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Save or Payoff Debt ?

March 15th, 2009 at 03:39 pm

Emergency Fund

I've been contemplating on rather I should save only a $1,000.00 as a small way to begin an emergency fund. By doing that I could foucus then on paying down debt.

On the other hand by taking Suze Orman's advice by saving 8 months for an emergency fund, I could pay down down debt without having to worry about hitting a snag. And trust me I always hit snags. I guess once I get more of a grab on my finances, I'll be able to get a better picture.

5 Responses to “Save or Payoff Debt ?”

  1. frugaltexan75 Says:

    It depends. Is your job pretty secure? Do you own a house or do you rent?

    If your job is pretty secure and you rent, then I would just save the $1000.

    If your job is secure and you own, then I'd save at least $2000.

    Then I would do an 80/20 on debt repayment. Meaning, 80% of anything you have over immensely needed expenses, would go towards debt. The other 20% would go towards continuing to build up your EF.

    If your not sure about your job/income, then I would save up at least 6 weeks income, and then go 40/60. 40% going towards paying down debt, and 60% to building up your EF.

  2. oceansluver78 Says:

    My job is very secure and I rent,so maybe the 1000.00 emergency fund sounds more reasonable. I never thought of it that way. Thanks for the advice Frugal!

  3. crazyliblady Says:

    Regardless of whether you use an 80/20 or 40/60 strategy, I think you need a cushion of easily available cash. Even if you can only save $5.00 a week because of your debt, you should save something. When I had both my checking and savings at the same bank, my efforts to save for emergencies were thwarted by little cash flow "emergencies" that would creep up and bite me in the butt. I would have to transfer cash to the other account. I finally closed the savings account, as I could not keep anything in it. The only thing that has worked was opening up an account at a credit union and doing direct deposit out of my pay each payday. Congratulations, though. You are doing very well.

  4. oceansluver78 Says:

    Wow lib, we had the same problem! I kept taking money out of my savings account and putting it into the checking account, so much that I was having to pay the bank just to keep it open! I've now planned on setting up a ING account. Sseperate and better intrest rates as well.

  5. Ways To Pay Off Debt Says:

    Thank you very much for your post. I believe this is very sound advice. I am going to have to sit down with my wife over the weekend and review all of our options. Thanks again for the post!

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