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Pay down debt quicker or sock the money away?  

post #1 of 11
7/19/08 at 5:51pm
Thread Starter 
I don't know what to do right now. I feel sick. Sick to my stomach sick. I don't like dealing with major financial things and dh seems to avoid reality a lot.

Is it better to take money and pay more off on loans or to sock the money away? With talk of bank troubles and all, how safe is it really to just sock it away unless it's in your closet when you have debt?

Dh needs a new work truck and it's worth HALF of what we owe on it now. I am in a panic and don't know where to start with things now.
post #2 of 11
7/19/08 at 5:53pm
I like Dave Ramsey's suggestion of starting an emergency fund of $1,000 then working on eliminating debt. After you've eliminated your debt you can build a bigger EF. That is what we've been doing.
post #3 of 11
7/19/08 at 5:57pm
Thread Starter 
Am I right in thinking that it's harder to save money up when you are getting nickel and dimed to death on all kinds of other debts?

Dh thinks it's better have a large cash reserve than to pay loans off quicker. I see his point in having that in case he's out of work, but isn't it a horse a piece if you owe a lot or don't have a lot when you have no income?
post #4 of 11
7/19/08 at 9:02pm
We are big Dave Ramsey fans, but $1K just wasn't enough of an emergency fund for us. So we put away $2K for emergencies (job loss, unexpected bills, etc.) and are concentrating on paying off debt. There have been times that we've had to dip into that fund, and replenishing it is our number one goal until it gets put back there. I do agree with you that it's more important to eliminate debt, especially in the current economy, but it is also important to have emergency money. If I were you, I'd come up with an amount that you feel comfortable having in savings (it could be up to $5K), and then save until you get that amount. As soon as you get that amount, start snowballing your debt and paying it off as quickly as you can.
post #5 of 11
7/19/08 at 9:41pm
It really depends on what "sock it away" means. There are prudent and imprudent ways to sock away money.
post #6 of 11
7/19/08 at 9:57pm
Thread Starter 
Quote:
Originally Posted by velochic View Post
It really depends on what "sock it away" means. There are prudent and imprudent ways to sock away money.
Which is which?

I have to say, investment numbers aren't exactly enticing me to put more money in when I want to make sure we aren't totally screwed if things keep getting worse.
post #7 of 11
7/19/08 at 10:15pm
Well, I guess I would have to ask what type of loans. Typically from what I've seen, student loans tend to have the lowest interest and can be defered in times of financial hardship. If this is one of your loans, I would pay minimum on these and put any extra towards credit cards.

I am not a Dave Ramsey follower -- I always say pay off loans if they have a higher interest rate then what you would earn in a bank.

As far as bank troubles, the banks are federally insured up to $100k--so if you have that kind of money, lucky you. I'd suggest talking to a financial advisor to offer the best course of action.

As far as the truck, there is good news and bad news. You owing more then what the car is worth is typically refered to as being "upside down." Unfortunately, that is common these days. People tend to roll over their "negative equity" into their next vehicle. Here is the good news...if you need a truck, now is a darn good time to buy one. There are so many incentives on trucks out there its not funny. Ford has employee pricing, 0% interest, rebates, "loyalty cash" (meaning if your DH truck or you have a Ford vehicle you can extra cash on the deal -- you don't even need to use it as a trade in) plus gosh knows what else. That is just what Ford is doing. I suppose if he realllllllly needs one, then you might as well as get your current loan paid off (assuming you pay interest on it) roll in you "negative equity" and get a 0% loan -- that is as long as you can afford the payments.

Hope that helps.
post #8 of 11
7/20/08 at 4:11pm
I would say it depends on your debt and how long it will take you to pay it of. I am paynig off my debt first but all I have is a few hundred on a credit card. we are talking maybe 2 months. if you are looking at a long term pay down I would start saving. at least a small amount of savings. then pay off debt. then focus more on savings.
post #9 of 11
7/20/08 at 9:22pm
Thread Starter 
Well, we have a bit more than just a couple thousand in savings, but the problem is that we owe much more than what we can cover from savings. This week I am going to just take some money and pay of the smaller debts and then I am going to increase the monthly payments on the large loans. I guess we'll see where that takes us for now. Does that sound like a good idea?
post #10 of 11
7/20/08 at 9:38pm
Quote:
Originally Posted by tayndrewsmama View Post
Well, we have a bit more than just a couple thousand in savings, but the problem is that we owe much more than what we can cover from savings. This week I am going to just take some money and pay of the smaller debts and then I am going to increase the monthly payments on the large loans. I guess we'll see where that takes us for now. Does that sound like a good idea?
Sounds good to me. Start with the highest interest rates and work you way down.
post #11 of 11
7/20/08 at 9:49pm
Thread Starter 
Quote:
Originally Posted by Logan's Mom View Post
Sounds good to me. Start with the highest interest rates and work you way down.
Oh good idea! It makes perfect sense, but I didn't think about that. Thanks!
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