https://boards.hellobee.com/ Pregnancy, Baby and Parenting blog, by Hellobee en Wed, 22 Apr 2026 08:16:30 +0000 https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize/page/2#post-2777863 Thu, 05 Oct 2017 14:08:27 +0000 Modern Daisy 2777863@https://boards.hellobee.com/ <p>@DesertDreams88: I am also extremely risk averse with $. And in my line of work I've seen individuals and businesses lose everything when investments took a turn for the worse. So I think money you invest should truly be extra cash and money you would have otherwise invested elsewhere like in an income property or a business or something. Ideally you pay off your debts first THEN invest your cash. That's just my personal approach though and I'm sure a lot of finance people would disagree. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize/page/2#post-2777855 Thu, 05 Oct 2017 13:37:01 +0000 Modern Daisy 2777855@https://boards.hellobee.com/ <p>I am a business credit underwriter and review a lot of personal financial statements for a living so I have opinions about this lol! It really depends on your personal situation and what your cash flow is like. But I always think it's best to pay off toxic debt like cc's, helocs, even student loans, etc. while at the same time building a cash reserve. I don't think the reserve should come first I think it should be 50 cash/ 50 debt payments. Then once toxic debt is gone pay off things like car and house. In theory it should get easier and easier as you go. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize/page/2#post-2777836 Thu, 05 Oct 2017 10:46:50 +0000 jape14 2777836@https://boards.hellobee.com/ <p>@Dr. Pepper: thanks for pointing this out! I work in a university setting and we only have the option for a 403b but you can choose different carriers (e.g., Vanguard, Fidelity, etc) and different funds within them. I have a target date retirement fund that is functionally the same thing as my husband's through a 401k. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize/page/2#post-2777802 Thu, 05 Oct 2017 09:10:18 +0000 Dr. Pepper 2777802@https://boards.hellobee.com/ <p>I do want to point out that not all 403b's are terrible. I had a healthcare run 403b and it was amazing. The fees were low and the funds performed great. I think a lot of that depends on the administrators of the plan. My hospital has done away with the 403b at the end of last year in favor of a 401k (which is also performing amazing). No matter if your work has 403b or 401k, you need to look through those wordy documents that describe the fees, the funds, and the administration of the plans. You can have good and bad in each kind. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize/page/2#post-2777669 Wed, 04 Oct 2017 15:57:04 +0000 petitenoisette 2777669@https://boards.hellobee.com/ <p>@DesertDreams88: I wasn't sure what your pension situation was so was interpreting your prior explanation as not having any retirement. So with the pension then no I wouldn't be so worried about investments right now. I really consider my retirement contributions beyond the pension to be a bonus. I started teaching so young that I can retire at 80% salary age 58 so I'm hoping that will work out. Don't know what life will throw at us though! Reminded me that I gotta get on the life insurance situation 😬 </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize/page/2#post-2777650 Wed, 04 Oct 2017 15:28:00 +0000 DesertDreams88 2777650@https://boards.hellobee.com/ <p>@lawbee11: yes, I love Ally and that's where we keep our savings. As for CC, yep, we pay everything on CC and pay them off weekly. Since we budget and track expenses, I never worry about not being able to pay them off. We earn about $50 in rewards monthly and have for the last 10 years.... wow that is $6000! Just did the math for the first time. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize/page/2#post-2777648 Wed, 04 Oct 2017 15:23:48 +0000 DesertDreams88 2777648@https://boards.hellobee.com/ <p>@Dr. Pepper: thanks for your detailed reply. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize/page/2#post-2777647 Wed, 04 Oct 2017 15:22:40 +0000 DesertDreams88 2777647@https://boards.hellobee.com/ <p>@Truth Bombs: My mom is an accountant and my best friends are *stellar* financial planner people so I definitely get your main focus on interest rates (both debt and savings) and qualms about DR. From my rudimentary understanding, a basic rule of thumbs is 7% ROI?? I am a risk-averse person with $$. I hate the idea of the stock market etc. but I know I have to dip my toes in, in a low-risk way. So to me, paying off my student loans around 5-6.8% has a better physiological pull and a roughly-even financial pull. Where it gets tricky is definitely when you get to areas like the mortgage, 4.7% APR, etc. My heart says mortgage, my head says investments. I know both is optional but I struggle with allocations. