Loans vs. savings?
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40,000 in student loans (min. 220 per mo for 20 years), and I'm trying to save for emergencies/retirements. Meager wages. Should I try to pay above the min. or save the surplus
Loans vs. savings?Dave Ramsey says to pay off all debt first before saving for retirement. He says to have a $1000 emergency fund (only for true emergencies). Then start snowballing all your debt.
Loans vs. savings?I recommend you focus more on Saving, than on paying off debt.
I also recommend you find a way to supplement your income.
Loans vs. savings?Of course, with a few exceptions, paying above the minimum is a very good thing. This, though, is one of them.
Here's the reason: emergencies happen, no matter your planning. You must have cash or credit to deal with them or the cost of each emergency can skyrocket. An example: your car is damaged in a parking lot 鈥?someone "overparks" and crushes in your bumper, bending one fender down into the tire. You have to replace the radiator and the tire but cannot because your cash/available credit is pretty non-existent. You cannot get to work and lose your job or at least cause enough of a problem you lose a chance at promotion for a year or two. What then is the actual cost of that accident? Just the radiator and tire? Or thousands of dollars from the lost job/promotion chances?
Financial advisors routinely recommend six months wages in an emergency fund. If you try to use a credit card for that purpose, try to find one with a low interest rate (sure) and that is unlikely to surprise you a month before needing the credit with a letter lowering your credit line to maybe $50 over your current balance. In other words, save some cash. Shoot for the six months worth. Advisors want every penny of yours they can get under their thumbs so they earn money on it all, but the last thing they want is you calling for cash every other week so even they forgo some earnings by suggesting you keep the six months wages in cash. So that sounds like a plausible number.
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