Comments on: Pay off Credit Cards VS Build Emergency Fund Savings – Me VS Suze Orman

By: Personal Finance Armor

Personal Finance Armor — Thu, 18 Feb 2010 18:08:33 +0000

[...] fund and other high interest savings accounts by using the percentage approach. I currently designate 25% of my available funds to my savings even though I am still in debt reduction mode.Debt reduction – this is where I am current [...]

By: Walter Updegrave, Suze Orman, Financial Planners, Minimum Payments, Bad Ideas, Shortcuts, Credit Card Balances, Emergency Fund

Thu, 04 Feb 2010 16:20:01 +0000

[...] one when you already have a good deal of credit card debt (for example, here’s Suze Orman tweeting with fellow blogger Matt Jabs), there should be near complete unanimity that if you are current on your credit card balances [...]

By: Jeff

Jeff — Thu, 19 Nov 2009 21:31:59 +0000

Deciding to payoff or pay high interest is a double edged sword. For people with interest rates in the single digits and low teens, building up a reserve is a good idea. But anyone who has a 20% plus interest rate is wasting $200 a year on every thousand dollars of debt they carry. That’s a grand for someone with 10k.

Basically, you might get hurt by a credit limit cut if you pay your card down, but you’ll end up with a lot less in the bank if you continue to pay absurd interest rates on your credit card debt.

By: Gazelle Intensity in Debt Repayment | Debt Free Adventure!

Gazelle Intensity in Debt Repayment | Debt Free Adventure! — Fri, 30 Oct 2009 07:04:54 +0000

[...] Pay off Credit Cards VS Build Emergency Fund Savings – Me VS Suze Orman [...]

By: Steve in W MA

Steve in W MA — Sat, 26 Sep 2009 16:56:17 +0000

@ Dana:

Wow, you’ve been through the wringer!

I’m glad you had that little extra money put aside and it was able to help you.

And I’m glad you’re OK!

By: Torrey

Torrey — Fri, 11 Sep 2009 20:29:33 +0000

Following the Dave Ramsey plan would have screwed me a couple of weeks ago. I had an emergency over $2500. That's why I feel better having more than $1000 in my EF and lean more with Suze's advice. .-= Torrey´s last blog ..What Happened To Respect? [Inspired by Rep. Joe Wilson] =-.

By: Matt Jabs

Matt Jabs — Fri, 11 Sep 2009 01:51:46 +0000

Thanks Leah… great info!

Yeah, we are familiar w/Dave’s awesome teaching points. He truly is an inspiration, and I thank God for him. Like Dave says, “personal finance is personal and you can’t go wrong getting out of debt”! We employ (and invented ) this 75/25 approach because of several successive instances that drained our puny $1,000 EF and left us using a credit card again. You can go through the archives of my Monthly Debt Reduction and Savings Statements or my detailed post on our Balanced 75/25 Method for details – but suffice to say… we found we felt much more comfortable with more than $1,000… so we just continually save 25% of it.

By: Leah

Leah — Thu, 10 Sep 2009 16:19:33 +0000

Matt,
Goodness, what a concept. We follow the Dave Ramsey protocol on EF building. Which is first and foremost saving up $1000 before devoting extra money to debt.
We paid off our CC’s at the beginning of this year with Income Tax Return, so all we have now is Car Loan, Mortgage and those dreaded student loans.
Anyway, Dave says to save up this $1000, because most emergencies cost you less that that and it is easily built up again should you need it for a true emergency (ie: new refrigerator, car repair, etc.)
So, the goal is to get to only having a mortgage to pay off. When you only have the mortgage left, then build up the EF to a 3 to 6 month savings. Once you have that EF built up, attack the mortgage with “Gazelle Intensity” as Dave is so fond of saying.

I’m sure you know all this, Matt. For the good of the readers.
.-= Leah´s last blog ..Tithing =-.

By: Dana

Dana — Sun, 30 Aug 2009 03:32:30 +0000

When I was married I amassed some credit card debt but was socking money away into a savings account in case we might need it later. When my husband found out, he was *livid.* He said it made no sense to save any money when we had a credit card to pay off. (Never mind he was adding to the balance with various stupid purchases.) He insisted that I withdraw it to go toward bills.

My stepmom, who had her name on the account (it had been mine since high school and I was funding it from my own paychecks, even), wisely did not let me have the full balance. Because not even a year later my husband got into serious legal trouble that involved me having to leave him because I was the one who turned him in. Had I never said anything to him about the account, I would have been in a lot better position to deal with the situation. And even if the marriage itself had never run into problems, let’s say his grandmother or mom died and we had to go to a funeral suddenly–we’d have had the money to go, and wouldn’t have had to pay interest on it.

You never think it will happen to you. But life doesn’t work that way.

By: New Rules for the Credit Card Act

New Rules for the Credit Card Act — Thu, 27 Aug 2009 04:21:56 +0000

[...] current market conditions, paying off credit cards before investing is a sound financial decision. Even if the market were performing in an [...]

