Keep saving or pay down debt?

**EconoMutt** · 12-10-2009, 09:09 AM

I'd do alittle of both.
You will never regret having extra cash.
You may want to eliminate that student loan just to get one less monkey off of your back.
It looks like you're in good shape.
Good Luck. :-)

**kork13** · 12-10-2009, 10:11 AM

I'd say you're in a pretty good place right now (savings-wise), so you can safely turn your focus to debts. You still want to continue saving some every month, but I would send most of your spare cash to your debts. You have $1670/mo 'surplus', so maybe send $400 (~10% income) to savings, then funnel the rest toward your 2nd mortgage. 10 months from now when you're facing possible layoff, the 2nd mortgage would be all but gone, and your savings would be up to $24k (12-month EF for you).

**Broken Arrow** · 12-10-2009, 12:02 PM

Were it up to me, I would just keep saving.

I too would set my sights on the second mortgage, but paying it off partially is unlikely to make any impact on your monthly budget, and paying it off completely will put you down to only 2 months worth of savings right now.

So, just keep saving and see what happens. If it turns out that you do lose your job, you will have the protection of... an extra six months' worth of cushioning by then? However, if you still have a job next year, you can knock the second mortgage out in one blow and still retain a decent emergency fund.

**wincrasher** · 12-10-2009, 12:43 PM

Don't panic - alot can happen between now and October 2010. I'd agree with others - pay out your student loan. Your mortgage rate is fairly low, so that is nothing to fret over.

With your unemployment benefits, your "runway" is alot longer. But you never know, you may have other emergencies, so save all you possibly can. The security savings brings right now is much more important that the bit of interest you are paying on debt.

Also take a look at your W-4. If you are getting a big tax refund this year, then raise your expemptions so that you get more in your check each week. That will help your savings.

**lovcom** · 12-10-2009, 02:08 PM

To the OP:

You seem to have a good emergency fund, so I would kill your student loan as aggressively as possible.

Then I would raise your emergency fund up to $30,000.

Then I would just save and not do aggerssive paydowns of your 1st and 2nd until you get another job after October 2010. Once you're workinb stabily again, make double pmts against your 1st and 2nd, but don't touch your EF savings account.

You seem to be very responsible and are in a very good position financially....kudos to you!!!

**Fizgig** · 12-11-2009, 05:34 AM

Thanks for the tips, guys.

I think I'll continue what I'm doing - save as much cash as possible and see where things sit next year. If life is all roses and butterflies, I'll go ahead and write the checks to pay off my debts. Until then, I'll put everything in the bank.

The student loan would be easy to pay off, but at the same time it just doesn't bug me that much. The interest and payment are so low I don't even notice it. The second mortgage, on the other hand, has an annoyance factor.

I adjust my tax withholding every year, so that's already been optimized.

Broken Arrow - I didn't want to take my current savings and pay off the debts, but stop funding the EF to start paying the down much more aggressively.

Thanks again. I've never faced a layoff and want to be as prepared as possible. (sigh) It's a shame. I really love my job.

**wincrasher** · 12-11-2009, 05:51 AM

Fizgig,

Good plan.

But also, don't get depressed - at least don't let it show at work. Keep a good attitude and let the love of your job show at the office. You never know who is watching and what is cooking in the background. Managers might have something going (that you and others don't know about) and will bring you along if you're a strong player.

Keep saving or pay down debt?