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Money Expert Tim Clegg

Where the Money Should Go



I am 38, married, with 3 kids - 12, 8 and 4. We earn $50-60K total, annually. We have about $50K in debt: 25 percent credit cards, 20 percent car payment, 55 percent family expenses and loans.
How should we prepare for college tuitions? Should we pay off all the debt first? How should we save for retirement?
San Angelo, Texas    

Tim’s Answer

It sounds like you’ve taken a good first step! All three of your goals are good ones, but if your situation is like most of my clients, you should prioritize as follows: 
  1. Pay off your credit cards and other short-term debts first. Then start building a reserve in a savings account of 3-6 months’ income for emergencies like losing your job.
  2. Start saving for retirement. If your employer will match your retirement contributions, make sure you contribute at least enough so you can get all this additional “free money.”     
  3. Once you’ve built a rainy day fund, and are setting aside enough to reach your retirement savings goal, you could add college savings to your “savings portfolio.” 
The trouble with college savings, of course, is that they almost always reduce financial aid. Retirement savings, on the other hand, usually don’t. 


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