paying debt to begin investing

first post for me...my wife and I recently came into some money via settlement ($75K) we have some outstanding debt i would like to address before beginning investing for retirement

$15k credit cards (0% interest currently)
$25k HELOC (7% interest)
$15k car loan (5%)

I am considering paying all of these off in entirety, putting aside a $10k high interest savings emergency fund, then starting Roth IRA's with the rest...thoughts?

It sounds like you have the right idea going into this. many people would have that settlement spent already.

Although simplistic and with the fact that I know nothing about you personally, here are some idea for starters:


-$17000 to your emergency/liquid fund (Hi-yield such as ING, Emigrant, etc.)
-$15000 additional to Hi-yield account to earn interest while your CC are at 0%. When they reset at a higher interest rate (which they will), pay them off with these funds.
-$18000 to two Roth IRAs with 2007 & 2008 contributions maxed (if you qualify and are under age 50).
-$25000 to pay off 7% HELOC and increase cashflow (no more payments)
-Use increased cash flow from HELOC payoff to accelerate pay down of auto loan.
-Try to stay out of debt. Make any purchases with current savings.

Hope this helps you in your decision-making. Keep in mind, these suggestions are very general, deal only with the windfall, and err on the conservative side due to very limited information about you and your wife, family, etc.

I'm pretty sure you didn't get a reply sooner because your post is extremely vague and is lacking on even the most basic information. Hopefully, this will jumpstart a more thorough examination. You have to understand that very few will stick their necks out based on the info provided. Just a few of the other things to consider:

-How long have you been married, and is it strong? I ask because settlement proceeds are protected from divorce proceedings UNTIL they are comingled with a spouse.
-Do you have kids, will you?
-What is your income? Any disability?
-How old are you?
-Have you ever invested before? How risky do you want to be?
-How liquid do you need to be?
-Do you have adequate insurances (life, health, disability, etc.)?
-Do you have primary mortage?

Etc, etc, etc.

Thanks for the advice up front. Here is some basic info about my situation:

26 yrs old
recently married (within 6 months)
after tax salary approx $40000
wife is in medical school so living on single income for about 4 more years
adequate health insurance, but no life/disability and approximately $5000 in regular savings

We do not plan to have kids until she is finished school so that gives us a 5 year jump on increased savings which i would like to take full advantage of, with the help of this settlement to get started.

On a side note about Roth IRA, if I feel we afford to budget $5000/year to invest in this, is it better to put the $5000 all in one IRA, or divide equally among two accounts? (one for each of us). This is of course considering we will stay married, and if anything ever did happen, all savings would be split equally regardless. Thanks again.

Do you own a home? What is primary residence situation?

Sorry I left out that point. We do own a home ($127k) of less than a year.

On a side note about Roth IRA, if I feel we afford to budget $5000/year to invest in this, is it better to put the $5000 all in one IRA, or divide equally among two accounts? (one for each of us). This is of course considering we will stay married, and if anything ever did happen, all savings would be split equally regardless. Thanks again.
With all of the new info, I think the original recommendations still stand and would provide you with the best use of the lump sum. In regard to the IRA question, I would fully fund them both for 2007 & 2008 ($18000) out of the lump sum as earlier suggested, use your $5000 annual budget to fund for one of them for 2009, and move the balance to fully fund the other out of the hi-yield savings.

You may also want to explore the possibility of taking out a $150,000 20 year term life on each other to protect the mortgage balance. When kids come rolling along this need will rise, but for now mortgage protection should be sufficient as long as your spouse will have the funds to continue her education for the 4 years needed. If she can't continue her education, you may want to add tuition and the needed income to do so to your policy face amount.

Pricespector, thanks for your patience as you can see this is my first post and first time investing....i've been doing as much research as possible and I have another question about starting a Roth IRA. As soon as my wife is finished school we should be exceeding the income limits for Roth. This means I would have only 4-5 years to contribute and then have to beginning contributing to a Traditional and/or other retirement plans. Is there any downside to contributing to a Roth for only that short time frame? Should I consider other options because of this? It seems to me that it would not affect me adversely in the long run, but I'd like a second opinion. Thanks.

The fact that you may be ineligible soon simply underscores the importance of maximizing the tax exempt Roth opportunity while you have it.