I’ve made a lot of progress up to this point. I’ve increased my net worth by roughly 200k in the last 5.5 years. Its been a fairly steady road without two many bumps. Currently I have about $17k in student loans and $6k in an auto loan (we own one car). On the flip side I’ve got 35k in cash (although 15 of that is set aside for our emergency fund). This pile of cash is growing at roughly $1,300 a month. If you do the math I’ve got just about enough to pay off all my non-mortgage debts. The main question I’m asking myself right now is, what should I do?
Option 1 would make Dave Ramey’s followers happy. I could pay off all my debts and be debt free other than my house. Its been a while since I’ve been a Dave Ramsey fan but I believe that’s a baby step. My debt payments currently total about $320 per month and the average interest rate is roughly 4%. I’m only getting 1% in my savings account so I’d be winning that battle as well. Although, I am a fan of having cash on hand and depleting all my cash other than my emergency fund would be a tough pill to swallow.
Option 2 is to keep making the monthly payments and hoarding cash. This would allow me to continue to save and know I have some money in case something happens. I’d continue saving at my current pace. One thing I like about this is that I can wait and see what my family income situation I after we have baby #2.
Final result of option 1 would be to pay off all my non-mortgage debts, have zero non-emergency cash, and increase my monthly cash savings to roughly $1,600. Final result of option 2 would be to still have roughly $23k in non-mortgage debt but be sitting on a pile of cash that is growing fairly quickly.
I’m currently wrestling with this question and don’t quite know what I’m going to do. What do you think? If you were me, what would you do?