Author Topic: Is it worth having emergency savings if you have debt?  (Read 6791 times)

partgypsy

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Is it worth having emergency savings if you have debt?
« on: August 20, 2015, 01:49:12 PM »
This coming year (and next year as well) our cash flow is going to be negative, primarily due to private school expenses for youngest, the tune of 13-16K a year, for the next two years (pretty much necessary due to her learning difficulties). We were hoping to cash flow it by my husband working additional hours and that has helped, but we have already run into snags, namely in the past month alone needing in addition to the 1600 a month additional payment, to replace washer (and hence dryer) to tune of 1800, $500 car repair, and termite treatment (1K). We have about 2K in a savings account (pays about 1.2% interest), and another 2K CD (1.85% interest), and other than a little cushion in checking and that's all the liquid cash we have. We took out a heloc and because of these hits already have a 1900 balance on it.

I guess we should just cash out the last bit of money to pay for all these expenses, but I am hesitant to (we seem to be more motivated to pay off debt than accrue savings, so I feel it would be psychologically easier for us to pay off debt, than to replenish the emergency fund). We are hoping to pay back any debt put on the Heloc in the period of Feb-may, when there are no tuition payments and will get a tax refund, or in 2 years time once the tuition bills end. 

CmFtns

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Re: Is it worth having emergency savings if you have debt?
« Reply #1 on: August 20, 2015, 02:04:11 PM »
If your heloc interest rate is higher than the interest your savings makes then math tells you to pay off the debt. You do not need an emerjency savings because if there is an emergency you would just pull money out of the heloc instead of savings and end up in the exact same place

Scenario 1:
$4k in liquid cash in savings
-$2k in debt

PAY OFF DEBT AND NOW (use 2k of savings to pay off debt)

$2k in liquid cash in savings
$0 in debt

OH NO $4K emergency (take 2k out of savings and 2k out of heloc)

$0 in liquid cash
-$2k in debt

Scenario 2:
$4k in liquid cash in savings
-$2k in debt

DON'T PAY OFF DEBT

...then

OH NO $4K emergency (take 4k out of savings)

$0 in liquid cash
-$2k in debt

except in this scenario you would have slightly more debt because of slightly higher interest rate

But Mr Money Mustache probably explains it better than me:
http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

I cant really comment on the mental motivation to pay of debt vs save money... i'm a very linear rational numbers type of person whatever makes better math is what I do
« Last Edit: August 20, 2015, 02:06:44 PM by comfyfutons »

Mr FrugalNL

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Re: Is it worth having emergency savings if you have debt?
« Reply #2 on: August 20, 2015, 02:08:52 PM »
Quote
Is it worth having emergency savings if you have debt?

Depends on the nature of the debt.

'Inflexible' debt whereby you can't borrow more to meet new needs (e.g. mortgage, student loan): Emergency savings make sense, because you need them to meet any emergency that may crop up.

'Flexible' debt whereby you can borrow more to meet new needs (e.g. creditcard): Emergency savings don't make sense, because any emergency can be covered by going further into debt. The emergency savings would be better used to pay off the debt, because the interest on the debt is so high.

This is all assuming the interest on the money you're lending is lower than the interest on the money you're borrowing. If the reverse is true, then congratulations, because you probably have a banking licence!

partgypsy

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Re: Is it worth having emergency savings if you have debt?
« Reply #3 on: August 20, 2015, 02:14:04 PM »
If your heloc interest rate is higher than the interest your savings makes then math tells you to pay off the debt. You do not need an emerjency savings because if there is an emergency you would just pull money out of the heloc instead of savings and end up in the exact same place

Scenario 1:
$4k in liquid cash in savings
-$2k in debt

PAY OFF DEBT AND NOW (use 2k of savings to pay off debt)

$2k in liquid cash in savings
$0 in debt

OH NO $4K emergency (take 2k out of savings and 2k out of heloc)

$0 in liquid cash
-$2k in debt

Scenario 2:
$4k in liquid cash in savings
-$2k in debt

DON'T PAY OFF DEBT

...then

OH NO $4K emergency (take 4k out of savings)

$0 in liquid cash
-$2k in debt

except in this scenario you would have slightly more debt because of slightly higher interest rate

But Mr Money Mustache probably explains it better than me:
http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

I cant really comment on the mental motivation to pay of debt vs save money... i'm a very linear rational numbers type of person whatever makes better math is what I do

The heloc is 5.5 (2% above prime so can change) Yes mathematically it makes more sense to cash out the remaining funds. I just know if we did that, we may never get around to building up an emergency fund, because then we will have the heloc for the next 10 years, and after that it will be immaterial (our house will be paid off, should have better cash flow etc).
I will think about it, and if I can get comfortable about having no cash, will do so.

