Pay down debt or ???

[ZbornacSVT]

Normally this wouldn't be a question for me, but I think the climate is different enough to revisit this.....

Is paying down debt the best use of extra funds with the current/future economic situation? Does the shadow of the fiscal cliff change this answer?

I am not saying lets go blow the funds all willy nilly, but I find myself reluctant to just throw it at existing debt....I just feel like I need/want a larger emergency fund, but if things really go bad, what is cash really going to be good for?

Thought? Opinion? Discuss.....

 

[Leo]

I think we will see a drastic loss in the value of money. We have lost 20-25% of the dollar's buying power since the arrogant kenyan moved to D.C. I believe we will see another 50% loss in a very short time. That will cause huge unemployment and poverty that will cause a big increase in crime. On the otherside, a person has to live somewhere. Unless you have a place to move, I would fortify the nest both financially and provisionally. Just my two cents (of course they now cost $4.57) Pray for our country and our families

 

[Mr.JAG]

I think the answer is very dependent on your situation.

 

[Naptown]

money is going to continue to be cheap to borrow. I think Leo has a good point - get in a house that you can hunker down in for the long term. Moving is not going to be easy the next 4 years when real estate values fall*. After that, quit incurring more dept. Move towards paying it off.

* I'm not a realtor, this is just a "could be" secenario

 

[Hotdoger]

Get debt free. Incur no new debt. Ala Dave Ramsey

Small overview.

1. $1000. emergency fund
2. Pay off debts smallest to largest ( except mortgage)
3. 6 month of living expenses emergency fund.
4. payoff mortgage

It works!

I know.

 

[Justin Case]

Get debt free. Incur no new debt. Ala Dave Ramsey

Small overview.

1. $1000. emergency fund
2. Pay off debts smallest to largest ( except mortgage)
3. 6 month of living expenses emergency fund.
4. payoff mortgage

It works!

I know.

Great advice Hotdoger! This is what we're doing.

Also, look at where you can save money. For example, we've cancelled DirecTV and went to over the air reception, changed our cell phones to basic cell phones with no internet plan, changed to term life insurance instead of whole life, switched auto insurance to a higher deductible, limited our driving by combining trips, and stopped eating out.

We also sold off some things that we no longer needed through ebay and craigslist and turned stuff we weren't using into cash.

By doing these things we were able to pay off our auto loan (secured debt) and have now applied what we were paying on the auto loan to credit card debt and we will be paying off one of our credit cards this month. Then we will apply the amount for the auto loan and what we were paying on the credit card to the next credit card and we should be able to pay it off in 2 months. This process is called the debt snowball (#2 above). When the credit cards are paid off we will increase our emergency fund (#3) and then begin making additional principal payments on our mortgage. We will be totally debt free in 3 years.

 

[beararms1776]

Continue to pay on your debt if possible. Work overtime. That is if your employer can afford to pay you.
Hotdogger has some great advice there.

 

[hoosierdoc]

I say continue to get out of debt, but work overtime for a larger emergency fund. I'm attempting to increase my hours 20% next year to aid our debt payments.

 

[possum_128]

Pay it all off if possible. The money that you have been paying on debt will go to enlarge your savings so fast it will make your head spend.

I retired at the end of July and payed 98,000.00 to pay off my home with money from my retirement fund, vehicles were payed off some time ago. The feeling of owning everything in sight around you at home is hard to explain. For me this was the right choice, as there was no way I could make it on my retirement income and have a house payment. Now I can make it with funds to spare.

If you can do it, then go for it, pay it all off. You will not be sorry.

 

[CountryBoy19]

I'm not paying down any debt right now except one of my wife's student loans that is still north of 5%.

I anticipate inflation will far out-pace my mortgage rate so it will be beneficial to hold onto the mortgage and buy other thing that will otherwise be rapidly inflating in price (food, fuel, and other "goods").

 

[jeremy]

I'm not paying down any debt right now except one of my wife's student loans that is still north of 5%.

I anticipate inflation will far out-pace my mortgage rate so it will be beneficial to hold onto the mortgage and buy other thing that will otherwise be rapidly inflating in price (food, fuel, and other "goods").

