In these times: Save up vs. Pay off debt? (credit card, student loan, payments)

[oscottscotto]

So, what would you do in my situation?

Preface: I currently owe 50k in student loans, and obviously that will not be paid off anytime soon. It's hard to consider it an immediate debt since I cannot do anything about it currently - other than pay my bill each month for the next 20 years. Aside from that, I owe about $6700 on a credit card and $4800 on my wife's car. I don't own a house. So, in immediate debt, I'd say I'm at around $10,500.

Situation: By summer of 2009, I will have enough money saved up to pay off this immediate debt of 10k. But, if I do that, my checking and savings will start over again at zero (yikes). Normally, that would not be a problem, as I could then start saving again. But now with the economy looking shaky and such, it seems like it might be a better idea to keep that 10k in my bank account at that time, and just continue to pay $300-$400 a month towards these two bills ... because what if I pay off this debt, get laid off, and have no money to pay for the necessities - such as rent, food, gas, etc? Whereas, if I keep the money at that time, I may still owe debt, but will have plenty enough stockpile money for necessities (at least for 4-5 months) if something were to happen to my job.

Question: What would you do in this hypothetical situation to happen next summer, based on this shaky economy? Would it be better to pay off all my immediate debt at that time (not including student loans), or to keep the significant money in the bank and continue to make monthly payments on the debt?

[TexianPatriot]

Originally Posted by oscottscotto

So, what would you do in my situation?

Preface: I currently owe 50k in student loans, and obviously that will not be paid off anytime soon. It's hard to consider it an immediate debt since I cannot do anything about it currently - other than pay my bill each month for the next 20 years. Aside from that, I owe about $6700 on a credit card and $4800 on my wife's car. I don't own a house. So, in immediate debt, I'd say I'm at around $10,500.

Situation: By summer of 2009, I will have enough money saved up to pay off this immediate debt of 10k. But, if I do that, my checking and savings will start over again at zero (yikes). Normally, that would not be a problem, as I could then start saving again. But now with the economy looking shaky and such, it seems like it might be a better idea to keep that 10k in my bank account at that time, and just continue to pay $300-$400 a month towards these two bills ... because what if I pay off this debt, get laid off, and have no money to pay for the necessities - such as rent, food, gas, etc? Whereas, if I keep the money at that time, I may still owe debt, but will have plenty enough stockpile money for necessities (at least for 4-5 months) if something were to happen to my job.

Question: What would you do in this hypothetical situation to happen next summer, based on this shaky economy? Would it better to pay off all my immediate debt at that time (not including student loans), or to keep the significant money in the bank and continue to make monthly payments on the debt?

Depends. If you think we'll hyperinflate, then pay as little as possible towards the debt. If you think we'll see deflation, pay down as much debt as possible as soon as possible.

[cpg35223]

My opinion? Unless you have a 100% assured stream of revenue coming in (i.e., you're a government worker with job tenure), cash is king right now. If you don't have six months' expenses in the bank, then you need to get there in a hurry.

[Movie Lover]

I do nothing but save. I've never accumalated any debt as I would never pay it all off. I KNEW MY LIMITS THEN AND I KNOW THEM NOW. I NEVER GOT TAKEN FOR A SUCKER AND YOU KNOW WHAT, I'M PROSPERING WHERE OTHERS HAVE FAILED.

TA TA.

[oscottscotto]

Originally Posted by Movie Lover

I do nothing but save. I've never accumalated any debt as I would never pay it all off. I KNEW MY LIMITS THEN AND I KNOW THEM NOW. I NEVER GOT TAKEN FOR A SUCKER AND YOU KNOW WHAT, I'M PROSPERING WHERE OTHERS HAVE FAILED.

TA TA.

Are you saying I'm a sucker? I owe 50k, but that is for a bachelors and a masters degree. I owe 6k on a credit card because of a medical emergency combined with moving expenses to take a nice, new job. I (we) owe 5k on a car because I married a woman who still owed on her bought car. Now, on the last one, I may be a sucker now that I think about it lol. Other than that, I am not. But thanks for your opinion (although it didn't really answer my question or help any).

[oscottscotto]

Originally Posted by TexianPatriot

Depends. If you think we'll hyperinflate, then pay as little as possible towards the debt. If you think we'll see deflation, pay down as much debt as possible as soon as possible.

Well, I would think hyperinflation a better prospect to bet on right now?

[TexianPatriot]

Originally Posted by oscottscotto

Well, I would think hyperinflation a better prospect to bet on right now?

I think so too. That's why I'm not too concerned about borrowing for college and my truck note. We are the largest debtor nation on the earth. We either default or print money. In either case, the dollars that the rest of the world is holding will find their way back home.

[Movie Lover]

I'm not called anyone a sucker, you did what you wanted to do.

[emailvasally]

next summer is a long time away.
at this point IMO you should pay min. and bank every cent you can. And when I say that it means no going out to eat, instead of buying that nice steak for dinner buy a flank stk, etc. cut you expenses as much as you can and bank any leftover. Watch your cc closely. someone mentioned cc's changing rates on another thread and I checked into it. they are not only changing rates but also changing limits. You need to keep your FICO up so that other bills dont go up. As long as you have a decent interest rate on the cc's keep the money in the bank in case of emergency.
If I were you, I would even grab an extra part time job until I had 6months reserve plus cc's paid off. also the type of student loans make a difference. Can the interest rate change?

[cpg35223]

Aside from our mortgage and a car payment, we retired our debt last year. Even then we bought a lot less house and a lot less car than the bank would have financed. My big worry would be in terms of our commercial real estate holdings. We're in warehouses and industrial properties, all of which are at least 90% leased, and the cash flow more than pays our mortgage. We're in an economically stable market. At the same time, we're keeping a close eye on everything, right down to what we spend on groceries.