Where do I even start? Paying off debt..

posted 4 months ago in Finances
Post # 46
Member
1407 posts
Bumble bee
  • Wedding: August 2017

LilliV :  that’s amazing that you were able to put away that amount of cash in your 20s. I wish I had had the same opportunity, but I didn’t finish graduate school until I was 26 (8 years total to a doctorate). I wish that there was a stronger focus on young people to be smarter with money, I definitely would redo a few things if I could go back in time! 

Op – maybe consider listening to the Dave Ramsey podcasts  to get an idea what other people in similar situations are doing? Your scenario is definitely common. 

Post # 47
Member
7447 posts
Busy Beekeeper

anev :  I agree – personal finance education is basically non existent and schools should have a course. I work my butt off to save money but I also got lucky that my mother is a CFO and taught me the importance of saving early. My first salary was so low but she said “live at home for a year if you have to but you are putting in enough to get that match”. She was right in that I didn’t miss what I never saw in my paycheck. I figure out how to make the scraps work and got a second job but I never considered stopping retirement. 

Post # 48
Member
14899 posts
Honey Beekeeper
  • Wedding: June 2011

kmbumbee190618 :  i only skimmed the responses so sorry if this is repeating anything.  First off, the snowball method is not the “best” way imo.  It cuts down on the number of account you owe to and is good if you need a mental boost, but dollar wise, it’s not necessarily the best.  I’m a strictly numbers person… I’d work out different senarios and crunch the numbers to see how to pay the least amount to pay everything off.

What I’d do is first find out exactly when your 0% on your card ends and do everything in my power to pay that off before the interest hits.  I’d even pull out of savings to pay it off if necessary… why have savings while you have credit card debt.  Use the savings to pay it off, and then rebuild the savings.  At worst if you have an emergency and not enough savings to cover, you could put it on the card at that point and you’re not worst off than when you started.

Then if your student loan interset is tax dedcutible, I’d focus on the car loan first since that interest is not.  If both are 4% and the student interest is tax deductible, effectively, the student loan interest is slightly lower than 4%.  If the student loan is not tax deductible, then I’d go for the 9k/5% first I think since that fits the bill for highest rate and where’d you’d start a snowball.

Post # 49
Member
26 posts
Newbee

Take any advice on this board, including my own, for what it is–those of complete strangers who may actually be in worse financial shape than you are and are steering you on the wrong path.

With that caveat: Dave Ramsey’s method may not make the most “mathematical” sense, but debt is not about math. It’s about emotions and psyche and a lot of other things. If debt was only about math, we’d all be driving the cheapest cars we could find that still worked and living in the cheapest houses we could find that had 4 walls and a roof…

I’m a huge proponent of following Dave Ramsey. Granted, at 46 I’m in a different stage of life now, but we have $0 debt, own our home with no mortgage, own 3 cars outright, and our 4 kids–who will all be in college in the fall!–will graduate with no student debt. I think the track record of those who follow DR’s method (and follow it strictly, not just picking and choosing the parts they like) prove it’s successful beyond what the “math” indicates it should be.

Post # 50
Member
877 posts
Busy bee

I know Dave Ramsey snowballing goes by interest rate, but I like the “mental game” of paying off lowest balances first so that you’re making a smaller # of payments each month and finally just end up with that 1 final account you’re paying off.

 

You got this, bee! If you do have 6 months living expenses saved, then I would stop saving and convert all extra $$ to paying down debt.

Post # 50
Member
1034 posts
Bumble bee
  • Wedding: March 2015

I just want to reiterate what pinkshoes said: there’s no reason *not* to take money out of your emergency fund to pay off your credit card. In the worst-case scenario, if an emergency comes up and you need that money, you’ll put it back on the credit card—i.e., you’ll be exactly where you are now. And in the meantime, it gives you peace of mind for when that 0% interest rate suddenly ends.

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