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Do I have to change the name of my blog?

What situation would you rather be in…

Situation Uno: You could have $20,000 in savings, but also have $15,000 in mid-interest debt (7%).

Situation Dos: You could have $5,000 in savings, but zero debt.

I’m currently sticking with situation uno. I have $22K in the bank and a little over $15K in debt. I could pay off my student loan tomorrow, be truly debt free, and still have a small emergency fund. I chose not to. Dave Ramsey would be pissed! My blog’s title is Punch Debt In The Face, but by choosing to remain in debt, perhaps I should change the name to Punch Debt In The Face When You Feel Like It. It doesn’t quite have the same ring, does it?

I would be all about transitioning to situation dos if not for one small detail. I’m getting married. There are a lot of unknowns at this point in my life. I know I will be paying for a honeymoon (probably around $4K) and will face other wedding related costs over the next few months. Not having to pay for the actual wedding day has been a huge blessing, but I will still have some financial obligations.

I have no clue what to expect for monthly expenses as Girl Ninja and I move in together. I’ve never lived with a girl before, but word on the street has it those things can be expensive. It’s also unclear what Girl Ninja’s income will be. She is a substitute teacher in California, and we all know the California government can’t manage money.

Maintaining a rather large savings account keeps me from stressing out about the “unknowns” of marriage. Personally, if I paid off my student loan, and only had a few grand in the bank, I would be super anxious about our stability. So for the time being, I plan to continue operating in situation uno until, at least, the end of the year. After a few moths of the married life, and once I have a better handle on our future, I will strongly consider paying off my loan.

So what would you do? Does the security of having a large amount of cash in the bank keep you from stressing about your debt? Or does debt overwhelm you, and you would get rid of it in an instant. I have a feeling there will be a pretty even split.



  1. Would def. bug me having savings AND debt, but I'm like you, would much rather have the safety net of cash savings. Gives you more flexibility when it comes down to it 🙂

  2. Things are always easier to deal with when it's a choice. Currently, you are choosing to keep the debt until your life settles down for your own sanity. That's alot different that being in debt and having no means of ever getting rid of it. And after things settle down, you always have the option of using a portion of your savings to pay down the debt faster – it doesn't have to be an all or nothing situation.

  3. I can't answer about the student loan without knowing the interest rate and how much time you have to repay. If the rate is low, I would repay according to schedule, and if inflation reverts to its average 3% in the future you'll be paying with cheaper dollars. Your bank balance is fine and probably as large as it needs to be. You have liquidity and safety; on the other hand it's earning next to nothing and again will lose value if inflation reverts to the norm. I'm a good deal older than you and have a higher net worth, but I keep less in cash.

    As for expenses, you may save on certain things like utilities that you each previously paid separately. But since substitute teaching is so haphazard, I think the best strategy would be for GN to try to find additional sources of income. You also need to consider taxes when your filing status changes to MFJ; that may have the most radical effect on your finances of all.

  4. Oh – and I wouldn't worry too much about Dave Ramsey. I took a look at one of his mortgage calculations, where he claimed paying at 15 years would save you a ton of money over paying at 30 years. Only he failed to take inflation into account, which makes the gap between 15 and 30 years far less significant, as well as other factors like the mortgage interest deduction and the increased stress on cash flow if you take a 15-year note.

  5. Situation Uno, por favor.

    We pay down debt as fast as we can, but we're not going to take our $15k emergency fund and dump it into the car loan just for the sake of paying it off in one go. Then what if the car dies and insurance won't give us enough to get a comparable vehicle? We're back in debt again AND with no emergency fund.

    And in this economy, having money in reserve is definitely the best way to go, IMHO. Interest rates on credit cards are shooting through the roof and getting a loan is increasingly difficult, so if you need to borrow a little dough to cover a shortfall, you will get royally screwed. I'd rather eat a little bit of the low interest rate of our current debts than risk having to pick up an uglier one.

