So, in the bottom of my signature, it says that I am half way to a fully funded emergency fund. It also says I have $8,500 in auto debt (our one and only debt except for our mortgage).

My question is, what would Dave do in this situation? Would he take everything out of the EF except for $1,000, and put the rest toward the auto debt? (And then rebuild the savings as quickly as possible once auto is paid off). Or would he leave the half-done fully funded EF alone, and just try to pay down the auto debt as quickly as possible otherwise.

Relevant facts: the loan is at 6.5% interest, and has 3 years left, if minimum is paid. However, we plan to (and can easily) pay $200 extra toward this every month anyway, which would have the loan paid off in December of 2006, or 18 months. DH is the only one working, but his job is very secure.

DH and I just discovered Dave Ramsey, and are very excited about following his plan, but we are going back and forth on this at the moment. I know that had we been following him all along, we would have stopped the EF at $1,000 and put everything else toward the auto debt, but since we didn't discover Dave til after the fact, and now what's done is done, I'm not sure what to do. Any input is appreciated. And sorry for being so long-winded.

Natasha, I can't speak for Dave but I would not touch the EF money. I'd just start paying on the debt now. It's tough enough to get money built up, as you well know. Whatever you do, you're gaining ground and fast but the cushion may be needed at some point and you won't be caught in a lurch. JMHO. ;)

I wouldn't touch your EF either. Emergencies can arise out of the blue at any moment and you will have that to fall back on until the emergency is over. I would just start paying the extra $200 you were speaking of toward the debt and be debt free is 18 months.

Leave the money in the EF. Stick to your initial committment for the EF. :)

If the debt was a cc with high interest, I would say, pay the cc. But since it is a car and not too high in the interest, I would leave the EF as is and just pay as much extra on the car as I could.

I haven't been around to post much lately, but here goes.....

I'm pretty sure Dave would say to drain the EF to 1000 & pay off the car, then build up the EF.

Baby steps......he always stresses to do it in that order. :)

Plus, he's big on the "behavior" of paying off debt to change your life.

I'm pretty much a DR junkie & I listen on my computer almost every day........I'd guess that's what he'd tell you to do. :)

Dave would say to keep the emergency fund intact. He'd say to yard sale,ebay or even deliver pizza to pay that debt down.

I have to agree with Mom22grls, Dave would drain the fund to $1K, pay the debt off as quickly as possible, and then rebuild the emergency fund. Not saying I would necessary do that but I've heard him give similar advice. ;) Either way you choose to go you will be much better off than most folks. Good luck! :)

I think Dave would say drain the EF too.

But what I would do personally is leave the EF but stop contributing to it for now. Put whatever you were putting towards the EF towards the debt. Get the car paid ASAP and then resume working on the EF.

Dave would not advise to complete drain the fund. I think he would advise to keep the smaller EF in there.

Originally posted by mom22grls
I haven't been around to post much lately, but here goes.....

I'm pretty sure Dave would say to drain the EF to 1000 & pay off the car, then build up the EF.

Baby steps......he always stresses to do it in that order. :)

Plus, he's big on the "behavior" of paying off debt to change your life.

I'm pretty much a DR junkie & I listen on my computer almost every day........I'd guess that's what he'd tell you to do. :)

I have to agree. He is really BIG on getting debt paid off.

I haven't read his books yet, but personally, I wouldn't touch the EF. I'd pay as much extra per month as you can on the car, that way incase an emergency comes up, you have money set aside for it. Just my 2cents!

Okay, since Dave is my personal finance guru and I listen like crazy, here is my take- I agree with mom22grls and Emerald_Mommy- Dave would definitely say to drop the EF down to $1000 and pay off the vehicle. His two big mantras- the borrower is slave to the lender and pay off your debt (or save, if you have no debt) with gazelle like intensity. He says you should not have a fully-funded EF until all debts (except mortgage or another VERY large debt- I think he says 40% or 50% of yearly income) has been wiped out.

Dave would say to pay off the auto loan. Being debt free is what it's all about! Just think how good that would feel to be DEBT FREE! I believe you could have your emergency fund rebuilt in no time. Or he might even suggest selling the vehicle depending on the situation. That way you wouldn't have to touch your emergency fund. Let us know what you decide!

You have small children...keep the EF!!! You never know when you will need it! The interest isn't high. OR, if you can't decide which way to go, do BOTH! Take only half the money you would to pay towards the auto loan and keep the remainder in your EF. That way your EF isn't so drained and your debt is cut in half.

Thanks for all the replies and advice ladies! This is really a tough call, and you all have made great arguments for both sides of the issue. I think Dave probably would say to drain it down to $1,000 and put the rest toward the auto debt. However, a part of me REALLY finds comfort in having the EF there.

I think we are going to do a modified version of this plan. What we have come up with is to keep putting the extra $200 per month toward the debt at this time (or more if budget allows), and when we get it down to around $3,000 left, just take that from the emergency fund and pay it all off to be done with it. This will realistically have us debt-free (except for that silly mortgage, lol) within a year, and we will still have the security of the EF during that time.