Gonna take the plunge and pay off HELOC from E-fund

[rosarugosa]

It's a little bit scary, because I just LOVE having a healthy emergency fund (it makes me feel so adult, responsible and in control, and it's something we've only built up in recent years), but we've decided to use about 75% of our e-fund and pay off our HELOC, which will leave us totally debt-free. Of course, it also leaves us with a much diminished e-fund, but we've decided that it's crazy to pay 4.25% on the HELOC loan when we have the cash reserves to pay it off, and they are only reaping 1%. If we have an expensive emergency, we can of course always tap the HELOC, but right now we're paying the 4.25% regardless. My Mom is always willing to loan us money as well, because we always pay it back as agreed. And we have plenty of credit available on our credit cards, which get paid in full every month, but a credit card could fund an extremely short-term crisis (e.g. unexpected car repair to be paid off by next billing cycle). We've been so committed to paying the HELOC down aggressively, that this feels a little like cheating and ruining the fun, but I think we can throw our energies and enthusiasm into restoring the emergency fund ASAP. Gotta have something to strive for!
I'll let you know if we live to regret it.;)

[Stella]

That sounds like a good plan. I bet it will be a huge relief to be totally debt free.

[loosechickens]

hey, sounds like a good plan to me, because if there IS an emergency, you have systems in place to deal with it....so, really, you are now getting a 4.25% return on your money instead of 1%.

good for you.....and congratulations on becoming debt free. it's a nice feeling, isn't it???????

[rosarugosa]

Thanks LC; I think it's going to be an amazing feeling! We're not quite there yet, it's going to take me a week or two of ING transfers and such, but we're almost there. We've never been overburdened with debt, but oh, the idea of being able to say that we don't owe anyone anything - wow!

[Kat]

Good for you! :-) I am so happy to hear that the burden of debt will be gone for you! With no debt, you should be able to build your emergency fund back up quickly. :-)

[Zippy]

Do it, do it! Good for you!

[TVRodriguez]

Ooh, exciting! I am looking forward to the day when we use up some savings to pay off the last of our mortgage. I know for myself I won't be able to do it unless it still leaves us with a fairly healthy e-fund, but you gotta do what will let you sleep at night, and as others pointed out, with your good track record, you will be able to rebuild the e-fund in no time.

[dreambig]

Fantastic!!! We have 2 years left and I can't wait.

[larknm]

This sounds like a fabulous idea.

[rodeosweetheart]

Lark, we did this in January. It was terrifying!! We used the e-fund and paid off credit cards and medical bills and boy was I scared.

It seemed to liberate a tremendous energy! It was amazing. Suddenly my husband got some new freelance jobs, we started tithing again (since we were no longer in debt, and it was no longer someone else's money) and we have managed to save more than we had in the e-fund when we paid it off--probably the original e-fund and 50 percent more. We have separate little e-funds, and have also saved to go to a family wedding with our kids. We have taken a trip with cash the last two weeks. We could not believe how much better life was, and I started sleeping at night.

But the incredible thing is that we didn't pay all this off til January, which is like 6 months ago. We have had more momentum forward in the past 6 months than we have inthe past six years. And I credit it to getting out of debt.

We have decided that wehn we move, we will not do a mortgage ever again (that was something we paid in full, too.) It may limit us quite a bit, but I am really hoping we can stick to this no-debt living. When we debt, we really debt! I don't ever want to go down that road again.

So if you do this, be prepared for some great changes!!:)