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URL:  http://boards.fool.com/interesting-idea-id-still-have-a-period-of-low-23594035.aspx

Subject:  Re: Should I pay off a cc with my ING fund? Date:  1/22/2006  11:30 PM
Author:  xraymd Number:  219070 of 308239

Interesting idea! I'd still have a period of low acccount balance insecurity, but it would be a lot shorter. But would I end up paying more interest that way, since I'd slow down the cc snowball temporarily?

Greetings, FIgirl, I don't know all of your interest rates but I would have to believe that even with slowing down the cc snowball temporarily, you would most likely end up paying LESS interest by doing this than if you let your MBNA balance start accruing interest at 11.9% when you could instead have paid the whole thing off before it turns into a pumpkin! Plus you meet your other major goal of funding your Roth for 2005. This is all part of a coherent money management strategy where you look at ALL of your goals for your money and then apportion your payments according to what best meets ALL your goals in the fastest, least costly way possible.

The major savings of not owing interest on any of the MBNA balance, plus the fact that the Roth contribution will be itself earning interest may go quite some ways towards offsetting how much more in interest you accrue on the cards not paid back as rapidly due to the brief diversion of your snowball. But then you end up with a fully paid off MBNA! And a Roth contribution for 2005! And with an empty MBNA, you may indeed get a nice new low-or-0% balance transfer offer which then lowers your overall interest rates owed even more - I know you were feeling shy about doing more balance transfers but you are now on top of your payback and it might start to feel much safer. Further, this might inspire you to see that tightening up on your expenses in favor of speeding up your debt repayment might not feel like such a steep sacrifice, after all. So you might be right side up again even quicker than you'd imagined.

I know Windowseat takes a very cautious view of paying off large chunks of debt in favor of hanging on to savings - and her view is very understandable since, for a nervewracking duration, she was not working. But you have a steady job that you are not likely to lose in the next 2 months (when you'd be making great strides at refilling your savings), so your considerations may be able to be different. Ultimately, you must do what lets you sleep best at night but I offer this other perspective to say that sometimes being so tightly focused on achieving one financial goal could make the simultaneous achievement of other financial goals less possible. And averting interest on a still-large MBNA balance, plus funding a Roth for which there is a hard deadline, both seem like reasonable financial goals even if for a short period your ING savings dip lower than you would prefer.

xraymd


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