UnThreaded | Threaded | Whole Thread (44) | Ignore Thread Prev | Next
Author: Dwdonhoff Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 310986  
Subject: Re: emergency fund while in debt? Date: 2/27/2001 11:58 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
Clearly, you still have available credit... so consider the various considerations;
1) Savings will earn some amount of interest (small),
2) the unpaid debt will be charged interest (larger), making the net of the 2 accounts a negative monthly charge,
3) Unused credit incurs no interest charges, so it acts as a savings account at a net zero monthly charge.

SO... as long as your credit is good and available, keep paying all extra funds to eliminate debt principal. The unused credit balances will serve as your savings accounts, and cost you less (zero interest on unused credit) than the net effect of paying interest on credit balances and receiveing savings interest.

If you do not have enough available credit for the emergency timeframe you want to cover (6 weeks, or whatever), then do stuff away the necessary balance into savings... but do so AFTER you've paid all funds to debt principal. In other words, always make sure you pay your cheaper money (the stuff you earn) to buy back expensive money (the stuff you borrowed) first. Definitely save, but only when that's the highest and best use of your funds.

Best luck!
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (44) | Ignore Thread Prev | Next


TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.