QUESTION:
My husband and I are in our mid-30s with three young children. We lost our nest egg in a bad investment, are now renting, and live on one income. We have $50,000 in debt and $20,000 in savings. We would love to buy a home but feel overwhelmed at the thought of saving a house deposit again. Should we use our savings to pay down our debt, or hold onto the savings and try to reduce the debt from earnings? All our spare funds currently go straight into paying off the debt. Do we have any other options, are we destined to rent for the long haul, and what is the smartest way to use the $20,000?
ANSWER:
I would prefer that you use the savings to pay down the debt – this is on the assumption that you are paying a hefty rate of interest on the debt, and it is far more than you are earning on your savings. Then use all the resources you can muster to get rid of the debt as quickly as possible. Once that is out of the way, you can start afresh. Is there any possibility of the non-working partner getting a part-time job?
