Help deciding on paying off loans or keeping cashola in bank...

**lovcom** · 11-11-2009, 11:54 AM

Stop the 401k, IRA and cash savings dead.

Keep the savings untouched for emergencies.

Make massive monthly Pmts to all your debts until they're paid off.

Don't use the kid's savings.

You should be able to wipe the debt in under a year i would guess.

Make life long changes going forward.

Once the debt is paid off, DO NOT TURN ON 401k, IRA, etc...yet!

Build your emergency fund up to 2 years worth of savings, then, and only then, turn the 401k, IRA on.

Been there, done that....my kids are now 19 & 22...

**GREENBACK** · 11-11-2009, 01:24 PM

Originally posted by lovcom View Post

Stop the 401k, IRA and cash savings dead.

I disagree with stopping contributions to retirement accounts. OP appears to be young based on the age of the children. The value of contributing early and often to these accounts cannot be overemphasized for young people. He may want to cut back on the contributions but I don't reccomend completely stopping them.

Paying off debts is great but there is time to do that. Funding retirement only gets harder and more costly the longer you wait.

**gertymac** · 11-11-2009, 01:55 PM

I agree with GREENBACK. Don't stop your contributions to your retirement accounts.

I would focus on paying down debt by cutting expenses and using all extra money to eliminate the CC debt first, then the cars. I'd also recommend putting more in your cash savings. Is $11K equal to at least 3 months of expenses for your family if your income got cut to zero?

Unless you build up an emergency fund, you'll end up getting yourself in greater debt whenever times get tough.

**lovcom** · 11-11-2009, 03:04 PM

Originally posted by GREENBACK View Post

I disagree with stopping contributions to retirement accounts. OP appears to be young based on the age of the children. The value of contributing early and often to these accounts cannot be overemphasized for young people. He may want to cut back on the contributions but I don't reccomend completely stopping them.

Paying off debts is great but there is time to do that. Funding retirement only gets harder and more costly the longer you wait.

No, better to hit the debt full bore, and it's probably for under a year anyways....the faster he kills that mountain of debt the better...and frankly, debt is costing him a heck of a lot more then his 401k is earning....it would be foolish to continue the contributions especially when the interest on the debt murders the slight gains the 401k provides in that time frame.

In this market, in these horrible economic days, this should be his priority:

1. Maintain a minimum emergency fund.
2. Kill all the debt.
3. Maximize the emergency fund to 9-18 months.
4. Contribute to retirement.

...and in that order....

**LivingAlmostLarge** · 11-12-2009, 07:24 AM

Where'd the kid's CDs come from? You or gifts? If from you, then cash it out and pay off debt. If it's gifts, then leave it alone.

**lemmyk** · 11-12-2009, 07:48 AM

Thanks for the great reply's, everyone.

The kids CD's are a combination of gifts and us. About 50% from gifts...

We are in our mid-thirties, so I do think we need to be planning our retirements - I think if I was 10 years younger, I would perhaps stop the retirement savings, but in all reality, I am not contributing much - only 4% with a employer 50% match. My IRA I haven't funded in years.

We contribute about $400 a month to our emergency/cash savings, I was thinking of reducing it down to about $100 month until at least the CC or 1 car is paid.

My general expenses per month (bills + living) is around $6000, so you see, I don't have 3 months in my cash account, but when you include kids CD's + cash accounts we have about 4 months (which is why I didn't want to touch either).

Thanks again... still unsure what to do however.

**lemmyk** · 11-12-2009, 07:58 AM

Another quick question... when you guys say "kill all the debt", are you also including mortgage? This would take many years to pay off a 309k mortgage, even if I send in an additional $1000 per month...

**GREENBACK** · 11-12-2009, 09:48 AM

I'll again restate that you should absolutely continue funding retirement. You'll be out of debt at a fairly young age. Putting retirement contributions on hold is something you'll regret. It's instinctive for most to want to eliminate debt as quickly as possible but you should look at the big picture.

I could pay off my mortgage and heloc with the stroke of a pen. Why don't I? %3.00 on the heloc and %5.00 on the mortgage and the tax deduction to boot. I'm certain I'll do better with my investments in the long run.

CC and vehicle debts are a little different but If you put off your retirement contributions now you won't be glad that you paid these off in a hurry. You only get one time to get this retirement thing right....don't miss out.

**Fizgig** · 11-12-2009, 09:49 AM

This is what I would do -

If your job is stable, I would consider my cash savings + CDs a sufficient emergency fund for now, but continue funding retirement. I would stop funding other savings and go after your CC and car loans.

You didn't tell us your take home pay, but based on your income and 401k contirbutions, I estimated it at ~$7500. If your expenses are $6000, that's $1500 a month you could put at the debt, and they'd be paid off in about two years. Cut your lifestyle a bit, and it'd be done even faster.

