Debt vs savings?? Would you rather pay off debt or have a nice cushion in savings?

Read Dave Ramsey :) love his book! We have no debt because of it and both drive 2 year old vehicles and own a brick home :) pay off your smallest debt first and us the money from those payments to pay off next lowest debt sooner

Agree with most others, pay what has highest interest. One other thing to consider is what you could make on your money too...

For instance if your loan has 3% interest but you could invest your money or something and make 5% interest it makes more sense to pay the loan and invest. However finding something low risk and high reward is not easy so to keep it simple...pay off what has higher interest!

I would ask a financial advisor :) my bank offers free finance "counseling".

I was just given a slap to the face when I was told that you don't really have savings/extra money when you still have debt. Lol. I guess it makes sense.

I'd leave enough in savings for at least 3 months PLUS the two months that you're going on maternity leave. I'd use the rest to pay down the highest interest. Did you run it through an amortization calculator to know how much you'll end up paying on both based on your estimated time to finish paying them off? Do it so you can see the difference. Google "Bret amortization calculator" that's the one I use.

Paying off debt opens up funds to be put in savings. So we've paid off and then worked on getting more savings.

We've used Dave Ramsey's teachings. Basically we've kept $1000 in the bank for emergencies, paid off debt and then worked on more savings. No sense in paying interest on debt and making nearly nothing for interest on savings.

Go to ther groups and type Savings...I will see if I can invite you OP

Imo, "savings"doesn't count for much when there are large loans owed. I figure that I only have as much money as I don't owe elsewhere. So I'd pay off the car and put that money towards the student loan after.

Would doing so still leave you with a couple months worth of living costs in savings?

I'm not, I'd like to be. What's it called?

I personally would rather pay off my debts now and rebuild a savings. I am slowly but surely paying off my debts while slowly building up my savings (coins and loose dollars that SO and I put in a taped up coffee can).

OP are you in the "Savings" group on here?

The car payment is higher per month but the student loan has a bigger interest rate.

We don't struggle by any means, we live comfortably and put money in savings, 401Ks, and college funds for both kids (need to start one for #3 soon). My goal is to be completely debt free, so it's hard for me when I know we have the money but we still have the debt. :-)

I would pay of the car and then use the $ for student loan payments, leaving some of your savings. Unless the interest rates were much higher on the school loans.

Personally, I would pay off either the car loan or half the student loan. I wouldn't deplete your savings because you do need funds in case of an emergency (I believe I've heard 3 months worth of bills) and then out the rest towards one of your loans. We did that with my loans and a few of my husband's smaller school loans and it has helped tremendously. Especially since we are adding kid 2 to the mix. Good luck in what ever you decide. My mom is an accountant and does just what I said. They put enough money in savings until they have enough to pay off whatever they've bought, then pay it off. Granted, she makes 6 figures so it's a little easier for her to do that, but they usually pay off cars in 6 months to a year doing that.

which payment is higher per month and has the most interest?

the answer to that question is where you should put the money. but i see your husbands point. ide personally pay half of nest egg to whichever bill and keep the other half for emergencies.

You are right. Pay the car and put the payment elsewhere.

Also, with me going on maternity leave from Oct-Dec, he's nervous about funds. :-)

The school loan definitely has higher interest AND longer terms. It's double what the car loan is. I REALLY want to get that sucker paid off!

We had a plan, we'd pay of DH's car by the end of this year and my loan by the end of 2015. Unfortunately we had some things come up unexpectedly, and while we didn't have to pull any money out of savings, we just weren't able to up the payments on the car.

I think it depends on how much interest you're paying. For example, I don't pay any on my car loan, so it makes no sense to pay it off early.

If you are paying interest, I think it might be worth it to use part of your savings, depending on how much you have left. I wouldn't want our savings to drop below 3 months of living expenses (we are currently at around 4.5 or 5 months).

We pay on both loans every month, I just HATE paying loans. Hahaha! Aside from our mortgage, we've only ever had three loans. I paid off my car in February, 18 months early, and now we have these two that I'm really trying to tackle.

It is better to pay the smallest amount you owe, and then after that is paid off roll that money into the next highest payment. I would keep $1000 in savings in case of emergency.

I agree. I would rather have a nice cushion than deplete my savings completely