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777644 Wed, 04 Oct 2017 15:06:40 +0000 DesertDreams88 2777644@https://boards.hellobee.com/ <p>@Silva: "We are not people who are hoping to retire early, so while we are saving for retirement and our kids college accounts, the house (and the life we want our family to have while our children are young) have been our primary financial focus." That's a great point in regards to personal financial goals. Being mortgage-free is def. more appealing to me than early retirement. My grandma worked until she was 78 :) I'd like to have more job flexibility after 50ish, but I still want to have a paying job. </p> <p>@gingerbebe: @catomd00: @Madison43: @Mrs. Lemon-Lime: @ElbieKay: @Truth Bombs: @petitenoisette: interesting points about retirement. DH &amp; I are both teachers and have a mandatory 11% contribution to our pension. From what I hear from our "union" AKA educational association, our state's teacher pension fund is healthy and looks to be long term. I DON'T trust of love my state but 11% is nothing to be ignored, at least. I would never contribute to a 403b, I have too many financial advisor friends who warned me, but thanks for putting it out there @petitenoisette: - people got to know, they prey on teachers!! If DH &amp; I were to do extra retirement savings, it would be a Roth IRA. I am thinking of moving *some* of our E-fund savings yearly into a Roth as a last-resort e-fund, since I am usually a disciplined person and wouldn't touch it unless things were dire. I got the idea from here:<br /> <a href="http://www.thesimpledollar.com/when-and-how-to-use-your-roth-ira-as-an-emergency-fund/" rel="nofollow">http://www.thesimpledollar.com/when-and-how-to-use-your-roth-ira-as-an-emergency-fund/</a><br /> @Truth Bombs: what do you think of that concept as described in the link?</p> <p>Lastly, on retirement, I totally get the importance of compounding interest and I think it is tantalizing, but my goal in life is to enjoy it responsibly, but not to amass as much $$ as possible. I'm very motivated my short term goals within the next 10-15 years, but when I think about retiring in 30 years, I'm like.... ehhhh. Who knows if we'll all be around in 30 years with the way things are. I know that sounds stupid and nihilist to a point but I'm just saying that for ME, paying off debt is helpful in the short term AND long term, and if everything is chugging along in 30 years, being debt free will be a big help. Like, retirement savings is important, but it's just not a big, big motivator to me. So, to me, it's a pie of the pie, but not the biggest piece right now. I'm fully aware I may regret this view in 10-15 years. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777642 Wed, 04 Oct 2017 14:59:49 +0000 Mrs D 2777642@https://boards.hellobee.com/ <p>For us, we are currently in the most expensive stage of life...in theory. Two kids in FT daycare, DH still has decent student loans and we are in our "forever" home. Once we re-financed after sinking tons of cash into our home we made the following plan:</p> <p>1) Paid off DH's highest % loans, now his payment is managable and no loans are over 7%<br /> 2) Build Savings - we have 3 months covered<br /> 2) CC paid off</p> <p>At that point we assessed how much we were comfortable saving vs investing.</p> <p>We made the decision to just get as tight as we can with our budget...teach ourselves how to live within our means at our most expensive time. We refi'd to a 15 year mortgage to get our rate below 3% (barely :happy: ), I max out my 401K and DH contributes to his such that he gets the most max from his employer he can.</p> <p>And thats it for now. We have specific plans for as our big items drop off (i.e. DD1 daycare next year, DD2 daycare and student loans in 2020). That will collectively be a roughly 4K swing in our cash flow.</p> <p>Would I like to save more, yes. But in reality DH and I are both in stable jobs and careers where we should be able to find something. Plus we have plenty of space on our credit cards if the unthinkable happened.