Pls help me get my head around this. DH and I are trying to snowball our debt. We are paying off from highest interest rate on down. Unfortunately, our snowball is kind of on hold right now (employment issues) as we are currently just BARELY bringing in enough to cover our expenses. We are living pretty bare bones as it is...the only things left to cut at this point are our gasoline and food.
So here is my question. Cash flow is obviously an issue right now, as we are having to dip into savings every month a couple hundred dollars. (dh is actively trying to fix his income problem and I am trying to get some part time work too, but who knows how long this will take to pan out).
Still with me?
Credit card #1 is at 19.99%. There is a balance of $2600. The min. payment is $84/mo.(tied to a percentage of the balance) Credit card #2 is at 9%, with a balance of $1000. This min. payment is a flat rate of $130. We've recently had a small windfall. I already have $1000 in a Baby Emergency Fund (Not a strict DR follower, but I apply some of his stuff to our finances). I have the ability to throw this $1000 windfall (separate from our EF) at one of these credit cards.
So do I throw it at credit card #1 because of the high interest rate - although in the short term the min payment won't go down all that much? Or do I wipe out card #2 bcs that will immediately free up $130/mo?
(We have several other ccs that are only getting min payments at this point btw, so they are not factoring in to this equation)
The harsh reality is that I will probably not be able to throw that $130 at the snowball once it is freed up. It will just be $130 less that we are dipping into savings until our income goes up.
I know that the rule of thumb is "higher interest rate first" (unless you are doing DR). But in this case, card #2 flat rate min payments are eating up a lot of cash ea month and I have the ability to make it GO AWAY. If I put it toward card #2, my monthly payments will only go down about $30/mo...
Or do I just keep the $1000 in savings and keep treading water?
WWYD???
Thanks in advance...
So here is my question. Cash flow is obviously an issue right now, as we are having to dip into savings every month a couple hundred dollars. (dh is actively trying to fix his income problem and I am trying to get some part time work too, but who knows how long this will take to pan out).
Still with me?
Credit card #1 is at 19.99%. There is a balance of $2600. The min. payment is $84/mo.(tied to a percentage of the balance) Credit card #2 is at 9%, with a balance of $1000. This min. payment is a flat rate of $130. We've recently had a small windfall. I already have $1000 in a Baby Emergency Fund (Not a strict DR follower, but I apply some of his stuff to our finances). I have the ability to throw this $1000 windfall (separate from our EF) at one of these credit cards.
So do I throw it at credit card #1 because of the high interest rate - although in the short term the min payment won't go down all that much? Or do I wipe out card #2 bcs that will immediately free up $130/mo?
(We have several other ccs that are only getting min payments at this point btw, so they are not factoring in to this equation)
The harsh reality is that I will probably not be able to throw that $130 at the snowball once it is freed up. It will just be $130 less that we are dipping into savings until our income goes up.
I know that the rule of thumb is "higher interest rate first" (unless you are doing DR). But in this case, card #2 flat rate min payments are eating up a lot of cash ea month and I have the ability to make it GO AWAY. If I put it toward card #2, my monthly payments will only go down about $30/mo...
Or do I just keep the $1000 in savings and keep treading water?
WWYD???
Thanks in advance...
