Throwaway account but my main has been in personal finance for the past year. I am following the flowchart as best as I can, but have multiple debts that I could use some advice on paying off. I flew a little too close to the sun with my spending before I really learned about credit cards and have been carrying some debt for a few years now. I just want it all paid off. Here's my breakdown:
37 years old
Salary: $110k/yr with possibility of a bonus. Contributing 7% (company match amount) to 401k ($268k in the account)
HYSA: $8600
Rent: $2585 which drops down to $2275 in July (moving to a 1 bedroom). I live in a HCOL area
Student loan @ 6%: $43,000 on PAYE plan until I get kicked off. Current payment is $355/mo but will go up when I recertify for the first time since Covid in August of this year
Discover CC with 0% interest until July 2026: $1610
Discover CC with 0% interest until Nov. 2026: $1942
Citi CC with 0% interest until April 2027: $11,253.99
Unsecured loan @ 10.5%: $7903 ($350/mo)
My plan so far has been put away around $1k-$1200/mo and then pay off the Discover card that starts accruing interest after July, followed by the other Discover debt, then the Citi debt. I am targeting these since the interest will be much higher than the loan once they do start gaining interest. Finally, I plan to pay off the unsecured loan in April when I pay off the Citi card. I could definitely pay off the loan now but I just finally got over my 1-month expenses in my HYSA and would rather not wipe it all out.
Should I be doing something different here?
Need advice on which debt to tackle first
byu/Overrated_Airplane11 inpersonalfinance
Posted by Overrated_Airplane11
4 Comments
Pay off the unsecured loan with the money in the HYSA. The point of having a HYSA is to not go into high-interest debt. But only do this if it will not affect your being able to pay off the 0% ccs before the rates go up.
ran into this exact thing last month when I was struggling with the same choice. I listed everything by interest rate and attacked the highest one first because the math just works better.
Can you roll July 0% interest onto the November 0% interest card and just lump that all together?
I’d take a little bit of your HYSA money to throw at the unsecured loan. Then tackle the July 0% if you can’t roll it into the other card.
Worst case and last resort, you can always lower your 401k contribution for a few months to help free up a little money to pay off the debt. Sure it costs money long term, but sometimes you have to survive the now before you can worry about the future.
Leverage the 0% interest to your advantage. Don’t pay those off until the absolute last moment.
What I would do:
Pay off unsecured loan fully right away. You’ll have about 700 left. April – June refill your HYSA. Then pay off your discover card. May – October refill your HYSA. Then pay off your discover card fully at once. Then repeat the same thing for your citi from November to March.
As long as you have self control there is no point in paying off 0% interest loans until they run out. Earn free money in a HYSA.