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What to do with a small windfall
In the next week or so, I'll get a small (around $2,500) inheritance from my grandfather's estate. I'm torn over what to do with the money. The two ideas I'm looking at are:
If I put it towards the credit card, it would pay just over 20% of the balance. That's a big chunk towards retiring that debt. It would reduce the finance charges quite a bit, and at 20% interest, any little bit helps.
Emergency Savings
I have a rather large fear that something else will happen to my wife or me, and the rest of our already depleted emergency savings will be gone. If I put the inheritance in my emergency savings, it would double the account and be right at the 2.5 months of expenses. That's a much nicer cushion to have.
Other factors
We did our withholdings pretty well this past year, and are getting $500 back from the IRS. That will certainly go on the credit card (paying down about 5% of the balance). As I mentioned on Saturday, we cashed our remaining EE Series bonds and will pay $1,100 of that on the credit card. Added together, that's nearly a 15% reduction in the credit card balance.
What do you think?
I'd be interested in hearing what other people think on this. Is it better to add to emergency savings, or pay down high interest debt?
- Pay more on the credit card (balance - ~$12,000), OR
- Increase emergency savings ( current balance - $2,500)
If I put it towards the credit card, it would pay just over 20% of the balance. That's a big chunk towards retiring that debt. It would reduce the finance charges quite a bit, and at 20% interest, any little bit helps.
Emergency Savings
I have a rather large fear that something else will happen to my wife or me, and the rest of our already depleted emergency savings will be gone. If I put the inheritance in my emergency savings, it would double the account and be right at the 2.5 months of expenses. That's a much nicer cushion to have.
Other factors
We did our withholdings pretty well this past year, and are getting $500 back from the IRS. That will certainly go on the credit card (paying down about 5% of the balance). As I mentioned on Saturday, we cashed our remaining EE Series bonds and will pay $1,100 of that on the credit card. Added together, that's nearly a 15% reduction in the credit card balance.
What do you think?
I'd be interested in hearing what other people think on this. Is it better to add to emergency savings, or pay down high interest debt?
posted by walt | 12:06 PM
2 Comments:
pay off the credit cards first! that 20% interest is going to keep adding up (as you know). best to get that conquered. or, maybe split your $ and use 2/3 of it for cc's and 1/3 for savings.
Yeah, from what you and other folks I've talked to are saying, I'll probably split it up between the two.
I'm hoping to get a lot of the balance moved to a 0%-on-transfers card.
We'll see I guess.
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