Help me think this through, please.

[Valerie in WA]

My two big financial areas right now are paying down the credit card and saving for the kitchen remodel. (Lest you worry, the EF will be fully funded by the end of the year - that's a given.)

Currently I'm paying $400/month to the credit card. The balance is $7,238.03, and the APR is 3.99%. My finance charge is usually about $25 per month.

I also have been saving $320/month for the kitchen remodel. Plus I'll have a one-time deposit of $1400 in April. The balance is currently at $2,573.78, with the account paying 1.25%. By the end of May, I will have my (former) goal of $5,500.

I thought the materials would cost about $5000. (My dh is a contracter and has done about 50 kitchen remodels, so labor is free. ) Well, we ran a quick estimate through one cabinet company and it came up at $11,000.

So now it's going to take another whole year. ( ) I will have enough money by June of '07, assuming I continue saving as I have been and paying that credit card as I have been. (I'll have another $2800 lump sum, plus the monthly amounts). Coincidentally, the credit card will paid off that same month.

So here's my question: If I'm going to reach both goals at the same time, would it make more sense to pay $720/month to the CC now, and then save $720/month for the kitchen after the CC is paid off. Either way, I get my kitchen at the same time, right?

And in the mean time, would it be wiser to buy a CD with the $2500 I have saved?

TIA for your help.

[my4littlebuffaloes]

I am a big Dave Ramsey fan and I think you should concentrate on paying off the cc debt before working on something like a kitchen remodel. However if someone were to know they would need to replace a car within the next few months, then it would be wise to save for that, so they could pay cash. I view that as a need, rather than a want. How about putting your savings (except for $1000 for emergencies) towards the cc and then paying that off within in the next few months. Then savings like crazy for the remodel?

Also, does your dh get a contractors discount? Are you set on the place to get the cabinets from? Can you look elsewhere? I don't know how many cabinets you are talking, but $11K seems high to me (keep in mind I know nothing about cabinets LOL)

Good luck!

Jennifer

[homesteadmamma]

I agree witht the above post - pay off your debt now. Once that is done, then put the money towards your kitchen cupboards. You will feel so much better when that debt is paid off.

[Englishlady]

I would go with paying off the debt.

Why?, because when you owe money to any one, THEY have the power!

Nothing beats the feeling of having no debt and no I am not being smug ( read my thread "My humble beginings" & you will see where I am coming from).

I KNOW there are aspects to our homes that drive us mad with desire to change them and yes we all want the good stuff.

But often ( just like with clothes and such) we can end up paying more than we need to..............expensive doesn't always mean better quality, sometimes the company are just better at "selling" the products.
I have re-done my kitchen ( in this house) and did a lot of research in to the cupboards (cabinets) and the carcass in each case is pretty much the same.It is the doors that dictate the price.

( I also had an old friend who worked at a plant that made kitchen cabinets and he pretty much confirmed that to me!)

The biggest cost to me was the labour, not a problem YOU will have

So I would say pay off your debt and in the meantime I would be surprised if you didn't find something that you like equally that you get a better deal on......................that's usually how these things turn out!

[forestdale]

Valerie, I would pay off the credit card first, you'll save interest by paying it off faster. Then I'd concentrate on the kitchen.

I'm not sure what this means: "And in the mean time, would it be wiser to buy a CD with the $2500 I have saved?" Is this $2500 your emergency fund? Is it a CD player you want to buy? I'm sure you'll get a CD player for a lot less than $2500. If this $2500 is not your emergency fund and is a lump sum you've received, why not put a portion of that on your CC too?

[my4littlebuffaloes]

LOL A CD is a type of savings account at a bank. You give them your money and it is locked up so to speak for a set amount of time and you get a higher (but still not good) interest rate than a regular savings acct. You cannot withdraw from it until the term is up, without major penalty. It is actually called a certificate of deposit.

Jennifer

[Valerie in WA]

Yes, a CD is a Certificate of Deposit. You buy it for a period of time, such as 6 months, or 12 or longer. Current rates are at about 3.65%. Much better than my savings account at 1.25%.

The $2,500 is the money I have saved for the kitchen. I had about $1,800 in the EF, but then we unexpectedly had to buy a new heat pump.

I've started another thread called "Another question" that you may want to look at if you like crunching numbers. It includes my plan to have the EF back up to $4400 at some point during this year.

It's hard to let go of 'my' money that I've saved toward 'my' kitchen, but it really does seem wise. Had we been able to do it this spring, things would be different. *sigh*

[AmyBoz]

I have to agree with everyone else...pay off the cc.

[forestdale]

LOL thanks jennifer. Here we call that account a Fixed Deposit. I thought Valerie had gone bonkers wanting to buy a CD player.

[guest7]

Valerie, I had the same issue with my car savings account vs. my cc bill. [My car account is the payment that I no longer make to loan- and put it in a savings account, so that when I'm ready to buy a car- there it will be! I had $8500 in it]
Well, I racked up $3200 on cc over christmas holiday and I had a dilemma about using the car account to pay off the cc since this interest was at 16% or $60/mo. I didn't want to dip into the savings.
After some good advice here in the village, I paid it off- and like Englishlady says.. there is a good feeling in being debt free. But put that card away and work towards EF fund, a christmas fund, etc. so you won't NEED the cc for emergencies. When you have that cc paid off- that frees up $400/mo plus the interest you were paying!) You could get your EF $1000 up quickly (month and half?)- it seems that you have about $700/mo to save. Then when that's done- slap all that money toward the kitchen redo. I'll bet you 'll be able to put aside $1000 in some months... if you tried REAL hard! LOL! Yard sale season is coming up!

With ALL behind you here!! And we'll bug ya until the $$ is saved! LOL

[missmollymayhem]

I agree with everyone else- If you think about it- it's costing you roughly $24/month to have that kitchen savings account. Even if you put your money into the high yeild CD you're STILL paying to have it!

If you put your kitchen savings onto your card ($2500) and make $720 payments you will have the card paid off in 7 months. In that time you can research the cost of the kitchen, see if there are any change you can make to make it less expensive, and you'll be paying off a major debt.

[Mojjo]

pay off the cc...i hate interest...so i wouldn't want to keep paying it