  6. If I could go into a marriage with no debt and still have money in savings, I would. That's just my opinion. Once you're married other obligations crop up, and getting preexisting debt paid down becomes less and less a priority. If GN isn't working, because we know subsituting can be hit or miss on occasion, or CA isn't paying, then paying those loans down isn't high on the list. If I could cut out one more monthly expense, I would go for it.

  7. I honestly don't know what I would do since I've never had "real debt" before. I am planning on going to grad school later this year, so maybe then I'll experience it. I've always felt like I would rather pay off my loans first then move forward with my life, but with the impending wedding, I think stability is first. I guess I'll just take a lesson from you and not get married until I PUMMEL my debt in the face!

  8. Hi! I'm in a similar situation, weird. I have a chunk of money in savings, student loans, and my fiancee and I are getting married this summer. Which means in the next six months there's a lot of "what if's" about moving, employment situation, etc.

    For the moment I'm trying to treat my savings as I would a windfall: don't do anything with it rashly. In six months I'll have a much better picture of where we are long-term and we will be in a better place to know what our financial goals will look like for the next five years or so. I'm letting the money sit in my savings account for now and whatever six-month opportunity cost I lose is nothing compared with making better long-term decisions.

  9. I'm with you on situation number uno, with some caveats:

    1. I've only carried that I could pay off with savings when there's a major life change. In the past year, I've gotten married, and we've bought a house. We wanted to "build up" our savings again to have a decent cushion before tossing every penny at our debts.

    2. The debt is low-interest. Our car loan is at 0%, and our credit card debt was a 1.99% interest rate. That rate just expired this month, so we're using our tax refund next month to pay off the balance that's left (about $2500).

    3. We still make large payments toward the debt. Sure, we could pay it all off with our savings, but we'd be up a creek without a paddle if the boiler went. We could toss $1500 a month at it, but we usually pay $700-$800/month.

    But since our interest-accruing credit card debt will be paid off by April, we'll be able to save a lot more money. The car loan debt doesn't bother me much, as it's at 0% for another four years. The mortgage, though? I will be tossing extra money at that, for sure.

  10. The harshness comes in assuming PDITF is "rationalizing," when in fact he is simply asking for advice, and in concluding, "You've got more rationalizations and problems ahead than you realize." There is no sign of rationalization, and no evidence to conclude the young man is or will be facing unusual or crippling financial difficulties.

  11. LOL, dude I love your opening image. I cant stop laughing at it. Your graphics always rock! 🙂

    Me personally – I would do situation dos, but I am an extremely hardcore debt hater and it would bother me to keep $20,000 in savings when I knew I was paying even just 7% interest on $15,000 of debt. I would definitely surgically remove the debt from my life, and then recover knowing that $5,000 is enough to handle most, if not all potential emergencies. I do not know what your monthly payments are on that debt, but that is something to take into consideration as well. Without those payments dragging behind you, it would be much easier to build that savings back up and fast. Something to think about at least. As far as your bride-to-be's income being unknown, perhaps you should just budget your income completely and anything she brings in would be extra to add to it, and likely go into savings at that.

    With that said, I do not think that situation uno, is the end of the world. You are a smart man, and have done great at saving and investing your money, so I have no doubt in my mind at all that you will be okay either way. Ultimately, it is you that has to decided if paying that extra bit of interest every month is something you are okay with doing. It sounds like you are. That's okay, that's why they call it personal finance my friend.

    I hope my children are as responsible as you have been at such a young age. With Enemy of Debt on their heels I do not see anyway around it, do you? haha 🙂

    Keep up the great work man, and keep rocking this blog out, I have been enjoying it.

  12. I made literally the exact same decision as Ninja did, and maybe it is a rationalization, but I think the decision is more well thought out than that.

    For instance, if the debt costs per month vs the savings interest income is $XX.XX or even $XXX.XX it may be worth the peace of mind.

    For instance in my situation, my credit card debt was costing me a couple hundred a month (I have since paid that off) and at the time my interest was probably that less $100. So for $100 a month I got to keep tens of thousands in the bank just in case I lost my job or the wife lost her clients (she is an independent sales person). That let me sleep at night.

