Comments on: Some Thoughts on Making the Transition from Debt to Savings http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/ personal finance that makes cents Fri, 16 May 2008 04:36:28 +0000 http://wordpress.org/?v=2.5.1 By: Frugal With Flair http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-119658 Frugal With Flair Thu, 28 Feb 2008 00:03:36 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-119658 I am so so glad to find your blog. I really look forward to reading it and learning from your tips. I have just started my life-changing adventure into the world of frugality and I am looking forward to all the benefits. Thanks for what you are sharing! I am so so glad to find your blog. I really look forward to reading it and learning from your tips. I have just started my life-changing adventure into the world of frugality and I am looking forward to all the benefits. Thanks for what you are sharing!

]]> By: Sarah http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-116179 Sarah Wed, 06 Feb 2008 15:56:59 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-116179 I'm really glad to have read this. Trav is a friend of mine and has always been instrumental when I've thought about planning my own savings, and going through my own financial battles. These are really great messages though - emergency savings are really hard to compile when you've got debt. As I'm coming out of excessive debt, I'm trying to plan ahead to ensure that I have a nice solid amount of savings as soon as possible. Thanks to JD and Trav for the words of wisdom. I’m really glad to have read this. Trav is a friend of mine and has always been instrumental when I’ve thought about planning my own savings, and going through my own financial battles. These are really great messages though - emergency savings are really hard to compile when you’ve got debt. As I’m coming out of excessive debt, I’m trying to plan ahead to ensure that I have a nice solid amount of savings as soon as possible. Thanks to JD and Trav for the words of wisdom.

]]> By: Link Roundup: Punxsutawney edition at Mighty Bargain Hunter http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115941 Link Roundup: Punxsutawney edition at Mighty Bargain Hunter Tue, 05 Feb 2008 04:32:58 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115941 [...] Get Rich Slowly talks about making the transition from debt to savings. [...] [...] Get Rich Slowly talks about making the transition from debt to savings. [...]

]]> By: This Week’s Stroll Through My Blogroll http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115894 This Week’s Stroll Through My Blogroll Tue, 05 Feb 2008 00:01:32 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115894 [...] Get Rich Slowly has an interesting post about transitioning from debt to savings. [...] [...] Get Rich Slowly has an interesting post about transitioning from debt to savings. [...]

]]> By:   Money Crashing Articles Of The Week by Money Crashers http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115342   Money Crashing Articles Of The Week by Money Crashers Sat, 02 Feb 2008 03:07:35 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115342 [...] JD at Get Rich Slowly gives his thoughts about making the transition from debt to savings [...] [...] JD at Get Rich Slowly gives his thoughts about making the transition from debt to savings [...]

]]> By: Elena http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115142 Elena Fri, 01 Feb 2008 06:13:29 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115142 One of my goals this year also is to regularly fund our emergency fund. I decided not to wait to fully pay off the credit card--although the end is in sight. Definitely worth setting up automatic withdrawals and budget, but, if anything this month showed me that I need to work toward saving even more. I had three medium to large unexpected expenses this month that I've been able to work around because I had some emergency funds available. Two were reimbursable medical expenses(needed to have $1200 cash/credit available) and the other, an emergency vet bill. Even though I get reimbursed in about two weeks for med expenses, I had to refigure cash flow for that time to avoid debt. Interestingly, I was very protective of my emergency stash and shifted/cut out everything I could to avoid draining it completely. Another year, the medical bills might have felt like financial crush. Previously I would have put them all on the cards if I could, probably stressed out, and said, "Oh well, bad month." Even though I haven't come out far ahead this month, I'm really pleased that I haven't abandoned my original goal of establishing emergency savings or taken on new debt. One of my goals this year also is to regularly fund our emergency fund. I decided not to wait to fully pay off the credit card–although the end is in sight. Definitely worth setting up automatic withdrawals and budget, but, if anything this month showed me that I need to work toward saving even more.

I had three medium to large unexpected expenses this month that I’ve been able to work around because I had some emergency funds available. Two were reimbursable medical expenses(needed to have $1200 cash/credit available) and the other, an emergency vet bill. Even though I get reimbursed in about two weeks for med expenses, I had to refigure cash flow for that time to avoid debt. Interestingly, I was very protective of my emergency stash and shifted/cut out everything I could to avoid draining it completely.

