I have a question for everybody

iVillage Member
Registered: 07-01-2004
I have a question for everybody
7
Sun, 07-03-2005 - 11:21pm
I dont post very often but I try to read the posts as much as I can. I have a question for everybody. We built up a large ef after we sold our old house and paid off all our business debt. My dh wants it at 10k because he is self-employed and I am a sahm. We just recently bought a couch, love seat and chair for 1500.00. We took the money from the ef. My dh also just ran up 2k on cc for his new business. The debate we are having is should we pay off the cc debt first or replenish the ef? I want to pay the cc and dh wants to pay the ef. What do you think? Leanne
Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Mon, 07-04-2005 - 1:33am
If it were me, I would pay off the cc with the ef, and then put all effort into rebuilding the ef.

All my best,
Danni

iVillage Member
Registered: 08-19-2003
Mon, 07-04-2005 - 10:40am

I have to agree with Danni on this one, but with a twist..

Pay off the credit card with the Emergency Fund, and then work to pay off the total amount you borrowed from the Emergency Fund but decide on an "interest" amount and pay that back to your Emergency Fund.

Shannon

Shannon


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Avatar for mymartes
iVillage Member
Registered: 03-26-2003
Mon, 07-04-2005 - 12:15pm

I agree with the previous posters. Payoff the c/c with the EF and then pay back the EF.

Good luck.

MYM

iVillage Member
Registered: 07-26-2004
Mon, 07-04-2005 - 3:04pm

I would think about the interest part of it.

Unless your EF is at ING (which is still at only 3%), you are getting a very small interest percentage on your savings. (This is different if you have it invested - like in a mutual fund or something - but consider what you're getting on it)

If you're paying *any* interest at all on your loans, you are losing money big time by paying the EF before paying off the loans. I would use the EF to a comfortable level to get the loans paid off (don't get yourself down to what makes you uncomfortable - you need to feel safe), then pay it back with the extra (that you would have been sending to the loans) until it's where you want it to be. Otherwise, you're paying loans at 15-20% (or more) in exchange for an EF that pays you less than 1% (if not at ING). Ouch!

The loss of interest just isn't worth it, unless there's a real chance that you or dh wouldn't be bringing in any income sometime soon.

But that's just what we would do. If we had $10,000 in an EF, we wouldn't have our debt problem! :)

iVillage Member
Registered: 02-06-2005
Mon, 07-04-2005 - 9:05pm
Respectfully disagreeing with the previous posters here and saying that I think you should replenish the emergency fund first and then tackle the credit cards.
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iVillage Member
Registered: 07-01-2004
Mon, 07-04-2005 - 9:32pm
Thanks for all the replies it really helps a lot. My dh really wants to get the ef back up to 10k so we will do that then tackle the 2k of cc. It really scares me to have cc debt again because only a year ago we had 100k of business debt. We sold our old house and paid it all off and bought a cheaper, better house in a place we love. I do not want to get into cc debt again ever. It makes me really nervous. Leanne
iVillage Member
Registered: 08-19-2003
Tue, 07-05-2005 - 9:58am

She has a $10000 emergency fund, if she repays her loans of $3500 using the ef she will still have a $6500 emergency fund. If she would use up all of her ef to reapy the loans we would not have said to use the emergency fund!

So you can disagree, but really it makes better financial sense to take less then half of her emergency fund , pay the debts, and then work hard to repay the ef with interest!

Shannon

Shannon


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