Pay down CC vs. Save for E-fund

[Deleted]

I'm trying to achieve 2 important money related goals and I'm not sure I'm approaching it in the best way.  Interested in hearing other opinions.  I have a $6300 outstanding balance on my Amex (my only debt other than mortgage).  The interest rate is 10%.  And I want $18k in my e-fund (6 months expenses).  I have an extra $1,200 a month right now and I have been splitting it $700 toward the Amex and $500 toward the e-fund.  Right now I have $7,100 in the e-fund.

The reason I'm not sure this is the best split is that I feel like if I achieve one of the goals quicker rather than both of the goals slower, that it will just ease my mind having only one money problem rather than two.  It does bother me, I hate having debt and I also feel better having a financial cushion being a single mom.

Thoughts?

[Pom]

I would ALWAYS pay off debt at 10% interest first, then resume savings.

[zacksbride]

In this scenario, because you have some efund already, i would put all the extra to the cc (with a high interest rate), it will be paid off in about 6 months, after which point i would put all of that to your efund.

[illgetthere]

Agree with everyone else. Put it all towards the cc. I would also weigh your situation and decide if some of your efund should go on the cc. I, personally, wouldn't keep more than 1 month expenses with cc debt unless there was special circumstances.

[Susie]

Pay off the AmEx, then resume building the e-fund. $7100 is a reasonable cushion for the short term while you pay off the AmEx.

[sporky]

Personally, with over $7K in emergency funds right now, I'd be throwing everything at the CC debt.

[kadams767]

I'd pay the CC with all of the extra. $7,100 in an e-fund isn't anything to sneeze at. Barring something pretty catastrophic, that should cover you in most situations and if something more dire came up, you could still use your CC if you really had to.

[crashgizmo]

Agreed that you should pay off the CC now. You could knock it out pretty quickly with the extra cash you have.

[Deleted]

Oct 24, 2014 11:06:45 GMT -5 milsaroo said:

Is18K the bare minimum for 6 months or for current lifestyle/comfy living?

Could you squeeze anymore extra money out each month to apply to the credit card? I agree with the feeling of relief paying something off so throw everything at that card!

$3k a month would cover my bills if I lost my job but it would be the bare minimum

[ssmjlm]

What are the chances you will lose your job?

Honestly I would probably take the efund, pay off the cc, and then rebuild it. You're paying more in interest fees than your efund is earning in interest I'm betting.

[Deleted]

Oct 24, 2014 11:12:38 GMT -5 ssmjlm said:

What are the chances you will lose your job?

Honestly I would probably take the efund, pay off the cc, and then rebuild it. You're paying more in interest fees than your efund is earning in interest I'm betting.

I think the chances or slim but I feel like you never really know.  I was fired from my last job but I have been at this job 3 years.  Last summer they eliminated my department but I made it through that.  In February they laid off a lot of people but it was related to a big project that was cancelled.  I work on the core business and bring in a lot of money (like $10 million this year).  So I feel like I am pretty valuable.  Based on that how secure would you say my job is?

[msmerymac]

I agree with credit card first. $7k is enough for many emergencies (car repair, some home repairs/insurance deductibles, minor medical expenses, emergency trip to help family).

[ssmjlm]

Then pay off enough to have 1m expenses in your efund. Then put everything to the cc to pay it off and then re-build the efund.

If you do get laid off, cut everything to make the efund last as long as possible.

[illgetthere]

You can pay the card off in 2 months if you use part of you efund leaving 1 month in it.

[mich1]

Since you already have a good amount in your emergency fund, then I concur with the others and divert your money to your AmEx. If the $7100 isn't enough for an emergency, you can always go back to AmEx.

Another thing to consider.....do you have any accrued vacation? If something should ever happen that you lose your job, you should be paid out that amount. So that is a boost to any emergency fund you have.

[bostonmichelle]

I would pay off the Amex and then go back to the efund.

[caligurl]

(De-lurking) I'm no money management mastermind or anything so do what you will with my opinion: I do what you're currently doing when it comes to debt repayment so that's my vote. I personally feel very anxious if I'm not actively contributing to savings and e-fund because I like the peace of mind that comes with knowing I'm still building my reserves. You could always allocate more towards debt and reduce your savings contribution if you're not comfortable with stopping completely. That way you're still addressing both areas but your debt will be repaid a bit faster. Might be a more comfortable compromise.

[badgergrl]

I would use the current Efund to pay off the credit card, then go into massive saving mode to get my Efund back up.

[AAM2012]

Since your job is secure, I would take all savings except for $3k (one month efund) and put towards the CC. If keep paying it off and then go into save mode.

[lolo]

Oct 25, 2014 6:47:09 GMT -5 AAM2012 said:

Since your job is secure, I would take all savings except for $3k (one month efund) and put towards the CC. If keep paying it off and then go into save mode.

Yup, this.