OK, I've already had the discussion here about how large my e-fund should be. But I'd like to revisit it to specifically cover the question of whether I should use some of it to pay down a student loan debt.Some background:* My base salary is $90K* My bonus rate is 10%* With employer match, I contribute 9% to my 401(k) and maximize my Roth IRA.* I have just over $23,000 at EmigrantDirect in my "e-fund", earning 5.05%* I am currently paying $300/month on my student loan. The remaining balance is just over $19,000 and carries an interest rate of 6.875%.* I am not eligible for the student loan interest deduction.* A portion of my student loan was transfered to a credit card to take advantage of a lower interest rate. The residual balance on this card is just over $2,000 at 3.9%. I currently pay $175/month to this card, well above the minimum.* Aside from the "installment loan" on the above referenced CC, I carry no credit card debt. My mortgage and my student loan are my only obligations.* I own a condo with a marginal amount of equity that is going to market next month. I'm not yet clear whether I'll walk away with any cash in hand, but I should, at a minimum, be able to walk away without spending anything.* My current residence is a townhouse owned by my girlfriend. We opted to keep her place and sell mine but have NOT decided to become co-owners until we buy another house together. At that point we will take full advantage of the equity in her townhouse.* My GF and I have a joint bank account to which we both contibute. This account is used to cover combined expenses, including all utility expenses at both condos. The only expenses we keep seperate are mortgage payments, insurance, and taxes.* My career, and job, are quite stable. As a Certified Internal Auditor, I am smack in the middle of a demand-exceeding-supply labor situation which keeps jobs plentiful and salaries high. There is no expectation that this trend will reverse anytime in the foreseeable future.So -- when I think about what I might need emergency funds for it basically boils down to transportation. I'm driving a 9-year old car with 100K+ miles on it. The likelihood that I'll ever need to use $23,000 over the course of a few months is fairly small. One expense, however, on the horizon is the purchase of a certain piece of jewelry. Thanks to a connection, I can get a near wholesale price, but will still spend thousands. I wish I didn't have to, but, well, there isn't any way to get around that tradition (don't go there ... trust me).I would dearly love to free up that $475/month going to Sallie Mae and Citibank -- but am very aware not to reduce my e-fund to dangerous levels. Obviously, I could eliminate my student loan debt entirely, but to do so would leave only $2,000 in the e-fund -- much too low.What I was thinking was the following:* See how much I end up spending on the diamond. Pay cash. I'm really hoping this is less than $5,000.* Depending on the amount left in my e-fund, eliminate the student loan on the credit card (yes, it's the lowest rate, but the residual balance is so low that the interest difference amounts to about $60). Take the $175 and overpay Sallie Mae.* See whether I walk with any cash on the sale of my condo. If I do, use that cash to either a) replenish my e-fund or b) pay down Sallie Mae.What do you think? How much, if any, should I nab from my e-fund to reduce my student loan obligation?TIA!CPAScott
I would hold pat right now and continue your current process until after the property is sold. Then if you have cash left, throw it at the student loan (at either location). Take the savings you get once you stop paying for utilities on the second place and add those to your snowball. Then when you get bonuses, throw those at the student loan.I wouldn't touch your efund, even for that important piece of jewelry. It's for the "that would never ever happen to me" moments. Can you guarantee your house won't burn down? Or that you will never get hit by a car crossing a street? That you will never need to take a leave of absence because of someone else's death or illness?Lara Amber
Some thoughts:How secure is your j.o.b.? How quickly could you rebuild an efund if you raided it?I'd use at least part of your money to put towards debt and eliminate a negative interest situation. It doesn't have to be all or none and you should answer the above and base it from there. Figure out what you will walk away with from the closing table. It isn't hard. Ask your realtor(if any) or banker to help if you are unsure. Get gazelle intense and finish off your debt. The security that a lack of debt offers would make a great gift to your bride. Leave around $2500 worth of car money...just in case your low mileage fairly late model car should have a major meltdown. Commit to being weird and NOT having a car payment.Think ahead 3-5 years or more and get cooking!Talk to some old married couples or a counselor/pastor about how important a rock is. Personally I have been married for 15 years on a $99 CZ. The stone was lost and replaced about ten years ago with the same. I am glad an expensive diamond was neither lost nor needed. Enjoy the journey!Pdub
""I wish I didn't have to, but, well, there isn't any way to get around that tradition (don't go there ... trust me)."">>>GO THERE before marriage!
