Author Topic: convince me to keep my emergency fund! I'm feeling dangerous!  (Read 4552 times)

homeymomma

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convince me to keep my emergency fund! I'm feeling dangerous!
« on: August 13, 2013, 01:46:42 PM »
I am at the very end of paying down all debt - we have about 7,500 left at 3.9%, 3.15%, 1.8%. I know those are all really low, and we would be better off investing what we're putting toward debt. But my husband and I made a pact to become debt free in 2013 and the psychological boost it will be outweighs the possible interest loss, I feel.
Anyway - to knock out the rest of the debt we are putting the full $2,000 we don't spend every month towards it. This gets us all finished on the first of December.

We have also stashed 6,500 in a Roth IRA in my name, and we have 4K in an Emergency Fund (<1% savings account).

The plan is to finish the debt this year. Then next year on Jan 1st open a Vanguard account for my husband's Roth IRA, max it out for 2013 before April, then continue on through the rest of 2014 maxing out both Roths, and putting the remaining extra savings in a taxable account for a home downpayment.

UNLESS, I use 3K of our 4K emergency fund to pay it down even sooner, getting us debt free by October!!!! Then we can continue as we were going to before, but using the first few months of would have been earmarked "house" to rebuild the emergency fund.

We have about 2,000 in non-negotiable expenses every month. We could cut it down a bit if my husband lost his job (unlikely, but it is our only income). We have a baby and I stay home. If something REALLY emergency-like happened, we would still have the 1K, we have credit cards that we never use, and there is family that would be able to help out in a real jam.

So - convince me not to do this! I am just TEARING MY HAIR OUT ready to be done with this debt. We have already paid off about 30K and I want to be DONE!!!

olivia

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Re: convince me to keep my emergency fund! I'm feeling dangerous!
« Reply #1 on: August 13, 2013, 01:49:55 PM »
I would do it!  I'm currently keeping a super minimal emergency fund so I can pay off all credit card debts.  Only have $500 in there at the moment!  In a real emergency I have credit cards and family to fall back on, plus a Roth.  And we're both employed, so it's doubtful we'd lose our jobs at the same time. 

aj_yooper

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Re: convince me to keep my emergency fund! I'm feeling dangerous!
« Reply #2 on: August 13, 2013, 01:56:42 PM »
Since you have the Roth and save $2k a month, it does not sound like a big risk to pay it off in October, if that gets you guys stoked.  Just replenish the emergency fund so you have that comfort zone.  Congratulations on your hard work!

homeymomma

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Re: convince me to keep my emergency fund! I'm feeling dangerous!
« Reply #3 on: August 13, 2013, 01:56:53 PM »
Oh I forgot to also ask - is this going to tank our (mostly my) credit? It's a car loan and the last two remaining student loans out of a previous 8. My understanding is that closing these accounts all at once may have a negative effect on my credit score? I'm not sure I care, but if it's going to be really really bad I guess I could keep the lowest one going as a buffer. As paid off the other student loan accounts I didn't see my credit score change at all.

Cromacster

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Re: convince me to keep my emergency fund! I'm feeling dangerous!
« Reply #4 on: August 13, 2013, 01:57:08 PM »
If you really want to pay it off go for it.  For the amount of debt you have versus the amount of income you are probably safe.  You will be able to rebuild it fairly quickly.  Then its also one less thing to think about.

aj_yooper

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Re: convince me to keep my emergency fund! I'm feeling dangerous!
« Reply #5 on: August 13, 2013, 02:01:34 PM »
IMO, paying off loans solidifies and improves your credit score.  Debt ratios go down.

livetogive

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Re: convince me to keep my emergency fund! I'm feeling dangerous!
« Reply #6 on: August 13, 2013, 02:08:24 PM »
I think it will improve it as well.

Closing accounts is only bad, as i understand it, when it's revolving credit that isn't utilized.  That brings your balance to available ratio up because you're reducing the denominator.  Student loans aren't available so no adjustment.

On the other hand, you're improving your cash flow per month which may not affect the number but certainly improves your credit strength in the eyes of a lender.

Numbers Man

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Re: convince me to keep my emergency fund! I'm feeling dangerous!
« Reply #7 on: August 13, 2013, 02:09:38 PM »
I didn't read anywhere that you had line of credit. Shit happens, so keep your emergency fund intact and pay off the debt with cashflow.

iamsoners

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Re: convince me to keep my emergency fund! I'm feeling dangerous!
« Reply #8 on: August 13, 2013, 11:53:46 PM »
I'd say go for it.

Also, if you haven't seen this, it's helpful: http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/