"Riding Out The Storm"-Personal Debt To Cash Ratio
Tuesday, November 25, 2008SUSIE GHARIB: As we continue to follow how you're riding out the storm, tonight we take a look at dealing with debt. One viewer, Marie, admits she hasn't been as savvy with her finances as some other viewers. Marie is 37 years old and single. She earns $52,000 a year and has accumulated $27,000 in credit card debt, but she's cash poor. She contributes the maximum amount to her 401k to receive matching funds from her employer. We asked personal finance journalist Eric Schurenberg for his assessment on carrying this much debt with only a little cash on hand.
ERIC SCHURENBERG, PERSONAL FINANCE JOURNALIST: You just don't have enough of a cash cushion and you're too close to the edge. If anything happens to you, you're bankrupt and that's an incredible burden to bear. Now I know a lot of people think that getting that corporate match is a big deal and it is, but remember that's a one-time hit. The interest you're paying on your credit card debt occurs month after month after month and keeps compounding. So concentrate on paying down that debt and when you're through, you'll feel better. You'll be in a better financial position to go back to saving for retirement.
GHARIB: Schurenberg says that once that credit card debt is paid down, Marie should re-start her 401k contributions.