Personally, I'm okay with withdrawing your contributions to the kid's CDs (not the gifts, though). I think that the parent's responsibility is to provide a safe and stable home first and foremost, and you're under no obligation to hand them a pile of cash or even pay for college. The house must be in order first.

If your job is not stable, I'd continue to fund cash savings but look very seriously at cutting back the budget to allow more savings and debt repayment.

**lovcom** · 11-12-2009, 10:13 AM

Originally posted by lemmyk View Post

Another quick question... when you guys say "kill all the debt", are you also including mortgage? This would take many years to pay off a 309k mortgage, even if I send in an additional $1000 per month...

No, not the morgage....just CC and consumer debt only.

**lovcom** · 11-12-2009, 10:14 AM

Originally posted by LivingAlmostLarge View Post

Where'd the kid's CDs come from? You or gifts? If from you, then cash it out and pay off debt. If it's gifts, then leave it alone.

What does it matter when the kid's money came from? It would be stealing and of course immoral to raid their accounts.

**lovcom** · 11-12-2009, 10:19 AM

Originally posted by GREENBACK View Post

I'll again restate that you should absolutely continue funding retirement. You'll be out of debt at a fairly young age. Putting retirement contributions on hold is something you'll regret. It's instinctive for most to want to eliminate debt as quickly as possible but you should look at the big picture.

I could pay off my mortgage and heloc with the stroke of a pen. Why don't I? %3.00 on the heloc and %5.00 on the mortgage and the tax deduction to boot. I'm certain I'll do better with my investments in the long run.

CC and vehicle debts are a little different but If you put off your retirement contributions now you won't be glad that you paid these off in a hurry. You only get one time to get this retirement thing right....don't miss out.

Not counting the mortgage, the OP is less then a year off from getting rid of his CC and car debts. It is irrelevent if he is young or not...consumer debt at any age should be paid off ASAP, and I even tell my 20 year old daughter this.

Also, a lot of the advise here may well be good for normal times, but we no longer live in "normal" times. A different strategy must be used....the old one will leave one vulnerable.

I think to keep the debt on the books just for the sake of adding to retirement is exceedingly foolish. Kill the consumer debt, crank the EF to at least 9 months, then double up on the 401k contributions if you want to. I know a fool that had $20,000 in debt for many years...he could've paid all this down but instead he funded his retirement....then last year his 401k lost 45% of it's value, and guess what? The $20,000 debt is now $22,000! See what I mean?

And although you are supposed to take care of your kids, you should NEVER do it at their expense, with their money....you should only use your money...I am appauled at posters that think it is okay to raid their kitty...this is so wrong, and on many levels too.

**GREENBACK** · 11-12-2009, 10:59 AM

Originally posted by lovcom View Post

I think to keep the debt on the books just for the sake of adding to retirement is exceedingly foolish. Kill the consumer debt, crank the EF to at least 9 months, then double up on the 401k contributions if you want to. I know a fool that had $20,000 in debt for many years...he could've paid all this down but instead he funded his retirement....then last year his 401k lost 45% of it's value, and guess what? The $20,000 debt is now $22,000! See what I mean?

I do see what you mean. It's short-sighted to look at last year as anything but an anomaly and a great buying opportunity. If his 22k of debt was related to indiscriminate cc spending then yes this person should focus on debt elimination and financial strategies for the future. If this "fool" retires with a couple million in his account I'm sure he won't be concerned about the 20k he could have given to some bank that doesn't give a damn about him or his financial future.

In the Op's case I believe he would be better to fund his retirement(with a solid EF in place, of course). The market is rising and I think it will continue to do so. Waiting to fund your retirement years will only lead to having to put that much more into it down the road.

Not sure whart he has in mind for the "kid's cd's" but his children have a lifetime of earning potential ahead. It's great to want to help them but don't put so much towards it that you aren't able to take care of yourself and you eventually become a financial burden to them in your old age.

**LivingAlmostLarge** · 11-12-2009, 02:08 PM

Um, because if he funded the Kid's CD then he should take the contributions and pay off debt NOW. Not wait till later.

If they were gifts from generous grandparents or aunts and uncles, EARMARKED for college, that's a different situation and STEALING.

But parent contributions? Seems to me like the parents in this case need the money to get a fresh start.

SO yes it makes a difference! I would take out all parents contributions from CD and pay off some consumer debt.

I would not stop retirement because screw it, behavior needs to change. And the best way is to cut your budget and live lean and pay off debt. NOT stopping retirement contributions and putting it to debt.

You have to LEARN to live without that retirement contribution money. It is GONE to savings. It's not meant to be a safety net.

Save 15% to retirement, and you'll always be used to living on 85% and making a budget work on 85%! Using 100% is stupid.

Help deciding on paying off loans or keeping cashola in bank...