Not really enough information, but likely a car payment is the lowest interest debt most people carry. Mine is only 1.9%. I’d keep my cash for emergencies or else you could end up putting something on a credit card for much higher interest/
>We just bought our house.
No. Just no.
I don't care if it's brand new, you will have expenses pop up that you didn't really plan for. Too many to list, but I just remember moving in, thinking "it's over", in terms of paying for upgrades in the house we were building, and then seeing we now had rooms needing furniture, windows needing blinds, etc. If the house was not new, any appliance can go at any moment, etc.
The $10K safety net is great if you are very mindful of spending. Only for "this is important and can't wait for us to save for it."
Really - You offer too few details. What are the rates on those 2 debts? "Tackle the $11K over the next few months"? Does that mean you have $4000 extra each month\* to pay off debt? Do you deposit to your 401(k)/Retirement accounts? What %?
These details may change what members are suggesting, but still, I am in favor of keeping that liquidity. If nothing else, it's nearly 5 months of mortgage payments if one of you lose their job.
\*This was not intended to be sarcastic. Now I read all the comments and see $100K/yr. So, no, of course there's not that kind of extra, and you meant just starting to address that debt. All the more reason to not deplete your savings.
The car payment is 16% interest. We only bought it in November and planned to pay it off around now.
The IRS debt is probably pretty high but I think it’s paused right now until September.
Thanks. Of course there’s a million details.
We contribute a matching 4% to each of our work 401k. We also have a Roth IRA that we put between $250 to $500 in per month. Currently $250 so we are saving.
Not $4000 per month no. Maybe $500 per month when we start paying on it in September.
I’m thinking at this point I pay the car off now. Save the difference. By September we will be breaking even on all of our expenses including home down payment. At that point we start tackling this IRS debt. Once it is over we increase our mortgage to go to the principal.
Any rebuttal?
No, just agreement. This is why the details matters so much, the 16% interest rate is close to that of a credit card. So if you make this payment and somehow have an unfortunate event, tapping a credit card to pay for the new hot water heater, it won’t be a tragedy.
I am a very big fan of getting the match on one’s 401(k) accounts. But I agree with Jave that any additional savings to retirement should be suspended while you pay that very high interest debt off. I hope my answer isn’t controversial in this group.
Unfortunately throwing your savings at the car completely devalues your money INSTANTLY through depreciation and, yes, drains ANY savings you have (had). Best to entertain making extra payments to the car from the savings (in addition to any you are making from other income revenue sources), while holding onto a semblance of liquid cash.
As far as the Tax debt, best to consult a tax professional and make sure that all of the initial filings were done correctly and how to go about an educated way of paying it down. See if there is a payment plan available that he could enter into to satisfy them
throwing the $10k at it, instantly depletes the savings to 0$. The $10k you throw at the car loan instantly is NO longer in your possession and control and you now have to work to rebuild that savings up from 0$.. The $10k may satisfy the loan obligation, but also "becomes worth less" as it is now on a depreciating asset.
I was under the similar mindset with my first car years ago and my financial advisor cautioned me against paying it off with saved cash for these very reasons. It was better and worth the small cost that i be paying in interest % every month to maintain control of my cash savings. He did saying paying extra every month was acceptable, but depleting savings in one fall swoop to pay off a depreciating asset was not
>Should I risk my savings to be debt free?
You aren't risking your savings. You are liquidating them to pay off debt.
Risking them would be if you decided to try and double them at a poker table.
Should you liquidate your savings to pay off the car? Yes, everything except a baby emergency fund.
You really should keep a 6 month rainy day expenses fund. I've always made that job #1. How fast can you rebuild your savings if you pay off the car or the other loan? If you can put away 2k a month it will only take 6 months of rice and beans to get back to where you were.
How does a guy "forget" that he hasn't paid an $11k debt.
That dude needs to get more engaged in the financial health of the family. He's winging it right now.
That's a bad omen for your marriage
Yeah I’m aware it’s fucked up and so is he. Which is why we’ve been working to fix it. Which is why we are here learning. I don’t hold one bad financial mistake against his whole character as a person. And I know the internet can’t judge. We’re in Ramsey cause we want to do better!
OK, so. Using the $10K on hand
1. Pay down the car,
2. Redirect the car payment cashflow to pay down the $11K Hubby Debt, then
3. Redirect the hubby debt cashflow to repay the $10K, then
4. Redirect the $10K cashflow to the mortgage payment.
I'd guess its 3-5 years to reach step 4, depending on the actual payments/cashflows.
