Question: Elizabeth in Texas and her husband have $68,000 in debt. Elizabeth makes about $105,000 a year, and their income will double when her husband graduates in January. She was in a car accident five years ago and received a $365,000 settlement. They also have investments in mutual funds. Should they cash out some mutual funds to pay off the debt?
Answer: You've been very protective of that money and have protected it from yourself, which was very wise. I don't know who helped set that in your psyche properly, but they did. Dad or Mom or somebody needs a hug. They did a great job of setting you up to go, "Don't freaking touch this!" That's really drilled down inside of you to the point it kept you from spending it. You didn't go on a European vacation and buy two BMWs with it, which was brilliant to not do that. You didn't consume this money. But now that you're living on a game plan, you are telling your money what to do, you are as likely to put that money back in the mutual fund as you are to pay off the debt by August, and the two of you have this tremendous income—it just keeps growing by leaps and bounds as you continue to hit these milestones of graduation and entering your careers and those kinds of things.
Yes, I would write a check today and be debt-free. Let's be so excited that we ask what's the next goal? Pay cash for a house. Then we've got to say, "All right, we need $X. We have $180,000 minus $70,000. We now have $110,000, and we need $X and we have this income. Let's map that out and be excited about building that $310,000 or whatever-that-target-is nest egg to buy that house with for cash." Just be as excited about that as you are about becoming debt-free. In other words, you've got to have something you're aiming for as a reason to keep you reasonable on your consumption and reasonable on your giving. You want to be consuming reasonably, and you want to be giving a lot, but you want to do it in such a wise way that it allows you to completely change your family tree, which you are setting yourself up to do.
What I would do is say you need to be saving $4,000 a month or $5,000 a month or $8,000 a month—whatever it is depending on when he goes to work, that kind of thing—and we're trying to hit this certain goal. The fact that we don't have these payments anymore allows us to do it that much faster. I would today be debt-free. Then I would reset my savings goals to replace my get-out-of-debt goals. Just keep trucking. You're really, really doing well.