The first step to a debt free lifestyle, according to people who are living the life, is an emergency fund. Dave Ramsey recommends an initial "baby emergency fund" of $1000 (which should pay for most common emergencies). After paying off debts, a six month emergency fund is recommended (6 months of essentials- not luxuries).
Suze Orman has been recommending eight months of living expenses as an emergency fund before paying off credit cards or becoming debt free.
Honestly, I'm torn between the two options. Because all personal finance is personal I guess I have to find what works best for me. As a single guy, I doubt that 8 months of living expenses should be a primary goal. A family man may see this as a necessity.
I am glad that as of Oct 7, I will have an initial emergency fund of $1000 stashed away in an ING account. Then, at least for the next 12 months, I plan on following Ramsey's advice and eliminating all credit card debt from smallest to largest. The only other debt I have is a student loan.
After paying off the credit cards, I am going to stop and see where I'm at- where the economy's at- and determine whether to plow ahead or stash a 6 or 8 month long term emergency fund aside before tackling the student loan.
If possible I would like to take a trip to Albania (as cheaply as possible) as a "reward" once my credit cards are paid in full. Hopefully this will be in 2013!
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10 comments:
I like Suze Orman's idea, but I think Dave Ramsey's is more practical and doable for most people. I hope you get to take your trip in 2013!
dhsauers(at)gmail.com
Thanks Danielle! It might be 2014 but I am determined to see my sponsored child before he grows up!
Good advice. I know a lot of people that have done Dave Ramsey's 'Financial Peace' class and it has helped them significantly. Suze Orman also gives great advice.
Oooh, I still have yet to finish Dave's Step 1.
I really do need to take some of this advice. I would love to even have $1,000 of emergency money. Even though I coupon I am a spender on things we don't need.
bryantsmommy07@yahoo.com
We don't have emergency fun, but we are trying to be smart, and not buy things on credit card above what we can afford.
no i dont think so
No, we don't have an emergency fund :(
I do have a emergency fund I take a certain amount out of my check and put it away even if its just a little at a time and let it save up for anytime I need backup.
We used to have an emergency fund, then we had to refill our fuel tank again this winter, at $700 each time, there went our fund - but I guess having heat...or not having heat could be an emergency.
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