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Suze firmly believes in having about six to eight months of an "emergency fund." I agree with her. I cannot tell you how bad it was when I was totally broke and couldn't pay my rent. If I'd had an emergency fund, I wouldn't have been in so much trouble. You know what they say, that most people are only two paychecks away from homelessness. This is because most Americans are terrible savers.
I'm not questioning having a rainy day fund to keep afloat. As matter of fact, I believe people should have the fund to stay afloat as the average time it takes to find a job which is 39.7 weeks (10 months) now in our current economy for someone to find a job or quit looking.
However when it comes to paying down CC debt vs. Building liquid fund it is questionable recommendation. Essentially you're getting in more debt by paying minimum on CC in return for building a backup cash just in case. The point that need to be understand fully on importance of the difference and look beyond the fact that hey I got cash vs. no cash as well as opportunity cost. Plus in places like NYC and NJ, due to living cost expenses building 6-8 months of rainy day fund will take a long time. Months if not years for some individuals. If you have no rainy day fund at all then yes, it's imperative to have some but at the same time, if you have some already or after you built some up. It'd completely idiotic to not pay down one of the highest cost debt the individual owe. At the same time, the paying min. on CC to build rainy day fund needs to be supplemented with not using your CC to even further snowballing your debt.
Otherwise, you now have rainy day to fall back on but will have big debt to pay down. That said and done, when push comes to shove. Credit score taking a dive and being harassed by collector for CC agency is better than being kicked out of your home because you have no cash. But you need a balance, you can't go one extreme end to another. I'd reserve comments like paying min. to CC vs. building savings for edge case of individuals who are in position to start saving. Folks who listen that have no or very basic financial sense will end up screwing themselves over by following advice like that without understanding why.
Overall, I favor Dave Ramsey and Suze Orman overall for financial newbies including myself and all I'm saying is that they're not perfect and need to be taken with grain of salt and applied to each individual's situation & location. Besides these guys are far better than garbage like Robert Kiyosaki.
Edit: Some basic math to show you what I mean. Let's say I need 3k a month to keep afloat for family of two and I have no savings. In order to build 7 months of rain day fund, that's 21k I need in bank. If I'm able to sock 1k a month, it'll still take me 21 months to have 7 month of fund built. In meanwhile, I'm paying minimum and if I was good enough to not charge any more on CC, my CC debt won't grow and I'll be able to shave some of debt off. However when you take into fact that average household has 14-16k of CC debt and average credit card rate is 14-17%. You can see for 21 month, it'll hurt...
If you don't mind how many channels you get, try the basic cable for around $10.00/month. That's all I have and you get plenty to watch.
I don't mind how many channels I get--I watch three or four hours of TV a week usually. I like Jeopardy on Channel 7, and right now there's a newer show on Channel 2 (Person of Interest) that I've gotten hooked on. The only cable channel I'd miss somewhat is one that has all the true crime stories on it, but I could live without it. I watch it until I realize that all the shows are reruns and then wait a couple of months until they get new ones.
I don't know if Comcast offers basic cable as cheap as you say, though. I'll have to check. Right now phone/Internet/"limited basic" cable on Comcast is costing me $137 a month. I got the triple play thing when I first moved in, but now the price has gone up. No premium channels. Part of the reason I even had that much TV was because my daughter was with me, although she's at college most of the year, and there were certain channels she liked. However, she's been in China since August, coming home next week and returning to her real college, and so she hasn't watched ANY television in four months because they don't have TVs in the dorms in Chengdu. I think that broke her of the "need" to have certain channels.
I don't know if Comcast offers basic cable as cheap as you say, though. I'll have to check. Right now phone/Internet/"limited basic" cable on Comcast is costing me $137 a month. I got the triple play thing when I first moved in, but now the price has gone up. No premium channels. Part of the reason I even had that much TV was because my daughter was with me, although she's at college most of the year, and there were certain channels she liked. However, she's been in China since August, coming home next week and returning to her real college, and so she hasn't watched ANY television in four months because they don't have TVs in the dorms in Chengdu. I think that broke her of the "need" to have certain channels.
Don't need the landline phone, either.
I have limited basic with comcast. It costs $13 or $16 per month. I forget. Limited Basic options are regulated by the FCC, so all cable providers must offer it.
You can save a lot on your phone if you get VOIP service. My OOMA service was $150 upfront with no monthly fee ever.
