Susan from Mountain View, Calif., asked: "My husband and I each have a small entertainment business and I have 3 part-time teaching jobs. Our housing costs alone (rents for home and biz over $2.5K/month) and other living costs have caused us to live above our means to the tune of over $10K in credit card debt, not including car loan and fixed expenses. We paid over $10K just in premiums to our Health Insurance provider last year. We have had this amt. of debt for a few years now despite paying as much of it as we can. It WAS up to $15K a few months ago. We don't take lavish vacations or go to cultural events or really even movies out. Seems like we both just work and don't take time out to enjoy! How long will it take us to get out of debt at this rate? We would love to buy a house of our own but I don't know how we can afford to in this Silicon Valley. By the way, we are an artist/teacher and a musician/teacher, not high paid tech workers. We have no children, no disability insurance and no life insurance, but I have just purchased long-term care insurance for myself. Any advice?"
McPherson answered: It's tough to address every issue you raise, but here are a couple thoughts. First, it sounds like you're renting both a home and a business location. Any chance of doing both in one location? If not in your current home, is it worth finding a new place to live from which you can also operate your business.
Second, I'd suggest that as a business owner you look to ensure you are maximizing your income opportunities. I don't know anything about your business, but that may be your best route to a higher income.
On the health insurance issue, I'd suggest you look into maybe setting up an HAS, or health savings account. They're not for everyone, but for small business owners already paying for their own insurance, they can be a smart option.
Finally, I'd revisit the issue of the long-term care insurance. I don't know your age or health status, but generally for working age people, disability insurance is more important. In the next five years, do you face a greater chance of incurring a disability that keeps you from working or needing long-term care assistance?
I'm not suggesting you drop the long-term coverage, but rather study it closely and consider which is more critical at this time.