I (34) and my wife (34) put all our credit card debt into a 7-year loan from my bank at 12% interest. The loan balance is $31k, and my minimum payment is around $650.
Our investments:
- Mutual Fund – $7,448.29
- Non-employment Based Roth IRA – $6,225.92
- Non-employment Based Roth IRA – $5,005.75
- TSP Roth – $45,807.41
- Crypto – $2,821.88 (No longer adding)
- Previous Employer IRA – $15,663.38
- Previous Employer IRA – $11,940.96
- Previous Employer Roth IRA – $3,868.78
I thought about dipping into my retirement savings. The plan was to pay off the 12% loan and invest the saved payments for better returns.
But, being a federal employee, my TSP Roth has some restrictions. I can’t withdraw until I’m 59.5 years old, except in cases like hardship. I can take a loan against it but only got approved for $14k, less than half of what I need.
I try to pay more than the minimum, but it’s tough some months. Recently, I lowered my retirement contributions to get a match, hoping it frees up more for the loan. Today is my first paycheck after the change.
Also, I haven’t used my credit card in ages. I’m sticking to cash for now.
Farewell,
Penny Saver
Response from THE MONEY MINDER:
Hello There,
While I commend you for taking the initiative to consolidate your credit card debt and exploring various options to pay it off sooner, it’s essential to approach this situation with a pragmatic mindset. Pulling from your retirement savings should be a last resort, especially considering the limitations imposed by your TSP Roth account. Given the interest rate on your loan and your current financial circumstances, a more realistic approach might be to focus on increasing your monthly payments gradually.
Since you have already adjusted your retirement contributions to the minimum to receive the match, consider allocating the additional funds towards your loan payment. By increasing the amount you put towards the loan, even slightly, you can make significant progress in reducing the balance and saving on interest over time. Additionally, creating a budget and reallocating any extra income, such as bonuses or tax refunds, towards the loan can further expedite the payoff process.
Furthermore, maintaining a cash-only approach and avoiding the use of credit cards is commendable. This practice will prevent you from accumulating additional debt while you work towards paying off the existing loan. Remember, small consistent efforts can lead to significant results in the long run. Stay focused on your goal of becoming debt-free and continue to prioritize your financial well-being.
Remember, financial stability is a journey, not a sprint. By staying committed to your repayment plan and making informed decisions, you can overcome this challenge and set yourself on a path towards a more secure financial future.
Best wishes on your journey to financial freedom.
Farewell from THE MONEY MINDER.
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