Confused where to start - have money, but also in debt

**odqlesz** · 12-30-2009, 12:54 PM

I understand the DR Baby steps, but my situation is a little different.

I am 80,000 in credit card debt but have 80,000 saved for
college education for a 6 and 8 year old.
I also have 120,000 in my 401k at work.

What is the best way to get rid of the 80k credit card debt.
I am no longer using the cards and trying to pay off as much
as I can each month(snowballing).

I am maxing out at 15500 each year for my 401k

Should I stop contributing to the 401k and use that money?
Should I use the kids college money, then try to rebuild it.

Thanks in advance

**Greebo** · 12-30-2009, 01:06 PM

More information required: Where is the 80,000 for the kids college saved? Is it YOUR money? Or a trust in their name?

You should absolutely stop your 401k contributions, but DO NOT take money OUT of the 401k.

**odqlesz** · 12-30-2009, 01:12 PM

80k for the kids college is in an investment.
Classic cars - a 67 Corvette and 57 Chevy Belair
I was hoping to enjoy them until college comes.
I know they won't loose any money.

**frugalwarrior2** · 12-30-2009, 01:15 PM

Sorry Questions for questions
-what is your age?
-How much is the rate on the CC?
-Are you making good money on the money saved for college while CC interest piles and takes money?
-Are there other kids to pay for college for?

W/o being a professional and knowing your entire situation i couldn't say. However, w/ the $80,000 just sitting in the bank and the credit card draining your finances I might take 1/2 the college fund and pay credit cards. You have to veiw your finances as a whole not just parts. Why is the college fund fully funded when you have so much debt.?? How quick could you pay off the CC that way and get back to funding college? Do you have an BEF for short term costs and at least 8 months expenses saved for ememrgencies?

**frugalwarrior2** · 12-30-2009, 01:16 PM

No cars can't be considered a college fund. They have to be sold for money first.

**MandaRenee** · 12-30-2009, 01:22 PM

To me it seems silly to focus on paying for your kids' college before taking care of your own finances first.

That could just be me but its how I feel. There are loans and scholarships for college available. There isn't for getting out of debt and securing your financial future. Also if you are able to get out of debt you would have that money available to put into 529 or savings accounts for your children. That makes more sense to me.

**odqlesz** · 12-30-2009, 01:28 PM

Originally Posted by frugalwarrior2

Sorry Questions for questions
-what is your age?
-How much is the rate on the CC?
-Are you making good money on the money saved for college while CC interest piles and takes money?
-Are there other kids to pay for college for?

W/o being a professional and knowing your entire situation i couldn't say. However, w/ the $80,000 just sitting in the bank and the credit card draining your finances I might take 1/2 the college fund and pay credit cards. You have to veiw your finances as a whole not just parts. Why is the college fund fully funded when you have so much debt.?? How quick could you pay off the CC that way and get back to funding college? Do you have an BEF for short term costs and at least 8 months expenses saved for ememrgencies?

Age 45

Average rate on the credit cards is about 7%

Considering I paid about 50k for both cars about 8 years ago and
now their value is about 80k I think it was a good investment.
Besides I got to enjoy my investment.

Another step-child age 20 currently in college but we saved her
social security money and her college will be paid for with that.

Basically I had started my 401k back in my 20's and within the last
8 years the cc have been piling up.

Living paycheck to paycheck with 1000 in backup money.

At the rate I am going it will take me 5 years to pay off the cc without me changing anything else.

**Greebo** · 12-30-2009, 01:30 PM

Originally Posted by odqlesz

80k for the kids college is in an investment.
Classic cars - a 67 Corvette and 57 Chevy Belair
I was hoping to enjoy them until college comes.
I know they won't loose any money.

They may not lose money, but cars are also not investments.

I'm sorry, but those are very expensive toys. Nothing more.

Now I'm NOT saying you need to sell them. We need a clearer financial picture first.

What is your annual household take home income?

What other debt besides the 80k do you owe? Cars? House? Other?

**Greebo** · 12-30-2009, 01:33 PM

Rule #1 on investments - they make money, they don't cost money.

Cars only make money if you actually FIND A BUYER. Until then they cost you money.

**frugalwarrior2** · 12-30-2009, 01:38 PM

The interest rate on a cc is not locked in. If you rates go up it's not like low offers will be popping up because of the size of your unsecured debt. You can't easily get a bank loan to cover this. Even a credit union loan. How much interest are you paying monthly? Total it all up. Thats the leak. I would try to sell 1 of the cars now. Are they at least appraised for that value currently. Each investment like that is only as good as the last buyers offer.

**frugalwarrior2** · 12-30-2009, 01:39 PM

Greebo were leap frogging. I don't want to make them feel bombarded so your in i'm out.

**Greebo** · 12-30-2009, 01:40 PM

Originally Posted by frugalwarrior2

Greebo were leap frogging. I don't want to make them feel bombarded so your in i'm out.

But this is more fun!!!

**odqlesz** · 12-30-2009, 01:42 PM

Originally Posted by Greebo

They may not lose money, but cars are also not investments.

I'm sorry, but those are very expensive toys. Nothing more.

Now I'm NOT saying you need to sell them. We need a clearer financial picture first.

What is your annual household take home income?

What other debt besides the 80k do you owe? Cars? House? Other?

Annual gross income is 130000 between me and my wife.

Other debt about 5k left on wifes car and about 5k left on my car.

Yes, they are toys but also investments. Since they are desireable makes and models, I will make money on them. More money then
any other investment.(just my opinion)

**Lady_V** · 12-30-2009, 01:55 PM

Personally, I would sell both cars... I wouldn't feel comfortable having them while 80K in debt, especially living paycheck to paycheck. That's a lot to depend on... what happens if they are stolen, crashed, in a garage fire, etc?

People are different though -- You could sell one of them, and pay down the CC debt.

I speak from experience when I say 'life happens and you never know what is in the future'. I did a free-fall to where I am now. I once had 750K in assets/investments... a mortgage, 2 houses, 3 cars, a car payment, a baby, a husband... and about 50K in 'stupid debt'. We HAD the money to pay off the CC's... we just didn't... and they snowballed on us, and we got over our heads.

Now, I no longer have the second house or the mortgage, two of the cars are gone, as well as the husband. After a lot of struggle, the debt is gone (except car payment). (I still do have my daughter

)

The kicker to it all... my (now ex)FIL is a financial planner, the ex-hubby was a stock broker as well... and we KNEW better.

My daughter has her 529, the debt is gone, and we have more wiggle room than paycheck to paycheck (although, not much more, but that is something we will be working on in 2010)

Please remember, you came here looking for advice, you may not like what people will say, but they aren't going to talk-down to you... but they won't sugar-coat things either.