I'm in my mid-forties, very low retirement savings, high debt, recovering slowly with a new stable salary. I need to get my finances fixed so that I'm not working full-time on my 70th birthday nor living in a trailer park.
I had zero credit-card debt but I was laid-off and I've made mistakes.
Had a house with a manageable mortgage and increasing salary. I extracted equity via a refinance, later had to sell the house, didn't/couldn't re-buy, so I had to pay IRS & state taxes due to the house's increased value but ... refinance, so no cash at the sale.
Had a decent 401(k) account, rolled over to IRA and made mistakes with stocks. (I now only invest in a low-cost lifecycle fund).
IRS debt total = 15% of my gross annual income. On a payment plan with 3% interest. Even at the high minimum payment, it will require 5 years to payoff.
credit card debt total = 20% of my gross annual income. It's on 0% offers which expire ~mid-2018. Paying the minimums since it's 0% and I already paid the 2-3% fee. I've shifted that a couple times to new 0% offers. Rates are going up.
monthly outflow = ~55% of my monthly take-home (too high): rent, food, insurance, debt payments, misc
emergency savings = ~3 months expenses saved
401(k) funding = 5% of gross annual income to get employer matching
401(k) savings = less than my total debt
- Do I pay off the IRS debt ASAP because of the high monthly payment, or consider 3% low enough and keep saving?
- Do I save as long as I can keep shifting the credit card debt to 0% offers (AKA "leverage"), or do I pay off the 0% card debt first because the IRS 3% rate won't increase?
- My wife is re-graduating in months. Should her new income (60% of mine) be focused to pay off the low-interest debt, or targeted 100% into retirement (401(k), IRA), or some percentage?