I am trying to figure out a way to balance having a emergency fund with having credit card debt. I don't like having the debt and at the same time I don't like that our emergency savings only has enough to get us through 2 weeks worth of expences. We are currently adding $100 a month to the saving and putting all excess income toward debt. Still we are not making much of a dent and something always comes up to put us further behind. How do you or would you deal with the issue of paying off debt while still build up savings. At what point would you say we are ok with what we have in savings lets concentrate solely on Debt?

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Kimberly Proud Mommy to Bethany Rose April 2006

From most of the financial advice I've heard over the years, the order generally recommended is....

ETA: After reading everyone else's post they are absolutely right. There should be a minimum of $1000 in the emergency fund before anything else.

1) Get rid of all consumer debt first (credit cards).

2) Then build up your emergency fund (3-6 months of your net monthly salary).

3) Then put 12-18 % of your gross monthly income away for retirement (automatically every month).

4) Then pay off the mortgage as aggressively as you can, (while at the same time continuing to automatically do #3)

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I'm a Dave Ramsey follower. His philosophy is to set up an emergency fund of $1,000 first, then start paying off your debt. If you do not have an emergency fund you will always have to charge the emergencies, therefore never getting any farther on your debt payments. After your debt is paid off, then start saving for 3-6 months of household expenses. Our emergency fund has kept us from charging a new tire for our Ford Expedition after we ran over some glass. I hope this helps.

Yeppers, bulk up the emergency fund first while paying the minimum on the credit cards. You have to stop the bleeding first. In other words, you have to stop whatever it is that is causing you to charge to your cc's in the first place. I loath taking money out of my emergency fund. Funny how some issues turn out not to be much of an emergency when I no longer allow myself the luxury of using a credit card.

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"I've been rich and I've been poor but independently wealthy is where it is at."

This is the step we took as well. $1000.00 or even $500.00 will take care most of those emergencies, ours always seem to be something on the car, and the padding makes you feel more comfortable while paying off your debt.

Yeah I know what started the debt. We had a number of emergencies fall all at once last spring. With our 2005 taxes we made just enough to bumb into a higher tax bracket owing the IRS over $2000. We totaled our car around the same time and our home did not have insulation $1000 there. All this fell at the same time that I had DD and quit my job to stay home. We would have no problems except for the car payment. So then this winter did damage to our yard that we are still fixing. We are at the point while we strugling to break even. I have $1900 in savings, $1400 in a do not touch fund for a real emergency $500 in a dip into if we need it but replace it as soon as we can. So taking that into acount for the moment our total of accounts is only in the red $1500. If it hadn't been for owing on our taxes and not realizing we owed we would have been fine. I am frustrated because we never seam to make much of a dent. Every time I think we are making progress something sets us back. I want to eventually have the type of emergency savings so say something Really big like the furnace goes out, or DH looses his job or one of us has an extend hospital stay it won't criple us. I really don't like having to rely on CCs. I don't know where I can cut my budget more.

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Kimberly Proud Mommy to Bethany Rose April 2006

Everyone always says to pay off the debt first then focus on saving. But, you should be paying yourself first. MOst generally, it's recommended to have a thousand in savings first then start paying on debt but if it makes you feel more comfortable to have more in the savings, then put more into it before paying off debt.

THen stop saving- whatever you were putting into savings, apply that amount toward your debts and as you pay one debt off, apply the savings monthly amount PLUS the monthly debt payment toward your next debt.

Slow and steady wins the race. If you stick with it and both your dh and you have the attitude of "We WILL get out of this" money will start really rolling in and you can say goodbye to your debts for good.

Once your debts are gone, then finish out your emergency fund with a total of 3-6 months worth of expenses. Then go on to work on retirement and the mortgage.

Also don't forget to plan ahead for things like Christmas and realize Murphy will hit- make sure your budget includes these items, such as a household maintanence fund. While you don't have to put a ton into it, do put some into that fund because you never know- by the time the next repair hits, you may have enough in there to cover it and won't have to touch your EF.

You can do it Ember!!

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Devin

David 6, Alexis 2

I think it makes sense if you pay off the consumer debt first. Once you are done you can put that money aside for emergency fund or retirement. Minimum payments take forever (believe me) we are doing it right now. We are about to change that pretty soon. You can actually see the bigger picture once you get done paying them. Work one problem at a time and stick to it. I know its hard sometimes when out of nowhere unexpected emergencies come up. Stick to what's important.

I agree wit hDave Ramsey....build your Emergency fund first...Like Crazylady said, if you don't have an emergency fund then you will have to charge your "emergency" expense and your debt will never go away....
Even if you just start your emergency fund with $500, then work on your debt (and in steps the argument of paying lowest debt or highest interest first ) get that paid off and start building up your savings again.

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Personally this is what I'm doing.

I take 10% of my take home and add it to savings. It's only 25 a week, but it's better then nothing. Now I budget for groceries, household, misc and save my $1.00 bills. What I don't use I add to my savings. And I find ways to not spend my money. It adds up quick. I also rebate, so when money comes back from that I add it to my savings. Change once a month gets added too. After 4 and half months I have almost 3,000 in savings that I can get to in an emergency. My goal is $5,000. Now I do owe on my cc about 3,000 but I can handle that. It will be paid off my September. Slow and steady. I would look to find a transfer card. I did to Bank 1 for 2 years at 0%. and it helps very bit. You must, must must have something for savings. I was probably one of the worst on here about money and this board help me tremendously. You have to find your comfort. Mine was knowing that incase of an accident I would not have to do a CC cash advance or put it on the cc. It feels good to have that money there. You can do it. Just takes time. It's much easier to just spend the money then pay it off, so just reverse it., don't spend, make it a game to see where you can cut, drop or cancel. We're all here for you.