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Okay, dh and I are having an argument. We don't have a huge amount of debt (outside of our house), but we do have some that just seems to keep hanging around. It's what's left of my school loans and our van. I say we need to pay off the frigging debt because we are paying interest which is just stupid to be paying AND our credit scores will go up when we pay off our debts. He thinks it is silly to pay off the debt (just wants to keep paying the monthly minimum) and put money in the bank. I can't seem to get him to budge, but I know my way is more financially sound (please feel free to disagree and give me your reasons!). Yes, I think we need some savings in case something happens, but I would rather pay off our debt than put it all in savings, kwim? Please chime in.
 

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What's the interest rate in savings?<br><br>
What's the interst rate on your loans/CC debt?<br><br>
Whatever's higher you put the money toward...basic economics...money used to pay down debt is money invested...<br><br>
The only case where you MIGHT choose to pay down a "debt" is if you have a mortgage and choose to invest the money in stocks/mutual funds which have a higher yield, esp. when the tax break is considered.<br><br>
In almost ALL other cases, paying down debt is a better bet.
 

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<div>Originally Posted by <strong>katheek77</strong> <a href="/community/forum/post/7981659"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">Whatever's higher you put the money toward...basic economics...money used to pay down debt is money invested...</div>
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That's what <i>I</i> say to him. Argh. We don't have CC debt, but the car and school loans definitely have higher interest rates than what we'd make saving money. He's honestly not even thinking about interest with savings - just putting money in savings. I just want to be out of debt!!! Every financial guru I have ever heard speak always says that the first step is to get out of debt. Not to mention the savings on my emotional well being. It drives me nuts to be in debt. I was raised very frugally whereas my dh was raised living outside of their means. We were not raised similarly at all when it comes to finances - and I cannot stand being in debt. He thinks we should be all kinds of stuff on credit (he has gotten WAY better about this since I have vetoed every single thing except vehicles and house).
 

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Well, as in most things financial, I don't believe that there is a cut and dried "pay debt" OR "save". There are a lot of factors you need to be thinking about (geez, I hope this post doesn't get too long<img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/lol.gif" style="border:0px solid;" title="lol"> )<br><br>
Is this for an emergency fund, or is this really his way of "investing for the future"? If it is an emergency fund, then I think in spite of debt, it's wise to feed this fund a little every month. How stable is his job? If you're in a job situation like us, (dh is a tenured professor, so he has about the most stable job in the world) building up an emergency fund can be a lower priority (although it is a high one for us and we keep about 6 months in a MMMF). But if he has a job that is really unstable, like maybe a fisherman or something, then building that emergency fund should be your #1 priority.<br><br>
But if you're in the middle, then there is no reason you can't do both. I'm a really big fan of emergency funds and although I'm always going on about "run the numbers" and see where you are paying the most interest so you can get the most return, I think that you *have* to feed that emergency fund every month, even if it's just $10, until you have it built up.<br><br>
If you already have an emergency fund, and he is putting money in savings to save it, then he needs to crack some books and learn some about getting your money to work for you. That's not going be in a savings account. And if this is the case, I agree with you 100% - if it's pay off debt or put it in a rinky-dink savings account, definitely pay off debt.<br><br>
What I am saying is that every dollar you have should have a goal attached to it. It should have a purpose. This dollar is for utilities, this dollar is for mortgage payment, this dollar is for the vacation savings, this dollar is for emergency savings. Do you see what I mean? Each and every penny you own should have a purpose, even if the purpose is "this is my money to blow however I want to". So, if he is just "saving for a rainy day"... nope... that's just not a good way to handle your money. Give it a purpose.<br><br>
Hope that helps and if you want to give a little more info about the intended purpose of the savings, it might help us understand better. Knowing the actual rates of return you are getting compared to what you are paying would be helpful too.<br><br>
FTR- My personal thoughts about debt - which I've formed from listening to the gurus is that I've come to discover that I don't consider debt to be necessarily bad. It can help you make money, so this may or may not be a cut and dried situation of yours. I think unsecured consumer debt is absolutely unnecessary and the scourge of the earth, but debt doesn't scare me. Having a low net worth scares me. <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/winky.gif" style="border:0px solid;" title="Wink"> For example, we have strong credit scores, so if I want to buy a new bed and the place is offering 6 months same as cash, I will use the 6 months same as cash. It's FREE money for 6 months. I don't have to take money from my savings to pay for it and I get to continue to accrue interest on my money while using *their* money for free. If your car loan is a really low interest rate, this should be your way of thinking, too. But you need to have the savings money *making* more money than you are paying in interest. HTH Good Luck! <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/smile.gif" style="border:0px solid;" title="smile">
 

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<div>Originally Posted by <strong>velochic</strong> <a href="/community/forum/post/7983320"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">What I am saying is that every dollar you have should have a goal attached to it. It should have a purpose. This dollar is for utilities, this dollar is for mortgage payment, this dollar is for the vacation savings, this dollar is for emergency savings.</div>
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If you have all of the emergency fund money in one account, then how do you separate the goals? I mean, how do you remember how much $$ is set aside for what?
 

