Dave Ramsey, debt, credit cards, retirement, etc
- Thread starter SuperJETT
- Start date
ballen
X
- Location
- Westland, MI
a couple questions...
How much should be kept in a emergency fund?
and when you figure debt do you include your mortgage?
How much should be kept in a emergency fund?
and when you figure debt do you include your mortgage?
There are two emergency funds that Dave talks about the first one is his first "baby step" and that is $1,000.00 cash in a savings account. After that he would say to pay off your debts from smallest to largest EXCLUDING your primary or first mortgage. The second emergency fund is 3-6 months of expenses in a savings account or somewhere that you can easily reach it whenever you may need to.
Yes and no. If you have a second mortgage then it is included, however if you only have a first then Dave would tell you to:
1. Get $1,000 in the bank
2. Pay off your other debts (excluding your mortgage) starting with the smallest balance and ending with the largest balance, this is called the debt snowball.
3. Fully fund your emergency fund with 3-6 months of expenses
4. Start putting 15% of your income in a retirement account.
5. Begin saving for your kids college (if applicable)
and then
6. Pay off you first mortgage.
Last edited:
thrllskr
Converted Coucher
- Location
- Hoboken, NJ
If you still have debt aside from your house than you should have $1000 in an emergency fund, though I keep mine higher just in case something big goes like the furnace.
Your mortgage is the last thing you pay off, after all your credit cards, vehicle, student loans, etc. and you have 5-6 months of living expenses in an emergency fund.
ballen
X
- Location
- Westland, MI
does fully funding an emergency fund with 3-6 months expenses mean
everything, like enough to pay "all bills" for 3-6 months?
I'll just go buy the book....
Thanks
Last edited:
Yeah pretty much I suppose that you could exclude things like the cable bill or cell phone bill if you are not under contract. We have enough to pay for all of our 'necessary' expensed for about 4 or 5 months. If we were both out of work I would quit school and try to find a job so we wouldn't need to worry about tuition, we would also cut out cable and some other stuff that we don't need. We would basically just pay our house payment, light/gas bill, insurance, gas and other necessities.
freestylegeek
waiting...
- Location
- Grand Rapids, MI
Yes.
but, once you're out of debt and buying things with cash, "all bills" will be:
Mortgage
Food
Electric/Gas/Water
Fuel for your car
etc...
Most full emergency funds are around $8000-$12,000
kingnothing3
give me fuel give me fire
- Location
- Petersburg,Michigan
damn those are some nice emergency funds!!! Im pretty good at saving my money but with $12000 sitting in the bank im pretty sure I would be tempted to buy a nice lamey powerplant based, lightweight ski with the works. ooo thats what I am doing:banghead:
but then again Other than my mortgage, I have 0 debt.
but then again Other than my mortgage, I have 0 debt.
ballen
X
- Location
- Westland, MI
alright... I can see where the big emergency fund comes in... AFTER you pay off your debt... Honestly I was thinking to myself how in the friggin' world am I supposed to come up with 6 months worth of car payments, credit card payments, etc... it's all starting to make sense now...
My wife and are really starting to get into this stuff, Mainly because we have no other choice. I guess you could consider us "impulse buyers". If we want it, we buy it! I think I'm worse at it than she is, but it still has got us in sticky situations.
My last impulse purchase was roundnose hull... well i still have to pick it up sat.
so how strict are your budgets... do you stick to to them... in other words if you alotted $100 bucks for entertainment do you ever go over that??
My wife and are really starting to get into this stuff, Mainly because we have no other choice. I guess you could consider us "impulse buyers". If we want it, we buy it! I think I'm worse at it than she is, but it still has got us in sticky situations.
My last impulse purchase was roundnose hull... well i still have to pick it up sat.
so how strict are your budgets... do you stick to to them... in other words if you alotted $100 bucks for entertainment do you ever go over that??
Last edited:
We stick to ours for the most part. You'll find that it is really difficult to figure out a budget the first couple of months. However if you and your wife sit down and talk about why you *need* to go over in any category of your budget before you do then you'll cut down your impulse buys. Something else that Dave talks about is the envelope system it is really effective at making you behave in areas like entertainment because you can look at the amount of cash that you have left and decide if the purchase is worth it or not and when the money is gone then the money is gone.
After about 2 or 3 months you guys will be pretty good about figuring out how much money you really spend in each category. You will also cut your impulse buys down by following a couple pieces of advice.
1. Do a budget every month
2. Use the envelope system, i.e. stick your alloted money for food in an envelope in cash and only use that money for food, nothing else. When the envelope is empty you shop from your cupboards.
3. If you are off in an area then sit down with your wife and figure out where you can take money from and talk about why you should take it out of that area and not another, also discuss why this purchase is a necessity. Then don't forget to consider necessities like that in the future.
Last edited:
ballen
X
- Location
- Westland, MI
were definitely going to do the envelope system for some of this stuff. I'm starting to feel better just talking about it.
ballen
X
- Location
- Westland, MI
but I'm assuming, when you set your budget it has to be within reason.
40 bucks for groceries is unrealistic...
40 bucks for groceries is unrealistic...
Yeah use common sense. Try going through your check book or credit card statements and finding all your "food" purchases add them up and maybe take a little off if you ate out a bunch. Food is one that most people really "underestimate", most don't know how much they really spend on food, we didn't that's for sure.
ballen
X
- Location
- Westland, MI
But how do you adjust for things that are inconsistent... like the $509.00 elec/gas bill we just got? do you come up with an average then if it's less keep the difference to put towards next month?
You guess, if you know that you will use a lot of heat then guess high. I don't know exactly what our heat bill will be for Feb but it will be less than Jan and Dec since we were out of town for a couple of weeks and March will probably be less still because of "global warming" aka spring. Does your utility company offer a consistent billing option? If so you may want to try that. Or just average them like you said.
kingnothing3
give me fuel give me fire
- Location
- Petersburg,Michigan
ballen, If you start reading at the bottom of page 12 in this thread and read through page 13, its all about budgeting. snackem and jett actually gave me a few examples of there budgets.
guess as close as possible, if you guessed to high on something thats good because chances are you went way to low on something else. I did.
guess as close as possible, if you guessed to high on something thats good because chances are you went way to low on something else. I did.
Do you still have that Excel Program that I email to you? How did that work for you?
freestylegeek
waiting...
- Location
- Grand Rapids, MI
I know you've explained it to me before, but is there any chance you can explain it again for the other folks on the thread? If I remember right, the 'bills account' can only work if you get paid on the 1st and 15th, right?
Right now, we pay everything out of the checking account. I get paid on every other Friday, and my wife gets paid on the other Fridays. As the bills come due, we pay them (maily by electronic bill payment). With a 'bills account' when do you transfer money into it? Is it the same ammount transfered in per week? I always get confused when you talk about it.
I get paid twice/month, so it makes things easy.
day of month - credit/debit into bills account (these are rough numbers)
1 - credit $1000
2 - mortage -$1000
15 - credit $1000
16-30 rest of monthly bills, gas/electric/cable/insurance
We always have enough $$$ in the bills account to cover our monthly bills, when one comes in I pay it. No worrying/moving money around, wondering how to get everything paid every month. It's worked well for us for YEARS.