Hellobee Boards

@Bao: I believe they recommend looking at what the yearly cost is and then "budget" for that amount over 12 months.

For example, we budget about $1,200 car repairs, oil changes, etc every year (I have an older car). So, a simple $100/month is set aside for that and if it isn't used that month, it saves up for the future months.

@runsyellowlites: I think the point of the savings it's to build money, since Dave Ramsey's next steps include investing and such, but moreso IF something were to happen (needing new tires, etc) you wouldn't have to rely on your CC to pay for them.

That is true, but as long as you are still carrying CC debt, that savings is not truly savings to me. Say it's January and you have 2k CC debt, you put 100 into the CC and 100 into savings. But In Sept, you need to fix something in the house, and use that 900 in savings to do it. Ok, great, you didn't need to put it on the credit card. But the way I see it, if you were to have been putting all 200 into the CC, then in Sept, yes, I have no savings and I'd need to use the CC again for the expenses, but during that entire time, the money has been applied to the CC reducing the interest being charged. You'd end up in almost the same place, but just slightly ahead due to the saved interest.

@bao: I’m usually not a fan of taking on new debt to get out of debt; but if your credit cards are up over 8% interest you might look into getting a personal/debt consolidation loan through a local credit union. My credit union offers personal loans for up to $15k at between 4-6% interest (depending on your credit score). If that would be a lot less interest than you are currently paying; that might be worth it to look into.

@Bao: seperate from your tax return, can you afford to put anything into your savings every montth? If you can then it might make sense to pay off the cc and personal loan and put $1k into your emergency savings with the tax return. From there, you can decide on an amount you want to put into your emergency fund every month until you have 5K or 10K or whichever amount you feel most comfortable having.

@PurplePumps: If we weren't following the Dave Ramsey plan then I could see the "breaking even" and still having the "savings" BUT acquiring new debt is a pretty big no no for us and since any emergencies would rely on us paying 100% cash (given we had it all) and depleting our savings we would be much more frugal in how we dealt with our emergency as opposed to how things may be if we had the "credit" to deal with it.

Since we don't survive on our cc we will not be adding to the debt we have through them and once paid off they will be cut! (For those that have been relying on their CC to survive Dave Ramsey does suggest weaning off them as opposed to not using them/relying on them immediately)

I think this couples situation give examply to exactly how DH and I would handle a situation that needed emergent funding without acquiring more debt.
http://www.whitneysparks.net/oh-no-our-emergency-fund-has-depleted-what-are-we-going-to-do/

I think it really just depends on what is more important to you... cash or not increasing debt. For us, I know we can build back up and acquire more cash, but trying to pay off debt and KEEP it gone is much harder so being more diligent in that area would take precedence for us.

@runsyellowlites: Knowing that you want to be wise with your money wouldn't you be just as frugal paying with credit? I certainly don't pick more expensive choices just because I'm using credit.

@runsyellowlites: This used to be the case for me too, but then I started paying my cc balance every 2 days to keep myself accountable. This has been really great for keeping my balance at zero and forcing me to question whether I can really afford things but still racking up rewards etc.