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Author: dsemmler 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 308519  
Subject: Re: intro & what to do with extra $$ Date: 8/21/2003 4:07 PM
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Lisa,

First and foremost, welcome to the Fool and congrats on taking the time to sit down and plan out how this money will best work for you.

$7000 in a student/career training loan at ~8%

Is this a typical student loan? I am not sure what you meant by student/career training loan. If this is a standard student loan, have you looked into consolidating/refinancing at the current rates? Of course, that assumes you have not already done so but the student loan rates are quite low right now.

I put 15% into my 401(k) (not matched)

Are you investing in a Roth IRA as well? If not, you may want to consider maxing out on a Roth before you make any contributions to the 401(k) and then resume contributions. The general advice is to contribute to a 401(k) to the level required to receive a match (if there is one), then max out a Roth IRA, and then finally max out the 401(k).

have no savings or efund to speak of....Unfortunately my job situation is precarious so I want to make sure I have at least a bit of an efund available.

What are your expenses per month that would have to be paid for by an eFund if you were to lose your job? How long would $1000 last you? $2000? You don't need to answer these on the board but if you feel you can get by on $1000, $1500, $2000 or whatever, that will help determine how to use the money you will have.

I am planning on selling some stock next week that will result in around $2000

Is this stock being sold for a gain or a loss? If being sold for a gain, are you accounting for the capital gains tax that will be due on that money? Just wanted to point that out so there are no surprises come tax time next year.

I am expecting a reimbursement for unemployment benefits of around $2000.

How certain are you that this will be $2000? The reason I ask is that for both the stock sale and the unemployment benefits, you have stated they will be around $2000. Yet in your proposed plan, you are counting on having a total of $4000. Is it possible that you may only end up with $3500? Maybe $4500? I don't know how certain you are regarding these amounts and I would hate to see that derail your plans.

Put the $2k from unemployment reimbursement directly into E-fund
Put $1000 from stock sale toward credit card
Put $1000 from stock sale toward student loan


Good idea as far as the eFund. However, rather than split up the other $2000, it would be better to pay the full $2000 to whichever debt you want to attack first. The common snowball approach would have you attack the student loan first since the interest rate is higher. However, if this is a standard student loan, I personally would attack the CC first. In the event of job loss, a student loan can be deferred (not sure that is the right term).

If you were to pay $2000 to the CC, that would leave a balance of roughly $800 plus any finance charges. Depending on how much you feel you need in the eFund, you could always pay the full $2800 and put $1200 into the eFund. That then leaves you with only the student loan.

With regard to the student loan, I would look into consolidating/refinancing that to a better rate if possible. If it were me, I would be apprehensive to transfer the student loan balance to a CC but it might work for you.

How much do you have available per month for debt repayment? You mention a $100 payment to the CC and allude to a $100 payment to the student loan. Are those both the minimum payments due? Or are you paying extra on both of them? Do you have more that you can snowball into those payments?

Lastly, have you considered looking for a part-time job to supplement your income? That can boost your eFund savings and speed up your debt repayment. I am not sure if that would be possible for you but it is something to consider.

dt
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