WWYD - cash and debt

[Anonymous]

Here is the situation, I'd like to hear some opinions on what to do
I have some amount of money (30K+) that just sitting in my saving account earning 0.8%, it's designated for specific purpose in the future (2+ year). I add 500 every month to this fund.

I also have couple of debts I pay interest on monthly: car 25k @ 1.99% monthly pmnt $500, and HELOC 40k+ @ 2.99% interest only $100/month for now, repayment starts in 7 years.

Here is the thing - I don't like the idea of sitting on cash while I'm paying %% on my debt. So, I'm considering paying out car and/or part of the HELOC.
I won't need full amount in 2+ years, even than payout will be in smaller chunks 7-8K over 4 year period.
Would you pay your debt in this situation? Which one?
Would you use open HELOC as a vehicle to accumulate money for big expenditures, e.g. pay it out ahead of schedule instead of setting aside on saving acct, and drawing out when needed?

[Anonymous]

How much do you need set aside for an emergency?

[Anonymous]

Emergency fund of 4+ month of expenses is already established.

[Anonymous]

Pay off the car first. You can write off the HELOC interest. Add the car payment saved to the HELOC monthly payment. You've reduced your interest and are paying off the HELOC more quickly.

[Anonymous]

how much money do you need in 2 years for "the specific purpose"?

what is the total a mount you can borrow from your HELOC?

[Anonymous]

ah, and what is your tax bracket?

[Anonymous]

What is heloc?

[Anonymous]

I would have my car paid off by the end of the day today and put the rest towards the HELOC. I hate debt, it makes me feel burdened, and you're clearly good at savings - you can save up at least 12K before you need the money (two years). If you have that emergency fund in place, that 30K would go towards debt if I was you.

[Anonymous]

Anonymous wrote:how much money do you need in 2 years for "the specific purpose"?

what is the total a mount you can borrow from your HELOC?

15-20K per year over 4 years
max~50K, but can be easily increased to up to 90K
tax @28%

[Anonymous]

Put your cash in a total stock market index fund. If you can keep it there you'll make at least 5% or so long term even if you keep paying your debt interest.

[Anonymous]

Anonymous wrote:What is heloc?

Home Equity Line of Credit.
http://en.wikipedia.org/wiki/HELOC

[Anonymous]

Anonymous wrote:Put your cash in a total stock market index fund. If you can keep it there you'll make at least 5% or so long term even if you keep paying your debt interest.

Not a good idea if you need the money in the next 2-5 years.

[Anonymous]

Assuming your 4 months emergency fund is separate (not included in the 30K saving). Here is what I will do:

Pay the car loan in full. Pay the last 5k or so toward the HELOC balance. Apply 1,100 payment to the HELCO each month. In 2 years your HELOC balance will be about 9K, At which point you will have more than 40k to borrow when you actually need it instead of paying interest now on the loan when you do not need it.

[Anonymous]

Anonymous wrote:Put your cash in a total stock market index fund. If you can keep it there you'll make at least 5% or so long term even if you keep paying your debt interest.

Yeah, but she needs her money soon, not "long term." Don't do it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Put your cash in a total stock market index fund. If you can keep it there you'll make at least 5% or so long term even if you keep paying your debt interest.

Yeah, but she needs her money soon, not "long term." Don't do it.

No, I have no plans to invest that chunk of money, I cannot afford to loose principal.
So, HELOC payoff it is.
Thank you everyone!