We are in FPU class and have baby step 1 in place. We are working on debt snowball. 1. $8000 at 0% until June, (we will use my husbands bonus in March to pay this off entirely) 2. $14000. at 20% we are excellerating payments to $1000. per month. And 3. $48000 on home equity (used for improvements to vacation home we will possibly retire to in 10 years) Mortgage is done in 7 years on vacation home. Primary home has 24 years left but we plan on selling in 10 years and either moving into the vacation home as primary or looking to purchase another smaller home near our children. We do have a 401K we contribute 6% with a 6% match and two small Roths we contribute approximate 3% combined. We net approximate $7856. monthly. Our combined investments minus the houses are only at $226,000. to date. My husbands pension at age 65 will be $50932. yearly. Any suggesstions to do this right in the last stretch before retirement. I feel we did things backwards. With 5 children we put all through college paying off two small loans and the rest cash. We also have 4 of the 5 children married and we paid cash for all weddings. Now what?

Michelle H. February 21 2010 11:56 AM

We are in FPU class and have baby step 1 in place. We are working on debt snowball. 1. $8000 at 0% until June, (we will use my husbands bonus in March to pay this off entirely) 2. $14000. at 20% we are excellerating payments to $1000. per month. And 3. $48000 on home equity (used for improvements to vacation home we will possibly retire to in 10 years) Mortgage is done in 7 years on vacation home. Primary home has 24 years left but we plan on selling in 10 years and either moving into the vacation home as primary or looking to purchase another smaller home near our children. We do have a 401K we contribute 6% with a 6% match and two small Roths we contribute approximate 3% combined. We net approximate $7856. monthly. Our combined investments minus the houses are only at $226,000. to date. My husbands pension at age 65 will be $50932. yearly. Any suggesstions to do this right in the last stretch before retirement. I feel we did things backwards. With 5 children we put all through college paying off two small loans and the rest cash. We also have 4 of the 5 children married and we paid cash for all weddings. Now what?

Michelle H. February 21 2010 11:55 AM

Do I invest 15% of my gross or Net income towards retirement?

Chip February 20 2010 11:55 PM

Do you have to claim the interest that is made on a savings account or on Mutual Funds account on your income tax return?

PPerez February 15 2010 3:44 PM

I am a very late starter at age 56 in May. I need to know how do I get out of debt and save at the same time. I am so overwhelm with trying to catch up. I lost income in my home and can't seem to get back on track with my creditors who add late fees to my accounts. Please advise.

Maxine Guy February 11 2010 10:11 PM

Age 54 New divorce :( .Income is 3878.00 per month. Owe 70,000.on house at 6.125 %.pay off date is 7/17. Value per Realtor is app. 139,000. Have 70,000.00 invested in mutual funds. Investing 3% into 403-B at work. Emergency fund done, and now saving 3-6 month expenses. Do not feel like I am moving fast enough. Any suggestions on how to improve . Budget tight because of living expenses. One child at home finishing college.

jan February 08 2010 12:03 AM

Should I pull money out of any of my investment vehicles (money market, IRA, 401k, TSP, etc. approx $390,000) to pay off my mortgage? I have about 5 more years on the mortgage ($60,000 currently owed @ 4.78%). I will work for 7 more years, my husband has been retired 4 years, has a pension and will collect SS in a few months. In 2017 I will retire with a small pension, husband's pension, husband's SS and my SS are both @$1,500/mo. We have no other debt. We pay off our bills monthly. I'm afraid to remove money from funds when I'm so close to retirement. I have no problem making the house payment with my income. Just wondering if I should pay it off and bank the payment.

Julie February 02 2010 11:25 AM

Larry (Jan 14) - it is not a good idea to use your IRA to pay off your mortgage. If you are not over 59 1/2 years old, you will pay a 10% early distribution penalty (Fed is 10%, there may also be a state penalty). The distribution is treated as regular income for tax purposes. Your combined tax rate could approach 50%. When you take the distribution you also reduce a tax deferred investment vehicle. Make a plan to pay additional on your mortgage to pay if off early. I hope this helps.

Martin February 01 2010 2:46 PM

Our daughter who lives in Mesa, Az needs $5,600 dollars to stop forclosure on their home which takes place Apr 16, 2010. Her husband's job ran out and he is now working in Utah for only $2,000 a month. She is working, bring in about $1,500. It is not enough to pay their bills. House payment is $1,600 a month. Should they short sale there house and move to Utah and rent so the family can be togethr. They have 4 children ages 8- 18? 0r Should we help them out with their rent till he can find a better job?

Nolan Alcorn January 26 2010 3:54 PM

Kim, Money Markets are like CDs and Savings accounts. They aren't investment vehicles, they're just someplace to park a chunk of change for emergency purposes. Mutual funds are investments in growth stocks. There really are a lot of mutual funds available which historically return 10-12%. Dave says to select those with 20 year track records of those returns, then put your money into those - but you leave that money alone for a good 10-20 years. The idea is to let your money work for you. By leaving it alone for a long period of time it generates more money, so that when you stop earning an income your investment money picks up the slack. The goal is to be able to live off the money your investment generates - leaving the principle amount alone to keep working.

Ellen January 26 2010 10:18 AM

Where are you getting the 12% interest rate for mutual funds? I have a Money market barely making 1%. All the examples still say 12%, but I can't find hardly anything that's giving any interest.

Kim January 24 2010 8:08 PM

Anyone have an opinion whether it's a good idea to use your IRA to pay off your mortgage?

Larry January 14 2010 5:12 PM

Mary- Now is the time to downsize. If you only have $50k saved for retirement and no pension but Social Security, you are going to be living on beans for the next 20-30 years, so start now. Invest in tax deferred savings, because you won't be paying any tax at your income level after you retire. If you work to age 70, you can get enough out of Social Security to live on. Meanwhile, save another $150,000.

Larry Caldwell January 13 2010 11:45 AM

And what about over 60, with only about $50K in retirement savings... but our house IS paid off, and no outstanding debts. Just regular light/heat/auto maint. (cars paid for as well). We may not be ahead (by much), but at least we're not behind!

Mary January 05 2010 2:20 PM

What about if you are over 50? Can you give me the numbers? Thanks!

Julia Broughton January 02 2010 6:08 PM

Thank you for this article. I was feeling hopeless about being 41, soon to be divorced with two young children, and only 35K in teacher retirement, but now I'm a bit hopeful. I'm downsizing my life, which will take adjustment and planning. Thank you Mr. Ramsey. You truly are a blessing.

Angela December 27 2009 6:46 PM

Some of the best bargins can be found at estate sales. I know because I work part time for an estate sale service. I have found brand new clothes, some with the tags still on the garment at these sales for under $10.00. I have them dry cleaned and wear them to work for my full time job. Our coffe pot died, we found an expensive Krups at an estate sale for about $7.00. Make sure you know what the retail value is for the item you want, and whether what you are looking at is a good deal, then grab it. Most sales require cash, a few have debit cards, almost none take checks. You can factor a five dollar bill in your budget for fun shopping at an estate sale and see who comes up with the best deal in the end. Lots of inexpensive fun .... PS: You can find just about anything, including canned goods, spices, cosmetics, appliances, furniture, clothes, plants, jewelry, sporting goods, movies, records and so on - never pay retail again.

Susan October 30 2009 4:43 PM