>>>GO THERE before marriage! I'd be willing to bet they've "gone there" and this is the end result. Inasmuch as people around here talk massive amounts of smack about engagement rings, if he's decided he's going to do it, then he will and that's that. It's a matter of priorities and given his job stability and manageable debt load, I can't see anyone reasonably giving him a hard time about this one. Not you personally, but this is oft-tread territory.Full disclosure - I myself didn't get an engagement ring. DH and I wear matching white gold bands that cost $60 each. But that's us.
What do you think? How much, if any, should I nab from my e-fund to reduce my student loan obligation?I would hold off on raiding the e-fund until you've bought the ring and sold the condo. That will give you a better idea how much you have. In the meantime, if there's extra money from bonuses and other unexpected sources, I would start an on-line savings account dedicated to wiping out your student loan. By keeping the money, you get the benefit of the interest that will accrue.Once the ring has been bought and the condo sold, wipe out the credit card portion of the debt. Direct that $175.00 a month toward the on-line account until you're confident about how things will be, and you are sure that you won't need to buy a new car (I know that you feel yours will last, but there are a lot of idiots out there on the roads, and if someone runs a red and creams you, you aren't going to get a lot of money from insurance).When you have enough in the savings account to wipe out the loan, pay it. But I wouldn't throw the money at it bit by bit when you can get the value of the accrued interest, and then wipe out the entire debt at once.Nancy
Don't forget that once you buy that jewelry, you'll have another upcoming expense. There are many other threads about those costs, but just realize that you could easily spend the whole $23K and more on a big party. My advice is to keep the efund as is, as much as you can. Pay cash on the ring, and use any condo profit to add back to the efund and in planning for that party.
wish I didn't have to, but, well, there isn't any way to get around that tradition (don't go there ... trust me).</iandI'd be willing to bet they've "gone there" and this is the end result. Inasmuch as people around here talk massive amounts of smack about engagement rings, if he's decided he's going to do it, then he will and that's that.If what Mrs. Poppy said is true, OP, you should start talking differently about the ring. Your initial post indicates that you do NOT want to do this and are giving in. If you have made a conscious choice to buy this ring because you really want to (whatever those reasons might be for wanting to), you cann't say things like "not any way to get around that tradition." There is ALWAYS a way around things that are not necessary (food, clothing, housing for instance). Either you have made a choice to do so and thus want to do it; or you do not want to do it in which case you still have the option of not doing so. No one can make you spend thousands on an engagement ring.Selphiras
I think if the ring is important to her, it should happen. You shouldn't break the bank, instead focus on the style, material, and size she would like. (I would recommend looking at her hand size when figuring out the size of the ring. Women with small fingers don't look good in fat bands with large stones, women with longer fingers shouldn't wear hair-thin bands with tiny solitaires.)I admit I wear a decent chunk of change on my left hand (the neighborhood of $5-$8k, depending on where you shop). I love my ring. I tease that the ring was my husband's way of saying "see honey, you are so important to me, I bought this instead of more toys for myself".As far as wedding costs go, a large ring price does not mean a large wedding bill. Consider it all the same pot of money and talk to her candidly. She may decide that having a nice ring (that will last forever) and a memorable honeymoon is way more important than dropping a fortune on one day (that will be a blur). (If you can present the ring on a vacation in a locale that will marry you immediately, so much the better. You aren't being sneaky, you're being romantic.)Lara Amber
<<<<I think if the ring is important to her, it should happen. You shouldn't break the bank, instead focus on the style, material, and size she would like.>>>>I know it is probably more romantic to do like in the movies: surprise her with the ring.It is more practical and not unromantic to go ring shopping together.At the very least, at least go windowshopping for rings together.That way she gets a ring she likes.Molly--
