Use EF or LOC?

[kittynurse]

Hi everyone! I need help making a decision about transferring money.

We are in the very very early stages of reducing debt and getting back on track financially. Our line of credit is the big debt that we have but we are slowly paying it off. I just paid off a big credit card bill which means that I basically don't have any money in the account until payday next Friday. The only bill I have coming due before then is the mortgage.

In order to have enough money in the bank to make my mortgage payment, do I:

a) Transfer money from the line of credit (which makes us backtrack a bit and will cause us to incur interest fees).

b) Use our emergency fund (I have approx. $800 in it and would need $500 for the payment)

c) Let the account go into overdraft and pay the associated fees.

What would you do?

Martha

[JamieCatheryn]

Use the emergency fund, refill it asap later on.

[karkli]

Definitely use the EF. Then, on Friday, pay yourself back FIRST.

Don't use the LOC! Not only would it be symbolically setting yourself back but it would also mean that a) you will likely spend the next few years paying off this one single budget discrepancy - with interest, and b) you'd pretty much negate the fantastic accomplishment of having paid off a credit card earlier this month.

It sounds like you need to work on the budget. Paying off a credit card is fantastic but if it leaves you strapped for another important bill, it could actually do more harm than good. You budget needs to account for your fixed monthly expenses before it allows additional debt repayment. That way, you can feel 100% awesome about having paid off a credit card bill without having to worry about how you're going to pay the next bill that comes in.

[MCsMom]

choice B