My situation

[cashisking500]

Hello! I haven't posted on here in awhile, but I would really like your input on my current situation.

My wife and I have the following debt remaining...

Student Loan $4,100
Car Loan 1 $9,400
Car Loan 2 $8,500

Currently, we have $20,000 in our emergency fund. Our monthly expenses are about $3,800 per month. We typically save $750-$1,000 each month. I would like to take some of that emergency fund to pay off this debt once and for all.

I would like to pay off the student loan and the Car Loan 1 with the EF, leaving us with about $7,000 in our EF. From there, I would split the difference, adding some money to build our EF back up and some towards paying extra on the Car Loan 2 until it's paid off.

We have no children and are putting some away for retirement, but not the recommended 15%.

Thanks for your help!

[ua_guy]

I'm generally wary of shotgun approaches. Why not take your excess savings and start over-feeding those oustanding loans and paying them down quickly, but not all at once? The added time and gradual drawdown puts you in a better risk position than cutting your EF in half instantly. You could presumably knock out that student loan in about 4 months. Once that one is done, take what you were paying on the student loan, plus your extra savings, and knock out one of the car loans. Rinse, repeat until the 2nd vehicle is paid off, or if you need to do it even quicker, consider taking only a portion of your EF (maybe 25%?) if you get antsy towards the end and want to blow all the debt out.

This is of course assuming your loans are relatively low interest.

There could also be an opportunity cost by not saving additional money for retirement. Consider an annual 7-9% return on pre-tax monies versus paying a 4% car loan, after tax.

[autoxer]

You have one more week to make a 2013 Roth IRA contribution.

[Inigo_Montoya]

Use the EF

Well, I generally approach issues like this from the Dave Ramsey point of view. Take the EF down to $1,000 and pay off $19,000 of the $22,000 in debt you have. Then pay off the last $3,000 over the summer, and rebuild the EF. Unless of course you're just going to go out and get new debt and ignore creating a new EF. If you're rid of the payments, I can't image that's not freeing up another $750-$1000 at least, so 10-12 months to rebuild the EF.

[greenskeeper]

knowing the interest rates on each loan would help.

If the highest rate was something crazy I'd pay that off right away leaving at least $10k in the emergency fund. From there I would throw all of the extra money per month at the next highest rate loan.

[Eagle]

Hello! I haven't posted on here in awhile, but I would really like your input on my current situation.

My wife and I have the following debt remaining...

Student Loan $4,100
Car Loan 1 $9,400
Car Loan 2 $8,500

Currently, we have $20,000 in our emergency fund. Our monthly expenses are about $3,800 per month. We typically save $750-$1,000 each month. I would like to take some of that emergency fund to pay off this debt once and for all.

I would like to pay off the student loan and the Car Loan 1 with the EF, leaving us with about $7,000 in our EF. From there, I would split the difference, adding some money to build our EF back up and some towards paying extra on the Car Loan 2 until it's paid off.

We have no children and are putting some away for retirement, but not the recommended 15%.

Thanks for your help!

So your monthly income is between $4550 and $4800 each month. You have 20k in your e-fund. That's about 5 months worth of expenses based on the $3800 per month listed. I'd be very cautious about only haveing 7k in the bank to pay off one of the CC and SL loans earlier at the cost of your e-fund balance.

What are the interest rates on the loans? Depending on the interest rates I might go ahead and pay off one of the credit cards if I were in your situation.

How much do you have invested in your 401k, Roth IRA, mutual funds, or other investments? Do your employers have a 401k match contribution?

[cschin4]

My approach to life was to get debt paid off ASAP. But, I don't mean sacrificing your EF or investments, but by really taking the time and effort to knock those loans out. For me, I would go after the student loan first. Who wants a student loan hanging over their head for YEARS after they graduate? I didn't. If you want to try to focus on interest rates, that it up to you but there is a psychological satisfaction to paying off the student loan. So, I would start I think you could take a portion of EF and set that aside and add to it every time you get a few extra bucks, then pay that sucker off.
I have taken this approach all of my life. I HATE, HATE debt. Doesn't mean I don't use it at times but only for the short term. I paid off my home in 7 yrs. I own 3 cars, free and clear. I have NO debt whatsoever! None. I pay every CC off in FULL at the end of EVERY month, period. I have done so since I was 21. If I can't pay it off in full, then I stop shopping!
And, for cars, I have paid cash, but really, I find nothing wrong with getting a 0 % or very , very low 1.9% or something like that. That is the ONLY debt I will carry, though I usually just get sick of a monthly bill and pay it off anyway.

