I would need to know if you have children, what the interest rates are on the CC debt and the mortgage (and whether the mortgage is fixed or variable and its term plus outstanding balance) plus your age (and spouse if any), # of years with BC employment pension and any anticipated milestones (having children, going back to school, retirement age, getting married, etc.)

It is quite complicated to give the best answer. General answers can be provided when furnished with general information.

Perhaps you may want to submit your details to FT as a ‘Case Study’.

Take it easy – one at a time first.

Pay off debt –> increase credit score –> improve skills –> get better higher paying job –> save money —> buy a house

Good luck!

My question to the group is what if:

a. have $25k in cc debt but under low interest payments
b. cant contribute to rrsp bc employment pension plan takes up all rrsp room
c. net take home pay $60-70k pa
d. already have a low interest mortgage
e. havent invested in a TSA or stocks yet (so no investments)
f. dont have emergency fund yet

how would you prioritze your finances?

1) pay down high interest debt
2) pay down high interest debt and
3) pay down….well, you get the message.

Although investing may appear sexy, so is not having any debt other than your mortgage. Not many people can say that!

Make a plan, stay the course, and it will happen for you.

Cheers!

Adam, the pension is a public pension plan that my wife owns, not CPP.

From a net worth stand point, reducing the negative is, in fact, increasing the positive. It’s a moot point – fact is she won’t be able to find a net return exceeding 20% in the market YoY. By investing rather than reducing 19.5% interest on an existing debt, she will in fact be increasing her ‘negative’ further.

Cannon, good point. I didn’t clue in that it was a couple… I try to keep my women unwed and at their own address – so I think singularly all the time ;)

Of course it is ridiculous to have loans at 15-19% and not pay them off. But if she gets a $100 raise at work, I see nothing wrong with $75 (or a large percentage) going to repaying these debts and investing the other $25 (or a small percentage) in your RRSP.

If every cent that you have goes to repaying bills, although it is the prudent thing to do, goes to repaying bills (reducing the negatives) it can be a bit depressing. We all like to increase our assets (increasing the positives). Although this will be a slower way to reduce her debt to zero, it probably will work a little better for her in reality.

Just my two cents.

I truly appreciate all of your advices and help. The reason I haven’t put my savings against debt is I have concerned about the current recession. Say if one person lost a job, it will be a tough situation. However, I would take half of my savings into LOC which I treat it as my emergency fund, another half I will pay off the credit card balance with the highest interest rate. BTW, if I paid LOC, will the lender reduce the limit? As it happened on my credit card already, PC financial just reduced my credit card limit from 5,000 to 4,000 after the balance is less than $4000.

I understand that debt consolidation, balance transfer and ask lender to reduce the rate are good ideas. Unfortunately my credit score is just 620 and my credit cards are all maxed out. No bank or at least no big banks would approve a new LOC or offer me a lower rate at this point.

I am very clear about my financial priority now and I will figure out an action plan with my husband. The successful stories from Million Dollar Journey and your comments have inspired me a lot. Again, I thank all of you from bottom of my heart. I will come to the site everyday to remind myself where I came from.

Miya

You do not want to be in a bigger whole then you are already in. Investing can always come later. Nothing beats the peace of mind you receive once you are debt free.

Good Luck!

Don’t forget they are a couple. So $10,000 this year and another $10,000 in just about 5 months.

(Be careful dragging the TFSA into this arguement as everyone I know only has 5K room in their TFSA – at this point, when you start talking 21K in a TFSA, you’re generally talking 4 years out from now.)

The BEST thing she can do right NOW is negotiate those interest rates down and start paying off the high interest debt first. Muddying the waters with RRSP loans and the like is making some serious assumptions about her level of discipline. Personally I don’t think she has enough to follow through with any plan like that. Long time horizons with slower results and more volatility.

Just renegotiate your rates and start hammering the CC\LOC debts down aggressively.

Adam

The consensus here is that you need to pay off your debt otherwise it’s going to swallow you alive.

But I also think you shouldn’t use your savings to pay the debt off though – instead try to budget your expenses and use your income to pay the debt off. Only reason I say not to use your savings is because you might need it for something important – you never know what what will happen. And also because the savings is what you pay yourself. Also, hold off on the putting your money into the RRSP.

Also see if you can consolidate some debts on a lower interest line of credit to help you pay them off faster. Most of your cash should go straight to the debt. Get rid of it asap!