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<div>Originally Posted by <strong>FireflyFan</strong> <a href="/community/forum/post/7985066"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">If you have all of the emergency fund money in one account, then how do you separate the goals? I mean, how do you remember how much $$ is set aside for what?</div>
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We keep our short term savings and emergency fund in one money market account, and we keep a separate list (a spreadsheet is good) to keep track of the different things we're saving for, the amounts saved for each, and future savings goals. It's not really that complicated because there aren't really many categories <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/smile.gif" style="border:0px solid;" title="smile">
 

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<div>Originally Posted by <strong>FireflyFan</strong> <a href="/community/forum/post/7985066"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">If you have all of the emergency fund money in one account, then how do you separate the goals? I mean, how do you remember how much $$ is set aside for what?</div>
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There is no goal for an emergency fund except to use in the case of an emergency. It's for things like losing a job, a dire medical need, natural disaster.<br><br>
You don't touch it unless some grave tragedy has occurred in your life. It's goal is to keep you from going into debt for 6 months or a year while you recover from whatever has happened. The money you set aside in an emergency fund is to pay your bills as if nothing happened. It should be several months to a year of your gross monthly income.<br><br>
Outside of an emergency fund, if you have other short -term goals you are saving for, you can keep them in the same bank account as your emergency fund, but keep a spreadsheet of how much is for each purpose. If you are tempted to tap into emergency to, say, pad your vacation fund... keep them in separate accounts.
 

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<div>Originally Posted by <strong>velochic</strong> <a href="/community/forum/post/7983320"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">Is this for an emergency fund, or is this really his way of "investing for the future"? If it is an emergency fund, then I think in spite of debt, it's wise to feed this fund a little every month. How stable is his job?<br><br>
If you already have an emergency fund, and he is putting money in savings to save it, then he needs to crack some books and learn some about getting your money to work for you. That's not going be in a savings account. And if this is the case, I agree with you 100% - if it's pay off debt or put it in a rinky-dink savings account, definitely pay off debt.<br><br>
so if I want to buy a new bed and the place is offering 6 months same as cash, I will use the 6 months same as cash. It's FREE money for 6 months. I don't have to take money from my savings to pay for it and I get to continue to accrue interest on my money while using *their* money for free.</div>
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Well - he is basically wanting to "save for a rainy day." I also believe in an emergency fund, but this is not the saving he is talking about. I'm not talking about feeding it a little every month either. He is saying that he would rather put all the money that we could use to pay off the loans early into savings. I wouldn't be afraid of "6 months same as cash," if it were just me. BUT - I know my husband, and I know how he thinks, and I KNOW the financial situation he was in when we got married. Make sense? That is why I have vowed that the only thing I will buy on credit is a vehicle or a house. Now, I can't say that would NEVER change, but it is the situation for now. Dh has a very secure job. I, personally, don't consider any job absolutely secure, but his is very secure. Also, I have a college degree, a good resume, and good work skills. I have never had a problem getting a job, so I'm not too worried on the job front. Like I said, I do believe in emergency funds, but right now I'd rather have our car and school loan paid off than be putting that money in the bank. I wish I could get him to crack open a book and learn from some real financial advisors rather than take financial advice from his dad! No, he's not interested in researching for ourselves (something I have done and he hasn't), but he would be willing to PAY someone to advise us financially. Now, I don't necessarily think that's a bad idea - later - but right now, I want that money to pay off our debts! Can you tell I'm frustrated with him?<img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/irked.gif" style="border:0px solid;" title="irked">:
 

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<table border="0" cellpadding="6" cellspacing="0" width="99%"><tr><td class="alt2" style="border:1px inset;">What I am saying is that every dollar you have should have a goal attached to it. It should have a purpose. This dollar is for utilities, this dollar is for mortgage payment, this dollar is for the vacation savings, this dollar is for emergency savings. Do you see what I mean? Each and every penny you own should have a purpose, even if the purpose is "this is my money to blow however I want to". So, if he is just "saving for a rainy day"... nope... that's just not a good way to handle your money. Give it a purpose.</td>
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Just want to say that this is probably the best advice about money I've read in a long time. So practical, so succinct, and so perfectly wise. <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/thumb.gif" style="border:0px solid;" title="thumbs up">sup
 

