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What crazy emergency are you foreseeing that $2000 won't cover? The six month fund is for after you're debt free. edit: MMM'S advice is loaded with risk, and in some instances just wrong. You are not losing a HUGE mount of money by keeping a cash emergency fund. MrKatharsis fucked around with this message at 17:43 on Jan 2, 2013 |
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Jan 2, 2013 17:37
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Personally, I would keep enough in cash to cover any emergency expenses that can only be paid for in cash, plus a little bit extra.
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Jan 2, 2013 17:40
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tuyop posted:Yeah, that's exactly how I feel, but it's complicated because the easiest way to achieve a credit-free life is to use my line of credit as an emergency fund until all the debt is paid off. The reader's question in that link is stupid. It's setup to imply that Dave Ramsey's advice is any different while in debt. Dave Ramsey: Are you in consumer debt? Get a $1000 emergency fund and spend the rest on debt servicing. MMM: Springy debt - throw the money at debt, small emergency savings, lines of credit for larger emergencies. Dave Ramsey's advice is AFTER you're out of consumer debt you then acquire 6 months worth of expenses in an emergency fund. Maybe this is where the MMM advise differs but the "reader's" question specifically asked vs. paying off debt.
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Jan 2, 2013 17:47
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It's not an all-or-nothing thing here. If I'm reading correctly, you guys have a combined 9k or so in cash. Why not put 1/3 in an emergency fund, and 2/3 on your debt? You'll be able to drop your 9.5% interest debt by about half by doing that. You can always pay more on the debt later out of the e-fund if you want. But the idea is that you DON'T run up any more credit. My husband and I had the same problem, and we never got our debt down for any length of time, because we thought like you. "I have $3000 extra this month! Quick, pay down the credit card!" One month later.... "Car needs a new transmission - guess we're using the credit card!" Keep a couple thousand handy for unexpected NECESSARY expenses (not vacations). Put the rest on your debt. When something breaks, do not use your lines of credit.
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Jan 2, 2013 17:59
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Having cash and not succumbing to the temptation to spend it on the next gee-whiz idea that pops into your head is how you build financial discipline. When I was a kid, I tended to blow every week's allowance on bubble gum and cheap crappy plastic toys (like a bag of green army men). Which meant I never saved up to get a nice big lego set like I actually wanted. I'm not a kid any more and I'm now capable of handling having a few thousand dollars in savings that I only touch for good reason, and not just because I suddenly am really interested in mushrooms this month (oh man! I went on a mushroom hike this weekend, mushrooms are cool, I could take a class and then grow them in my garage and did you know you can sell a single large Chantarelle for like $25!). Reserving a line of credit for your emergency fund, instead of a cash emergency fund, entails a certain degree of risk. The risk is that a credit line can be reduced or revoked at any time. Just because you currently have a $9.5k balance on a card does not mean that if you pay off $2k, you'll always have $2k more overhead on that account. If a creditor decides your creditworthiness has dropped - say, because your employment situation has changed - or if they decide they're over-exposed to sub-prime debtors, or if they decide they want to shift debt from Canadian dollars to US dollars, or any other obscure loving reason - then suddenly your emergency fund is gone and so is your ability to charge things. The other risk is of course not being able to charge every possible expense. Convenience checks from a credit card company often come with fees, higher interest rates, or both. And not everyone takes a check. None of this means that the idea of using a credit card as an emergency buffer is completely stupid, of course. It can be a viable safety net. But for Tuyop, who is still fairly new to having any cash in his account at all, I'd say stick with a ~$4k to ~$6k buffer and put the rest into the higher interest debt. Having the cash without earmarking it for anything or spending it on anything will prove on a daily basis that he isn't a total fuckup after all, and that's an important psychological force. "Today we're eating beans because I want to preserve the money I have" is different than "Today we're eating beans because we have no money".
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Jan 2, 2013 18:57
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Tuyop, how about a New Year's resolution? Pick a luxury item that both you and Toeshoes want, then draw up a plan to save up for it over a period of (say) 4-6 months? The money for this each month should come out of your monthly luxuries/personal budget (and not from the money used to pay down debt), and if you're forced to overspend elsewhere then you take that money out of the long-term-luxury-saving-plan first?
