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Level 2

How To Prioritize Emergency Funds, Savings and Paying Off Debt

"The general rule of thumb is that you should put between 10-15% of your income towards retirement. While some people advocate for focusing all your efforts on debt payoff, putting money toward retirement now can save you money later."

 

We follow Dave Ramsey's approach because the issue is that most people can't squeeze 10-15% of their income to invest because all their $ is going out in monthly payments. Focusing on paying off debt first frees up the funds to actually be able to invest. Stopping all saving (except for the initial $1000 emergency) in order to pay off debt first is only a problem if you plan on taking many years to pay off that debt. But the idea is that you reduce your expenses to a minimum and quickly tackle all your non-mortgage debt. 

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Level 3

How To Prioritize Emergency Funds, Savings and Paying Off Debt

@primend  Exactly! The Baby Steps have helped thousands of families and individuals. It is what I guide all my clients through and have practiced myself. My husband and I entered baby step 7 in September 2018.

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Level 3

How To Prioritize Emergency Funds, Savings and Paying Off Debt

@Jesus123456789  - It is never to late to start an emergency fund. You can start small, even with 5% of your monthly take home pay. The key is to begin!  You can do it. 

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Level 3

How To Prioritize Emergency Funds, Savings and Paying Off Debt

@Barb52   Congrats on owning your home and car!! Fantastic!! Keep putting money away towards retirement and I would encourage you to go a step or two further and cut-up that credit card. 😉  If you do not already have 3 - 6 months of cash set aside for your expenses, build that up. 

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Level 2

How To Prioritize Emergency Funds, Savings and Paying Off Debt

Congratulations! That's amazing! My husband and I completed baby step 2 this past October. We paid off 130K (my undergrad & grad student loans) in 3 years. God willing we'll be done with step 3 by the end of March 🙂 

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Level 2

How To Prioritize Emergency Funds, Savings and Paying Off Debt

 
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Level 2

How To Prioritize Emergency Funds, Savings and Paying Off Debt

Hi Barb52. It sounds like you have a good plan underway. You didn’t claim to be employed in any fashion. But let’s cover the basic fundamentals in case you are employed. Always pay yourself first. Some advisers indicate 15%. I believe 10% is the minimum. Nobody will take as good care of you as you will. This is for all working age groups. If you are older you may need to evaluate exactly where you are currently with your plan. Second your debt is beyond great having accomplished your dwelling and auto payoff. Third thing is to evaluate your expenses for the next 6 months and up to a year. Having your emergency fund is essential to the completion of fundamental rules. Congratulations!

Level 2

How To Prioritize Emergency Funds, Savings and Paying Off Debt

I, too, listened to Dave Ramsey for many years. He has a staff, building, etc. to pay for. He also has books to sell. If someone is having difficulty financially they most likely can’t afford the books.

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New Member

How To Prioritize Emergency Funds, Savings and Paying Off Debt

I know, right. It sounds so IMPOSSIBLE. But really, it literally just starts with a change jar or a $50 savings account start-up. if it sits without anything added to it for some time, no worries. if you add some change when you break a dollar, cool. If you deposit or transfer $5 or $10 when you pay your bills or deposit your check great. The point is to establish a pattern or habit of paying yourself first. 

That's a concept that took me far too long to understand. Don't do what I did and wait till you are 40 to start thinking seriously about your future. As your baby nest egg grows, you will find more ways to add to the value of your time and future. you are worth it. Don't sell yourself out. LIVE LONG AND PROSPER, CHILD!

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Level 2

How To Prioritize Emergency Funds, Savings and Paying Off Debt

There’s no need to buy anything from Dave Ramsey to learn the steps. It’s all online for free with a simple search on YouTube. Plus his daily show’s podcast/videos are great motivation to anyone seriously trying to get out of debt and save. What I appreciate about his strategy is the sense of urgency. In most cases the main issue is not just an income issue but mainly behavior issue. His strategy and his answers to callers on the show helps & motivates us to change our attitude and behavior regarding our finances.

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Level 1

How To Prioritize Emergency Funds, Savings and Paying Off Debt

I'm filing my taxes.

 

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Level 2

How To Prioritize Emergency Funds, Savings and Paying Off Debt

I actually do know of a good one. I’m using them now and the fees are reasonable. They’re called Lutheran Social Services and can be reached at [phone number removed]. You’ll have to see if they’re available in your state, however. Also Trim has a debt negotiation program with a fee starting at $10/month I believe. 

I hope this helps and good luck! 👍🏽👍🏽

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Level 3

How To Prioritize Emergency Funds, Savings and Paying Off Debt

Hello @Ole,
Those $5 bills that we occasionally come upon get put in a jar to pay for laundry. The communal machines in our building require increments of $5. So we like to have $5 and $10 bills available for that purpose. Beyond that, we are just about flush each month. 

I will say that on our own behalf, we have been able to almost pay off a smartTV on a special offer of 6 monthly payments without interest. The only debts we have are friendly ones from people who accept $25/month to keep us in good standing.

We also just cut back to 'Broadcast Basic' on our cable TV service to save about $80/month. There are so many streaming shows for both education and entertainment that we do not miss all the bloody, gorry, gratuitously violent shows we no longer access. I highly recommend this as a way to save money for whatever your priority is.

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Level 3

How To Prioritize Emergency Funds, Savings and Paying Off Debt

Hi @KristineS5 
Thanks for all your suggestions. We are retired and do not have active income to increase. BUT I have been able to devise a number of passive income or expense reduction techniques. I want to share them with the group.
• I have been using cash reward credit cards responsibly and profitably. This means that I have opened and received Welcome Bonuses to the tune of $100 to $200 dollars EACH. We have good credit scores in the 800's so companies have welcomed us. In addition, we receive cash rewards regularly.
• We have a budget and do our best to stick to it. I have a bookkeeping checks and balances system that includes three elements: my checkbook and online bank account, a manual monthly spreadsheet system, a digital monthly bookkeeping system. 
• We just cut our Cable TV to their 'Broadcast Basic' cheapest package. We will be saving almost $80/month. 
We were able to purchase a new Smart TV interest-free with 4 of 6 monthly payments already made. In addition, the educational documentaries and entertainment shows, series, and movies are far superior to what our Cable company offered. 
• I review my bookkeeping daily to make sure I am on budget.
• Last but not least, I write about everything I have learned to share with others. My blog posts can be found at The Alison D. Gilbert Blog. I have also written four eBooks about how we have survived for the last 10 years going from Middle Class to One Day from Homeless. 
• Our entire mission has been to survive, to find meaning in life beyond materialism and to share our experience and successes with others so that they may benefit as well.

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Level 3

How To Prioritize Emergency Funds, Savings and Paying Off Debt

@Alison "Our entire mission has been to survive, to find meaning in life beyond materialism and to share our experience and successes with others so that they may benefit as well."    

 

Love this. Thank you for sharing what has worked for you and to help inspire others!