You’ve got questions, we’ve got answers. Each Monday we’ll tackle one of your pressing personal finance questions by asking a handful of money experts for their advice. If you have a general question or money concern, or just want to talk about something PeFi-related, leave it in the comments or email me at alicia.adamczyk@lifehacker.com.

This week’s question comes from jpomonkey, who asks,

I have $2000 credit card debt at 6.9% and $4000 in savings. Should I just pay off my credit card debt in full, or continue to make payments every month and build up my savings account more? I own a home and am worried about having extra cash on hand in case something breaks.

This is what individual experts have to say generally about an issue that affects each person differently—if you want personalized advice you should see a financial planner.

Make Short-Term Sacrifices Now

“Given the amount of the debt and savings you have, I would not recommend that use your savings to pay off your credit card debt in full,” says Patricia Stallworth, an Atlanta-based money coach and host of the Minding Your Money 360 podcast. “Doing so would severely reduce your savings and leave you vulnerable if you had an emergency.”

Instead, Stallworth suggests refraining from using your credit card until your debt is under control and making more than the minimum credit card payment. Ideally, you’d also work a little harder to get some extra cash flow. That could include trying to take on extra work on the side, or scaling back your spending for a few months.


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“In this case, $200 a month would pay off this debt in less than a year,” she says. “You have an opportunity to eliminate your debt and keep your savings, and you can do it in short order. But it may require some diligence and determination on your part.”

An interest rate of 6.9% is pretty low (the national average tops 16%), as is the $2,000 debt. With that in mind, Ilene Davis, a certified financial planner, suggests a similar approach to Stallworth’s, though advocates attacking the debt a bit more aggressively.

“What I would recommend to this client is to buy nothing that is not ‘life critical’ until the debt is gone, and then pay $150 per week before spending money on anything other than bills and basic necessities,” says Davis. “The debt would be gone in four months, and if this person is wise, they will then invest at least $100 of that $150 to start building wealth while having $50 per week to spend on more fun stuff.”

Paying down your credit card debt will enable you to use the available credit for possible home emergencies in the future.



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