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Jan 2, 2013 19:17
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DoctorTristan posted:Tuyop, how about a New Year's resolution? Pick a luxury item that both you and Toeshoes want, then draw up a plan to save up for it over a period of (say) 4-6 months? The money for this each month should come out of your monthly luxuries/personal budget (and not from the money used to pay down debt), and if you're forced to overspend elsewhere then you take that money out of the long-term-luxury-saving-plan first? Well we're having a wedding in August that kind of qualifies. I think it'll cost us between 3 and 6k. As the plans get more concrete, I'll be able to nail down an actual number.
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Jan 2, 2013 19:43
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tuyop posted:Well we're having a wedding in August that kind of qualifies. I think it'll cost us between 3 and 6k. As the plans get more concrete, I'll be able to nail down an actual number. Maybe I missed you mentioning this before, but congratulations! So yeah, start saving for that like mad. It will cost more than you think.
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Jan 2, 2013 20:38
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Yeah 3 - 6k is really, really cheap for a wedding. Just the dress can set you back 30% of that amount.
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Jan 2, 2013 20:50
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FrozenVent posted:Yeah 3 - 6k is really, really cheap for a wedding. Just the dress can set you back 30% of that amount. Yeah Im hesitant to call it a wedding for this reason. There will be no dress, tuxedos, rings, priest, the venue is my family cottage and accommodations will be tents strewn about the forest or the local inn for the faint of heart, and the main cost will be our part of the potluck (whole pig from the farm up the hill whatup) and (probably) a photographer. If I can and it makes sense, I'll probably get a major to marry us, which is apparently legal.
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Jan 2, 2013 20:59
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Check with the provincial civil registry, at least in Quebec anyone can officiate a wedding, as long as they get a one time license beforehand. (They have to go on a tangent on the definition of marriage and shared dwellings in the middle of the show, but hey.) Start budgeting and pricing your wedding, in any case. They bloat quickly - my friend had plans similar to yours a year ago, they're up to 20k and the wedding is still more than half a year away.
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Jan 2, 2013 21:05
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tuyop posted:Yeah Im hesitant to call it a wedding for this reason. There will be no dress, tuxedos, rings, priest, the venue is my family cottage and accommodations will be tents strewn about the forest or the local inn for the faint of heart, and the main cost will be our part of the potluck (whole pig from the farm up the hill whatup) and (probably) a photographer. If I can and it makes sense, I'll probably get a major to marry us, which is apparently legal. This sounds like an excellent reason to not reduce your current savings to pay down debt, as you have a large expense coming up. If you haven't already, spend some time in the Engagements/weddings megathread in A/T. This will keep you from thinking that you need to pay for the plane ticket and hotel room for every Tom, Dick, and Harry who is related to you. Your costs can balloon greatly if you two don't hold the line on not paying for only "things which are expressly important to the bride and/or groom."
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Jan 2, 2013 22:47
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tuyop posted:Yeah Im hesitant to call it a wedding for this reason. There will be no dress, tuxedos, rings, priest, the venue is my family cottage and accommodations will be tents strewn about the forest or the local inn for the faint of heart, and the main cost will be our part of the potluck (whole pig from the farm up the hill whatup) and (probably) a photographer. If I can and it makes sense, I'll probably get a major to marry us, which is apparently legal. You can make that a really cool day. Congrats you two, I sincerely wish you the best.
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Jan 2, 2013 23:07
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You guys do realise that there are no fees attached to a line of credit unless you have a balance, right? And you also realise that a line of credit in Canada is another bank account attached to his debit card, yes? There is zero difference between cash available in a bank account and cash available on a line of credit, short of the fact that you pay interest when you have a balance on your line of credit and the bank doesn't pay you poo poo when you have a balance on your savings account. Tuyop, pay off the 9.5% debt with your cash now. If you need cash in the future (which you almost certainly won't) just take it out at 9.5% again. The only difference is that you won't be paying interest now for no loving reason at all. I can't seriously believe people are advocating that you carry debt for some stupid punitive psychology or whatever it is.
