Post # 1
FH and I in no means are expecting gifts of money at our wedding, but know we have generous families and will be getting at least something. We are not sure if we should save anything we may recieve, or pay off any debts. We have about $900 in CC debt, $13,000 in combined student loans, about $4,000 left on my car payment and then obviously our regular bills (rent, groceries, gas, utilities, etc) We really do not have a savings account (the wedding depleted that). Any advice?
Post # 3
It depends on the interest rates of those.
CC’s should always be paid off unless its 0% interest, and then it should be paid off when that period of time is over.
Your car loan is probably a good thing to pay off
Student loans can very. If its really low, then probably not. Technically if you invest that money that would pay off the debt, you can earn more than then the interest you pay on the loan. Also, depending on your income level, you get to deduct the interest paid on student loans from your taxes.
Post # 5
Dave Ramsey says you should always get atleast 1k in savings first… that way IF something happens while you’re working on your debt, you aren’t dipping into your spending/bill/debt money… or trying to use a CC to take care of it.
So I would save first and take whatever is left over to first pay of CC debt and then the car, and then student loans.
Post # 6
I’d say put some money aside in savings for emergencies. Then pay regular bills and CC debt first. Is your car payment monthly and $4000 is what you still owe? I guess it depends if the interest rate on that is higher, or if it’s higher on your student loans- pay off the higher interest rate first.
Post # 7
@lefeymw: The interest rate of the CC is 8%, the student loans are very low but not exactly sure on that off the top of my head, BUT If I pay $100 per month on my student loans, about $30 of that goes to interest and $70 goes off the principle. That’s not very good, in my opinion.
Post # 8
If I were you I’d use some of the money to set up a “cushion” so you have a bit of money for unforseen circumstances.
Then I’d use the rest to begin to pay off your debts. Like @lefeymw said, I’d start with the debts with the highest interest rates. I’d start with either CC or car.
Post # 10
@galloway111: Correct, I pay about $340 monthly on my car and my remaining balance is around $4,000….
Post # 11
I know it’s not the best thing to do, but FI and I are in a similar situation. Unfortunately, most of the debt is mine. I still owe about $13K on my car, and a few thousand in Credit Cards/Furniture.
Any money we get, we will save half, and put the other half towards my C.C. Debt. My car will be paid off in 3 years so we will probably just keep that payment for now, and pay more on it when we can.
I can’t wait to be debt free! It was easy to get into though, as I run my own business which can really put a drain on my finances sometimes.
We also put so much a week into savings, plus any extra we have at the end of the month.
Post # 12
Put the money into savings. Right now you don’t have any emergency savings, and you should try to build up your savings to have at least enough money to cover 6 months of expenses just in case, although that isn’t easy. Even having $1,000 in the savings in case of an emergency is better than nothing. Start working towards that first. Once you have at least $1,000 in your emergency fund, THEN you can start paying extra on your debt.
Post # 13
I agree, it depends on the interest rates.
For sure you should pay off the CC debt if you can. It’s almost never worth carrying a balance on your CCs.
Depending on what kind of car/student loans you have, I would say leave them and pay them as normal. As long as the interest rates are reasonable, you already have the financing for them. It sounds like you need to put away some cash for a rainy day. It’s not worth paying everything off now just to have no savings and then need it for something.
Depending on how much you get as gifts though, you should go and get some investment advice. Savings accounts now are getting next to nothing and it’s unlikely that you’ll match the interest rates you are paying out on your loans. In fact, it’s pretty hard to even keep up with inflation right now. So if you have a LOT of gift money left over, it may be worth paying off some of your loans just because it’s almost a better investment than anything you could put the money in.
Post # 14
@Bao: Definitely pay off the CC and car loan first. Student loans can be last because the interest is a tax adjustment that will lower your taxable income. If you really want to save, I suggest save a portion to be your “rainy day/emergency” fund.
Post # 15
I say do both at the same time. Pay what you can on your debts while putting some in savings. Little bits add up quickly.
Post # 16
Assuming the student loans are federal, not private, then I wouldn’t put it towards that– credit card companies don’t care about your life situation at all, but the terms of federal student loans have a lot more options. Previous posters have said this, but I agree: save some as cushion, it’ll save you money in the long run to not have to dip further into debt for emergencies, then credit card, then car balance. It’s awesome that you’re thinking about this ahead of time! Makes me wish I had a plan for what to do with any “extra” money, wedding or otherwise. Hmm.