Clear credit card debt before making donations

IF you have a burning money issue, or you want to win a fight with your spouse, put your questions to Barefoot Investor.

06/02/2009 BUSINESS: Scott Pape. The Barefoot Investor. HWT staff.

Q I HAVE always given to my church, and I’ve just completed a course that encourages us to tithe. The only challenge is that I’m single, on an admin wage ($55,000), and I have $4500 in credit card debt.

I’m torn between my spiritual commitment (I really do want to give) and my current financial situation. What would you do?

Chloe

A Hi Chloe,

Now I don’t consider myself a financial guru — let alone a spiritual guru, but here goes. I truly believe that you first need to be financially strong yourself before you can effectively help other people.

So my advice would be to delay your tithing (if that’s what you want to do) and spend the next few months knocking over your credit card debt: sell stuff, work an extra job, and put as much of your wage into smashing off the debt.

If you’re still unsure, think of it this way: right now you’re paying close to a thousand bucks a year in interest to a bank — and your church sure needs that money more than the bank does!

TAKE TIME TO THINK

Q I really get a lot of advice and confidence from your column.

I’m single, 29 years old and have $600,000 in cash for the last three years in my bank account from an inheritance.

I spoke to a financial planner who quoted $5000 per year for financial advice, but that seemed really high.

Overwhelmed by all the information, I felt it was safest to just lock the money in term deposits and continually roll it over. What should I do?

Kerry

A Hi Kerry,

It sounds like you had a terrible “first date” with a planner.

It’s the financial equivalent of a guy sitting down to dinner and gawking at the woman’s breasts all night. The adviser was more interested in getting his hands on your cash than really getting to know you.

It sounds like you are feeling the weight of responsibility of such a large amount of dough. That’s a very good thing, by the way.

However, the truth is that you’ve been blessed with an opportunity early on that few people have: the chance to live life on your terms.

So rather than seeing you jump straight to the “meat and potatoes” of investing, I’d encourage you to roll the money over in a 90-day term deposit and grapple with these three questions: If money

was no issue, what would you do for work? What legacy do

you ultimately want to live?

And how can you honour the person who gave you this opportunity?

Once you’ve got the answers to those questions, drop me another line.

STICK WITH WORK

Q My partner is 66 and he wants to scale back work. He has been offered a 20-hour

shift, which would clear $450 per week.

We owe $18,000 on our mortgage, and he has $90,000 in super. I am 63 and am earning $400 per week, with $90,000 in super. Should he try to work the 20-hour shift for a while to increase his super instead of drawing down each week from his super?

And if we downsized our house could we put the money into his super in a lump sum?

Doreen

A Hi Doreen,

I’m going to give you some advice that should make you happier, and wealthier. You should both definitely work as long as you possibly can. Given your partner is over 65, he can access lump sums from his super at any time. So, withdraw $18,000 from his super and knock off the mortgage.

Now when he starts working part time, he should apply with Centrelink for the age pension. The income test is pretty generous, so he may be able to get a part pension.

Now here’s the kicker. If you wait to downsize your home until you have a Centrelink concession card, you may be able to save yourself thousands of dollars in stamp duty on your new home.

Originally published as Clear credit card debt before making donations