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Author: Jubii Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308367  
Subject: Re: DeLurkign for some advice Date: 3/7/2008 8:39 PM
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How do I justify putting money in savings when I have cc debt?

I'm so glad you're thinking this over.

The only way to stay clear of cc debt is to practice saving. Otherwise when the car needs repairs, how will you pay for it? When the holiday season rolls around, how will you pay for it? If saving for those kinds of predictable expenses isn't part of your routine monthly budget, then you're planning to fail by failing to plan.

But! You are not failing to plan. You have Foolishly come to the boards for advice. Wise you. Now please prepare to duck.

(I'm sorry, it's been a very long workweek and the blow-off-steam quotient is running high over here.)

When you write you're afraid you'll blow any savings, I'm guessing you're worried about frivolous spending, like a Wii, instead of mundane real expenses like when the plumber has to come out to remove the Barbies from the U-bend of the toilet. You deal with that concern by starting a savings account at an online bank. Out of sight, out of frivolous-spending mind. The "online bank account" suggestion crops up again & again on the discussion boards, and that's because so many people have found that it works for them.

Another great feature of the online bank account is sub-accounts. Set up one for Car and one for Christmas and one for Cat, and when the holiday season rolls around, there you go, you know how much you can afford to spend on presents and the tree, because it's sitting there in its ING sub-account or the bank of your choice. Or when the cat returns from the vet with a $1,400 bill, you'll have at least part of the payment ready to meet the need.

How much to focus on savings while you're in debt paydown mode, that's another question. Send something to savings, even if it's $5/paycheck. That's like starting to exercise by walking 10 minutes a day. Anything, just to begin working those muscles.

My first savings target was for car insurance. It comes around twice a year, you can predict when and pretty close to how much, so it's easy to work out you need $X from every paycheck going into a savings pile for it. I definitely didn't have room in the monthly budget for a whole semi-annual car insurance bill, so I had to save for it. To start with, I didn't have enough dollars to set aside to save for this expense that I knew was coming. That was a wake-up call all by itself.

Get that savings pattern going, then look at the other big irregular expenses that have hit you in the past. Predictable? How often? How much? What would that be, per paycheck? We still haven't worked up to a regular Vacations savings pile, but Car, Christmas, Dog, Home Repair, & Kid Camps/Activities are covered, and it's a huge peace of mind.
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