I am also still contributing to our retirement (about 6.5K which = 10K with job match). I suppose I could stop contributing to retirement for the next 2 years, but I feel that is a mistake. We pay less in income taxes for example due to the pretax contributions, and don't really notice the smaller paycheck. The next 2 years will be difficult though.
« Last Edit: August 20, 2015, 02:16:13 PM by partgypsy »

CmFtns

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Re: Is it worth having emergency savings if you have debt?
« Reply #4 on: August 20, 2015, 03:20:24 PM »
If your heloc interest rate is higher than the interest your savings makes then math tells you to pay off the debt. You do not need an emerjency savings because if there is an emergency you would just pull money out of the heloc instead of savings and end up in the exact same place

Scenario 1:
$4k in liquid cash in savings
-$2k in debt

PAY OFF DEBT AND NOW (use 2k of savings to pay off debt)

$2k in liquid cash in savings
$0 in debt

OH NO $4K emergency (take 2k out of savings and 2k out of heloc)

$0 in liquid cash
-$2k in debt

Scenario 2:
$4k in liquid cash in savings
-$2k in debt

DON'T PAY OFF DEBT

...then

OH NO $4K emergency (take 4k out of savings)

$0 in liquid cash
-$2k in debt

except in this scenario you would have slightly more debt because of slightly higher interest rate

But Mr Money Mustache probably explains it better than me:
http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

I cant really comment on the mental motivation to pay of debt vs save money... i'm a very linear rational numbers type of person whatever makes better math is what I do

The heloc is 5.5 (2% above prime so can change) Yes mathematically it makes more sense to cash out the remaining funds. I just know if we did that, we may never get around to building up an emergency fund, because then we will have the heloc for the next 10 years, and after that it will be immaterial (our house will be paid off, should have better cash flow etc).
I will think about it, and if I can get comfortable about having no cash, will do so.

I am also still contributing to our retirement (about 6.5K which = 10K with job match). I suppose I could stop contributing to retirement for the next 2 years, but I feel that is a mistake. We pay less in income taxes for example due to the pretax contributions, and don't really notice the smaller paycheck. The next 2 years will be difficult though.

You seem to be right on the edge of breaking even cash flow wise. Have you embraced all the areas of mustacianism? Maybe it's time to buckle down and squeeze just a little bit of savings out of some categories... at least for a couple years while your paying for school... Even a few hundred dollars a month could make some serious cash flow differences that will not just keep you out of debt during this time but will let you add a little to savings so when something does come up you don't have to rely on the heloc.

galliver

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Re: Is it worth having emergency savings if you have debt?
« Reply #5 on: August 20, 2015, 03:43:44 PM »
I'm young and a renter so I don't know how HELOC works, but in my opinion it's always good to have some cash on hand. There are some expenses that can't be put on credit cards and I imagine it would be hard to get a loan if one suddenly lost income (that calculation is different for a secured loan like a HELOC, surely).

I also think your point on psychology was valid. The only time in my life I incurred an interest charge was when early in grad school, the school took too long (>2mos) to reimburse me for conference travel expenses around Christmastime and I didn't want to break my last $1000 in savings. I preferred to pay $7.

partgypsy

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Re: Is it worth having emergency savings if you have debt?
« Reply #6 on: August 20, 2015, 03:58:25 PM »
I definitely haven't embraced all the areas of mustachiasm (aka see 1.8K washer/dryer purchase). I have some weaknesses, my husband has others. I have done better with my issues since December or so, but not enough to make up the difference.

I do know we are better at buckling down and being mustachian when there is debt to pay off, than to save for an abstract emergency. Normally it takes us a couple years to pay off 15K in debt, which we will have x2 these next 2 years. Even if we are doing great with finances hard to see us completely absorbing that amount.

I guess I could calculate the difference in interest for 2K 1.2% and 5.5% accruing for 2 years (around $200). Hmm more than I thought. Not going to get rid of the 2K CD, it's my security blanket.

