Dave Ramsey, debt, credit cards, retirement, etc

[BruceSki]

what happens if the car needs 800 in repairs?

then you have to swipe the card to pay for it if you dont have the emergency fund

 

[Matt_E]

can someone explain why a 1k emergency fund is better than paying down a CC 1k? the money is still available if needed and knocking out some interest is paying the CC down.

The idea is to get you to quit using credit cards altogether.
With the 1k emergency fund, you can take care of the inevitable things that happen without resorting to credit.

 

[tnj4life]

Savings is an absolute blessing. Sometime stuff happens, tires, insurance, work slowing down, B pipe. My work is stopped right now. Im kinda self employed if there is such a thing, and my work is 95% outside. Its been freezing lately with ice and rain. If I didnt have savings we wouldnt have been able to afford propane for our heat cause work has been crummy the past few weeks.

 

[SuperJETT]

can someone explain why a 1k emergency fund is better than paying down a CC 1k? the money is still available if needed and knocking out some interest is paying the CC down.

It's weaning you from using the credit cards as your emergency funds source. If you keep using the cards, you won't change your habits.

 

[Big Kahuna]

It's weaning you from using the credit cards as your emergency funds source. If you keep using the cards, you won't change your habits.

OK, How about this scenario. You have $5,000.00 in savings. Your HVAC system goes out, It is going to cost you $4750.00 to replace the whole unit. Do you wipe out your savings to pay for this?? Also, your tires need replacing. You need brakes for your wifes car, you just got a $500.00 medical bill that Insurance does not cover.

What do you do?

 

[WaveDemon]

The idea is to get you to quit using credit cards altogether.
With the 1k emergency fund, you can take care of the inevitable things that happen without resorting to credit.

It's weaning you from using the credit cards as your emergency funds source. If you keep using the cards, you won't change your habits.

I guess that is the answer I was expecting.

 

[SuperJETT]

OK, How about this scenario. You have $5,000.00 in savings. Your HVAC system goes out, It is going to cost you $4750.00 to replace the whole unit. Do you wipe out your savings to pay for this?? Also, your tires need replacing. You need brakes for your wifes car, you just got a $500.00 medical bill that Insurance does not cover.

What do you do?

What is savings for? We have like $8500 in our emergency fund now, yeah, you use it, that's what it's for. It's not retirement money.

What else do you save up for? If you have the money, why on earth would you put it on a credit card and pay interest?

I'm not sure what your point is, I know you don't agree with DR's plan, but it works for TONS of people, so why are you always trying to find flaws in it?

 

[yamasaki]

cause he used to ride an XR482 12 years ago. :smile:

 

[Big Kahuna]

What is savings for? We have like $8500 in our emergency fund now, yeah, you use it, that's what it's for. It's not retirement money.

What else do you save up for? If you have the money, why on earth would you put it on a credit card and pay interest?

I'm not sure what your point is, I know you don't agree with DR's plan, but it works for TONS of people, so why are you always trying to find flaws in it?

Damn, who pissed in your fruit loops this morning............

I was just throwing out a hypothetical. I was just curious how other people would handle it.


We have about $7500.00 in savings right now.......... I dont have a problem with DR's plan. We have used parts of it in the past..... Actually, info we got from our banker at one time, not from him, About 10 years ago.

Oh, we have some credit card debt, But we do not pay any interest on it. But we have never run up 10K in debt like many here post. Not even half of that.

 

[WaveDemon]

Oh, we have some credit card debt, But we do not pay any interest on it. But we have never run up 10K in debt like many here post. Not even half of that.

what does that have to do with anything? You must be making assumptions about why people got into high CC debt.

 

[freestylegeek]

OK, How about this scenario. You have $5,000.00 in savings. Your HVAC system goes out, It is going to cost you $4750.00 to replace the whole unit. Do you wipe out your savings to pay for this?? Also, your tires need replacing. You need brakes for your wifes car, you just got a $500.00 medical bill that Insurance does not cover.

What do you do?

Let's try it this way (I'm just changing some discriptions here).

Question: You have $5,000.00 in your EMERGENCY fund. You have an EMERGENCY where your HVAC system goes out, It is going to cost you $4750.00 to replace the whole unit. Do you USE your EMERGENCY fund to pay for this EMERGENCY??

Answer: Yes - that's what it's there for.

Also, your tires need replacing. You need brakes for your wifes car, you just got a $500.00 medical bill that Insurance does not cover.

You've been planning on replacing your tires and brakes, so you pay for that out of the car repair fund. You're 'NON COVERED' medical bill is also something you've been planning on (since you read your insurance coverage from work) so you pay for that out of your medical savings (or HSA).

 

[douglee25]

Personally, in that situation where something drastic happened and was going to wipe my emergency fund totally out, I would split the costs between the emergency fund and the CC. I would keep $2k of my emergency fund, pay off the HVAC with $3k cash and put the balance on a 0% CC. I always have a 0% card for that very reason. For some reason my dumb luck occurs in 3's (at the very minimum). I would pay off the remaining HVAC balance in the next couple months. There are some people like me who can be very disciplined, but for others CC debt becomes a hole that just keeps getting deeper and deeper.

