Author Topic: Emergency fund or pay CC debt?  (Read 1230 times)

mxmoney

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Emergency fund or pay CC debt?
« on: September 07, 2018, 06:11:31 AM »
I have about $2500 in credit card debt and exactly $0.39 in my savings account. Is it better to start contributing to an emergency fund or to throw money at my debt? Both at once? Thanks!

Dicey

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Re: Emergency fund or pay CC debt?
« Reply #1 on: September 07, 2018, 06:19:18 AM »
Find a side hustle and keep the first 1k you earn as a mini-EF.  Meantime, kill the c debt by living more frugally and throwing every saved cent at it. When the CC debt is paid off, increase EF to whatever is comfortable.

tyler2016

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Re: Emergency fund or pay CC debt?
« Reply #2 on: September 07, 2018, 06:47:05 AM »
Pay off the credit card. If something pops up, just put it on the credit card, otherwise you are getting no interest vs whatever rate the credit card is at.

Example.

10000 at 12% APR is about 100 a month in interest.

If you pay 1000, you are saving 10 a month in interest. If something comes up and you charge 1000 back to it, you will be 10 dollars ahead because of not paying the interest that month.

RWD

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Re: Emergency fund or pay CC debt?
« Reply #3 on: September 07, 2018, 06:49:22 AM »
What's the purpose of an emergency fund if not to pay off your credit card? That's what you'll be doing with it after an emergency anyway, right?

ShoulderThingThatGoesUp

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Re: Emergency fund or pay CC debt?
« Reply #4 on: September 07, 2018, 06:54:15 AM »
Seems like you need to fix what got you in this situation in the first place.

GoHokies

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Re: Emergency fund or pay CC debt?
« Reply #5 on: September 07, 2018, 06:58:09 AM »
I might establish some sort of small cash cushion in case any emergency comes up that you can only pay for in cash (unlikely, but possible). I would then target the CC and use the additional capacity on the CC as a temporary emergency fund if something major comes off.  You just end up saving more interest doing it this way, as Tyler noted.   

Have you into cards you can balance transfer to with 0% interest for a period of time? For instance, the Chase Slate has a $0 initial balance transfer fee and 0% interest rate for 15 months. Haven't looked into other balance transfer cards in a while, but I know that is a good one.  You just need to be committed to paying it off before the 0% interest rate window expires.


mxmoney

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Re: Emergency fund or pay CC debt?
« Reply #6 on: September 07, 2018, 06:58:37 AM »
Seems like you need to fix what got you in this situation in the first place.

Oh, I'm already doing that. Reevaluated my entire budget and am doing a no-spend month. I have $1000 extra in my budget now! I'm just wondering what the best way to approach the situation I'm in is.
« Last Edit: September 07, 2018, 07:00:26 AM by mxmoney »

mxmoney

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Re: Emergency fund or pay CC debt?
« Reply #7 on: September 07, 2018, 06:58:57 AM »
What's the purpose of an emergency fund if not to pay off your credit card? That's what you'll be doing with it after an emergency anyway, right?

I'm not sure, what if I need cash for something? That's why I'm asking.

RWD

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Re: Emergency fund or pay CC debt?
« Reply #8 on: September 07, 2018, 07:14:23 AM »
What's the purpose of an emergency fund if not to pay off your credit card? That's what you'll be doing with it after an emergency anyway, right?

I'm not sure, what if I need cash for something? That's why I'm asking.

Do you often need cash for things? Transactions that require cash on short notice are pretty rare these days.

How long will it take you to pay off the debt? What is the interest rate? Can you temporarily cut back on other things as much as possible to pay it off quicker? $2,500 typically shouldn't take very long to vanquish.

mxmoney

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Re: Emergency fund or pay CC debt?
« Reply #9 on: September 07, 2018, 07:16:01 AM »

Do you often need cash for things? Transactions that require cash on short notice are pretty rare these days.

How long will it take you to pay off the debt? What is the interest rate? Can you temporarily cut back on other things as much as possible to pay it off quicker? $2,500 typically shouldn't take very long to vanquish.

I don't often need cash for things, no. I can't think of anything I couldn't put on a cc other than a big ticket or something. I have $1000 extra in my budget monthly so I can knock it out pretty quick. Interest rate is about 15%.

I'm a red panda

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Re: Emergency fund or pay CC debt?
« Reply #10 on: September 07, 2018, 07:22:08 AM »
I'd use an emergency fund to pay CC debt.
CC debt IS an emergency.


RWD

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Re: Emergency fund or pay CC debt?
« Reply #11 on: September 07, 2018, 07:23:54 AM »
I have $1000 extra in my budget monthly so I can knock it out pretty quick. Interest rate is about 15%.

Great, now just find a few more areas to cut back (temporarily or permanently) and you can knock that out in under two months. Maybe go cold turkey on the weed ($300/month savings)? Buy Abound instead of Halo wet cat food ($92/month savings)? etc.

mxmoney

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Re: Emergency fund or pay CC debt?
« Reply #12 on: September 07, 2018, 07:26:27 AM »
I have $1000 extra in my budget monthly so I can knock it out pretty quick. Interest rate is about 15%.

Great, now just find a few more areas to cut back (temporarily or permanently) and you can knock that out in under two months. Maybe go cold turkey on the weed ($300/month savings)? Buy Abound instead of Halo wet cat food ($92/month savings)? etc.

I've actually cut the weed down to $150/month and it's getting even better, soon to be around $75 a month. I can probably get away with not buying for the rest of this month and can probably go cold turkey next month. I already bought the cat food for the month but next month I can certainly go a little cheaper (for two of my cats, one of them needs the healthy good stuff).




tyler2016

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Re: Emergency fund or pay CC debt?
« Reply #13 on: September 07, 2018, 07:28:13 AM »
If you need cash, get a cash advance. Even small HVAC companies accept credit cards. Paying it off will save you $30 a month in interest. The chance of a 1000 dollar emergency that won't accept a credit card or provide a financing option in the 10 weeks it will take to pay off is pretty small.

Retire-Canada

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Re: Emergency fund or pay CC debt?
« Reply #14 on: September 07, 2018, 08:49:57 AM »
I already bought the cat food for the month but next month I can certainly go a little cheaper (for two of my cats, one of them needs the healthy good stuff).

Don't buy junk food for your cats because you want to smoke weed. Buy quality food for your pets they all need "the healthy good stuff" just find the best price you can for it. If you can't afford to do that why do you have 3 cats???

RWD

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Re: Emergency fund or pay CC debt?
« Reply #15 on: September 07, 2018, 09:30:03 AM »
I already bought the cat food for the month but next month I can certainly go a little cheaper (for two of my cats, one of them needs the healthy good stuff).

Don't buy junk food for your cats because you want to smoke weed. Buy quality food for your pets they all need "the healthy good stuff" just find the best price you can for it. If you can't afford to do that why do you have 3 cats???

Thread by mxmoney about cat food options. Short version is they are spending more than double the necessary threshold to get "healthy good stuff".