I am with Rina. My first goal is to pay off debt, of which I have only 45,000 (including mortgage)...... i save about 5% in my 401 k which is okay because i also have a defined benefit pension plan. i will increase my retirement savings in a little bit (summer) i will then begin agressive savings to build e fund..... it's been a year since my dh lost his job..... big reality check (instead of a paycheck)
"If I had not liquified my e-fund, then at the end of 4 years, my cc debt would not be paid off. Now, my cc debt should be paid off in about 3, leaving that 4th year to concentrate on my student loans." What happens to your debt plans when something happens? How are you going to pay? With no liquid savings? Run a scenario on your spreadsheet for any emergency and see the length added to your plan. Emergencies happen they need to be planned for. I have tried to break the cycle and I am not lucky enough not to have emergencies. I want my cards paid in full so bad I can't stand it. I'll never get there unless I have a cash reserve. Something always happens. That's Life
>What happens to your debt plans when something >happens? >How are you going to pay? With no liquid savings? With your credit. This is why I advocate acquiring multiple high-limit low-interest lines whenever you are able to but don't need them. The e-fund crowd would rather keep their debt load artificially high instead of risking having to charge something. They're so afraid that they MIGHT run up their debt that, oops, they're intentionally holding it up instead. I suspect it stems from a drive to exert control as much as they can and not let fate pick up the ball and run with it. Hey, you can keep the oil changed and the tires inflated properly but you just can't help it if you get the one bad engine in 10,000 that decides to throw a rod at 80k miles for no apparent reason. Odds are, I have the one of the 9,999 that won't. So I'll take my chances and keep my checking account drained in favor of beating down the balances. RM
If an emergency should happen, my income is sufficient to cover it. It would mean that for that month I wouldn't be able to pay extra on the debt. btw - I have been out on disability now for a little over 2 months (it was only planned for 4-6 weeks, but I've had complications). This has slowed down my debt repayment only in the sense that I'm no longer making the large payments on the debt, but now smaller payments. The larger payments will resume when I'm back to work.
A nice $15K credit line with "credit-protect" active is a great way to keep your self in check. Pay down debt as much as possible, if get laid off, invoke a BT from that 15K line, and activate credit-protection. Thats one of the methods i've decided upon.
sam, I can understand, from a consumer's standpoint, why you would feel this way. However, having worked in the financial industry (still do, but on the engineering side now), those credit protection services are 90%+ pure profit for the companies who offer them. They have a very low payout ratio and stringent claim requirements, which have drawn the attention of AGs & pro-consumer groups which discount their worth. The only people, besides the marketers, who like the fees incurred for such products are the stock analysts, as these fees produce a crucial stream of revenue. By "paying down the debt as much as possible," as you suggested, you thereby provide your own "insurance" against a layoff, illness or other unforeseen event.
::throws in 2 cents:: Here's how I do it, I'm by no means a model credit citizen, but it has worked for me. I have/had a same as cash Gateway charge, I charged $1100 and 90 days to pay it or it would go to 27.99%, it made sense to me that THIS got paid first, my last payment is next week for $200 and I did it in 60 days. I didn't NEED a computer, but once I pruchased it, my other computer crashed, basically I got it to get a retail card on my CR. Then I go to the BT, I have 6 months @ 6.9 to pay it. Only $1300, but I see no reason in doing a "limited time" BT offer and not using it. Then the highest APR CC, going down to the smallest (student loan). To me this only makes sense, like others have said why save @ 2-3% and pay out 10-20%. Also with medical bills (we don't have health ins.) we always pay in payments, there is no interest and MY hospital is happy with $50 a month. ::takes back 2 cents:: Hell I can pay that onsomething! LOL
As someone who is going through this right now, this is not a theoretical debate. I lost my job over the Newy Year break. Two weeks after commitng to a lease option on a house and setting a move in date of 1/26 (This Saturday!!!). The house needs some repairs before move in and so we've been getting that done. Now of course, Job One is to Get A Job, and towards that end I have sent out over a hundred resumes. Three different opportunities seem to be sliding toward job offers over the next week, all at substantilly more money than I was making before. We had some savings, though not six months, or even three months worth, but some. I got cash for my accrueed, but unused vacation time, and two weeks severance. So, we're not flush with cash, but we're not starving. But, I have to tell you, as someone who hasn't completed my Credit Repair journey, and who is still turning my financial boat around in terms of savings, etc., it's very reassuring having that nice shiny new Platinum Select card that I got just before Christmas with the help of Doc and Marci(Link). BTW, if I never said it before; Thanks Doc and Marci!!!! I've been using the Platinum Card for the fix up materials; paint, plaster, etc. needed as we get the new house ready. I have to fly out of town next week for a second interview. The company will reimburse me regardles of outcome, but I still need to pay out the travel costs. I'm able to do that without eating into the Cash Reserve (that sure makes it sound like more than it is!) because of that Platinum card. In a nutshell (which is where I feel like I belong right now), while I agree that everyone should strive to have a safety nest egg set aside, while you're in the process of achieving that, it is imperative that you get some good credit lines set up for a rainy day. The clouds can gather fast. I read recently that the difference between Theory and Practice is that in Theory, everything whould work out the in real life exactly the same way it was planned. BUT, in Practice, things seldom work out so nicely. Plan for that.
You're so welcome. I'm just glad you were able to get the cards from Citibank. I hope that you get a good job soon, and that everything works out with the home. Best wishes,