Another year, the medical bills might have felt like financial crush. Previously I would have put them all on the cards if I could, probably stressed out, and said, “Oh well, bad month.”
Even though I haven’t come out far ahead this month, I’m really pleased that I haven’t abandoned my original goal of establishing emergency savings or taken on new debt.

]]> By: Elizabeth http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115108 Elizabeth Fri, 01 Feb 2008 03:41:25 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115108 As far as people not being excited enough about saving, I'm pretty sure that I'm not the only one who found it a victory that last year just to not increase the debt load and actually saving substantial amounts of money seems surreal right now. As far as getting your spouse on board with any part of the budget, I found that making it about working as a couple towards joint goals and not about the money is the best avenue. It still takes a lot of patience on the part of the person who is not the saver, but working slowly with them to make them understand your goals for finical stability and make that more important to your spouse than whatever materialistic item it is that they want. As far as people not being excited enough about saving, I’m pretty sure that I’m not the only one who found it a victory that last year just to not increase the debt load and actually saving substantial amounts of money seems surreal right now.

As far as getting your spouse on board with any part of the budget, I found that making it about working as a couple towards joint goals and not about the money is the best avenue. It still takes a lot of patience on the part of the person who is not the saver, but working slowly with them to make them understand your goals for finical stability and make that more important to your spouse than whatever materialistic item it is that they want.

]]> By: Shirley http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115069 Shirley Thu, 31 Jan 2008 23:24:20 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115069 I am pretty sure I am going to get slammed for this comment, but the lack of excitement for saving is where our financial planner has been phenomenal for us. Somehow having him as our cheerleader, getting financial statements monthly, meeting with him quarterly, etc. has been huge for us. It shows in our assets, too. In addition to our house, cars, and other property, we have $500K in retirement (401Ks and IRAs) and other liquid funds now. When we first started with him in 2002, we had about $80K total in these funds and some debt (credit cards). Our only debt is our $135K mortgage (our home, which sits on three lakefront lots, is valued at $400K). I know that some people can do just as well on their own, but like others here we would not have because even when we were debt free, we did not get into saving a lot. I had transitioned on my own to contributing more to my 401K, but that's a far cry from the $500k I am speaking of now. I know financial planners are often a can of worms, too, but they can be fabulous. Having him in our corner has made us work far harder at saving and be much more on top of our financial situation all the way around. I am pretty sure I am going to get slammed for this comment, but the lack of excitement for saving is where our financial planner has been phenomenal for us. Somehow having him as our cheerleader, getting financial statements monthly, meeting with him quarterly, etc. has been huge for us. It shows in our assets, too. In addition to our house, cars, and other property, we have $500K in retirement (401Ks and IRAs) and other liquid funds now. When we first started with him in 2002, we had about $80K total in these funds and some debt (credit cards). Our only debt is our $135K mortgage (our home, which sits on three lakefront lots, is valued at $400K). I know that some people can do just as well on their own, but like others here we would not have because even when we were debt free, we did not get into saving a lot. I had transitioned on my own to contributing more to my 401K, but that’s a far cry from the $500k I am speaking of now. I know financial planners are often a can of worms, too, but they can be fabulous. Having him in our corner has made us work far harder at saving and be much more on top of our financial situation all the way around.

]]> By: bethh http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115063 bethh Thu, 31 Jan 2008 23:10:33 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-115063 This is all quite interesting. I'm not debt free, and won't be for a while, but I'm getting there. I paid off my credit card in August, and my car will be paid off in two more months. I still won't be out of debt, though: I just ran the numbers for my school loans - Sallie Mae is HAPPY to give me 12 more years at the low amount I'm paying. I just realized (thanks to my tax forms) that almost four full payments per year are dedicated solely to the interest on the loan.. and it's at a low rate! So, I'm going to add $100/month to the loan repayment, which will cut the payoff to 7 more years, and "only" two payments/year will cover the interest assessed (yes, I know it'll drop over time). I noticed that though I'm no longer paying $700/month to my credit card, my saving hasn't increased by that amount... of course, I'm a bit ahead of the game by already having paid off some later-this-year vacation expenses, and I closed out the holidays without any debt, but still... it's time for me to figure out how to get cash in the bank. If I'm just going to fritter it, I'd be better off just paying off my student loans. This is all quite interesting. I’m not debt free, and won’t be for a while, but I’m getting there.

I paid off my credit card in August, and my car will be paid off in two more months.

I still won’t be out of debt, though: I just ran the numbers for my school loans - Sallie Mae is HAPPY to give me 12 more years at the low amount I’m paying. I just realized (thanks to my tax forms) that almost four full payments per year are dedicated solely to the interest on the loan.. and it’s at a low rate!

