Should saving or paying off debt be priority?

Question

So I am 27 and my husband is 35. We have $10k in savings and $2k in checking at all times. Our bills are paid on time and we always have enough left over to go out to eat weekly and buy small things when we want to. However we do have a lot of debt. I have $9k in student debt and he has $20k in student debt, we have $6k in debt for a home renovation, and we’re fixin to do IVF and will have that debt. We still owe $84k on our mortgage. My husband says we shouldn’t worry because we are definitely well off for our age, I however feel we may need to be stricter on our spending because we are playing with fire with all this debt. Thoughts? How much do you have in your account versus debt? Should we be paying off debt instead of hoarding a savings? Trying to be financially responsible but I just don’t know what to do!

Answer

Both. You have to save money to be able to pay off debt and handle things that you need to have done. Start by paying off the smaller bills and work your way up. Pay more than the minimum on the rest. That way you are both saving and eliminating debt. Honestly I would wait to do the ivf if it was me personally. That savings will be gone once kids come. Plus it’s an expensive process often Not 100% covered by insurance.

Answer

I wouldn't say that's well off for your age being THAT much in debt. I think you all should find ways to pay the debt off faster.

Answer

Pay off the debt. Long term you will be paying a lot in interest. Sure savings is important but you'll save more when your debt is less. Start with the highest interest loans or balance that can be paid in full. Paying only the minimum payments goes towards interest and not your actual bill. I would actually meet with a financial advisor and see what the best course of action should be as they will be able to tell you your debt to income ratio

Answer

I’d have an emergency fund set up with roughly 3-6 months expenses and then start focusing on paying that debt off and I’d close out at least one of those loan accounts before taking another one on. I’be got 5k in my savings, owe 4.5k on a car and then have my mortgage. My priority is to split my extra money between savings and my car. And then once my car payment is done put that money towards extra principal on my house. I’d definitely come up with a plan for paying off that debt, you only look well off to someone not looking at your finances, it sounds like your husband has a “keeping up with the jones’” mentality which could get bad if you keep accumulating debt without paying it off.

Answer

Honestly what I would do is throw that 10k in your savings and pay off your student loan debt. Keep 1k in savings. I'd then take whatever payment you were putting toward your 9k loan and put it on top of your payment for your 6k loan. When it is paid off, I'd take both payments and add it to your 20k loan payment and pay that off.
For example:
 9k loan = $250 payment
6k loan = $150 payment
20k loan = $500 payment
Pay off 9k. Take $250 payment and add to $150 payment for $400 payments toward your 6k loan until it is gone. Then take the $400 and add to the $500 payment for $900 toward your 20k loan monthly until it is paid off. Plus if you wanted to put any extra money toward it. But with this plan you'd probably have those 3 all paid off within 2.5 years and just have your mortgage. 
If it was me this is how I'd plan it. I'm doing something similar and it really works for us.

Answer

Which interest yields more? My student debt was extremely low interest and my savings accounts were high interest. In Australia your work deducts your student loan repayment before tax so it's also untaxed income. I did the maths and my money did more for me in my savings account. 
If the interest on your debt is higher than the interest on your savings, the money you put in your savings renders you less value than if you'd applied it to your debt. You should get out your calculator and work it out.

Answer

If ur loans are all low interest, leave them as is. Keep paying everything on time. 
The thing is, you really have low debt compared to a lot of people your age who have student loans. Also, $10k in savings isnt all that much. Rule of thumb is having enough money to hold u over for 6 months of unemployment. Here's the kicker though, right now federal reserve note dollars (the green bills) are in a state of high inflation so if you do have more than $10k in the bank, its depreciating quickly as what u used to be able to buy with it is now much less. Take groceries and gas for example, everything is more expensive since covid and all the stimulus bills. What u can do to offset that loss is buy gold, silver and perhaps invest in something that will give you at least a 4% return and where u can pull ur money in case of an emergency.

Answer

If you knock out all debt first, you can save more month to month and be better off in the long run, as well as saving additional money on interest if the debt is on credit cards.

Answer

Definitely work to pay down your debt…you seem to be fairly blasé about how much debt you have and willingly taking on more for IVF which can be very expensive. That’s not a good place to be. You might be amazed to see how much you could pay down on your debt by simply not going out to eat as often. Good luck!

Answer

Saving is always good cause you never know when you’re gonna need that cushion but for me paying off debt would be more important as it improves credit score and with everything practically needing a credit check nowadays you’d probably want to keep that in better standing.

Should saving or paying off debt be priority?

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