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Pay off the cc or keep the emergency fund??

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    Pay off the cc or keep the emergency fund??

    Hello new here....
    I see that this has been asked before but here is my situation. We have almost $20,000 in credit card debt. 5,000 at 0% And 14,000 and change at 10%. I have an emergency fund of 20k.
    We have been paying 500 towards the large card and 300 towards the smaller. Our income is 120k. Our net that we bring home is about 6500 per month. We go out to eat alot and we buy lunch and breakfast out every day at work . I realize this is the #1 thing to change but...

    Our rent is 2500
    Car ins 150
    Groceries 500
    Student loan 200
    utilities 300
    Cable 150
    Phone 100

    Should I just take plunge and pay off the debts ANC start fresh and save for a newcemergency fund?

    #2
    If it were me, I'd pay off the 10% debt with your cash on hand. I might just keep putting your $800 a month to the $5K debt, but definitely have it paid off before that 0% interest rate would expire.

    It would be very wise to track ALL of your spending...eating out, ect. You must be spending more than you take in, since you have that much credit card debt. In order to not go back into debt, you need to know where you spend your money. And in order to get your emergency fund back you need to have some money to save!!

    Good luck.
    My other blog is Your Organized Friend.

    Comment


      #3
      The credit card debt is old and has been consolidated into the two cards it was a racked up before we were bringing home our current salaries. But I agree I need to create a budget. I just want to know if smart to not have an emergency fund for a few months

      Comment


        #4
        I would pay off the 10% card in full asap. I would leave the other alone and pay the min until it just before it starts charging you interest.

        As a very temporary measure, you can consider the CC line of credit in your EF. But by no means is that a permanent solution. The ultimate goal is no CC debt, and 3-6 months expenses in cash for your EF.

        But saving you 10% interest will help get you there sooner.



        Is the $20k EF the only savings you have? Any brokerage trading accounts? CDs?

        And is the CC debt your only financial concern? How else can we help?

        Comment


          #5
          Pay off the interest bearing CC. And then pay off the other CC debt before interest charges begin (I'd have the money saved up and then write the check just ahead of the 0% expiration).

          Yes, you need to budget your outflows but just as important is understanding what drives you to eat out so often.

          Dissect your budget to understand what drives your spending. Are your emotions being manipulated by advertising? Is it a lack of financial understanding? Lack of financial or personal goals?

          Managing your spending is much easier and more effective if you know WHY you manage it.

          Comment


            #6
            I agree with the consensus - pay off the interest bearing card inf ull immediately with savings on hand. However, it is absolutely imperative that you get a realistic, complete budget in place along with paying off the CCs. You will just end up racking up more CC debt and not have an EF to fall back on if you don't get the spending under control. Maybe you are not spending beyond your salaries now, but you'll never know that if you don't track spending and put together a budget. Also, people tend to continually "up" their lifestyle as their salaries increase. You need to understand where your money is going and put together a plan that prioritizes your spending and saving appropriately to your goals and needs. Don't forget about periodic expenses like car maintenance, medical spending, vet bills, car registration, gifts, vacations, etc when putting together the budget. You should be putting money aside each and every month for these types of irregular but predictable expenses.

            Comment


              #7
              ...pay the min until it just before it starts charging you interest.
              Pay off the card at least one month before it is due. Make sure you have a zero balance going in to the next and final month. I had one card with zero interest on half of it, and interest on some minor purchases. I "paid it off," only to have one additional bill for like $1.50. This would have made my "zero interest" loan balloon considerably. Don't wait until the last minute risking dollars to save pennies.

              Otherwise, I agree with the above. Pay off the $14K, keeping $6K for emergencies. You can quickly build up the emergency fund.

              Everything said above assumes you have set up a budget. If you don't have a budget, then I suggest you plan to be in debt again for another $20K, but have spent much of your emergency fund by following only half of the advice you've been given.

              Comment


                #8
                There has to be a reason you are eating breakfast, lunch and most dinners out. Why is that?

                Comment


                  #9
                  Originally posted by Bounceoffclouds View Post
                  Hello new here....
                  I see that this has been asked before but here is my situation. We have almost $20,000 in credit card debt. 5,000 at 0% And 14,000 and change at 10%. I have an emergency fund of 20k.
                  We have been paying 500 towards the large card and 300 towards the smaller. Our income is 120k. Our net that we bring home is about 6500 per month. We go out to eat alot and we buy lunch and breakfast out every day at work . I realize this is the #1 thing to change but...

                  Our rent is 2500
                  Car ins 150
                  Groceries 500
                  Student loan 200
                  utilities 300
                  Cable 150
                  Phone 100

                  Should I just take plunge and pay off the debts ANC start fresh and save for a newcemergency fund?
                  Pay off the $14K immediately. Then, cut back on expenses and get the EF built back up ASAP.
                  Brian

                  Comment


                    #10
                    I guess my question to you is - how did you manage a $20K EF and rack up $20K in credit card debt?

                    That just does not make any sense - you build your substantial EF AFTER you pay off all your debt.

                    TheVirtualGuy

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                      #11
                      Most of these people have the best idea. You will want to get rid of the credit card debt first. And if one is incurring interest and the other isn't then you will want to start with that one. Once your debt is paid off you can begin focusing on continually putting money into savings.

                      Comment


                        #12
                        Good advice that you have gotten here so far by paying off the 10% credit card interest rate.

                        Why are you eating out so much-I find that planning a menu keeps us eating in the house alot more plus it is better for my waist line.

                        Comment


                          #13
                          Pay off the credit card first then if you need emergency funds, use the credit card.

                          Comment


                            #14
                            Originally posted by DiscounThem View Post
                            Pay off the credit card first then if you need emergency funds, use the credit card.
                            Well said. This seems like good logic. Be sure you are keeping an eye on what "emergency funds" is as well. This doesn't include your splurging for dinner out.

                            Comment


                              #15
                              I paid off my CC, which had been accumulating for several years, and have never felt better. I now take the extra money that I would have used to pay the card off and save it for investments or special treats like a new car.

                              Comment

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