What should I do with $$$?

iVillage Member
Registered: 01-01-2008
What should I do with $$$?
2
Sun, 08-15-2010 - 2:01pm

DH gets money for school - some grants, some loans. He's getting back $5245 after his tuition/fees are paid - plus he will get another $2250 in several weeks (after the Army processes his tuition assistance application). So total we're looking at $7495, of which $668 has to go pay off the credit card (we just put some minor home/vehicle repairs on it b'cuz we knew we could pay it off before interest was charged). That leaves us with $6,827. So - tell me - what should I do with it?

-I have a student loan with a balance of $6,341.75 remaining (monthly payments are $87.97. Interest rate is 6.8%; of course, the interest is tax deductible.

-We owe $16,845.38 on the car we just bought with an interest rate of 6.69% APR and $336.56 monthly payments.

-We have $2,236 (1.5 months worth of bills - not including grocery/gas/household needs) in our emergency fund, which is a savings account that earns 1.1% interest.

-We have a vacation account and a Christmas account but neither of them need additional money.

-We have no other bills/savings.

Part of me wants to pay off the student loan to free up the monthly payment amount. However, it would also be nice to pay a huge chunk on the car and not have to be paying on it so long. With the interest saved by making such a huge payment, it would cut out like 2 years of payments on the car. Of course, it would also be nice to put at least some of it into the emergency fund, but I hate to pay almost 7% interest and earn just 1%.

Okay, I'm done blah-blah-blah'ing and am open to suggestions now. Thanks in advance!


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Avatar for jennebryan
iVillage Member
Registered: 11-25-2003
Sun, 08-15-2010 - 4:02pm

If it were me, I'd pay off the student loan and then put the remainder in your emergency fund.


--Jenn

iVillage Member
Registered: 07-26-1997
Sun, 08-15-2010 - 6:47pm
I would probably do like you thought. Pay off the school loan. What is left after that. Put it in savings. Sure the interest on the school loan is tax deductible. But initially your paying that interest. Not sure how much of that interest you get back on your taxes. I'd rather not have that payment every month to a loan. If it's money you can spare. I would take the monthly payment and put it in savings for the future. You never know when an emergency might come up. You need some extra money. You'll know you have something you can dip into if need be. If no immediate emergency comes up. Well then that savings will keep building. You'll be surprised how fast you'll have a nice little savings going. And it will make interest also. I would put that money in a separate savings. Separate from the checking and regular savings. Then you won't get the money mixed up with bill paying money and spend it.