  13. Sadly, I'm with the numero dos crowd. I am so anti-debt that I cannot stand having any. And if I had the money in savings, I would pay it all off in a heartbeat. But I'm also in a very different situation. I'm a student whose bills total $330 a month and whose part-time job isn't going anywhere. If I had an emergency, I would sell off furniture and go back to living with my parents until I got back on my feet. If I was a bit older, married or had a job that was less-than-steady, I would choose option 2.

  14. The question is whether paying off debt should always be the top priority. In some cases yes, in some no. Depends on the interest being charged and whatever other factors in his finances are being affected. And no, I would not take nearly 3/4 of my cash reserves to pay off a loan. And as student loans go, this one is not extreme and he has paid 50% of already.

    But call it an emergency fund or just a savings account, I think one should maintain at least 3 months in liquid expenses, more if the job situation is not secure. On the other hand, the interest rate is a bit high, and it would certainly be worth the effort to negotiate to a lower rate and/or to pay off a good chunk of it (maybe $5000) without materially affecting his cash reserves. He could also consider less expensive wedding or honeymoon costs.

  15. I think Situation Uno is not ideal, but acceptable given the circumstances. The problem is, you'll find a lot more ways to spend that $22k in savings rather than paying off your debt. The wedding and honeymoon end up costing more because you feel like you have extra to spend on it. Your old apt seems dumpy so you get a better, higher cost, flat – or even buy a home.

    If you paid off the loan and had $7k to work with, it could certainly help limit your spending in the next year. You could always go back into debt to pay for any more expenses, rather than remain there to keep cash flow around.

    Tough call man. I understand the need for the extra cash, particularly at your time in life. Just define this situation for a fixed period of time (like you said, until the end of the year, or maybe until she gets a teaching job this summer), and that will keep you from over-spending. I hope your wife has the same financial plan as you do!

    BTW – what part of Cali you from?

  16. Hi Ninja
    I so love reading your story because I can relate to a lot of it:) We got married at age 24, I was a teacher in SoCal (we are now in WA), and we had 20k in the bank and about 15k of sallie mae debt (I know, the similarities are a bit creepy).
    So, now that you know more about me than you could possibly care about, my answer to your question would be Situation Dos. We ended up buying a house with the 20k as a down payment. Fastforward 5 years, we never took on any more 'unsecured debt', we are debt free (except for said house-which we love btw), have an emergency fund, paid for my masters in full, have 2 babies and are currently paying for hubby's mba in full…while funding retirements and 529s. It is crazy.
    I think you totally have your head on straight and have made awesome financial decisions (and raps about financial decisions 🙂 and there is no need to change your domain name;)

  17. I totally agree with the above poster. When I have more in savings I save less! It's like I need the fear motivation to get my butt into high gear and punch that debt! that being said, I recognize that having no emergency fund is a recipe for MORE debt. i'm going to ask you some questions…if you had only 1500 or 2000 instead of 4000 for the honeymoon…where would you go? i bet you could do it for MUCH cheaper and it will still be fantastaic because you are spending time with your new wife. I know some people who spent a ton of money and time traveling to Tahiti for their honeymoon and do you know what they said when they got back? sitting on the beach is sitting on the beach…we should have done it locally and cheaply!

  18. I say split the difference…pay 10,000 towards your debt and keep 10,000 in the bank. it will lower the amount you pay in interested and probably motivate you to be more frugal since you do not know what financial changes the future holds..and in that situation is spending 20% of your emergency fund for a honeymoon really realistic or ninja like? btw- we are planning a wedding very soon and will be gifted 20,000 towards the cost. we are going to do it super cheap, budgeting 5-8000 and put the rest towards a home down payment… ninja chop!

    • That is just what I was going to say….split it and then work hard. I think you might be surprised..the two of you living together will probably save you more than cost you more. Even wih her income hit or miss.

  19. I've been in the same dilemma lately, only we'd be left $0 in reserve which I'm not cool with. So instead we're planning to throw a big chunk at our car loan since it has the highest interest rate (6.5%). I figure the student loans can wait a while since the interest is tax deductible. I'm assuming your interest is tax deductible as well, but unless you itemize it may not help much.

