Freaking about economy and debt

**nodmicks** · 04-20-2005, 06:26 PM

Anyone else with debt freaking about the economy? I am. The more I read the worse it seems.

I'm having a hard time deciding if we should save more or pay down more debt. Any insight?

**amysh** · 04-20-2005, 06:46 PM

Hi Michelle,

This is my first post...but here are my thoughts. It depends.

Sorry, that wasn't very helpful, was it?

Things to consider:

How secure is your job?

If your job is fairly secure, you are in better shape, because you have *less* of a need for a large emergency fund and can feel a little better if you decide to forego increasing it in order to pay off debt.

How much do you have in an emergency fund?

If you already have a good sized emergency fund, definitely pay off debt. Interest rates are going to go up in the near to medium term, overall, and the interest you make on your emergency fund is dwarfed by the interest you are paying to the CC companies.

Is your debt at a fixed interest rate or variable rate?

If your job is secure and your debts are fixed interest rates, I wouldn't worry *too* much. Keep in mind, however, that the interest rate on a credit card can be raised by the issuer, even if it's not a variable rate card. (The Truth in Lending Act requires only that the lender give you 15 days notice on a fixed rate card. In reality, that's not much notice at all.) I assume your car loans are fixed rate - pay those off last, assuming that they are a lower rate than other debt.

Given the economy, I see interest rates going up substantially over the next year or so. (For anyone who cares - the deficit is ballooning, our trade deficit is growing, causing exchange rates to tank, gas prices are going up - all of these are bound to have a huge negative effect on the economy - that is, interest rates.)

Amy

P.S. Yes, I'm definitely freaking about the economy.

**PrairieRose** · 04-20-2005, 07:16 PM

Michele, I'd be sure to fund your ER and afterwards I pay down the debt as rapidly as possible. I'm not freaking out over the economy but it's always, ALWAYS best to have that debt paid down. Take a deep breath. It will be ok.

**Nikmom** · 04-20-2005, 07:25 PM

Yes, I am too. Everything is going up, gas, electricity, groceries, you name it. I am doing some of both, building an emergency fund, and paying down debt as much as I can. This is the first month we will have paid off all of our medical debt for a long time.
I am hoping that the lessened debt will make things easier when they start going up more.

**rebecca** · 04-20-2005, 07:40 PM

I feel the same way you do. I paid off my car early and figured I could put more in my EF. It seems as if I have alot of unexpected bills. Have to have a root canal done and have to Take $800 for my EF. Need to have brakes on my car. I know that I should feel better that I can pay cash with the above, but with everything else going up I feel like I'm barely making it.

**homesteadmamma** · 04-20-2005, 08:08 PM

I think you need to take a deep breath first. I'd work at having a well stocked pantry, a EF that I feel comfortable with and then I'd put every penny I could towards debt. I'd also make sure I don't add anymore to my debt.

Many of you don't remember the 80's because you were too young, but interest rates soared and many people lost their homes along with everything else. Personally I think many people carry way too much debt and continue to add to it. I also believe countries carry way too much debt.

I think we need to be diligent when it comes to the economy but not worry ourselves sick. Just keep plugging along at what you feel comfortable with. Making a few sacrifices here and there will certainly help you get a good emergency fund and help pay down debt.

**Nikmom** · 04-20-2005, 09:16 PM

I remember the 80's, but we were double income, no kids then, so it didn't impact on us so much except for income taxes. It's hard not to worry, but I think you are right, we all need to take a big breath. But, I still want to continue to pare down debt, and a nicer emergency fund. Thank heavens our retirement fund is good, and isn't something that relies on the stock market or something.
Car repair is what we seem to be struggling with lately.

**sarahsmile** · 04-21-2005, 04:51 PM

im going for paying down debt. i have a lot, and for some reason, i can breathe easier knowing my debt is less, even though my EF isnt as high as id like!

**nodmicks** · 04-21-2005, 05:34 PM

Originally posted by amysh
Hi Michelle,

This is my first post...but here are my thoughts. It depends.

Sorry, that wasn't very helpful, was it?

Things to consider:

"How secure is your job? "

"How much do you have in an emergency fund? "

"Is your debt at a fixed interest rate or variable rate? " Dh's job seems quite secure. He works for a trucking company that is really growing. I'm a part time stylist so my job is secure but as the economy gets worse people spend less $ on their hair. However I could always get anotherPT job.

If your job is secure and your debts are fixed interest rates, I wouldn't worry *too* much. Keep in mind, however, that the interest rate on a credit card can be raised by the issuer, even if it's not a variable rate card. (The Truth in Lending Act requires only that the lender give you 15 days notice on a fixed rate card. In reality, that's not much notice at all.) I assume your car loans are fixed rate - pay those off last, assuming that they are a lower rate than other debt.

I'm thinking everything extra should go to the 0% until oct card.

Given the economy, I see interest rates going up substantially over the next year or so. (For anyone who cares - the deficit is ballooning, our trade deficit is growing, causing exchange rates to tank, gas prices are going up - all of these are bound to have a huge negative effect on the economy - that is, interest rates.)

