How to organize accounts for paying off $50k in debt.

[Permanent Temp]

It makes me nervous to take so much out of savings... is that the best option?

If I were you I would. A few years back I had an inheritance at about that amount and credit card debt of about equal amount and wiped it out. I ended racking the debt back up but that's because the rest of my inheritance had to serve as an EF for unexpected tuition hikes which we had to cover out of pocket in my last year at school. I needed the degree to get a job after school and I wasn't working so I couldn't replenish the EF and racked up the debt again while looking for a job.

Things happen though. In your case you'd still have 14K left in savings and I'm sure its not earning 19% in interest which you are losing by not paying it off. According to your calculations posted here so far 14k would still be almost 6 months of expenses in and EF which is pretty good assuming your numbers are actually correct. And this will give you a head start so you can pay off the car loan and lower those students loan principle balances before they go into repayment.

Have you figured out where the other 2K is going each month in expenses? I didn't see that update yet.

I would probably focus on paying off the car next (because it is a small amt and lowers your monthly output.) And then roll that money over to paying off the student loans (even if they are still in grace at this point).

Is that private loan at a variable interest rate? If so you might want to focus on that one so that you can pay off as much as possible before the interest rate hikes up on you and makes it difficult to pay off.

Then again if any of your federal loans are subsidized and small you could get rid of those more quickly to give yourself a boost. I would need more information to help you figure out a plan for paying them off.

I have started paying extra to my student loans which are all federal. I have broken it down by paying the highest interest unsubsidized ones first as they rack up interest if I should ever have to defer them again.

[doingitallwrong]

If you could pay $2,000 per month on the credit card you'd pay about $140 in interest until you paid it off in three months. You wouldn't make $140 in a savings account in that time period, of course! Really it's just a matter of whether your peace of mind at having $20K is savings is worth $140 to you.

[JettRN]

Thank you!

So I just started my job in mid-July, and we hadn't really had a full month of income yet to figure out the budget completely (this is re: the other 2k in our monthly budget). Now that a month has gone by and we have an accurate picture of what we make in a month, this is a little more up to date.

Income for August:
Him: 2500
Me: 3200
Total: 5700
(unfortunately this will be a little less this month because I'm not getting the night differential anymore, so 5500 is still fair).

This is what we have come up with:

Paychecks are direct deposited into one joint checking account for monthly bills:
Rent: 1000
Car payment: 260
Car insurance: 160
Cell phone: 140
Gas: 140
Electric: 200
Cable/Internet: 70
Total: 1970

5700-1970=$3730 per month after bills

After reading several threads, we thought we'd create a "sinking" fund and put $300 per paycheck ($600/month) for vet bills, car maintenance, health emergencies (does this seem reasonable?)
3730-600=3130

Then, we figured groceries/dining out/entertainment we'd lump together and do $500/month for all of that.
3130-500=2630

And I'd like to visit my parents in Arizona once a year/maybe take a trip, so $200/month for a travel fund
2590-200=2430

I'm actually shocked, because I'm not sure where the rest is going. We moved, so I think last month we had moving costs, had to pay the deposit on the apartment, had to buy some furniture, etc.

Is the amount in our sinking fund reasonable/is this the best way to divide up our funds?

Thank you so much!

[Eagle]

I agree with Permanent Temp's post. I would pay off the credit card account ASAP. 19% interest is simply crazy when you have money in the bank IMO.

[Eagle]

Is the amount in our sinking fund reasonable/is this the best way to divide up our funds?

Thank you so much!

Looks like you have a plan on the savings front. We have savings for expenses we know we'll incur. We have a savings account for baby, car insurance, vacations, purchases, etc.

I still think you should check out www.mint.com to see where your money is going each month. It's a good tool to track your actual expenses and compare them to your budget.

[JasonSimms]

Although there are lots of ways to do it, you need to know that not all of them will work for all of us! You ought to consult a practiced financial advisor in that particular case.