt.

[disneysteve]

Assuming you pay it off in 18 months, its something you probably don't have to mention to your wife

It's pretty much a casual affair to keep secrets from partners in these day.

If you are doing something or hiding something that has an impact on your spouse and family, you need to be open about it.

Do I tell my wife every penny I spend? No. Nor does she tell me every penny she spends. But if I somehow got US (and it is US, not just ME) in financial difficulty (and I'd consider 12K of debt to be a problem), I would certainly tell her and discuss TOGETHER what we needed to do to address it.

Sorry, but I don't buy the argument that keeping secrets is the norm or has become an acceptable way to conduct a marriage. I also don't buy the argument that it is your debt and not her concern. If you were both single and just living together, that might be true as long as you were meeting all of your agreed upon financial obigations. Once you are married, though, everything is joint. Your problems are her problems.

[rizzmo]

But what marriage in America that does not keep secret(s) to wifes/husbands right? I'm sure lots so that's exactly my reasoning.

So your reasoning is if many people do something immoral, than it is ok because it has become status quo. I hope they never apply that logic to child abuse or sex offenders.

It's pretty much a casual affair to keep secrets from partners in these day.

I'm pretty sure if you found out your partner was having an "affair" and keeping it a secret from you, it wouldn't be met with such aloof response.

IMHO if someone can not bear to be honest to there partner about there finances, either because of shame, vanity, or other selfish reason, then having seperate finances seems an appropriate choice.