Should we pay off debts now or pay them off over time?

[nicky]

Me and my husband have been married for 8 years. We have 1 son, and I am pregnant with twin girls that are due in late november. We completed a partial DITY move (for those of you who are civilian DITY=Do It Yourself). We're expecting about $4500.00 back after taxes. I want to use all of the DITY move money, to pay off some bills that we have. Paying them off will free up about $400.00 a month. My husband just wants to pay only part of them off, and save the rest for a down payment for a new car for me and our kids.Our 1 months advance pay is going to be paid off in September, and that will free up $189.00 a month. The loan with the Navy Marine Corp Relief Society, will be paid off in March, and that will free up another $110.00 a month. My husbands credit card with Capital One will be paid off next February, with our tax return. The rest of our tax return is going to help pay off his Military Star Card.I have to admit we're careless, and put ourselves into a lot of debt. We've been slowly been digging ourselves out. My husband is deploying to Bahrain next March. He will be receiving per diem, while he's deployed. He lives very frugally while on deployment. We have agreed that with the excess per diem money, I want him to apply that to our consolidation loan, and his military star card. We can be 100% debt free by the beginning of next summer. I am doing medical billing and coding from home. I completed my first month, and I made $1200.00 (after taxes). 80% of it is going toward the new car. The rest we're using for our monthly household expenses.So what should we do with the DITY move money? Should we immediately pay off some bills (my idea) or should we only pay off part of them, and save the rest for a down payment for a new car? P.S. I did forget to mention that we do have a small amount of money in a separate account for "just in case" money. There is about $1100 in there right now.

[Elayne]

if all of your debt is collecting interest i would pay it offf. then when tax return comes you vcoiuld use that money for a new car

[kk]

Pay off your bills. The amount you would save in interest alone is well worth paying off.Use the money you would be spending on a down payment for a car, or look to lease a car with little to no money down

[dairyday]

Pay off the half with the higher interest rate if you don't want to pay them all off at once.

[fokker_triplane]

I like your idea i think u should go ahead and pay off what u can now and then start saving up for your own car its best to get the debt paid off now so u can be debt free and have money for your family needs. Congrats on the twins!

[justoverhere]

Okay so, say your new car monthly payments are going to be around 400$ a month. Would you be able to afford that without cutting back 400$ worth of bills per month. Like would you be able to add an extra 400$/mo to your monthly bills?Personally what I would do is, pay off the highest interest rate bills first. See if you can put all your debt into one pile at one low interest rate, that way you aren't paying 5 different people and just have to concentrate on one. If you do decide to pay off your debt with the DITY money, then continue to live like you would if you hadn't paid them off and take that 400$ or so and put it towards your car. So it would take about 11.25 months to get 4500$ if you put away 400$ a month. But, i know it's cliche to say, in this economy being debt free is a great goal to achieve. No worries and after that just watch what you spend. But, if you're going to be careless and end up with as much debt as you've paid off then there's no point. Best of luck! I wish I was debt free Stupid credit card.

[Steffie]

Pay off the bills.

[Ocean]

Pay off the bills first. You're wasting money paying interest on the debt that you do have. When it's all payed off, take the extra money you have each month and put it into a separate account specifically for a down payment on the car you want. Then when you have enough, buy the car. Also, just in case money is good. Leave it as just in case money, because you never know when you will need it.

[Melissa]

We were thinking the same thing when we got 8,000 tax credit this past February for buying our first home. We paid off all the debt we could with the money. We owed my husbands Grandmother 3000 ( she lent us for down payment on the house ) We owed my sister 2000 ( our dog needed surgery while in escrow on the house so we couldnt do anything on credit)So we payed them both off which took 5000, so we had 3000 left and were debating what to do with it. We decided to pay off our small credit cards. Sears, A Tire Company, and Mervyns. We closed off those accounts completely. With the way the economy is now we want to have the least amount of monthly payments as possible!

[SSQ8]

I would put 3,5000 highest interest rate item(s) and then keep 1000 dollars back and put it in "just in case".With twins coming then you can never be sure what will happen. So I personally would feel better with a little more cushion in your "just in case" saving.