Emergency Fund/Debt snowball question?

**WorshipHim** · 06-13-2011, 01:00 PM

I have a question if someone can answer, we have some doctor bills that are in collection and some that aren't but if they aren't paid on prob will be soon..So if we have to build the emergency fund first, do we just let those things go into collection if we aren't done getting the first $1000?

**greekislandgirl** · 06-14-2011, 01:57 AM

If you're following Dave Ramsey's baby steps then yes, you build up you Emergency Fund to $1000 before you start paying that stuff (but pay the minimum payments on everything every month - that's part of your household budget). Your EXTRA money should go to the EF until $1000, then you start paying off the other ones.

Personally, I would probably look at your personal circumstances before deciding what is right for you. Are you trying to make a major credit purchase soon (like buying a house with a mortgage) where having bills in collections will hurt you (credit rating), that may affect what you decide to do. An EF is always a good idea but some people can get away with less money than others will need. It will depend on your circumstances like how many people in your family (a single person can probably get away with a smaller EF than a family of 4), where you live (do you live in a place with frequent natural disasters, cold winters/hot summers, or do you live in a place with very low utility costs and no real risks), what kind of transportation you use (if you use public transportation, you don't need as much $, if you have a car, is it new, is it potentially breaking down all the time, does it burn a lot of gas, how important is it (could you get to and from work without it?), what your insurance is (do you have good health insurance?), and so on.

As I understand it, DR suggests $1000 EF before paying off debt (beyond those minimum payments) across the board - someone will correct me if that's not true - but I suspect that number should be higher for some and lower for others.

**mndtrp** · 06-22-2011, 01:21 AM

Originally Posted by greekislandgirl

If you're following Dave Ramsey's baby steps then yes, you build up you Emergency Fund to $1000 before you start paying that stuff (but pay the minimum payments on everything every month - that's part of your household budget). Your EXTRA money should go to the EF until $1000, then you start paying off the other ones.

Wouldn't this mean the answer to the OPs question is "no"? You keep current on your bills, meaning they won't go to collections, and put extra money into an emergency fund?

**WorshipHim** · 06-22-2011, 10:11 AM

funny thing is, we already have so many things that have went to collections, doctor bills, and the ones that haven't, we don't have the $$ to pay on those either just yet..My husband has 4 weeks of vacation and he can sell it if he wants..he is going to sell a week to get our emergency fund almost knocked out..Then maybe we can concentrate on other things..We are a one income family so having any extra to pay on things is hard, we have enough to pay our mortgage and other bills and buy groceries..My husband has a good union job, electrician, and he gets 2 or three raises a year..So I know soon we will be in a position to pay things off..I got a call today from a debt collector wanting me to pay on a doctor bill, lol..Its a new one..Oh well..I can only do what I can do..

**greekislandgirl** · 06-22-2011, 02:43 PM

mndtrp, I think your interpretation is correct, that's what I was trying to say (I think). I am not a DR follower and I don't know if the OP is? (this isn't in the DR forum) - so I'm not sure if s/he was looking for a DR answer or not?

**khaski** · 06-24-2011, 09:19 AM

Originally Posted by WorshipHim

funny thing is, we already have so many things that have went to collections, doctor bills, and the ones that haven't, we don't have the $$ to pay on those either just yet..My husband has 4 weeks of vacation and he can sell it if he wants..he is going to sell a week to get our emergency fund almost knocked out..Then maybe we can concentrate on other things..We are a one income family so having any extra to pay on things is hard, we have enough to pay our mortgage and other bills and buy groceries..My husband has a good union job, electrician, and he gets 2 or three raises a year..So I know soon we will be in a position to pay things off..I got a call today from a debt collector wanting me to pay on a doctor bill, lol..Its a new one..Oh well..I can only do what I can do..

Have you guys considered selling 3 of the 4 weeks to get the EF and pay down/off some thing? If selling a week gets you almost $1k, selling 3 should get you $2500+, yes? Still would leave him a week's time for now and sounds like could make great headway for you guys.

**kita** · 06-25-2011, 09:40 AM

While selling vacation may seem like a great idea, think about what that vacation covers. Does he have sick pay in a different fund? Or is he expected to use his vacation pay?

**my4littlebuffaloes** · 06-26-2011, 06:02 PM

I think I would sell a week or two of vacation and use it to pay off debt as well. The EF is established after minimum payments are met each month.

**khaski** · 06-27-2011, 02:46 PM

Originally Posted by kita

While selling vacation may seem like a great idea, think about what that vacation covers. Does he have sick pay in a different fund? Or is he expected to use his vacation pay?

You make a good point, you wouldn't want -all - of it to go, but it consider selling off most of the vaca time as another spin off of Dave's garage sale he encourages to help get that EF going.