Budgeting after a layoff - pay off debt or save? - Mothering Forums
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#1 of 23 Old 02-27-2010, 12:04 PM - Thread Starter
 
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So, my dh was laid off (very unexpectedly!) last week. Thankfully, we live in a much smaller house than we could have afforded, and my job can pay our basic bills and living expenses, although our living expenses will obviously be cut drastically. We won't have to touch savings unless I get laid off also, and he doesn't find a new job before then.

After bills and groceries we have about $1000 per month left over. We have about 10 months of living expenses in savings. If we really cut back (moved to a small apartment with cheaper rent, lived on rice and beans, etc) we could probably stretch that to last a year and a half. We owe a LOT (like, 50k) in student loans, but have no credit card debt or anything. I would kinda like the extra 1k to go to student loans. DH wants it all to go in savings.

I'm torn about what to do. On the one hand, savings is a really good idea right now. My job is secure until September, but after that I have no idea. He has always very strongly favored putting extra money into savings over paying off debt. His rationale being that student loans can be deferred if we were in a true financial crisis. I understand that, but at the same time, I feel like we probably have enough in savings to weather any realistic storms. And I kind of feel like there's NO amount in savings that will ever be enough for him to want to pay extra on student loans. I feel like, if I could get him to part with even a small portion of that 1k for extra loan payments, it would be a good precedent, you know?

But, maybe I am being unrealistic about our current situation. I've heard many stories of experienced professionals being out of work for 6 or 12 months with no end in sight. And my job is VERY unstable after September. My company's contract is up, and I have no idea if they'll renew or not. Maybe savings is the best place, since there is a potential for us to both be out of work. Scary thought.
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#2 of 23 Old 02-27-2010, 12:20 PM
 
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While I hate debt,I'd agree with your DH, a large savings and emergency fund would be a good idea.

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#3 of 23 Old 02-27-2010, 01:01 PM
 
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You have a really good emergency fund already, I'd maybe grow it a couple more months just to be sure and then keep working on the debt.
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#4 of 23 Old 02-27-2010, 01:46 PM
 
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I vote to put it in savings. You can put it on the student loans after he gets a new job if you want to compromise.
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#5 of 23 Old 02-27-2010, 01:56 PM
 
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I vote to put it in savings. You can put it on the student loans after he gets a new job if you want to compromise.
Just coming off of DH being unemployed for three months, I have to agree that anything extra should go into savings. If you find yourselves in a position that's more stable and you have more emergency fund than you need, then you can pay on the loans.

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#6 of 23 Old 02-27-2010, 02:04 PM
 
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I think I would set it aside until September. If your job is secure in Sept or your DH finds a job then you can put that chunk towards the debt.
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#7 of 23 Old 02-27-2010, 03:49 PM
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I would do savings til sept then if you'r still employed throw a big chunk at the student loans. I'd also compromise with dh if we couldn't agree, $500 to s loan, 500 to savings.
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#8 of 23 Old 02-27-2010, 05:18 PM
 
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I'd probably put about $200 into the debt so you can continue to see that amount go down, and the rest into savings.
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#9 of 23 Old 02-27-2010, 08:20 PM
 
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Originally Posted by ItsBasilThyme View Post
I've heard many stories of experienced professionals being out of work for 6 or 12 months with no end in sight. And my job is VERY unstable after September. My company's contract is up, and I have no idea if they'll renew or not. Maybe savings is the best place, since there is a potential for us to both be out of work. Scary thought.
Yeah, save it. Unless something is an absolute need (paying the electric bill, gas for the car, life insurance, groceries, mortgage, that kind of thing), keep the money in your checking/savings account. Then when your employment situation settles down and isn't as up in the air, you'll have a big chunk of savings to throw at student loans as need be. But feeding your family comes first - if you put the student loans before your family...

Fwiw, hubby, a mechanical engineer, got laid off in June (unexpectedly!!). Had about 4 or 5 interviews throughout the summer/fall, finally got an offer on Halloween. He's the *only* engineer from his old firm that has found a paying job in engineering so far - and there was a decent handful of them, some more experienced than hubby in some respects. It's nuts out there. Anyway, we trimmed our budget down to absolute bare bones - no saving for anything besides bills like life insurance (which is only paid once a year), no paying extra on the student loans, nothing. We wanted to make our savings stretch and squeak for as long as possible for however long it took to find another job. And because we had that financial cushion? Hubby was much more relaxed while interviewing - he didn't have an air of desperation that some of his former coworkers might have had which could skew an interview in several different ways.