[snafu]

Wish I knew your age and whether your or DW's employer offered matching retirement sums. It's important to take advantage of free money. I suggest keeping 3 months of basic expenses in EF and paying off highest interest car loan. Follow by focussing on 2nd car loan. I recall your SLs are very low interest but lack actual figures.

If your wife's vehicle has high mileage, what is the plan going forward? Will she buy another vehicle by January 2015 or when current vehicle tops 250,000 mi? You might want to start a car replacement fund.

[cashisking500]

Thanks everyone for your feedback. To answer some of your questions...My wife and I are both 30 years old. The interest rates are as follows:

Car 1: 4.5
Car 2: 4.3
Student Loan: 2.0

At minimum I would like to pay off Car 1 now leaving about 11k in our EF (still gives us 3 months EF) and then focus on knocking out Student Loan over next few months.

Does this sound like a better, more conservative approach?

Thanks.

[Goldy]

Do you have a mortgage? Also, what are the monthly payments on those loans?

If you are comfortable with having 11k in your bank account then I would pay off the first car loan. I don't see any reason to pay the student loans off before the second car loan due to the interest rate difference unless the student loans have a huge monthly payment.

[cashisking500]

Thanks Giddy. Payments on them are...

Car 1: 365
Car 2: 370
Student loan: 125

[autoxer]

I wouldn't be so anxious to pay down the student loan when it is carrying such a low interest rate. Why not attack both auto loans first?

And getting the relevant information from you is like pulling teeth, when you ignore so many questions.

Do you have a mortgage?

How much do you have invested in your 401k, Roth IRA, mutual funds, or other investments? Do your employers have a 401k match contribution?

So are you investing towards retirement?

[Weird Tolkienish Figure]

Hello! I haven't posted on here in awhile, but I would really like your input on my current situation.

My wife and I have the following debt remaining...

Student Loan $4,100
Car Loan 1 $9,400
Car Loan 2 $8,500

Currently, we have $20,000 in our emergency fund. Our monthly expenses are about $3,800 per month. We typically save $750-$1,000 each month. I would like to take some of that emergency fund to pay off this debt once and for all.

I would like to pay off the student loan and the Car Loan 1 with the EF, leaving us with about $7,000 in our EF. From there, I would split the difference, adding some money to build our EF back up and some towards paying extra on the Car Loan 2 until it's paid off.

We have no children and are putting some away for retirement, but not the recommended 15%.

Thanks for your help!

You're doing quite well, $20k in your emergency fund is exactly $20k more than most people have in their emergency fund. That being said, it does seem overfunded in lieu of your debt.

[Eagle]

Thanks everyone for your feedback. To answer some of your questions...My wife and I are both 30 years old. The interest rates are as follows:

Car 1: 4.5
Car 2: 4.3
Student Loan: 2.0

At minimum I would like to pay off Car 1 now leaving about 11k in our EF (still gives us 3 months EF) and then focus on knocking out Student Loan over next few months.

Does this sound like a better, more conservative approach?

Thanks.

Yes, probably a more conservative approach... I'd pay off both cars before tackling to the student loans due to the higher interest. But you do what you think is best. As long as you get rid of them fast that's the key.

At 30 are you guys investing towards retirement?

[cashisking500]

Thanks Eagle. Yes, we are investing some for retirement. Currently, my wife does 3%, which is up to the company match in her 401k. For me, I'm also doing 3% across a 401k (no match, but there is a profit sharing which equates to a % of yearly salary whether I contribute or not) and a Roth IRA.

To answer an earlier question, yes, we have a mortgage.