We are the gazelle, our lendors/creditors are the cheetah (hunter.)
“Deliver thyself as a gazelle from the hand of the hunter, and as a bird from the hand of the fowler.” – Proverbs 6:5
In the past I have gotten into some pretty hefty comment debates with various readers about saving money while paying off debt.
If you don’t remember those discussions, you can read these two posts to catch up:
- Pay off Credit Cards VS Build Emergency Fund Savings – Me VS Suze Orman
- Debt Reduction – Emergency Fund Savings – The Balanced 75/25 Method
Basically we ran into a few things that made us realize that $1,000 for an Emergency Fund was just not enough in our case, so we made personal finance personal and did what worked for us by using 75% toward debt repayment and 25% toward savings.
A Changing Of The Guards
Now that we have our Emergency Fund built up to the amounts equal to roughly one month’s expenses, we have decided to set aside “The Balanced 75/25 Method” of debt repayment/emergency fund savings and focus on full strength gazelle intensity.
To us, building our initial EF up to these levels – THEN turning the gazelle intensity back on – just plain made sense. We feel better, and the gazelle has left the building, so things are good.
Why one month’s worth?
The main reasons we needed one month’s expenses:
- Wisdom – if something goes wrong we have prepared by setting a decent amount aside. $1,000 just didn’t cut it in our situation.
- Security – my wife feels more secure with that money there, and at the end of the day, if she feels more secure everybody is happier!
- Preparedness – this is like the manly version of security. I feel more prepared knowing that even in the unlikely event that both of us lost our jobs simultaneously, we would still have over one month of time to fully devote to finding jobs without having to worry about whether we could pay the bills that month.
So what’s next?
Now that we are able to focus 100% of our available money toward debt we are going to attack our debts one at a time. Here they are in the order we plan to pay them off:
- Lending Club Loan – Like I have said before, the math doesn’t work out, but I am still faithful to believe that we can have this paid off by 12/31/2009. We started this loan at $11,000+ just 2 short months ago and have already paid this down to $8,500. Maybe you know of some rich dude/dudette who wants to donate to a good cause?
- 2nd Mortgage – We’re breaking slightly from the debt snowball method here and tackling this one 2nd because the interest rate is quite a bit higher than our student loan rates.
- My student loan – This is a smaller of the two student loans and the one with the higher interest of the two, so that works out nicely.
- Her student loan – This will be our last non-mortgage debt to pay off because of its super low rate.
- 1st mortgage – and once this is paid off – you guest it – WE WILL BE DEBT FREE!
It is so true that simply having a plan in place gives a lot of financial peace in and of itself because you understand what needs to be done, how long it will take, and that it is just a matter of time, patience, and fortitude.
What about you?
How much savings is right for you? Are you happy with the $1,000 Emergency Fund that financial guru’s like Dave Ramsey promote, or are you like us in that you feel more prepared and secure with slightly more money?
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DFA is passionately dedicated to helping people break the bondage of debt and work toward financial freedom using biblical principles.