Hi Money Minder,
I am 27 and living in the USA with about 15k in debt. My gross income is around 53k per year. Here’s the breakdown:
- 6k in student loan debt
- 5k Discover debt
- 4k in Amex debt (consolidated and interest-free for the next ~16 months)
My boyfriend and I are planning to move states in the next year or two to start our new life. We want to clear off as much debt as possible before we go. I’m considering withdrawing everything from my Acorns Savings account (about 15k) to pay off my debts and start fresh. My savings is not growing much lately as I’m putting most of my money toward debt repayment. The only other savings I have is around $300 in an Ally savings account. I have some investments like a 401k, but I don’t know much about them. Should I clear my Discover debt first and work on the rest slowly? I’m a bit confused.
Farewell,
Debt Dilemma
Response from THE MONEY MINDER:
Hello There,
As THE MONEY MINDER, I understand the burden that debt can place on your financial well-being and your plans for the future. It’s commendable that you’re seeking advice on how to tackle your debt before making a big move with your boyfriend. Given your situation, it’s important to weigh the pros and cons of using your Acorns Savings to pay off your debt. While paying off your debt in full can provide a sense of relief and allow you to start fresh, it’s crucial to consider the impact on your emergency fund and financial stability.
With a gross income of 53k and various debts totaling 15k, it’s recommended to first assess your budget and prioritize high-interest debt, such as your Discover debt. By focusing on one debt at a time, you can effectively reduce your overall debt burden while minimizing interest payments. As your Amex debt is interest-free for the next 16 months, it may be beneficial to maintain those payments while aggressively paying off higher-interest debt.
Regarding your Acorns Savings account, withdrawing the funds to pay off your debt may leave you vulnerable in case of emergencies or unexpected expenses. It’s essential to strike a balance between debt repayment and building an emergency fund to ensure financial stability. Consider a combination of debt repayment and ongoing contributions to your Acorns Savings to maintain a safety net while working towards your financial goals.
In addition, familiarize yourself with your 401k and other investments through your employer to ensure you’re maximizing your financial resources. Seeking guidance from a financial advisor or utilizing resources provided by your employer can help you make informed decisions about your future financial planning.
Remember, taking small steps towards debt repayment and financial management can lead to significant progress over time. Stay focused on your goals, prioritize your debts strategically, and continue to build your financial knowledge. All the best from THE MONEY MINDER as you navigate your journey towards financial independence.
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