AlwaysLearningToSave

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Re: Is it worth having emergency savings if you have debt?
« Reply #7 on: August 20, 2015, 04:06:04 PM »
I struggle with this question, too.  Right now I maintain a small cash emergency fund to hedge against the risk of loss of income.  We have a mortgage to pay and that cannot be put on a credit card.  I would be comfortable with a HELOC as an emergency fund for most anything else, but the mortgage is my biggest worry.

Can you pay the mortgage with a HELOC?  When are you obligated to repay a HELOC? 

backyardfeast

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Re: Is it worth having emergency savings if you have debt?
« Reply #8 on: August 20, 2015, 04:11:18 PM »
We've struggled with this too, where we're putting the bulk of our savings into paying down debt quickly, then just starting to save up again before being smacked down by an unexpected need, and so starting the cycle all over again.  When I posted about this here, the concensus seemed to be that our budget was too tight, and there wasn't enough flexibility.  In your case, (separate from dealing with your immediate deficit), if you know you have to come up with the extra money for tuition, it may be time to revisit your overall budget and start looking for commensurate savings...

It was a good kick in the pants for us; we thought we were doing ok, but we were essentially living paycheque to paycheque without a big enough buffer in our "cost" of living (because we didn't want to disrupt other savings, as you don't).

AlwaysLearningToSave

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Re: Is it worth having emergency savings if you have debt?
« Reply #9 on: August 20, 2015, 04:21:17 PM »
. . . private school expenses for youngest, the tune of 13-16K a year, for the next two years (pretty much necessary due to her learning difficulties).

I question this.  Maybe your area is different, but my wife has worked coordinating services for kids with special needs in both public and private schools.  A good number of private school parents would enroll their kids thinking that by paying they were getting better resources from the private school.  The fact is, the local public schools have access to far more resources and can provide better services to kids with learning difficulties or other special needs.  Again, I don't know anything about your situation or your child's needs so take what I say with a grain of salt, but it is at least worth remembering that the fact you are paying for it doesn't necessarily mean its better.   

partgypsy

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Re: Is it worth having emergency savings if you have debt?
« Reply #10 on: August 20, 2015, 07:42:59 PM »
It is in coordination with her local school. I love the school she is in. She has an individualized assessment program, she is pulled out of class for 3 different areas, and because of her academic difficutlies was eligible for things like after school programs and a summer program. But it wasn't enough to keep her from falling farther behind. The truth is there may be 5% of kids at either end of the spectrum, the mainstream school system doesn't have the resources to completely address their needs.

The school actually brought up this program (lower income families can qualify for financial aid; the amount we are paying is less the amount of financial aid), and the school wrote the necessary letters of recommendation from her teacher, specialist and psychologist. The way the program is designed  is she goes half the day to her regular school, half the day to this other program, and the idea/plan/hope after 1 to 3 years she is completed re-integrated back into the public school.   
We don't have to do it, but most likely she would end up being held back. I don't want the school experience to be so aversive she becomes alienated to learning and being in school. 

cincystache

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Re: Is it worth having emergency savings if you have debt?
« Reply #11 on: August 20, 2015, 08:38:35 PM »
That's a tough call. Most importantly, I hope your daughter benefits from the private schooling, good luck these next couple years.

On the financial side; You might be able to find some 0% for 12 or 18 month credit card deals, just make sure you pay the minimum on time to avoid penalties. Those are handy for short term emergencies and I would go there first before a HELOC.

Outside of that, I think the bigger problem is your negative cash flow. If you are spending more than you are bringing in you are going to either spend your current savings or take on debt (or both), that is mathematically unavoidable until you get your cash flow positive again.

I tend to vote for doing what makes you sleep better at night when the choice is between two things that are pretty close in overall effects.

Dicey

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Re: Is it worth having emergency savings if you have debt?
« Reply #12 on: August 20, 2015, 09:08:14 PM »
I see you've already sorta facepunched yourself for the washer AND dryer, (Really, you replaced a working dryer?) but it bears repeating: What the fuck? Where else are you blowing money that's not on this list? How about getting a roommate to help defray these expenses? Move into less expensive digs? Sell a car?

The thing that really gets my attention is what if a year or two doesn't do the trick and it turns into three, four, five or more? If you don't get this figured out immediately, you may be in for a very rough ride.

Sorry to sound harsh, but yes, I am trying to get your attention. I can't get over replacing that dryer under these circumstances and that you didn't check CL for a nice used washer. And $1800 was a lot more than you really need to get the job done. At this spending rate, you could be up shit creek in no time.

partgypsy

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Re: Is it worth having emergency savings if you have debt?
« Reply #13 on: August 21, 2015, 05:41:32 AM »
I see you've already sorta facepunched yourself for the washer AND dryer, (Really, you replaced a working dryer?) but it bears repeating: What the fuck? Where else are you blowing money that's not on this list? How about getting a roommate to help defray these expenses? Move into less expensive digs? Sell a car?

