Hi Money Minder,
45-year-old Fiona here, working in a factory making $50k a year, with my 53-year-old husband Mason bringing home $60k from retail.
So, here’s the deal: we both have 401ks, and I recently started a Roth 401k through work. I split my percentage between the two, with my company matching 4 1/2% if we invest 5%. Mason does 5% with a 5% match. I’ve got around $55k in my 401k, while Mason is sitting at about $105k.
We’ve both got 401k loans – mine’s at $9k and I think Mason’s is somewhere between $10-12k. Thinking about taking out another loan for some home renovations.
Our monthly mortgage sits at $950, we’re on year two of a 15-year term. Oh, and we have one pesky vehicle payment of $375 a month at a 7% interest rate for another four years. On top of that, we’ve got $5600 in credit card debt. Recently shifted $5000 of that to a no-interest-for-18-months card, phew.
Emergency fund? Not really a thing for us. We do have about $15k available on credit cards though. Trying to kick the credit card habit, haven’t added to our balances since March.
What’s our next move, Money Minder?
Should we…
- Open a high-yield savings account?
- Keep hitting the credit card debt hard?
- Increase our 401k contributions?
What about our car loan?
My gut says to tackle the credit card debt while it’s still interest-free.
Would appreciate any advice you can offer!!
Later, Fiona.
Response from THE MONEY MINDER:
Hello There,
Congratulations on taking the first step in seeking advice on how to improve your financial situation. It’s great that you both have stable jobs and are actively contributing to your retirement accounts.
Given your current financial snapshot, I would recommend focusing on paying off your credit card debt as your top priority. With the 0% interest, this is a prime opportunity to aggressively tackle this debt and eliminate it completely. Create a realistic budget that allocates extra funds towards paying off the credit card balance within the 18-month period.
Once the credit card debt is paid off, you can redirect those funds towards building an emergency fund. Start by opening a high-yield savings account where you can save up to cover at least 3-6 months’ worth of expenses. Having this safety net will prevent you from relying on credit cards for unexpected expenses.
In terms of your car loan, given the high interest rate of 7%, it might be beneficial to look into refinancing the loan to a lower rate if possible. This could potentially save you money in the long run.
As for your 401k contributions, since you are both already contributing and receiving employer matches, focus on maximizing those contributions once you have addressed your immediate financial priorities.
Remember, financial wellness is on ongoing journey. Stay committed to your goals, track your progress, and make adjustments as needed. All the best from THE MONEY MINDER as you work towards a more financially secure future.
Leave feedback about this