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I need your help

January 7th, 2008 at 05:22 am

Here's our debt we pay a month. We pay a little bit more toward each loan except my parent's loan.

Loan 1. $15K remaining balance (2nd owned property) @ 5.39% = $200 A month
Loan 2. $21K Car payment @ 5.59% = $700.00
Loan 3. $12,573.00 remaining balance (owed my parents Down Payment towards our current home @ zero rate) = $213.00 a month.
A total $1,113.00 monthly payment.

My wife and I save an extra $1000 a month towards our emergency fund goal of $12K this year. In addition, I also saved an extra $210.00 a month towards my own personal savings account (earning less than 2% ).

My dilemma: Should I use this extra money towards paying off the car faster, which we pay the higher interest rate, or should I just continue to saving it?

In defense of saving the money, I use this savings as my day trading account online. On the other hand, 2007 has not been a good year, but not the worst either. I just broke even. So it really hasn't appreciated that much except what I put in.

14 Responses to “I need your help”

  1. annab Says:

    If the interest rate on the debt is higher than if you'd have saved the $$, then pay off the debt. Smile

  2. nance Says:

    I'd pay on the debt.

  3. Ima saver Says:

    I think you need to fully fund your emergency account first. I am wondering why you spend $10 a day on coffee and lunches out? That is the one thing we notice about our construction workers. They eat lunch out everyday, but don't have a dime in savings. My husband takes his lunch and a jug of water to work every day. That saves major bucks!! Not critizing, but just asking!!

  4. disneysteve Says:

    I would stop putting money into the 2% account. In fact, close that account and use that money to pay off the car. Then start directing that $210/month toward loan #1.

    I'd also get rid of that $10/day on coffee and lunch. If that is just weekdays, that's over $200/month. Make coffee at home in a thermos and pack your lunch. You'll probably spend more like $3-$4/day, freeing up an extra $60/month that can go toward debts and savings.

  5. tripods68 Says:

    The responses definitely solidify my decision a lot clearer. I had a feeling that most of you agreed to pay off my car loan faster.

    As far my coffee and lunches, I normally spend on average about $20 to $25 a day, which comes to about $500.00 a month budget expense. After being on site and reading peoples experiences on ways of cutting back expenses, I was eager to try and incorporate this as my main goal for 2008. So I set a achievable goal of limiting myself to $10.00 a day, which will save me about $300 a month. That's means, brewing my own coffee and bringing my own lunch to work. Whatever I saved leftover savings on $500.00 budget is transferred towards our emergency fund. The more I become consistent on this, the more I will save. I just didn't want try "cold turkey" since this has been my lifestyle for 5 years.

    Again, thanks guys!

  6. Nic Says:

    If you have $1210.00 extra p/month , why not pay your parents back a bit more each month, along w/the other bills? And $20-25 per DAY of coffee and lunches is ridiculous when you have bills? Made at home, you wouldn't be spending that much p/week.

  7. disneysteve Says:

    "So I set a achievable goal of limiting myself to $10.00 a day, which will save me about $300 a month. That's means, brewing my own coffee and bringing my own lunch to work."

    I think it's great that you are cutting back. Certainly, $25/day was way too much. But are you saying that bringing your own, you are still spending $10/day? If so, what are you bringing that costs that much? I pack my lunch every day and about the most I spend is around $5.00 and most days is a lot less than that.

  8. tripods68 Says:

    Nic: We could pay off our parents, but we wouldn't achieve our goal towards building our emergency of $12K this year. My parents is cool with this arrangement, so I don't really see your point. We try to add extra $$ on loans we pay higher interest rate. To suggest that all of our extra $1000.00 a month all goes towards paying off my parents, is not a smart decision, when we don't even enough built in savings. When we do achieve then we could pay off our other loans faster. But in the mean time we choose not. We do live within our means, we don't have other debt, like student loan. We contribute to our max monthly on my pension, Roth IRA, our kids 529 plan, wife 403(b). So on retirement we do excellent. So we can't really complain.

    Steve. No to answer your question I still pay myself $10.00 a day regardless I bring my lunch or not. But I still save that money which goes towards building our emergency fund. The incentive is for me to bring my lunch more often than eating out, so we can save more. Hopefully I can stick to this plan, and I have too.

  9. annab Says:

    Do you not like to cook? Maybe you can team up with another colleague who likes to cook and work out a barter? Like maybe trading cooking for childcare or something? Because you could probably drop your lunch cost to $5 max, if you cooked. But if you hate to cook, maybe outsource. Wink

  10. tripods68 Says:

    Honestly, I'm not a good cook. I depend on my wife for her best cooking...I only prepare sandwiches though.


  11. Nic Says:

    Sorry tripod, I suggested a bit more towards bills, certainly not the entire $1000. Afterall, you do need an EF to fall back on...we all do.

  12. tripods68 Says:

    Nic: Thank you for agreeing with meSmile

  13. annab Says:

    Just for kicks, maybe try doing a week's worth of lunch in a batch? You can prebag a week's worth of the snacky things (I love things like baby carrots*, or cut fruit, and a cookie) and then all you have to add each day is the main meal. If you like sandwiches, you can do that the night before, and soup is even better, because you can make a week's worth in a batch. Then in the am, just grab and go. And there are the more manly looking lunch totes: the key is to get spill proof containers for wet stuff. I get mine when I get carryout soup, and they work great. If you have a microwave at work, that's awesome. But if not, just go to the store who has the name like a river in south america, and look for a lunch thermos, about 10 oz. There's a green kind that construction workers use, and it'll keep your food hot for like 6 months.

    Actually, even for sandwiches, you can do a few days of fillings in a batch: this is what delis do. And if you want to make it super easy, aliquot the filling in small containers at prep time, put 2 slices of bread in a sandwich bag (one for each day) and then you can pack an entire week's cold lunch in about 90 minutes tops. The only thing I would do every couple of days is tuna. But I eat chicken salad for a week and not bat an eye. YMMV.

    I think the trick to packing a lunch is to make it tastier than what you'd buy. I get silly with my lunch, and make it all colorful and cute, and I pack stuff I really like. Check out lunchinabox.net for ideas.

    *baby carrots: I know, they're just big carrots cut small and they're a gazillion times more $$. But I have yet to compel myself to make carrot sticks for lunch. Big Grin

  14. tripods68 Says:

    Annab: Thanks for the tips.

    This past two days, I brought my lunches and save myself $20.00. I actually use to bring baby carrots and some fruits to work for snacks last summer and stop. Being in the computer all day, I do like to snack on my desk to munch on. I probably will go back to eating them sometime againSmile

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