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Valued Member
thedaveytrain
Posts: 41
Registered: ‎01-23-2008

To pay, or not to pay?

I'll try to make this as short as possible. I am a teacher, getting laid off in June. While I am searching for a new teaching job, there just aren't that many out there and so I am hitting dead ends. I just registered for my last semester of grad school, and in December I will have my master's degree. My degree also requires 600 hours of fieldwork, which if I am not working I can complete in the spring. Now, here's my question: When I leave my job in June, I will have approximately $30,000 saved to get me by, plus I will almost surely get unemployment of about $2000 per month. My monthly budget is $3500, and I have stripped just about everything I can out of it. My biggest chunk of debt, besides student loans, is credit cards of about $21,000. So, anyway, I am wondering if I should take about $15,000-20,000 of the savings and pay off credit cards, thus reducing my monthly outgo, which is $416 right now, just for minimums. So, if I paid off everything, my budget would drop to around $3,000, and $2,000 of that would be covered by unemployment. My only problem with this idea is that I have no way of knowing when I'll get another job, so if it lasted past the 8-10 months I'd have left to supplement with, I'd be up a creek. Suggestions?

01/25/10 - TU 709, EQ 729, EX 705
Contributor
daytrade5
Posts: 114
Registered: ‎03-30-2011

Re: To pay, or not to pay?

 

First...You know this was coming..Lol. :smileyhappy:, how did you manage to rack up $21,000 in credit card debt? Lol. Humor me please. Ok, on to the serious stuff. I think you should pay that credit card debt off with that $30,000 you have, but save $9000 of it for living expenses (emergency fund) just in case you don’t find a job down the road. This is all assuming you will get that $2000 a month in unemployment.

Valued Member
thedaveytrain
Posts: 41
Registered: ‎01-23-2008

Re: To pay, or not to pay?

I know, it's depressing isn't it? But it was once over $30K. I bought a house in 2008, so part of it went to repairs, part of it was medical bills, part was school expenses and the rest was stupid stuff I probrably shouldn't have bought, like a cruise to Alaska last summer when I thought my job was secure. I will also have about $12,000 coming back to me from loans and grants next year, which I can justifiably use for living expenses, therefore further freeing the $30,000 savings to pay bills. It's just a scary proposition to blow almost my entire savings in one shot.

01/25/10 - TU 709, EQ 729, EX 705
Contributor
daytrade5
Posts: 114
Registered: ‎03-30-2011

Re: To pay, or not to pay?


thedaveytrain wrote:

I know, it's depressing isn't it? But it was once over $30K. I bought a house in 2008, so part of it went to repairs, part of it was medical bills, part was school expenses and the rest was stupid stuff I probrably shouldn't have bought, like a cruise to Alaska last summer when I thought my job was secure. I will also have about $12,000 coming back to me from loans and grants next year, which I can justifiably use for living expenses, therefore further freeing the $30,000 savings to pay bills. It's just a scary proposition to blow almost my entire savings in one shot.


Well, it's even scarier ending up with a BK on your credit report so I think paying off your debt with your savings is a wise choice at this point. Honestly, it would be one less thing to worry about in the long run. And it wouldn't be all of your savings, only about 75% of it. :smileyhappy:. At least you'll still have some dough saved for expenses should you need it. After you get out of credit card debt the key is to stay out once you've had all your lines reset to zero. It's easier said then done.

Frequent Contributor
mmduluth
Posts: 320
Registered: ‎05-17-2011

Re: To pay, or not to pay?

Honestly I would hold off on taking all that money out of savings to pay it off. Maybe take a few thousand to pay it down but you don't want to pay it all off using your savings and then have a hard time finding a job and get stuck. You never know how long it may take and you might end up running out of unemployment. 

 

I am by no means a financial advisor but it seems to me like it would be better to have debt and a bit of a cushion in case of hard times than to have absolutely no debt as well as no money. 

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Moderator Emeritus
MarineVietVet
Posts: 14,084
Registered: ‎07-14-2009

Re: To pay, or not to pay?


thedaveytrain wrote:

I'll try to make this as short as possible. I am a teacher, getting laid off in June. While I am searching for a new teaching job, there just aren't that many out there and so I am hitting dead ends. I just registered for my last semester of grad school, and in December I will have my master's degree. My degree also requires 600 hours of fieldwork, which if I am not working I can complete in the spring. Now, here's my question: When I leave my job in June, I will have approximately $30,000 saved to get me by, plus I will almost surely get unemployment of about $2000 per month. My monthly budget is $3500, and I have stripped just about everything I can out of it. My biggest chunk of debt, besides student loans, is credit cards of about $21,000. So, anyway, I am wondering if I should take about $15,000-20,000 of the savings and pay off credit cards, thus reducing my monthly outgo, which is $416 right now, just for minimums. So, if I paid off everything, my budget would drop to around $3,000, and $2,000 of that would be covered by unemployment. My only problem with this idea is that I have no way of knowing when I'll get another job, so if it lasted past the 8-10 months I'd have left to supplement with, I'd be up a creek. Suggestions?



You don't have to explain what happened and how you got into CC debt. I think just about everyone here has been there and back. I've been there and back more than once in my life.  :smileysad:

 

It's a very tough decision to make. Using almost all your savings to pay off all your CC's. Getting out from under that monthly interest is a very nice feeling though. You'd be surprised what a burden is lifted when you become CC debt free.

 

My concern though is that during your period of unemployment that the cards will be used and the balances run back up and then you'll be worse off than before. You'll have high CC debt and very little savings. And I'm not saying you would deliberately use them for non-essentials. Real life has a way of disrupting all of our well thought out plans and you might be forced to use the cards to actually live. I know that's a worse case scenario but it could happen.

 

But I also think the lesser of two evils is to pay off those credit cards and live just as frugally as possible. Perhaps you can find a part time job until full time work is found.

 

In any case I wish you well.

 

 

 

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

Regular Contributor
Chaos122
Posts: 204
Registered: ‎12-20-2010

Re: To pay, or not to pay?

Before you decide weather to spend a majority of your savings to pay off your cc debt, i would wait untill you apply and are Approved for unemployment benefits.  I'm all for paying off your cc debt and saving alot on interest, but you shouldnt even think about doing that untill you are approved for unemployment benefits. 

 

I lost my job a couple years ago, and my unemployment benefits were hardly enough to cover my expenses, so i lived off both savings and credit cards,  As soon as i got a job i worked on paying them back.

 

 

Since your getting laid off your first priority should be having a large emergency fund....Although your almost certain youll recieve the unemp benefits, you should hang on to your savings untill then, just as a safety net. 

 

 

Good luck to you


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