I guess I will start shopping for food in Pa,which is 20 minutes from me.
Since its cheaper there ill give it a shot.
I used to think shopping at Walmart was cheap but i because its so big with things other than food I got suckered into buying other things.
so I grossed $97,000 last year but the net was $67,000.
I think when people say "I live on less than that and can save" don't understand that they get certain perks that I can't get.
My sis loves talking about her house and her savings but she overlooks the fact she gets food stamps,SSI for her children,and the EIC,and free school lunch.
It actually brings her income up there with mine.(the net range)
I guess I will start shopping for food in Pa,which is 20 minutes from me.
Since its cheaper there ill give it a shot.
I used to think shopping at Walmart was cheap but i because its so big with things other than food I got suckered into buying other things.
so I grossed $97,000 last year but the net was $67,000.
I think when people say "I live on less than that and can save" don't understand that they get certain perks that I can't get.
My sis loves talking about her house and her savings but she overlooks the fact she gets food stamps,SSI for her children,and the EIC,and free school lunch.
It actually brings her income up there with mine.(the net range)
That's how messed up all those handouts are. Where does the $30,000 difference go? Taxes? If so, you make less, and pay more taxes than I.
switch from a house to a 2 bedroom apartment , move into a dense suburban or Urban town like Weehawken or Bayonne , ditch the car. I know alot of couples who live on 100k with no problem and quite a few singles. The cost of living for a person in North Jersey with Taxes factored in is 17k..... Utilities , Food , daily life needs , and Transportation....
i lived in hoboken with a roomate and our combined income was around 90k pretax...i don't see the problem. bought myself decent things, frequented bars and restaurants, etc.
That's how messed up all those handouts are. Where does the $30,000 difference go? Taxes? If so, you make less, and pay more taxes than I.
$14,000 to the feds, $4,300 to the state of N.J.
$1,400 medicare tax.
$3,600 SS tax.
Sorry,I forgot not to include my pre tax health insurance in the total.
But the total is still incorrect because this year I will owe the feds $3,500.
So its about $27,000.
But in any event,I'm am in no way using this to justify my spending habits.
I could ***** all day about the amount of taxes I pay but that won't help me to curtail my spending habits.
After all,taxes and death are the only certain things in life.
School loans? My husband and I are in our late 20's and make slightly over $100k/yr, however, we pay $800/month on students loans between the 2 of us.
We live in south Jersey though (not south south Jersey, closer to Philly area), so we're able to have a newish house with a huge yard and still be able to save every month.
i started off making around $50,000 living with my roomate, and my monthly payment was $450/month for student loans. i still don't see how that eliminates savings, as i contibuted 6% to 401k, and 10% to a savings account. but - student loans do hurt a bit.
sorry I havent responded sooner, been busy.
I actually wasnt looking for an assesment of our situation, rather just input on the cost of living around here. Thanks anyway for all your input
Moving from the house may save a little money, however a 2 bed apartment in this area (essex cty) in a decent town would only save few hundred a month.
We moved from a 1 bedroom about 3 years ago, we were paying at the time around $1200 a month for the 1 bedroom with a garage for storage. We came across a small 3 bed house in the same town for $1800/month, rent has not increased since. Around here you cant touch a decent 2 bed apartment for much less than $1400. Yes, we could move to a cheaper area, this generally means moving further away from work which increases commuting costs, we already ran through these different scenarios.
I have some other topics I want to touch on....later
2 people need a 3 bedroom house? a 2 bedroom is just an invitation for clutter. to me, it looks like you're wasting at least $400/month, possibly $600/month. that's more than "a few hundred a month". that's a minimum of $4,800/yr after taxes. that's nearly $7,000 of your pretax salary. so somewhere around 7% of your salary is being wasted, in my opinion. and that's just 1 slice of your budget, excluding the accompanied wasted money on utilities and excess *stuff* you need to furnish those rooms...
Research the next car you buy. I have read that Kias are inexpensive up front and where they really get you is in the exorbitant cost of parts. I think Consumers Report runs assessments of new and used car reliability annually.
This is so true!
I work in the automotive business, and this is just another reason to BUY AMERICAN!
hyundai/Kia (same company) are known in the business as disposable cars, they're cheap to buy but when you have the first major repair usually it will cost more than the car is worth.
Dont get me wrong, there are plenty of Imports that have low maintenance costs, you just have to do research before buying, or ask your mechanic.
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