Financial advisor vent

[Ima saver]

First of all, find out if the 401 is matched, if so, that is where your savings should start. You are smart to take the $3000 he has coming and put that in an emergency fund, or do you call it a freedom fund. Even tho it is costing you a few dollars every month to invest in Franklin, at least you are doing something.
The smartest thing you can do it take the extra money to pay off your credit cards. What percentage rate are you paying on the smallest one, and on the large one?

[Hypersion]

What's the interest rates on the two CC? What is the freedom account used for?

[Kris10Leigh]

Shoot. You asked what is the interest rate % and I went to look before admitting that I don't know and I can not find it on either website.

The lower amount credit card is approx. 13%
The higher amount credit card was 0% until this month and is now 7%.

My plan is to pay off the high interest/small amount card first. $19,000 is our limit on the other one and we are $700 away from that. Once it reaches a point where our remaining amount matches the amount on the other card, I will transfer the money from the low amount card to the high amount card. I can't explain it, but I know what I mean. Basically, it makes sense to have all the money on the card with the lower interest rate.

What is my freedom account used for?
Christmas gifts, birthday gifts, amusement park pass, childcare, lawn care (fertilizer...just short of a necessity), school expenses, car lisence renewal, professional membership dues (for my job), and medical bills.

I JUST set all that up and am rather proud of us for doing so. I know we have a lot of debt, but we are truly not so hard up that we can't afford gifts. The only real expenditure that we don't need is the amusment park pass. It's right around the corner and we passed on it this season to save a little. Our plan is to purchase it at the end of season 2006 for the 2007 season thereby getting a little extra useage out of it at the end of this season. It's just our way of stretching our membership.

All that divided by 26 pays comes out to $300 per pay or approximately $600 per month. I budget bi-weekly but I used monthly figures early for simplicity sake.

[Ima saver]

Right, You need to throw all the money you can at the card with the 13% rate. I understand what you mean, you are going to transfer what is left on that card, to get the lower rate as soon as you can. You said your husband is earning an extra $600 and you can put it all on the high interest card, right? That should pay it off in less than a year!

[Ima saver]

Kris, now that I know what your freedom fund is, you need to have an emergency fund. That is very important cause you know emergencies do happen. You need to have 3-6 months salary saved up in an emergency fund.

[Kris10Leigh]

Yes, absolutely!! If all goes as planned, I hope to have it paid off by Christmas! I run the numbers obsessively in my head as I go to bed each night, which makes getting to sleep awfully darn hard! I've mentioned we have 2 separate bank accounts. I work bi-weekly with money in DH's account, but "my" account works better monthly. In September I will get 3 pays and the third pay will ALL go to that card! DH has been working overtime and all the overtime over the $800 per pay we budget with will go to the cards. Leftover budgeted gas money will go to the cards. Unexpected checks we get in the mail will go to the cards. Plus, like I said, I plan to transfer some to the other card. With all that, we should be down to one card with $19,000 by Christmas. Then I can worry about that one!

See! Now you guys are giving me much better advise than my "advisor" and you didn't tell me to take on extra work this summer! We are doing the best we can. We really are! The ONLY thing we are not doing is having me work extra.

[Ima saver]

You are thinking ahead and you are doing well. The only thing that worrys me is that you don't have an emergency fund. If something happends, you will have to charge in an emergency!!

[Kris10Leigh]

I figure the freedom account can also act as a sort of emergency fund. If we had an emergency, we could pay for it with the freedom account and then stop paying on the CC's while we reimbursed ourselves. Unless I am just being naive.

[Thrifty Ray]

Originally Posted by Kris10Leigh

I figure the freedom account can also act as a sort of emergency fund. If we had an emergency, we could pay for it with the freedom account and then stop paying on the CC's while we reimbursed ourselves. Unless I am just being naive.

I also have a freedom account that I use for very similar reasons..I keep it in an excel workbook with a tab for each savings category...but my FA also includes a 'miscellaneous' or ermergency category.

If I run into an emergency, i pull from the miscellaneous and if I need more, I pull from one of the other categories. So, in essence, your freedom account could be used in an emergency, but it is probably wise to earmark $$ specifically for emergencies.

[Ima saver]

Yeah, if you can do it, it is better to have two funds. There will always be an emergency and you don't want to use your christmas money to pay for it. I have had an emergency fund almost all my life and I have had to use it a few times.

[Kris10Leigh]

I understand what you guys are saying. Does it help that I have overestimated a few costs? LOL! I feel like a stubborn child saying "But I don't want to!" I want to pay off that CC debt as fast as I can because it has been hanging around FOREVER! Prior to our marriage I was really good with money! I bought a $1500 flute in the 8th grade...with babysitting money! That flute is still worth every penny too and I have made back at least 20 times that by teaching flute lessons. So I want that debt gone! But I also understand that part of the reason we can't rid of the debt is because emergencies to pop up and our only source at that point is the CC's.

[Ima saver]

That is right, Kris. Emergencies happen to everyone and if you have the money saved, you won't have to charge it and pay interest on it. It is hard to get debt paid down because interest is added in every month.

[Thrifty Ray]

In essence, you will be paying off your debt and setting up a safety net for future emergencies at the same time.

If you have padded some of your FA categories, just scale them back to a minimum you are comfortable with and earmark the extra for emergencies.

I did this for my daughters wedding.

I scaled our vacation fund from $10 to 5, our Christmas fund from $50 to $30, our car repair fund from $10 to $5...and we just adjusted expenses accordingly....all the money saved by scaling back went into the wedding fund...and i was able to pay for the wedding in cash.

Massage your numbers...you may have your emergency fund savings already and can continue to pay down the debt.

[Ima saver]

That is a good idea, Ray. I usually cut my christmas fund and my misc fund to come up with exta money some weeks. Perhaps you can take the money your husband is getting back, and have a emergency fund and a freedom acct., split the money in other words.

[boefixepa]

I put a little extra in budget categories and they work like little emergency funds to balance things out. I have meds that cost $30 every month. I put in $35 so when I need another med for an illness there is extra money already in the meds category for this. I put more than I need for oil changes in the auto care category so when I need new tires or brakes the money is there. This means my 'emergency fund' is really only used for real emergency just not periodic known expenditures. Toss that idea around and see if you can tailor it to your needs.

[Ima saver]

I do the same when it comes to prescriptions that we need to get. Ijust budget more than I usually need so if we are sick and get a one time prescription, it will be covered. We try not to touch the emergency fund unless it is a big emergency!

[shanecurran]

you asked for his advice and he gave you a suggestion. You don't like his suggestion, but don't be mad at him because you don't like the suggestion.