Should I pay off debt or save my bonus?

Question

Its time for my anual bonus at work, Im estimating about 1500 after taxes, (taxes take a HUGE chunk of it unfortunately). I'm currently making 19 an hour and am hoping for a 1 to 2 dollar raise. I have about 500 in savings, 4000 in my 401k and 4000 in credit card debt. I also have a baby on the way and will be out on maternity leave for 12 weeks with 70% of my pay. So do you think it would be better to put the money towards the credit card (the interest isnt very high but I pay about 50 a month in finance charges) or put it all in savings? My fiance pays a majority of our bills so my main responsibilty is getting my credit cards paid off, I have no other debt...advice?

Answer 1

I agree with Naztazia; it's always best to pay off debt.

Answer 2

Without knowing what kind of situation you are home-wise, ie renting or homeowner...it's kind of a tough decision.  It is wise to pay down that credit card, but you also need to keep in mind that it is expensive having a child (if you plan on breastfeeding, but aren't lactating, and need to buy formula at $25 a container, diapers, etc).  Perhaps pay some towards the credit card, and sock away a few hundred just in case for the baby.  Good luck and congrats

Answer 3

Whatever rate you're paying on your credit card it will be greater than anything you can get in a savings account. If you can live off your 70% of pay and your fiance's salary I'd suggest you pay down your debt.

BTW, if you think a lot is taken out of your paycheck now for taxes, just wait until Obama gets elected.

Answer 4

pay your debt first.

Answer 5

I were you i'd pay the debt first.

knock down that interest

things will change when that baby is here...

experience

Answer 6

i say split the difference, put half to the credit cards but still make as much of a monthly payment as you can and maybe put the rest the getting that college fund off the ground. never too early to start on that!! Congratulations on the new baby, Momma!!

Answer 7

I'd take the money and... CONSULT AN EXPERT :D

Seriously, you've got some debt, and you also have a lot of other variables that need to be consdered, especially with a baby on the way (that 500 in savings won't go far if something happens).

So you NEED TO CONSULT A FEE ONLY FINANCIAL PLANNER. Yahoo answers is a good place for ideas, but you're beyond that stage at this point, you need professional advice. If not for you than for your baby. Take your bonus and consult a fee only financial planner (fee only because they are independent and therefore do not profit from selling you products), who will be able to help you set up goals and plans for your whole life, not just what to do with this bonus.

Take your bonus and spend some of it on the planner. They'll give you some options as to what to do with the rest, how best to pay back your debt, start your emergency fund etc...

It's pay the planner now or have h**l to pay for it later, and I'd hate to see you pay for it later!

Good luck!

Answer 8

Always pay off credit card debt first.  Unfortunately, bank accounts - even the best - are barely making 2% interest... and I'm sure your credit card finance charges are much higher than 2%.  So you will be losing money in the long run if you put it in a bank account.  The 70% pay won't affect you that much at this time.  Most of the stuff you need for the baby will be given to you through friends and relatives for the first 3 months.

Answer 9

move your 500 in savings up to a 1000 and dont touch that unless it is an EMERGENCY... pay the remaining 1000 to your credit cards. the money in the savings account has nothing to do with making money with interest. its there to use in case of an emergency. you dont want an emergency to come around and put it on the credit card. if you dip into the 1000 for an emergency. refill that fund back up before you do anything else. cut the credit cards up and then pay them off. you dont need credit to buy anything.. all you need is cash.