[krbshappy71]

If making a credit card payment saves $ on interest and would free up that same amount on the credit card that could be used for an emergency, why not do that?

Is it to get off the merry-go-round of credit cards?

Is that really more important than getting this debt knocked out? I have such a small shovel, its more of a teaspoon, to dig myself out.

 

[Palooka]

My head spins about this all the time. :scratch: I'm the type that rather just throw all the money to a bill if I have extra.

Darn, I liked your post before you edited it.

 

[Jamauk]

It is in case an emergency comes up, you can deal with it with cash and not have to use the cc.

Part of his snowball is getting out of debt, but at the same time, it is mentally breaking the habit of pulling the cc out each time an unexpected expense comes up.

 

[pollypurebred39]

Us too! We are not following DR rules. We may end up being sorry, but every dime we can get our hands on goes right to living expenses and then debt.

 

[Sumacaroni]

The BEF for me means security blanket

I have always been one who wants to see cold hard cash money in the bank but we've never been particularly cc dependent. I feel very uncomfortable when we get down to a few hundred after purchasing a vehicle (downpayment $$) or paying for home repairs or whatever. So for me, I feel better having the $1000 in the bank as a cushion (albeit a relatively uncomfortable cushion at only a thousand!).

The BEF is 1) to decrease dependency on cc's and the resulting interest that inevitably increases debt thereby defeating the purpose of the DR plan and 2) to develop the feeling of enjoyment knowing we have the ability to build ICE (in case of emergency) money thereby relieving a tiny bit of pressure while paying down debt with everything else we've got to throw toward it!

"Freeing up an amount on a credit card" is not making YOUR money work for you, it's asking someone else to pay for you and promising to pay them back while they suck the very life blood out of you sapping both energy and determination. If you have to use the BEF rather than credit cards and have to go back to Step 1 to replenish it, you're paying yourself back, rebuilding your cushion rather than padding the pockets of the credit card vampires.

Also note: the BEF should not be used for non-emergency purposes - in other words only use it for UNplanned unforeseeable circumstances like a cracked tooth or a vehicle accident where you will need to use the fund to cover a deductible and such expenses. For example, Christmas/gift spending is not an emergency but rather something to be planned in advance (everyone knows it arrives in December) and if you don't have the money to afford your previous level of gift-giving, then be honest with yourself and plan alternative ways to show people you appreciate them and love yourself enough to stop creating additional debt :wink: And the reason I reiterate the purpose of the BEF is to remind myself as well as any newbies reading this that we are trying to change habits by making a plan, sticking to it, and telling our money where to go rather than wondering where it went.

 

[Jamauk]

Agreed, Sumacaroni! I had issues with that, myself! I seemed to keep dipping into that EF!! So, we moved it to another bank. It's easy when you can transfer money with just a few clicks online!
If you have to actually drive to the bank, fill out a withdraw slip and walk up to the teller to get money, you tend to think twice about it

 

[madjen]

It's to prevent any further CC debt while getting out of debt... Car repairs, minor home repairs/appliances, medical bills, etc... At least that's the impression that I've been under since following Dave.

 

[Sumacaroni]

Agreed, Sumacaroni! I had issues with that, myself! I seemed to keep dipping into that EF!! So, we moved it to another bank. It's easy when you can transfer money with just a few clicks online!
If you have to actually drive to the bank, fill out a withdraw slip and walk up to the teller to get money, you tend to think twice about it

I did the same thing. I moved the BEF to a bank where we have no online access. It's much better for me to have to make conscious decisions and deliberate effort to access that money.

 

[Jamauk]

I did the same thing. I moved the BEF to a bank where we have no online access. It's much better for me to have to make conscious decisions and deliberate effort to access that money.

We seemed to keep taking one step forward, three steps back ~ until we moved the EF to another bank. Then we decided to ONLY give ourselves our monthly budget amount and we moved EVERYTHING else to the other bank each paycheck (our snowball). We would let our snowball grow for a few months and then throw a huge payment at whatever debt we were working on every couple of months.

Once we did that, we busted out our debt in NO TIME. 12 months and we just made the last van payment this week. We are now officially debt free (minus the mortgage & HELOC)

 

[krbshappy71]

My head spins about this all the time. :scratch: I'm the type that rather just throw all the money to a bill if I have extra.

Darn, I liked your post before you edited it.

Oh I'm sorry I felt it was too rambling and personal after I re-read it.

 

[kita]

I also thought about things I could not pay with a CC. The last three places I have lived in I couldn't pay my rent with a CC. Cash/check only. BEF is the way to go.

