Emergency fund question - again sorry

[april47]

I am retired and have an EF of a little over $21,000. I've paid off and closed all but one CC. On my one card I owe $3300 at 16.4% and have no other debt. I also have a CD but that's left alone. My SS actually covers my monthly expenses but at the moment that is my only income. I will be receiving a pension(reliable company) next year when I turn 65. My medical insurance will also decrease. I know that it would make sense to pay off the CC but I seem to have an aversion/fear to dipping into my savings and decreasing the amount to $18,000. Someone convince me.

[Gardening Grandma]

Are you able to make the payments on your current income?

Have you tried to get a cc with a lower int rate?

[MN-Investor]

At 16.4%, you're paying the cc company $45 / month for the privilege of using their money. Personally, I wouldn't be giving them that money. Pay off the $3,300. If an emergency come up, you can always borrow the money then and pay the $45 / month then!

[maraqxa]

Can you do it in small steps? Not pay it at all once but take 200 every month from EF and put it towards the card? I'm all for paying it off right away but I understand your concern.

[Deleted]

At 16% interest I would pay it off. What interest are you getting on your EF? Unless it's over 16%, I say pay it off

[Gardening Grandma]

Is $21,000 ALL you have in total assets? Or is that your EF and you have other retirement funds (IRA, 401K or taxable investments)?

[Deleted]

Even if $21,000 is all you have in assets, you should pay the loan off with that interest rate. Then you can pay yourself back. Most credit cards (and bank sites) can tell you how long it would take you to pay the $$$ back at that interest rate. If necessary, use that to figure out how much to pay back to your savings.

You will be stunned to learn how many YEARS it will take you to pay this back otherwise.

[Deleted]

I agree with those that say pay it off now. Then you can take the monthly payment you were sending to the card and send it to build your EF back up. No sense in paying 16% in interest.

[❤ mollymouser ❤]

I'd pay off that credit card, too. If you can't get yourself to the place (mentally) to pay it off all at once, pay it off in $1,000 increments ... $1,000 this month, $1,000 next month, $1,000 the third month, then $300 (or whatever's left) in the 4th month.

[DVM gone riding]

So I will join the crowd in saying pay it NOW or in big steps if need be, but once you have done that put the min payment back in your EF (or whatever you were paying) act like it is still a bill, then keep putting in the EF every month like it is still a BILL your income is tight you need this when something happens, and it will. Rather then having to take out the CC again.

[Peace77]

I agree with the previous posts that recommend paying off the credit card.
Paying it off in steps is a bit less difficult.

Have you considered getting a part-time job? You are still young. Working just a few hours a week could add to your EF and decrease your anxiety over your finances.

[Plain Old Petunia]

You only have 1 year to go before your income increases and your expenses decrease. If you pay off the card, you still have 18k left. If you needed to use it during your 1 lower income higher expense year, you could spend $1500 per month. You still have the CD in the event you have a large emergency. Pay off that high interest debt. Keep the hundreds of dollars of interest for yourself.

[Nazgul Girl]

April47, I know it's hard to let go of that security blanket. But if you pay off that last credit card, you can then put whatever you were paying on it monthly back into your emergency fund and pay yourself back the $ 3300 balance. You'll feel better once you know the credit card balance is gone from your life.

[share88]

I get the idea you know you should pay it you are just not comfortable. So what can you do that would be a step in the right direction you can live with? Accelerate the payments? Pay 1/2?

[tskeeter]

Pay off the credit card, then apply the amount you would have paid to the credit card company to rebuilding your EF. You have taken a loan from yourself, rather than the loan your currently have from the credit card company. Who collects the $45 a month in interest on the loan? You do! Your investment in paying off the credit card now pays you about $540 a year. A 16+% return on your investment is a pretty darn good return these days.

[april47]

Thanks for the feedback. I did it and feel good about it. I guess sometimes it is a little hard not to have anyone around to discuss money choices with. I'm a widow and somehow discussing money with my kids is harder than discussing with people here. Sad but true.

[Gardening Grandma]

april,
I don't discuss our finances with my adult children, and my husband hates discussing or making financial decisions, but I have found this board to be a very good sounding board. I've come here at various times asking for advice or feedback and have often had someone post a thought that had not occurred to me.

[april47]

May 30, 2011 13:56:56 GMT -5 Gardening Grandma said:

april,
I don't discuss our finances with my adult children, and my husband hates discussing or making financial decisions, but I have found this board to be a very good sounding board. I've come here at various times asking for advice or feedback and have often had someone post a thought that had not occurred to me.

My husband never liked discussing or making decisions either but it was good to have him as a sounding board and every now and again come up with a thought about it. It used to irritate me a bit but I miss it now.

[MN-Investor]

The trouble with children giving advice is that they may tell you what you want to hear, not what needs to be said. Also, once they give you advice, then they have an interest in what you decide. They can get hurt if you don't follow their advice. You really don't have to worry about hurting our feelings. We're just avatars in the ether.