Credit Card Debt Update – $5,499

The weather outside is absolutely freezing! It’s a good chance to sit down and really take a close look at our finances and do some forecasting.

January may end up being a really nice month financially. I’m a little scared to see our next gas bill (due to this arctic chill in the Midwest), but other than that things are going well. Our income is up and we are still keeping our expenses fairly low. I am pleased to be able to get our debt down to $5,499.

I realized that we are only technically $1,759 away from being credit card debt free – that’s if we decide to use our savings to pay the rest off when we get close enough. I’m not sure if we will do it or not. I guess we’ll see when we get there

Posted by Tricia on January 15, 2009 at 10:19 PM in Debt Updates | 28 Comments »
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Kick Debt's Butt responded:
Posted: January 15th, 2009 at 10:38 pm
wow! Talk about a light at the end of the tunnel –

IF everything goes as planned, I’ve got a good 33 months to go – ugh…now if my wife’s company takes off (she owns an apparel business) then maybe that will go a bit quicker – one of the items in our Family Financial Freedom Pledge is that all windfalls go straight toward paying down debt.
Nicole responded:
Posted: January 16th, 2009 at 7:31 am
Wow, so close!!!! Congratulations!

Personally, I would use the savings when I got to that point. Or, at least most of it. As long as you are able to replenish it fairly quickly.

Freezing is rather an understatement! (I live in Wisconsin
Sara M responded:
Posted: January 16th, 2009 at 8:13 am
I’d recommend *NOT* using your savings to pay off your debt, once you reach that magic $3750…

It’ll keep you in the mindset of not touching that emergency fund unless it’s a true emergency, and not having to rely on your credit cards if something unexpected happens.

I had contemplated using our savings to reduce debt – and then WaMu and Providian each slashed my husband’s available credit (from a combined $24,000 to a measly $1100). He was able to get it raised up to $3000 total, but that would not be enough to cover any number of potential emergencies (replacing a furnace, major dental work, major car repairs, etc) – not to mention, there are some bills that just can’t be paid using a credit card. [see http://theundomesticwife.com/?p=176 if you want to read more about what happened]

As tempting as I’m sure it will be, I say keep the emergency fund and continue slowly reducing that CC debt!
Qcash responded:
Posted: January 16th, 2009 at 9:18 am
Tricia

Your NetworthIQ doesn’t seem to have been updated since July. Am I just missing something?

Congrats on all the hardwork you have been doing to get you and your family debt free.

Q
Tricia responded:
Posted: January 16th, 2009 at 9:32 am
Hi Qcash – no, you aren’t missing something. I am very behind with updating it. I need to do it soon for an end of 2008 recap.
cheryl responded:
Posted: January 16th, 2009 at 10:28 am
Fantastic job so far. I am so looking forward to the day when you say it is all gone.
Jen responded:
Posted: January 16th, 2009 at 10:36 am
Wow!! You’ve come such a long way!

If I were you, I wouldn’t use my savings to pay of the debt, either. You don’t know if you’ll need that savings to pay a high heating bill, a mdecial bill if someone has a boo boo, etc. I know it’s tempting to wipe out the debt in one fell swoop, but I’d be worried about any unexpected ermegencies that might come up, especially with the economy the way it is.

But, once again, congratulations on all your hard work!
Debtfree2009 responded:
Posted: January 16th, 2009 at 11:08 am
Congrats on your success. I would not use my savings because with this economy you never know what will happen. My husband was just told this morning he has to take a paycut.
Eddie responded:
Posted: January 16th, 2009 at 11:11 am
Stay the course….hang to the savings.

I could have killed off my cc debt sooner by tapping savings, but I wanted to discipline myself in the plan my wife and I started years ago.
danielle responded:
Posted: January 16th, 2009 at 11:48 am
Great job! I don’t see anything horrifyingly wrong with leaving only about a thousand in savings to pay off debt. The decision is up to you. Whatever you decide, don’t feel like you’ve done the wrong thing.
Michelle H. responded:
Posted: January 16th, 2009 at 3:08 pm
Hi Tricia,
I know Suze Orman says we all need 8 months of living expenses in an Emergency Fund. Anything over that could go to pay off debt. It kind of depends on how secure your income is too I think. We are self-employed so we save a bit more. Either way you’ve done great!
Alicia responded:
Posted: January 16th, 2009 at 3:48 pm
Congrats! You’re a true inspiration! Save that cash for emergencies as planned.
messy responded:
Posted: January 16th, 2009 at 3:53 pm
You have come so far! Wow that’s a lot of debt to pay off. Congrats!
momstheword responded:
Posted: January 16th, 2009 at 4:24 pm
It’s a tough decision, because of the interest you are paying on a credit card you want to pay it off as soon as you can.

But also, you want to have money in savings in case something happens, so you don’t have to start using the credit card again.

I’m sure whatever you decide will be what works best for you. Congratulations on doing such an awesome job!
danielle responded:
Posted: January 16th, 2009 at 8:55 pm
Re: paying off credit cards vs. having money in savings “in case something happens so you don’t have to start using credit cards again.”

So- what if “something” did happen? What if you got your debt down to $2750, and your savings is still at $3750? What *if* you just then paid off your debt and had $1000 left in savings and then “something” happened to the tune of $1500? Would it really be THAT bad? $500 back in the hole after paying off 37K in credit card debt? Do you think you wouldn’t be able to do it again?

