twinmama85
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Have a blessed New Year!
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EF 2
Aug 6, 2011 14:25:29 GMT -5
Post by twinmama85 on Aug 6, 2011 14:25:29 GMT -5
I didn't want to take away from the other emergency fund thread, but it made me think. I am active duty Air Force. Should I have a substantial EF saved up? Like 6 months expenses or should it be 3 or less? After the whole melt down the gov. had in April, it made me wonder. Right now, if my DH lost ALL his income (~$2800), we would still get my income ($1729/mo base pay, $323 food, & $1341 housing) and I live in base housing so and I know for a fact that they wouldn't kick us out. We also don't pay utilities either. What do you think?
ETA: we are in the middle of paying of debt and our monthly bills, not including any debt, is $1015.
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Poppet
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EF 2
Aug 6, 2011 16:04:55 GMT -5
Post by Poppet on Aug 6, 2011 16:04:55 GMT -5
Military or civilian, always have a financial cushion. Even if it's just $500 - 1,000. It can stave off the wolf at your door.
I was a military housewife for 10 years. I didn't get my financial act together until the last 4 of those years. What a profound difference it made to have a bigger distance between oneself and the financial ledge.
When that recent threat of delayed pay for military occurred lots of military families royally flipped their lids in panic. I was on another message board and military wives were serious when they said they didn't know how they were going to eat or put gas in their car.
And it reminded me that this paycheck to paycheck lifestyle is how we used to live.
Its still rampant.
So yes, yes, yes, yes, yes. Make yourself a financial cushion. You'll be way ahead of just about every one of your peers.
You can do it. Get frugal. Get smart about expenditures. It'll add up before you know it.
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twinmama85
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Have a blessed New Year!
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EF 2
Aug 6, 2011 16:27:57 GMT -5
Post by twinmama85 on Aug 6, 2011 16:27:57 GMT -5
i have $1000 in a small EF right now since im following dave ramsey's snow ball plan...so i guess the question is more for when we start to get serious about the actual EF after our debt is paid off
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Poppet
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EF 2
Aug 6, 2011 17:18:49 GMT -5
Post by Poppet on Aug 6, 2011 17:18:49 GMT -5
twinmama, If you're following the DR plan then you should have a minimum of $500 - $1,000 in savings before you start snowballing the debt, so you're doing good. Good luck paying down. It's hard, I know, but you'll be so proud when you get down to zero. The hardest part is staying out of debt. Just like dieting, ya gotta make it a lifestyle.
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meli_beach
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EF 2
Aug 6, 2011 20:43:26 GMT -5
Post by meli_beach on Aug 6, 2011 20:43:26 GMT -5
twinmama,
I've been a mil spouse for 17 yrs now, DH will be retiring next yr w/24yrs. Once you get your debt pd off definitely build up that emer fund to 6+ months. You never know what is going to happen in the future, before this yr being mil you never had to worry about a gov't shutdown b/c you KNEW the mil. would be pd, that is no longer a certainty in todays world. Also, the military is constantly doing drawdowns and just b/c you DH has a job today doesn't mean he will tomorrow no matter what speciality he is in. It is NOT the same military that it was many years ago. Definitly keep following DR to get your debt pd off, it will be a HUGE weight off your shoulders.
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Deleted
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EF 2
Aug 6, 2011 21:32:33 GMT -5
Post by Deleted on Aug 6, 2011 21:32:33 GMT -5
I'd think that as long as you have $1000 put away, and are putting money aside for car repairs, I would pay down your cc debt before building up a 3 month EF.
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❤ mollymouser ❤
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EF 2
Aug 6, 2011 23:02:46 GMT -5
Post by ❤ mollymouser ❤ on Aug 6, 2011 23:02:46 GMT -5
Hello! I'm a military wife ... and we have an emergency fund to cover all sorts of emergencies, contingencies, etc.
If I were you, I'd try to get at least $2500 in your EF .... even if you have to build it up slowly while paying down your debt. That would be enough to help pay for a big car repair, emergency travel, etc.
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Deleted
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EF 2
Aug 7, 2011 11:06:44 GMT -5
Post by Deleted on Aug 7, 2011 11:06:44 GMT -5
I think you need to kill the debt, but maybe factor your EF into your snowball plan?
So, whatever your smallest balance is, if you are paying $200 per month on it (or whatever you are paying), when you get that debt to zero, start sending an extra $50 to your EF and add the remaining $150 to whatever you had previously been paying on your next lowest balance.
It will stretch your paydown timeline out just a bit, but you will be more prepared for all of the contingencies molly mentioned.
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bring in the new year
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Happy Thanksgiving!
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EF 2
Aug 8, 2011 3:11:44 GMT -5
Post by bring in the new year on Aug 8, 2011 3:11:44 GMT -5
Twinmama, what keeps you awake at nights?
If it's the thought of all your debt, then I'd keep paying that down.