</p> <p>We have plans in place with out advisors for when our cash flow changes - but it wont involve just cash in the bank. In terms of a boring old savings account ours will always be minimal - as we'll be placing our money elsewhere. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777638 Wed, 04 Oct 2017 14:54:41 +0000 DesertDreams88 2777638@https://boards.hellobee.com/ <p>@gingerbebe: thank you for sharing some unique insights and ideas. I've always used the 3-months-expenses as a target, but I think I might shift more towards a personalize target like you mention, of "What would be the biggest emergencies, for us? How would we handle it? How much cash would we need?"</p> <p>As for other forms of insurance, great point. Due to pregnancy / TTC, I have the max STD at my work, which is 6 weeks. DH doesn't have any because we'd rather save more than 6 week's income in cash, and not overpay into a policy. We both have enough life insurance. We don't have long-term disability insurance, def. something to think about, though I know DR says that comes later in the steps. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777632 Wed, 04 Oct 2017 14:40:14 +0000 DesertDreams88 2777632@https://boards.hellobee.com/ <p>@looch: @gingerbebe: Our whole family is on a high-deductible HSA plan with $2600 deductible and $4000 OOP max. After 5 legit ER trips between DH &amp; myself in the past 4 years, plus a birth.... haha yeah we have spent a LOT of money on healthcare!! Thankfully our budget includes maxing out our individual and family HSAs, but that has been a growing process in the past 4 years. Luckily, the 2 major hospitals in town are very flexible and willing to offer interest-free payment plans for up to 2 years, so usually that ends up being a $100-$200 monthly bill. They even will roll multiple claims into the same payment plan, and offer pay-in-full discounts. It has been a big part of our budget, which stinks, but thankfully it can be handled. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777574 Wed, 04 Oct 2017 13:00:12 +0000 looch 2777574@https://boards.hellobee.com/ <p>@gingerbebe: yeah, we don't have that kind of plan. In retrospect, we made a poor decision and went with the high deductible plan, not knowing that our son needed a procedure, but we went into it feeling comfortable that we could pay that deductible amount. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777555 Wed, 04 Oct 2017 12:35:06 +0000 gingerbebe 2777555@https://boards.hellobee.com/ <p>@looch: Yes, great point. We have outstanding health insurance through my job that doesn't have a deductible and very low co-pays, but if I didn't, I'd definitely plan to save for a medical event in concert with an FSA. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777525 Wed, 04 Oct 2017 11:43:03 +0000 looch 2777525@https://boards.hellobee.com/ <p>@DesertDreams88: After reading a few of the responses, I think you need to additionally look at your health insurance and what would happen there, if you or your child needed to have a procedure or something this year. What would it take to cover that, if you have a deductible?</p> <p>That's the minimum amount I'd want to keep liquid. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777512 Wed, 04 Oct 2017 11:11:40 +0000 gingerbebe 2777512@https://boards.hellobee.com/ <p>So, as you can see, you're going to get a lot of difference opinions on this. Personally, we are modified Dave Ramsey users. How you decide to prioritize savings and debt really depends on your personality. If you feel fine holding debt in order to win over time in investing, then that's fine. If you just want to get rid of debt and not have it hang over your head, then prioritize the debt. </p> <p>We don't keep a huge emergency fund while we are paying back the rest of our student loans. $1000 emergency fund can seem thin, especially if you have kids. Generally, how DH and I have dealt with this is we try to keep enough cash to cover whatever would be a "major" event at that point in our lives. This is always a shifting target - for example, when we first got married, the biggest thing would be something going wrong with our car. Since it was a 4WD Jeep Grand Cherokee, we knew if something seriously went wrong, we were looking at about a $2500 repair. So that's what we kept as the cushion.</p> <p>Now with 2 kids and a house, the math changes on that somewhat. We have very low maintenance cars now, but our major expense would be a big home repair. So we have set aside for that, but also try to mitigate by being diligent in our home maintenance and budget for small repairs/updates each year.