Dear Dave,
My wife and I have $15,000 in debt left to pay off. We bring home around $32,000 a year, and we usually spend $250 to $300 on Christmas. I started talking to her about your plan earlier this year, and she finally agreed and got on board a couple of months ago.
How should we handle Christmas budgeting in the middle of working our debt snowball?
Scott
Dear Scott,
The first thing I’d suggest is to not mention my name for a while. If she’s agreed to start working the plan and help you guys get control of your money, that’s enough for now.
We don’t want to cause a rift during the holidays.
Just sit down together and ask her what she thinks is a reasonable amount to spend for Christmas while you’re trying to get out of debt. If it’s a reasonable figure, smile and tell her you agree. You might even ask if she’s OK with your old Christmas budget. If she is, then pencil it in and move on to other things.
The big thing is to make sure you listen to her opinion and work on this together. On the off chance that she gives some crazy dollar amount, just nod and ask how she came to that figure. Then, talk things out. Don’t bring up my name or go crazy about things. It sounds like you two are on the right track!
Dave
Switch to Roth TSP?
Dear Dave,
Do you think I should consider switching from my traditional TSP (Thrift Savings Plan) to a Roth TSP?
Jeremy
Dear Jeremy,
If I’ve got a choice, I’m going with the Roth TSP. Now, if you’re starting out really late with your saving and investing, the math might work out either way. But in most cases, when you’ve got several years ahead of you, a Roth TSP, or even a Roth IRA or Roth 401(k) where your money grows tax free, is a much better choice.
Remember, unless you’ve waited until you’re in your sixties, the vast majority of the money in the account will be growth. Ten percent or less will be the money you actually put into the account. This tax-free growth is what makes the Roth TSP an excellent choice.
In other words, if you’ve got $1 million in your current investment, and $900,000 is growth, you’ll get taxed on that portion. That would amount to around $300,000. If your money is in a Roth, there are no taxes. You just saved $300,000 out of every $1 million. Not a bad deal, is it?
Dave
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