Which Debt to Pay Off First?

Question

Another question of mine asks about buying a home, and someone mentioned paying off debts. My husband has some trust funds maturing this Christmas, and will be no less thank 1250.00, could be more. Which debt should we pay off first? Ok, here's a list of all our debts... (blech) .

3235.51 My Car (64.00 Monthly)
6034.98 His Car (112.00 Monthly)
1400.00 Credit Card (100.00 Monthly)
200.00 Dog Training (120.00 monthly)
800.00 Car Insurance (due april/ 134.00 monthly)

Also, we were thinking about selling my car to get rid of that debt, we could probably get 4,500 for it about putting 700.00 body work into it (my husband hit my car in the driveway, needs a new bumper)

Any advice here? I know I'm asking some similar questions, but I'm at my wits end here!!!! Thanks in advance.

(ooh and again here's our figures. 1260 earned/month, 926 expenses/month.)

And I plan on getting re-hired at the place that laid me off, since they are re-hiring in January. Works out that my husband works at this company as well, so we'd carpool. :D

Answer 1

You operate on a pretty thin margin...

Since you operate on such a thin margin every month I would first try to minimize your monthly obligations. That means I would immediately pay off the dog training. $200 will finish off a $120/mo. committment (I assume the $200 was not a typo). This frees up $120/mo. and can go directly to the credit card company (I am assuming this debt is the highest interest rate). With the extra 120/mo, you can pay this credit card off in ~7 months (or a little less). Now you have an 'extra' $240/month that you can choose to either add to your savings or split up between savings and your car payment.

I would keep the remaining $1000 in savings to protect against some unexpected expense like a car repair. (You were getting ~$1250 in December, pay off the dog training for $200 and save the rest).

As this progresses it will snowball in a positive fashion! Trust me it really works!!

I don't think I would get rid of your car. The payment is pretty low. The only way I would do that is if it paid off the loan and greatly reduced your insurance.

You should shop for car insurance to make sure the rate you are paying is reasonable.

You get a copy of your credit report and address any issues that are keeping your scores lower.

It sounds like you really want to do the right thing and are trying to get your finances in better shape. Keep up the good work!!

good luck!

Answer 2

Wow, you are paying dog trainer $120 a month? I am not sure is this a loan that is incurring interest or not, but if it is...includes into the comparison (you will know what I am talking about later). Actually to answer your question we really need the very crucial info - interest rates on each one of the loans. I don't think you should include the car insurance since that is a very basic need that you will have to pay no matter what (and pay it in full, so you don't pay additional fees on the installments), so you definitely pay that first before you pay off any debts. Then the rest of the money go toward the HIGHEST interest rate loan. If there is still money left then pay the SECOND HIGHEST (now became the HIGHEST interest rate after you pay off the first one, make sense?), then if you still have extra money..the third highest interest rate....

Answer 3

First, car insurance isn't debt. It's a recurring expense.

Anyway, pay off the dog trainer (and don't run up that bill again), then focus on the credit card.

If you can sell your car for more than you owe, do that. It'll free up money to dump the rest of the credit card or pay down his car and will lower that insurance bill.

Then, pay off his car.

Finally, start saving so you don't have to go back into debt.

Answer 4

Dog training, car insurance and as much of the credit card as possible. And if you are going to sell your car will it be more difficult to get around for you?

Answer 5

Concentrate on the loan with the highest interest rate first, which is probably the credit card.

Answer 6

I would pay off the credit card in full.

Answer 7

FIRE THE DOG TRAINER! FIRE YOUR HUSBAND FOR HITTING YOUR CAR. TAKE THE MONEY AND PAY OFF THE CREDIT CARD FIRST. DO YOU NEED 2 CARS TO GET YOU BOTH TO AND FROM WORK???