Credit Card Debt vs College savings

[it99]

using emergencey fund money

My emergencey fund is prett low just 5k.
But I have contemeplated just using it to pay down the Credit Card debt, which will help make it easier to pay quicker and then I'll be able to replish it pretty quickly when the debt is paid off. If I need emergency funds, I can just get it from the credit card. But in the mean time I'm saving interest on that 5k that I paid off on the card. Does this make sense? In 3 years thats probably hundreds of dollars.

[James00]

This is very good way to express the views about the credit card debt vs college savings both the opponents are inversely related to each other.

[Cassius King]

My emergencey fund is prett low just 5k.
But I have contemeplated just using it to pay down the Credit Card debt, which will help make it easier to pay quicker and then I'll be able to replish it pretty quickly when the debt is paid off. If I need emergency funds, I can just get it from the credit card. But in the mean time I'm saving interest on that 5k that I paid off on the card. Does this make sense? In 3 years thats probably hundreds of dollars.

I would leave the EF of $5k alone right now. I would take the $10k from the college savings account and pay down my credit card debt. I would then attack the credit card debt with avengence and then build up the EF to a more proper level.

[it99]

college savings

If I take out college savings won't I get penaized with taxes?
It a NY 529 plan

[disneysteve]

I would take the $10k from the college savings account and pay down my credit card debt

If I take out college savings won't I get penaized with taxes?
It a NY 529 plan

Yes. You will be penalized if you withdraw money from a 529. Leave it there. Just don't add to it right now.

[it99]

A year later

It's almost a year(in August) when I originally posted the below question about paying down credit card debt. Someone suggested I try to pay off as much as I could on the credit cards to possibly pay it off it 3 years. Then I can start saving for college( my son would be 12). I just wanted to update people on my progress and ask for suggestions. My 40k of CC debt is now down to 35k, so I paid off 5k this year. I think to get it paid off in the 3 years suggested I would have had to pay down 13k a year. In another 2 years from now my car will be paid off and i'll have an extra 400 to use each month. We've had a ton of unexpected expenses this year with things on our house or car breaking. Given the slow progress of paying down the debt what are suggestions beyond just trying to pay it down as quick as I can. At this rate, my son will be close to college age before the debt is paid off. I have an IRA with 9K in it. I know that's I shouldn't touch it, but I'm gettin more desperate with the credit cards. When should I abondon paying down CC and start saving for college???? Thank you.


Last years post:

I'm wondering if I should try savings for my childs college in 9 years(I have 10k so far and want him to go to a private school0 or concentrate on paying off credit cards. Currently been saving $75 a month.

Have 131k mort, 42k 2nd mort, 17k auto, 40k credit card debt(12-16%). Income 112k.
We've been just doing min payments on credit cards because money has been tight.
It scares on the credit card statements how much you end up paying if your just doing min payments.

Should I even be bothering with college savings right now until I get a good chunk of credit card payed off?

[disneysteve]

We're going to give the same answer we gave last year. You earn too much to be this broke.

You need to list your income, expenses and debts for folks to review. Something is seriously out of whack in your spending if a couple earning over 100K/year could only manage to save 5K in a year's time. My wife and I make a little bit more than you and save at least 25% of it each year. If you list everything here, we can point out where you can cut back to free up cash.

I don't think you should abandon the credit cards to save for college. What you need to do is abandon the overspending to pay off the credit cards. Without seeing your budget, though, I can't give any more specific advice than that.

[My English Castle]

The credit cards should be your major focus--and super savings and economizing.
You need Dave Ramsey. Saving for college with that much high interest debt is digging you deeper in the hole. Serious serious economizing. No dinners out, no new purchases--buckle down.

[it99]

Ira

We save from my work between what I put in and my company match 15% towards retirement.
So we do save a lot for retirement. So I'm not as worried about retirement. I cant' put any less in by company rules. So I can't get extra income that way.

About the IRA:
IRA : 9k balance, I think these are valid guesses at penalty.
Penalty will be taxes(1/3 income) +1k penalty = 3k +1k penalty = 4k

If this helps me pay off my credit cards sooner, in 2-3 years, then when I'm done paying off CC, I'll have 1K-1.2K extra a month that I'm not paying towards CC. I can make up the 4k penalty in 4 months.

As far as budget, we've trimmed a lot out of our budget but min CC payments are like 1K, plus extra that you want to pay towards balance. I've gone through using budgeting software, Yodlee, and Mint and have everything in there. They are not accurate as far as doing your exact bugdget. They miss items in your bank statement or things get categoriezed wrong and it takes a long time to go through every item in bank register and categorees. If you set up rules it's inaccurate.

