I have been struggling with a concept. For the longest time I have heard "get out of debt". The church very much supports this, as have many financial advisors. I was watching Oprah the other day and it was Suzie Ormond day. For those of you who don't know she is a famous financial advisor. She is well known for encouraging everyone to get out of debt as fast as possible. This particular day she shocked a lot of people when she stated that because of the situation reguarding the economy, she is now saying to leave the debt and save as much as you can. She stated that we should pay our minimum payments only and put the rest in the bank.
One of the reasons she said this is important is because a lot of credit card companies are closing accounts when balances are paid. If a person looses thier job they will have no credit to fall back on. Saving money will create a cushion that can be used without having to use credit that may not be available.
I am very curious to hear what you all have to say reguarding this. I want to pay off my debt, as we are doing well and making good progress, but should something happen.... we have not a penny in savings. What do you think?
Wednesday, April 8, 2009
Subscribe to:
Post Comments (Atom)
4 comments:
Oh! Interesting concept.
With all the financial people I listen to on the radio, I've heard this advice, too, from one or two of them.
But, mostly what I hear from the conservative ones is that you should get your emergency fund of approx. $1,000 put in the bank, in case the car breaks down, or whatever, then start working on the debt.
Get a second job delivering pizzas or newspapers, eat rice and beans, whatever it takes to pay off your debt as fast as possible.
Once the debt is paid off, you should put away an emergency fund equalling six month's worth of salary.
Seems daunting, doesn't it?
But, you don't want to miss a payment on your credit cards, or be even late with them, because they will jack your interest rate up to over 30%, or higher.
Lovely, huh? It's bondage, that's for sure. I can understand why our prophets tell us to stay out of unnecessary debt.
So, you now know why we don't own a home, have clunker cars, and are trying to pay on our student loan debts and only use our credit cards sparingly.
I have been pondering this for a loooong time too, and I saw that Oprah and I think it makes sense. Suzie said, don't use credit cards, pay them off, but stash cash for emergencies because there is no one else out there right now that will bail you out, so you have to protect yourselves that way. So we are working on both.
I say save as much as you can however keep your debt under control. Pay your bills on time every time and do not gain more debt. Cut back on your budget, if you can, and put the money saved aside. I always try to pay more then the minimum payment by at least $10-20. However if times are hard I will fall back to paying minimum, but I always pay. I guess to make it short, debt (that is under control) gives you a good credit score, which in these times is a very valuable thing to have. So like I said pay all your bills on time, every time, DO NOT get in more debt and save what ever you can.
From the Financial advisors of Slingerland & Roff
Charlene nailed it! Begin by cutting up all of your credit cards. A credit score is really your "debt" score. Save $1,000 for an emergency fund in a liquid savings account - during this time you will want to make sure you are making the minimum monthly payments on your credit cards. Then, eliminate debt using the snowball method (begin by paying off the item you owe the least on. Once paid off, add that same payment to the payment for the next largest item. Repeat the process until all debt is paid off). Next, move to the 3-6 month's worth of expenses in savings.
Post a Comment