If it's wondering if you would make it through the month if you had an unexpected car repair, then I'd increase the EF.
My guideline for the EF is can I cover the mortgage for two months. The assumption is that if it's longer than two months, I'll sell out some of the taxable shares. Now in this economy, I'm thinking of increasing the EF but that's more because I think I can painlessly.
Good luck.
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mizbear
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EF 2
Aug 8, 2011 11:27:10 GMT -5
Post by mizbear on Aug 8, 2011 11:27:10 GMT -5
Both of my uncles kept at least 6 months in the EF when they served, plus an emergency travel fund for their dependents, based on where they were stationed.
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EF 2
Aug 9, 2011 20:02:08 GMT -5
Post by bluecluessubtlety on Aug 9, 2011 20:02:08 GMT -5
Sarah has a good plan. And I think mizbear point about emergency travel is good.
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haapai
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EF 2
Aug 10, 2011 13:02:19 GMT -5
Post by haapai on Aug 10, 2011 13:02:19 GMT -5
From what you have said so far, I'd conclude that you and your husband are stronger than normal candidates for DR's almost-no-cushion debt reduction strategy. Your employment is more stable than most and your debt-zotzing timetable appears relatively short.
What is less clear is how much discretionary income you have to devote to accelerated debt repayment or building up an EF. The $1015 a month figure that you mentioned sounds great until the bit about it not including any debt sinks in. A much more useful number for evaluating the adequacy of your savings is total monthly bills plus minimum required payments on all debts. It matters quite a bit whether you have $600 a month in minimum debt payments or $2600.
Have you built yourself some debt amortization tables to calculate when each debt will be paid off and how your minimum required payments will decrease over time? Such tables can tell you a lot about the risks that you are taking by operating with little room for error and how it changes over time. They also tell you what to expect in advance, so you'll get less bummed out in the months when no debts get completely paid off.
There's also nothing wrong with taking a certain number of months to pay off your most toxic debts and building up savings before tackling the what remains, except that it isn't what DR recommends.
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blackcard
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As of April 2013 Mortgage is paid in full :) NO debt of any kind.
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EF 2
Aug 10, 2011 18:51:28 GMT -5
Post by blackcard on Aug 10, 2011 18:51:28 GMT -5
I see that you have already paid of $4,100 in debt. How long did that take you? My plan, FWIW that worked for me, was that I paid 1/3 to my EF, 1/3 to my bills and 1/3 I spent on myself. Slow but reassuring. Some months I used the extra that I did not spend on myself, and used that extra money for more debt payments.
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twinmama85
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EF 2
Aug 10, 2011 22:50:05 GMT -5
Post by twinmama85 on Aug 10, 2011 22:50:05 GMT -5
haapai -- i was mostly asking this question for when we have our debts paid off..right now our bills with debt is probably the range of $1600 or so..not very high at all. my DH is a golf instructor/ pro shop person so he has a small base pay but he also does lessons on the side and makes quite a bit from it for doing it less than part time (maybe 5 hours a month) and everything he earns as cash on the side (tips and lessons) goes straight to the snow ball...hes also in the AF reserves and next month will be bringing in an extra $3000 + because of his 2 week tour and with that money, we will have paid of 1 CC and 2 SL leaving us with the BIG totals left. i think we will have all of our debts paid off in about 2-3 years and in that time frame, since im still under contract for 3 years, ill only make more money (unless of course i do something completely stupid to lose a stripe) because of time in grade, promotions and our yearly COLA raises... im ok with the $1000 EF right now, its mostly when we get to baby step 3 which is building an EF. i dont really know if i should have 6 months or what it should be considering that even if the gov didnt pay us, the base housing company already said that they wouldnt and cant evict tenants out of base housing. blackcard -- the debt took about 3 mos or so... but we just barely got serious about this and both of us have been putting HUGE efforts into our debt pay off...dh even suggested we not goto vegas for vacation and instead we put that $1000 to pay off my OBGYN. i like dave ramsey's plan quite a bit because i want this debt gone. i mean we have one debt thats $21k and its just 1 student loan (DH) which is last on the list since 1 he is in school still and its not earning interest since its federally backed and 2 because its just the biggest one and i want to have everything else paid off so we can throw everything we have at that debt. so i like the plan i have right now with the $1k EF because i am a lot more stable then most positions out there... but i just need some direction when the debt is gone and we focus on the EF if i should have a 1, 3, or 6 month EF thank you so much for all those who have responded, all the advice is quite wonderful and refreshing!
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haapai
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EF 2
Aug 11, 2011 10:30:00 GMT -5
Post by haapai on Aug 11, 2011 10:30:00 GMT -5
I'd probably take a break from paying down debt and build up a war chest before tackling a student loan with the characteristics that you describe. Right now it's interest-free. Even when the in-school deferment ends and it enters repayment, it will still be relatively cheap, long-term, and loaded with hardship options. It matters a great deal that the $21K student loan belongs to the less established earner.
