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Yesterday, 11:17 AM
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1,707 posts, read 3,646,039 times
Reputation: 1337
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Thoughts for advise to give...
Scenario:
Single friend, fledgling savings, new job, should he divert all saving plans for 3 months to completely pay off all his consumer debt? He would still have student loan to contend with afterwards.
Or...
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Yesterday, 11:27 AM
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Location: Denver, CO
1,741 posts, read 4,110,027 times
Reputation: 1318
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Most answers here will be, it depends. What are the rates involved? Is there company matching for retirement? Is there any emergency fund? How did he get in debt in the first place?
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Yesterday, 11:45 AM
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1,707 posts, read 3,646,039 times
Reputation: 1337
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Divorce, car[s], credit cards and credit at stores (pretty much all funiture etc in his place). He has no 401K and his emergency fund would keep him fed and the lights on for maybe a month. He's basically just starting [over].
He could live and pay his utilities along with all his debt in 3 months at which time he could then start to save/invest again. My initial inclination was to say do... but the new job is kind of shakey
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Yesterday, 11:45 AM
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Location: Florida
4,538 posts, read 3,864,676 times
Reputation: 4381
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Yes and then build up an emergency fund in case the job ends. Also he pays off all credit cards each month. He should get CC to start building a credit history.
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Yesterday, 11:50 AM
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Location: The Triad (NC)
29,168 posts, read 63,403,155 times
Reputation: 33515
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Quote:
Originally Posted by recuerdeme
...should he divert all saving plans for 3 months to completely pay off ?
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If he can pay off all unsecured debt in 3 months... go for it.
Once in the habit of not having that money for monthly bills...
keep paying that amount into a good save/invest plan.
(those are a different conversation and only come later) |
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Yesterday, 11:51 AM
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26,565 posts, read 28,973,127 times
Reputation: 25583
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Quote:
Originally Posted by recuerdeme
Thoughts for advise to give...
Scenario:
Single friend, fledgling savings, new job, should he divert all saving plans for 3 months to completely pay off all his consumer debt? He would still have student loan to contend with afterwards.
Or...
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I would say yes. I tend to agree with Dave Ramsey about keeping only $1000 in cash and focusing on paying off all debt. I might be inclined to keep a little more than that in cash, but not too much. Having cash in the bank while having debt at the same time tends to make people feel complacent about their debt. |
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Yesterday, 01:22 PM
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7,059 posts, read 7,487,804 times
Reputation: 10015
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Build the emergency fund FIRST.
If as you say "his emergency fund would keep him fed and the lights on for maybe a month" that's basically no emergency fund, meaning for all intents and purposes he can't miss a pyacheck.....and certainly can't afford to be unemployed for ANY length of time.
So saving the emergency fund would be my priority.
As for Dave Ramsey's recommendation of a meager $1,000 EF is practically no EF at all. What if a person's expenses are 2K or 3 K a month? That's not enough for even one month's living expenses.
Once a person has whatever amount equals the equivalent of a minimum of six months living expenses, THEN they can stop building the EF. And go 100% concentration of eliminating consumer debt they may have. IF they just have to do one then the other.
However, I always say participate in your job's 401k to get the full match -- no matter what. Whether a person is in debt or not. But, for me, I'd much rather make a little process on both efforts. Doing both at the same time means each one progresses a little slower. But, Personally I wouldn't halt building savings until I had at least six months to a year's living expenses saved. And I'd never put a hold on the 401k. But that's just me.
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Today, 11:59 AM
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5,780 posts, read 2,491,048 times
Reputation: 17230
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Quote:
Originally Posted by recuerdeme
Thoughts for advise to give...
Scenario:
Single friend, fledgling savings, new job, should he divert all saving plans for 3 months to completely pay off all his consumer debt? He would still have student loan to contend with afterwards.
Or...
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Why are all questions on this board Yes/No, Black/White, Alpha/Omega?
Why doesn't he take that allotment and divert half to savings and half to pay off consumer debt?
That way, you have something in the bank in case something unexpected comes up. |
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Today, 12:55 PM
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Location: The Triad (NC)
29,168 posts, read 63,403,155 times
Reputation: 33515
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Quote:
Originally Posted by MinivanDriver
Why doesn't he take that allotment and divert half to savings and half to pay off consumer debt?
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If the timeline were three YEARS... then yeah.
But for three MONTH's? Make it happen and then move on. |
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