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I have a question for everybody
| 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

Danni
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All my best,
Danni
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
I agree with the previous posters. Payoff the c/c with the EF and then pay back the EF.
Good luck.
MYM
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! :)
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