Erica,

You clearly need a disclaimer. Any sane person I have seen post financial advice like this online has made sure to defer blame.

I claim no financial responsibility for my advice here. Always consult a real financial planner that has your interest in mind and not just selling their employers products.

1) 15 year fixed mortgage is a great ideal, but only about 25% of our population makes enough money to purchase a $175K house on a 15 year fixed 5.9% interest rate without comitting more than 28% of their income towards it (the calculations and recommended percentages I used bankrate for). That income by the way would be $62,868. Top 25% of our country from the 2006 Census is $77,500.

2) Call you bank and immediately arrange a short sale of your house? A bank will only agree to shortsale if they think they can't get more money from you in a forclosure. If you are that on the edge here and other creative efforts to make more income, take on boarders, or reduce your other expenses have not been sucessful then maybe, but talk to someone knowedgable about it first. It is better for your credit report than a forclosure, but in this climate I would try a few other avenues first depending on how much time you have.

3) Investing for the long term means you should invest agressively, not that you should be in an index fund. An index fund is a way to invest MODERATELY.

4) If you are within a few years of retirement, taking all of your money out of stocks now and into "mostly bonds" is to general a blanket statement and applies to almost no one. The top recommendations I have seen are:
* keep up to 70% in stocks (afterall if you are about to retire your nest egg has to last a while and cover increasing medical expenses)
* reduce expenses, work longer or use pensions/Social Security or other investments to avoid tapping your 401K
* if you have to withdraw funds don't increase the amount each year as they usually recommend until things recover

5) If your job is not secure or if you have no emergency fund you might be better off to save money rather than agressively paying down credit card debt.

There is a lot of good advice in here too though, and the best of it is, if you don't need your money in the next 5 years you should not be making decisions based on FEAR, that will only water down the returns you could get if you continued to invest.

luck to you all!

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