So, I’m going to add $100/month to the loan repayment, which will cut the payoff to 7 more years, and “only” two payments/year will cover the interest assessed (yes, I know it’ll drop over time).

I noticed that though I’m no longer paying $700/month to my credit card, my saving hasn’t increased by that amount… of course, I’m a bit ahead of the game by already having paid off some later-this-year vacation expenses, and I closed out the holidays without any debt, but still… it’s time for me to figure out how to get cash in the bank. If I’m just going to fritter it, I’d be better off just paying off my student loans.

]]> By: Vic http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114985 Vic Thu, 31 Jan 2008 17:36:21 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114985 The timeliness of these posts are amazing. I spent 14 months getting out of debt, and am in the process of transitioning from paying off debt to building up savings. It took me several months of trying to pay down my debt before I started my snowball rolling. Once I got some momentum going, it just took some determination to stay on track. Now it seems that expenses have been popping up and hindering any savings progress. Is there such thing as a "Savings Snowball"?... lol. The timeliness of these posts are amazing. I spent 14 months getting out of debt, and am in the process of transitioning from paying off debt to building up savings. It took me several months of trying to pay down my debt before I started my snowball rolling. Once I got some momentum going, it just took some determination to stay on track.

Now it seems that expenses have been popping up and hindering any savings progress. Is there such thing as a “Savings Snowball”?… lol.

]]> By: Cornelius http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114978 Cornelius Thu, 31 Jan 2008 17:11:11 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114978 An interesting post there J.D. Thanks for including your reader's thoughts. The psychology of saving is a challenging thing and sometimes being in debt is less stressful than being out of debt, but without income, or having unemployment! The hard thing with savings is the amount of interest you get on them. Currently in Australia the rates are over 6%. That's much better than 4 years ago when savings were not getting much. Cheers.. An interesting post there J.D.
Thanks for including your reader’s thoughts.
The psychology of saving is a challenging thing and sometimes being in debt is less stressful than being out of debt, but without income, or having unemployment!

The hard thing with savings is the amount of interest you get on them. Currently in Australia the rates are over 6%. That’s much better than 4 years ago when savings were not getting much.

Cheers..

]]> By: Aaron Pinkston http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114969 Aaron Pinkston Thu, 31 Jan 2008 16:06:06 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114969 Another way to do this is to get hit your savings goal first, and then attach you debt. This way, you break the cycle of debt first so that you don't take two steps forward and two steps back (as Paula Abdul might say). If you shop around for savings rates and credit rates as this site mentions, you should be able to get a deal that only costs a 2-3% swing. That's not a lot for the liquidity that you now enjoy knowing you will never need to increase your revolving debt again. Another way to do this is to get hit your savings goal first, and then attach you debt. This way, you break the cycle of debt first so that you don’t take two steps forward and two steps back (as Paula Abdul might say).

If you shop around for savings rates and credit rates as this site mentions, you should be able to get a deal that only costs a 2-3% swing. That’s not a lot for the liquidity that you now enjoy knowing you will never need to increase your revolving debt again.

]]> By: Bonnie http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114960 Bonnie Thu, 31 Jan 2008 15:29:23 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114960 I just received an unexpected $1500 bonus from my job. I put $1000 into an ING savings account for my emergency fund, and put the extra $500 toward my usual credit card payment, which allowed me to pay over $1000 toward my debt this month. (Usually I'm doing well if I can pay $500.) I've been feeling great all week--just thinking about my new $1000 emergency cushion makes me happy. This is the first time in my life that I am excited about savings. I think it has to do with a new mindset. I just received an unexpected $1500 bonus from my job. I put $1000 into an ING savings account for my emergency fund, and put the extra $500 toward my usual credit card payment, which allowed me to pay over $1000 toward my debt this month. (Usually I’m doing well if I can pay $500.) I’ve been feeling great all week–just thinking about my new $1000 emergency cushion makes me happy. This is the first time in my life that I am excited about savings. I think it has to do with a new mindset.