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#10 of 23 Old 02-27-2010, 08:29 PM
 
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Grow your savings until September when you find out what your job outlook is. If it's good after that, put the extra towards the loan as long as your on contract at work.
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#11 of 23 Old 02-28-2010, 01:35 PM
 
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Savings for sure! You can never get those student loan payments back should you need them - and having the security of knowing you're not going to starve/become homeless is a BIG deal.

You can forbear on the loans since he's unemployed. Alternatively, would it be possible to switch to an income contingent plan that would be VERY low since he's unemployed?

That's fantastic that you have so much saved. I wish I were in that position. Good luck to you.
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#12 of 23 Old 02-28-2010, 01:55 PM
 
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What is the interest rate on your student loans?

I have to say that based on what you've said, I'm agreeing with your dh.

You said "His rationale being that student loans can be deferred if we were in a true financial crisis. I understand that, but at the same time, I feel like we probably have enough in savings to weather any realistic storms."

The problem is that these are not "realistically stormy" times. They are more stormy than we have experienced since the GD. I have two friends whose husbands, both very qualified for their profession, one blue-collar, one white-collar, have both been out of work now for 18+ months. They have applied everywhere in the US where there is even the slightest chance. Neither have gotten a job, and few interviews. People are really getting a rude wake-up call that this recession is different. I think your dh has some valid points and is thinking things through. I agree with the pp... if you find that you need the extra money you've put toward your student loans, there is no way to get that money back.

Along with your dh's job loss, the fact that your job is secure for only 6 more months... yep, I'd be saving the money. If he finds a job and your job is still secure in September, then you can always take some of your savings and throw it toward your student loan at that time.

Good luck!
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#13 of 23 Old 02-28-2010, 03:09 PM
 
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Every penny to savings. When your dh starts working again, then you can start paying off debt and even use a portion of your savings to make a big payment.

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#14 of 23 Old 02-28-2010, 11:50 PM
 
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Save it. I totally agree with pp.

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#15 of 23 Old 03-01-2010, 12:33 AM
 
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Also, this may be obvious, but your husband should immediately apply for unemployment benefits. I wasn't sure if you were calculating that in your budget. I'd still be for savings but it might help ease the pinch.
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#16 of 23 Old 03-01-2010, 12:38 AM
 
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Savings. Once you are both working full time, then you will have plenty of money to start paying off the student loans more quickly.
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#17 of 23 Old 03-01-2010, 01:05 AM
 
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Savings!!!

Once you are both in secure jobs again, then take anything over a 1 yr emergency fund and throw a large lump sum at the loans )

That is what I would do.

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#18 of 23 Old 03-01-2010, 01:06 AM
 
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I also wanted to say....Good Job!!

You guys are in a very good position compared to most people who lose their jobs! You should be very proud of yourselves!

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#19 of 23 Old 03-01-2010, 01:19 AM
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While I hate debt,I'd agree with your DH, a large savings and emergency fund would be a good idea.

"Our task is not to see the future, but to enable it."
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#20 of 23 Old 03-01-2010, 01:23 AM
 
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Savings without a doubt.

How much is the minimum payment on the student loan? I would just pay that like normal, and everything else goes into savings.
You can always throw a huge chunk to the student loan when he gets a new job as well as when you know what your job outlook is once September comes.

Until pay everything as normal and all excess to savings.
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#21 of 23 Old 03-10-2010, 02:42 PM - Thread Starter
 
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Sorry to post and disappear, everyone! Thank you all so much for the advice. It sounds like Savings wins by a landslide. After reading all of your thoughtful responses, I think I agree. These aren't normal times, and it's possible that our 10 month emergency fund won't be enough if I get laid off too.

Savings is the right choice for this situation. I just get frustrated sometimes because in his mind, savings is the right choice for every situation. I'm the opposite - I want those stupid loans paid off! And I know that even if we were both employed and confident that no lay offs would occur, he would never consent to taking money out of savings to pay off a big chunk. Once it's in savings, it doesn't come back out. I mean, that's a good thing for this situation, I know that. It just makes me sick to see all the interest we pay to student loans when our savings produces so little. But, that's an argument to be had when our situation is more stable
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#22 of 23 Old 03-10-2010, 03:46 PM
 
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I think I would set it aside until September. If your job is secure in Sept or your DH finds a job then you can put that chunk towards the debt.
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#23 of 23 Old 03-11-2010, 09:20 AM
 
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another vote to put your money into savings - my dh has been laid off since September and is very qualified and has only gotten a handful of interviews. If you pay down debt you don't have that money available for monthly expenses should you need it. Do everything to maximize the number of months you can live should you lose your job. It is brutal out there right now.
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