I was just thinking about how finding to nickels to rub together is getting pretty tough lately, but we have money in savings (not a lot, but some) and we keep putting money in savings. Up until recently we were using everything we made to live from and pay debt and when my dh got his meager bonus, we decided to put some money into savings. I'm just wondering how one makes the choice to save over paying down debt. I know that we need money to fall back on and that's the number one reason we're putting money away. We've been through a point in time when my dh lost his job and we had nothing (hence some of our looming debt) to fall back on and I just don't ever want to go through that again. It's hard though when I think of all of the interest that our debt is earning and it's a lot more than we put into savings every month. Obviously, I feel like we'd get further ahead if we used that money towards debt, but we could be in bigger trouble if something happens. Soooo, how do you decide?

Hi. I too have gone over this very question many times in my head. My hubby and I have one debt left to pay off, totaling approx. $9,200. I have considered taking the money from savings to pay it off, and then paying myself back monthly. I have decided not to do this. 1. I know I will never put it back. I am just not that disciplined yet. 2. Having that "emergency" money helps me sleep at night. I think you have to do what feels "right" to you, what helps you sleep better at night. You'll do great, whatever you decide. :)

We opted to first put aside emergency money, enough to get us through a couple months of unemployment. Now we've been working hard to pay off the debt. And when that's done, we will use that money to aggressively begin saving.

Our feelings are this: if we don't have an emergency fund, when we get into a tight spot, then we will have to fall back on credit cards again---which we never want to use again.

We also have yearly expenses set aside that aren't included in the emergency fund so that we can pay them when they come up (ie, property taxes or such).

So no, we don't really have much savings right now because our ccs' interest rates would quickly outstrip the interest rate on a measly savings account. But we won't have to use the ccs again because we have prepared a little better.

Hi, we put off having an EF for years, and I stressed out majorly because of it. I finally, after 25 years, convinced dh we needed one. One that didn't get pilfered all the time to pay out debt. So we built up one month's worth in 6 months. I've let it sit there because our mortgage is so close to being paid out. We've decided to sink everything onto the mortgage right now. Then we'll go back to saving for more in the EF.

HOWEVER, we are in a different situation. We do not owe on CC, and never have. We only have a mortgage. Our children are older, one having left home and the other in the process of leaving. We are looking at a lightening of financial responsibilities in the near future. Dh works within a union and isn't likely to be fired or laid off. I have a stockpile of food for at least a month in the house.

My suggestion is to look at the small areas in your life that allow you to cut expenses...like the ideas on this board for being frugal. And don't repeat what I did! Insist on an EF that sits there, ready for when you need it. It sure would have came in handy when dh got laid off from his non-union job when the kids were little.

I would be paying more than the minimum on your CCs though. Often the minimum is set so that your debt still builds, even when you pay it. Figure out for yourself how much you need to put down to pay out the card. Don't count on the cc company to do it for you in your favour. Remember, they want your money!

HTH Take care and good luck!

Jean

I most recently went threw a credit counseling agency to lower my interest rates, which were already low. We had never made a late payment and were in great standing.....I thought that they might refuse an offer from a credit agency, but to my surprise both credit companies cut my interest rates in 1/2. The agency does take a fee for there services, but this was a very important step for me to take, we weren't in trouble yet......it would be just a matter of time. I have saved a small amout in EF, need more
would definately save some first and try to make a little more then miniumum payment on CC.

What stresses you out more - the debt or not having a cushion.
Then you have to be realistic that there are many other unexpected things that go wrong besides being laid off - car repairs, water tank goes, new tires, medical expenses. And it always seems that something comes up. Will you feel more secure having money in the bank?

And you have to be brutally realistic about the two of you. Will the money build a bit and then get blown? If so, you might as well put it towards the debt.

And you would need to come up with an amount in your emergency fund that will make you feel secure. One month pay? Three months?

And do you have other financial goals? Will you need a new car soon? Do you live in an apartment and want to be in a house?

I agree about the money possibly being blown. That would likely happen. That's why I created two interest earning savings accounts in my name only with no debit card. It would take us one to two weeks to access the money. All of the money currently goes into a bank account that only I hold as well. DH is terrible with money. I pay the bills and assess the extra. At this point, even paying the minimums is a struggle, but I'm scared of being without any money at all again like when my dh lost his job the year before last. We were literally penniless. So for now I think I'm going to keep building up the savings bit by bit and paying whatever extra I can towards debt.

I personally, like having a cushion, just in case.I just had to transfer 500 to our checking to float some bills (2 mortgages) until the 15th (payday, and I hope to transfer it back at that time) But, I am thinking of using some (we have in EF 15500 to pay 3000 in ccard debt and 2100 for the property tax for next month, but, I am terrified because at one time, we had 56000 in our ef fund, and now it is at 15 and change.

I am a true believer that it is harder to save than to use OPM, but I do want to have less ccard debt, even if it is all at 0% interest, 8300.00 is more than double what I feel comfy with, and I have no problem with using opm, but, I do try to stay within a certain limit and alway at 0%.

I think in your case- you want to get the EF up. work on that then plunk into the debt. Dave Ramsey recommend $1000 of EF saved before slicing the cc.

You're on the right track.

littlemotherhaywood,

If you haven't already, maybe you and dh should sit down and read "Your Money or Your Life" by Joe Dominguez and Vicki Robbins. It's a real eye-opener for people. I had a son-in-law like your dh, until he and dd#1 read that book. He's a lot more cautious now, planning ahead for purchases. It gave him hope of being able to afford things without going into massive debt for them.

Jean

I think that its a personal call with however much you feel comfortable with. Some people feel much better knowing that all the extra is going to debt and they'll be debt free that much sooner, some people feel much better knowing that they have some money in savings. Its an individual choice.

DH and I put $500 a month into savings. All of the extra beyond that goes to debt. When the CC debt is paid off, the extra will also go into savings. We do use our savings as an EF, as a place to build up funds for our yearly ROTH contribution, and after the debts are paid off, down payment on a house.