Debt Reduction vs. Retirement Investing

I've wobbled back and forth in the ongoing dilemma of debt reduction vs. retirement investing. My drive to eliminate debt is strong and I've reach a point where I feel confident that I'm on track to do both.

My highest interest debts have been eliminated. Last June my average APR was somewhere around 25%. Now all of my standard APRs are below 15% -- the average is below 10% with a portion of my balances at 0% APR until July and another portion fixed at 5.99% until its paid.

I've eliminated one third of my personal debt and I'm definitely on track to eliminate the rest if not by December 2008, then definitely by January 2009. That one month set back won't cost me much in terms of dollars, but not investing in a 2007 Roth IRA would be a forever lost opportunity.

That being said, I have decided to re-direct a small portion of my debt reduction and emergency funds to an IRA with Sharebuilder. With a referral I was able to get a $25 sign up bonus plus 7 free trades (email me for more info). I got started right away and I'm already hooked. By April I will have invested over $1000 into my 2007 Roth IRA. Thats only a quarter of the contribution limit, but its better than nothing! I feel great about getting started now, even if it slows down my debt reduction plan a little bit. Although my goal is long term, I like the fact that my contributions can be taken out at anytime - a last resort emergency fund in addition to the cash I keep on hand.

Ideally I would have invested a set amount each month or maybe twice a month into a balanced fund. Since I wasn't able to find a fund that offered the balance I was looking for, I decided to invest in a few ETFs. I've been investing each week to with a plan to have a portfolio composed of about 85-90% stocks and 10-15% bonds. That balance seems to be right on for a mid-20's investor. The stock ETFs I've selected give me a solid mix of US, European, Pacific, and Emerging Market holdings. The bonds fund is an aggregate index of mostly intermediate term bonds. Yeah, I still don't really know much, but I feel like I'm off to a good start.

My boyfriend tells me I should get out of debt before worrying about investments. Maybe he's right, but I've made my choice. I feel like $1000 is a responsible amount to test the waters in a situation like my own. I'm ready to embrace market volatility because I'm in it for the long haul. I say that now, but we'll see how it goes! I already start to feel a little stressed when my funds lose value, but when they go up... thats another story :)