</p> <p>Then there's risk management. Depending on the stability of your job(s), the nature of your employment, etc. it might be advisable to have a bigger savings cushion, but I think generally a bare bones 3 month savings would be plenty for people in a decent job market.</p> <p>We both have extremely-to-fairly stable employment, so we hedge a lot of risk through insurance. We both have good long-term disability insurance, we have short-term disability insurance, and we both have sizeable term life insurance policies. The rates are really affordable the younger you are when you get the policies. </p> <p>While we are paying off our loans, we are still contributing to our retirement. I have a pension, so its not really an option not to contribute. DH's employer gives a HUGE match, so we max that out. </p> <p>We also contribute a modest amount to our kids' college savings. We will bump that up once we're done paying off our own loans (which is hugely motivating). We also encourage contributions as gifts from family members (they have largely obliged). But we aren't huge fans of 529s in general and expect to be able to cash flow quite a bit at the point the kids are in school, so there's also that.</p> <p>We conservatively calculate an FSA amount for copays and prescriptions and max out the childcare FSA each year to take advantage of that, since those will be for sure costs. Same thing, we save for predictable expenses, like holiday gifts, family travel, and vacation through budgeting.</p> <p>But otherwise, yeah, its trying to stay disciplined in our living expenses and throwing what we can at the student loan for now. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777486 Wed, 04 Oct 2017 10:41:44 +0000 petitenoisette 2777486@https://boards.hellobee.com/ <p>@Truth Bombs: I can definitely see how Dave Ramsey's method could be seen as predatory since he's making money off selling his advice to people who need their money! </p> <p>I totally agree that paying off your mortgage early vs. investing is very likely a poor choice. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777458 Wed, 04 Oct 2017 10:04:41 +0000 Truth Bombs 2777458@https://boards.hellobee.com/ <p>@petitenoisette: A quote from Dave Ramsey's website: "30 year mortgages are for people who enjoy slavery so much they want to extend it for 15 more years and pay thousands of dollars more for the privledge". Let's ignore the fact that joking about slavery is incredibly poor taste. This statement can absolutely be wrong for someone who is INVESTING their money. I did the math using an expected rate of return I was comfortable with and even with the slightly higher interest rate I was better off doing a 30 year mortgage and investing my extra money than doing a 15 year mortgage. But Dave doesn't believe in math. And don't worry, at the end of this article there was a link to Dave's endorsed realtors who I'm sure pay him a pretty penny to be included on that list. Dave Ramsey, in my opinion, preys on people's financial inexperience and religious convictions to make millions of dollars for himself. I recognize that I'm not the target Dave Ramsey demographic, but I am a financial professional and in my opinion math works the same no matter what your financial situation is. And the last thing people on a tight budget need to be doing is paying for advice that doesn't actually save them money in the long run. I believe people can (and should!) be motivated enough by saving/making the most money for their families that they don't need to trick themselves into psychological wins. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777448 Wed, 04 Oct 2017 09:37:47 +0000 petitenoisette 2777448@https://boards.hellobee.com/ <p>So all debt we have is at low or 0% interest so I do not prioritize paying it down at all even though 2 of those loans are small and it would be nice to pay off. It doesn't make sense financially. </p> <p>There is a certain amount that we have in an emergency fund that is not technically 3 months worth but I am the breadwinner, confident in my job security, and I would have a lot of advance warning if I were going to be laid off (teacher). </p> <p>Beyond that, we prioritize maxing out our IRAs but not 401k. My DH has a small employer match so we max that out but neither of our employers offer good plans. We also are saving beyond our emergency fund to do house renos that need to be done before we can sell our house hopefully in 2-3 years. </p> <p>It is hard to tell if