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Jan 2, 2013 23:55
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I got married for something under $2000, and that includes the ~$800 my mom paid for catering (middle eastern food from a local deli, which turned out to be massively too much food: maybe half of it actually got eaten, even though it was delicious and everyone ate as much as they could). My wife's dress was from Nordstrom or something, under $200. My suit was from Men's Warehouse, ~$200. We bought some decorations, printed our own invitations, and paid $50 for an afternoon saturday reservation of a beautiful redwood tree forest picnic site at a nearby state park. My stepdad took photos. We planned for 35 guests and had about 30. Nobody seemed offended, everyone had a great time, and our nuptials were punctuated by a sudden lightning storm and subsequent ignition of the state of California. Then we went off and spent three days in Mendocino (total outlay: ~$500). It was kind of awesome. So but yeah, the point is, if you go into it with the attitude that you're marrying each other and want some close family and friends to be there to participate, there's no need or reason to spend thousands and thousands of dollars on idiotic bullshit. The "magic" of the Big Day is going to be there regardless, because it's powered by love and commitment, not money. e. Fraternite posted:If you need cash in the future (which you almost certainly won't) I find it difficult to believe you've actually read this thread, and yet think this is likely. Tuyop has experienced live right in front of us in dramatic Technicolor the exact reason why his previous assumption that $750 was an adequate cash safety net was completely wrong. Leperflesh fucked around with this message at 00:01 on Jan 3, 2013 |
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Jan 2, 2013 23:59
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Leperflesh posted:I find it difficult to believe you've actually read this thread, and yet think this is likely. Tuyop has experienced live right in front of us in dramatic Technicolor the exact reason why his previous assumption that $750 was an adequate cash safety net was completely wrong. Who cares? Even if he takes the cash out again 3 months from now he won't have paid 3 months interest. That's how lines of credit work. And more importantly, if you think he's incapable of emerging from debt you shouldn't be in this thread. People shat all over Cornholio too but he emerged from his money problems by following good advice and slowly changing his behaviour. Tuyop can slowly change his behaviour, and paying down his debt as he goes is the only way he'll do that. I don't know where this vibe of "tuyop shouldn't get good advice because he's a fuckup" is coming from, but it's completely unfair and unhelpful. The guy should pay down his line of credit ASAP with the cash he has because it reduces his interest (and he doesn't need to worry about the credit being cut back once he does that!) -- and that's objectively good advice. Nothing more, nothing less. Fraternite fucked around with this message at 00:34 on Jan 3, 2013 |
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Jan 3, 2013 00:31
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Three months interest is peanuts. Tuyop's issue stems from his "I turn to debt when I need something" mentality, and "need something" could mean any self-created emergency. I don't see why we're having this discussion again when the only thing that changed was an unexpected cash surplus. If your plan is constantly changing as your income varies, it's a bad plan. Tuyop: Keep the emergency funds at $1000 apiece, put the rest towards debt, repeat month after month until you're not a fuckup anymore.
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Jan 3, 2013 00:39
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The number one trick for a cheap wedding is to invite fewer people. Don't let your parents politic you into inviting everyone. It's your wedding and your money.
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Jan 3, 2013 00:53
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My wife and I spent < $3000 on our wedding (not counting flying her brother out from Germany), it's definitely possible to do cheap if you don't get sucked into the mindset of "weddings have to be like this because that's what I saw on some TV show". Take advantage of family or community resources (sounds like you're doing this already); for our reception, we used a field that's part of our church's property for free, and we honeymooned at an aunt's timeshare.
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Jan 3, 2013 01:43
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Just chiming in with the cheap-wedding brigade. I don't remember what my wife and I paid but it was probably $3-4k for everything including probably 150ish guests.
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Jan 3, 2013 02:52
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dreesemonkey posted:Just chiming in with the cheap-wedding brigade. I don't remember what my wife and I paid but it was probably $3-4k for everything including probably 150ish guests. Yeah, I wouldn't worry too much about the number of guests if you have the cost per guest under control -- in fact, you should be able to turn a profit if that's what floats your boat. For reference, we paid $4.5k for our wedding in 2011 and we had 182 guests.
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Jan 3, 2013 03:12
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Fraternite posted:And more importantly, if you think he's incapable of emerging from debt you shouldn't be in this thread. People shat all over Cornholio too but he emerged from his money problems by following good advice and slowly changing his behaviour. Tuyop can slowly change his behaviour, and paying down his debt as he goes is the only way he'll do that. I don't know where this vibe of "tuyop shouldn't get good advice because he's a fuckup" is coming from, but it's completely unfair and unhelpful. The guy should pay down his line of credit ASAP with the cash he has because it reduces his interest (and he doesn't need to worry about the credit being cut back once he does that!) -- and that's objectively good advice. Nothing more, nothing less. No one is saying he shouldn't get good advice but saying he won't need cash for unforseen events is a joke because Tuyop, for as much as I want to see him do well, is apparently a singularity of Bad Luck. It's better in almost every case to pay for emergencies with cash when possible and to not rely on credit. The solution here isn't JUST to focus on paying down debt (but it is an enormous part of it). I feel like it's dangerous to only focus on that when all that's doing is alleviating the symptom of poor decision making. Tuyop's main problem was a mindset of "I can get this now with cheap credit and worry about paying it off later." He's starting to the turn the ship towards "I should plan for things better." Putting cash into savings is part of this, paying off debt is the other.