The thing that really gets my attention is what if a year or two doesn't do the trick and it turns into three, four, five or more? If you don't get this figured out immediately, you may be in for a very rough ride.

Sorry to sound harsh, but yes, I am trying to get your attention. I can't get over replacing that dryer under these circumstances and that you didn't check CL for a nice used washer. And $1800 was a lot more than you really need to get the job done. At this spending rate, you could be up shit creek in no time.

The only decent place to put our washer and dryer is in our bedroom, so it has to be stacking. Maybe it's a line, but they told us we couldn't stack our existing dryer with the new washer, so that's why we bought new. We now have our old washer (long story short, the deliverypeople took it against our wishes and we had to complain to get it back) so we are hoping to sell it. I was going to sell it to a friend, but because of the back and forth and not having it the friend ended up getting another.
We have been very spendy this past year. We have a screened back porch. It was in poor shape. We were hoping to just replace the walls but when the contractor came in he found issues with the foundation so except for the roof the whole thing needed to be rebuilt, to the tune of 12.4K. We also replaced our roof, and they also repaired/replaced some of the fascia, again to the tune of 15K. Our oldest started braces (and yes that is a whole other debate does she really need them or not? I don't know) again that will be the tune of a little over 5K for the next 2 years.  The biggest other spending area is groceries. I feel we spend too much there. But my husband refuses to budge in that area, and leads to fights. The thing I've been working on is my personal spending (household items, clothes for myself, etc) but as that is a relatively small part of the budget hasn't made a huge impact, as these larger expenses swamp them. We also did a 4.4K repair on our used car, whcih is a car that is not even worth 2K in the condition it is in (the same car that had $500 just last month). These have all been expenses just in the past year, which has wiped out our savings. In retrospect we should have just gotten another car, but we keep hoping if we patch the leaks so to speak we can hit a smooth area of sailing. but yeah I agree we are kind of screwed. Oh yeah forgot about the 1K bill for termite treatment this month as well.
« Last Edit: August 21, 2015, 07:26:06 AM by partgypsy »

CmFtns

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Re: Is it worth having emergency savings if you have debt?
« Reply #14 on: August 24, 2015, 08:14:31 AM »
I see you've already sorta facepunched yourself for the washer AND dryer, (Really, you replaced a working dryer?) but it bears repeating: What the fuck? Where else are you blowing money that's not on this list? How about getting a roommate to help defray these expenses? Move into less expensive digs? Sell a car?

The thing that really gets my attention is what if a year or two doesn't do the trick and it turns into three, four, five or more? If you don't get this figured out immediately, you may be in for a very rough ride.

Sorry to sound harsh, but yes, I am trying to get your attention. I can't get over replacing that dryer under these circumstances and that you didn't check CL for a nice used washer. And $1800 was a lot more than you really need to get the job done. At this spending rate, you could be up shit creek in no time.

The only decent place to put our washer and dryer is in our bedroom, so it has to be stacking. Maybe it's a line, but they told us we couldn't stack our existing dryer with the new washer, so that's why we bought new. We now have our old washer (long story short, the deliverypeople took it against our wishes and we had to complain to get it back) so we are hoping to sell it. I was going to sell it to a friend, but because of the back and forth and not having it the friend ended up getting another.
We have been very spendy this past year. We have a screened back porch. It was in poor shape. We were hoping to just replace the walls but when the contractor came in he found issues with the foundation so except for the roof the whole thing needed to be rebuilt, to the tune of 12.4K. We also replaced our roof, and they also repaired/replaced some of the fascia, again to the tune of 15K. Our oldest started braces (and yes that is a whole other debate does she really need them or not? I don't know) again that will be the tune of a little over 5K for the next 2 years.  The biggest other spending area is groceries. I feel we spend too much there. But my husband refuses to budge in that area, and leads to fights. The thing I've been working on is my personal spending (household items, clothes for myself, etc) but as that is a relatively small part of the budget hasn't made a huge impact, as these larger expenses swamp them. We also did a 4.4K repair on our used car, whcih is a car that is not even worth 2K in the condition it is in (the same car that had $500 just last month). These have all been expenses just in the past year, which has wiped out our savings. In retrospect we should have just gotten another car, but we keep hoping if we patch the leaks so to speak we can hit a smooth area of sailing. but yeah I agree we are kind of screwed. Oh yeah forgot about the 1K bill for termite treatment this month as well.

