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I just turned 26 years old and I’ve got $6700 in credit card debt (All at 0% except for $1700 at 11%) and $4500 in an emergency fund savings account.
It costs about $1600 a month for me to live, giving me about 3 months of living expenses saved up. I have a stable part-time job, and freelance income that is somewhat regular but has been decreasing since the economic events months ago.
I’m maxing out my IRA contributions, contribute to the point of employer match (i contribute 5%, they give 7%) in a 403(b). I don’t have a car, live with a roomate in the cheapest apartment I can find, work 3 jobs, and have cut out cable, gym membership, and anything else even remotely considered “discretionary” from my life, so I’m able to put more away a month in recent months for my savings & paying down debt goals.
Being in debt makes me incredibly uneasy, and I know that is my fault that I got here (although most of the expenses on credit were business-related) but it keeps me up at night and makes me feel like a bad person.
I don’t know whether I should take the money in my emergency fund and pay down my debt, or if I should continue to contribute to my emergency fund while paying the minimums (and more than the minimum to the high-interest card). Any advice you have is greatly appreciated. 🙂
First off, you are not a bad person. No way. If anything, you just made some mistakes. You’ve got to put this guilt behind you so you can move forward.
I hear what you are saying about tapping the savings account to pay down some of the cash but I’m afraid the impulse to do that is more emotional than logical.
You said yourself that income has been a bit less reliable in these uncertain economic times. Because of that I think you should keep the money you currently have in savings and not be in a rush to touch it.
However, now that you’ve got $4,500 tucked away, you should feel comfortable using most of your spare cash to reduce your debt levels using the debt snowball method.
I’d suggest that you take out a new gym membership if you will use the gym. Exercise is a great stress reducer and it will only benefit you during these times. And depending on how much you workout, it can even help you to sleep better.
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