EF vs. Debt Payments - Layoffs Looming

[Lindahfx]

I work with a company that is in the process of being acquired. If the acquisition succeeds, it will take place this fall and the acquiring company has been known to slash jobs with previous acquisitions. We have a lot of debt. I have a fair amount of money coming to me over the next few months but not enough to pay off all debt. I have 2 questions:

• Should I focus on paying off debt in anticipation of improving cash flow both now and if I am laid off or establish an EF? Or both?
• When prioritizing the debt payoff plan, I am doing the snowball method. We are tackling the highest interest cc's first... but when I get to LOCs that are of higher interest and balances vs. a cc that is lower interest and balance, should I still focus on the highest interest first or is it better to tackle all cc's first? I know they are both revolving credit but I have it in my mind that cc debt is worse than LOC (not secured).

Thanks

[disneysteve]

You should be stockpiling cash. Get your EF as big as you can. Now is not the time to worry about extra debt payments. Just pay the minimums and prepare for the possible job loss. Now is also when you should be updating your resume and online profiles (Linked In and such) and starting to search job listings. Don’t wait for the pink slips to go out to start looking because then a bunch of people will be hitting the job market at once. Jump off before the ship sinks.

[crazyliblady]

I work with a company that is in the process of being acquired. If the acquisition succeeds, it will take place this fall and the acquiring company has been known to slash jobs with previous acquisitions. We have a lot of debt. I have a fair amount of money coming to me over the next few months but not enough to pay off all debt. I have 2 questions:

• Should I focus on paying off debt in anticipation of improving cash flow both now and if I am laid off or establish an EF? Or both?
• When prioritizing the debt payoff plan, I am doing the snowball method. We are tackling the highest interest cc's first... but when I get to LOCs that are of higher interest and balances vs. a cc that is lower interest and balance, should I still focus on the highest interest first or is it better to tackle all cc's first? I know they are both revolving credit but I have it in my mind that cc debt is worse than LOC (not secured).

Thanks

I am confused by your first statement. You said you "work with" the company. Are you employed there? If so, I put as much money as possible into emergency savings but also continue paying required payments on debt.

[kork13]

Agreed with the others, when you see storm clouds on the horizon, it's time to start preparing for it. Building up a healthy EF is definitely a reasonable, practical step.

I would still stick with a focus toward highest interest rates, because that's your fastest route to debt free. But for now, let off the gas & focus on security (the EF). Once you're either past the threat of layoff or established in a new job, you can take any excess cash from savings, throw it at those debts, and pickup where you left off.

Often, the threat of layoff is enough to push someone to reevaluate priorities, skills/strengths, and desires ... Leading to finding a better job before the company can even try to lay you off. Start looking, you might be surprised with what you find. I've always believed & proven out that life has a way of working out for your benefit. I know this is & will be a stressful time... Good luck, and I hope things go great for you.

[srblanco7]

Consistent with other responses. Stockpile cash, pay minimums on debt, and polish up the resume and find a new job. The current unemployment rate remains historically low at 3.4% - so it's a pretty good time to actively look for a new landing spot.

If you find new employment quickly, take the cash you've stockpiled and put it towards the debt.

[disneysteve]

As for attacking the debt, avalanche (highest rate) or snowball (smallest balance) both work. Avalanche gets you debt free a bit earlier but snowball is much more psychologically motivating. Without knowing details of your debt, it might not be unreasonable to knock out a couple of small debts now if you can just to give yourself some breathing room mentally if nothing else. Having one or two fewer payments to make each month can make you feel less overwhelmed.

[bjl584]

Build cash. Pay the minimum on the debts for now. Don't take on any new debts. Start looking for a new job.