AboutGina Boykin Expertise Financial planning, debt management & credit cards, and money-saving tips for adults and teens. Saving vehicles such as CDs, treasuries, bonds, and money-market funds. I provide honest, objective and relevant information to help you made the best decision for your money.
Experience Over 10 years of combined experience in accounting, audit, investing, entrepreneurship, real estate.
I am the CEO of Atlanta Y.E.S., a nonprofit organization dedicated to financial literacy for youth.
Education/Credentials B.S. Accounting, 10 years of experience in accounting, audit, and investing
Question I recently saw Suzie Orman on a talk show where she said with today's recession situation, CASH IS KING! If you do not have 8 mos. worth of savings and you owe credit card debt, it's better to pay the min on the credit cards and keep the cash in your acct verses paying off the card. We have a significant amount of credit card debt which we will be able to pay off in a week because we have sold a piece of property. Our plan was always to take this money and pay off the debt. However, we have no savings. So my question is, is it better to put the money into a savings account and NOT pay off the credit card debt? Or do we pay off a portion of the debt and put a portion into savings. Suzie mentioned that what the credit card companies are doing to folks who pay off their debt is closing down their accounts and not allowing them to reopen them. Our fear is that if we pay off the credit card debt and the credit card companies close our accounts, with having no savings, we'll have no safety net (or credit cards) to fall back on if needed. What are your recomendations, we want to do the right thing with the money we'll be getting shortly.
Answer I agree with Suze that cash is king. It is so important these days to have an emergency fund. You may not need an entire 8 months worth - this may depend on how secure your job is, and whether you and your partner both work (one job loss in a 1 income household will result in a much faster use of savings). Use the remainder to pay down debt. Also, since you no longer have that property, it sounds like you may have extra money every month (the amount you were using to pay the mortgage). You can use this extra, and any other income left over after your monthly expenses, to pay down the remainder of the debt as soon as possible.
If you have several credit cards (different issuers) with a sizeable amount of available credit, you may also chose to pay down more toward the credit card, because even if one card issuer closes your account, you still have other cards to fall back on. Even in this case, I'd still suggest having an emergency fund.