Our thoughts as well...

 

[teddy12b]

I can't speak about what's best for everyone, but I'll say what my families plan is. For most of my life I've been the type to live relatively debt free. I don't like to stack up credit cards or finance TV's. With that background I've set myself up to have an outstanding credit score as has my wife. In the last year we build a house on a couple of acres where we can hunker down in for the long haul. I made certain features & upgrades that would be good for being prepared were included in the house. For example, a wood burning fireplace located towards the center of the house and not just an exterior wall. Another example would be in the design of gravel around the premeter to make overly sure that the sump pit wouldn't overflow in the event power was off for an extended period.

Did we go up in debt with all of this heck yeah. Was it worth it? To us I would say so because all we owe on is the house. Cars are paid off, and the credit cards that were used for out of pocket expenses building the house are soon to be paid off. Part of why we did it was because I wanted the land & water for obvious reasons, and my wife wanted the house with my few suggestions. We both wanted a low fixed rate and we have a 30 locked in at under 4% which is insanely dumb for the lending industry but that's for them to endure.

Besides the loan debt we're good with everything else and not to mention, I'm probably just like every other guy on this forum who could sell a rifle or four if I had to and still be feeling pretty good about things. If the US dollar collapses (matter of time at this point) then you know the want/need/demand for everything you've got in the safe just went up. Guns & ammo are probably the smartest investment a person could make right now and if nothing else it's an alternative cash account. The value of your stash of federal bulk 22lr isn't going down. The value of that 870 isn't going down, that rem 700 you bought at Dick's Sporting Goods for $450 on sale isn't going down. Those blemished AR-15 stripped lowers sure as the sunrise aren't going to be going down. The value of any high cap mag, glock pistol, etc etc etc. If you've got a tangible savings acount that you can liquidate quickly, then I think taking on more debt in some cases can be reasonable so long as you are capable of and intend to pay it off.

I don't want the responsibility of telling you what to do in life, but I'd sum up everything I just said by saying to make sure you have something tangible you can sell if you need to.

 

[PistolBob]

I'm just about ready to cash out some 401K, pay the penalty, and pay off my house. The value of money keeps getting to be less and less...so why not? I'd still have to pay the state property taxes or they will rape my dog and throw me off MY property. Property taxes on primary residences is nothing more than theft.

 

[femurphy77]

Pay it off!!! We just paid off a note we had to take out to sell our house 4 years ago, paid it off 1 1/2 years early. The last full year that we made the required payments, they made $600 interest off of us. The past year in which we've been paying 2 1/2 times the required payment they made less than $15 in interest.

Now the hard part is rolling all of that extra cash into our next debt which would go from 16 months to 5 months. We sure would like to take a vacation but we sure DO want to get it all paid off!

 

[Expat]

From an economic point of view, any fixed interest rate debts that you have, you may want to just make your payments. I am basing this on the assumption that inflation is going to continue to rise and eventually even the gubmint will have to admit it. Interest rates will also rise. In those circumstances, debtors benefit as they are paying back money that isn't worth what it was when they borrowed it. Debts with a variable rate like credit cards (read the fine print, they don't need much of a reason to raise the rate), I would try to get paid off before they start getting jacked up.

 

[Jarhead77]

For those choosing not to pay down your debt. Please be careful, unless you are self employed and/or are POSITIVE you will keep your job forever, you might find yourself without the means to pay in the future and could regret this decision. Just My Two Cents.....

 

[CountryBoy19]

I'm just about ready to cash out some 401K, pay the penalty, and pay off my house. The value of money keeps getting to be less and less...so why not? I'd still have to pay the state property taxes or they will rape my dog and throw me off MY property. Property taxes on primary residences is nothing more than theft.

First of all, I would think long and hard before you cash in your 401K. Cashing it in the pay down your mortgage will not benefit you that greatly financially. Even if your 401k isn't making much, your true benefit will be relatively small unless you absolutely must be debt free.