you're going to make more from retirement or paying down debt quicker but beyond getting a slightly healthier emergency fund, I would personally prioritize investing more in retirement before throwing everything at the debt. Magic of compound interest and all that. Just a warning, if and when you are able to invest more in retirement, be super wary of 403bs if that's what you have through your school. They often are really high fees. I unknowingly thought I was doing the right thing opening one up when I was 22 years old and now I have money sitting in there that I cannot get out and that could be making me more elsewhere. I stopped contributing to my 403b last year and am now contributing the same to IRAs instead. </p> <p>@Truth Bombs: Does Dave Ramsey really advocate for paying off a low interest mortgage before investing? That seems nuts. And yes, mathematically Dave Ramsey might not make sense, but if you have the funds to pay off your mortgage now I think you need to recognize you're in a position that the majority are not and that you are not the target audience for Dave Ramsey. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777441 Wed, 04 Oct 2017 09:34:58 +0000 Dr. Pepper 2777441@https://boards.hellobee.com/ <p>We are Dave Ramsey followers. As much as he hates it, we did tweak it a little for ourselves- so technically we followed our own plan which we based off Dave Ramsey's plan. We no longer have consumer debt, only our mortgage left. But this is what we did:</p> <p>We kept a small emergency fund- around $2,000. But we also had our 2 son's savings we could use if times got too rough (about another $1,000). We were also paying off over $3,000 in debt a month, so if we skipped one month of doing that we had well over $6,000.</p> <p>We did not stop 401K contributions, but we did decrease them to just enough to maximize our company match. </p> <p>Pay off all debt, smallest to largest. For us it just so happened that our smallest debt, the camper at $8,000 was our highest rate of 4.5%. Then the car at $15,000 was 2.5%, and the student loans of $80,000 was 1.74%. So it was also highest interest to smallest interest. We accomplished this in 2 years 4 months. </p> <p>Increased our 401K contributions- 15% for my husband, max allowed ($18,000/year this year) for mine. We will be increasing both to max for next year.</p> <p>Increase savings to 3-6 months of expenses. </p> <p>Now we are attacking our mortgage. We pay off a minimum of $3,000 a month in principle. We have a goal to have it payed off by the end of 2020. </p> <p>Throughout all of this we have stocked away 1% of our income toward college for each of our boys. This will give them a good starting amount for college and we will be in a very good financial position to cash flow the rest. </p> <p>Thoughts on small emergency funds: We both earn a good income and are a dual income family with very stable jobs. We would be able to survive on either one of our incomes if something happened to one of us or one of use got laid off. Having a small emergency fund gave us motivation to cut deeper and pay off debt more aggressively, but also didn't scare us too much because we knew we were in a fairly stable position to handle what life threw at us. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777416 Wed, 04 Oct 2017 09:06:06 +0000 sauerkraut 2777416@https://boards.hellobee.com/ <p>My family is entirely reliant on my income, so I have really prioritized having a healthy emergency fund over paying off my student loans (my only debt currently). It gives me so much peace of mind to know that I have 4 months of income (which I could stretch to probably 9 or 10 months of expenses) just in case I lost my job or was unable to work. I feel like that's enough time for me to at least figure out a temporary source of income or make changes to significantly reduce expenses. I have never carried credit card debt, but I think I'd be willing to tap into that fund to avoid carrying a high interest balance. Before I had kids, any debt over 4% I pretty aggressively tried to pay down (I had some higher interest federal loans). </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777414 Wed, 04 Oct 2017 09:05:20 +0000 snowjewelz 2777414@https://boards.hellobee.com/ <p>So I'm not super financial savvy, and others above gave really good advice too; I'll just add to what we do with our modest income. </p> <p>I care most about an emergency fund. Esp now with 2 kids, it's just too big of a risk to not have a cushion in case something happens. And like others have said, as long as whatever debt I have has low/no interest, then I'd just pay a monthly payment until I feel like I have a chunk of extra money to pay something off (ex. paying a car payment then using tax return to pay off balance or something).