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Borrowing money to buy clothes, furniture, cars to "build your credit score" costs thousands of dollars in interest that could otherwise be saved.
No it doesn't have to at all. I use a CC for everything that I can. I get reward %s back. And I pay off that credit card (and any other) every month without fail. I don't believe in paying interest, so I don't, except for my mortgage. If you are a disciplined person and understand what you have available in your accounts to spend, you can use credit cards and not incur additional debt. I'm proof of that. I haven't paid any interest on any CC ever.
I bought a new car at the end of 2010. I keep my cars as long as possible, so I expect to keep this one 12 to 15 years as long as the cost to maintain it isn't worth more than the vehicle itself. In the meantime I'm saving $$ for my next car so I can pay cash for that one when the time comes. And I'm not driving a beater by a longshot.
I don't feel comfortable without an emergency fund of less than $20,000, the idea of having only $1000 in an EF sounds ridiculous to me. Personally I think an emergency fund should be 18 months of expenses - I don't know about a lot of you, but if you were laid off at the beginning of the recession, it took more than a year to find another job.
I think some of Ramsey's advice is good - the snowball method is a really satisfying way to pay off debt. I used that method when I was younger, had put moving expenses on a credit card, had a car loan and still had student loans. It did work better, even though I was not taking into account the interest rates, it was psychologically very gratifying.
Ramsey's advice is good for people who have gotten themselves into a serious debt hole. Once your debt is paid off, his advice is actually pretty bad.
I also think his thoughts about mortgages are ridiculous. If everyone followed that hardly anyone would own homes.
I don't feel comfortable without an emergency fund of less than $20,000, the idea of having only $1000 in an EF sounds ridiculous to me.
That is not what Ramsey advises. It's what he suggests as a first "baby step" to get started. Ultimately he suggests 6+ months of full living expenses in an "emergency fund."
I think people should aim for 1 year full living expenses in an EF.
That is not what Ramsey advises. It's what he suggests as a first "baby step" to get started.
Exactly. The $1,000 emergency fund advice Ramsey's pitching is to the people whose current "emergency fund" is "Let's charge it to a credit card!" (in other words, people who have no savings at all). It's aimed at people who are actually broke, with a negative net worth. He's not saying $1,000 is enough emergency savings long-term, but it's a reasonable amount to have in the bank first before starting the process of doubling down hard on debt payments.
Remember, folks, his target audience is the completely financially illiterate, who are swimming up to their eyeballs in credit card debt and just can't seem to figure out how to save any money. It's not us!
I also think his thoughts about mortgages are ridiculous. If everyone followed that hardly anyone would own homes.
Actually if people followed his advice on housing costs and mortgages there would be a lot less foreclosures and a lot more people able to stay in their house when life happens.
The key I think to an EF especially when it comes to job loss is to have 6 months worth of current expenses but once I lose my job I also cut expenses so that the 6 month fund actually covers 9-12 months worth of expenses then. I think a years worth of current expenses in cash is overkill
It doesn't have to all be in cash. One could keep 6 months in cash and another 6 months in a lower risk investment that has a little bit of equity exposure. Hopefully one doesn't ever need to burn through an entire year, but better to have it than not.
An EF also has to do with your career. If you are a good doctor, nurse, lawyer...ect. Then one can pretty much ensure you will be working if you want to...in some capacity. The EF can be on the lighter side.
Salesman career...I would lean on the heavier side.
An EF also has to do with your career. If you are a good doctor, nurse, lawyer...ect. Then one can pretty much ensure you will be working if you want to...in some capacity. The EF can be on the lighter side.
Salesman career...I would lean on the heavier side.
To that point earning diversity helps. I make over 100k and my wife is just under 100k and we save about half our income. If she lost her job and we cut out saving we wouldn't touch our savings
I don't feel comfortable without an emergency fund of less than $20,000, the idea of having only $1000 in an EF sounds ridiculous to me. Personally I think an emergency fund should be 18 months of expenses - I don't know about a lot of you, but if you were laid off at the beginning of the recession, it took more than a year to find another job.
Amount of emergency fund depends on your personal situation, could be $20k could be $5k could be $0.
Not everyone needs an emergency fund, we had one when we were younger but eventually reached a point where it wasn't necessary.
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