SURVEY PLEASE: Build savings or payoff debt in 2020?
Hi, I'm usually on a new fast, however, in light of today's global crises ......
QUESTION: would you SAVE all that you can in 2020, -OR- would you pay off your last debt of $9,000.00 and then save money?
I'm curious to what others are thinking/doing during these present world issues. I'd like to pay off last $9K in four months to be 100% debt free; however, I wonder if it is more pressing at this present time to sock in more savings.
Thanks you so much for your time and input to my dilemma.
Hi Ellen !
Is there an amount you can think of that would make you feel comfortable with your savings? I know you mentioned having a $1k emergency fund, if that was $5k would your mind be at ease? If so, could you save up that $5k, then pay off your debt, then go back to savings?
I didn't have a lot of consumer debt (just student loans and mortgage), so I chose to put savings aside first. Now that I have a comfortable (to me) cushion to fall back on, I'm tackling my student loans in full force.
Totally agree with having cash on hand as described already. If you're serious about be ready for almost anything, then I'd suggest you read https://www.amazon.com/S-L-T-Plan-Economic-Proportions-ebook/dp/B0077A2AL8 If it sounds interesting to you, I can give you a short summary. Some steps are easy, others are not and require international travel to complete.
From my perspective, the type of debt matters in this case (since you already have $1,000 in savings for emergencies).
If it's debt that has no upside (i.e. interest paid can't be used to reduce your income tax liability), then it's probably better to pay off the debt before putting more toward savings.
On the other hand, if it's debt that does have an upside, then concentrate on building up your savings, putting your mind more at ease.
Ultimately, there isn't any ONE right answer to this question. It's a personal preference situation, and what you ought to do can really only be answered correctly by you. What is going to make you feel most secure, and able to sleep at night?
This question for me depends on how much the debt is costing. There are plenty of places you can figure out the cost of debt (like undebt.it). If that 9K is costing you a LOT every month, then it's not worth putting it on hold to save up funds. It would be far better to get it paid down and then start saving up money. In the greater scheme of things being able to pay it off in 4 months is FAST. Way faster than most people can manage to pay off debt, frankly.
However, if it isn't costing you anything, then I wouldn't stress about it that much, and focus on saving up money. My BF currently has about $5000 in debt which we keep chipping away at and rolling over to a different zero interest balance transfer every time the promo period ends. It cost him less than $200 to move it over to a new promo this month, and he'll have zero interest for the next year again, so we'll simply pay the minimum payment and let it sit there so we can focus our efforts on much more pressing matters.
Like I said - paying off 9k in 4 months is really fast. If you think that in 4 months there's going to be something that you would really absolutely need the money for (and wouldn't want to take out loans), then yes, focus on saving while working on the debt. But if you can make it just 4 months, then ditch the debt and then start focusing on the savings.
Hi, thank you for taking the time to reply and share with me your insights. All great information. Yes, I agree that it is a personal decision ... but I've been frozen in a way ... not wanting to decide (take action) as I feared making the wrong choice for us this volatile year, and I was still on the fence. However, after pondering your suggestions ... I believe now I will jump off the fence and split the difference; half in savings and half on my 4% int bank loan (which means I'll still be debt free in 8 months instead of four). I believe I can live with that. Thank you for helping me to decide. 😐
I was doing the Dave Ramsey baby steps last year, but this year I decided to do my own plan and now I'm saving and paying off debt at the same time. It will take me longer to get out of debt, but I will not have to then wait to build up my emergency fund, I will just be making it a bit beefier. I'm also maxing out my Roth IRA this year after not putting anything in it for a year. Feels good to be paying off debt and also saving, but it's entirely up to you which you do. I'm paying slightly more interest on my debt to save while paying off debt, but I decided it was worth it to build up my emergency fund at the same time so I am less and less likely to need to go back into debt the closer I get to being out of debt.
I personally don’t think there’s a wrong choice. Additionally the worst choice is to do nothing.
Both options have risks. What is key is thinking about how you would manage the risks of both options, weighing those decisions in with the options and then committing to the plan you decide to run with.
I don't get it. What global issues? All I see is a booming bull market and trade deals left and right brightening my every morning 🤑 🤑 🤑.
Can I just mention how incredibly stupid I feel right now? Like, really, really stupid. Sorry. 🍳🤦🏽♀️🍳
If the 1968-1969 Hong Kong Flu Pandemic (which I lived thru) serves
as any kind of milepost we are only in the first or second inning of
living thru this beast; our extreme measures of economic shutdown
and social distancing did not occur in 1968 so indeed we may flatten the
infection curve significantly this time; I just hope the cure is not worse than
the disease itself and that we all can come out on the other side of this