    My argument for option dos would be: if you pay, say $600 a month in debt payments, once it's paid off you have $600 of extra income that can and should go straight into a savings account to replenish your e-fund. But I'd say wait until the wedding is over and see where your expenses settle.

  20. There are many different ways that we rationalize our debt. Your way is one example. This is what Dave would ask you: Would you borrow $15k at 7% to prepare for contingencies caused by a life with girl Ninja? That's a very important question. If your answer is yes, and if girl Ninja agrees, you've got more rationalizations and problems ahead than you realize.

    • I think this comment is unnecessarily harsh. This guy certainly is making thoughtful efforts to manage his finances intelligently, and if he weren't, he wouldn't even be maintaining this blog. As for the student loan, I didn't at first catch that 7%, which is a bit high. He could try either negotiating the interest rate down with the lender, accelerating his payment schedule, or both. I'm not terribly interested in what "Dave" would ask.

      • I don't think he's being harsh, but he's asking a pretty deep question about their agreement on finances in general…
        If I was that concerned about stuffing money away before I was married…well…me and the future hubs would be having a massive "come to Jesus" discussion about finances and spending behavior. Instead of squirreling money away for "what if's" – put it out on the table. If someone's financial decisions or spending behaviors concern you, better get that out of the way before you combine your finances. I know it's helped us immensely, and heck, we're probably a good two years from getting married!

      • Larry – The question is an important one and has nothing to do with Dave Ramsey. Mr. Ninja is anticipating and preparing to incur more debt to launch his married life with Mrs. Ninja. Instead of borrowing when the spending starts, he's borrowing it now by not paying off his existing debt. If that's his attitude, he should rename his blog "Staring Debt in the Face."

  21. If you paid the $15K back, what would you have to pay to borrow money? Higher than 7%, I'd guess.
    I am keeping the EF low as my cost to borrow is 2.5% pre-tax. So for me, paying ahead on the mortgage at 5.24% and risking a short term loan at 2.5% is ok.
    This is a comfort level question as much as a finance one.

  22. I'm getting 8k back from the first time homebuyer credit and I can pay off both my car loan and student loan with that mula. BUT, I'm only paying off my car loan which has a 4.99% interest rate and is not tax deductible and choosing to keep paying my tax-deductible and 2.80% variable interest rate student loan. The fact it's tax-deductible is the key.


    Kill the debt. You'll thank yourself down the road. You can keep saving during the interim.

    Also, with the wedding (and honeymoon) in mind, read this article:

    Things don't have to be expensive just because society says they should.

    And wives don't have to be expensive, either. Sit down together, talk about the finances, and come to an understanding that you earn and spend as a team. It ain't rocket surgery.

  24. I think I would do what you are doing. If you pay off your loan, and then have 5k remaining. Most of that 5K would go towards the honeymoon. This would leave you with your 1k emergency fund. That would suck, because then you have all the expenses of moving and Rental fees and deposits. Situation Uno sounds good to me.

  25. I am struggling with the same delima right now. We are carrying $25M in our ING Direct account, but I also have 3 small debts that could be wiped out with that.

    My solution so far has been to snowball the payments on our debt, and if emergencies come up that would normally prevent us from doing that, we tap the "slush" fund.

    That seems to be the perfect medium for us at the moment. Another issue is, our tax brackets have rocketed in the past 3 years, and we are no longer reaping the April 15th bonus check. Long live the middle class!

  26. You are my new favorite blogger. I love it!

    I have a job in the family business, which is going really well (growing in spite of the economy). I am doing well in my job (so not gonna get fired anytime soon). So my ability to keep my income steady, grow the income, and keep a job is really high. So we can aggressively pay down debt. If I was in your situation, I would hold on to some cash money in the bank. Slowly pay things down, and leave some room to wiggle. Smart. Sure you may lose money in the long run on interest, but so? You are already in debt- might as well save you sanity and preserve your future. If in 2-3 years, you are still at the same place and wont start paying it down, then we can all punch you in the face. But for now, in a tumultuous time of marriage and life change- having cash will let you ride it out. We had a kid in our second year of marriage, and my wifes health issues during the pregnancy plus newborn baby= we went into debt. If i had cash on hand, all we would have been left with is our original debt and our sanity. Good trade for me!

