The following are questions from some of those readers looking for a plan:
Q: $11,000 in a consolidation loan (did a consolidation to stop using credit cards, and it's been great. The interest rate is lower than the credit cards'). We currently have $12,000 in savings. Would it make more sense to keep paying the loan (the minimum is $350 a month, but I usually pay $700 to $1,000) and save what we can, or take the money from savings and pay off the loan and then build that back up (this would eliminate all debt)?
A: •Calculate how much you need for an emergency fund of at least three months of living expenses (rent/mortgage, food, utilities, cable, cell, etc.). •Designate about $1,000 to $2,000 for a "life-happens fund" for expenses that come up such as car repairs, etc. That leaves you with $10,000 of the money you've saved already. From that, do the following: •Set aside $5,000 as the beginning for your emergency fund. •Take the remaining $5,000 and pay down the $11,000 on the consolidation loan. That will leave you owing $6,000. If you are paying upward of $1,000 a month on that loan, you could be done with it in six months. Once you've set up the life-happens fund, met your goal for the emergency fund and paid off the loan, you're ready to start saving for the house. Q: $1,700 and the other with a balance of $2,400. I have a personal loan of $2,800, a car payment of $312 a month with a $14,000 balance and a student loan of $15,000, which is now in deferment. I want to start the process of paying these bills off to purchase a house in a year. Where do I start first? I make at about $1,200 biweekly after taxes. I currently have $3,600 in savings. A: •Credit card No. 1, $1,700 •Credit card No. 2, $2,400 •Personal loan, $2,800 •Car loan, $14,000 •Student loan, $15,000 That's total debt of $35,900 and total savings of $3,600. You should start by putting off the idea that you will be in the position to buy a home in one year. You have too much debt to deal with first. If I were you, I would: •Work on increasing my emergency fund. •Work on building up a life-happens fund. •Start aggressively paying off your debts in the order that I listed above. •Get your student loan out of deferment and make minimum payments as part of the debt reduction I just laid out.
Email
Facebook
Google
Twitter
Favorites
More
Advertisement