Here's my question:
My wife and I have been focusing hard on paying off my student loans, and we're a few months away from knocking out the biggest one, which was originally $26000 @ 9.5%. Our income has increased recently, and at the end of this month, the balance on this loan will be about $6,500. We're paying between $2,500 and $3000 towards it every month, and so, if everything stays the same, it should be paid off by August.
In addition to the loan that's almost paid off, I have a lot of smaller loans, at lower interest rates, totaling about $52,000. Once the big one is gone, these should fall pretty quickly, one by one.
We have a $3,000 emergency fund in a high-yield savings account, and in addition, we keep a fluctuating balance of $1500 to $3500 in our checking account, to ensure that money is always there when monthly bills are automatically withdrawn. The emergency fund is enough to cover 2-3 months of bare-bones living expenses, not including our loan payments, which can be skipped or drastically reduced if needed.
As the loan balance gets smaller and smaller, I find myself wanting to do whatever possible to reduce it further, and it gets harder and harder to wait. August seems like forever!
So, I find myself wondering, do we have too much put aside for emergencies, since technically, that massive debt is an emergency too? Should we reduce our emergency fund to get the debt paid off sooner? If so, how much is appropriate?
To add to the complexity, my wife's job is contract based, and is likely to end in June. Her contract might be renewed, but it isn't a sure thing. My salary is enough to cover our expenses and continue making loan payments, but we'd probably reduce our monthly payment from $3,000 to $1,500 until she can find a new job.
So, Mustachians, what should we do? Raid our emergency fund to pay off the loan about a month earlier, or be patient and conservative?