Financial Planning?

[Leelei]

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During the last year it seems like everything that could go wrong has. :hSo, we've ended up pretty much depleting our savings and using our credit cards more than we like. :shock:

With my husband in Iraq we were planning to put 100% of his special pay into the TSP. But, now I'm wondering if we'd be better off using that money to pay down credit card debt and replenish our savings. He's planning on retiring from the Army with 24yrs in, so that only gives us another 11 to contribute to TSP. Anyone have any ideas/suggestions on the best way to meet our retiremnet goals and get back on our feet?

Thanks!

Leelei

 

[Guest]

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One way or another (and there are various methods possible...including home loans), get rid of your credit card debt. The interest charges are generally staggering and are not deductible, as are home loans. One website that I read about today is called disputemycharge.com. They state that they can reduce your credit card charges for a small fee. (I don't vouch for this...just stating what I read). There are also many many other companies to help you get out of debt for a fee. In any event, I would definitely pay off any credit cards before saving for TSP. Then, rip up the credit cards and put as much into TSP as possible.

 

[pyriel]

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I echo what Saraho is saying. I just want to add that paying off your credit cards is better than putting your special pay in TSP or contributing at all in TSP (at least for now). The reason behind this is that your credit cards and personal loans are probablycarrying high interests (10% or more). If you add two to three credit cardsand personal loans' inetersts rates, you will be getting more gains out of those than getting it from TSP. Now, I am only saying this because I think that you are in a position where I was. I overextended myself once so I can emphatize with you. Pay off your credit cards systematically. You can't tackle them all at the same time. If I am in your shoes, I'll do the following:

1. Stop contributing to TSP or IRA for now.

2. Pay the minimum on all credit cards except for one. Pay the max amount you can until it is paid off then put the savings you receive from paying the first credit card then do the same to the next one, etc. etc.

3. Then pay offall of mylong term bills, especially the personal loans and cars.

4. Pay cash for everything for now. Later as my financial becomes better, I can start paying everything using my credit cards. Now, this time, the difference is that I will be deducting everything from my check register right away. So when the bill comes, I will be able to pay off the balance right away. Now, I willnot spend anything else once my check register gets close to $0. I don't recommend this for everyone but those who learned to harness their expenses can actually keep their money for at least 60 more days. Here is how: if you have a credit card and the cutoff is the 30th and you buy an item on the Feb 1, you will not get the bill until March. Once you receive the bill, you usually have 25-30 days to pay it off. Since you will be paying it off in full and you've already set the money aside, you will not be penalize with interest. In the meantime, you just earned interest on your money for 60 days.

5. Create a financial statement. I am inserting one for youto use. You need to see the big picture on where all of your money is coming from and where are they going to. Do them every month. You'll be suprise to find out what your financial statement will tell you. The more liabilities you have the moreexpenses you have. So you must start paying attentionin paying off those liabilities so that it will lowerdown your expenseswhich will then allow you to keep more of your money.

6. Once you have recovered, max out on your TSP and ROTH IRA.

I hope this helps...

Pyriel

 

[Citizen]

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Since your husband is deployed, I'll assume that you have notified all of those credit cards of your rights under the Soldier's and Sailor's relief act and they can't charge any fees or interest higher than 6.2%.

What Saraho says is right, whatever you have to do to get rid of the credit card debt is the way to go. Believe me when I say I know exactly how the credit cards can get away from you, especially with the deployment. In theory, the deployment would be a good time to pay it down with the tax free income and the lowered interest and eliminated fees, but in practice it's hard to make that work.

If you feel the need to look into debt consolidation, I would suggest talking to USAA. IMHO they can be trusted to give fair advice.

Good luck, and hang in there for the deployment.

 

[Rolo]

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Normally I would agree, but not so sure in this case.

Since that income is tax-free,the contributions are tax-free as well as the growth. This could save you a bundle in retirement.

However, if you are struggling to make decent (not minimum!) credit card payments, then that problem needs to be addressed first; the now is more important than retirement in this context.

If the cc debt is a little unwieldy, just as saraho said, check out the debt consolidation services. I used genus.org a long time ago and it did the trick.

Let us know how you do.

 

[Rolo]

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Citizen wrote:

Since your husband is deployed, I'll assume that you have notified all of those credit cards of your rights under the Soldier's and Sailor's relief act and they can't charge any fees or interest higher than 6.2%.

ONLY if the debt was incurred before ENLISTMENT, and you do not have to be deployed to invoke the SSRA.

 

[pyriel]

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Rolo wrote:

However, if you are struggling to make decent (not minimum!) credit card payments, then that problem needs to be addressed first; the now is more important than retirement in this context.

This is exactly what I was referring to...

Pyriel

 

[Leelei]

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Thanks for all the advice. Unfortunately, we don't qualify for the Soldiers and Sailor Relief Act. My husband has been in 13 years and most of our debt has accumulated in the last 18 months. :?We aren't struggling to make a decent payment on the cards, but it's definitely putting a cramp in our lifestyle.

Aafes will lower it's interest rate to 0% for all deployed soldiers as long as the card is not being used, for the length of the deployment. My highest Mastercard has an interest rate of 9.9%. Should I try to pay this one off first or pay off Aafes while at 0%? How much would our retirement be affected if we stopped contributions for a year?


Thanks!

Leelei

Thanks for the worksheet Pyriel, but I don't have the right program to open it. :%

 

[Citizen]

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ONLY if the debt was incurred before ENLISTMENT, and you do not have to be deployed to invoke the SSRA.

I'm a reservist, so forgot about that. For us, deployment invokes the SSRA.

My highest Mastercard has an interest rate of 9.9%. Should I try to pay this one off first or pay off Aafes while at 0%?

Pay the one with interest off, then work on the other balance.

 

[jgpalmerdds]

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Leeleei,

The card that has the 9.9% interest rate, roll it into a new card that has a 0% balance transfer cardfor a period of at least one year. If you still have debt on that card, when the "promotional period" ends, roll it into another 0% interest card. These offers for these 0% cards are a dime a dozen and I bet you get them (as I do) all the time in the mail. Be aware of BALANCE TRANSFER FEES and you have to ask about them as well as annual fees. I've been rolling a bad real estate debt ($6000) from one 0% card to another for almost 3 years now and have not paid one cent of interest (and no fees) You just have to keep track of the 0% interest period and when it ends. If for some reason you don't get those offers, check the web and they are everywhere. I agree with the above. Pay down the card with the highest rate (or the one where the 0% ends first if all else is equal)

Even at 9.9%, you can save a ton of money with 0% interest only, even if you pay the same amount as you would of on the 9.9% I hope that this helps.

As far as not saving for the TSP, I would do both, as I do. I don't let a 0% debt (if you keep rolling it) get in the way of compounding in my advantage. Take care

Joel

 

[pyriel]

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Leelei,

As you can see, there are alot of different opinions here and they are all valid based on one's point of view. So it is up to you to choose which poison to drink, I mean, which advice to take.

Take care and give my regards to your husband.