It will be much easier for you to build up an EF while you are still in the service than after leaving. You also might want to save a whole lot more than three months of what you have to pay now. Three times $1600 does not go very far in the civilian world.
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twinmama85
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Have a blessed New Year!
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EF 2
Aug 11, 2011 11:24:23 GMT -5
Post by twinmama85 on Aug 11, 2011 11:24:23 GMT -5
I don't plan in getting out...I plan in doing 19+ more years. When he geta done school,his pays will be in the $250-$300 range for ten years...I'm not paranoid bout my future and I wabt the debt gone so I'm gonna stick w my plan now...thanks for the advice tho
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haapai
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EF 2
Aug 11, 2011 11:32:22 GMT -5
Post by haapai on Aug 11, 2011 11:32:22 GMT -5
In that case, I'd like to point out that while three times $1600 won't go very far in the civilian world, it will still give you amazing choices compared to your military peers who are living paycheck to paycheck.
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twinmama85
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Have a blessed New Year!
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EF 2
Aug 11, 2011 13:29:11 GMT -5
Post by twinmama85 on Aug 11, 2011 13:29:11 GMT -5
I thought the Ef was a % of your income (so 3 mos would be $15000 for me)
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haapai
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EF 2
Aug 11, 2011 14:00:51 GMT -5
Post by haapai on Aug 11, 2011 14:00:51 GMT -5
That might just be a better rule of thumb than three months of bare-bones expenses. Using the cash that's leaving your checking account each month can lead to disaster. A lot of people fail to account for health insurance and other benefits that make up a substantial portion of their income. Paid-off cars can also lead to too-lean EFs. Annual and semi-annual automobile insurance also tends to get forgotten a lot.
I'm guilty of all of these sins, BTW.
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Peace77
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EF 2
Aug 20, 2011 14:19:33 GMT -5
Post by Peace77 on Aug 20, 2011 14:19:33 GMT -5
The monthly figure is your cost to pay your necessary expenses for each month. Some people plan to eliminate cable tv but if you're laid up in bed, that might be the last thing to eliminate.
Suze Orman recommends 8 months worth of expenses for an Emergency Fund.
Part of the reasoning is that in this economy it takes much longer than 3 months to find a good job with a comparable income.
However, job loss is only one reason to have an emergency fund. Emergencies can come in double or triple whammies. For example, a car accident can total your car and put you or your family member in the hospital at the same time. You could be faced with paying:
the difference between your car insurance and the cost of a new car
out of pocket expenses due to hospitalization (even if the hospital costs are covered, meals and hotel expenses aren't if your loved one is at a distant hospital) loss of wages while you or DH recover (after sick leave runs out)
and care for your children while the emergency is ongoing.
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blackcard
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As of April 2013 Mortgage is paid in full :) NO debt of any kind.
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EF 2
Aug 21, 2011 15:49:45 GMT -5
Post by blackcard on Aug 21, 2011 15:49:45 GMT -5
Double or triple whammy. twinmamma16, U paid down $4,100 in 3 months, if I understand that correctly. That is a nice amount of discretionary money you have. You are using it wisely. Karma 4 U. As far as the EF goes, 1 month, 3 months, 6 months. After we hit the 1 yr mark we cut down our contributions to our EF, but kept making them. We are now up to 39 or 40 months of basic living expenses.
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twinmama85
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Have a blessed New Year!
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EF 2
Aug 21, 2011 22:07:03 GMT -5
Post by twinmama85 on Aug 21, 2011 22:07:03 GMT -5
blackcard -- holy cow!! i think that would take us quite a few many years to do that and yes we have been getting quite a few extra bucks a month and been using it all to debt
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bmephdinco
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EF 2
Sept 6, 2011 14:33:49 GMT -5
Post by bmephdinco on Sept 6, 2011 14:33:49 GMT -5
I would say have 3 months of expenses - plus the cost of one last minute plane trip to where you might be deployed. That way your DH could rest after he picked up your body - morbid I know but it would probably keep you feeling comfortable. That plane ticket could also be used for emergency family visits or whatnot as well.
Although SL are high debt, they are NOT the same as CC so pay the CC first, then worry about the cars, then the loans, etc - in otherwords, a $21k CC is much worse than a $21k SL (interest being lower usually for the SL, if that's not the case, then worry about the higher interest).
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twinmama85
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Have a blessed New Year!
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EF 2
Sept 11, 2011 18:02:13 GMT -5
Post by twinmama85 on Sept 11, 2011 18:02:13 GMT -5
if i were to deploy,i would not be required to pay for it since it would be in the interest of the govt...im paying all my debts from the smallest to biggest so right now i am working on a $1300 cc that will be paid off this month. then i will work on my 2 student loans that are small and working up to DH sl and finally our ford edge and his large SL..
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