Gotten Gazelle Intense-now need some direction!

[StonesThrow]

Hi there,

I discovered this site about a year ago and planned to do the $20. challenge in '06 because it sounded 'fun!" and we had no savings to speak of. But after a serious look at our finances, setting some challenging life goals and reading Ramsey's Total Money Makeover (got it a yard sale for .25!) I, and eventually my husband, realized we needed some real focus.

We have since edited everything we had and questioned all of our 'needs'. We've set up an emergency fund (1,000) at our bank and another (1,000) in cash (under our bed, I'm embarrassed to say, but my husband's sense of security required cash on hand in case we have to 'bug out' -We live near a major metro area and experienced a bit of the chaos following 9/11)

We also have 7 children, so I am quite ok with doubling Ramsey's emergency fund plan.

We've since paid off one CC and have 2600. left to pay on our van (planned to be paid in full by November 1.) After that 4700. on the last CC. As our snowball has picked up speed we budget an additional 1200. per month to debt reduction on top of the 300. we were already paying. So by next March should be attacking our student loans (29,000) at -1844. a month (1500+344-the regular payment)

Here's where my gazelle intensity if failing! I would rather skip to Step 3 at that point and fully fund the emergency fund (especially since we feel we should have closer to the 6 month mark than 3 months put aside.) I really want to get that done first. It is just a comfort thing-our jobs seem secure & our health is good (you think sleeping on a grand would give me more peace of mind!)

I know this is about our Personal Finance and that we need to do what works for us, but I don't want to derail this process~ especially since my husband is motivated as well. Any ideas?

The loan is at 6 1/4% and we consolidated our loans together about 8 years ago, so there is no way to lower it unless we both go back to school and take out new loans (NOT going to happen anytime soon!)

What do you think--I guess I know the answer but need a push to keep from stalling on the debt. Push me please!

[meaghanchan]

I think ultimately you have to do what makes you comfortable. I agree that with 7 kids I would prefer to have, say, $20,000 in student loans and $10,000 in savings than $12,000 in loans and $2,000 in savings.

I think you have a couple alternatives here that aren't all-or-nothing.

One option would be going halfway- instead of doing student loans, emergency fund or emergency fund, student loans, you could (after paying off the rest of your debt) pay minimums on your student loans while putting 3 months (not 6) living expenses in your emergency fund. Then hit the student loans hard, then finish up your emergency fund up to 6 months.

Another option would be to put $100 (or another amount) in your emergency fund every month, and send the rest of your money to your debts. By the time your student loans are paid off, your emergency fund may not be completed, but it'll be in a good place.

I think if you do decide to do step 3 before paying off the student loans, make sure you set a time frame or a money amount (or both) as limits on your emergency fund. You could say, "from March to August we'll put all the money we can in the emergency fund, but that's IT- after that we're leaving it where it is, no matter how much is in it (as long as it's over $1000) and attacking the student loans". And whatever you do, review your plan every month. If you begin to lose focus, it's time to review what's happening and maybe make some changes.

[StonesThrow]

Thanks for those thoughts! We've been so focused on doing it by the book because it is the first thing that has really made us change our ways and it has been a very positive experience (tough but positive!)

I'm thinking now that 1500. a month into one of those ING or Emigrant accounts I keep reading about, for 3-4 months would feel really good and keep the wolves at bay for a while longer if things turn bad.

Just a little detour I guess-nothing to panic about!!

[creditcardfree]

I'm a Dave Ramsey fan myself.

I really like having an emergency fund. In fact, I even went back into debt on a car for $5000 after a freak accident. I have the money in the emergency fund, but I just like it too much. I would only have about 3K left if I paid it off, so I say do what feels right.

Why don't you do the $1500 for 3 months...then get gazelle intense again on those pesky student loans? You can do this. You are doing great so far. Keep up the good work.

[lillyb]

I'm right there with you. Everything is paid off except the mortgage and student loan. Finally! Yet we've decided to up the emergency fund before attacking the loan. It's just how it will be for us. With seven children I can imagine the security gland is going haywire putting off a bigger emergency fund for as long as the loan would take to pay off. Do what's best for your family.

[Ima saver]

I agree, I would never be comfortable with just $2000 in emergency fund and no other savings. I want at least 6 months in my emergency fund because my husband is self employed (and I have at least that much) I think you should build up your savings and pick back up on paying down debt the first of next year. You can join the $20 challenge at any time, you don't need to wait 4 months!

[disneysteve]

Originally Posted by StonesThrow

We've set up an emergency fund (1,000) at our bank and another (1,000) in cash (under our bed, I'm embarrassed to say, but my husband's sense of security required cash on hand in case we have to 'bug out' -We live near a major metro area and experienced a bit of the chaos following 9/11)

I just wanted to say that your husband is absolutely correct by keeping cash on hand, hopefully in small bills. After 9/11, after the summer blackout in 2003, after the hurricanes, there were lots of situations where ATMs were down, CC terminals were down and banks were closed. If you didn't have cash, you were out of luck. Part of everyone's EF should be a stash of cash, perhaps $500 in bills no larger than a $20.

[StonesThrow]

Thanks to everyone who has offered advice! Sorry to be out of touch.

We've decided to build a greater EF from now 'til the first of the year and then attack the student loans. Honestly, we're both so happy with the decision that we're feeling stupid that we struggled over it at all.

And yes, the cash on hand feels like a smart thing to do.

Hurricane Ernesto, despite being downgraded before it hit us, left us without power for 2 days and 2 inches of water in the basement this past weekend. Luckily our basement family room was furnished entirely with dumpster diving treasures and freecycle finds. Time to redecorate again.

So many of our neighbors are dealing with downed trees, smashed sheds and cars and even a boat now sitting ON the dock. While we don't have any big expenses due to the storm, it sure feels good to know we could have handled something without resorting to the CCs.

Thanks for sharing the ride to a healthy financial future with us. We're enjoying the company and have learned so much here.

[creditcardfree]

Great job on making the decision. Don't beat yourself up for feeling like you struggled with it. That is just part of the journey.

I'm glad you made it through the storm safe and without significant damage...financial or otherwise.

[greedy4chips]

Sorry about the storm damage! If I wasn't living so far away I would offer to send you some of the furniture we had stored for my brother in the navy who doesn't want it anymore. It is older stuff, but I think a local college house's front porch would suit it perfectly!

I would also build up the EF to 6 months and at that point I would still consider adding to it about 25% of your surplus that is earmarked for debt reduction. My reason is simply this, with 7 kids you have to have a big safety net versus a family of 3 or 4. You can always choose to pay off the remaining debt using a portion of the EF when you feel absolutely comfortable.

Isn't it great though that you can see the light at the end of the tunnel now that you only have the one debt left! You are doing great!