For those who understand Ramsey's plan...WWYD question
I am getting such great advice from everyone here, I am going to ask for your input on this situation my dh and I are trying to figure out what to do.
Ok, we follow Ramsey. Not to a "T", but pretty close.
We have the $1,000 in savings Ramsey says to do.
We are following the monthly zero budget using Ramseys forms and also use the envelope system monthly.
We've been on this plan for almost 6 months and are making good progress.
We have a debt snowball going like Ramsey says. And it has worked really well so far.
Here is the situation:
My dh is a school principal. It has been a year from H*ll politically this year. ( long story but dh's job is secure) The last board meeting was this past Monday and dh was offered his contract again for next year. He told the board he is not sure he will be signing it and needs time to think. However, he thinks (told me) he will re-sign again for next year.
Ok...now how this affects our snowball and savings account and Ramsey's plan that we mostly follow.
Because we are not getting out of debt as fast as some of Ramseys people featured in his book, we have a bit more of a savings accumulated beyond his suggestion of $1000. We don't want to touch that savings to put on the snowball. We feel we need more than the $1000 that Ramsey says. Especially in light of how unstable school administration can be. (no tenture and very politically unstable in small districts)
I am looking now at our $2000 tax return that will be coming soon. We were thinking of just adding that to the savings which would bring the savings up to around $7000.
OR....We could put that $2000 on our dental bill which is on our debt snowball as our next debt to pay and this would wipe that sucker off. (pay it in full)
What that would mean is because of how snowballing works (and you know what I mean) we'd then be putting $555 minmum a month on our one credit card bill just from the snowball. The credit card bill is the next bill on our snowball after the dental bill. We are currently paying $230 a month on that credit card as our minimum on the snowball. We owe approx $11,300 on it.
If we put the $2000 on the dental bill, therefore paying it in full.....then that would in turn really increase the speed in which the snowball is rolling and we'd pay off that credit card faster...especially taking into consideration that we also put what I can onto the debt snowball from my monthly self-employment earnings. (we don't count my pay at all in our monthly budget since it varies soooo much that we don't want to rely on it for anything other than putting on the debt snowball as "extra" snowballing.)
I hope that made sense.
So......do you think if dh decides to stay with his current school and re-sign his contract that we'd be smarter to put that tax return of $2000 on the debt snowball and pay off the dentist? Or should we build up that savings account even more?
What do you say? Our big goal is to be debt-free within five years....however we know very well that we have one car that may quit running at any time plus a furnace that is 30 years old. (but the furnace guy said just two months ago that it appears to be running well) That is one reason why we feel we need a larger savings than the $1000 that Ramsey suggests for those folks who are snowballing debt. If the furnace went out or the car died totally....we'd have the $ in savings to replace either one.
Advise me? And please tell me in your response why are you advising me in whatever direction you choose to tell me?
Thanks...OK now I really need to get on the treadmill.
That's a tough one. Since you have an old furnace and a car that could go, you may want to stockpile the money just in case those go, unless you have some other way of coming up with money for those things. You are in the same place we were recently. Our furnace was 37 years old and our van was falling apart. They both died this past week.
If it were me in your situation *I* would pay off the dental bill and then quickly snowball the credit card. It sounds as though you have a good savings built up to help repair or replace if something goes wrong.
Or could you do half and half- half add to savings and half go to the dental bill?
Tawnya
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Case in point regarding my job being very unstable.....I just got off the treadmill to answer a call from the parent of one of my clients. Calling to cancel (again) this week which means I did not earn nearly $200 this week from cancellations. (totally unpredictible job....that is why not many around our community do it)
Ack to having the furnace and the van go in the same week!!!!!!! How much is a new furnace anyway? Would $5000 be enough for a new furnace with some $$ to spare?
In my mind, I go back to the furnace man telling us a couple months ago that our furnace was in excellent condition..........trying to see if that factors in to helping decide, KWIM? That makes me tend to think that the furnace has a few more years at least to go before we have to replace it.
I suppose we could do half-and-half with the $ like was suggested but then that does not hit the snowball as hard since it won't wipe out that dental 100% KWIM?
I could also take my pay for the next two months and put it back into savings if we decided to take the tax return of $2K and wipe out that dental bill rather than add the money to the savings.
Ideally.....I'd like to have $10K in savings. With our family and our medically fragile children and then the furnace and old car. Blah Blah Blah.....it would cover more than one "disaster", KWIM? But it would take us six months to get to that amount with us putting the tax return in savings and also putting all my earnings in savings rather than putting it on the debt snowball like we currently do. But then again....do we really need that much savings? Also that seems to just slow down the goal of debt free as fast as we can.
The debt looms. It is really true that you are in bondage when you have debt.
Here is what we are roughly looking at on the snowball:
1. Orthodontist (will be paid off with my pay this month...so the first week of March I'll pay it off)
2. Dentist (that is the one we could wipe out with that tax return)
3. Credit Card....which has a interest rate that keeps on going up each time the fed raises the percentage rate.
4. Husbands Student loan. This has about half-the balance of the credit card but has only 2% interest rate as compared to the ever-rising credit card interest rate...that is why the credit card is #3 and this is #4 (I know that goes against Ramseys method)
5. Second Mortgage. (technically a home equity loan) We did not have any money down for buying this house when we moved here a few years ago so we had to finance the 10% down via this type of credit. Looking back at it, this was stupid since it is totally variable in it's rate of interest. Right now we are making the minimum payment as the snowball method says, and it only pays for the interest on the loan each month. I can't wait to hit this one when the snowball reaches it. This is what keeps me up at night....this one debt is the most looming for me personally.
