You Asked, We Answered: Paying Off a Mountain of Bills, Budgeting Wisely and More

Randy from Moreno Valley, Calif., asked: Hi, we have a difficult and confusing situation. My wife and I are both teachers. She has taught for 24 years(breadwinner) and I changed careers having had a successful business for 17 years. My career change added on to our debt as well as the lower teacher's salary. We do very well putting money away for retirement and are making our first/second mortgage fine. Now to the problem: I have 3 school age daughters who are doing very well in dance. This is their sport and we know how important it is for them to be active. The problem is that it is causing us to rack up even more bills--most credit cards. We have an embarrassingly high credit card debt and it continues to climb. Do we need to axe the dance(the kids already blame my career change for the money woes.) or do we cut back on retirement contributions in the hope of paying more towards credit cards. I am afraid cutting back on retirement contributions will just force us to pay more in income taxes. We just seem to be going in circles. Some months we seem to make no more than minimums on credit cards and so far we have been able to keep the rates on the cards fairly low but the debt is climbing!"

McPherson answered: Randy, first, make sure you're staying current on all credit card payments. The worst thing that can happen is to get hit with penalties and higher interest rates. That just digs a deeper hole.

The most important thing is to stabilize the situation and then try to deal with the debt.

Without knowing your ages or how much you have set aside for retirement, I can't say whether it would be wise to scale back your retirement contributions. If you started saving early and have a healthy nest egg for your age, you might be able to trim what you're contributing. But if you're behind for your age, it may not be the right move. You might want to try out the retirement savings calculator available in the personal finance section of www. Morningstar.com. It can help you determine if you're near where you should be for your age.

Also, be sure you're contributing enough to capture the full amount of any matching contributions made by your employers.

Whatever route you do go, it sounds like a family conversation is needed. If dance is that important to your girls, then maybe they need to make sacrifices in other areas such as clothes or other activities. For most families, it's question of setting financial priorities. What's most important to the family as a whole?

And remember, your career happiness should be a top priority as well.

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