I think if the ring is important to her, it should happenYep, this it is. Obviously from my original post you can tell that I'm not hopped up excited about spending thousands on jewelery. It's not that I wouldn't spend a little, but it just seems crazy to me to spend $6, $8, $10K on a rock. I'm frugal after all!My GF isn't about the price, but there is a balance between price and her expectations of what the ring will be. Some quarter-carat carbon-pocked stone ain't gonna cut it. We're likely talking a 1-carat stone here. I have no idea what that will run.Fortunately, a connection should yield a price that is a lot closer to wholesale than retail, but we'll see. Personally, I'd rather there was something else to demonstrate commitment and desire to move to marriage than having to shell out thousands for a stone.It's interesting ... my GF is a responsible money manager, but she grew up in a family that was a bit more traditional -- her and her sister are the first women to not be taken care of financially by their husbands. She works, makes a good salary, saves a great deal, shops for bargains, is careful not to overspend, but will not sacrifice buying the things she wants provided she can afford them.Thus, as a diamond is technically within my budget, its technically affordable and fits the tradition she expects. I just have a hard time reconciling the expense with my own frugality. The success of our marriage will have little to do with the size of the ring. The level of affection and commitment isn't altered by it either. So why is it necessary? Because DeBeers has conned us into thinking so.I have an issue with that. But it's not an argument I'm gonna win.:-)CPAScott
We're likely talking a 1-carat stone here. I have no idea what that will run.You can check prices on www.bluenile.com.Minxie
I would put the carat weight last on your list of considerations.1. Cut, the better the job done cutting the stone, the better it will refract light. A poorly cut stone will just suck it in. A well cut stone will have no extra facets, a thin middle, and perfect proportions. Cuts are rated Excellent, Very good, good...2. Color, a diamond is a diamond is a diamond isn't exactly true, certain colors are very rare and worth more, but generally the more colorless the stone the more it's worth. What I would actually focus on is the color compared to the setting. Certain color ratings look better in yellow gold, others look best in platinum. The low end of the color spectrum look like dull rock.3. Clarity. You want clear enough to not see any flaws when you look at it closely, paying for absolutely flawless is a waste of money.4. Now you are at carat weight. A poorly cut, low color grade 1 carat diamond will look like junk jewelry. But you just shelled out a small fortune for the words "1 carat" Last words of advice:1. Buy a stone where they list the weight in decimals, not fractions. A .75 carat weight is exactly .75 carats. A 3/4 carat weight stone could be .67. A yes that tiny difference can mean you are getting ripped off. Also, you can save money buying a .90 or .95 carat diamond, she's just going to round up when she shows her ring off, and the naked eye can't tell the difference.2. Get a diamond with a GIA certificate, preferably where the GIA number has been laser inscribed in the stone. One, your insurance company will love having that documentation if they ever have to replace the stone. Second, if you take the ring in for any work (sizing, loose stone, etc) it takes just a few seconds with a loupe to see that laser number and make sure no one has switched out your stone.My ring's main diamond is .75 carat weight. We paid for the cut, color, and clarity and my stone outshines many 1 carat rings. Another option, paying a little extra for side stones or channel set diamonds in the band adds extra sparkle and is cheaper than going all out for one large rock. (Seriously most girls just want pretty and shiny, they aren't pulling out scales to weigh it, they just want it to draw the eye.)I second going to bluenile.com (that's where we bought our rings). They have excellent information and sell stones both loose and set for you (you pick the stone and setting, they set it). Lara Amber
<Sorry, previously posted to wrong thread>Check Sam's Club and Costco for diamonds. They seem to have good prices and if she doesn't like any of the settings, both stores sell loose diamonds which can be taken to a custom jeweler to make a unique setting.
when I think about what I might need emergency funds for it basically boils down to transportation...Then you don't understand what an efund is for.What about the emergency called "I got let go from my job"?The purpose of an eFund is to cover your expenses for that possibility.Your expenses during unemployment may actually be lower, because you won't be contributing to a 401K, and your transportation costs will probably be lower, too.Replacing things that are reasonably expected to wear out (cars, the roof on your house, your furnace, etc.) are not emergencies in the sense that we KNOW they are going to happen, and they should be in your budget.I have an efund that's roughly 25% of my annual income. I also have a "buy a newer car" fund, and a "house maintenance fund."
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