  27. I would pay it off.

    But it is your money and you have to do whatever helps you sleep at night. $5,000 is a lot for an E-fund – and once all the debt is gone that money can go right back into building back up the savings.

    I think you're overestimating what life with Lady Ninja will be like, but hey, that's just this girl's opinion.

  28. Man, this should be a regular scheduled quarterly blog feature -since I'm reading the same kind of arguments that got you to toss $1000/month at that sucka last year…Ninja…do whatcha wanna do, but you are rationalizing. If you were tossing the big bills at the SL, it'd be gone from your life forever before the wedding & you'd still have $10K+ in the bank, since you're saving at a big pace. Maybe Mom Ninja's $300 monthly gift could be better spent after you get this SL out of the way? She could save that money for a nice gift for your wedding instead of sending it to you?

  29. I never have money, any extra nickle I have always goes to debt. The feeling of being broke motivates me to spend less.

    We do have an emergency fund in savings bonds (which was the only thing that doesn't feel like real money to me), so it's not like we're truly living on the edge anymore, but at your age, I had little to no buffer.

    Okay, so what I'm saying is that I have to trick myself into feeling poor so even in my 30's, I continue my miserly ways.

    You say that you're naturally frugal and I thought the same when i was just out of college. It was pretty easy to continue living like a college student for a few years..but it gets tougher once you have a house to maintain and kids to feed, cloth and teach. There are many more things to spend your money on and it takes significantly more effort to prioritize. And I'm not talking jet skis..just basics like appliances, garbage cans, rakes, tools. It does add up.

  30. If all your debt is in a single account at about 7% interest, AND you're comfortable each month making the payments while dealing with the rest of life then you're probably better off leaving that as-is, or paying as much per month from your income as you are comfortable until it's gone. I wouldn't deplete my savings to cover long term "normal" debt.

    As well, you should always have about 6-12 months of paychecks (or at least expenses) in the bank ready as your e-fund (emergency). This isn't to deal with "oh my car is broken, I need $1000", it's more of a "I lost my job" type of account.

    I have a considerable amount of money in the bank now, but when I recently bought a used car I used financing because I decided that I'd rather pay 5% on the borrowed money then lose that chunk of my savings. The interest I pay on that loan is essencially a fee to allow me to retain access to that $15,000 in my bank.

    Good luck 🙂

  31. Best option IMO is to go to your local bank get a $15k line of credit, but don't draw on it. Pay off your debt with your savings and work on building savings back. That way you aren't paying the interest, but if you need the money it is still there in the form of a line of credit.

  32. I've been in both situations. FWIW, my opinion is that having low savings and no debt is preferable. You can always rebuild your savings.

  33. One thing that really stands out in all this is that perhaps you and Girl Ninja need to get together and have a good ol' heart to heart about what living together is really going to look like. You can't enter into a marriage not knowing these things! That's bad investing Ninja dude! I'm guessing that if you two sat down to discuss how things might look, and what a better plan would look like, that would create some stability for you. This isn't just an issue of keeping your cushion or paying down debt. Case in point: let's say you keep your cusion, you move in, pay for the honeymoon and incidentals, etc, and then before you know it, you've gone through that savings of yours and are down to $5 grand. You turn around and still have that debt and no cushion. Without talking this one out you could still end up where you fear most being!

  34. Great article, and thanks for taking the effort to publish it; I’m sure other readers benefited as wel. It really opened my eyes for some new perspectives that I hadn’t thought of before.

  35. I have a very similar situation. About the same amount of student loan debt as savings. I plan to continue paying down the debt gradually, in increasingly large increments. The rate is only 3% or so in a consolidated loan.

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