Layoff coming, save or reduce debt first?

**moneymama** · 09-25-2011, 12:38 PM

My husband knows his job will end in June 2013. He's 60 and the chances of him getting anything else in his field are slim to none, even part-time teaching (academic). My job ends June 2012 and I'm going back to school for 8 months to get a teaching certificate and take over as the main breadwinner. We are in 30K debt with credit cards/line of credit. My question is where do we maximize our current income, knowing that unemployment is coming for us both but only for hopefully about a year for me. (during that year I will be unable to work).

I know we can do some damage control given this time, but what? Do we save first, the get intense (to use a Dave Ramsey term) about debt, or the other way around?

**madhen** · 09-25-2011, 01:01 PM

From a purely psychological viewpoint, I'd be working on getting the debt down. Worst comes to worst, you can work PT while in school, if you need a little extra money, but it is a world of difference (to me) between having a little extra to buy a little extra, or having a little extra because you owe somebody some money and have to pay it.

**Uniwolf** · 09-25-2011, 02:02 PM

I would say pay off as much debt as you can before either of you lose your jobs.

**Josephhgoins** · 09-26-2011, 11:04 AM

I would suggest contacting your creditors and explaining the situation with them. They may be able to work out a low payment plan for you, thus reducing the amount you have to pay every month.

Although I have been really close I have never been laid off though.

**Mojjo** · 09-26-2011, 11:46 AM

Pay off as much as possible. BTDT. It helps to not have creditors to deal with too. But can you put the $1000 away first just in case?

Is DH getting a part time job out of the question come layoff time?

**nuisance26** · 09-26-2011, 12:13 PM

~Do you have three months of expenses saved? If not, do that first. Be sure to include the cost of Cobra or other health insurance premiums.
What I would do in your situation is a half & half approach. Cut your budget to the bone and funnel half the excess funds into debt reduction and half into your EF. Don't stop funding the EF when you hit three months expenses. Keep saving, you will need it.
There's no guarantee your DH or you will be able to find jobs. Cash in the bank is better than money sunk into paying down debt should the worst happen.~

**my4littlebuffaloes** · 09-26-2011, 04:43 PM

I would do the half & half approach as well. That or save everything for one month, then use all extra to pay debt for one month and alternate. Another option would be to payoff a debt, then save like crazy for a month or two, then work hard towards another debt, then save again. It all depends on how many debts you have and how much extra money you have. Either way, I would cut things to the bone and work as much as possible right now while you can.

**miss_cas** · 09-26-2011, 05:24 PM

Does hubby have a pension? I would give some thought to hubby taking social security early. Look at his social security report to find out how much he would get from ss. I would recommend hubby get any part-time job when his job ends.

You can do some checking around with the unemployment office near you. There is a program that will pay for up to 2 years of schooling + books and give you an unemployment check too.

I think now is the time for both of you to get a part-time job. Sell all the play toys: RV, boat, jewelry, etc to pay all the debt down. Do a very modest xmas and almost no cost staycation.

Do a projected budget to know how much your bills will run after husband's job ends so you know how much you will need to cover the bills. Get a $3k emergency fund saved up now then start throwing everything at the debts. (If you have any unexpected bills: car or home repairs, take them out of the emergency fund then pay emergency fund back. Any medical bills should be paid in installments unless provider is a jerk.)

You can:
1. Refinance house to cover some of the debt to lower payments and interest rate.
2. Put utility bills averaged payment plan. Takes last year's total and divides it into 12 payments. You won't have a high winter or summer bill.
3. Read "Total Money Makeover" by Dave Ramsey for inspiration.
4. Make the necessary spending changes now. Stretcher.com can give you some inspiration.

**nodmicks** · 09-27-2011, 09:35 AM

Originally Posted by nuisance26

~Do you have three months of expenses saved? If not, do that first. Be sure to include the cost of Cobra or other health insurance premiums.
What I would do in your situation is a half & half approach. Cut your budget to the bone and funnel half the excess funds into debt reduction and half into your EF. Don't stop funding the EF when you hit three months expenses. Keep saving, you will need it.
There's no guarantee your DH or you will be able to find jobs. Cash in the bank is better than money sunk into paying down debt should the worst happen.~

I think this is excellent advise!

**mndtrp** · 09-27-2011, 09:12 PM

Do you have an emergency fund, at all? That would be the first place to start. In your position, I wouldn't go for anything less than 3 months. Once that has been attained, I would also put money towards savings and debt both. If things work out for the better, you can always put your extra money in savings to the debt later on.