Ask:
Ok I understand first thing your suppose to do is get a $1000 emergency fund and then do the debt snowball. We now have a little over $5000 in savings in case DH goes on strike in October. I just added a $1000 of that money from the insurance company due to work we did ourselves on the house due to a hail claim. My question is do I still need another $1000 as an emergency fund or can I just put all the extra money we have toward bills? Tell me your thoughts.
Answer:
Ok, b/c you are in a different position....I would suggest maybe doing half and half. You don't know whether or not he will go on strike and if he does - you don't know how long. You don't need "another" emergency fund. So my recommendation would be to take 1/2 the money that you had been saving to put into the $5K and pay down bills and put the other half with the $5K. I might try getting it into a money market or something similar that you have easy access to but that also gives you a higher rate of interest on your money than a typical savings account. So, lets say (for easy numbers) that you had been setting aside $100 every month for the "in case he goes on strike" fund I would put $50 in the that fund and then take the other 50 and pay down bills. Now if October comes and goes without a strike I would take a HUGE portion of that fund and get rid of as much debt as you can. The interest a person pays on CC debt is so huge that you will never match it in any mutual fund etc. So get rid of the debt so that you can truly save.
Does that make sense?
Rachel
Answer:
The $5k we have saved is our just in case money, I just paid off $1k on credit card bills and I think we are down to $2300 on them. I'm also looking into getting rid of my husbands truck but we are having a hard time because of gas prices. Do you think it would be wiser to save up another $1k for an emergency fund or just pay bills down? I'm thinking pay bills down, then if they don't strike we'll be $5k ahead and we'll be down on the amount we have in bills. If he does strike we'll have $5k + my income to live off and have fewer bills. My thought is screw the $1k emergency fund for now and just pay bills. Maybe I'm way off, let me know.
Answer:
I would do what you are comfortable with. My husband and I were not comfortable with one $1000 so we upped ours to 2500 but if your husband goes on strike you want to know that you have living expenses for that long. I would say to put $1000 in an emergency fund and then living expenses in another and then I would put the rest towrds your debt. That way you might feel more secure. Then if he doesn't go on strike you can use that money to put towards debt. I think Dave would agree but that is just me...
Answer:
See normally you would just save the $1000 and then start snowballing your debt. BUT b/c you know of a very real potential "emergency" you have upped your $1000 to 5k which is, in my opinion very wise. So, you may still want to add more to it (?). So put a portion of what you have been saving on your bills and the other to give you an even bigger cushion b/c of not knowing how long the strike could last. You don't want to be forced to go back to usinc credit cards. But I don't think yhat you need "another" emergency fund.