I’ve been putting $625 a month toward debt since the beginning of the year. Im just about finished paying off all the little balances (any less than $1500). My remaining debt is $12,000, split between a chase card and a citi card, no interest. If I continue using the same amount on them, I’ll be debt free in 20 months.
The problem is that we really have really no emergency fund. Our dryer broke in July, we put a new one on a credit card, and it will be paid off this month. For October, I’m thinking about paying the minimum payment on the chase and citi card ($125) and put the rest ($500) into savings. I’d do this for 4 months, have $2k in the account, and then start on the chase and citi. Does this sound like a reasonable plan?
That seems like the greatest course of action to me! Similar to your scenario, you will always need to pay back your credit cards if you don’t have an emergency fund. That does nothing but increase the length of time you have credit card debt. You have options when you have cash.
You will inevitably relapse if you don’t have some kind of safety net between you and your debt. In my opinion, you should adhere to the Money Guys FOO, which states that your initial emergency fund should equal your maximum insurance deductible.
My highest insurance deductible is $500. I want to have more than that on hand. I’m on medicare, so I don’t have a deductible like insurance plans for younger folks.
I agree with you on that point. Each person’s emergency fund is unique, but generally speaking, I would want to start with about $5,000. Once more, you have to determine what is most comfortable for you. Instead of having a set quantity and no peace of mind, I would rather someone to have too much.