What if something happened tomorrow, and it was a $5,000 emergency?

What if you used all of your savings to pay off all of your debt, put yourself right at zero and then NOTHING “happened”?

The truth is that we don’t know what tomorrow will bring. In the end, it will all come out the same.
Catherine responded:
Posted: January 16th, 2009 at 9:35 pm
Here’s why I wouldn’t use the savings: Your credit card debt is at 0%. You are earning *something* in your savings account, and you aren’t paying any interest on your debt. So if you use up your savings to pay off debt, you lose the earnings in addition to your emergency fund.
c.c. responded:
Posted: January 16th, 2009 at 11:58 pm
Wow. That’s so good. Your blog was my very first PF blog and it inspired me to start thinking real hard about paying down my debt! Just wanted to let you know.
Deby responded:
Posted: January 17th, 2009 at 2:03 am
Congratulations Tricia!
I vote leave the money in your savings. We are down to just $800 left on our credit card. I wanted to pull the money out of our baby emergency stash and pay it off, but BF talked me out of it. Just a couple of days later, my mother had major surgery. Instead of paying off the last of our debt, we’re using our savings to pay for a hotel room, food and gas 400 miles from home. We will pay off our debt, just a couple of months later than what I had hoped. I am certainly glad I listened to my BF, or we’d be 2 steps behind again.
Tabitha responded:
Posted: January 17th, 2009 at 12:53 pm
Catherine – that is great advice! I would leave the money in savings, also. Money in savings is “real” money. A credit limit is not real money and I would hate to have to use credit after all that work paying it off. But, I can also see wanting it over and done with.

Great job, Tricia!
Ninja responded:
Posted: January 17th, 2009 at 1:12 pm
It’s really hard for me not to use my little amount of savings toward credit card debt. What prevents me from doing so is that something would probably happen as soon as I did, forcing me to pull out the plastic to cover it.

Having that cash buffer is Murphy repellent!
Janelle responded:
Posted: January 17th, 2009 at 2:35 pm
Wow Tricia I am just so proud of you and your husband. I can remember when your balance was well over $25,000. Way to go! You encourage me to stay at it.
Ken responded:
Posted: January 18th, 2009 at 7:49 am
You definitely need to leave money in your savings for emergencies. I would have no less that $2000 at all times. Anything above that I would put toward paying down debt. Kudos to you for all the discipline you’ve shown in paying this large sum down. Keep up the great work!
Michael responded:
Posted: January 18th, 2009 at 1:10 pm
Great job Tricia! It looks like your well on your way to being out of the hole.
emmi responded:
Posted: January 18th, 2009 at 2:27 pm
This is very sad… we’re going to miss you when your cc bill is gone :_(
JW responded:
Posted: January 18th, 2009 at 6:37 pm
I was in a similar situation a month ago: I could either keep paying off one of my student loans at the regular pace, or use the savings I had accumulated to just get rid of it. I opted to pay it off.

While I think it’s probably sensible to have an emergency fund, a large part of debt involves our emotions. Not everybody reacts the same way, but I found the idea of not having to think about 2 student loans to be -less stressful- than not having any savings.

Great job, nonetheless. Congratulations.
emmi responded:
Posted: January 19th, 2009 at 1:21 pm
I find that building the savings account (like some crazed collector instinct) is the best buffer against buying things we don’t need. But everyone’s psychology differs.

If you want to make a mathematical decision about it… just look at where your zero percent ends. If I recall correctly (and really I’m not a stalker, I just remember stuff) you paid a 3% premium up front to move your balance to a new zero card…. In that case, if you are going to definitely pay it off before that runs out (thus limiting your interest to 3%), you should instead take some of the emergency savings you are tempted to pay down the card with, put it in a CD to earn that 3% interest back and hold on to the cc balance.
Shana responded:
Posted: January 21st, 2009 at 12:48 pm
DON’T use your savings!!! Back in August/September, I realized I had enough cash in my savings accounts to completely get rid of the last of my credit card and student loan debt, and be completely debt free. But, given that I’m super skittish about not having any money in savings, I didn’t do it. I’m SOOOO glad I didn’t, because in October, I lost my primary client and I’ve been unemployed ever since. If I hadn’t kept my cash reserves, I would be out on the streets or my mom’s couch. If I had a condo or a house, I’d probably be in, or close to, foreclosure.

I’d thought I was pretty safe with my primary client, yet I still was included in their corporate layoffs. Until this recession starts to abate, hold on to your cash!
Christy responded:
Posted: January 23rd, 2009 at 9:22 am
Our line of credit (our only non-mortgage debt) was $884.99 last week. We paid it off with money taken out of our account set aside for our house taxes (due June 30). We put a chunk aside every month to pay our property taxes.

The only reason we did this was it would have been paid off in a few weeks when I got paid anyway. So we borrowed the $ from ourselves to pay it off, saved the interest and now the money designated in our budget for paying that debt off by Feb 28 goes right back into savings to pay it back.

We got some extra money for selling our youngest’s old car seat and Dh got paid a little more than we expected, so we put all of that toward the savings and we’ll have it all paid back before we intended.

There’s nothing wrong with borrowing from yourself as long as A) you have a fast plan to pay it back, B) you don’t take it out of your emergency fund (unless it is a very small portion) and C) the money isn’t needed for at least 3-6 months.