[ambroseya]

So we went from BS6 and having our 6 months savings, last year, to having virtually nothing in the bank + debt out of our control (unexpected medical bills + funeral costs for a child right after paying for a very expensive graduate degree) but we are getting back to where we were. It's deciding where to pay back first that is difficult so right now I've been contributing to all 3 of our commitments.

1) 6month savings buffer - this is 1/3 of our annual income that we need, and we have about 1/3 of this value in the bank.
2) Debt to my parents (no interest as it was for their grandchildren) - 1/3 of our annual income and have paid back 1/15 of the debt
3) Pledge to church building fund at a little less than 1/4 of our annual income with "deadline" of 2015. (They are understanding about changing circumstances but we want to meet this).

So, I don't know what order I should be going in. My parents would rather we had the savings up first so that we wouldn't have to borrow again (they do need the money back for sure) rather than pay it to them and then wind up with no buffer and unexpected expenses again.

Since there's no interest involved here, I don't know what to do. My initial instinct was to pay #2 first and get debt free, but again they'd rather we don't mess up again and just take longer paying them back so we don't borrow again.

I work and provide money not in our budget (it's all over the map in terms of level as I am self employed, but am putting all my profit into these three items).

 

[Ceashels]

I would prioritize the three goals, just as you listed them. I think you need to have a buffer in place first but you may want to consider making it a three months instead of six. Your parents debt would be next on the list as you don't want them to be in a financial bind and have to borrow either.

I understand that your work income is variable, but have you run the numbers to determine a rough timeline on when you could reach priority one then two then throw everything at three? Once you set a plan you may find the goals reached more quickly than you expected.

 

[ambroseya]

Thanks - as for my work income, it's hard to tell right now. I had built up my business last year to close to where I wanted it, but had a very high risk pregnancy and other medical issues which caused me to take a hiatus where I lost some of my major clients. I've been back to work fully for less than a month, and it's slow. Not as slow as when I first started my business, but I'm making peanuts, literally, and hoping that it grows back the way it had been. So I can't really count on it for much, but I can hope.

I also use Dave Ramsey ideals for my business; I just invested in a new computer last week (I'm a web developer so it's quite related/necessary) and have to rebuild my "business savings" (goal there to keep 2500 in the bank so that I can always afford any necessary repairs or replacement items for my business (computer, peripherals, modem/router, etc). ) Then I take anything over that 2500, monthly, and apply it to the household budget/issues. With the new computer I'm down to $341 in the business account so I have to build that back first before I am really contributing to the household items, and that could take a couple months at this rate. Assuming no unexpected business expenses, and income near where I am right now (hopefully more but in this economy with losing some of my clients, who knows, this is just a number I know I can achieve), it would take me another 3-4 months to get 3 mo expenses, about 6 months to get the rest of the 6mo expenses, about a year to pay off the loan to my parents, and then 10 months to get the church pledge... so...

that's
Business Buffer - ~ May 2013
3 mo savings - ~ August 2013
Parents loan - ~ August 2014
6 mo savings - ~ Feb 2015
Church pledge - ~ Dec 2015

Wow, I definitely hope that I can get my income rolling in better than that to speed things up, and that we can get more savings out of our household budget... I guess refining the household budget will be a next step, I'll have to analyze where we are and draw that up again next.

 

[DixieChick]

I think it sounds like you have a good plan.

 

[frugalwarrior2]

I agree w/ the order provided your folks arent strapped for the money. Get that buffer going in this wicked economy. If your folks become strapped the savings will be there also. Makes sure you write off that computer on the taxes as I'm sure you know and of course the church donations.
Sorry about the loss. And i also wish you luck in restarting your business.
Stop here frequently. The people are great.

 

[Chris4x4Gill2]

I agree with your prioritization order, but would consider changing 3mo savings goal to a 1K emergency fund and pay the parents quicker. Then use that cash to build your 3-6mo Emergency fund faster.

I know your parents are understanding, but owing family money is the worst thing possible in my opinion. But your relationship may be different.

 

[Greebo]

What would Dave do?

You have non mortgage debt.
Dave would tell you that you are now back in BS2 again.

 

[NikoSan999]

Nothing to add except to say so very very sorry for your loss

 

[CookieLee]

I also echo ... condolences on your profound loss.

Since the parents are considering the money a loan and not a gift, it needs to be repaid. If it was a business loan, then the money comes out of the profits of the business. If it was a personal loan, then it comes out of your household budget. Either way, it needs to be paid as quickly as possible.

The business needs its own emergency fund.

You might want to get Dave Ramsey's book on business.

Welcome to the board.

 

[ambroseya]

I have read Dave's book on business - My business EF is only $ 2500 because that's enough to replace anything vital, and I don't have any employees, so I don't have to worry about payroll beyond myself; and I'm not the major breadwinner of the house. Then, I had to actually *use* it, to get a new computer (my business is web development so the computer is the most vital piece). I'm rebuilding my 2.5K right now and ought to get it back up pretty soon. Anything on top of that becomes my payroll so that I can get the rest of my household stuff handled.

The loan from my parents was a personal loan (0%) but it's not one of those "worst things ever" to owe my parents; I know that they are fine without it just stressed about having enough to retire on, so they need it back but not a problem if it's this year or next year. We've started paying it down, but they keep saying they want us to get our 6mo expenses up first.

I guess I have to just realize that if we get 6mo expenses saved, we'll have the money to pay it off immediately if necessary; I have this gut feeling that I should pay the debt first, but then if anything goes wrong we'll be right back asking for help again, but we won't be if we have that 6mo buffer up...

Finally did the taxes today, after my last form was released at the end of Feb and was happy to find that our refund was significantly higher than expected (I know Dave suggests not getting a big refund, but we didn't know where we were going to wind up and had a surprise tax deduction -- baby born prematurely in Dec that was due in Jan). Right now we plan to split it between my father and the church pledge.

Actual amounts:
parents loan - 14K remaining
church pledge - 8885 remaining
savings buffer account - 8078 in bank (goal is 15K minimum we'd like more like 18-20 as 15K was our 6mo rock bottom expenses before having a baby in december and we don't know really how much more he adds - it was his twin we lost so we're not used to having kids in our budget)

 

[New2Debt]

So sorry for your loss.