Credit Card Debt Update – Under the $4K Mark

I love days like today where we can hit little milestones. I actually updated my debt tally on the right earlier today but I didn’t get a chance to write a post until now. Danielle was eagle-eyed and spotted it:

omg, are you really only $199 away from savings=debt now? Aaaahhhh!

Yeah, it sort of feels like that – Aaaahhhh! Our savings is at $3,800 and our credit card debt is at $3,999. I wanted to be able to pay $199 more but we just couldn’t do it right now. By the end of the month, we should be able to hit that milestone.

Then will come $3K, $2K, $1K, $500. We still have a way to go, but I am getting excited that we are getting so close!

Posted by Tricia on March 10, 2009 at 9:25 PM in Debt Updates | 13 Comments »
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debtdieter responded:
Posted: March 11th, 2009 at 3:31 am
Congrats on cracking the $4K mark, you’ll be done before you know it.
cheryl responded:
Posted: March 11th, 2009 at 4:59 am
Fantastic. You are so close. What a great job you have done so far.
a_reader responded:
Posted: March 11th, 2009 at 7:21 am
I have two credit cards totaling $27k. I have $2k in a savings account and am getting $11k back in tax refunds.

I’m debating on what to do with the tax refund. I could pay off one of the credit cards ($9k) and put away the other $2k or use some of it.

Or do I put away the tax money into my savings, to build that up…then keep paying towards the credit cards until next year (hopefully get a nice tax refund and pay off a large chunk then).

note: i am committed to not using the credit cards anymore. so having a nice chunk in savings could be good, in those cases where I need the $ but dont want to use the cards.

thoughts, suggestions???
Jen responded:
Posted: March 11th, 2009 at 10:07 am
A_reader: I think some of you decision depends on how secure you feel in your job. Right now with all the layoffs that are occuring, for many people cash is king.

If you were to save your entire refund, then you’d have $13K in the bank, which sounds like a very good cushion should you have a major emergency, such as losing your job or having a medical emergency. If you suddenly lost your income, then the $13K would help you stay current on your credit card payments as well as assist in paying for food, utilities, etc.

So, I’m heavily in favor of saving cash right now. My advice to you would be to save enough of the tax refund so you have at least 3 months’ worth of expenses. That should make a good emergency fund. Then, if there is any of the tax refund left over, put that towards your debt.

Also, $11K seems high for a refund. It might be a good idea to review your withholding and see if you can get more take home pay in your paycheck. That would enable you to put more towards debt throughout the year.

Of course, this advice may not apply to your particular situation. Maybe you have a source of income other than your job, or your income is highly variable, or your peace of mind at paying off a credit card is worth more than having a stash of cash for an emergency. Ultimately, it’s up to you to decide what is best.
a_reader responded:
Posted: March 11th, 2009 at 10:53 am
yea I’d like to have a stash and pay off the credit card.

i currently claim 0 b/c I like having a refund at the end and not worrying about owing…it’s a nice way to “save” so to speak. of course I could claim more, get more in my paycheck and force an auto-withdraw from checking to savings instead.
Deby responded:
Posted: March 11th, 2009 at 1:48 pm
Congratulations Tricia! You’re getting soooo close!
We paid off the last bit of our credit card debt last week and boy, does it feel good
Mike responded:
Posted: March 11th, 2009 at 4:22 pm
a_reader, as a taxpayer, I’d like to thank you for providing that 0 interest loan to our government in their time of need.
HS@OurDebtBlog responded:
Posted: March 11th, 2009 at 4:38 pm
CONGRATS!! we applied all our tax refund to our credit card so we are down to 1000 this month. Part of me wants to rake up debt again so I can blog about it LOL

HS
Jessica responded:
Posted: March 11th, 2009 at 6:05 pm
ohmygosh. I remember first coming to the site when you had about 30k in debt and I was like O_O and thought the debt was insurmountable. Congratulations so much! Start working on retirement savings after debt is paid off.
a_reader responded:
Posted: March 12th, 2009 at 7:53 am
@Mike – yea I know, I debate whether to claim 1 or 2, but I’ve liked getting a nice refund at the end. guess I have to control myself and just drop the additional income (if i claim 1 or 2) into savings without spending it.
danielle responded:
Posted: March 12th, 2009 at 3:19 pm
Congrats again and thanks for quoting me, lol
Filing Bankruptcy responded:
Posted: March 12th, 2009 at 4:04 pm
Great job!

a_reader: I agree with a few other suggestions, you should definitely make sure you have enough savings to get you through a job loss. I know first hand what it’s like, my partner lost his job due to his company moving across the country 2 years ago, it took him 9 months to find something. We were lucky enough to have the savings to make it through. Unfortunately we haven’t been able to save enough to replace that savings and he just got laid off again last week. Three months isn’t enough savings in this economy, so be prepared for disaster.
James @ GoingBrokeBlog responded:
Posted: March 12th, 2009 at 11:03 pm
That is amazing Tricia; I really respect the fact that you and your hubby were able to work and have discipline to get those debts paid off. You are a rare example of fiscal responsibility and recover from debt. Good on ya!

a_reader, just to throw in my two cents and to offer another voice, if I were in your position I would use the tax return money to pay off your highest interest credit card and keep the remainder in savings. You’ll knock out the interest you are paying the credit card company each month, and in case of a life emergency, you can always use the credit card. I haven’t found an auto shop, repairman, or hospital that wouldn’t take a credit card for payment.

Unless you have incredible rates on your credit cards, you will get a lot more cash in pocket from paying down a 10-20% credit card than you would gain from putting that same money in a 5%-interest savings account.

Just a thought.