Debt Reduction

I used the debt reduction planner on CNNmoney.com to get a general estimate of when I could except to be debt free at my current rate. (Also, I learned from this that my estimate of reducing my debt to $12,000 in 2009 in completely on target, assuming no additional charges on the card cnn.com predicts that the balance will be 12,500)

I put in my two store cards, my computer, my credit card and my student loan. Paying $600/month I’ll have all my credit cards paid off in 3 1/2 years and all debt paid off in 5 1/2 years.

Honestly, I’m not quite sure how I feel about this. Over 5 years on this budgeting and waiting game to get out of the debt seems so — long. Also, I know that it is near impossible to believe that I’ll be able to go through life through the next 5 1/2 years without acquiring any new debt. What if I need a new car? Buy a house? I suppose I shouldn’t think about these things until I get my 3 1/2 year debt taken care of, then I can start saving for these purchases properly.

At the same time, it took me 10 years to get into this debt, so the fact that it will only be half the amount of time to get out of it doesn’t seem so horrible.

I’m still debating how to handle the emergency fund. People say that you should have 6 months saved up. But in my career path it is highly unlikely that I will be unemployed. If I don’t get an academic job, I will be held on as a post-doc. If I have to leave my post-doc I will always be able to get a small liberal arts teaching position or another post-doc. So what that means is that I might have 3 months that I would be unemployed max plus moving expenses. I can get by with $2000/month comfortably. So I suppose I do need an emergency account of $8,000. At my current rate of saving it would take almost 7 years to get his amount of money. I would be past the point that I would NEED this money before I HAD the money. And as far as I’m concerned paying off the debt is far more important. So I think that $3,000 is a good long term goal to shoot for and should only take me 2.5 years to save up for. At that point I can put another $100 on the debt a month — giving me $700/month I would be putting on the card.

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