I just recently read an article this morning that besides climbing interest rates they will be changing the payment % on most cedit cars from 2% of balance to 4% of balance. There for payments will rise. I think that might cause some foplks alot of problems with late fees etc.

Amy

P.S. Yes, I'm definitely freaking about the economy.

Dh's job seems secure. I'm a pt stylist so my income fluctuates with the economy. People just dont spends as much on their hair when moneys tight. However if we buckle down we should be able to put my pt income on debt.

Or EF is only about $1000

Debt is car fixed at 2.74 for 24 months, car 6% for for 34 months, mortgage 6.25% and a credit card at 3.99 for life of balance and a 0 until oct credit card. I'm thinking I should bust the 0% cc first as it could be sky high by oct.

I just read an article by Gregg Moore this morning that in 2006 the CC cos are going from billing on 1-2% of the balance plus interest to 4% of the balance plus interst. Good for not having permadebt but I bet theres going to be alot of late fees for folks.

**nodmicks** · 04-21-2005, 05:48 PM

Originally posted by PrairieRose
Michele, I'd be sure to fund your ER and afterwards I pay down the debt as rapidly as possible. I'm not freaking out over the economy but it's always, ALWAYS best to have that debt paid down. Take a deep breath. It will be ok.

See thats when I get confused. How much Ef is enough? We followed Dave Ramseys plan with $1000 baby emergency fund but thats nothing if Dh cant work for 2 weeks.

**nodmicks** · 04-21-2005, 05:54 PM

Originally posted by homesteadmamma
I think you need to take a deep breath first. I'd work at having a well stocked pantry, a EF that I feel comfortable with and then I'd put every penny I could towards debt. I'd also make sure I don't add anymore to my debt.

Many of you don't remember the 80's because you were too young, but interest rates soared and many people lost their homes along with everything else. Personally I think many people carry way too much debt and continue to add to it. I also believe countries carry way too much debt.

I think we need to be diligent when it comes to the economy but not worry ourselves sick. Just keep plugging along at what you feel comfortable with. Making a few sacrifices here and there will certainly help you get a good emergency fund and help pay down debt.

I'm currently trying to stock up. I always have quite a bit but I'm shooting for a 3 month supply.

Nope not adding more debt. We recently had to replace Dhs car his was no longer worth cobbling together according to the mechanic besides the 200000 miles the doors, trunk windows wouldnt open but 4 1 door (deer hits). Dh and I vowed about 2 years ago to add no new debt and have been slowly paying it down. Anyways I about had a stroke signing the note for the 4500 on the new car we couldnt pay cash for(so did Dh!)

I'm going to shoot for paying an extra 400 -500 on the cc's. Dh is now in the busy season so we should be able to put my pt income on that debt.

I think I need to quit watching the news!!!

**nodmicks** · 04-21-2005, 05:56 PM

Originally posted by Nikmom
Yes, I am too. Everything is going up, gas, electricity, groceries, you name it. I am doing some of both, building an emergency fund, and paying down debt as much as I can. This is the first month we will have paid off all of our medical debt for a long time.
I am hoping that the lessened debt will make things easier when they start going up more.

Sounds like a good plan! Are you stockpiling a bit too?

**Nikmom** · 04-21-2005, 06:02 PM

I know what you mean, maybe I should just shut the tv off lol. We can only do what we can do. I had a big conference with the whole family, too, about shutting things off when we aren't in the room. Hopefully that will help the electricity bill. This site has a lot of good ideas that I have used. I can just keep paring down the debt as fast as I can!

**nodmicks** · 04-21-2005, 06:02 PM

Originally posted by Nikmom
I remember the 80's, but we were double income, no kids then, so it didn't impact on us so much except for income taxes. It's hard not to worry, but I think you are right, we all need to take a big breath. But, I still want to continue to pare down debt, and a nicer emergency fund. Thank heavens our retirement fund is good, and isn't something that relies on the stock market or something.
Car repair is what we seem to be struggling with lately.

I remember the 80's. My folks had bought a new house in a new subdivision at 18%. We lived in UT and the coal mines were closing down. As a result my dads job (structural steel- bridges, big buildings) came to a screetching halt. My Mom was a sahm. I remember Dad working in MN and SD and comming home once a month. We moved to WI as a result of it and Dad worked in MN. The first 7 months we were in WI my folks home in UT was still for sale. Mom later said they had almost drained savings by the time it sold. At the time though I didn't really know a thing was wrong but was mad about moving and excited at the same time to finally live by family.

Dh's retirement is all in the stockmarkets. Thankfully its not losing much ground. Scarey!

**nodmicks** · 04-21-2005, 06:04 PM

Originally posted by rebecca
I feel the same way you do. I paid off my car early and figured I could put more in my EF. It seems as if I have alot of unexpected bills. Have to have a root canal done and have to Take $800 for my EF. Need to have brakes on my car. I know that I should feel better that I can pay cash with the above, but with everything else going up I feel like I'm barely making it.

Oh do I feel for you and does it sound familiar! 1 step forward 2 back. I swear my cars, home, appliances hear me if I say I have an extra dollar!