]]> By: Lee http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114959 Lee Thu, 31 Jan 2008 15:26:30 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114959 @Sam: I think that once you get that $50k in savings (even $20k), you'll feel a lot more motivated to save. Especially when you can see your money growing by $100 (give or take) a month in interest. I'm currently excited about hitting the $100k mark in RRSP's (same as 401k), so it's all about shifting your motivation. But it did take me a while (several years) to get into the "save for the long term" mentality. Once you're there, its an easy ride though! @Sam: I think that once you get that $50k in savings (even $20k), you’ll feel a lot more motivated to save. Especially when you can see your money growing by $100 (give or take) a month in interest. I’m currently excited about hitting the $100k mark in RRSP’s (same as 401k), so it’s all about shifting your motivation. But it did take me a while (several years) to get into the “save for the long term” mentality. Once you’re there, its an easy ride though!

]]> By: Sam http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114933 Sam Thu, 31 Jan 2008 13:45:04 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114933 We just wrapped up paying off $55,500 in debt 1/15/08 and we set $50,000 in saving goals for 2008. We/I are having some trouble getting excited about savings the way we got excited about paying off debt. We have not reverted back to old spending habits but getting motivated about savings is hard for us right now. We are cont. to refrain from using our credit cards, we are working on a 2008 budget and we have studied our spending habits from 2007 to see where we spent too much or not enough. And while we did not give ourselves a we're out of debt reward one of our savings goals is to save for a nused car for me. We also use many of the tools TosaJen mentioned in her post, we have auto deposit to our 401k and auto transfer to savings, etc. We also limit the amount of money that we have available to spend and the goal is to put the remaining towards our savings goals. Still, with all that said, I feel blah about savings while I was super excited about paying off debt. We just wrapped up paying off $55,500 in debt 1/15/08 and we set $50,000 in saving goals for 2008. We/I are having some trouble getting excited about savings the way we got excited about paying off debt. We have not reverted back to old spending habits but getting motivated about savings is hard for us right now.

We are cont. to refrain from using our credit cards, we are working on a 2008 budget and we have studied our spending habits from 2007 to see where we spent too much or not enough. And while we did not give ourselves a we’re out of debt reward one of our savings goals is to save for a nused car for me.

We also use many of the tools TosaJen mentioned in her post, we have auto deposit to our 401k and auto transfer to savings, etc. We also limit the amount of money that we have available to spend and the goal is to put the remaining towards our savings goals.

Still, with all that said, I feel blah about savings while I was super excited about paying off debt.

]]> By: Lee http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114928 Lee Thu, 31 Jan 2008 13:08:31 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114928 I'm not seeing this "transition" from debt to savings as a big hurdle. Perhaps that's because I'm still in debt, however I have been saving for years. I think in the first 5+ years of your working life (I'm 28), it's really quite difficult not to accumulate debt. There's student loans, cars, a house, furniture for the house, etc. But this doesn't mean that you can't save (I guess this sort of goes against the debt snowball approach). As soon as I started working I started pumping money into my RRSP (I'm Canadian) and as soon as I was maxing that out, I started putting money into non tax-deferred savings. I've got an emergency fund built up. And I have a lot of debt. I think it's a balance though. My wife and I have about $60k in misc debt (loan, line of credit, cars) that we are working to pay off, and $185k left on our mortgage. But we've got $80k in RRSP's, have $120k of equity in our house, and a $1000 emergency fund (working on building this higher). My point? If I sold everything, I wouldn't be in debt. My belief is that if you have a good retirement plan (mine is to retire at 50), and you do the required steps to get their (i.e., pay yourself first), accumulating a bit of debt here and there on the way shouldn't make you feel bad, because you are already taking care of your long term financial needs. Now, if you need to be debt free to sleep at night, I guess this type of mentality isn't for you. But it works for me! If everything goes as planned I will be out of non-mortgage debt by mid 2009 (that pesky $60k). All the money that currently goes to that debt will immediately go into a mutual fund and it won't feel any different than it does now. I'm not paying down my mortgage at all, since it's at 5% and I'm making 8-14% in my investments. It seems like a pretty simple transition to me, but perhaps I'll have a different tune to sing when I get there! Happy Saving :-) I’m not seeing this “transition” from debt to savings as a big hurdle. Perhaps that’s because I’m still in debt, however I have been saving for years. I think in the first 5+ years of your working life (I’m 28), it’s really quite difficult not to accumulate debt. There’s student loans, cars, a house, furniture for the house, etc.

But this doesn’t mean that you can’t save (I guess this sort of goes against the debt snowball approach). As soon as I started working I started pumping money into my RRSP (I’m Canadian) and as soon as I was maxing that out, I started putting money into non tax-deferred savings. I’ve got an emergency fund built up. And I have a lot of debt.