6. Van payment. (again we go against Ramsey here since we did not sell it...but with all the medical travel we have to make...which is a LOT, we could not go with two "paid for" junker vehicles. So we have the one junker and then this van) Percentage rate is decent on this one at 6%
7. Then we have the main mortgage on our home at the very bottom of the snowball. Then it is total 100% debt free.
The good news is that our home has appreciated at a modest rate since we bought it.
Not sure if this helps in further advising me....but thought I'd try to give as complete of a picture I can w/out giving exact amounts since I am on a public board. *lol*
There is a possibility that the school is going to give dh a bonus at the end of this year. But dh said the teachers had to get bonuses also or he would not take one w/out them also getting one. (but the board is in panic mode from their bad decisions this year that has ticked off dh and also his staff of teachers and the board thinks bonuses for all will help to smoothe ruffled feathers) So, if that happened....I have no idea how much money we'd be talking...but it could go on debt snowball or the savings.
Ack to having the furnace and the van go in the same week!!!!!!! How much is a new furnace anyway? Would $5000 be enough for a new furnace with some $$ to spare?
We replaced our furnace and our AC (both were years old and needed to go, so we decided to do both at the same time) and total cost was $4360. I'm not sure if price varies on where you live though or how big your home is.
It really is a tough call on what to do. If you pay the dentist off (which would be great), what would happen if the furnace or the car (or both) were to die on you? Would you have a way to deal with those? If so, then I would pay off the dentist. If not, I'd just stash the money for a while in case something goes, so you aren't in a worse bind then.
We replaced our furnace and our AC (both were years old and needed to go, so we decided to do both at the same time) and total cost was $4360. I'm not sure if price varies on where you live though or how big your home is.
It really is a tough call on what to do. If you pay the dentist off (which would be great), what would happen if the furnace or the car (or both) were to die on you? Would you have a way to deal with those? If so, then I would pay off the dentist. If not, I'd just stash the money for a while in case something goes, so you aren't in a worse bind then.
I bet it would be enough. We dont' have AC. House is approx 2100 sq ft....typical ranch style house. (upstairs and basement of the same sq footage each) Duct work is all good.
hmmm. Okay, if it were me, I'd pay off the dentist. I don't like debt. Like you said, it looms over your head. I don't have a more detailed answer than that.
I'm going to read your post again, when a cranky-needs-a-nap-right-now 2yr old isnt on my lap and then have dh read it too, if that's okay. he's very logical abt money and sees usually from the most $$ efficient way possible.
I think that you should probably pay off the dentist. You seem to have a good amount in savings and although something could happen to both the furnace and car at the same time it is unlikely (especially since someone told you it was in good condition).
Another thing could you call the dentist and see if they would negotiate a lower payment. Tell them you have a certain amount of money (not the entire bill amount) and that you want to pay off one of your debts, find out if they would be willing to take a lower amount to pay the debt off. So if the bill is $1000 would they take $750 to pay the bill off, always offer lower than you are willing to pay because they may come back and say no but we will take $800 or $850. That would save you money in the long run and also you could pay it off.
I also think that you should continue using your extra income to go on your debt snowball rather than in savings. I am assuming that you are still putting a little in savings every month, if not then I might split the extra between the savings and snowball until you get a healthy amount in savings that you feel comfortable with. The sooner you get out of debt the better you will feel (we are in the same boat).
Plus, I will be praying for a bonus for your dh and that the furnace and car keeps on running!
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mama to four beautiful boys
I'd wipe out the debt that you can, because it will snowball faster, and you will have that much more to add to savings once your debt becomes less. If you pay off the $2000 debt, you say that gives you $555 to go to the next card, what if instead, for four months you put that in savings? That would add the $2000 to your savings, just take 4 months longer, and there would be more in there for you since it is earning interest. Am I making sense?
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Crissy
Mama to Anthony, James, and Donovan
I'd pay off the dentist and snowball the other payments faster. If your furnace is in good shape (and a furnace guy wouldn't say it was unless it was, you know?) then you have enough in savings to cover other disasters.
Kerri
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Mama to Cole (9), Naomi (8), Adam (7), and Noah (4)
All adopted - All breastfed
Wife to David for 12 years!
Breastfeeding Counsellor and Doula
Accepted into midwifery school for February 2009!
We are moving to New Zealand on January 29th
Yikes, there is TONS to do before then. Gulp.
hmmm. Okay, if it were me, I'd pay off the dentist. I don't like debt. Like you said, it looms over your head. I don't have a more detailed answer than that.
I'm going to read your post again, when a cranky-needs-a-nap-right-now 2yr old isnt on my lap and then have dh read it too, if that's okay. he's very logical abt money and sees usually from the most $$ efficient way possible.
Yes, I'd love for yours and your dh's input.
I am leaning towards paying off the dentist. (so is dh)
I really loathe debt of any kind.
Regarding the dentist. Once we pay this off, it should not build up again. It is this high because dh had to have major major work done. I've paid cash for all our bi-yearly visits for the children and I and will continue to do that. (we set aside a specific amount monthly in what is called our "freedom checking account" for various expenses that come up a few times a year) So once this dentist bill is paid, I think dh will be done with all his major dental work and it should not accumulate again like that. (I wish we had dental insurance!!!)
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