I think one thing you could work on would be thoroughly examining the potential purchases then asking yourself is there a better/cheaper/alternative way of achieving the same results. A lot of times you can achieve the same results for far cheaper. For example when I moved I was looking at washer dryers as well because I never had had one before. I shopped in the stores and looked at basic, ugly $700 top loader sets, I looked at nice $1600 front loaders, then I searched on craigslist and found people selling a barely used 6 month old front loader LG washer and dryer set for $600 because they moved and new house already had ones installed.

I jumped on that deal real quick:
http://www.lg.com/us/washers/lg-WM2655HVA-front-load-washer
http://www.lg.com/us/dryers/lg-DLEX2655V-electric-dryer

Dicey

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Re: Is it worth having emergency savings if you have debt?
« Reply #15 on: August 24, 2015, 09:08:00 AM »
Wow! The first thing that popped into my head is harsh, but sorry, here goes.

You need to stop spending retail for shit! You seem not to trust yourselves or your ability to do things yourselves. Do not throw money at something just because someone you think knows more than you do says to! Watch you tube videos, get multiple bids, defer or delay anything that you can (Did DD need braces Right.Now? Did you consult multiple orthodontists? Could it have waited a year? Could you have spread the payments out over three years instead of two?)

And what's this about DH not letting you spend less on groceries? The way to spend less on groceries is to find ways to spend less on groceries. You do not ask permission to be mustachian, you just figure it out! If he insists on his favorite brand of overpriced whatever, give him that and make cuts elsewhere. (And by elsewhere, I do not mean that you only cut your own stuff.) Write a letter to the mfr. praising their/your husband's favorite product and you might get free samples and/or coupons. Look for it on Amazon or ebay. Use swagbucks or ebates or cash back credit cards, or all three. Make it a game to see how much you can reduce the bill without changing the things that are important to him. Bonus points if he doesn't even notice.

Finally, I do not agree that you are screwed, as that implies that you will never learn from this experience. If you had the smarts to come here and ask for help, you have the smarts to figure it out and make the necessary changes.

Okay, I must stop. This facepunching is hard work! Sorry, but I hope it helps.

Easye418

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Re: Is it worth having emergency savings if you have debt?
« Reply #16 on: August 24, 2015, 09:24:13 AM »
Wow! The first thing that popped into my head is harsh, but sorry, here goes.

You need to stop spending retail for shit! You seem not to trust yourselves or your ability to do things yourselves. Do not throw money at something just because someone you think knows more than you do says to! Watch you tube videos, get multiple bids, defer or delay anything that you can (Did DD need braces Right.Now? Did you consult multiple orthodontists? Could it have waited a year? Could you have spread the payments out over three years instead of two?)

And what's this about DH not letting you spend less on groceries? The way to spend less on groceries is to find ways to spend less on groceries. You do not ask permission to be mustachian, you just figure it out! If he insists on his favorite brand of overpriced whatever, give him that and make cuts elsewhere. (And by elsewhere, I do not mean that you only cut your own stuff.) Write a letter to the mfr. praising their/your husband's favorite product and you might get free samples and/or coupons. Look for it on Amazon or ebay. Use swagbucks or ebates or cash back credit cards, or all three. Make it a game to see how much you can reduce the bill without changing the things that are important to him. Bonus points if he doesn't even notice.

Finally, I do not agree that you are screwed, as that implies that you will never learn from this experience. If you had the smarts to come here and ask for help, you have the smarts to figure it out and make the necessary changes.

Okay, I must stop. This facepunching is hard work! Sorry, but I hope it helps.

+1.  Agree with this facepunch.

$5k on braces?  Tell me you didn't get them Invisalign for your child.... Wire braces work just as good (probably better) and you could of gotten them for $2k or less.