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Jan 3, 2013 03:18
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Higgy posted:No one is saying he shouldn't get good advice but saying he won't need cash for unforseen events is a joke because Tuyop, for as much as I want to see him do well, is apparently a singularity of Bad Luck. It's better in almost every case to pay for emergencies with cash when possible and to not rely on credit. Okay, literally the only difference between "cash" and "credit" here is which bank account he withdraws from when he goes to the ATM unless you're advocating he dig a hole in the ground in his backyard and hide his money that way. Oh, and the other *insignificant* difference is that if he does it your way he'll keep carrying almost $7,000 at nearly 10% interest completely unnecessarily, but hay, we in BFC are big fans of people paying interest for no loving reason whatsoever so I guess he should keep the "cash" in the account that ends in 043543 instead of not paying interest and using the account that ends in 78970 in the event of a possible future emergency.
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Jan 3, 2013 03:27
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Fraternite posted:Oh, and the other *insignificant* difference is that if he does it your way he'll keep carrying almost $7,000 at nearly 10% interest completely unnecessarily, but hay, we in BFC are big fans of people paying interest for no loving reason whatsoever so I guess he should keep the "cash" in the account that ends in 043543 instead of not paying interest and using the account that ends in 78970 in the event of a possible future emergency. Calm down bro. The Canadian angle probably wasn't accounted for, but overall, I think people are reacting to the temptation that credit poses. Building a cash emergency fund is as much about building up financial discipline as anything else. So yeah, if tuyop is truly as reformed as he claims to be, then by all means play the numbers. If, however, he is not, then it would be a good exercise for him to build up savings, pay for things out of a budget, and responsible pay down his outstanding debts. (Again, this is aside from the Canadian differences.)
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Jan 3, 2013 05:35
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And nobody is suggesting Tuyop shouldn't pay down debt. Rapidly. Obviously prioritizing the high-interest debt, unless the option of selling the Mazda is back on the table (my recollection is that we all agreed it wasn't a good plan, even once he's back right-side-up on it, but I may be recalling poorly).
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Jan 3, 2013 07:04
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What are your plans with the car? I was always in favor of selling the Mazda. It still represents a huge chunk of debt. At this point is it still over half your debt? The problem you always ran into was that you could never sell it because you owed more than it was worth and you never had the money to pay the difference. If you suddenly fell in love with it again I don’t care if you keep it, but if not, I am still in favor of selling it, writing a check to pay off the difference and buying a cheap car for cash. It would seem that you are close to having the money to do this.
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Jan 3, 2013 20:49
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Zeta Taskforce posted:What are your plans with the car? I was always in favor of selling the Mazda. It still represents a huge chunk of debt. At this point is it still over half your debt? The problem you always ran into was that you could never sell it because you owed more than it was worth and you never had the money to pay the difference. I don't remember the numbers but last I looked he was still a significant amount of thousands underwater, if he could even sell it for whatever bluebook value he was using. Maybe something like $5-8k to get out from under it and buy and buy a really cheap car, seemed like a pretty big stretch at the moment.
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Jan 3, 2013 21:03
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Doesn't he get access to an inheritance in April which he was going to use to pay off the car?
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Jan 3, 2013 21:09
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dreesemonkey posted:I don't remember the numbers but last I looked he was still a significant amount of thousands underwater, if he could even sell it for whatever bluebook value he was using. Maybe something like $5-8k to get out from under it and buy and buy a really cheap car, seemed like a pretty big stretch at the moment. I would be OK with borrowing a few thousand to do this, if it means by borrowing $4000 you can get out of $19,500 in car loan debt. Of course he is getting the inheritance in April. drat. Beaten
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Jan 3, 2013 21:11
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We plan on getting rid of the car in April or May when I get an inheritance, and we get posted together. We'll just pay the balance and sell it, banking the difference. A goal for 2013 is go without a car for as long as possible. The car is probably worth like <9k and I owe 19.5k.
