pay down debt, save, or do both?

[maat55]

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.

The economy has most people leaning more towards a good EF than paying off debt. Earlier this year, before paying off my last debt, I built my EF to 3 months.

I've since become debtfree and built my EF to 6 months. BTW, I sold my Suzuki Intruder to finish my EF.

[Snowgirl]

While I understand the appeal of having money sitting in th bank in case of emergency, I just can't see why you'd do that when you pay 15, 18, & 22% interest. That's a lot. Personally, I'd focus on the high interest debts: CU first, then motorcycle, and finally credit card. After that, you could build up savings before starting on the cars, since those are very low interests. Remember, after the first debt is cleared, that's one payment you won't have to do, so you would have even more room in your budget, hence breathing room if "something" happened.

[jcd]

That's a good point @Snowgirl. I suppose part of the reason to do both is motivation, or at least lack of de-motivation when an unexpected cost arises.

[noppenbd]

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.

Also check out Snowball debt calculator - Become debt free at WhatsTheCost.com, they have a free snowball calculator (highest interest first or lowest balance first).

[My English Castle]

I agree with everyone else--if you must--and it helps you sleep--put $50-100 in savings and the rest to debt. And I think anything at 21.9% is a HIGH priority and I'd do something about that asap. Plus with that kind of debt, I'd cut back drastically and try to get 'er done faster--but debt makes me very uncomfortable.

[snafu]

Did you know... The value of your vehicles should not exceed more than 1/2 your annual income. If your Vehicle payments exceed 12% of net income; 15% including insurance, you have too much tied up in things that are going down in value.

[Alex_Adviser]

Its better that you pay off the debts first and get debt free and then look forward to savings. As the more longer you take time to pay of the debt the higher the interest amount will accumulate to it. And then to you already have $1000 in your savings for emergency.

All the best..............

[Almond73]

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.

I like your plan. It's all about balance. I could pay my debt down a lot quicker if I wasn't saving, but I feel safer building my EF and just having a cushion for unexpected expenses. As a matter of fact, I recently had one of those when I had to get the timing belt on my car replaced. It helps me sleep better at night.

[carlsguide]

I say make the highest interest rate your priority. For example if you can earn 10% by saving and you debt interest rate is 5% then you should save and earn the 10%. But if you can earn 5% by saving and your debt interest rate is 10% then you should pay down the debt. And if you are going to pay down the debt then you should start with the highest debt interest rate first.

[DebbieL]

Personally, if I were you I would probably do more like the opposite of your plan ($400 to savings and $700 to debt). Some of your interest rates are pretty high. I'd rather be eliminating those as quickly as possible. Good luck to you on the debt reduction.

PS - It does sound like you guys have too much car debt. I would probably want to do as others suggested and sell at least one vehicle. You can get a pretty decent used vehicle for a lot less money than you are paying.

[autowoman]

Debt stresses me out so I like to pay it off first. I'm not so good at savings so I keep getting back into debt. Can't win.