Savings/emergency accounts

iVillage Member
Registered: 03-26-2003
Savings/emergency accounts
9
Mon, 06-09-2003 - 11:20am
I have a question about savings/emergency funds. How much should one have??? I think I recall the rule of thumb being 3 months of your monthly bills. Does that include your minimum for cc payments??? Or is it 3 months of your salary????

Also, is it better to save or pay down your debt???

Right now we use DH's savings as our savings/emergeny account. Our joint checking and savings for bills and I have a savings accoutn that used to be my fun $$$ but am going to turn it into the snowflake account. I'm planning on putting $$ into it every week and at the end of the month flake the amount to my big cc. My hope is that by doing that, if something comes up I can pull $$ from my savings rather than dip into dh's which I am trying to build to that 3 month thing.

Thoughts????

iVillage Member
Registered: 09-22-1999
Mon, 06-09-2003 - 1:31pm
I just watched a Suze Orman show on PBS this weekend.....she said 8 months of expenses should be covered by an emergency fund, and she also said to work to pay down the credit card debts as soon as possible.....

So I'm working on this, too!

Littlesbigs

Avatar for phoenixmama
iVillage Member
Registered: 03-20-2003
Tue, 06-10-2003 - 3:06pm
I've been putting some thought into this recently, so here's what I came up with. If you're putting all your available extra money toward your debt, that's great and you'll get out quicker, BUT what if something happens that you're not prepared for (layoff, illness or accident, etc) and you have no savings? Boom - back deeper in debt, missing payments, further damaging your credit.

What I've decided to do was open an ING savings account (so easy!) and put 10% of all my money coming in, into that account. I've only been doing it for a few months, and my cushion is getting more comfortable already. (If I get one of these $400 child tax credit checks from the IRS, 50% will go into savings since it was an unexpected bonus.) And when it comes to bill paying time, I really don't miss it much, since I'm staying more aware of my cash flow and avoiding the unnecessary impulse purchases I was making before. Yes, it will take a little longer to pay off my credit card debt, but I got a nice balance transfer for 1.9% and at this point I don't mind the fact that it will take longer.

I rent, and I'll be moving soon, so I may have to dip into that account for the security deposit and prorated overlap (I like to have at least a week overlap when I'm moving so I don't feel rushed) - and I feel good about the fact that the cushion is there to fall back on and I don't have to stress out over the money.

Ultimately, I'm aiming to build that account up to several months worth of expenses. Once I reach that goal (I don't have a set number in mind yet) then I'll probably hold off on the savings and redirect that 10% extra toward the remaining debt. Round about that time, my student loans will start coming due (I'm in school now and hoping to graduate next year.)

And, of course, all these plans are subject to periodic review and open to change as my situation changes. =)

Hope this helps ~Jen

iVillage Member
Registered: 03-26-2003
Tue, 06-10-2003 - 4:22pm
You know I thought I had posted something to this thread yesterday. Well maybe I didn't.

Lately I have been trying to put $100 a week into our savings and it is amazing how quickly it can grow. In just the past few months I was able to replace the $$ we took out when we bought our sideboard for our dining room.

I also have been wondering how I was going to split up my taxs rebate (if I get it) and also had considered doing half in savings and 1/2 towards bills.

Did you recently get a 1.9% card? I bet you will soon get lots of 0% offers. That is how it happen with me. I started getting offers for 3.9, then 1.9 and now daily I am getting 0% offers. Right now I have 2 0% cards. One ends in Jan and one ends Jul '04. I am trying hard to pay off that Jan one befoer it expires, but I just don't see it happening. Yesterday I got another 0% that is good until Sep '04 and am considering transferring the Jan one over, but I cna't help wondering if I will then same offer later this year.

Avatar for cl_beckymk
iVillage Member
Registered: 03-19-2003
Tue, 06-10-2003 - 9:41pm
I agree with the others here. I think having an emergency account is extremely important. Cash on hand is important. I like the idea of doing both saving for an emergency account AND paying down debt.

