Home > Getting a Little Nervous

Getting a Little Nervous

February 21st, 2008 at 12:07 pm

I'm getting a little nervous about only having $1000 in my emergency fund. I know the reason that Dave Ramsey recommends that amount is because most emergencies will be under $1000. But with the car repairs (if the insurance hadn't covered them) being over $500 just for struts, that's a little too close for comfort for me.

I also think he recommends the $1000 so that it will spur you on to getting baby step #2 (pay off debts) done faster. I just feel like we're not really making much headway there because there always seems to be something else coming up.

I would really like to save another $1000 just to have a higher comfort level, but then it would be putting off getting the mortgage paid off even longer.

15 Responses to “Getting a Little Nervous”

  1. Broken Arrow Says:

    I think you should do whatever you feel most comfortable here. There's no rule saying that 1k is the magic number and any deviations from that will cause your financial world to collapse. Smile 2k sounds great!

  2. mom-sense Says:

    i have $12,500 (used to be $15,000 but had to spend some) and i have $9,500 in debt. why don't i use it to pay off the 3.99% amex? because i feel secure having it there in the case of unemployment or something along those lines! keep whatever you feel you need to be secure. I think "secure" it a relative term, applicable to each individual.

  3. Nic Says:

    Do what feels comfortable for you and your family/situation.

  4. Aleta Says:

    Rduell: No one can give you advice if you already have a feeling of what you need to do for yourself.

    I will tell you something that I didn't realize when we started down the debt freeing road. I've actually learned this here on this forum. If someone has an open line of credit, that can be an emergency fund. Some reason that it is better to pay down debt that has a higher percentage that isn't deductible rather than having an account paying a small percentage that is taxable. Thinking realistically, there are items that you probably would want cash for.

    You have never mentioned how high your interest rates are on what you currently owe. That would help alot and it seems like most of your debts are high ones right now and you wouldn't see any paid off for a while and maybe that's why you feel the way you do. Anyway, as others have said, you have to sleep tight at night and if this is something that would give you a peace of mind - it's your decision.

  5. rduell Says:

    Aleta...the interest on the mortgage I'm working on right now is 9.375%. It's higher than the car loan, so that's one reason I chose to pay that first, besides being the lowest loan amount. Also, this is the bank that didn't pay some one of our escrowed taxes last year so that we got turned into a collection agency. I guess you could call it a personal vendetta against them. :-)

  6. Aleta Says:

    That is a high interest rate.If this appeared on your credit report, can you write a letter offering your side of the story. Can't blame you for how you feel about that bank and more reason to get rid of it. Can you file a complaint to the Better Business Bureau or file with your state about their practices? That doesn't seem fair what they did to you. I left something out earlier. I think that it was Suze Orman that said that it is better to borrow money from your credit card with a 0% rate for a time rather than your home. She felt like it was better to owe the money rather than put the home in jeopardy. I do understand the way you feel about the urgency though because of the economy. Hope that this helps.

  7. luxlivingfrugalis Says:

    Yep, have in there whatever makes you able to sleep comfortable at night w/o worry. Then hit that mortgage gazelle instense!

  8. scfr Says:

    Either one (building up the EF or paying down the high rate mortgage) is a move in the right direction. Is there any way to do both at the same time?

  9. rduell Says:

    Yes, that is a possibility. I could divide DH's overtime between the 2.

  10. Aleta Says:

    When will you be able to pay off the mortgage on the budget that you have now? Are your payments higher on the mortgage with the lowest amount than the other one? Just trying to help to see where you are.

  11. rduell Says:

    With what I'm paying now, it could be paid off within the next 2 years, maybe sooner. That's if DH's overtime continues and we don't run into many unforeseen expenses.

    The payments are highest on the biggest mortgage. The little one has our taxes escrowed into it and they're twice the amount of the actual payment. So even when it's paid off I'll need to continue to put the amount for taxes away to pay them when they come due. The interest rate on the small mortgage is 3% higher than the larger loan.

  12. Aleta Says:

    Are you talking about making your normal payments a month or by paying extra that it would be paid off? I know that you will feel relieved to have it paid off. When we were doing this, we had the list, but focused on the one we were trying to get rid of first. The great thing is that when you finally get rid of one; the others have much lower because of your monthly payments and then you can take each paid off payment and add it to the next. By focusing on only one at a time, we started looking for all kinds of ways that we could raise money to pay it off. You're really doing a great job. Good luck and know that we are all rooting for you.

  13. rduell Says:

    I'm making extra payments on it. If I only made the minimum, it wouldn't be paid off until 2018. Then I plan on rolling what I'm paying on that onto the car loan.

  14. Aleta Says:

    This is where the stimulus package will help some people. To either put it in the emergency fund or to pay off debt.

  15. luxlivingfrugalis Says:

    I think Aleta gave you good advice.

    We did the split thing when we decided to start prepaying stuff and didn't have an emergency fund. I think it was David Bach's book 'Automatic Millionaire' that encouraged this - even though it doesn't make the best 'financial' sense, his idea is that you must do what let's you rest. And if that is paying some on the debt and putting some in the, then so be it. At some point in time you get to the crossover point where you've got a decent little amount in the efund and can then hit the debts hard.

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