Need advise where to start

**SaverGal** · 03-08-2006, 08:00 PM

My DH & I are trying to start Dave's program. (Much to my DH's reluctance, but that's a different thread.) I've got the baby steps sheet and am working on establishing monthly budget. We have $11K & $4K & $800 in separate savings accounts. None are earning interest of any matter.

The $11K was suppose to go to retirement, I think I should put it in the 3-6 months savings now. I'm concerned with hurricane season coming that we will need the money for evacuations or disaster.

I'm afraid to give up the $4K as an EF in case little $ come in. We are self-employed. The $800 was savings for a new laptop.

My question is what would Dave do? Should I spend the $11K or a portion of it to bring down the debt? That would cut it in half. Should I spend a portion of it or go fully commando on the debt?

Where would you start? Would you follow the baby steps to the letter and put $1 in EF and the rest to debt reduction and then hope nothing bad happens? Any suggestions would be greatly appreciated. Thanks.

**juliek** · 03-08-2006, 10:41 PM

I'm pretty sure Dave would say to keep a little more in your emergency fund because you are self-employed and most likely have a variable income.

But not all of it. Seems to me that $4K would be sufficient, which would allow you to use the $11K and $800 toward debt.

How many times have you needed to evacuate due to hurricanes and how much did it cost you? Use that a a guide for how much to keep on hand.

**FrugalMomof3** · 03-09-2006, 08:55 AM

I agree, keep 4K as your emergency fund, then use the other to pay down debt.

If you feel 4K wouldn't be enough for an evacuation add a couple thousand more to maybe 6K and use $9,800 for debt.

JMO! But that is what I would do, for us 4K would be more than enough but hubby has a salary job, keep in mind that your self employment may cease for a while should something arrise.

**pammy** · 03-09-2006, 09:32 AM

If I woke up in your shoes....

I'd set aside a seperate $1000 EF. This is only for emergencies. Car repairs, insurance deductibles, evacuation, etc.

I'd keep the 4k for your business. Dave said he had an account for those 'hills and valleys', good months, slow months. Plus, if you did have to evacuate that would defintely be a valley, you could use some of this if needed over your EF.

The rest I'd pay towards debt. Less debt=less risk

Make sure you have good insurance to include natural disasters, displacement, etc. I'm not insurance savy so don't know if this is seperate or included, but I just keep thinking of the Katrina victims.

Start workiing those steps. After you've done them in the right order you'll be able to put away money for retirement like never before, because you aren't still making debt payments.

Look at it this way... you said your 11k isn't really making much of a return. For example, lets just say you have an 11k car loan that is at 10% interest. They're making all the money because of the interest. If instead you got rid of debt and started investing instead, they wouldn't be making their money off of you, but your investments will be making money for you. If you got rid of the debt you'd have control of you most wealth building tool again, your income. Instead of someone else controlling it and earning from it.

Work the baby steps, they work. I'll be cheerin' ya on!

**SaverGal** · 03-09-2006, 01:04 PM

Thanks for the input, it really helps. I think we will use part of the $11K for debt. Maybe, $5K. I'm sorry, I just can't give up my security blankie yet. I fully understand the less debt less risk idea, but after last years hurr. season I'm nervous. I live 300 ft. from the Gulf and have had to evacuate about 4x in 2 yrs. So far we have been blessed to not have any serious damage. But so afraid our luck will run out.

Anyway, babysteps for using our savings as well. We did pay off our smallest debt this a.m. Only $55, but considering we've been carrying it for live 4 yrs. it felt great. Next paying off a relative who funded our business start up 7 yrs ago. Need to make this right.

**FrugalMomof3** · 03-09-2006, 01:07 PM

SaverGal,

Every step counts! Your doing the right thing, you paying down debt and having a security blanket, that's awesome!

I just started and EF and still have $2400 in debt (recently it was $9000) we paid off most of it and started the EF but every baby step counts!

**pammy** · 03-09-2006, 02:40 PM

Wow! That's a lot of evacuating! I lived near the Gulf growing up, near Corpus Christi. I remember only once having to evacuate, and mom said once when we were smaller that I can't remember. We moved when I was 14, so twice in that many years we had to leave. It was no fun and scary, bumper to bumper for hours with everyone else wanting to leave at the same time, sleeping in a gym for shelter on cots. So I know how scary that is.

Here's hoping for a calm hurricane season!

**ladydi** · 03-09-2006, 09:09 PM

You have received some good advice here (not surprisingly!!). I think I would use the savings that's making no interest and add it to the debt payment, especially if it would pay off half your debt. If you are nervous with a $1000 EF, keep $2000 instead. You'd really be cutting into the interest you're paying on top of the debt, and if you are getting no return on your savings, you'd be doing even better!
If you're still not sure, you could always call Dave himself! His radio show is 2-5pm everyday and he takes calls. You can find out how to listen on his website. I usually stream it live on my computer or listen to the archives.
Good luck! I'm on baby step two too..