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Which one?

May 12th, 2014 at 10:08 am

I don't like how debt feels; it chokes me. After giving it some thought I decided that I will no longer hoard our money for savings. I feel that $50K is an adequate emergency fund and any excess beyond that amount will go into paying debt. I am torn about my game plan. At first, I was thinking that I should pay off the furniture at 0% interest which has a balance of $2,900.00. This will free up $106 a month from our budget. Then I thought about it and realized that I have a car loan at 2.99% and I'm paying $75 every month on interest. Maybe I should apply the money towards that debt instead of the furniture. I figured that I want to eliminate debt in $5K increments. I also decided that we are going to use the envelope system for bills. We are spending too much on credit cards and I'm not properly keeping track of our income and I don't like it. My hubby is very low maintenance guy, all he cares about is having a little money to buy beer. No hobbies and very low spender. What do you think? Concentrate should I pay off the furniture or apply the money towards the car?

7 Responses to “Which one?”

  1. Petunia 100 Says:

    While the furniture debt isn't costing you any interest, if it is costing you emotional stress, just pay it off. Today.

    Draw your savings down to 50k, pay off the furniture and send the rest to the car loan.

  2. MonkeyMama Says:

    I'd pay off the furniture loan today, also. My answer might be different if you were actually earning a decent interest rate on savings. But with these piddly interest rates, why even bother with the hassle?

    If you need some numbers to sway you... $2900 x 2.99% interest = $87 per year interest. So if you pay off the 0% loan first, that is how much interest you will be paying on car, by not throwing $2900 at the car. About $7 per month. But, you will also have an extra $106/month to throw at the car loan. At the end of the day, it doesn't make much difference either way, financially and interest-wise. We are just talking a few bucks difference. BUT, paying off the 0% loan eliminates a potential minefield and simplifies your life.

  3. Beawealthywarrior Says:

    I follow Dave Ramsey program so I would list all debts starting with lowest balance(never mind interest rate) and pay off the lowest balance first. He encourages this method because it gives a quick feeling of victory. Then I would apply the $106 from the furniture to your next debt.

  4. creditcardfree Says:

    Oh, I really could go either way. I see the point everyone else has made. My initial thought was through it at the car loan, since you WILL save interest that way. You didn't say the balance of the car loan, so I might have a different answer depending on the amount.

    Another thought pay off the furniture today, add the current furniture payment to your current car payment plus any extra...and you will be debt free with that car SOON!

  5. NJDebbie Says:

    Decision made: Sending a check for the remaining balance for the furniture when I get the next bill. I will apply the the extra $106 we will have available to the car payment. Every time I reach savings of $5K above the $50K (emergency fund)I will write the a check to the car loan.

  6. snafu Says:

    You've done such an amazing job of minding your money so I am bewildered by your comment about not paying sufficient attention to income and spending on CC. I don't wish to be noisy but what/how are CCs a concern? Most of us operate our cards primarily for the various benefits that meet our particular circumstances. One of our CCs give a 3% discount for gas and my closest station discounts gas on Thursday & Sunday [@ $ 5. gal] getting a 5% discount adds up over the year, for example. Is there a category you believe would operate more efficiently using cash rather than CC?

    If you track categories like food, clothes, household supplies, transportation, gifts and more is it easier with a CC statement than minding small sized receipts?
    ...just asking

  7. creditcardfree Says:

    Good plan! Is there are reason for the $5K mark before writing a check? Why not a smaller amount? Maybe $250 or $500. I suppose if the loan has restrictions or it is simply for simplicity on your end I can understand. I just send extra small amounts to our mortgage ALL the time, so thus the question.

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