Need a plan-Newbie here

[lifeisgood]

So I'm looking for advice about long term saving. Just a little background. I work part-time. DH works full-time. We have 2 kids, ages 6 and 3. We live in a home with a $235,000 mortgage (30yr fixed 5.25%) and a $25,000 home equity loan (7.25%). I have $84,000 in student loans. Most of these loans are Stafford at 4.65%. Two of these loans, however, are private loans, $14,000 at 7.75%. Right now we'd like to build up our EF, pay off some student loans, and pay off our home equity line. Most of the money for these goals will come from paying off a car loan next year and the elimination of pre-school tuition. My specific question is how much of an EF do we need before we pay off some of the debts. EF is currently $6000. By the way, we have no CC debt.

[terry1156]

A lot depends on you and the amount you feel comfortable with for an emergency fund. The credit cards can also be factored in as emergency money - I don;t think it is a good idea to do this when you have no emergency fund because the interest rates are so high, but if you have $10,000 in cash, then another $10,000 in credit card space, the chances that you will ever need to dip into the credit cards is slim. Since you are locked into a low rate on the Stafford loans (you can earn more in an online bank), it makes no sense to pay these off early, but I would work on the other ones.

[Tree0164]

I would focus on getting your private student loans paid off first and then build up an emergency fund of 6-8 living expenses.

[disneysteve]

I work part-time. DH works full-time.

My specific question is how much of an EF do we need before we pay off some of the debts.

How much do each of you earn? It is impossible to answer your question with a dollar amount without that information. That said, I'd say in general 6 months worth of living expenses is a good goal. Three months at a minimum. It depends on a lot of factors. Things like what type of work you each do and how secure your jobs are.

[lifeisgood]

Thank you everyone for your responses. This site is very informative and motivating. Although I have only lurked until now, everyone's motivation is encouraging and I'm excited by our 2007 progress. From 2003-2006, we were spending more than we made and pretty much exhausted the savings. I was in school and had a baby and we really didn't have a handle on how much money a house costs with all the extras--septic tank cleaning, trash service, tree work, etc. This year we are in the black, contributing $75/month to a Roth IRA (DH has profit sharing), and $70/month to ING direct. We are hoping to do a lot better in 2008.

To answer some questions, we earn around $88,000 annually. Right now my part-time work is not 100% secure as part of my hours are freelance income ($10,000). DH's job is pretty secure. I agree about leaving the Stafford loans alone as the interest rate is pretty good. The private student loans are driving me nuts, but I want an emergency fund in place. Our home equity loan is a result of a basement flooding and a subsequent installation of a waterproofing system. So I really don't want to finance any more "emergencies".

I think I'd feel comfortable with $15,000 in the EF, then maybe start paying the loans. Thanks again for the advice and I look foward to hearing any more thoughts.