pay down debt, save, or do both?

[SuzukiRider]

How have others tackled their debts? I have $700-$850 a month to apply toward my debts and savings and currently have $1000 in savings. Should I build my savings up first and then start in on the debt, or save some while applying a power payment toward the debt at the same time?

[JeanneElle]

That's a tough choice, because the longer you wait to pay off debts, the more interest you generate, but on the other hand, it's nice to build up savings. I personally would do both, but apply the bulk of it to debt and a small amount to savings.

[jIM_Ohio]

What kind of debt? How much debt?

[SuzukiRider]

What kind of debt? How much debt?

Two cars $39,000(2.9 & 4.99 fixed), a motorcycle $7180 (currently 9.99, but will be 21.9 this summer), one credit card $5800 (0.0 til April, then 17.9?), and CU loan $2500 (15.75 fixed). Almost $55,000 total, with the powerpay method, it should take about 3 1/2 years to eliminate.

[hasselfree]

good advice Jeanne Elle

[Pitman]

The pay down debt or save question has come up numerous times, my take on this is which ever one is the most priority, thats the one to tackle. What I mean is, if you saving 6 or 7 hundred dollars a month but still have 5K in student loans, I'll stop contributing to my savings and put 100% towards paying off the student loan.

[kilapapipa]

Pay down the high interest debt first, especially those that will increase over time like the motorcycle.

[jIM_Ohio]

I would pay down the debt indicated as the rates, types of debt and the repayment timeframe suggest being debt free is a better financial move than investing in your case.

[MaskedMarvel]

I would pay a couple of debts before saving. Try to pay off that CU loan. Than pay off that credit card and destroy it. I would then tackle the bike.

I think those debts should be cleared because of the high interest on them.

[GREENBACK]

I would at least establish a rainy day fund first. Then go full steam ahead on the debt.

[cptacek]

Two cars $39,000(2.9 & 4.99 fixed), a motorcycle $7180 (currently 9.99, but will be 21.9 this summer), one credit card $5800 (0.0 til April, then 17.9?), and CU loan $2500 (15.75 fixed). Almost $55,000 total, with the powerpay method, it should take about 3 1/2 years to eliminate.

Wow. That's some high interest charges.

Is the $700 - $850 you said extra you can put towards these? How much are your monthly payments on each of these debts?

My first thought was "you have two cars and a motorcycle? Can you sell one of them?"

Second thought is to stop saving and put all extra towards the following in this order:
CU loan ($2500 @ 15.75%)
Motorcycle ($7180 @ 9.99% now, 21.9% later)
Credit card ($5800 @0% now, 17.9% later)
start savings / investments
Cars

Get the CU loan paid off by March, then work on the Motorcycle. Maybe you can get that paid off before it goes to 21.9%? But to actually run the numbers and see which would actually save the most in interest charges, I would have to know what you are paying on each of them right now.

[Bimmer]

Any way to free up a little more money each month (say get your numbers from $700-850 to $850-900)? Perhaps sell a car and get something cheaper (I know, easier said than done)?

While hardly the worst situation I've read about on these forums, those will be some scary interest rates if/when they kick in and things could get out of control before you know it.

I would jump on that CU loan, get it knocked out ASAP, then look where you are at and think about savings.

[terickson82]

How have others tackled their debts? I have $700-$850 a month to apply toward my debts and savings and currently have $1000 in savings. Should I build my savings up first and then start in on the debt, or save some while applying a power payment toward the debt at the same time?

Use that $700-850 a month and tackle that debt. Concentrate on one debt so you can get it out of the way quicker. Then when that's finished, roll that debt payment into the next debt you plan on paying off.

You've got a good $1000 cushion, so keep that the way it is. If you have to dip into it while you're paying debt off (i.e. your transmission breaks down, heater goes out, etc.), then build that fund back up to $1000 before paying off more debt.

You've got a good start, so begin paying your debt!

[maat55]

I would sell one of the cars and the cycle. You may have to use two or three months worth of extra money and buy a beater car.

What is your upside down amount on the three vehicles? I would start by selling highest price car and the motorcycle. You will have to finance the difference, but it will lower your debt a great deal.

Even if you end up with 5k loan, you will be much better off. At the very least the cycle should go.

I know this sounds drastic, but financially it is your best move.IMO.

[SuzukiRider]

Thanks for the great input, I'm glad I found this forum. Just want to let you all know that my wife and I are not in dire straights or anything, just wanting to get this debt gone sooner than we thought possible. After sitting down last night and going over our finances, we've figured out that we have $1100 to put towards the debt and savings. Our plan is to apply a $400 power pay each month to the debt (highest interest first) and $700 into savings (with this months deposit we'll have $1800). Next spring once the savings is at a good amount, we'll then apply the full $1100 towards the debt. At the current power pay amount, the debt will be gone in three years, so once the full $1100 is applied it will only accelerate the time line. We've printed up the chart and put it up on the bedroom wall so we can stay focused and see the progress. Does everyone know of the world wide web dot powerpay dot org? Thanks again for your input.