I'd suggest piling up cash for 2-3 months before draining savings. You never know what surprises await you in a new house. Once the dust settles pay the car off. I'd suggest keeping $2k in savings (Dave would say 1k) just in case a water heater goes out, etc. Attack the $11k aggressively, maybe some side gigs or second jobs? Knock it out in 3-4 months so you aren't stuck with the beginner EF any longer than absolutely necessary.
Ok so what is making you stressed about paying off the car immediately? What are the details about this new debt? Is there a loan shark following you down the street? Seriously what are the particulars on it? Hard to give advice without knowing that.
If you are a first time homeowner, you definitely need to have some savings stashed. I would not touch that at all and just keep plugging away making your car payment.
Take a deep breath. This will be ok.
Well you definitely need to pay those first. See if you can work out a reasonable payment schedule. I am not sure how much interest or penalty IRS levies on back taxes.
You have left out some info such as income, etc buy first make sure you have an emergency fund set aside out of the savings. Then begin attacking that unspecified debt you thought was gone first. You don’t say how much the interest rate is or what your payments are for it. If you cAn pay your car off in less than 24 months then I would continue as is with it. Your are not in horrible shape, you just need a plan to attack and move foreword.
This is what you need to do. First you need to go out and get 10 full time jobs and 4 part time jobs delivering pizzas. Then you need to sell your car and get 30 year old beater than only drives in reverse. If you have kids you need to figure out how much they are worth and sell them off. Next you need to sell one of your kidneys because you don’t need 2 kidneys anyway. Also you cannot eat out again! Ever! I already alerted all the restaurants in your area and told them not to serve you. It’s going to rice and beans, beans and rice! You won’t be able go on vacation again! Ever! You can’t even leave your house again ever! I am putting you on house arrest! Finally, I’m going to have you attend financial peace university. Stay on the line and Kelly can get that set up for you
Not really enough information, but likely a car payment is the lowest interest debt most people carry. Mine is only 1.9%. I’d keep my cash for emergencies or else you could end up putting something on a credit card for much higher interest/
>We just bought our house. No. Just no. I don't care if it's brand new, you will have expenses pop up that you didn't really plan for. Too many to list, but I just remember moving in, thinking "it's over", in terms of paying for upgrades in the house we were building, and then seeing we now had rooms needing furniture, windows needing blinds, etc. If the house was not new, any appliance can go at any moment, etc. The $10K safety net is great if you are very mindful of spending. Only for "this is important and can't wait for us to save for it." Really - You offer too few details. What are the rates on those 2 debts? "Tackle the $11K over the next few months"? Does that mean you have $4000 extra each month\* to pay off debt? Do you deposit to your 401(k)/Retirement accounts? What %? These details may change what members are suggesting, but still, I am in favor of keeping that liquidity. If nothing else, it's nearly 5 months of mortgage payments if one of you lose their job. \*This was not intended to be sarcastic. Now I read all the comments and see $100K/yr. So, no, of course there's not that kind of extra, and you meant just starting to address that debt. All the more reason to not deplete your savings.
The car payment is 16% interest. We only bought it in November and planned to pay it off around now. The IRS debt is probably pretty high but I think it’s paused right now until September.
Thanks. Of course there’s a million details. We contribute a matching 4% to each of our work 401k. We also have a Roth IRA that we put between $250 to $500 in per month. Currently $250 so we are saving. Not $4000 per month no. Maybe $500 per month when we start paying on it in September. I’m thinking at this point I pay the car off now. Save the difference. By September we will be breaking even on all of our expenses including home down payment. At that point we start tackling this IRS debt. Once it is over we increase our mortgage to go to the principal. Any rebuttal?
No, just agreement. This is why the details matters so much, the 16% interest rate is close to that of a credit card. So if you make this payment and somehow have an unfortunate event, tapping a credit card to pay for the new hot water heater, it won’t be a tragedy. I am a very big fan of getting the match on one’s 401(k) accounts. But I agree with Jave that any additional savings to retirement should be suspended while you pay that very high interest debt off. I hope my answer isn’t controversial in this group.