Becky

Avatar for phoenixmama
iVillage Member
Registered: 03-20-2003
Wed, 06-11-2003 - 2:50pm
Actually I didn't get a new card, I'm just transferring balances between 2 existing cc's. I do get lots of "0% for 6 months" type offers, but the terms after that are usually pretty high. Besides, working on improving my credit, I think 2 open accounts looks better than opening a third one. One card is near-maxed with that 1.9% offer, the other has about $200 left on it at 12.5%. Once my 1.9% offer is up, it goes to over 20% (with current regular payments, I'm hoping to get that lowered before then) - but at that point the $200 will be paid off and I'm pretty sure I'll be able to get another decent rate transfer back to that other card. I figure as far as they're concerned, any low-rate offer is better to them than my having a zero-balance account, LOL! Juggling for better deals is fun!

~Jen

iVillage Member
Registered: 03-26-2003
Wed, 06-11-2003 - 2:55pm
I agree having a savings is important but at what point if any do I "temporarily" stop saving and put more towards my debt? For example, this Friday, if my calculations are correct I will have about $1000 to flake. Do I put it all towards a cc or go 1/2 to savings and 1/2 to a cc. I'm tempted to put it all towards a cc because I know that my 0% is up in January and although I am hopeful of getting another 0% offer - I might not! Then I thought I should put it all into the savings and withdrawl it the month before the 0% is up, but usually once that $$ is in the savings, I am very hesitant to touch it.

Now I 'm jsut rambling. At least I have until Friday to decide. I have already changedd my mind several times. LOL I just need to make sure I do something with this money or I will spend it!

Avatar for phoenixmama
iVillage Member
Registered: 03-20-2003
Wed, 06-11-2003 - 3:14pm
Oooh, that's a good one! I think what I would do in that situation, if all your debt is at 0% and you have extra cash flow (snowflaking or otherwise) you might as well pay just your minimums and let the rest of your extra money accrue some interest. Then just before your 0% runs out, put as much of that savings as you're comfortable with, towards that debt. Or, leave it alone (or some of it) as that emergency fund. Whatever feels right to you - there's never one absolutely right answer. Of course, if you have other debts with interest charges, it's also wise to put some extra towards those.

As I've mentioned, I've got the cc at 1.9%, and my minimum is $60-something/month. What I'm doing for the moment is 10% income straight into savings, and just the minimum on cc for the moment since I'm moving soon and could use the extra cash in pocket. Once I know what my new expenses will look like, I'll reevaluate my plan *yet again*. =)

iVillage Member
Registered: 03-26-2003
Wed, 06-11-2003 - 3:30pm
I have considered doing just what you said. Stick it all into savings and then when the 0% expires pay everything, but I also love seeing my debt go down. Oh and yes, right now all my debt is on 0% cc expect for the small charges like the monthly internet and onstar which is paid in full every month.

The only thing I worry about is if we do get $$ into the savings, will we think Oh we can buy this or that, guess I do have a bit of compulsive spender in me still. I also think if I do pay off the cc's then I can go ahead and actively save everything I am currently snowflaking, however I think that time would be about 1 1/2 to 2 years away.

What I do know about myself, if I make finances tight by paying a lot on the bills, I tend to tighten the purse strings and make ends meet until the next payday and then say "why did I make things so tight?" I do have to admit, this is a nice dilemma to be in, especially when just a few months ago I was worried about how I was going to pay the mortgage (I was very fearful DH was not going to get a job before his paychecks stopped)

Avatar for phoenixmama
iVillage Member
Registered: 03-20-2003
Wed, 06-11-2003 - 4:08pm
Great demonstration of why there's no one perfect answer! If you doubt your ability to KEEP that money saved instead of spending it, you may be better off to put it right onto that cc and watch the balance go down. After all, that's one of the ultimate goals and it does feel great to watch your progress!

Personally, I track all my debt, cash flow, and savings in Quicken, and they have a nice feature that shows your net worth based on the accounts you want figured in. So whether I was paying more to debt, or putting more in savings, the bottom line for me is roughly the same.

If you feel your making your cash flow too tight, go ahead and loosen it up *a bit*. Keeping your goals in mind, whatever feels comfortable for you. Another thing I do is keep a cushion in my checking account - I don't keep my budget *too* tight. I put my 10%to savings, and what I can toward debt, but never so much that I have to worry about overdrawing. And it seems to be working - I haven't bounced a check in several months. This in itself is an accomplishment for me LOL! ;-)