When I had debts it was 80% paying of debt-with-interest, and 20% savings.
Savings is good to have, even if it is only $5 or $10 a week ( I tried to put away $20 a month) but high interest debt is killing you. Credit cards COST you money , and these days savings earns you nothing.
Just wanted to share what helped my husband and I get out of debt and save and invest.
These are the "Dave Ramsey" Baby Steps to 'getting out of debt'
Baby Step 1. Raise and save $1000 Emergency Fund -- as fast as you can... Could mean garage sale or some other way...get creative
Baby Step 2. Pay off ALL debt with debt snowball - List all debt smallest to largest. Pay minimum on all... attacking the smallest -- when you get rid of smallest -- add that minimum payment to the next debt on the list and so on -- continually adding to the next debt on the list until you get rid of all debt. then...
Baby Step 3. Go back and save 3 to 6 months expenses.
Baby Step 4. Invest 15% of income into roth ira's and pre-tax retirement plans.
Baby Step 5. College Funding.
Baby Step 6. Pay off your home early.
Baby Step 7. Build wealth and give!
If you want to find out more about these steps in detail, you can visit his website. I've learned so much from reading his books and listening to him either on radio (via my computer) or tv. It's changed our lives...
I can tell you that this helped my husband and I get out of debt and live in peace without creditors calling!
My Baby EF was $2K before I started to pay off my debt. Then about 8 months before I was done with that, my job got a bit scary. So I split some of the funds between building my BEF and debt. When I became debt free my BEF was up to $3K.
My $3K BEF is now growing into the FFEF with 6 months of expenses.
Depends on circumstances at the time. Always paid down debt first, but with lay-offs looming at work we are more focused on building up the savings and just paying minimum on the card we owe (even though it's not that much now). Way I see it if we don't pay the card, they can't throw us out of our home. If we don't pay the mortgage THEY CAN. So until the Storm Clouds subside..........
We are also saving rather than paying down debt. we have a credit card, but it's at 0% thru January 2010. I'll keep saving until we hear something final about dh's job, then move onto paying off the debt. You can be pleased as punch that you don't have any debt, but that isn't going to help a bit if you have no savings and a job loss or major emergency comes up. Everything costs money and none of us are going anywhere without it. So we're saving until the storm passes.
We are saving for now rather than paying off debt. Mostly because having our 6 month emergency fund will give me peace of mind in case one of us gets laid off. Once that's in place we're going to pay down debt, then we're going to build up to an 8 or 12 month emergency fund.
with the economy the way it is right now, I didn't feel comfortable with only $1000 in my EF. We have 2 accounts, the main account and the bill paying account.
Every paycheck we send x amount to the bill paying account to cover bills, credit card payments (minimum + snowball amount) and savings (set monthly amount). The other account is used for food and monthly spending. If there's a leftover in the bill paying account due to bills being smaller than usual, overage goes to credit cards. Leftovers in the monthly spending account goes to savings. That way our debts are going down and our savings are going up every month.
I'm starting to save more and slowing down my debt snowball due to the economy. When things start to turn around, I'll take my savings and pay off my debts. Until then, I need the $$ in bank in case I lose my job.
Debt stresses me out (even the smallest amounts) ... I'm saving and paying it off right now due to our jobs etc (not sure anything is secure right now and at both of our places of employment things are slow) .. so the car loan is getting the min payment now each month, credit card we are working away at, but at the same time I'm trying to get $1000 in the EF, but will continue to keep it growing (although it will be slow). Hoping our income tax return helps us as well... we shall see...
We are doing both also. We pay more than the minimum on all credit cards and try to put some in the savings. We want to buy land and build a house so we have to save and if the economy crashes in the meantime we have an EF.
Right now we are saving because of the economy and dh's company is owned by a bank. If we make it through, at some point that money will go to pay off debt. Right now though, I want my money where we can get it if something happens.
I am having problems with this to! I am the only one bringing in a paycheck and our bills are more then I really make, we are just squeaking by each month, so I am unable to build up my EF! Its so hard!!
My husband was laid off and finding a job here is not easy. He finally found one but the process to starting is long!! Hopefully once that happens I can build an EF and pay off debt!
Right now, we are paying off the car loan 500 euro a month. (The total is 2,500 euro on loan from my parents.) I do not want to have any debt to family members or friends; banks/companies are a different matter.
After paying off this loan - May - we will save as much as possible for our 2010 goals.
I am doing a bit of both. I am putting $100 per fortnight in specific savings accounts but also having a buffer amount in my bills account in case of an absolute emergancy and also for fortnights when i have a lot of bills e.g. when all the monthly bills fall in the same fortnight period and expenses are higher then income, so i have planned ahead for these situations. Overall my savings is nearly 10% of my income.
As for debt, i am currently paying 29% of my income towards debt, this is split between my loan, credit card and store finance.
We did both at the same time. It took a while to find the balance that was right for us (I think we started by putting $50/month into savings and we now put over $500/month into savings), and once we had a decent savings, we were still putting the same amount of money into it because our debt was disappearing so quickly!
We did just take out a large chunk of our savings to pay off my car, but that still left us with a decent savings.
Dave Ramsey has a good plan, but we tweaked it a little to what was right for us.
We've been trying to put as much as we can into savings and have been paying the minimum on the student loans for now. I was so happy when I looked at the savings account and saw that we had 6 months of living expenses! It helps me sleep a little easier...
We're pretty close to debt free, if you don't count Darth Mortgage! I swear I have nightmares about how many dollars in interest I'm probably accruing every single day, week, month....Aaaagh!
Actually I wonder exactly how much interest does accrue daily...hmm, wierd question.
So we go through phases... some months we really push to pay a chunk towards the principle on the mortgage, and some months we really try to pump up the savings.
Lately it seems as if we spend most of our time trying to get together enough money to pay for the next home repair.
We seem to be doing what all of you are doing. Putting more into savings at the moment. We are still paying more than min on the cc bills but not going gazelle fast. When things start to become more stable with the ecomony we will take some of the savings and put a chunk to the cc's. Like all of you have said you need money in the bank in these times.
There are some home repairs we need to do also. We have some smaller accounts set aside for them, but are not doing them now. We will just keep setting the money aside and if things settle a bit then we will feel more comfortable to spend the money. We can't let the house crumble around us, what good would that do us!!!!
I think that if you're in a financially difficult situation, one that's filled with uncertainty, then you need to do a little bit of both. You can alternate times when you do one instead of the other. Like for instance, if you know you're coming up against some hard times then you can pay the minimums on your debts and tuck the rest into savings.
We're able to pay off our debts and still put money into savings at the moment because DH's job is secure and we have my pension as well. Come December, we'll lose part of our two-phone cell contract and then in March, it'll totally go over to Pay As You Go so we'll free up another $80 per month to tuck away.
It all depends on your personal situation.
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