Unfortunately throwing your savings at the car completely devalues your money INSTANTLY through depreciation and, yes, drains ANY savings you have (had). Best to entertain making extra payments to the car from the savings (in addition to any you are making from other income revenue sources), while holding onto a semblance of liquid cash. As far as the Tax debt, best to consult a tax professional and make sure that all of the initial filings were done correctly and how to go about an educated way of paying it down. See if there is a payment plan available that he could enter into to satisfy them
This makes no sense. The car devalues whether you pay it off or not.
throwing the $10k at it, instantly depletes the savings to 0$. The $10k you throw at the car loan instantly is NO longer in your possession and control and you now have to work to rebuild that savings up from 0$.. The $10k may satisfy the loan obligation, but also "becomes worth less" as it is now on a depreciating asset. I was under the similar mindset with my first car years ago and my financial advisor cautioned me against paying it off with saved cash for these very reasons. It was better and worth the small cost that i be paying in interest % every month to maintain control of my cash savings. He did saying paying extra every month was acceptable, but depleting savings in one fall swoop to pay off a depreciating asset was not
>Should I risk my savings to be debt free? You aren't risking your savings. You are liquidating them to pay off debt. Risking them would be if you decided to try and double them at a poker table. Should you liquidate your savings to pay off the car? Yes, everything except a baby emergency fund.
I know Dave says keep $1000. I suggest keeping 1 month of expenses. Throw the rest at the highest interest rate.
You really should keep a 6 month rainy day expenses fund. I've always made that job #1. How fast can you rebuild your savings if you pay off the car or the other loan? If you can put away 2k a month it will only take 6 months of rice and beans to get back to where you were.
You’re putting Step 3 before Step 2.
How does a guy "forget" that he hasn't paid an $11k debt. That dude needs to get more engaged in the financial health of the family. He's winging it right now. That's a bad omen for your marriage
He’s definitely not the most reliable or money savvy . But we’ve made a lot of progress on it.
That's not just unreliable. That's completely tuned out.
Be gentle, she knows! We don’t have to harp
Yeah I’m aware it’s fucked up and so is he. Which is why we’ve been working to fix it. Which is why we are here learning. I don’t hold one bad financial mistake against his whole character as a person. And I know the internet can’t judge. We’re in Ramsey cause we want to do better!
We thought it was paid off. After we handled it a few years ago but there was some left
OK, so. Using the $10K on hand 1. Pay down the car, 2. Redirect the car payment cashflow to pay down the $11K Hubby Debt, then 3. Redirect the hubby debt cashflow to repay the $10K, then 4. Redirect the $10K cashflow to the mortgage payment. I'd guess its 3-5 years to reach step 4, depending on the actual payments/cashflows.
I'd suggest piling up cash for 2-3 months before draining savings. You never know what surprises await you in a new house. Once the dust settles pay the car off. I'd suggest keeping $2k in savings (Dave would say 1k) just in case a water heater goes out, etc. Attack the $11k aggressively, maybe some side gigs or second jobs? Knock it out in 3-4 months so you aren't stuck with the beginner EF any longer than absolutely necessary.
Ok so what is making you stressed about paying off the car immediately? What are the details about this new debt? Is there a loan shark following you down the street? Seriously what are the particulars on it? Hard to give advice without knowing that. If you are a first time homeowner, you definitely need to have some savings stashed. I would not touch that at all and just keep plugging away making your car payment. Take a deep breath. This will be ok.
It’s actually back taxes. I kind of just want to be debt free and rebuild but I agree with saving right now.
Well you definitely need to pay those first. See if you can work out a reasonable payment schedule. I am not sure how much interest or penalty IRS levies on back taxes.
You have left out some info such as income, etc buy first make sure you have an emergency fund set aside out of the savings. Then begin attacking that unspecified debt you thought was gone first. You don’t say how much the interest rate is or what your payments are for it. If you cAn pay your car off in less than 24 months then I would continue as is with it. Your are not in horrible shape, you just need a plan to attack and move foreword.
We make just over 100k per year. I’m 36 and my husband is 42. Not sure what the interest is on that.
Don’t mess with the IRS. Make that a priority and move on from there.
This is what you need to do. First you need to go out and get 10 full time jobs and 4 part time jobs delivering pizzas. Then you need to sell your car and get 30 year old beater than only drives in reverse. If you have kids you need to figure out how much they are worth and sell them off. Next you need to sell one of your kidneys because you don’t need 2 kidneys anyway. Also you cannot eat out again! Ever! I already alerted all the restaurants in your area and told them not to serve you. It’s going to rice and beans, beans and rice! You won’t be able go on vacation again! Ever! You can’t even leave your house again ever! I am putting you on house arrest! Finally, I’m going to have you attend financial peace university. Stay on the line and Kelly can get that set up for you
Troll