Strategy

Avatar for zaboz
iVillage Member
Registered: 03-26-2003
Strategy
5
Tue, 08-17-2004 - 8:45am
So, I'm wondering how to get back into

debt repayment mode. We have a little bit

of savings right now (about $700). And, like

I mentioned below, we have an open Home Equity

line of credit ($0 balance, but it can be accessed

like a savings account at any time). I've been

saving about $200 a month (but usually take some

out here and there).

Should I use our savings and put that toward our

student loan (right now at $4200)? I really want the student

loan paid off by the end of the year and it's going

to take a serious effort for us to get there. Should

I stop the $200 saving and put it toward the student loan?

I guess my theory is that, in case of a true emergency,

we could use money from our Home Equity line of credit.

Even if it was maxed out, we would be able to make

the payments so there's no real threat of losing

our house or anything like that.

It would feel weird not to have any savings at all,

but it would also feel good to see that student loan

start to drop. What do you think?

iVillage Member
Registered: 04-28-2003
In reply to: zaboz
Tue, 08-17-2004 - 8:56am
The way I see it, your student loan, in order to pay it off by the end of the year, would take about $1,050 each month, or about $250 each week. If I remember right from your first post, you are getting close to that on Discover payments each month. Really focus on NOT spending that money and there is almost your entire loan payment. Then, in Jan. treat yourself once you pay the loan off. Maybe cut back on the savings to $100/month and put the other $100 to the student loan. Is there anywhere that you can cut back the $250 from your weekly budget? I know once we get used to a certain lifestyle, it's hard to give it up but look at it as a temporary thing to get rid of the student loans.

I personally wouldn't take the money out of the savings. I know you probably aren't getting a huge amount of interest but for me there's something comforting about having the money in the savings that isn't attached to any sort of credit.

I don't know if any of this helps or not but I hope it does.

med12

Avatar for zaboz
iVillage Member
Registered: 03-26-2003
In reply to: zaboz
Tue, 08-17-2004 - 9:38am
Yeah, it does help, thanks!

When we were working hard on our debt repayment,

we had about $1000 a month to put towards it.

This was when we stuck to a fairly tight budget.

So I know the money is "there",

we just have to buckle down to find it again.

I think that's why it will be a good goal for

me to pay off the student loan. It will make

me focus again, otherwise we won't get there.

I'm still tempted to put EVERYTHING toward the

student loan just to see some change, but I

also hate to be without savings. I don't want

to think of our home equity as "savings" because

it's just another loan. But it IS something to

fall back on just in case. Hhmmmm.

iVillage Member
Registered: 03-27-2003
In reply to: zaboz
Tue, 08-17-2004 - 11:18am
Personally, I would keep the savings. You never know when you are going to need it for a true emergency. Definately resist the temptation to use the line of credit as savings. I don't know if I can explain this right, but I have found there is a different thought process between buying things with cash and buying with credit. Its easier to buy things you don't need or can't afford when using credit -- or at least it is for me.

Last week a poster said she was fustrated at how much she had left to accomplish . . . and then she looked back at all she had already done. I was certainly fustrated because I had hoped to start snowflaking to our car, but a sick cat and some school needs thwarted that plan. Then (because of the post) I counted up all the things I had done including paying off all credit cards, paid cash for vacation, started freedom account, started 529 plan and kept contributing to savings.

I know how much those home improvement projects can beckon. I desperately want to finish off the basement. SO I started listing all the junk we were storing in the basement on ebay. This will be the start of the basement fund.

I agree with the poster who said to try replacing a few at a time. Measure your windows and check out the prices at home depot. If you don't feel confident in yours or your DH's abilities, see if there is a local handyman that could do it for a reasonable price.

Good luck!

Sandra
iVillage Member
Registered: 07-06-2003
In reply to: zaboz
Tue, 08-17-2004 - 11:49am
I know how frustrating the "last" target debt can become.

But I wouldn't use the savings to pay it down. Even though it's $700, it's yours and in cash. When I was paying debt, all there was between us and potential disaster was less than $1K but it really helped me to get the debt out the way before something could happen.

As for the line of credit, I still view it as a source of potential debt to use in dire circumstances as their interest rates tend to be lower than the standard credit card rates (not including the 0% - 5% teaser offers).

I know you can find where the "extra" money has gone in your budget, and if you really want to pay down the loans by December you'll find the resources to get it done without dipping into your savings unless its truly needed.

Since we became debt-free we too have managed to lose track somewhat of the $1k and more we had been putting towards debt; I know I spent a lot of money for my dragonboat events/equipment. Starting in September we have made the commitment to really build up our retirement accounts up with this money.

Best of luck to you!

Kassandra

Kassandra

"It is said that life has its peaks and valleys.  The challenge is to accept them equally and experience them

iVillage Member
Registered: 03-28-2003
In reply to: zaboz
Tue, 08-17-2004 - 12:04pm
Welcome back to the board. I also took a break and am just getting back on board.

I follow the Dave Ramsey babysteps.

1. $1000 emergency fund

2. Debt snowball

3. 3-6 month emergency fund

4. 15% retirement savings

5. college savings (if you have children)

6. Payoff mortgage

7. Build wealth

Since you have the $700 in savings leave it and add the $300 to have your emergency fund in place and only use it for dire emergencies. Then start your debt snowball. Since you only have the student loan you can really focus all your energies on this last debt.

You mentioned staying in debt because it might be comfortable. If you decide to follow the babysteps you have goals to focus on and you won't be an tempted to go back into debt.

Also, instead of depriving yourself and then splurging try setting up freedom accounts for the things you want and need. I have gift, clothes, home repairs, vacation accounts. I've been able to give nice graduation, birthday, and bridal shower gifts with no debt. We took a short trip last week for my DS's girlfriend's college graduation with no debt. I'm going clothes shopping with no debt. Maybe for your windows you could get a free estimate and then decide how many months you could spread out the savings. If you could get by this winter and aim for next August to get the job done then divide the total by 12 and make payments to yourself and earn interest instead of paying interest to the bank.

Nice to have you back.

Julie