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Well, June turned out to be a rough month, but things ended up coming together. I’m a little late with this update due to holiday happenings, but we were able to pay back $500 to our savings account and we were able to pay the minimum payment on our credit cards ($132). With that, here are the new totals:
Credit Card Debt: $8,732
Savings Account: $3,644
It is very tempting to “borrow” some of that savings account money to pay off more of our debt. There is another big milestone looming - paying off $30,000 worth of credit card debt. We’d only have to “borrow” $1,118 to do it. You can see how tempted I am because I ran the numbers LOL. For now, though, I really want to get our savings account to $4,000.
Once our savings account hits that balance, then it will be time to start kicking some debt booty again 
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Credit Card Debt
- Starting = $37,614
- Paid Off = $29,012
- Current = $8,602
- $25 ING Savings Bonus
Savings Account
- Current = $3,750
Posted: July 5th, 2008 at 11:30 pm
I imagine it will be really tempting to move $4k in savings when your debt totals are hovering around $4k, too. While it would be nice to eliminate the debt in one fell swoop, it’s probably not a great plan because you would be completely without savings - and that’s usually when something bad happens!
Posted: July 6th, 2008 at 12:51 am
I can definitely understand the temptation to use the savings to pay debt, but Frugal Dad is right, no savings is scary if something happens.
Posted: July 6th, 2008 at 11:53 am
This is such an interesting topic. Here in the UK, the debate from finance expert, Martin Lewis is that one should use one’s savings to clear debt and then use credit card in emergencies.
On the whole, I agree with Lewis but not on this point about savings. Frugal Dad and Budget Mama are both right — no savings. I think that would be tantamount to being naked like Lady Godiva and knowing you will never see clothes for the rest of your life.
I think the problem is where do you strike a balance between healthy savings and a healthy(ish) debt?
Posted: July 6th, 2008 at 12:10 pm
It must be exciting to see the numbers in your savings account get closer to the amount of your credit card debt. It’ll be even more exciting when your debt is less than your savings.
Posted: July 6th, 2008 at 4:16 pm
I’ve been following your blog for over a year, and I love how your debt has been steadily decreasing for all that time. Slow and steady - you’re a perfect example of how chipping away at something little by little can have huge results. You’re almost there! I agree that it’s best to keep some money in savings, but when we had debt, I had a really hard time doing that… our savings account was pretty skimpy until we paid off our debt. I’m looking forward to the day when your debt number is a big goose egg
Posted: July 7th, 2008 at 8:02 am
Well, I’m going to give the contra advice. Unless your savings are in a tax free account or your credit card debt is still at 0%, it can be a costly not to focus on the debt considering the interest you earn on your savings is at a low rate and then you pay tax on that interest, whereas you’re paying a high rate of interest with after tax dollars on your credit card debt.
The problem with just paying off your credit card with the savings isn’t having to put any emergencies on your credit card (net worth wise you’d still be further ahead than c/c+savings), but is instead if that disappointment would encourage you to start spending on your cards again.
In the past, perhaps that might have been the case, but after such a hard slog and being so close to your goal I find it hard to believe you wouldn’t have the strength to see it through to the end, so I’d be in the “drop all your savings on the card” camp, get your credit card debt to zero, and then rebuild your savings… that will happen a lot faster when you aren’t splitting your funds and the credit card monkey will be off your back a lot sooner.
Posted: July 7th, 2008 at 9:05 am
Steve - Our credit card debt is at 0% right now, so it’s not costing us to have our money in savings instead. But you are right. If our debt was at 18% or so…it would be a different story. I’m sure our savings account wouldn’t be so large. We’ve given the CC companies enough in finance charges LOL.
Our 0% will expire near the end of the year. At that time, we’ll have to make a decision as to what to do.
Posted: July 7th, 2008 at 9:08 am
Steve- For now, her cc debt is at 0%, but from what I gather, it won’t last forever.
I often say to myself- it all comes out the same in the end. Whenever I have been in debt, I have used savings to pay it off, and then counted on the credit cards “in case of an emergency”. Then, I had an emergency, used the card, and wanted to kick myself in the arse for doing that. In reality, if I had not paid off the debt with my savings, and then in time, used the savings to cover that emergency, I would have been in the same situation, number-wise. Do you know what I mean? I probably would have been a lot less mad at myself, though.
Whatever we do, it will all come out in the wash.
Posted: July 7th, 2008 at 9:13 am
I’d keep going on the savings to get it to the 4k and then tackle debt. The thing I’m wondering is what happens when you get to 4k left on the credit card and 4k in savings? For me personally I would probably go for broke and sprint to the finish. Your effort to pay off nearly 30k in credit card debt is inspiring to me.
Posted: July 7th, 2008 at 9:28 am
Jim - I’ve thought about that a lot. I think it will depend on what is happening when we hit that sweet amount.
I think, though, that just knowing that we could pay off the existing debt in one swoop is going to be awesome.
Posted: July 7th, 2008 at 11:58 am
Very cool news on the 0%! That being the case, my advice flips to putting everything you can in savings until the 0% is off, then just use the savings to pay the c/card in full then
Posted: July 8th, 2008 at 3:39 am
When we moved our debt to a 0% card, we calculated a payment plan (easy to do without the compounding
that would get us to zero just as the card ran out. Technically, we paid the minimum and paid the rest of the “payment” into savings for the interest in the meantime. But you have to remember that money is for the card, not real savings.
Actually, you want to pay the card off just before it runs out or the penalties can be vicious. You really have to check the dates and fine print on those 0% cards. If even one day of the last statement period is outside the 0% deal, the whole month reverts to whatever the “normal” (loan shark) interest rate is. Make sure you check the exact date the deal runs out and your statement date. Also check for any other penalties for that last balance. You may find dipping into the savings account to be the better idea at the end there, unless you get another offer to transfer
of course.
Posted: July 9th, 2008 at 7:04 am
Oy, so many people saying so many scary things about 0% cards!!! I’m scared !