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Dear Dave,

My husband and I are retired. I receive a small pension, and we are both on Medicare and Social Security. We have about $25,000 left to pay on our mortgage, along with a second mortgage of $18,000. These are our only debts. We also have a nest egg of $30,000 set aside, and a small annuity that’s worth about $20,000. Would you recommend paying off our mortgages with our savings?

— Jane

Dear Jane,

If you know me at all, you understand how much I’d love to see everyone in control of their finances and living debt-free. But being broke, even in a house that’s paid for, isn’t a good idea. Believe me, I understand. The idea of paying off the house and everything is awfully tempting. But if you two did that, you’d be left with very little. To me, that’s a scary thought when your small pension—along with Social Insecurity and Medicare—are all you have coming in.

No offense, but your nest egg is kind of small to begin with, so I don’t think I’d be raiding it right now. On the other hand, if you’d told me you had $400,000 or $500,000 saved up, I’d tell you pay off the house and second mortgage today.

If you’re not doing this already, I’d advise you two to start making and living on a regular monthly budget. Give every dollar a name on paper before the month begins, because if you don’t, your money will control you instead of you controlling it. Make sure you’re living on less than what’s coming in, and hopefully you can devise a plan to have the house and other debt paid off in a few years.

God bless you two!

— Dave