| Family Emergency Fund or Pay Down Debt? |
|
|
|
|
|
snapmacro
Member
Cash: $ 3.30
Posts: 15
Joined: 01 Feb 2007
|
| Family Emergency Fund or Pay Down Debt? |
 |
|
Hi everyone and thank you in advance for any help on this topic.
I have a 1 yr old and I have $10000 in debt I need to pay off. Suze Orman, Dave Ramsey, and other finance specialists say to pay down my debt first and then create an emergency fund. But the maternal instinct in me wants to be sure that my family will be okay if somekind of emergency arose. I will pay off my debt in 2 years, but to have 2 years without an emergency fund seems even more risky than not using that money paying down my debt. Does family come first or does debt?
|
Thu Feb 01, 2007 5:59 pm |
|
|
BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
|
I agree with your assessment. The emergency fund is AT LEAST as important as debt reduction. Even though the debt is costing you money until you get it paid off, without an emergency fund you would be in a position to re-build your debt position should the "emergency" arise.
Establish a minimal emergency cash fund, making sure you stay at least current on your debts. Then split your extra cash between the e-fund and debt pay-down.
Best wishes -
Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
|
|
Thu Feb 01, 2007 7:02 pm |
|
|
snapmacro
Member
Cash: $ 3.30
Posts: 15
Joined: 01 Feb 2007
|
Thanks for the advice. I feel so better knowing I have that e-fund set up or at least started on.
|
|
Thu Feb 01, 2007 9:22 pm |
|
|
rockhound
Preferred Member
Cash: $ 26.45
Posts: 132
Joined: 03 Feb 2006
Location: West Virginia
|
| emergency |
|
|
Agreed, get some emergency cash saved up, so that if an emergency does arise you won't have to slide deeper into debt. Without knowing your current situation, I would suggest that you build up the emergency fund in steps, and concurrently pay toward your debt(s), always keeping up the payments on time. If you have no savings, at least get 1 month's worth of living expenses saved up in a money market account; once you have that, increase it to three month's worth of living expenses, and the wolf will begin to recede from the door. Keep building up your emergency fund until you have six month's worth of living expenses saved up. By this time, saving money will hopefully have become a habit, and you can divert what you were saving to making extra payments on your debt. That will pay it down faster and save you interest money. If knowing how to save is a lesson that you can truly learn, once your debt is paid off, then you can keep saving but this time for retirement/investment.
|
|
Sat Feb 03, 2007 1:36 am |
|
|
go2self
Preferred Member
Cash: $ 26.45
Posts: 129
Joined: 06 Aug 2006
Location: hawaii
|
| Emergency fund |
|
|
Why not get a HELOC as an emergency fund AND pay off the debt?
The Home equity Line of Credit is cheap insurance and any funds you use from it is tax free (as a loan) and interest costs may have tax advantages.
Time is our most volatile resource that if not used immediately is lost instantly
|
|
Sun Feb 04, 2007 9:23 pm |
|
|
|
