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Hello, my husband I are recently married and each brought some debt to the table. We have been chipping away at a $12K credit card balance for the last six months and now that it's almost paid off ($1,800 to be paid in full Nov. 1), we're trying to decide which debt to tackle next. We have the following:
1. $2,664 on a 0% interest Rooms to Go credit card that we can pay off in equal installments of $46.00 until July 2012.
2. Three months remaining on my 9%, 66 month car loan. Payments are $297/month. (The payments are on auto-draft and with only three months remaining I figured there is virtually no interest savings or any other reason to pay off three months early.)
3. 33 months remaining on my husband's 7.5%, 60 month car loan. Payments are $354/month.
4. $27,483 on an undergrad student loan that is currently deferred because I'm working on my MBA part-time. I consolidated at 3.33% fixed for 20 years, paying $157/month. At this point, I do not have to begin repayment until February 2009, although interest is accruing during deferrment and has been for a couple years.
5. $131,585 principal balance on our mortgage. Our interest rate is 5.875% fixed for 30 years. The monthly payment is $767, and we have been paying that amount for 17 months, with 343 months left to go.
A few other things to note:
- We have NO emergency fund in place, as we've been pouring all of our extra cash into paying off that $12K credit card.
- We have no kids and do not plan to for at least 6 years, if at all.
- We are planning on keeping our cars (both Toyotas) until they die, so we are not figuring on replacing either one for at least 7 years. At that time I would like to pay cash for a used car. No interest and no new-car depreciation for us!!
- We are 27 and 24. We each have a 401k with about $11K balance in each. We both get company match up to 6% (me) and 5.5% (husband) and we currently contribute only enough to get the full match.
- We average about $2,000 leftover after bills, gas, groceries, etc. each month to apply towards debt/savings. This amount will increase to $2,300 once my car is paid off. So we do consistently have a nice chunk of cash leftover each month, but with multiple ways to apply it, we could use some help figuring it all out.
Any thoughts? I know it's probably best, mathematically speaking, to leave the 0% interest credit card alone and just pay it off through equal installments for 5 years. Psychologically we would like to get rid of it, but I think knowing we can get an interest savings jumpstart in other areas would help, so we are leaning towards leaving it alone. Same with the student loan. I figure we can save a few hundred bucks by paying my husband's car off, but I wonder if the money is best put towards mortgage principal. Or, should we pump up our retirement savings by contributing more to our 401k's or adding a Roth IRA? I know an emergency fund is important too. We've been lucky so far and haven't had any real emergencies. Any suggestions or opinions are greatly appreciated!
1. $2,664 on a 0% interest Rooms to Go credit card that we can pay off in equal installments of $46.00 until July 2012.
2. Three months remaining on my 9%, 66 month car loan. Payments are $297/month. (The payments are on auto-draft and with only three months remaining I figured there is virtually no interest savings or any other reason to pay off three months early.)
3. 33 months remaining on my husband's 7.5%, 60 month car loan. Payments are $354/month.
4. $27,483 on an undergrad student loan that is currently deferred because I'm working on my MBA part-time. I consolidated at 3.33% fixed for 20 years, paying $157/month. At this point, I do not have to begin repayment until February 2009, although interest is accruing during deferrment and has been for a couple years.
5. $131,585 principal balance on our mortgage. Our interest rate is 5.875% fixed for 30 years. The monthly payment is $767, and we have been paying that amount for 17 months, with 343 months left to go.
A few other things to note:
- We have NO emergency fund in place, as we've been pouring all of our extra cash into paying off that $12K credit card.
- We have no kids and do not plan to for at least 6 years, if at all.
- We are planning on keeping our cars (both Toyotas) until they die, so we are not figuring on replacing either one for at least 7 years. At that time I would like to pay cash for a used car. No interest and no new-car depreciation for us!!
- We are 27 and 24. We each have a 401k with about $11K balance in each. We both get company match up to 6% (me) and 5.5% (husband) and we currently contribute only enough to get the full match.
- We average about $2,000 leftover after bills, gas, groceries, etc. each month to apply towards debt/savings. This amount will increase to $2,300 once my car is paid off. So we do consistently have a nice chunk of cash leftover each month, but with multiple ways to apply it, we could use some help figuring it all out.
Any thoughts? I know it's probably best, mathematically speaking, to leave the 0% interest credit card alone and just pay it off through equal installments for 5 years. Psychologically we would like to get rid of it, but I think knowing we can get an interest savings jumpstart in other areas would help, so we are leaning towards leaving it alone. Same with the student loan. I figure we can save a few hundred bucks by paying my husband's car off, but I wonder if the money is best put towards mortgage principal. Or, should we pump up our retirement savings by contributing more to our 401k's or adding a Roth IRA? I know an emergency fund is important too. We've been lucky so far and haven't had any real emergencies. Any suggestions or opinions are greatly appreciated!
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