Live Q&As

First, I have to say this. You said "$5,000" and "not much" in the same sentence. That's a lot of money.

But then I have a rule that helps me always think of every dollar as being much. I try to eliminate the word "just" in front of any dollar amount. So I try not to say, "It's 'just" $10. That way, I'm always conscious that every penny counts.

Anyway, to answer your questions. I would list all the debts, credit cards included starting with the debt with the lowest balance, as was your instinct. Then take all of the $5,000 (assuming you have some money in an emergency fund) and start paying off the debt at the top of the list. Use the money to pay off as much of the debts at the top of the list. Because you are right that getting rid of that debt can give you a great sence of accomplishment and push you to double, triple your efforts on the rest of the debt. It's what I recommend to people I help and it really does work. And for those folks, because they then aggressively attack the other debt, they don't end up paying more in interest rate charges because they get rid of the debt quickly.

Oh and one more thing, since it's tax season, make sure you are having the right amount of money taken out of your pay so that you aren't getting a large refund every year unless you have events that change your tax situation such as buying a home, having a baby, etc. The IRS has a withholding calculator that you can use to tweak your withholdings so that you let the government hold your money all year interest-free.

Since none of us knows what the tax rates will be down the road, best to talk to a financial planner or tax professional to figure out which is better for you. But generally many experts say it's a good plan to have retirement money in a Roth if you meet the income thesholds because you may be in a higher tax bracket as a senior than you think. 

So add to the mix, can you afford private schools if you want to stay?

Looka at all the numbers.

Can you afford to move? Will it increase your cost of living so that it overshadows even the amount you would have spent for private school? Would you over the years spend $250,000 to send them to private school? And what about saving for college? How will spending on private school impact your saving for higher education?

Or have you explored the option of staying and sending your kids to public school. Are programs within the schools that would give them a better education? Have you talked to parents sending their kids to schools in the public system? 

Just take the time to look at all the possibilities and the numbers. But if you can't afford to move than explore what you can do. 

I'm so sorry for your situation. I know times like this can be hard.

But pencil and paper is just fine. Works for a lot of folks.

However, you may find some useful tools on www.mint.com

Pick up your jaw. I'm assuming the person was just comparing the $5,000 to the debt that he or she has and thinking maybe it won't make a huge dent in the debt. So that it doesn't appear to be that much.

I just wanted the person to understand that it's still a lot and will help tremendously to start the process of paying down the debt.

Insure.com has some good information on umbrella policies. Here's what they say:  "Umbrella policies provide an extra cushion of insurance protection. An umbrella policy covers damage claims caused by you, your dependents and even your pets. It starts paying out after your homeowners and auto liability limits run out."

Here are a few links that I think you will find helpful.

http://www.insure.com/car-insurance/umbrella.html

http://www.iii.org/articles/what-is-an-umbrella-liability-policy.html

http://usatoday30.usatoday.com/money/perfi/insurance/2011-03-24-umbrella-liability-insurance.htm

Thanks for the extra input. 

Actually, I think both of you are right (the school and you). Parents do have a huge responsibility to teach their kids about personal finance. And part of the reason it's their responsibility because they can then impart their own values, values the school might not share such as tithing or that credit is bad, necessary for somethings but bad nonetheless.

But I also know that many parents weren't taught so how can they teach? So schools can and should help with that gap of knowledge. 

Try looking at the materials put out by the Jump$tart Coalition, which is dedicated to improving the financial literacy of pre-kindergarten through college-age youth.

Here's the site: http://www.jumpstart.org/

I hear you and your theory may be right. But my point about all this and when it relates to others living above their means is there is usually so much more under it all. It's not that they think they can get away with it. It's even more than that. What leads people to do such things. Why would Madoff rip off so many people, even people he knew and didn't need the money from? What happened to him that he could do such a thing? Same with Jackson. Could it only have been that he thought he could get away with it? Or that he wanted so much no matter the cost? If he thought he could just do it and get away with it, he wouldn't have done so much to cover up his deeds. We have a thriving industry in therapy because neither you nor me can really know what drives people to do what they do to ruin their lives. Only they with help can really know.

But a larger question for me is also why did so many, including his wife, enable him to do this? Just unbelievable and yet believable. 

Hadn't heard about this either. But how much money are you getting? Typically in these deals people don't get much.

Nolo.com has a lot of information about this. For some people a trust makes sense but not all. I would get a second free opinion. Often a will will do and cost less.

Or not trade the car at all. Can't you keep it?

Even if you have an expensive car repair, it's cheaper to keep the car unless it's breaking down so often you can't plan fixes and you are being stranded.

But okay, let's say you want out of the car. Negotiate your deals separately. Get as much as you can for the car and hopefully it's enough to pay off the current loan. If you are upside down on the car, meaning you owe more that it's worth try, oh please, try to hang onto the car. You do NOT want to roll a loan balance into another car note becaus than you become upside down on that car.

So get a good price for your current car and apply that money to a used car. If you are not upside down, then negotiate for the least expensive, safest used car you can get. 

I won't be flip about not stressing because I just know too many people in your situation. 

So be concerned but not so much that you make your health worse. You really can't do anything. So just plan for how you may handle the expense. Start looking at your budget and figure out if you can cut anywhere. Start figuring out where you might get the money. 

And if the stress gets bad talk to someone professionally.

Sounds like staying is a good option, especially since you like where you live and you won't obligate yourself for more debt.

The tipping point for private school for me is can you also continue to save for college?

We are in the shop for college phase now and my daughter is coming from a public high school in an area people say isn't a good school district. And yet she's received a great education and not having gone to private school hasn't hurt her chances of getting into a good school.