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<div>Originally Posted by <strong>ColoradoMama</strong> <a href="/community/forum/post/7985574"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">Well - he is basically wanting to "save for a rainy day." I also believe in an emergency fund, but this is not the saving he is talking about. I'm not talking about feeding it a little every month either. He is saying that he would rather put all the money that we could use to pay off the loans early into savings. I wouldn't be afraid of "6 months same as cash," if it were just me. BUT - I know my husband, and I know how he thinks, and I KNOW the financial situation he was in when we got married. Make sense? That is why I have vowed that the only thing I will buy on credit is a vehicle or a house. Now, I can't say that would NEVER change, but it is the situation for now. Dh has a very secure job. I, personally, don't consider any job absolutely secure, but his is very secure. Also, I have a college degree, a good resume, and good work skills. I have never had a problem getting a job, so I'm not too worried on the job front. Like I said, I do believe in emergency funds, but right now I'd rather have our car and school loan paid off than be putting that money in the bank. I wish I could get him to crack open a book and learn from some real financial advisors rather than take financial advice from his dad! No, he's not interested in researching for ourselves (something I have done and he hasn't), but he would be willing to PAY someone to advise us financially. Now, I don't necessarily think that's a bad idea - later - but right now, I want that money to pay off our debts! Can you tell I'm frustrated with him?<img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/irked.gif" style="border:0px solid;" title="irked">:</div>
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You don't say how solid your emergency fund is in particular, but I do want to say this in general: Emergency funds aren't just for job loss. You or your DH could be in a nasty car wreck that left you permanently disabled, mentally and/or physically. Those lovely resumes could be all for naught.<br><br>
Since having a kid, I've become much more paranoid about how much liquid savings we have. I mean, if one of us lost our jobs, we'd be OK, because we have a rule about all our necessities being able to be covered by one salary. The nonworking partner would just take care of the kiddo and we'd drop the daycare bill. But if one partner was seriously hurt, we'd be in bigger trouble, tt least until the disability insurance payments kicked in. (My other paranoid mommy move.)<br><br>
Savings vs. paying down debt is a tricky balance for most people. If I had a car note, I'd probably work on saving the money for the next one even as I paid the current note down so I could go cash-only after that.
 

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<div>Originally Posted by <strong>Knittin' in the Shade</strong> <a href="/community/forum/post/7986225"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">Just want to say that this is probably the best advice about money I've read in a long time. So practical, so succinct, and so perfectly wise. <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/thumb.gif" style="border:0px solid;" title="thumbs up">sup</div>
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Thank you. <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/innocent.gif" style="border:0px solid;" title="shy">
 

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<table border="0" cellpadding="6" cellspacing="0" width="99%"><tr><td class="alt2" style="border:1px inset;">
<div>Originally Posted by <strong>ColoradoMama</strong> <a href="/community/forum/post/7985574"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">Well - he is basically wanting to "save for a rainy day." I also believe in an emergency fund, but this is not the saving he is talking about. I'm not talking about feeding it a little every month either. He is saying that he would rather put all the money that we could use to pay off the loans early into savings. I wouldn't be afraid of "6 months same as cash," if it were just me. BUT - I know my husband, and I know how he thinks, and I KNOW the financial situation he was in when we got married. Make sense? That is why I have vowed that the only thing I will buy on credit is a vehicle or a house. Now, I can't say that would NEVER change, but it is the situation for now. Dh has a very secure job. I, personally, don't consider any job absolutely secure, but his is very secure. Also, I have a college degree, a good resume, and good work skills. I have never had a problem getting a job, so I'm not too worried on the job front. Like I said, I do believe in emergency funds, but right now I'd rather have our car and school loan paid off than be putting that money in the bank. I wish I could get him to crack open a book and learn from some real financial advisors rather than take financial advice from his dad! No, he's not interested in researching for ourselves (something I have done and he hasn't), but he would be willing to PAY someone to advise us financially. Now, I don't necessarily think that's a bad idea - later - but right now, I want that money to pay off our debts! Can you tell I'm frustrated with him?<img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/irked.gif" style="border:0px solid;" title="irked">:</div>
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I see that you say you "believe" in an emergency fund, but do you have a formal emergency fund? Maybe your dh is saving the money thinking of emergencies, but hasn't really named it an "emergency fund".<br><br>
I'd also keep in mind that with student loans, you have the flexibility of putting them in deferment without it affecting your credit when times get tough.<br><br>
At a minimum, maybe you could at least get your dh to look at savings in high yield savings accounts. ING and Emigrant Direct both have some good returns. If you can push it, talk to him about researching Money Market Mutual Funds, which are stable investments kept to $1/share (but not FDIC insured like the ING accounts). That's at least going to push your returns to +5%.<br><br>
I don't know this Dave Ramsey guy, but people here like him. That might be a starting place to get dh to read.<br><br>
Good luck!!
 

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Do you have enough in savings to pay your bills for a few months if something were to happen?
 
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