Doug

 

[WaveDemon]

Personally, in that situation where something drastic happened and was going to wipe my emergency fund totally out, I would split the costs between the emergency fund and the CC. I would keep $2k of my emergency fund, pay off the HVAC with $3k cash and put the balance on a 0% CC. I always have a 0% card for that very reason. For some reason my dumb luck occurs in 3's (at the very minimum). I would pay off the remaining HVAC balance in the next couple months. There are some people like me who can be very disciplined, but for others CC debt becomes a hole that just keeps getting deeper and deeper.

Doug

I don't understand why you'd hold onto cash when you still have the 0% card. if you need "just in case" money use the card then.

Unless you're talking about secret cash money... then I understand.

 

[Matt_E]

Personally, in that situation where something drastic happened and was going to wipe my emergency fund totally out, I would split the costs between the emergency fund and the CC. I would keep $2k of my emergency fund, pay off the HVAC with $3k cash and put the balance on a 0% CC. I always have a 0% card for that very reason. For some reason my dumb luck occurs in 3's (at the very minimum). I would pay off the remaining HVAC balance in the next couple months. There are some people like me who can be very disciplined, but for others CC debt becomes a hole that just keeps getting deeper and deeper.

Doug

Why would you do that if you can pay cash?

 

[Big Kahuna]

Personally, in that situation where something drastic happened and was going to wipe my emergency fund totally out, I would split the costs between the emergency fund and the CC. I would keep $2k of my emergency fund, pay off the HVAC with $3k cash and put the balance on a 0% CC. I always have a 0% card for that very reason. For some reason my dumb luck occurs in 3's (at the very minimum). I would pay off the remaining HVAC balance in the next couple months. There are some people like me who can be very disciplined, but for others CC debt becomes a hole that just keeps getting deeper and deeper.

Doug

This is what I was looking for, just someones else's ideas.

 

[Big Kahuna]

Why would you do that if you can pay cash?

That was kinda my point, you have the cash, but you just wiped it out, what are you going to do in a month when something else happens.

It is one thing to have $8000.00 in your emergency / savings fund and have to spend $4000.00 out of it, you still have $4,000.00, But to me it is another thing to wipe it out.......

 

[Big Kahuna]

Let's try it this way (I'm just changing some discriptions here).

Question: You have $5,000.00 in your EMERGENCY fund. You have an EMERGENCY where your HVAC system goes out, It is going to cost you $4750.00 to replace the whole unit. Do you USE your EMERGENCY fund to pay for this EMERGENCY??

Answer: Yes - that's what it's there for.

Also, your tires need replacing. You need brakes for your wifes car, you just got a $500.00 medical bill that Insurance does not cover.

You've been planning on replacing your tires and brakes, so you pay for that out of the car repair fund. You're 'NON COVERED' medical bill is also something you've been planning on (since you read your insurance coverage from work) so you pay for that out of your medical savings (or HSA).

Ok, revise the scenario, all the payouts that just hit you were the type when the fit hits the shan, Your tires got slashed, you just replaced them 3 months prior, so your tire savings was just starting over.

I am talking worse case stuff here, something that is gonna wipe your entire emergency funds out...

what do you do.

 

[Matt_E]

You re-double your efforts of rebuilding that fund.
How long does it take to put 1k in the bank? :dunno:

No matter what the answer is here, you can always come up with a bigger emergency that wipes out all your savings, and then what??? (I think this is the sentiment you're going for, is it not?)
The point is that you don't have to go into debt for that emergency, you have the cash to pay for it.

 

[tnj4life]

Also, with medical bills you can get on cheap payment plans that have zero interest. When you call to set up payments you can pretty much name your monthly payment. And from what I understand even if you dont send the amt you agreed on, but send them what you can they really can't do much to you.

Most of the time crap doesnt hit you in line like that, but it could. If you keep the car up and not run the tires down to wire and kinda do a little at a time it makes it not hit all at once. I do all my own work on our autos so I always check tires, brakes, and anything else just to give me a time frame on when it needs to be done. My wifes honda will need a $200 motor kit in around 5000 miles. Its timing belt + tensioner, water pump, possibly valve adjustment(not sure), and all gaskets and seals.

Its just all about budgeting and figuring out a plan for lifes problems. I hate CC but if I had to use one I would.

 

[douglee25]

I don't understand why you'd hold onto cash when you still have the 0% card. if you need "just in case" money use the card then.

Unless you're talking about secret cash money... then I understand.

Why would you do that if you can pay cash?

It's a personal thing, but I always want to have some liquid assets. Whatever the reason is, I know I can run to the bank and withdrawal money if I needed it right away. I'd rather not totally wipe out all my emergency money IF I don't have to. Don't ask me why, but my track record in the past dictates that when things go wrong, multiple things go wrong. There's a certain amount of debt on a CC that I'm comfortable with and there's a certain amount of money I always like to have in an emergency fund. It's just the way I roll. Again, for me, I can have some CC debt and not get in over my head because I'm very disciplined in paying things down.

Doug