Why not grow the IRAs?

Dear Dave,My wife and I have been following the Baby Steps, and we’ve paid off all of our credit card debt. We still have $51,000 in student loans left, and our combined income is about $140,000. We’re thinking about funding our IRAs while we finish off the college loans. How do you feel about this?Patrick

Dear Patrick,I wouldn’t do it that way. If you’re still on Baby Step 2, you need to stop all saving and investing and attack that last piece of debt with a vengeance. I know what you’re going through. The problem with student loans is that, like yours, they’re usually pretty big, and sometimes it’s difficult to see the light at the end of the tunnel. Even with all the work you’ve done so far, a debt that large can make you feel hopeless.

But there’s only one way to take down a giant. You start gnawing at his ankles and work your way up. That’s what you need to do, Patrick. I’m afraid you’ll lose focus and intensity when it comes to getting out of debt if you worry about saving more and investing too soon. I’ve seen that happen to lots of people, and when it does it can take a decade or more to finally get student loans off your back!

You guys have made great progress, and you’re making good money. Don’t give up now! If you stay focused and gazelle-intense about getting out of debt, those student loans will be history in about 18 months. Now is the time to roll up your sleeves, get ticked off at this thing, and really go into attack mode.

I understand the temptation you guys are facing, but I want you to stick to the plan. There’s power in behavior modification on a short-term basis that supersedes the power of mathematics!—Dave

Dear Dave,My husband says there’s more risk associated with using a debit card than a credit card. Is this true?Brittany

Dear Brittany,As long as you’re using a Visa or MasterCard debit card and processing it as a credit card, you will have the same exact protection against fraud and theft as a credit card—period. If your number is misused or your money stolen, both Visa and MasterCard require the member bank to replace the money you lost. In the case of a credit card, they would have to wipe it off your bill.

Remember, your debit card has two functions. If you use your debit card as an ATM card—which means you enter your personal identification number—then your protection extends only as far as your bank or ATM system allows. These protections can vary depending on your particular bank. And most of the time, the protection you receive from the bank alone isn’t nearly as good!—Dave