I think it’s a balance though. My wife and I have about $60k in misc debt (loan, line of credit, cars) that we are working to pay off, and $185k left on our mortgage. But we’ve got $80k in RRSP’s, have $120k of equity in our house, and a $1000 emergency fund (working on building this higher). My point? If I sold everything, I wouldn’t be in debt.

My belief is that if you have a good retirement plan (mine is to retire at 50), and you do the required steps to get their (i.e., pay yourself first), accumulating a bit of debt here and there on the way shouldn’t make you feel bad, because you are already taking care of your long term financial needs.

Now, if you need to be debt free to sleep at night, I guess this type of mentality isn’t for you. But it works for me!

If everything goes as planned I will be out of non-mortgage debt by mid 2009 (that pesky $60k). All the money that currently goes to that debt will immediately go into a mutual fund and it won’t feel any different than it does now. I’m not paying down my mortgage at all, since it’s at 5% and I’m making 8-14% in my investments. It seems like a pretty simple transition to me, but perhaps I’ll have a different tune to sing when I get there!

Happy Saving :-)

]]> By: TosaJen http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114899 TosaJen Thu, 31 Jan 2008 08:15:46 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114899 Seorsa: Do you and your wife agree on financial and life goals that make being debt-free and having savings worth working for? If you aren't on the same page with your goals, it's going to be hard to get her as a full participant with you in changing your spending habits and lifestyle. Seorsa: Do you and your wife agree on financial and life goals that make being debt-free and having savings worth working for? If you aren’t on the same page with your goals, it’s going to be hard to get her as a full participant with you in changing your spending habits and lifestyle.

]]> By: Seorsa http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114889 Seorsa Thu, 31 Jan 2008 05:29:09 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114889 We have been in and out of debt so many times. 2006 we started with no debt except house, got huge raises, and ended up with 13000 in ccard and 15000 in car debt! All this with income up about 20% in 2 years. I think we have had an attitude of "always will be debt". I am "in charge" of the bills, but say yes too way too much. I loved Dave Ramsey but my wife hated him (to self helpish for her). So now I am trying to articulate our savings needs (emergency fund and irregular expenses for a total of about 8000) before we pay down debt. With take home pay of 8K per month you would think it would be easy. I am trying to control my obnoxious personality and get my wife on board, but have started sverly limiting the checking account, and then hope to get her to look at it at least daily. Any tips for onboarding a spouse? We have been in and out of debt so many times. 2006 we started with no debt except house, got huge raises, and ended up with 13000 in ccard and 15000 in car debt! All this with income up about 20% in 2 years. I think we have had an attitude of “always will be debt”. I am “in charge” of the bills, but say yes too way too much. I loved Dave Ramsey but my wife hated him (to self helpish for her). So now I am trying to articulate our savings needs (emergency fund and irregular expenses for a total of about 8000) before we pay down debt. With take home pay of 8K per month you would think it would be easy.

I am trying to control my obnoxious personality and get my wife on board, but have started sverly limiting the checking account, and then hope to get her to look at it at least daily.

Any tips for onboarding a spouse?

]]> By: J.D. http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114877 J.D. Thu, 31 Jan 2008 03:44:42 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114877 <b>@MVP</b>: I think the issue is getting to that emergency fund of 3-6 months. Most people just coming out of debt only have about $1,000 for emergencies. I recently had $1,500 before my car repairs. My target is 3-6 months, and that's what I'm saving before, but I haven't had time to reach that yet. The danger point is when you're just passing that $0 mark, headed for positive territory. @MVP: I think the issue is getting to that emergency fund of 3-6 months. Most people just coming out of debt only have about $1,000 for emergencies. I recently had $1,500 before my car repairs. My target is 3-6 months, and that’s what I’m saving before, but I haven’t had time to reach that yet. The danger point is when you’re just passing that $0 mark, headed for positive territory.

]]> By: MVP http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114855 MVP Thu, 31 Jan 2008 00:58:13 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114855 If you have a solid emergency fund of 3-6 mos. of expenses AND you follow a budget, I'm not sure how you end up back in debt. We learned our lesson by working VERY hard to dig out of debt. There's no way we'll go back there. If we want something now, (at one time we would've charged it) we save up for it. We don't use the emergency fund for anything but real emergencies. If you have a solid emergency fund of 3-6 mos. of expenses AND you follow a budget, I’m not sure how you end up back in debt. We learned our lesson by working VERY hard to dig out of debt. There’s no way we’ll go back there. If we want something now, (at one time we would’ve charged it) we save up for it. We don’t use the emergency fund for anything but real emergencies.