By: Another good week of PF blog reading » JoeTaxpayer

Another good week of PF blog reading » JoeTaxpayer — Sun, 09 Aug 2009 12:04:33 +0000

[...] last month but I just discovered – Pay off Credit Cards VS Build Emergency Fund Savings – Me VS Suze Orman by Matt Jabs. It’s great to see that Suze took enough interst to reply to Matt and clarify [...]

By: JoeTaxpayer

JoeTaxpayer — Sat, 08 Aug 2009 12:52:23 +0000

I suppose, like anything, it depends.
If you have many cards, and owe so much that building that emergency fund will take a long time, the EF may be costing you 24%+ and you may never catch up.
I had a cash EF that was a good 9mo of expenses and decided to throw nearly all of it. That let me pay the mortgage down enough that combined with the lower rate, moved us from the 27yrs left on a 30 yr mort, to a new 20yr, at a lower payment.
Not for everyone, I know. Each person needs to lay out all their details and decide what’s right for them. Suze is trying to hit her audience, and I suspect her advice does just that.
.-= JoeTaxpayer´s last blog ..Frugal Friday Week 12 =-.

By: Personal Finance Armor | Debt Free Adventure!

Personal Finance Armor | Debt Free Adventure! — Wed, 29 Jul 2009 09:06:49 +0000

[...] fund and other high interest savings accounts by using the percentage approach. I currently designate 25% of my available funds to my savings even though I am still in debt reduction [...]

By: My Financial Recovery

My Financial Recovery — Mon, 27 Jul 2009 13:46:41 +0000

Carnival Of Twenty Something Finances…

Well – technically I turned 30 a bit over a week ago but I offered to host this week’s carnival about a month ago, before life got insanely busy. Anyway – given the crazy schedule lately I am going to jump right in. There are some g…

By: Weekly Wisdom in Personal Finance - Save Money Edition | Debt Free Adventure!

Sat, 25 Jul 2009 08:59:44 +0000

[...] you have high interest debt & have already funded your Emergency Fund with $1,000 – continue to save 25% of your available money while focusing the other 75% on [...]

By: Emergency Fund Before Debt Reduction | One Money Design

Emergency Fund Before Debt Reduction | One Money Design — Sat, 25 Jul 2009 03:22:52 +0000

[...] his article, Pay off Credit Cards VS Build Emergency Fund Savings – Me VS Suze Orman, Matt tweets with Suze about strategy in building emergency savings while paying off credit [...]

By: Matt Jabs

Matt Jabs — Fri, 24 Jul 2009 19:19:08 +0000

Good point…

Let’s all keep in perspective the fact that all these things should be done with prayerfulness – and should be tailored to each of our individual situations.

By: threadbndr

threadbndr — Fri, 24 Jul 2009 19:02:42 +0000

While I like a lot of what both Dave and Suze say, their advice is (and due to media must be) generic. For example, I’m not that far from retirement, so I do not feel comfortable suspending my retirement deposits to focus on other financial goals – especially the one that gets me the match from my employer!

By: Matt Jabs

Matt Jabs — Thu, 23 Jul 2009 16:07:44 +0000

Did I mention what I do?

Good points Dustin.

FOCUS is the name of the game. I focus on percentages, and I think this is a HUGE mindset change people can benefit from. Don’t think of things in terms of numbers… think in terms of percentages. Focus on those percentages and that is a single focus.

I did stop paying into my 401K and my IRA for now, until I get my high interest debt eliminated! I think it is unwise to pay into retirement accounts when you need the money NOW. And if you have high interest debt, then you DO need the money now. Getting rid of that debt is paramount to building savings.

That said… Emergency Fund/immediate cash savings is something I cannot stop contributing to while paying off debt. To STOP contributing to it altogether is unwise in my book.

So… I focus on percentages and put MOST of my funds toward the debt, but still reward myself w/a smaller percentage into my savings.

This concept has already saved me once in the last 6 months when a $1,000 EF just didn’t cover the $1,500 transmission I had to replace. Sometimes $1,000 just isn’t enough.

So what’s the answer?

Focus on percentages – put MOST toward high interest debt and the smaller part toward your liquid savings… the latter is your safety net.

By: Dustin @ Inzolo

Dustin @ Inzolo — Thu, 23 Jul 2009 15:50:29 +0000

Matt, why don’t you tell us what you do? hehe j/k

Having listened to Dave Ramsey for a number of years I know what his argument would be to this point of trying to do both. There is great power in FOCUS. If you focus on one thing you are much more likely to get it done faster. Spreading yourself out and trying to do everything you *should* be doing is what gets people frustrated and overwhelmed. This is why he advocates that you stop paying in to your 401K to put it towards paying off your debt. It helps you focus and provides greater motivation to get it done faster so you can get back to your 401K and getting that free match your company may offer.

I think it is the idea of focus that makes his baby steps so appealing. You work on one thing at a time and get a sense of accomplishment when you can check another one off the list.
.-= Dustin @ Inzolo´s last blog ..Allocating and Tranfering Funds =-.