</p> <p>We're in a season where we don't have debt besides our house, but since we have 2 in daycare, we're barely saving so it's super important to me that I already built up that emergency fund. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777409 Wed, 04 Oct 2017 09:02:40 +0000 raspberries 2777409@https://boards.hellobee.com/ <p>I agree with you - I don't think I'd feel comfortable with just $1,000 in the bank for emergencies. If that's what I had, I'd probably put half of my surplus income toward savings (and half toward debt) until I had 2 months' expenses saved, and then shift back to putting all of the surplus to debt.</p> <p>We've paid off our student loan debt, but when we had it, we prioritized from highest interest rate to lowest instead of using the Dave Ramsey method - I had a spreadsheet that tracked how much extra we WOULDN'T have to pay by putting xx amount toward whatever loan, and that was good motivation.</p> <p>I'd consider anything over 4-5ish% high enough to make a priority to pay off.</p> <p>@SugarplumsMom: Same here - we had thought at one point that we could pay down the mortgage aggressively and just be debt-free, but that was before two in daycare. :shocked: </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777408 Wed, 04 Oct 2017 08:57:22 +0000 lawbee11 2777408@https://boards.hellobee.com/ <p>We charge everything to our credit cards but pay them off each month. If we had cc debt that would be the first to go as the interest rate is usually crazy high. I agree with you that I'm not comfortable only having $1K in savings. </p> <p>What we do is we have $1K in our normal checking account so that we have easy access to it. The rest of our emergency fund is in a higher interest savings account. We use Ally...they don't have physical branches so if we ever needed access to that money it would take a few days. We each contribute to our 401(k)s and our other debt (car, mortgage, student loans) isn't high interest so we don't go out of our way to pay those off early. I'm also on team anti-Dave Ramsey. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777407 Wed, 04 Oct 2017 08:50:55 +0000 catlady 2777407@https://boards.hellobee.com/ <p>We dealt with this awhile back when DH and I were just getting out of grad school and starting new jobs, and we wanted to buy a house. We were used to living on grad school salaries so we kept that up once we both had full-time jobs. What we did, in order:<br /> - Saved 3 month's salary each as an emergency fund<br /> - Paid off my student loans with the highest interest rates first and very quickly (we actually paid them down in 5 years, instead of taking the 30 that I was allowed)<br /> - Saved for a downpayment for a house<br /> - Started maxing our retirement savings once we bought the house </p> <p>We never have/had credit card debt and we only have one car that we bought in cash. Our mortgage and remaining student loans are at very low interest rates, so we just pay the minimum on those each month and save the rest.</p> <p>In terms of my actual student loans, I paid them off in the order of highest interest rate to lowest. I dislike the Dave Ramsey approach, personally.</p> <p>Edited to add: We started paying down the student loans and saving for a downpayment at the same time. We just did the math to figure out how much we could afford for each. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777404 Wed, 04 Oct 2017 08:44:17 +0000 yoursilverlining 2777404@https://boards.hellobee.com/ <p>@DesertDreams88: Oh, I assumed from your initial post that you had CC debt. If you don’t, that’s awesome!! I agree with you that I would generally personally consider anything under 4.5% to be “low interest”; though others might have other figures they are comfortable with. I also agree with you that I wouldn’t be comfortable with having only $1k in savings and nothing else. That’s just not enough. For me, I would feel more comfortable with 3 months living expenses (minimum) in savings and then to curtail savings in favor of cutting debt. I’m not a fan of saving just to save when you have debt, especially higher interest debt out there. </p> <p>For me/us; my federal student loans are the fixed 6.8%, my private ones are all below 3%, our mortgage is 2.75% and my car is 0.9%. Obviously I’m paying off the federal student loans first. The rest, meh, I’m not in a big rush to pay off early. