Anyone using their savings for aggressive loan paydown?

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

  • Lordosis Lordosis 
    Status: Physician
    Posts: 1863
    Joined: 02/11/2019
    Splash Refinancing Bonus

    I was guilty of this as well.  Before I found WCI and learned all this stuff I kept way too much in cash.  Now I cut it way back but it is still higher then I would like.  It makes my wife happy to have the full 6 months e fund.  And if keeping an extra 20K in prime MM makes my wife happy it is worth every penny of opportunity cost.

    If I still had loans I would push harder to get to a 1 month E fund until they are gone.

    “Never let your sense of morals prevent you from doing what is right.”

    #231329 Reply
    Status: Physician
    Posts: 2509
    Joined: 05/01/2017

    The efund in 3 easy steps:

    1. Resident: $2k

    2. Attending with debt: $5-10k

    3. Attending w/o debt: whatever you are comfortable with ($40k for me, totally unscientific)



    Efund is an area where the personal outweighs the finance. There are excellent arguments on both sides of this equation everything from “you’re stupid why do you have an efund?” to “I keep 12 months living expenses in cash.” To me the way to decide on your number is to open your banking app and decide if the balance gives you a sense of peace. If my savings was at $10k it wouldn’t, if it was at $150k that would seem silly.

    Avatar burritos 
    Status: Physician
    Posts: 494
    Joined: 04/23/2018

    Pay down debt or fund 529?

    #231332 Reply
    Zaphod Zaphod 
    Status: Physician, Small Business Owner
    Posts: 6196
    Joined: 01/12/2016

    Get a checking account with a higher percentage, mine is 3.3% to 20k. Your rates are pretty low, if you’re concerned do it, but its basically a wash.

    #231341 Reply
    Liked by Tangler
    Avatar wideopenspaces 
    Status: Physician
    Posts: 1138
    Joined: 01/12/2016

    In residency our efund was always 15k. Since residency we’ve kept it about 25k. But we’re about to open a taxable in September and I plan to put all of it there, so we won’t technically have one? I always keep 5-10k in our short term savings account for vacations and such. So I’d plow all but 10k ish into the loans.

    #231349 Reply
    Avatar Tangler 
    Status: Physician
    Posts: 358
    Joined: 08/23/2018

    Kill the debt. Small emergency fund. Having no (small) emergency fund = incentive to work

    #231369 Reply
    Liked by xraygoggles
    Avatar Budgetmaestra 
    Status: Attorney
    Posts: 41
    Joined: 04/30/2019

    Yes, pay down that debt. I’d keep $5-7k in cash & throw the rest at those loans. Will it feel scary at first? You bet it. But it will keep you motivated to knock out those loans as soon as posssible. And getting those loans down to under $160k in one fell swoop will feel incredibly satisfying and will motivate you to keep going. Think about that in only four months half of your debt will be gone and your loans will be only five figures. Then you just truck on through the winter and come spring most of those loans are gone. Then you can reward yourself with a nice vacation next summer once the loans have been paid off.

    #231393 Reply
    xraygoggles xraygoggles 
    Status: Physician
    Posts: 93
    Joined: 10/26/2018

    This is exactly the reason why I come to this forum, always learning something useful. I just assumed having an e-fund is essential at all times.

    Time to crush the debt once and for all, e-fund be damned!

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

    #231404 Reply
    Avatar Peds 
    Status: Physician
    Posts: 4452
    Joined: 01/08/2016

    I don’t think that’s what we said…

    #231410 Reply
    Liked by Lordosis
    xraygoggles xraygoggles 
    Status: Physician
    Posts: 93
    Joined: 10/26/2018

    Well, some of you did, at least. I keep my checking above 10k at all times, so it should be okay.

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

    #231415 Reply
    CordMcNally CordMcNally 
    Status: Physician
    Posts: 2860
    Joined: 01/03/2017

    An emergency fund is essential, but it doesn’t have to be ridiculous. $5k-$10k is still an emergency fund greater than a majority of Americans.

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

    #231420 Reply
    Liked by xraygoggles
    Avatar Panscan 
    Status: Resident
    Posts: 1092
    Joined: 03/18/2017

    Your checking is an efund.

    #231421 Reply
    Avatar Tim 
    Status: Accountant
    Posts: 3088
    Joined: 09/18/2018

    Wink, wink.
    Once those loans are gone, don’t raid your Efund for that big vacation or car you have deserved for so long!

    * Official mortgage payoff thread! *

    Pat yourself on the back and a little boasting helps.

    #231478 Reply
    Avatar jhwkr542 
    Status: Physician
    Posts: 1316
    Joined: 02/15/2016

    Maybe some numbers would help.

    Current debt burden: 207k @ 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).

    Click to expand…

    You’re asking a pretty biased crowd, and I’m more indifferent. You’re just not losing a ton of money by having it in an account making 2.1% (although taxed) vs paying down 2.45%. It amounts to around less than $500 a year. People always underestimate the need for insurance. Nobody thinks they’re going to be disabled either but a lot of people do use disability insurance. I asked this same question and got similar responses. I split the difference and am going down to $20k or so in cash.

    #231485 Reply
    Molar Mechanic Molar Mechanic 
    Status: Dentist, Small Business Owner
    Posts: 400
    Joined: 10/29/2017

    2.45%?  I’d ride that cheap money horse till it runs out.  Put the $40k in a taxable investment and pay the minimum on the debt till they wise up and demand a decent interest rate.  Your rate is inflation or less.


    Pay it off by the time the variable loan resets or the fixed rate loan is depleted.  Down the road, you’ll be wealthy and can make emotional decisions like paying off cheap debt early.  Early in your career, using cheap debt to allow you to build assets is a no brained.





    #232426 Reply

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