I’m A Middle School Teacher And Not Saving Money. – Chris

“Dear Steve,

Hi, I am a middle school teacher. I have 80K in student loans and 10K in credit card loans. I am trying my darndest to pay down the credit cards as fast as I can. I think (HOPE!) they will be paid off by the end of the next school year–May 2010. Then I can start attacking the student loans for the next ten years.

My colleague says that I should be saving more for retirement than just the public employees retirement fund. Should I delay paying down my credit cards to save for retirement, or should I just pay them off and start saving next year? He says that if I waste any time I am costing myself lots of money in the long run. I contend that I should get rid of the high interest rate “dumb” debts first.


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Dear Chris,

Well it is true that if you delay retirement savings that it will be much more costly in the long run and it is true that if you delay paying off credit cards it can be more costly that way. I bet you never expected one of those tricky word problems to come back and bite you on the bum in adulthood, did you?

I think both goals are admirable and there is no reason why you can’t achieve both goals at the same time. You don’t need to take an all-or-nothing approach. In fact, if you don’t have a savings account that is increasing in balance I would suggest that you consider my law of thirds as yet another approach.

Using your leftover cash, after paying credit card minimum payments, send 1/3 to pay off additional credit card debt, use 1/3 to save for retirement and put 1/3 in a savings account. Rinse, lather and repeat, month after month.

It will take you a bit longer to eliminate your credit card debt and save for retirement this way but you don’t have to sacrifice one goal for another, plus you’ll have cash in the bank you can easily get to in case of emergency.

See also  The Great Illusion of Retirement Savings

By the way, teachers are heros to me.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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