I fucked this up to though.  I was in a rush at end of the year and so I paid $5k for Invisalign.  However, my insurance paid $1,200, company HSA paid $900, and used $2,500 FSA.  If I could go back, I would of shopped around or used Groupon.

partgypsy

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Re: Is it worth having emergency savings if you have debt?
« Reply #17 on: August 24, 2015, 09:30:32 AM »
No, it doesn't really help. The thing is, we have purchased used or made do with either used or repairing old things, and it ended up biting us in the butt big time the last couple years, costing us MORE than retail (not to mention the time and aggravation). Happen for a fridge and our current car. For me, it was worth it to reduce 1 thing I don't have to worry about in the next 5 years. 
I have to admit it didn't work perfectly anyways. Part of the allure was that they were going to both deliver and install it in a short time frame. They delivered it, but they didn't install it. My husband ended up having to get an extra part and ended up doing it himself 5 days later. So in retrospect in this situation, we should have tried to make the old dryer work, before breaking down to buy a new dryer. At the same time they were both 11 years old, and that is about the life span for these appliances anyways.
I am actually philosophical about the fact that probably for the next 2 years we will be in debt. I am going to do what I can to cut down on expenses, and my husband is doing his part by working more. But I'm not going to beat myself up about it either. It doesn't benefit me or my mindset.   

Nope, just regular braces. We got 2 quotes, and both were from people who were recommended (ood service, not price gouging). We were limited in who was in-service for the plan so there may have been others that were less expensive but out of service.
« Last Edit: August 24, 2015, 09:33:21 AM by partgypsy »

Dicey

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Re: Is it worth having emergency savings if you have debt?
« Reply #18 on: August 24, 2015, 09:52:01 AM »
+1.  Agree with this facepunch.

$5k on braces?  Tell me you didn't get them Invisalign for your child.... Wire braces work just as good (probably better) and you could of gotten them for $2k or less.

I fucked this up to though.  I was in a rush at end of the year and so I paid $5k for Invisalign.  However, my insurance paid $1,200, company HSA paid $900, and used $2,500 FSA.  If I could go back, I would of shopped around or used Groupon.

Sidetrack Warning

This tale might make you feel better, Easy. DH needed braces and did his own research. The ortho he chose charged  - wait for it - $8,800.00 for metal braces! (His insurance paid about a third of it.) He got his braces off last December and he has worn his retainers, except when eating, every.day.since. I noticed that his teeth had shifted and he asked about it when he went in for a follow-up last Friday. The technician did not mention the shifting, DH had to bring it up and then she called in the ortho. He offered to adjust his retainers, but when pressed said it probably wouldn't work. DH walked out with braces on his bottom teeth again. After that, he'll need a new retainer, which we sure as hell will not pay extra for. My point, besides the fact that I think DH's ortho was a total rip-off as evidenced by the way they rushed him through treatment, is that what he experienced will not happen to you with Invisalign. Once you complete your course of treatment, you keep wearing the same appliances at night and your teeth will not shift. And trusting your teeth to a random Orthodontist via Groupon? I'd think long and hard before I selected that option.

Finally,as someone who paid for her own braces as an adult with no insurance assist, I absolutely feel it was money well spent. Just don't "fuck this up" by not following through and wearing your retainers.

Okay, back to our regularly scheduled programming...

Rosy

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Re: Is it worth having emergency savings if you have debt?
« Reply #19 on: August 24, 2015, 10:41:47 AM »
Moving into negative cash flow territory is scary and in my opinion this certainly qualifies for "hair on fire" emergency in MMM terms. Financial restructuring is necessary to avoid the oncoming train wreck. Seeing your substantial savings wiped out is scary - realizing your emergency fund situation is scary.

It sounds like husband doesn't quite get the picture. Yes, he is doing great working extra hours and bringing in money to cover the kids school. But truly that is only part of the equation - the ground is shifting beneath your feet as we speak. You see it, he refuses to acknowlege it - hence the food debate. I'm a foodie, so nothing makes me more unhappy than having to deny myself things like expensive coffee beans that I grind myself.....
The budget, incl food has to be re-allocated - give him what he cannot do without, but challenge him to find new ways on his own to cut food spending.
Perhaps there are stores you have not shopped at yet that could be explored?
Timing the sales - if you know your favorite cereal goes on sale BOGO buy enough to last until the next sale. No need to change the brand - but 50% savings nevertheless, there are always options.
One tip I just read on this forum was to buy a grocery store gift card(s) with your credit rewards card (2 - 5% reward points for the gc purchase) in the amount you are budgeting for - voila automatic food budget.

My advice, don't let go of the cash and the CD, use the Heloc and see if you can get a 0% interest credit card, it will buy you time if you get one with 15 month 0% APR. Money for some of us is an emotional critter so keep that CD security blanket, since you know yourself well enough to know you will tackle the Heloc debt, but likely wouldn't try as hard to save.
You are not screwed - you are just in a tough spot - temporarily, but you must take action now and continue to stay vigilant so it will not capsize your financial life boat.

