What to do with $5K?

mamarazzi

We're selling our extra car because H's employer bought him one.  We're guessing we'll get around $5K for it.

So, do we

a) put it in savings to be used toward a down payment/closing costs when we purchase a new house in a year or two?

b) invest it in an IRA or something of that sort?

c) pay off debt (we have some cc debt, student loans and one car payment)

I'm thinking we should probably pay off the debt?

stacynikki

Pay off the cc and some of your car.  Then put the rest into savings.

elm1032004

pay off the debt, then the money you save every month by not having to pay that CC bill should go into the savings for either your down payment, or until you have enough to start an IRA. 

hmd

I would definitely pay off debt, but do you have an emergency fund ($1000 or so)?

Andrewsgal

Pay of debt! I am a firm believer in being debt free!

Mrs Manners

Pay off the debt.

Jodi&Joe

Here's my take --- the most financially savvy answer is, of course, to pay off the debt.

However it's hard to save $5k --- and to have a lump sum like that added to savings --- that would be motivating to me.  I would continue paying what I could on the debt and put the money in savings.

Again, that's not the most financially savvy answer!

co18co

Definitely get rid of as much of the debt as possible, and keep a little cushion, too.

I'd prioritize by interest rate (CC = bad, student loans = better to pay over time) and go from there. 

mommyme

split it.  put at least $1,000 in savings and then pay off some debt.

kjlrs

definitely pay off cc debt. the rest of the debt depends on what the interest rates are and if the interest is tax deductible. if you have a very low (say 2% or less) rate on car payment, it may not be worth it to pay off because you can make more than that in interest doing your own investing - even with a money market. if it's more like 7-8% then i would also pay that off. i think student loan interest is tax deductible but i dont have any experience there. not all debt is bad if you can deduct the interest and/or its low interest. cc debt is pretty much always bad though.

 

depending on how much you have left after the debt you decide to pay off, it would depend on whether you need the money for a down payment in order to secure a house or keep its interest rate low (and whether you will really leave it in savings and not spend it in the meantime). IRA or something is a great investment tool and now's a great time to invest IMO but if you need cash in the relative short-term then it doesnt make a ton of sense to invest the cash just to build up more debt.

Baby4OT

Absolutely pay off the CC and car debt. I think it would depend on what the APRs are for the student loans. Can you make more money in interest in a savings or high-yield account than you would save by paying off the loan? Some student loans have such low interest rates that it makes more sense to have the money in savings or CD to earn more in interest and keep making low payments on student loans.

The money that you save each month by not having CC/car payments should then be put into retirement accounts like IRAs or into a savings acct for emergency use or to work towards the down payment on your future house.

jaredswife

We would be boring and use it to pay down DH's school loans and then pad our checking account. 

And then we might use a very small portion of it for something for us.

Brideofranken

C! good for you!!!

kertybird

Pay off the debt. 

NikiGee

I say split too.  $1000 in savings for an emergency fund and pay off debt with the rest.

Kelly Madonna

Pay off the debt. If you think about your total balance sheet, you don't really have savings until you pay off debt!