by Tricia
The time stamp on this post is correct. I am a bit of a night owl tonight. I have been for the past few nights working to meet a deadline. My eyes are extremely tired and my cat is looking at me like, “Why aren’t you going to bed??” Sigh – my body is getting too old for this 🙂
My April Fool’s day was pretty uneventful. No one played any jokes on me. My son and I almost got my husband. We have two locks on our door and we were going to alternate locking them so my husband would unlock one and then we’d lock the other. He’d unlock the other and then we’d lock the first one. It was the perfect prank – if he didn’t hear us on the other side of the door. We did our best to hold in the laughter but we couldn’t do it. It feels good to laugh like that since sometimes as an adult things are so serious.
Speaking of a serious subject, I haven’t touched our finances in a few days. I had to pull some money out of our savings account for some upcoming medical costs that are not covered by our insurance. I’m not exactly sure how much it will cost, but I took out $400 to be safe. Our last debt payment really wiped out the cash we had available. At this point, I’m not sure if we will replenish the savings account before our credit card debt is paid off. We’ll see how it goes.
I’m starting to feel the pressure, though. That May 2009 goal date for credit card debt-payoff is right around the corner. Part of me is saying, “Go ahead – use the savings to pay it off.” The other part of me is saying, “Don’t do it – what if an emergency comes up?”
I think tomorrow will be dedicated to taking a close look at our finances to get my bearings.
I bet the process of trying to fool your husband was fun either way. Maybe next year.
You are doing great on your finances and your savings, even after your withdrawal, is still more than you owe on those credit cards. No worries. Fight the itch to use the savings to pay it all off with your savings though. Murphy likes to roll it at the worst possible times.
I have a friend who is in a similar situation (has enough savings to pay off credit card debt but opts not to based on fear of emergency). Can you explain the reasoning to me? I love your blog and you are doin gway beyond great but I don’t get this. If an emergency arises, why couldn’t you use a credit card? You are now disciplined enough to pay away the emergency asap. And if that worst case scenario happens you are paying credit card fees (just like you are currently). I think I am just trying to understand what seems like more of an emotional reason versus logical.
marg, it has to do with habits. You get out of debt by changing your habits and sometimes that means sticking to it, even if it might not be the most rational thing at that moment. You aren’t supposed to need the credit card for emergencies (that’s the start of a new hole, where you are paying interest instead of earning it), so you should not let yourself get into a situation where that might happen. period. Dumping all the savings into the credit card would set that potential up. You might get lucky and it might just work out, but that would be going against newly engrained habit.
I’m astounded Tricia is this close at all to her original pay-off date. That already is a victory. Who comes in that close to any long-term project? Tricia’s already made the deadline in my book.
Marg – It probably took several months to build up the cash cushion. Let’s say it takes your friend 24 months to save up $1000, or she can put away $50/month. If her debt payment is $100/month, then she has $150/month she’s doesn’t need to pay the other bills, such as rent/mortgage, utilities, etc. If she spent $800 of her savings to pay off her debt, then she’d have $200 left in her emergency fund, with the ability to add $150/month to it. So it would now take her 5-6 months to build up her savings to $1000.
If she has an emergency that costs $900 before she can build up her savings, and she has to put the $900 on her credit card, she isn’t going to be able to pay off that balance at the end of the month. In fact, since she only has $150/month to put towards that balance, it’s going to take her several months. This means she’s back to paying steep finance charges on that balance, and her $900 emergency is now going to cost her more than that – quite possibly A LOT more. And she isn’t adding money to her emergency fund. So now she’s back in the debt hole.
If she kept the emergency fund, then she’d have the cash to handle the emergency without adding to her debt problems. Granted, she’s still paying off her original balance, but at least she’s still making progress instead of taking a step backwards. And she’ll still have $200 in her savings account… That’s earning interest, however small it may be.
My example probably isn’t the best, and I’m sure someone out there can give a better one with interest calculations, etc.
However, you do raise a good point. If you take the security blanket approach to your savings too far you can end up being a hoarder and not using your cash when you really should. But, I think at this point, neither your friend nor Tricia are at that stage.
Heh – Emmi basically said what I was trying to say, but in much better way. That’s what happens when I started a long-winded comment, get distracted, etc. 🙂
You are a great inspiration to the rest of us! Don’t start second guessing yourself. If May turns into June – that is just fine!
Great job getting this close!!! It is going to take me all year to get where I need to be. I probably wouldn’t pay it off with the savings either (especially if you’re going to use all of your savings to do it). I’m contemplating doing it for a smaller amount, though, and leaving some in savings… because in my situation I don’t have to use all of my savings to get some of mine paid off.
I’m with Marg.
The fact that you are so close to your estimated pay off date with such little (as compared to your original balance) is such an ispiration, as well as speaking volumes about you and your family’s commitment of getting out of debt. I applaud you and take with me the inspiration that it can be done!
I, personally, would leave the savings alone. I would rather pay interest for one more month on a credit card than have Murphy visit and have to start the cycle over again, albeit for a shorter amount of time. You didn’t come this far only to use the credit cards once again!
Right now it is taking all I can take to not use my $1,000 checking account buffer and using it to pay off a chunk of my debt. I already have a $1500 EF – the buffer is in place because I work in tip based employment and income is NOT known on a month to month basis. This buffer helps tide the blow on slow months without having to touch the BEF, after making necessary adjustments in the budget, of course. I am telling myself it is there for a true purpose, but man, is it hard! I’ll make you a deal – you don’t touch your savings and I won’t touch my buffer, OK?