New Financial Direction

[disneysteve]

-Pay off CC within next few weeks from EF

Why would you wait a few weeks? Pay it off today. You have the money.

That is true about what DR would say, but I disagree with him about taking out the investments especially when you can be debt free in 20 months.

Sorry if I wasn't clear. I was just stating what DR would say. I was NOT supporting that opinion. I would also not cash out the investments to pay off a 6%, tax-deductible loan. I would do it for a 19% credit card, though, as JPG suggested.

[littleroc02us]

But you're okay dropping the cash to $1k, when you could be debt free in 23 months?

I kinda disagree with both of you

Yes, that is an easy decision. This is hopefully a situation where the person has a job and brings home an income, which obviously anyone can lose a job, but 1k can fix all sorts of problems for a 1 year 8 month project to get rid of debt. What emergency do you have that you can't solve with 1k for such a small time period, except hospitalization or something severe and in that case most of us will have a money problem?

[jpg7n16]

What emergency do you have that you can't solve with 1k for such a small time period, except hospitalization or something severe and in that case most of us will have a money problem?

What if the transmission goes out on the car? Transmission isn't covered by insurance. They can easily run $2-3k.

Car accident late in the month with a $1000 deductible. Then what do you do for food?

Same but you're injured, and also incur a few medical bills. Even with insurance.

Loses job and is unemployed for 2-4 weeks.



Since you can reborrow money on the credit card, while you're aggressively paying down credit card debt, I don't mind the $1k in cash. But you can't do that with student loans. You'd have to rack up credit card debt for no reason. If you had $3k in cash all of the above could be covered.

[disneysteve]

What emergency do you have that you can't solve with 1k for such a small time period

Actually, I've had plenty of times when $1,000 wouldn't have been sufficient. I've had car repairs that cost more than 1K. I've had home repairs that cost more than 1K. I've had medical bills that cost more than 1K.

I understand that having 1K set aside is a whole lot better than having zero set aside but there certainly are times when it wouldn't be enough.

[littleroc02us]

What if the transmission goes out on the car? Transmission isn't covered by insurance. They can easily run $2-3k.

Car accident late in the month with a $1000 deductible. Then what do you do for food?

Same but you're injured, and also incur a few medical bills. Even with insurance.

Loses job and is unemployed for 2-4 weeks.



Since you can reborrow money on the credit card, while you're aggressively paying down credit card debt, I don't mind the $1k in cash. But you can't do that with student loans. You'd have to rack up credit card debt for no reason. If you had $3k in cash all of the above could be covered.

Transmission blowout = You can buy a car for $1000 and under that would get you by.
Car accident=EF isn't for food, it would cover the 1k deductible.
Injured=Insurance, arrange payment options, put it in your debt snowball
lose job=Can happen to anyone, collect unemployment until you find a job, deliver pizzas.

*Stay away from credit cards.....

[yugugelizer]

The OP does not own a car, and rents. In that case, car and home repairs are not emergencies he needs to worry about. The only large emergencies I can think of would be health or job related. In that case, I would pay off credit card debt, and lower EF to $1,000 to pay a portion of student loans off right away.

[littleroc02us]

Actually, I've had plenty of times when $1,000 wouldn't have been sufficient. I've had car repairs that cost more than 1K. I've had home repairs that cost more than 1K. I've had medical bills that cost more than 1K.

I understand that having 1K set aside is a whole lot better than having zero set aside but there certainly are times when it wouldn't be enough.

So what do you think is enough. Because whatever dollar amount you say, it won't cover both you and your wife losing your job, you get into a car accident because you caused it the person gets hurt they sue you and win or you get hurt have huge medical expenses that are in the thousands, you break your back you can't work and you don't have disability insurance, you suddenly find out you owe thousands because you didn't file your taxes properly or forgot to withhold. Should I go on? In 20 months when the debt is gone the person can work on their EF to get it back to 6-9 months of expenses.

[disneysteve]

So what do you think is enough.

I was just responding to your question, "What emergency do you have that you can't solve with 1k?" I think there are many things that wouldn't be solvable with 1K, and I've encountered them numerous times.

Again, I totally agree with everyone having at least a 1K EF in place first before tackling other issues. I just know from experience that sometimes, 1K isn't enough.