 

[krbshappy71]

Hello again,

According to Ramsey I could start with a smaller EF, of only $500 and I think Greebo mentioned this before to me. I was resisting that at first thinking No I want to do it like everyone else but then, throwing all the money at a credit card is not doing "it" (Ramsey plan) at all.

sheesh even my baby step is a big step for me, I only had $200 saved thus far. No wonder he lets us low-income folk off the hook a bit at first, he knows we need the gratification of paying off a debt too.

sigh. snowflakes snowflakes.

Oh, kita, worst case scenario (and I know some will gasp at this) you could get a cash advance on a credit card to pay those items you listed.

Ouch, I think I just felt a swift kick in the butt from someone for typing that. ha!!

 

[Jamauk]

Lol!!

Just get yourself started. We started working the plan exactly as stated and as we got further into it we found something that worked for us and something things we needed to tweak a bit.

It's just wonderful that you are doing SOMETHING

 

[Wendy99]

We are struggling, income is low and to most people our debt is low too .. aside from our mortgage we owe about $4500. To us this debt is very high as we are having a hard time making ends meet and getting it paid down. Cost of hydro etc has gone up here as well making things all the more difficult. We opted to pay our credit card debt before we started to save a BEF. We have about $120 in our BEF and it's taken us a bit to get that. Would I feel better with more in the BEF - heck ya, but the cc debt really stressed us out as well. I think you have to do what feels right for you. We are working on our BEF now that our cc is paid, but we had to do that first for us. I have to agree that I would I feel better with the BEF fund in place; however that 18.5% interest on the cc was making me feel worse. In my opinion whether you are paying off debt or saving a BEF you are going in the right direction - you have to do what you feel most comfortable doing as you are the one who has to live with it. Just my opinion ..

 

[craftypam]

If making a credit card payment saves $ on interest and would free up that same amount on the credit card that could be used for an emergency, why not do that?

Is it to get off the merry-go-round of credit cards?

Is that really more important than getting this debt knocked out? I have such a small shovel, its more of a teaspoon, to dig myself out.

I agree with you BECAUSE if the emergency never happens that money could cut down your debt and IF it should happen you have available credit. I hate debt and agree with Polly living expenses first debt 2nd.

Another thing;

EF interest rate you are receiving on your money less than 1%

Intersst rate you are paying on cc fill in the blank. Thats the way I have always looked at it.

 

[frugalfriend]

Us too! We are not following DR rules. We may end up being sorry, but every dime we can get our hands on goes right to living expenses and then debt.

You're not wrong, your living expenses do come first before debt. You have to cover your basic needs (four walls) first.

 

[RABBIT]

I would have your BEF in place (even if it's just the $500) before you start to pay off the cc debt. The reason for this is you want to change the way the think about credit cards. If you don't have the $ for an emergency and then you have to pull out the cc once again, you are not changing the way you have done things in the past that put you in cc debt.

I know you are anxious to get rid of the cc debt but I think in the long run you will be glad to have that BEF in place. I know I sleep better knowing that I have an EF in place.

Best of luck to you!

 

[dcompton]

If the goal is to break totally from cc use, them probably DR's plan is best. But the numbers never made sense to me.

If you have to charge an emergency expense, yes, you will up the interest. But in the meanwhile, you will have been paying the balance down it down and decreasing the interest, so it seems to me that you are ahead, having saved the interest at least in the intersal, and certainly you are not any more behind.

Also, I agree with Craftypam. Interest on savings is totally stinky today. I don't have debt to pay down, but if I did, I would feel like I was loosing money and loosing ground with every dollar I put in savings.

Just my take on it. I say if you are going to be anxious over the BEF first, do it the other way. The point of this is to work on debt and gain some peace of mind. To struggle to work it a way that feels wrong to you is, it seems to me, counter-productive, because it will be harder to stick with it.

 

[Greebo]

The baby EF isn't about investing it's about insurance.

If you don't have a BEF in place before you start paying off those cars and your car blows a hose, how will you pay that repair bill but with the CC you hate?

And how much more demotivating will it be to see that balance go right back up again?

You need yourself a little anti-murphy insurance set aside so you can weather small storms when they come along - and MOST financial "emergencies" ARE in the under $1,000 to deal with range. The big ones - illness, job loss, etc - those are huge - but much less common than the little ones like car repairs, new washer, new water heater, etc.

Stop doing math - start thinking behavior. DR has never been about the math first.