Let's just say that you were going to receive a surplus of a few extra hundred dollars for the next 5-ish months... You either have to save the money or throw it at debt - what would you do? From a financial perspective, what is the smarter option?
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I say pay off debt. Debt comes with interest! (Unless you're talking about, say, a mortgage..)
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Definitely pay off debt.
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I pay off debt unless the interest I'm going to make on saving it exceeds the interest we will pay on the debt.
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Hands down I would pay off debt.
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Depends on what kind of debt.
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Depends on what your savings looks like.
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Pay off debt. I receive a reimbursement for not taking my jobs' health insurance and all of the money goes towards debt.
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The missing piece is what the interest is on both the debt and the savings. If I can make more in savings than what the interest rate is on the debt, I'd save it.
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Debt assuming you have an emergency fund already.
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If you don't have a decent emergency fund or if the interest rate on the debt is very low, save it. Otherwise, pay off the debt.
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Depends on how much you have in savings. If you don't have at least $1k in savings, save it. If you do, if pay down debt.
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If the debt is credit cards or car payments, pay down!
Likewise, if you have no savings, save!
I voted for paying off the debt, though. -
I typically throw at debt, BUT I like to have a decent amount of "Oh Sh!t" money. If you have a savings cushion; debt it is.
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Depends on the debt. I would put it towards credit card debit but probably not student loan or mortgage debt.
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We have a very small amount of debt (besides our mortgage) so I would throw it at debt so I can get rid of it quicker and put that money towards savings.
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Debt represents risk. The best thing you can do toyour wealth potential and stress level is to eliminate that risk.
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Impossible to answer this question without knowing the interest rates and the specific financial situation (ie is there ANY emergency fund currently in place).
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@Mrs. Pen: d epends!
Depends on interest rate of debts
And
Whether or not you have a savings at all.For us, we would pay off debt because we have a hefty savings. Our debt is only our mortgage though and that is a very low %, so in reality we'd probably put it towards fertility treatment or something like medical deductibles.
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@CupQuakeWalk: haha everyone seems to be forgetting it's hypothetical. I don't actually have a surplus (I wish)... it's a different situation. But I was curious what people thought.
Although, I suppose the "you" could be relative/generalized..
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@Mrs. Pen: I wish I had a surplus too!
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Debt. We already have a decent amount in savings and pay extra on our mortgage whenever we can.
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We just have a mortgage and a 0% car loan, both of which we are in no hurry to pay off, so savings.
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@Mrs. Pen: this whole convo is moot because ain't no surplus comin' anytime soon
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@CupQuakeWalk: hahaha. I'll wall you
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I wish we had this problem!!! If I had a sufficient emergency fund, I'd pay off debt. Otherwise I would save it. Personally I'd probably split it between savings and paying down debt.
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I would pay off debt, and then save the rest!
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I would pay off debt
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@skipra: haha I wish I did too
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@Mrs. Pen: so, what's the "right" answer supposed to be?
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@looch: oh I have no idea. I asked this because we have to learn to live on less by a set amount. So we would like to take that amount and use it toward either in the meantime to adjust to living on X amount, before that set amount won't be there anymore. Does that make sense?
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@Mrs. Pen: Sure, but that affects my answer! If it's an adjustment period, while you're figuring things out, I'd save it, just in case you do have a shortfall one month.
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Depends on the interest amount, but most likely throw it in debt because the interest is usually higher than what I could get back from my savings account!
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@looch: haha okay! I'm still not sure... I think we may split it between the two. We definitely have a good emergency fund, but I feel better with a larger one. But the sooner we pay off these two debts we have (last ones other than DH'sstudent loan!), the sooner we can then pocket that money.
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@Mrs. Pen: In that case I might split it up. Put a percentage into savings each month and the rest towards paying down debt.
When will you get home?: just saw your last post and I think that sounds like a good plan
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It depends on what kind of debt and whether or not you have any savings. If you have high interest credit card debt I would put 100% towards that. If you have lower interest debt like a student loan or mortgage I would split it between savings and debt repayment.
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35 comments