gettting rid of debt.

[robphelan]

ok.. here's the story. married w/1 kid(2.5 yrs old). wife is pregnant(just found out this weekend) and wants to quit work after having 2nd kid (daycare ~720/month/each kid)

i'll be cashing in some stock options in the next few months and should net about 20k.
also, bonus early next year should net ~12k. so i will have ~32k, give or take.

list of debt:
CC1 1,700 (no interest credit card normally pay 100-150/month)
CC2 5,500 (no interest credit card normally pay 150-200/month)
car1 12,500 (434/month 6.0% 2.5 years to go)
car2 18,000 (450/month 5.9% 4 years to go)
house 1,450/month


Plan1: pay off CC1, CC2, & car1. leaves me with ~12k cash & car2 payment of 450/month - should be able to save 684-784/month)

Plan2: pay off CC1, CC2, & car1, put ~10-12k towards car2 & refinance the balance of ~6-8k for 4 years - giving me a payment ~175/month instead of 450/month (should be able to save 959-1059/month but leaves me with 0 cash)

Plan3: pay off car1 & car2. leaves me with ~0 cash, but will be able to save ~884/month in payments because no more car payments. But still have CC1 & CC2 payments.

Seems like Plan3 is the worst option. Getting rid of only 884/month, however it is the longer term debt.

what to you think?

 

[radioouman]

Pay off the credit cards and save the rest of your money.
This way, your stock options can continue to earn money. You would be better off making payments on those cars and saving your money.
By paying off a car, you have less money available which is a higher risk scenario. If you have trouble making the payments monthly, then dip into savings to supplement your payments.

 

[Amplifier]

Make your wife work.

 

[lokiju]

Plan 1.

 

[robphelan]

Originally posted by: radioouman
Pay off the credit cards and save the rest of your money.
This way, your stock options can continue to earn money. You would be better off making payments on those cars and saving your money.
By paying off a car, you have less money available which is a higher risk scenario. If you have trouble making the payments monthly, then dip into savings to supplement your payments.

saving the options is pretty risky, though.

credit cards are 0%

 

[Mr N8]

Pay off the cars. If the CCs stay at 0% interest, then you are saving yourself more money in the long run.

 

[DaveSimmons]

How soon will the 0% interest cards start charging you interest, and how much will it be?

 

[robphelan]

Originally posted by: DaveSimmons
How soon will the 0% interest cards start charging you interest, and how much will it be?

we flip these every year to new CCs that give us 0% rate for a year... so, for the foreseeable future, they should always be 0%

 

[Linflas]

Pay off the CCs first. If possible get a home equity line of credit to pay off the balance leftover on car 2 so at least the interest is deductable.

 

[dxkj]

Originally posted by: DaveSimmons
How soon will the 0% interest cards start charging you interest, and how much will it be?

THAT is the important question

 

[robphelan]

Originally posted by: Linflas
Pay off the CCs first. If possible get a home equity line of credit to pay off the balance leftover on car 2 so at least the interest is deductable.

good idea, but we've only been in our house 2.5 years (moved in exactly 1 day before our daughter was born - i don't recommend doing that).

so i dont think we have much equity

 

[crystal]

Plan 1. You need some cashes on hand for the unexpected things.

 

[robphelan]

Originally posted by: dxkj

Originally posted by: DaveSimmons
How soon will the 0% interest cards start charging you interest, and how much will it be?

THAT is the important question

we flip these every year to new CCs that give us 0% rate for a year... so, for the foreseeable future, they should always be 0%

 

[orton]

Pay everything off But the house get on a tight budget and start saving for your kids education. Do such thing as good debt and a house is not an asset it?s a liability.

 

[robphelan]

I net about 4k/month.

so if i choose plan1, i'll have house 1450 + car2 450 = ~2k(w/insurance) per month of debt. but will have 12k in the bank.

gives us 2k for the rest of our expenses.

 

[alphatarget1]

Originally posted by: robphelan

Originally posted by: dxkj

Originally posted by: DaveSimmons
How soon will the 0% interest cards start charging you interest, and how much will it be?

THAT is the important question

we flip these every year to new CCs that give us 0% rate for a year... so, for the foreseeable future, they should always be 0%

You're being too optimistic that they'll offer 0% even though interest rates are just going to keep going up, IMO.

You owe quite a bit of money on cars... When do the 0% BTs expire? Take that into account.

 

[zebano]

I like plan 3 as long as the no interest deal doesn't end in the next six months. After paying off the cars, pay off CC 1 in 3 months with your savings. After this, look for another 0% BT if needed, and start paying at least $500 /mo. to CC2, and putting at least $200 into an emergency fund. This way, you should pay off everything in a resonable amount of time and have some savings. As more cash becomes available be sure to save (considering how much stock you have I doubt you need the reminder) and use a little to celebrate.

 

[Bryophyte]

Plan 3. You will have only unsecured debt (other than the mortgage) that is at 0% interest.

 

[dxkj]

Originally posted by: robphelan

Originally posted by: dxkj

Originally posted by: DaveSimmons
How soon will the 0% interest cards start charging you interest, and how much will it be?

THAT is the important question

we flip these every year to new CCs that give us 0% rate for a year... so, for the foreseeable future, they should always be 0%

Gotcha, I was slow on the response ... in that case NEVER PAY THEM OFF!!!! FREE MONEY!!!

 

[Pliablemoose]

Plan 3, use the extra cash (monthly income not used for auto payments) to pay off CC's as quickly as you can.

<--No short term debit for nearly 1 year now, trust me

 

[Pliablemoose]

Originally posted by: Pliablemoose
Plan 3, use the extra cash (monthly income not used for auto payments) to pay off CC's as quickly as you can.

<--No short term debit for nearly 1 year now, trust me

(there is plan 4, cash in stock options, fake own death, abandon wife & children, move to Mexican resort, blow money on booze & whores)

 

[Joemonkey]

If you go with plan 3, you can drop insurance to liablity, comprehensive, and uninsured motorist, which should be much cheaper than the full covergae you (should) have now. How much extra would that save?

 

[alembic5]

Originally posted by: robphelan

Originally posted by: Linflas
Pay off the CCs first. If possible get a home equity line of credit to pay off the balance leftover on car 2 so at least the interest is deductable.

good idea, but we've only been in our house 2.5 years (moved in exactly 1 day before our daughter was born - i don't recommend doing that).

so i dont think we have much equity

Have you checked? We've been in our house for 1 1/2 years, and are now doing a refi that is paying off the CC's, car, motorcycle and medical bills as well as getting $15000 back. Our payments go up about $200, but that is partially because our credit isn't the best. Our house appreciated $85,000 in that amount of time... I almost fell out of my chair when I heard that! Oh and for the stock options... 1 word... SELL!! Options are worthless for many. I sold a bunch of options 2 days before our stock dropped about $13... it then dropped again by another $12 2 months later. This was completely unexpected. Now my options that remain (unvested) are worth nothing. Damn financial analysts... The company is doing very well, and all this came from some poorly forecasted data. Joy. Best of luck to you, and congrats on the new little one! My first daughter is 10 months old, and my wife stays home.

 

[dxkj]

Originally posted by: Joemonkey
If you go with plan 3, you can drop insurance to liablity, comprehensive, and uninsured motorist, which should be much cheaper than the full covergae you (should) have now. How much extra would that save?

Why would he want to cut corners where it could cost him thousands?

 

[MX2]

Plan 4...Fake your own death. Works everytime