There are a few that haven't popped in for a while. Hope all are doing well! Maybe they are still active on the site but don't have much to say at the moment! Or, breeze through on other boards.
Hi! Yeah, this is me!
We just returned yesterday from our cruise to Denmark & Norway. We are beyond exhausted and I woke up at 4:30am feeling like I've been hit by a truck.
So glad I'm off today! It was a great trip but temps were colder than their norm and it rained some every day. Grrr...
We are doing ok on the financial end. I'm done with saving for Christmas and now I will be attacking this cruise which is around 1/3 paid for and the rest on a 0% x12 months BT offer. (Yes, I swore I would never incur more cc debt but after losing my mom I just needed this and paying this down is our first priority.)
I just wanted to add my 2 cents on the DR $1000 emergency fund conversation. My take on that is this: for most "emergencies" $1000 is enough. This is not meant to cover catastrophic loss of home, car, cancer diagnosis, etc. or be a life-long EF. It is only meant to cover the most common reasons why a person might resort to incurring more cc debt during the timeframe it takes to become debt-free.
If we all followed his debt payoff plan with "gazelle intensity" like he recommends, it would be paid off much, much sooner. I think we can all agree on that. He admits that it IS an uncomfortable state of living but it will be very short-lived if you stick to that intensity level and that the more "needs" you require (vacations, cable, car loan) the longer it will take to pay off the debt.
So for example, let's say 2 people, Tom & Paul, both have $30k in debt and same income & expenses, both follow DR. Tom is doing the snowball but loosely following his spending restrictions. Paul is following with gazelle intensity and then some. He knows the pain will be brief if he can make this debt disappear ASAP.
Tom can comfortably send $1000/month to his debt snowball. He still needs a yearly vacation or 2 and likes his kids to remain active in various sports.
Paul is quite the gazelle and with great spending restraint, he can send $2500 to his debt snowball.
It will take Tom 30 months to pay off his debt but Paul will be done in just 12 months.
In this example, Paul's emergency fund only needs to cover him for 1 year but Tom will need enough to cover 2.5 years. Tom will obviously need more of an EF to feel comfortable enough to keep paying down debt for that long. If he were to stretch it out to 5 years, he would need an even larger EF.
The EF is relative to the amount of time it takes to pay down the debt.
So this is why DR says to start with $1000 and admits it won't cover everything that could ever happen to you but it will cover a lot: unexpected tire blow out, a vet bill, washer died, etc.
I think another reason he doesn't mention is that when you're first starting out it's hard to even gather the $1000 in addition to paying on all the debt, without even paying a penny toward the debt, and without giving in to temptation to spend some of it. Almost all of us got into this predicament from spending more than we earn; we were not strong savers and there was no light at the end of the tunnel.
If the initial starter EF were, let's say $3000, many would give up before even paying down any debt and feeling that WIN feeling. It's that first WIN feeling, seeing SOMETHING with a $0 balance, that keeps you motivated to keep going. The closer you come to paying off all the debt, the better you become at managing discretionary spending and more confidence you have that IF an emergency were to come up that cost more than $1000, you have the knowledge and perseverance to temporarily stop the snowball payments, cover the emergency, rebuild your EF, then continue on your original path toward becoming debt-free.
Once I got motivated, and I started to quickly knock out one after another, and my snowball was 3-4x its original amount, I actually considered snatching half of that $1000 to add to my snowball but I didn't. I felt like it was a waste to just sit there when it could be more productive toward debt.
We all have to look at our own situation and find a balance between comfort level and pay down speed. I believe this is a continuum and regardless of where any of us fall on it, we can all agree that the fewer "needs" you have, the more you can pay toward debt and the faster it will be paid off completely.
I personally felt that I would likely give up too quickly, like a crash starvation diet, if I tried to go with gazelle intensity so I'm not saying that we should all follow his advice word for word.