Advice please

Hello Tiggy1 and welcome to a2k

Credit card debts are costly, as you pay anywhere from
13 to 18 per cent interest. My suggestion would be to
take an equity loan on your house for 5000.00 and pay off
your credit card. You should be able to get an equity
loan for under 5 %.

If you're very young you can forego your 401k for a
limited time, however, even a small contribution counts,
even if it is only $ 50.00.

I think it depends on how close you are to retirement age. Remember, you can carry a loan to pay for your house, but not for your retirement.

Number one is to pay off the damn credit card and to never carry a balance again. The interest rates are huge. Like CJ says you could get a home equity loan at a much lower rate and bonus - you can write off the interest on your taxes.

As much as others are saying don't invest in your 401k if you are young, I disagree. The younger you are, the greater the advantage - the compounding effect is huge even if you invest as low as $50 a month I would start one.

The last thing I would do is pay off my mortgage. If anything check into refinancing if you can get a lower rate. Remember your interest can be written off on your taxes so the interest rate is actually somewhat less because of what you get to write off.

Thanks,
I pay $500.00 a month on my credit card and have stopped using it. I don't want to take a loan, I have 5% on my mortgage. I guess I will just pay $200.00 a month extra on it until it is paid off and continue to add to my 401K. My house mortgage will be paid off in 2 years. I only bought the house 2 years ago, I think I saved almost all I can on the interest.

Considering that you are only paying 5% on your mortgage, you could easily earn more on a 401k especially if you are young enough and therefore would be investing in more growth type investments. Typically you will invest in a variety of mutual funds and any advisor or even any source you could easily find on the web will give you the appropriate blend of investments - for example a certain percentage of growth and a certain percentage of international and a certain percentage of bonds.

I would pay the $200/month extra on the credit card, rather than the mortgage; it is generally a good idea to prioritize the higher interest debts. Then, once you've wiped out the $5000 credit card debt, you'll have an extra $700/month to put towards the mortgage.

You can write off the mortgage interest. Pay off the credit card first.

Money contributed to a 401K isn't considered income for income tax purposes. Even though your company isn't contributing you are getting an advantage by doing so. It is as if the govt is giving you money now that you don't have to pay back until later.

If you are in the 28% tax bracket and contribute $200 a month to your 401K you are saving $672 a year in taxes on that $2400. (Even more if you have state or local income tax.) Not a bad return before you get any other growth. Even if your investments only return 5% you are ahead putting money in the 401K because you get the tax savings now that are also earning that 5%.

Oops, I misread 24,000 as 240,000. I guess you don't have much of a tax write off for mortgage.

That doesn't matter, you still get some tax savings by contributing to 401K unless you are in the 0% bracket.

With only 2 years left on your mortgage, how close are you to retirement at this point? Assuming you are making $30K or more and will be working for the next 2 years, pay off the credit card as quickly as possible, then put money into an account so you have some cash in reserve for emergencies, 3 to 6 months worth of income is the normal recommendation.

In 2 years with the credit card and the house both paid off and 6 months of cash readily available you might consider maxing out your 401K.

Thanks, I have a least 20 more years until I can retire. I believe I will pay off the credit card first. I was trying to find a way to pay my house off sooner, but 2 years isn't too bad. I just bought it 2 years ago, I put a large chunk down on it after I bought the house, then made double payments so I could get it paid off quicker. I had some land I sold after I bought the house. My car and truck are paid for from the land money.
Tig