Put everything on hold - defer anything you can for the next two years. Unless the roof is caving in (I know you just replaced it:) you make do, you find alternative solutions and you do not replace appliances at full retail price or accept your contractors evaluation of project cost. You talk him down - find someone to shovel the dirt for half price - get two other quotes - and in general do your very best at reducing project cost.
Not everyone is handy or into DIY, but everyone can get three quotes - tell the contractor I've only got X, how can I get it done for that? Alternatives!

I must say I read your compilation of expenses as - we have the money so let's get this done, leaving a lot of money on the table that could be in your savings right now if you had pushed harder, it is your hard earned money - don't give it up so easily. It is almost as if you had accepted a life of debt - don't think like that!
You can do it - you've proven already that you managed a nice stash. So you had to spend it on normal expenses like home repairs, that is a given if you are a homeowner. However, you cost yourselves money by not acting with a frugal mindset - that is the real problem.

What is the first rule? Pay yourself first - always! You know you have money coming in and you will pay your bills on time, you just need to find a way to turn your cash flow positive and if it is just by 50 cents:)
What you need is a different perspective and your husband totally on board.
You will sort this out - but it requires your full attention every month - find ways to slash your budget. Get creative, this is only a temporary - 1 to 2 year emergency, but it could turn into a full blown financial disaster. No new clothing, no vacay, no nothing for a while, you know the drill - not eating out is a low hanging fruit - send it to your savings account, so you build up cash again.

It is quite doable - but not if you continue to make choices like the WD - now is not the time to insist on a fancy pants standard of living - that is what put you into this mess in the first place.
Speaking of alternatives - there are laundrymats that you could have used for a few months which would have put $1800 in the bank - alternatives you obviously were not even willing to consider. I know - shudder:) - but if you look at it from a frugal mindset it would have been a viable option - so there you are!

Easye418

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Re: Is it worth having emergency savings if you have debt?
« Reply #20 on: August 24, 2015, 10:50:25 AM »
+1.  Agree with this facepunch.

$5k on braces?  Tell me you didn't get them Invisalign for your child.... Wire braces work just as good (probably better) and you could of gotten them for $2k or less.

I fucked this up to though.  I was in a rush at end of the year and so I paid $5k for Invisalign.  However, my insurance paid $1,200, company HSA paid $900, and used $2,500 FSA.  If I could go back, I would of shopped around or used Groupon.

Sidetrack Warning

This tale might make you feel better, Easy. DH needed braces and did his own research. The ortho he chose charged  - wait for it - $8,800.00 for metal braces! (His insurance paid about a third of it.) He got his braces off last December and he has worn his retainers, except when eating, every.day.since. I noticed that his teeth had shifted and he asked about it when he went in for a follow-up last Friday. The technician did not mention the shifting, DH had to bring it up and then she called in the ortho. He offered to adjust his retainers, but when pressed said it probably wouldn't work. DH walked out with braces on his bottom teeth again. After that, he'll need a new retainer, which we sure as hell will not pay extra for. My point, besides the fact that I think DH's ortho was a total rip-off as evidenced by the way they rushed him through treatment, is that what he experienced will not happen to you with Invisalign. Once you complete your course of treatment, you keep wearing the same appliances at night and your teeth will not shift. And trusting your teeth to a random Orthodontist via Groupon? I'd think long and hard before I selected that option.

Finally,as someone who paid for her own braces as an adult with no insurance assist, I absolutely feel it was money well spent. Just don't "fuck this up" by not following through and wearing your retainers.

Okay, back to our regularly scheduled programming...

+1 on proper retainer wearing.  Not wearing it will definitely cause your teeth to shift and all of your money to have burned in vain.

Basenji

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Re: Is it worth having emergency savings if you have debt?
« Reply #21 on: August 24, 2015, 11:08:54 AM »
I'm confused because your question is about emergency savings, but that's not the issue really. It's all the other spending you did before the current situation, e.g., back porch. Roof I can't fault because roof, but washer dryer and back porch redo sound like things got out of hand because you started in on something that could have been a modest spend, but let salespeople/contractors roll over you. It doesn't help you in retrospect, but do try to examine this tendency for future purchases.