Also, since you brought it up property tax isn't theft. It's a tax, just like all the other taxes. They're designed to help pay for the "services & conveniences" that you experience every day. Such as, your child going to school, you driving down the road, the fire-department that will respond to your house if it's burning down. That stuff has to be paid for somehow and they've determined that the burden should be shared relatively equally based upon your property value. IMHO that's a pretty fair way of doing it.

If we didn't have property taxes then we wouldn't have public schools so you would have to pay for private schools. If we didn't have property taxes you wouldn't have police, fire, or in some cases EMS services. You would have to pay to be a "member" of private fire districts etc such as they have in other states. Forgot to pay your membership fee this year? The firedepartment will stand there and watch your house burn down. The only reason they responded was to make sure the neighbors house doesn't catch fire; the neighbor paid his annual membership fees. That is a true story by-the-way. Happened in KY or TN IIRC. Guy forgot to pay the membership fees to the local private FD and they watched his house burn down while keeping the neighbors house safe from the fire.

Do you really want a life without any public services?

 

[Landon]

My wife and I are working on debt payoff now. We are 2 years into a 30yr fixed mortgage at 5% and doing a refi to a 20yr fixed at 3.25%. Essentually cutting 8 years off our mortgage while still making about the same monthly payment. We have never subscribed to cable or satelite and just watch the free stuff on antenna. We are also making a concious effort to eat out way less and eat at home a lot more, it saves LOTS of money. We've never carried debt on credit cards, we pretty much don't buy it unless we have the cash. Other than our home or a vehicle.

 

[Jarhead77]

First of all, I would think long and hard before you cash in your 401K. Cashing it in the pay down your mortgage will not benefit you that greatly financially. Even if your 401k isn't making much, your true benefit will be relatively small unless you absolutely must be debt free.

Also, since you brought it up property tax isn't theft. It's a tax, just like all the other taxes. They're designed to help pay for the "services & conveniences" that you experience every day. Such as, your child going to school, you driving down the road, the fire-department that will respond to your house if it's burning down. That stuff has to be paid for somehow and they've determined that the burden should be shared relatively equally based upon your property value. IMHO that's a pretty fair way of doing it.

If we didn't have property taxes then we wouldn't have public schools so you would have to pay for private schools. If we didn't have property taxes you wouldn't have police, fire, or in some cases EMS services. You would have to pay to be a "member" of private fire districts etc such as they have in other states. Forgot to pay your membership fee this year? The firedepartment will stand there and watch your house burn down. The only reason they responded was to make sure the neighbors house doesn't catch fire; the neighbor paid his annual membership fees. That is a true story by-the-way. Happened in KY or TN IIRC. Guy forgot to pay the membership fees to the local private FD and they watched his house burn down while keeping the neighbors house safe from the fire.

Do you really want a life without any public services?

Did you mean for the last couple of paragraphs to be purple? Some of us COMPLETELY disagree with what you suggest. There are absolutely fairer ways to pay for those services! The property tax gouges those who RARELY use the services you refer to!!!! We pay state and county taxes for schools and roads. Property taxes are a sham.

I'd prefer a tax on my gasoline for roads, charge me tuition for my kids in school and charge me a retainer for police and fire services with a scale of increase based on the services I approve! House burning down? If they get there and save it I'd pay for that. Get there late and save nothing, no pay! Same for police, protect me and my property from intrusion, violence, etc...I pay, show up after and take a report? Nothing!

 

[jeremy]

Did you mean for the last couple of paragraphs to be purple? Some of us COMPLETELY disagree with what you suggest. There are absolutely fairer ways to pay for those services! The property tax gouges those who RARELY use the services you refer to!!!! We pay state and county taxes for schools and roads. Property taxes are a sham.

I'd prefer a tax on my gasoline for roads, charge me tuition for my kids in school and charge me a retainer for police and fire services with a scale of increase based on the services I approve! House burning down? If they get there and save it I'd pay for that. Get there late and save nothing, no pay! Same for police, protect me and my property from intrusion, violence, etc...I pay, show up after and take a report? Nothing!

Did you mean for this to be in Purple?!

Do you actually have a clue what your taxes pay for or are you just spouting off...