Advice Needed - E-Fund vs. Debt

iVillage Member
Registered: 07-06-2003
Advice Needed - E-Fund vs. Debt
3
Mon, 03-20-2006 - 5:02pm

Hi everyone,

Well here is the scenario:

I currently have amassed an E-Fund of $2500.00 that I've built up since January 2006.
But I also have over $11,250.00 of cc/line of credit debt (took STBX share of debt in order to gain 100% ownership of condo without paying him any portion of equity...great deal in in the long run is my opinion!).

I have a couple of questions and I would welcome your opinion on what would you do given my circumstances:

I am now a single homeowner of a 9 yr old condo, that is very up to date and does not need any major work for at least a couple of years...sure I'd love to redo the flooring in a chocolate brown wood...but it's in pretty good condition and it can wait. At least if the boiler blew or there was a fire I would have the money to replace it or pay the deductibles.
I have a stable job that I enjoy and although there are no guarantees as many of us can attest to, in my field of work I can get a job quite easily even if I were laid off.
I also own a 8 yr old car with 116km on it, fully paid, still in good condition but as Murphy's Law will dictate anything can happen....

My question is, should I stop the E-fund where it is now in order to focus any other income/extra money received towards snowflaking to the cc's?
Should I instead consider bringing down the E-Fund to say $1K in order to pay the remaining $1500 on a debt or is the current $2500 a safer amount given my situation?
Based on my current salary (I got a good pay raise), I can pay off the entire $11K by Oct 2007 without any additional snowflakes...but it would be really nice to pay it off even sooner...shooting for Dec 2006 is really pushing it but that would be my dream goal!

What do you all think?

Thanks for reading,
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: 09-20-2004
Mon, 03-20-2006 - 5:43pm
Kassandra,
Being that you are a homeowner, and have an older car, I would keep the efund right where it is. I wouldn't necessarily feel the need to contribute further, but I wouldn't want to empty it to pay down debt, either. If your payoff date were less than six months from now, then I would be willing to risk a lower efund, but since you are looking at a year, I would just hold tight. But then, that is just what my comfort level is. i have had some pretty expensive situations just come up (out of the the clear blue sky)
Anyhow, tha's just my take on it...good luck finding what feels right for you : )
Heather
iVillage Member
Registered: 01-25-2006
Mon, 03-20-2006 - 6:01pm

Kassandra,
I am in a similar situation. The last time I bought a house, I took some of the equity to restore my eFund but left credit cards unpaid. I'm now uncertain of that decision but I still have the 4k in savings. I decided that I wouldn't worry too much about continuing to build it and focus on debt right now but my cc debt is at 1%. If it was at a much higher rate, I'm fairly certain I would make a different decision. There was recently a post on one of the PF blogs that illustrated why it was better to pay off debt than build an eFund first but he didn't really talk about 'what if you already have the eFund?'. My vote (especially given the age of your car) would be leave it as it is and start focusing on the debt unless that debt is at a substantially higher interest rate. Also, make sure you have that eFund in something that has a decent return (the other mistake I was making). If you need a referral to ING, I'd be thrilled to offer it. :)

Peg

iVillage Member
Registered: 11-13-2004
Mon, 03-20-2006 - 6:38pm
I agree with the other posters. Leave the E fund where it is at and focus any extra money on debt reduction. you can always access the equity in your home if the E fund isn't enough in a TRUE emergency, but I wouldn't do that unless it was ABSOLUTELY necessary. You are doing far better than alot of people who are divorcing, so kudos to you for that! Good luck with your new life!