[BuckyBadger]

If you don't post a *detailed* budget, no one can help you.

Your income is much too high to have only been able to pay off $5k in a year.

[it99]

We've cut everything as much as we can we shop aldis to subsidize or groceries.
We have all our cable\computer\phone\cellpones bundled in a FIOS package
FIOS -$244 \month
We eat out once a week for about $30 so that's $150/month.
Energy bill $300/month
Meds : $300/month
Car insurance: $84 /month
Life insurance: ?
Gym: $20 /month
Mort: 1.5 k /month
2nd Mort: $750
Credit Card min : $800
That's the basics then just misc. things the wife and kid need.
Gas we get at BJ/s the cheapest around here

This year we've probably had 5k of unexpected items we've had fix with car or house.
Those are killer. I think if everything stops breaking we can get to saving more each month.

[riverwed070707]

We save from my work between what I put in and my company match 15% towards retirement.
So we do save a lot for retirement. So I'm not as worried about retirement. I cant' put any less in by company rules. So I can't get extra income that way.

About the IRA:
IRA : 9k balance, I think these are valid guesses at penalty.
Penalty will be taxes(1/3 income) +1k penalty = 3k +1k penalty = 4k

If this helps me pay off my credit cards sooner, in 2-3 years, then when I'm done paying off CC, I'll have 1K-1.2K extra a month that I'm not paying towards CC. I can make up the 4k penalty in 4 months.

As far as budget, we've trimmed a lot out of our budget but min CC payments are like 1K, plus extra that you want to pay towards balance. I've gone through using budgeting software, Yodlee, and Mint and have everything in there. They are not accurate as far as doing your exact bugdget. They miss items in your bank statement or things get categoriezed wrong and it takes a long time to go through every item in bank register and categorees. If you set up rules it's inaccurate.

You are correct, the software while helpful will not do all the work for you. You have to put in a little time and effort and then you will start to see results. You've gotten yourself into quite a mess by not paying attention to where your money is going and continuing to neglect this will keep you right in the situation you're in.

Without knowing how you're spending, here are some of the things I would do to help tackle that debt sooner (none of which would include tapping my retirement).

• cut cable immediately
• sell your car(s), pay off the loan and get something cheaper -- you can't afford the one you have
• Phone bill -- should not be more than $100/month. If you have data, cut it. If you have a landline, cut it. If somone at home needs a phone for emergencies, get a trac phone they can use if needed
• cut up the credit cards. if you haven't stopped using them STOP NOW
• Limit dinners out to once or twice a month MAX - skipping them all together is better
• Take a look at other unnessary purchases - no snack stops at the gas station, no McDonalds on the way home, wash your car yourself, no vacations until you can afford them, etc

You sound like you want the debt gone but you don't want to make the sacrifices it takes to get rid of it -- there isn't an easy out, the money isn't just going to land in your lap. You got here becuase you're spending more than you make. If you want to put your son through school you're going to have to make some drastic changes.

[riverwed070707]

We've cut everything as much as we can we shop aldis to subsidize or groceries.
We have all our cable\computer\phone\cellpones bundled in a FIOS package
FIOS -$244 \month
We eat out once a week for about $30 so that's $150/month.
Energy bill $300/month
Meds : $300/month
Car insurance: $84 /month
Life insurance: ?
Gym: $20 /month
Mort: 1.5 k /month
2nd Mort: $750
Credit Card min : $800
That's the basics then just misc. things the wife and kid need.
Gas we get at BJ/s the cheapest around here

This year we've probably had 5k of unexpected items we've had fix with car or house.
Those are killer. I think if everything stops breaking we can get to saving more each month.

For starters, what is your income? You listed what you make in your OP but I assume that's gross -- what do you net each month?

Where's your car payment? Home maintenance? Gas for cars? Car maintenance? The reason everyone is so adament about a detailed budget is becuase most people who don't pay attention to their spending really have no clue how much they are overspending on non-necessities. We can't help you if you can't even tell us where your money is going.

[disneysteve]

We've cut everything as much as we can

We have cable\computer\phone\cellpones
We eat out once a week
Gym: $20 /month

You've contradicted yourself. If you think you've cut everything you can, you need to take another look. I've clipped a few things that lead me to say that and I suspect there are numerous others.

You need to have a detailed, accurate budget that accounts for every dollar that comes in. I think the big problem here is that you simply don't know where your money is going. As a result, it doesn't really go where you need it going.

Come back when you can post a complete budget and we'll be happy to help.

[it99]

Monthly net is 7524
Car payment is 415
gas probably 200 maybe
car varies, just this month we had a 1k repair .
other months nothing
Every 5 monts oil change 65 for synthetic oil