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Anyone using their savings for aggressive loan paydown?

Home Personal Finance and Budgeting Anyone using their savings for aggressive loan paydown?

  • xraygoggles xraygoggles 
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    Earnest refinancing bonus

    I’m sure this question has been brought up numerous times in the past, but has anyone personally raided their sizable savings (relative term, but I would say at least 25-50k+) to just pay down the loans faster?

    I’ve decided to be really aggressive and pay down the remainder of my loans in one year, which is possible if I use this strategy to start the snowball. Just curious if anyone else has done this, and whether you regret using the funds, etc.

    “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

    #231274 Reply
    fatlittlepig fatlittlepig 
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    Of course. Why wouldn’t you.

    #231285 Reply
    Liked by Tangler
    Avatar Peds 
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    Joined: 01/08/2016

    Yea if it’s cash savings you are losing money….

    #231287 Reply
    Liked by Tangler
    Avatar Tim 
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    It’s called a Texas Two Step.
    1st is the aftertax deposit when your start getting paid.
    2nd bump is when your done with loan payments.

    That dance step works anywhere but you have to finish to get the second raise. Sooner the better.

    #231290 Reply
    Liked by Tangler
    xraygoggles xraygoggles 
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    Of course. Why wouldn’t you.

    Click to expand…

    Hmm, is it really that much of a no brainer?

    I feel somewhat hesitant to do it, due to the slight anxiety of not having any cash savings. Would have to wait for next month’s paycheck for cash in case of emergency.

    “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

    #231291 Reply
    CordMcNally CordMcNally 
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    I kept a pretty thin emergency fund. There’s not too many things these days where you have to use cash and can’t use a credit card and their grace period.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #231296 Reply
    Avatar DCdoc 
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    seems like a no-brainer to me. Pay off your loans.  If you’re in massive debt, isn’t that an emergency?  If it’s not, what else is?  You’re keeping a good deal of cash earning next to nothing to protect yourself against an emergency, while ignoring the debt emergency you already have.

    #231300 Reply
    Avatar StarTrekDoc 
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    Really depends on what the savings are in and debt % is.   Remember the power of compounding on retirement funds.   You start early and the tail on this investments are significant if indexed and left alone.

    OTOH if savings is a MMF at 2% and your debt at 6% — well that’s a no brainer.

    If really 6months on all this — you’re talking small dollars over time and if you’re paycheck-to-paycheck; why lose sleep over this over the span of years?

    When starting out on physician career, there’s nothing more stressful than cash poor IMHO.

    #231303 Reply
    Avatar Panscan 
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    What does any cash savings mean, like 0? Obviously you don’t want 0 but it’s dumb to have 50k in cash sitting around with loans unless you have big expenses or unpredictable job

    #231308 Reply
    Liked by Tangler
    fatlittlepig fatlittlepig 
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    Blah blah emergency fund blah blah. Tell
    me what emergency can’t be handled by 10 grand and your next paycheck. Having 50K laying around while your in debt seems pretty dumb.

    xraygoggles xraygoggles 
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    Maybe some numbers would help.

    Current debt burden: 197k @ 2.45%

    Cash savings: 40k @ 2.10%

    Checking: 15k @ 0.37%

    I am thinking of plowing all of savings into the debt, and keep checking for any emergencies until next paycheck. The debt would be paid off in exactly one year (+/- 1 month).

    “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

    #231312 Reply
    Liked by SLC OB, Tangler
    fatlittlepig fatlittlepig 
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    Why think, just do.
    FLP

    #231313 Reply
    Liked by Tangler
    CordMcNally CordMcNally 
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    I’d cut down to about $10k and put the rest towards your loans.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #231314 Reply
    Avatar highdoseamox 
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    Status: Physician
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    Joined: 05/18/2019

    I keep a really small emergency fund (like 5-8k). I really have 2 or 3 paychecks to pay off anything big and unexpected if I put it on a credit card. That allows retirement savings and student loan paydown (similar balance to you)

    #231316 Reply
    Avatar treesrock 
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    Status: Physician
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    Joined: 08/14/2017

    Same vote as everyone else, keep like 10k in cash and pay off loans.  Assuming you have adequate insurance (disability, life, umbrella), you should be covered for a true emergency.

    #231317 Reply
    Liked by adventure, Tangler

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