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777388 Wed, 04 Oct 2017 08:13:25 +0000 Truth Bombs 2777388@https://boards.hellobee.com/ <p>Once you have a comfortable emergency fund (3 months of living expenses since you are a dual income family) I would start attack the debt. I definitely wouldn't save any more cash, because cash is basically earning nothing right now so you're better of paying down interest bearing debt. If you're talking about saving in terms of contributing to a brokerage account, retirement plan, etc, you have to compare interest rates. Will your money earn more than the interest rate by being invested? </p> <p>I'm not at all a fan of Dave Ramsey. Math beats psychology when it comes to financial planning. My husband and I have a pretty hefty mortgage but we have the ability to pay it off completely if we wanted to. But my brokerage accounts are up 10% this year and my mortgage is 3.2%.... why the heck would I pay it off? I'll take my 6.8% differential over the psychological win of paying off my mortgage. We do pay an extra $500/month on our mortgage which I look at as diversification... it's basically the same as buying a bond that pays 3.2% interest, but I have no interested in making huge payments against low interest debts in this market environment. But this logic only works if you're actually investing your extra money, not just parking it in a savings account. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777379 Wed, 04 Oct 2017 06:11:27 +0000 Adira 2777379@https://boards.hellobee.com/ <p>Ours all basically comes down to percentages.</p> <p>Will I earn MORE by saving (investing) than the interest rates of my debt? Then I'll prioritizing saving. Are the interest rates higher than my potential earnings from saving? Then I'll pay off debt.</p> <p>Credit Cards: These are higher interest rates, so we pay them off immediately<br /> Car Loan: Low interest rate - pay monthly amount<br /> Mortgage: Low interest rate - pay monthly amount<br /> Student Loans: Low interest rate - pay monthly amount </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777374 Wed, 04 Oct 2017 05:39:49 +0000 ElbieKay 2777374@https://boards.hellobee.com/ <p>If I had multiple forms of debt, I would probably have the following priorities:</p> <p>1. Pay all minimum balances due, on time each month.<br /> 2. Save enough month until I have an emergency cushion. Ideally, this would be a year's worth of expenses, but I realize that may be a big goal and unrealistic depending on the circumstances. You never know when something might come up, and you don't want an emergency to land you in more debt.<br /> 3. Assess my various debts and categorize them into "keep" and "pay off". For instance, credit card debt automatically goes into "pay off". Student loans too. A mortgage could potentially be "keep" depending on the terms of the mortgage and situation of the property.<br /> 4. Aggressively pay down my "pay off" debts starting with the loans with the highest interest rates first.<br /> 5. Once the "pay off" loans are gone, resume saving. Reassess the "keep" loans and factor them into your savings goals. For instance maybe you want to start paying down your mortgage while still continuing to build your nest egg.</p> <p>ETA: If your employer has a 401k match or similar, I would max this out before proceeding to (2) or (3) above. And if possible I would maximize retirement contributions ahead of (5) or maybe even (4) depending on what kind of debt it is. So for instance I would prioritize saving for retirement ahead of paying back a mortgage or even student loans if the rate on the loan is low. But most credit card debt is issued at such bad rates that it probably makes sense to get out from under that before focusing on retirement. </p> https://boards.hellobee.com/topic/savings-vs-debt-how-do-you-prioritize#post-2777373 Wed, 04 Oct 2017 04:35:34 +0000 SugarplumsMom 2777373@https://boards.hellobee.com/ <p>There was a time when we thought we could pay off the mortgage early. Then life got in the way :grin: I don't actually think that's possible at this point, so we've stopped trying. We automatically put away money each month for emergency, savings, retirement. But stopped aggressively paying off the mortgage. We also have student loans we're still paying off, but the rates are pretty low. Our savings right now looks pretty grim - we're renovating 😰 </p>