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Author: hrse Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308519  
Subject: Re: Order of paying off? Date: 10/18/2013 12:05 PM
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AJ, this is gold! Thanks.

Is the $11k for the contracting net of taxes?

Yes, I already considered the taxes.

What is the value of your home?

Purchased for $156k in 2002; current value near $210k as assessed in 2010 when we refinanced the primary.

The refinance was with two banks different than BoA and BoA had to approve letting a newer loan be primary to their HELOC.

How old is the HELOC?

This was something I did not consider. However in looking at the loan documents I see:
Draw expiration date: 08/01/2017

I assume the HELOC is a variable rate loan?

It is variable, but I don't know what it is indexed to, nor what the cap is, but I do recall that there is a cap. However I don't see interest rates going up much from here, but that boarders on Economic/Political so I won't go any further on this board.

What are the minimum payments on each of your debts?

Chase Mortgage: 1,324.49 (includes escrow)
Wife Car: 433.84
My Car: 305.00
BoA HELOC: 50.00 (intrest only, I have been sending $100)
BoA CC: $120
Medical Bills: 500 (over 24 months; 16 payment remaining)
-------------------------------
Total: ~2735 per month

but would you be comfortable with less money in the e-fund - say $5k

I am. I did not mention it, but part of my retirement money includes $40,000 in a Beneficiary IRA, which I now own after my mother passed. I am taking the min witdraw most years.***
I consider this as a back-up of last resort to our E-fund.

I would take $5k from your emergency fund, plus $4300 from your contracting payment, and pay off your wife's car. That will free up the car payment you are making to add to your $500 snowball.

Good.

Then I would set aside the other $6700 from the contracting payment, plus another $550/month ($500 from proposed snowball, plus $50 from your wife's car payment) into a savings account to pay off the BoA credit card. By next July, you would have $11,650 in the savings account, which should be enough to pay off the credit card. (Until you use this to pay off the BoA credit card, this could potentially serve as a back up e-fund, if things get really bad). In July, pay off the BoA card from the savings account. Put any additional money back into your e-fund or towards another debt.

The only pitfall I see with this is we have not been very good with a lot of money in our checking/savings. The e*fund I have set up is at a different credit union (I never turned on the on-line feature); that way it is always available, but we have to drive to a branch to get the money; but we would also have to drive to a branch to deposit money. I could do that on a monthly basis for the deposits. I hate to admit I am weak, but I have had > $5000 in savings before and eventually I feel rich and the budget starts to slip :$

Would it be ok, if I put this snowball savings in the e*fund account till the BoA payment is due?

So to review:
The only modification I did was I am going to deposit the snowball payment into the e*fund to pay BoA just prior to the rate rising; Otherwise I am going to pay off my wife's car; then apply snowball to E*fund until BoA payment is due.

Next my car; Then HELOC; Since Medical Bills will be paid in full at 0% after two years I will target it last for snowball;

An added advantage to paying off my wife's car is that I can drop the coverage to just liability....checking with Geico...that would only save me $187 per six months. I will have to think about if it's worth dropping comprehensive for just a $31 per month gain.

footnotes:
*** incase any one was concerned, and I know you are because it's what we do: after her accident I sold a big chunk of what was in there, because I did not want money I might need stuck in NFLX, APPL or other stocks that we all know could get cut in half with no warning. We did make a significant withdraw in Feb after our E-fund was drained. Now that we are back on a budget, this fund is back to 100% stocks.
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