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I Should Blog About This...

May 12th, 2008 at 10:05 am

So, awhile back I declared that we would use all extra funds to pay down our home equity loan. I have yet to send in any extra funds. I have over $3k that I could send in. Why the hesitation?

I'm not sure. I do know that we have spent the better part of a year waiting for my husband's raise and promotion, which he did get. The plan had been to get a new to us, Honda or Toyota van. We have spent a year looking at ads, watching prices, wishing and wanting and waiting.

Now the cash is there for a down payment. The cash flow is there for a monthly payment. There is even $800-900 extra per month...even with a car payment.

Is the decision really either or? Can we buy a newer van and work on the home equity? Would we feel too squeezed to do both at the same time. Would it be better to focus on one rather than the other? I'm really indecisive.

Haven't really let my husband know that I'm hesitating. He's pretty busy and stressed with work. So for now, the plan hasn't changed. We don't even have time to go new car shopping...not even for at least another 6 weeks!

The van and car we have just feel like they are both on their last legs. If we trade in the one with the best value, we would still need to put in money on the other one. The lowest value one gets the better gas mileage and my husband drives it to work.

We could probably pay off the home equity in about 6 or 7 months...just in time for tax time next year and cold weather van shopping.

I'm feeling impatient, hesitant and stuck all at the same time. I want it all and I want it now. I don't want to wait, I don't want to have MORE debt added to the home equity debt.

I just had to blog about this...I don't know if there is an easy answer.

Additional Note: We have an EF, the $3K is extra.

3 Responses to “I Should Blog About This...”

  1. PauletteGoddard Says:

    Are you mulling over the opportunity cost? I find much of my mental "rubbing" (gotta keep this at a family level) when I have the money available to pay down a debt, although I have other goals, is freaking out about the best application of limited funds, as I have the fear that paying something off will trigger an emergency in another category I won't be prepared for.

  2. ceejay74 Says:

    Hmm...I can definitely sympathize, even if I can't offer a solution. We recently realized we need a new fridge. Well, we have a $1200 budget surplus, but we were planning on keeping it around til one family member switched jobs, in case there was a pay gap, and then, if we didn't need it for that, put it toward debt.

    So I thought about putting a fridge on my Sears card. It would be 0% and no payments for 6-12 months, so it would be financially smarter to put the fridge there and use the whole $1200 toward interest-bearing debts in the meantime.

    But you know what I decided? I don't want to take on any more debt, even if it lets me keep some emergency cash and possibly pay off interest-bearing debt. As soon as we pick out the fridge, I'm paying cash for it from my $1200. I'll keep whatever's left over as my (much smaller) safety net, and then apply it toward debt once AS gets her first paycheck at a new job.

    So let's apply my reasoning to your dilemma. You have $3K and you want to put it toward old debt, use it for a new purchase and/or keep it as a safety net, just like me. For me, it's worse psychologically to add new debt, so I'd keep whatever you need to feel comfortable for an emergency ($500?), and put what's left on the cheapest version of your dream van that you can find. Then use that $800-900 per month extra cash flow--and whatever other funds you can scrape together--to pay down that van, ASAP, so that new debt doesn't stick around and get comfortable.

    Then, once your van is paid off, you're already used to living without the $800-900, so might as well put it toward your home equity debt.

    To me, this satisfies the three wants as much as possible: You've got the money saved for a rainy day, you're getting your new van but not taking on too much new debt, and you've got plans to get rid of both that new debt and the old debt eventually as well.

  3. merch Says:

    I owuld take the 3k and put it towards your van fund and then put your extra money towards your van fund. Keep driving the old van until either you can't drive it any more or you saved enough to purchase the van out right. I would strive for the later.

    That way your are minimizing the amount of new debt. And once you get the purcahse of the van out of the way, you can really attack the home equity loan.

    Good luck!!! I just really hate debt and how it really drags you down. Therefore I try to avoid creating new debt at all costs.

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