I submitted this question to Gail Vaz Oxlade today, I hope she answers it (of course if you have any advise - please feel free to chip in):
Good Morning Gail!
I hope this note finds you well.
My question is about priorities – and how to sort them all out.
A bit of context for you:
I have a small credit card debt ($2,500) and a relatively small student loan ($9,000) in terms of debt. I put $250/bi-weekly (bw) towards my credit card and $150/month towards my student loans.
In terms of TRUE savings I have goals including: an emergency fund ($10/bw), & my RRSP ($50/bw)
My planned spending funds include: House down payment ($150/bw – this is matched by my partner), a Christmas fund ($37.50bw),a buy company shares fund ($50/bw), & an annual expenses fund ($35/bw).
As my fixed expenses (rent, utilities, cell, insurance - ect) are about $750/month, and debt repayment is $650/month, and my planned spending accounts get $550/month - that leaves me with about $400/month for variable expenses from groceries, to gas, to fun.
Okay! Enough Context.
Here’s my question – in terms of figuring out priorities, what is the most important? Is getting my emergency fund to 6 months worth of hearth & home expenses number one? Or is paying of my debt number one? You blogged about this a bit today – but I guess my question goes further then that. What about all the other ‘savings funds’ and ‘planned spending’ funds that people have – where do they fall into the mix of priorities. I’ve spoken with some people (friends) who think the planned spending should just go towards debt. I think however; that if I have no money tucked away for planned spending – I’ll still spend the money – which is why I owe what I do on a credit card. If I have the money saved – in theory, I won’t use my credit card.
What I think might work best is if I try your debt-snowball technique as a savings-snowball technique. For this to work, I have to have a priorities plan.
I appreciate any tips, or advise you would have for me and those in my situation.
Thank you,
Jessie
A Question for Gail
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I've been thinking a lot about priorities lately too. The way I think about it is that I need to first get a small emergency fund ($1k-done) and then pay off my debt, then start some serious savings, all the while contributing to my retirement. Some disagree with that and go straight for fully-funded EF. As for the little things, I think that depends person-to-person and you can certainly make small monthly contributions to reach your goals.
ReplyDeleteLet us know Gail's response!
Hey there!
ReplyDeleteI will defn. post Gail's response if she write back to me - I'm sure hoping she does.
For me, when I didn't have a "planned spending" account, whenever I needed something (or wanted, really, really bad ;)) I had to back to my credit card every time. So, even though I was making payments to my credit cards every month - and considerably more that the minimum payment - I put those things on my credit cards. Its like taking one step forward, two steps back.
ReplyDeleteNow that I have an emergency account and planned spending account, I don't put nearly as much on the credit cards, actually nothing so far this month!
What I did was lower my payments to the minimum for three months and put all the extra money I was putting towards the debt - split 50/50% - towards emergency savings and planned spending accounts.
Now that I feel I have a decent cushion, I still put some money towards those goals but most if it has gone back towards the debt. And, since I don't need to use the credit card as much, its actually going down! :D
Hope that helps, let us know what Gail says!
~ Jamie
BTW, I love the new look for the blog, its pretty awesome! :D
looks like other people do what you have been doing, it is interesting to see what other peoples priorities are in regards to consumer debt.
ReplyDeleteI wonder if Gail will respond
It is really tough to select your priorities. Currently I have an emergency fund of $2000 but i am not contributing to it at all while I pay down my debt. Thankfully I have worked super hard over the last 6 months to eliminate $7000 remaining on my LOC and this month i will pay off the last $400 to be debt free! and so now I am planning to use the money from my debt repament to map it out to other areas -keep growing the emergency fund, but also build a planned spending fund as well as a vacation fund.
ReplyDeletei'm all about the debt repayment but I know Gail feels you should have a suitable emergency fund as well. I think if she does answer (based on past responses) she will encourage you to cut out at least a third of your debt repayment money and put it towards an emergency fund. good job!
Thanks for commenting!
ReplyDeleteI have $1000 in my E-fund currently, which is why I dropped the b/w savings amounts to $10 - so that I could re-direct $$ to other goals.
I think it will be really interesting to see what she says, if she reponds.