No. of Recommendations: 0
On the other hand, if $10k helps a person sleep at night and the worst debt is $6k at 10.9%, I'd be tempted to let it be with the progress the poster is making..

That is a reasonable point - Invalid is in good enough shape that he does not have to worry about optimizing every little thing. Currently, saving $2000 a month he will have more money than he knows what to do with in short order.

And I had a friend who recently had a heart attack while on vacation and the doctors decided he needed bypass surgery asap. Well, their medical coverage is great, but his DW and DDs plus assorted other family members had an unexpected 10 day stay in a motel plus meals out.

This is a great example of somebody who needed an e-fund. On the other hand, his situation has essentially nothing in common with Invalid here. That is the difference between "nobody needs an e-fund" and "this particular person does not need an e-fund."

E-funds are not free. They are money that comes out of real investments you could have made and real debt you could have paid off. Money is money and when it comes to emergencies, what's important is that you have fast access to it and don't spend it. Keeping it in some special cash account you call an e-fund is just a really expensive way of giving yourself extra discipline. But Invalid is obviously not someone who has the problem of spending every dollar in sight, so there's no reason he should pay this particular kind of tax.

Over a period of 40 years, keeping $10,000 in a 3% savings account e-fund vs real investments (or debt reduction) at 10% will cost you many thousands of dollars (it's difficult to put an exact number on it, but it's $30,000 at minimum, probably much more). That is very expensive peace of mind.

I looked at what I considered to be beyond the worst case scenario (15K in unexpected expenses, spontaneous 50% reduction in credit limit, 1 year loss of job, ignoring all stock and IRA savings) and frankly it works out just fine with about $1000 in the bank, an amount you'd generally have anyway. The key is that Invalid has almost no expenses and no responsibilities. You need less cushion in these cases. But it was windy enough that I did not bother to post it. I am happy to of course.

Onto the subject of real debt you actually have to pay:
As you've probably noticed your 2.9% card is costing you less in interest than you can earn in a safe investment elsewhere. So just pay the minimum on this and don't even bother to ever try to pay it off. The only time you would ever want to pay this off is if utilization is hurting your score - but with 75K of total credit it probably won't.

The 3.9% card is almost as cheap and while you can't get 4% in a conservative investment right now, you ALMOST can. The spread is barely enough to notice. So don't worry too much about this one either. Once your annual IRA contributions are maxed out, though, it wouldn't hurt to pay this off. The biggest reason you have to pay it off is that your total minimum debt payment is fairly high. This increases your risk if you have one of those emergencies that are so popular nowadays, and can hurt you when you try to apply for a mortgage.

With your income, in California, you may not be able to afford a mortgage unless housing prices sink considerably further. You don't have enough for a down payment, so you are looking at a couple of years of saving before you do anything anyway. Financially speaking, you should just continue to live with your parents until either they throw you out or you can't handle it any more (for instance, getting married has a way of making living with your parents impossible, or vice versa).

As for the 10.9% debt, with $6000 owed on it it is costing you some money, though less than $1K per year. So make getting rid of this your priority (and obviously, I advocate taking $6K of your savings and doing it immediately).
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