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Jan 3, 2013 21:13
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tuyop posted:We plan on getting rid of the car in April or May when I get an inheritance, and we get posted together. We'll just pay the balance and sell it, banking the difference. A goal for 2013 is go without a car for as long as possible. gently caress that is a lot of money to be upside down on a car  I'm torn between paying ~$13k to basically be rid of it an buy a crappy cavalier that could easyily be a money pit (because you will buy another car eventually) or just paying $19.5k and have a pretty nice and reliable vehicle to last you a long while.
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Jan 3, 2013 21:55
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Doubleposting: I also thought of a great money making scheme that I'm surprised you haven't thought of yet: Bitcoin mining! You don't have to pay your electric utilities so just get a pallet of computers with crazy GPUs and you'll make all the internet munies!
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Jan 3, 2013 21:56
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dreesemonkey posted:Doubleposting: I also thought of a great money making scheme that I'm surprised you haven't thought of yet: Bitcoin mining! Is that a thing that people actually do that makes actual money? I thought the cost of electricity was much higher than bitcoins are worth.
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Jan 3, 2013 22:02
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tuyop posted:The car is probably worth like <9k and I owe 19.5k. Is it really worth that little? Cars don’t go down in value in a straight line. They lose a lot of value at first and then it sort of levels out, or at least doesn’t drop as fast. I don’t think you need to give it away, but it seems you could have it cleaned and detailed and sell it to a private party and do better than that.
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Jan 3, 2013 22:03
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tuyop posted:Is that a thing that people actually do that makes actual money? I thought the cost of electricity was much higher than bitcoins are worth. No it's not. It's something crazy people do and then delude themselves into thinking they're making a shitton of money. Stay the gently caress away from Bitcoin, tuyop. Like take up BASIL before you get involved in Bitcoin.
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Jan 3, 2013 22:09
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Zeta Taskforce posted:Is it really worth that little? Cars don’t go down in value in a straight line. They lose a lot of value at first and then it sort of levels out, or at least doesn’t drop as fast. I don’t think you need to give it away, but it seems you could have it cleaned and detailed and sell it to a private party and do better than that. I'm not an expert on the Toronto market but yeah, I was vaguely looking at the price of a used Mazda 3 and I'd be surprised if he could get 9k for it here in BC. Usually in Ontario prices for used cars are lower, too.
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Jan 3, 2013 22:12
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Zeta Taskforce posted:Is it really worth that little? Cars don’t go down in value in a straight line. They lose a lot of value at first and then it sort of levels out, or at least doesn’t drop as fast. I don’t think you need to give it away, but it seems you could have it cleaned and detailed and sell it to a private party and do better than that. VMRCanada.com says 13825 wholesale to 16000 retail, Kelley blue book says 7500 private party and 10500 retail.
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Jan 3, 2013 22:19
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Zeta Taskforce posted:Is it really worth that little? Cars don’t go down in value in a straight line. They lose a lot of value at first and then it sort of levels out, or at least doesn’t drop as fast. I don’t think you need to give it away, but it seems you could have it cleaned and detailed and sell it to a private party and do better than that. If his situation is anything like mine, his loan also includes a few thousand dollars worth of taxes and environmental fees and what not. I bought a car this fall and something like 10-15% of the total purchase price was just taxes and similar poo poo (Plus the warranty, because I'm a loving idiot). So the loan might not have much relation at all to the value of the car.
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Jan 3, 2013 22:30
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The main issue is that he bought a brand new car and then put a metric fuckton of kilometers on it immediately, which shoved him down the depreciation curve far faster than normal. He's driven to south america and back or something.
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Jan 4, 2013 19:32
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Leperflesh posted:The main issue is that he bought a brand new car and then put a metric fuckton of kilometers on it immediately, which shoved him down the depreciation curve far faster than normal. He's driven to south america and back or something. I'm pretty sure it was Mexico. Plus he got a 72 month loan. I don't care how low the interest rate is, a 72 month loan will always put you upside down. Assuming he financed in the taxes and fees he started out about $5000 in the hole on day one and it's just gotten worse. If it's only worth about $9,000 I think you could make a good case for keeping it. If they replace it with a $5,000 car it doesn't move the needle enough to justify higher repair costs, more taxes, registation. But if a buyer comes along with $14,000 it's worth it. But 18 months ago he estimated it was worth $18,900 and most of the miles were already on it. It just seems weird for a car to lose half it's value in a year and a half.
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Jan 4, 2013 20:08
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