Anyhoo, the reason for my post was to do a quick poll on something my husband and I are trying to decide on. In short, we have about $3K of credit card debt that we've been slowly chipping away at for about a year. (It was accrued mostly from Kirk's birth and when Avery was in the Academy and took a huge pay cut for 7 months.) I had hoped to have it all paid off in a year's time, but that hasn't happened at all. (In fact, we've really only brought it down by about $1K in a whole year.) We got a nice big tax refund this year, but stuck it all in savings to put towards the bigger vehicle we will need when Baby #3 comes in June/July. So right now we have $3K in debt and $5K in savings. My question is, should we keep splitting our extra money between the credit card debt and savings or just bite the bullet and pay off all the debt right now? My gut instinct is to wipe the debt clear and then work towards rebuilding the savings account...it really irks me to be paying about $40 a month in interest fees. BUT we may not have much car money to work with by the time July rolls around if we did that.
So what do YOU think? If this was your financial situation how would you handle it?
I think Dave Ramsey suggests saving $5K for emergencies, then saving towards clearing off debts. So, he'd probably say keep chipping away at the debt and don't touch your savings. I'm like you, though -- I would be tempted to just pay it and be done with it, especially if there was $40 interest a month.
ReplyDeleteactually, dave suggests the $1000 emergency fund, then paying off debt, then saving a full emergency fund (3-6 months worth of living expenses). but he also suggest paying cash for a vehicle. so we have struggled with this decision, too, because we either pay off a credit card and then might have to take out a bigger loan for a vehicle. i wish i knew what to tell you! i definitely suggest keeping some of the savings for an emergency whatever you decide to do!
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