]]> By: Frugal Bachelor http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114852 Frugal Bachelor Thu, 31 Jan 2008 00:31:37 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114852 I've told my story before but it's worth repeating: I completely paid off a huge amount of credit card debt, but within a year I had more debt than I ever had (and no savings). I had paid down the first debt as quickly as possible using essentially the debt snowball/snowflake method, but didn't have plan for new money, or any momentum for savings, or any knowledge of how to save, since I was putting all my money into debt, not savings, and I never learned how to save, only how to get out of debt. Now, I'm about to finish getting out of debt the second time (in about six weeks). This time I have been paying off debt much more slowly than before and already have huge momentum for savings (my cash long ago surpassed my savings), so I expect the transition will be straightforward - just add on my debt payment to what I'm already putting into savings. I’ve told my story before but it’s worth repeating: I completely paid off a huge amount of credit card debt, but within a year I had more debt than I ever had (and no savings). I had paid down the first debt as quickly as possible using essentially the debt snowball/snowflake method, but didn’t have plan for new money, or any momentum for savings, or any knowledge of how to save, since I was putting all my money into debt, not savings, and I never learned how to save, only how to get out of debt.

Now, I’m about to finish getting out of debt the second time (in about six weeks). This time I have been paying off debt much more slowly than before and already have huge momentum for savings (my cash long ago surpassed my savings), so I expect the transition will be straightforward - just add on my debt payment to what I’m already putting into savings.

]]> By: Daedala http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114849 Daedala Wed, 30 Jan 2008 23:59:43 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114849 People's systems don't really like change. Homeostasis is pretty common. We have weight set points, risk set points (buckle up and speed up is really common...), and IMO debt set points. Changing any of them is hard. People’s systems don’t really like change. Homeostasis is pretty common. We have weight set points, risk set points (buckle up and speed up is really common…), and IMO debt set points.

Changing any of them is hard.

]]> By: RacerX http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114845 RacerX Wed, 30 Jan 2008 22:52:52 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114845 I think that a lot of people crash back because they don't have a sucess plan. Now what??? I know once I paid off debt before it was, "I will never do that again, and I pay off the CC every month" but I would just end up getting right back in, but deeper since the CC's would generally boost your limits! We now know that once we are paid off, we go to building 6 months worth or savings, then fully fund all retirement, then house, then investment funds. I think that a lot of people crash back because they don’t have a sucess plan. Now what???

I know once I paid off debt before it was, “I will never do that again, and I pay off the CC every month” but I would just end up getting right back in, but deeper since the CC’s would generally boost your limits!

We now know that once we are paid off, we go to building 6 months worth or savings, then fully fund all retirement, then house, then investment funds.

]]> By: Tajhia http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114844 Tajhia Wed, 30 Jan 2008 22:50:23 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114844 I have just found this blog today (via stumble - it gave me your baked potato soup which has just solved my dinner problems for tonight!) I will be reading with interest from now on, because with 4 children we HAVE to live fairly frugally or they would cost us a fortune! While we are not exactly short of money - we tend to have aprox $2-300 CAD spare each month to put towards paying off debts (not that we have too many of those) or for savings, I don't like spending money where it is not warranted... I guess this is something I have inherited from my parents who both grew up in wartime UK Thanks for the great blog! I have just found this blog today (via stumble - it gave me your baked potato soup which has just solved my dinner problems for tonight!)

I will be reading with interest from now on, because with 4 children we HAVE to live fairly frugally or they would cost us a fortune!

While we are not exactly short of money - we tend to have aprox $2-300 CAD spare each month to put towards paying off debts (not that we have too many of those) or for savings, I don’t like spending money where it is not warranted… I guess this is something I have inherited from my parents who both grew up in wartime UK

Thanks for the great blog!

]]> By: Lawgavulon http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114841 Lawgavulon Wed, 30 Jan 2008 22:19:49 +0000 http://www.getrichslowly.org/blog/2008/01/30/some-thoughts-on-making-the-transition-from-debt-to-savings/#comment-114841 After funding the "emergency fund" - we've started saving and paying down mortgage debt. After consumer debt paydown, there is always the challenge of trying to get rid of the mortgage! After funding the “emergency fund” - we’ve started saving and paying down mortgage debt. After consumer debt paydown, there is always the challenge of trying to get rid of the mortgage!

]]>