Author Topic: What to Do Next: Pay down 0% debt or increase savings  (Read 1895 times)


  • 5 O'Clock Shadow
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  • Posts: 37
What to Do Next: Pay down 0% debt or increase savings
« on: October 30, 2017, 04:52:51 PM »
Hi all,

Looking to you all for some advice on how I should proceed financially. I've posted a few things previously and have gotten great advice, so thanks in advance. I'm going to try to include as much information as possible to give you the full picture. I've had discussions in previous threads about ways to decrease my monthly expenses, so I'm looking less for that type of advice and more of what step I should take next with debt/savings.

  • Age: 27
  • Monthly Net Income: $4,239.86
  • Monthly Bills: $1,975
  • 401k: $42,531 (I'm currently contributing 6% in order to receive full company match. Plan to increase once CC debt is gone)
  • HSA: $7,029 (I contribute the yearly maximum here)
  • Roth IRA: $19,818 (I contribute the yearly maximum here)
  • Brokerage: $31.28 (I really just starting throwing money in here, but figured I should wait on it until other goals are reached first)
  • Discover Savings: $1,109.75 (This is my emergency fund, it earns 1.20% APR)

I currently have a 0% APR credit card that I've been using for all purchases relating to the new house I bought back in June. It's current balance is $14,122.73 and I will have to start paying interest on July 5, 2018. It might be as simple as, PAY OFF THE CC DEBT ASAP AND GO FROM THERE, which is fine and would make sense, I just wasn't sure if the time horizon (begins accruing interest 9 months from now, has any bearing on what I should do. The way I see it I can go a few ways:
  • Build emergency fund up to around 4-6k in order to have a few months of expenses and then go after the CC balance
  • Make it number one priority to pay off CC balance and wait to build larger e-fund/increase retirement savings until the CC balance is gone
  • Increase e-fund to 4-6k, save for 2018 Roth contribution to be made on January 1, increase 401k contribution to the maximum, and then pay off CC balance since it's due in July

Thanks again for all your help.


  • 5 O'Clock Shadow
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  • Posts: 36
  • Location: Massachusetts
Re: What to Do Next: Pay down 0% debt or increase savings
« Reply #1 on: October 30, 2017, 07:09:27 PM »
I would save 4-6k in emergency fund then pay off the cc before saving more, July will be here quickly and it is likely a high interest rate.  If you have not paid it off by July, you can use some of the EF to pay it off.


  • Magnum Stache
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  • Age: 29
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Re: What to Do Next: Pay down 0% debt or increase savings
« Reply #2 on: October 30, 2017, 07:28:48 PM »
Do I understand correctly that you have over $2k of savings per month to throw at this problem? If so, paying off the card is going to take you about 6 months, and the EF is going to occupy the other 2-3. Depending on how well you stick to your budget, that might be a tight deadline if you do the EF first.

Personally, since you already have a minimal EF, I'd get rid of the debt first. If you end up with a $2k emergency in the meantime, I see no difference between putting it on a 0% card and drawing it out of your account; it'll just push your payoff to 7 months instead of 6. (Granted, that better be a real and serious emergency; some of this depends on knowing your own self control.) The only advantage to paying off the card later is if you were putting the savings somewhere they would gain significant interest in the meantime. By my calculation if you had $6k in the EF tomorrow your 1.2% will return about $50 over those 9 months. Is that worth the risk of not making your CC deadline? Again, it depends on how strongly you trust yourself to hold to a budget.

Edit: Though as Anniemaygo points out, if you save up your EF first and come up a little short on the CC, you will have savings to pay it off last minute. So ultimately maybe it doesn't matter/is worth it for that $50.
« Last Edit: October 30, 2017, 07:30:38 PM by Tass »


  • Senior Mustachian
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Re: What to Do Next: Pay down 0% debt or increase savings
« Reply #3 on: October 30, 2017, 08:35:47 PM »
You can delay the 0% repayment until next year.

You can make this year's 401k contribution this year only.

Your option #3 looks best.  Just make sure you can - and do - pay the CC in full before you get hit with back interest.

See Investment Order for generic advice.


  • Magnum Stache
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Re: What to Do Next: Pay down 0% debt or increase savings
« Reply #4 on: October 31, 2017, 07:10:48 AM »
4.  Add as much as you can to your 401(k) before the end of the year -- that is use it or lose it.

Then on 1/1, start building up your EF.  Pay off the CC before you start accruing interest from this figure - looks like you should have just about enough time to save that up.  Then readjust your 401(k) permanently to the higher level that you can now afford with the CC gone, and allocate the leftover to your EF until you build it back up.