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daleksek25

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Savings or debt, which should be my focus now?
Hello Credit Karma users,

First, let me give you some generic financial background on myself. Since signing up for CK about a year ago, I finally have good credit (730's from low 600's). I carry about 5k (and dropping) of CC debt, and have a first and second mortgage that I'm paying ahead on by about $150 a month.

Now that there's a little background on my financial situation, here's the question. Should I continue to focus on debt elimination, or should I start to build up my savings? My wife and I have gone back and forth on this. I would prefer to pay off the CC debt and 2nd mortgage, but she would like to grow our savings. For me, I see our savings as futile investment at less than one percent APY, while our CC interest rates range in APR from 13-29%. It makes sense for me to pay down the CC, but I can also see the point in having a little bit of a safety net in a savings account. I'd like to get some member opinions and see where things line up. Btw, thanks Credit Karma for such an awesome site. I don't think I would have been able to get a handle on my credit without you!

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If you were investing the money and earning more than the interest you pay, then yes it would be worth it. But just to save money for emergency fund I don't see the point of having cash when today everyone accepts credit cards, so having available credit on the credit cards is just as good for this purpose.

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Pay down debt first

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I would first fully fund a $1,000-2,000 baby emergency fund - then pay off the CC debt as fast as you can.  You could also include car loans in this debt bucket if you'd like but CC debt for sure should be #1 priority.  Once all CC debt is gone, start funding a 6-month emergency fund.  Once that is done, then focus on retirement/investments and college funds (if you have kids).  Read Total Money Makeover - great book. 

Reply by
daleksek25

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Thank you so much for suggesting Total Money Makeover.  I will have just the 1st mortgage left with under 100k by June.  I knew what my end goal was, but the book gave me a road map to get there.

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Thanks for the sanity check

I'm glad to know I'm on the right track here.  I've estimated 3 months before the CC debt is paid off (with my new aggressive payment allocation).  Once the cards are paid off I'll be focusing on savings.  Savings will become a priority.  I will be sure to check out the book.  Thanks for the advice.

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