Feedback Please 29 June 2015 at 9:21AM edited 29 June 2015 at 11:05AM in Debt-Free Wannabe 4 replies 709 views

pineconesjay

Hi, I have a question and looking for some feedback.

I'll be getting access to $2800 of savings this week.
It's an old Australian scheme called the First Home Saver Account.
The idea was that you saved for a home and could ONLY use the savings to buy a home.*
It got scrapped so everyone with one of these accounts can use the money for whatever as of 1 July.
Anyway, I'm $10,200 in debt and trying to decide how to divvy up the money.
This is what I've come up with:

Debt payment $2,200
Emergency Fund $400
Dental work for Hubby $200

Is my Emergency Fund too small? (I plan to build it up over the next few weeks)
Is it too big? (Should I be putting as much as possible toward the debt?)

I tell you, it's a nice problem to have, for a change!

*We're actually not planning to buy a home for a long time - Aussie property bubble has to burst and I'd rather buy when prices are low, rather than at their peak. More time to save a deposit, etc etc.

Aphidgirl

I would say the emergency fund is on the small side. Dave Ramsey (Amercian personal finance expert) recommends saving up an emergency fund of $1000 before making any overpayments to the debts.

I'd be tempted by a slightly higher emergency fund (at least $500-600), then the rest on debt/dentist.

andyfromotley

Fully fund your emergency fund first. It is up to you what level you think you need but whilst you have debt most people agree that somewhere around £1000 (Aus$2000) is the right amount) after this everything on the debt.

Either cashflow hubby dental work or put it on the lowest CC you can, using your windfall to pay off the highest interest debts.

Whatever you do give it all a purpose or it will disappear!!

pineconesjay

andyfromotley wrote: »

Whatever you do give it all a purpose or it will disappear!!

Yes, so true!

Actually, part of the reason I'm so tempted to keep the EF on the lower side is knowing in the past just how quickly 'emergencies' pop up when you happen to have a bit of money set aside.
If I put a bigger sum into the debt then I know it is working to reduce my debt (and therefore the interest I pay), however having it sitting in an account just waiting for an opportunity...
I don't want to give in to temptation to use it, and hey, if I had iron willpower I wouldn't be in this debt in the first place.
In a true emergency I know I can call on my Dad. I've never needed to, but he made sure I knew I could count on him.
Also, we rent, so any house-related repairs are not our responsibility.
So that is why I'd rather keep a smaller amount for an Emergency Fund, and pay more towards the debt. Even so, I plan to build the EF each week anyway. And once I'm debt free I'll be 'free' to get onto Baby Step 3...

pineconesjay

Anyone else have any advice?
Am I being foolish not to have a bigger Emergency Fund?
Really want to be out of debt ASAP.