Even as I write this post I feel like I am sitting on a fence with the only two options I have is falling in a pack of hungry Cheetahs or falling into a herd of Elephants. Do I want to be chased to death or squashed to death? Hum?
Here is a little bit of background information. We have been on a modified Dave Ramsey plan for about 2 years now. In fact it is so modified that Dave himself would disown us. We are on month 10 of a gazelle intense Debt Snowball 14 month plan which would make us debt free (not including the house) in February 2012! So why are we pausing our Debt Snowball when we are so close?
Here are the details. We pay approximately $1100 per month on our debt. The debt snowball is down to the last debt which is our van. We have managed to do this for the last 10 months and I feel this is a great astonishment but it leaves us with absolutely no wiggle room. At the beginning of this year we changed our health insurance plan to an HSA (Health Savings Accounting) which reduced our premium by approximately 60%. We have the option to put up to $6,000 in the Savings Account per year. We have been able to put a couple thousand dollars in the account and have only used it minimally during the year. The amount you put into the savings account is tax deductible and this is why we are questioning paying the next two months on our debt snowball versus our HSA. Here are the options…
1. Continue on our debt snowball and scream debt free the Dave Ramsey way in February of 2012. (this was our original plan)
2. Take the money we normally apply to our Debt Snowball and put it into our HSA for the rest of 2011 and scream debt free in April of 2012.
The interest on our debt snowball is pretty low at 3.5%. I believe our tax rate is between 15-20% so theoretically; it is cost effective to stash this extra money away into our HSA. It would also give us a little more cushion on our HSA for future years. This seems like a win/win situation. So why does it make me queasy just thinking about pausing our Debt Snowball?