Next step after credit card debt is paid off

[danjoealexis3006]

Yep! Emergency fund 1st! My DH is self employed and didn't have any work from Christmas Eve until about a month ago! Thank goodness we had the emergency fund because there is no unemployment for sole propritors!

Now we have to build the fund back up again Not easy when things are still so slow.

Oh, we are debt free except the house and my student loans!

 

[Crystal824]

Yay. Congrats. If it is were me, I would start an emergency fund and put as much in there as I could until I have a 6-8 month cushion. Yes, it seems like it it is a huge amount, but if you paid off all that debt in a short amount of time, it shouldn't take you too long to build up a 6-8 month emergency fund using the extra money that used to go to pay the ccs and car loan. Then I would start building up the retirement fund. Finally, I would work toward a college fund.

Even with putting extra money toward the emergency fund, you might also want to start a 529 plan for each child if you haven't and just put in a small amount each month and do the same for a retirment plan. While this might not be your main focus for awhile, a little something for college is better than nothing.

 

[tjs198]

Thanks everyone! It is a relief. We were about $30,000 in debt plus an $11,000 car loan. We got it all paid off in about a year. The biggest problem is DH is self-employed and his pay varies each month.

I'm confused, in your 1st post you stated saving $18,000 seem impossible, but you state you've paid off $41,000 in 12 months, keeping that rate, saving $18,000 should only take a little over 5 months. You can do that easily. Good luck and great job!

 

[bettymae1121]

If you tackle saving like you did your debt, get an emergency fund in place shouldn't be hard for you at all. However most experts now recommend 8-12 months emergency savings. It take so long now to find new jobs that many people found that six months wasn't enough.

Don't forget that in addition to emergency, retirement, and college you should have other savings goals as well. You'll need a car fund for repairs and replacement down the road. You'll also want a vacation fund so you can travel. If there are other purchases you're thinking of making, you should have goals for that as well. But now that you are cc and car debt free, you'll have a lot more money to spread around to all of these things, you just need to list what is important to you. Emergency is #1 and retirement is #2, but the rest of the list you can decide on your own what is a priority for your family.

 

[LaurenLC]

I'm confused, in your 1st post you stated saving $18,000 seem impossible, but you state you've paid off $41,000 in 12 months, keeping that rate, saving $18,000 should only take a little over 5 months. You can do that easily. Good luck and great job!

I agree.. Saving up $18,000.00 should be a walk in the park compared to paying off $41,000.00! Congratulations!

 

[nellyru]

So great!! I need people like you to keep me motivated.
We are on the journey to getting out of debt, it is not easy...... but so looking forward to the rewards of being debt free!!

We did our EF first than started our debt snowballing (although we only have the $1000 EF right now).
We ended up needing to use some of that money for computer and car stuff so the Snowballing is in pause mode while we re-fund our EF!!

I would deffinetly check out daveramsey.com if I was you. He has down to earth, common sense help. No gimicks- just tells it like it is!! Love him!!

My DH and I will be starting the FPU through our church in a couple weeks. Can't wait!
The only thing that we are doing differently (Alot differently than Dave would do!! ) is we are still planning on going on a trip to Disney! But I feel you pick you intensity. We are using bonuses to pay for it- so no extra debt!

Way to go!!!

 

[christinec68]

Congratulations. Having a 6 month emergency fund is a great goal. If you paid off $41,000. worth of debt and car loan I think you can definitely do the $18,000 for your emergency fund. Just remember to pay yourself first, decide how much into savings and put that there first. It is completely worth it. Once you have your fund in place than you can move onto your next goal and sleep well at night knowing you are protecting your family.

Good Luck to you!

ITA!!! Congrats on getting your debt paid off in a year!! Do the same thing for your emergency fund - treat it like a debt and you'll have the $18K saved up in no time.

 

[linnylu]

ITA!!! Congrats on getting your debt paid off in a year!! Do the same thing for your emergency fund - treat it like a debt and you'll have the $18K saved up in no time.

You are right- this is what I need to do. I have a hard time because I think of all the fun stuff we can do with the extra money now that we are out of debt. I almost booked a cruise for our family of 7 next spring break because the early saver prices were so good. I didn't do it. I need to treat the emergency fund as debt and "get it paid off". DH just brought home an "extra" paycheck so that money can go to the EF. I need to learn how to make a ticker.

 

[OhMari]

Suze Orman suggests saving for retirement over college. Loans can be taken out for college.

Yes, I try to always have 6 months worth of everything in my emergency fund.

I think Suze is wrong. If you child can get the Federal Subsized loan, it is currently 6-8%. If they don't qualify for a Federal Loan, Student Loans are running in the 13-18% range. It is crazy. Me and my dh are both working over time, and our youngest 2 in college both are working part time jobs to help pay tuition and for them to live off campus.
If you can, I would look into starting college funds for your children, after you get your emergency fund. I think the states have some kind of plan, where you can put a certain amount away for each child, tax free.

 

[dxcspilk]

Your line of thinking sounds like Dave Ramsey's plan. It is the one I am currently using. Only 2 student loans left. Woohoo!

I would visit livinglikenooneelse.com they have a step by step process right in line with what you want to do, and very friendly forum members to help you along the way!

 

[averill94]

linnylu congratulations to you!!!

Can I asked if you are following any plan in particular?

We have quite a bit too. It made me feel better to see your number because ours is close to yours. I feel like it is going to be impossible to pay off....

It really gets me down mentally, especially when I didn't have a hand in creating all this debt. But it was my fault of course for not paying attention for so long.....

 

[linnylu]

I have to say that I did not use a particular plan to pay off our debt. We really just got lucky that dh's business picked up and I applied ALL extra money to the debt. But now that it is all paid off I am going to follow a plan to stay out of debt. We have 1 more year before our oldest goes to college and then our 2nd oldest goes the year after that. Neither will get financial aid, but both will get merit scholarships. We are not taking a vacation this summer- maybe next. And I really need to work on a budget too since I'll no longer have credit card debt to pay.

 

[stazmatic]

Not sure if this was mentioned or considered - the 6 months of expenses is not necessarily the same as 6 months of emergency fund expenses. If you were in emergency mode you could cut your monthly expenses to the bone - no eating out/cable/etc. Which may lower the amount you need to save. Depending on your situation and what you are willing to sacrifice 18000 could last much longer than 6 months.