Counting chickens/how much EF before paying car

[PrincessPerky]

This doesn't need to cover simple things, we have a mini EF as well.

And BTW it sure is nice to have this delema!

[tinapbeana]

average to find a job is usually a couple of months (most folks say 6, don't know if that's true or not). with that being said, my state offers up to 13 weeks of unemployment compensation per benefit year with the possibility of receiving an additional 13 weeks if your case is reviewed and approved. so, assuming the 6 month average job hunt is right, 13 wks unemployment + 3 month EF = 6 months of expenses without having to worry about being approved for an extension...

but as always, your state might be different than mine, so YMMV

[disneysteve]

I voted 3 months because I think that gives a nice cushion. But I am curious what interest you are paying on the car loan. If it isn't that high, you might do better to invest that money rather than prepay the loan. Are you fully funding your retirement accounts, for example?

[PrincessPerky]

It is high can't remember exact number (I know pathetic, but then some days I can't remember my birthday either!) anyway more than interest earned in ING.

[darlonzo]

I say six months or five if you can. That migh sound easier said than done, but times are rough.

[LuxLiving]

Princess P- I ran into this question when we started trying to get out of debt and decided we would do BOTH concurrently. Worked for us.

It doesn't have to be a 50/50 split either. At first we did 80% to EF - 20% car loans with the extra money we had to play with above the normal payments. And after there was about 2500.00 in the EF then we went to 70-30 until there was 3000.00 in EF. You have to understand that at that time any extra we had to do with was very minimal so it took a bit of time to build it up and then slowly over time things eased up and then we went to 50/50 for a time, then 40-60, 30-70, 20-80, 10EF-90cars and then finally all of it was going to the car paydowns - and we had two hefty car loans to begin with. NOW about four years later - both cars are paid off and new cars bought with cash AND there is a hefty EF. It does take a bit of time depending on the income you have but it is definitely do-able.

[poundwise]

I say you ought to have a small EF and then pay ALL debt (except the mortgage) and after that build the EF up to 3 months of pay or 6 months of expenses or somewhere in between.

Having said that, my current debt payment plan calls for my wife's car payment to be paid next to last and I may adjust it so that it is last. If an emergency, or if otherwise, I end up having to carry a payment for a while, I'd just as soon it be a car payment. In fact, I'd considered that once we only have the one car payment left, we may slow down the debt payoff in order to build up the HSA and start an IRA, etc., if need be.

Still, the basic premise I adhere to is to pay the debt first, while having a minimal EF.

[PrincessPerky]

Originally Posted by LuxLiving

Princess P- I ran into this question when we started trying to get out of debt and decided we would do BOTH concurrently. Worked for us.

Heh, Silly me, I was thinking all or nothing! I think I like a split.

Thanks to all responses, it gives us more to think about.

[kristinecfp]

A split is a good idea. It's hard for many people to focus on just one goal while letting others sit with no action going towards them.

The amount of ef depends on a number of things: how steady is your income? are you in a field that experiences layoffs? do you have good credit? is the car loan your only debt? do you have access to a home equity loan if a true emergency takes place?

If you answered yes to most of these questions, then a smaller ef is probably ok until the car is paid off. Otherwise, I'd recommend a larger ef.

Keep us posted on your progress!

[Ima saver]

I guess because my husband is such a "car" person, I almost think of a car payment as a normal expense, like paying the electric bill. Being self employed, I think a large EF is more important.

[PrincessPerky]

Originally Posted by kristinecfp

The amount of ef depends on a number of things: how steady is your income? are you in a field that experiences layoffs? do you have good credit? is the car loan your only debt? do you have access to a home equity loan if a true emergency takes place?

Income well he is in a field that is consistantly being pushed overseas, but he is also trying to get more into the hands on (hard to get a guy in india to fix your computer hardware that is sitting under your desk..) Basically in Aprilish he should be signing a contract for 3 years...so as long as that goes thru we are good for awile.

Excellent credit (well he does)
Car loan plus house. (car has yucky interest, house is ok)

home equity, doubt it, woulldn't want to but we do have enough open credit to buy a nice house on CCs so I think credit wise we have plenty of safety...we just don't want to have to use credit.

Right now we have some medical issues that need resolved, after that I think we will split the amount between car and EF.

Thank you for all the replies and ideas.