I'm going to be even more harsh and say that you should carefully examine the school spending as well. Those teachers are kinda like contractors, they'll tell you you need the deluxe package, and in an ideal world, maybe you do, but if it bankrupts your family, it's not the best plan. Seems like a lot of money for you all. But if it is absolutely the only way forward, I would make a family plan around it lasting more than 2 years.

partgypsy

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Re: Is it worth having emergency savings if you have debt?
« Reply #22 on: August 24, 2015, 11:33:45 AM »
I honestly wonder if we have like a sucker sign around our neck, because I will do my due diligence, get multiple quotes, then hire someone, and it is invariably significantly higher by the end of the job. The porch was originally 6-8K. It turned out to be 12.4K. The original roof quote was 9.4K. It ended up being 15K. And after they start a job, not like you can say, that is more than I thought please leave, and leave a half-finished porch or roof. At the very least these are close to 1-time jobs that should not need to be repeated, or at least not for another 20, 25 years. Same thing keeps happening with our used car. The mechanic will say, well this should be the last big thing you need to fix on the car. Until the next one happens.

The school decision I have to say has probably been one of the most difficult personal and financial decisions I've made. You will have to check back with me in a couple years to see what I think.

Basenji

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Re: Is it worth having emergency savings if you have debt?
« Reply #23 on: August 24, 2015, 11:51:17 AM »
I honestly wonder if we have like a sucker sign around our neck, because I will do my due diligence, get multiple quotes, then hire someone, and it is invariably significantly higher by the end of the job. The porch was originally 6-8K. It turned out to be 12.4K. The original roof quote was 9.4K. It ended up being 15K. And after they start a job, not like you can say, that is more than I thought please leave, and leave a half-finished porch or roof. At the very least these are close to 1-time jobs that should not need to be repeated, or at least not for another 20, 25 years. Same thing keeps happening with our used car. The mechanic will say, well this should be the last big thing you need to fix on the car. Until the next one happens.

The school decision I have to say has probably been one of the most difficult personal and financial decisions I've made. You will have to check back with me in a couple years to see what I think.
I really wish you well and obviously nothing is more important than taking care of your children. That doesn't mean you can't question school charges, ask for more money in aid, or ask for second opinions, etc.

House projects always cost more than the estimate, so there's that, but you can have contracts that limit changes in costs. We had one for a huge redesign of our entire landscape. There was a limit, it was explicit, and the contractor had to get line by line, item by item approval for added costs or he had to rebudget elsewhere. Not possible for all projects, but just an idea.

Good luck!

partgypsy

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Re: Is it worth having emergency savings if you have debt?
« Reply #24 on: September 03, 2015, 11:38:52 AM »
I'll try to update this post. participated in a group meeting at the new school, which made me feel  this is the right thing to do. Her academics failures are affecting how she sees herself and also the learning experiences, and this is a way for her to experience that with hard work comes success. It is almost like a boot camp (except not aversive) in the way they start with fundamentals, overlearn, and then use homework as reinforcement, but small focused amounts, and designed so the child can work independently. However they are serious! if the homework is not completed for 2 days in a row it results in automatic after school detention. We are really going to have to up our game, but if we can it will pay off.
 
As far as the grocery, I have taken over the grocery shopping and will detail with him what the different meals are. But he will do stuff like (this week alone), wait too late to start something that needs the crock pot, and get take out burritos for the kids instead. The following day, again not wanting to do the crock pot, going to the grocery store to buy $25 worth of food and cook that instead. I didn't say anything to him, but for him to change his mindset about this, it is going to be an uphill battle, or I will have to do both the grocery shopping and the cooking (and I know with my schedule I don't have the time). However there are times I have made multi day meals such as over the weekend, the next day he will simply make something else new for dinner and not eat the leftovers.
Some saving graces is our mortgage compared to some is relatively low, and as we both either bike or walk to work our gas bill is low ($40) (though this will go up because of the school commuting which is split between 3 parents). I have done well with spending on clothes, miscellaneous areas (no new school clothes needed at this time).  And despite the fact that of the additional expenses (school payments, a $500 car bill and 1800 in washer and dryer), managed to be cash positive the last 2 months (I'm not sure how)- though we still heloc debt from June negative income. 
Anyways because I feel the value of this experience for my daughter, I am on board with postponing things like vacations until we get a handle. We will have our 20th anniversary this spring, but like birthdays, it's really just a number, we can take a raincheck for a better time for us.
-eta I figured out how we managed to be cash-positive, I was paid 3x in July. This won't happen again the rest of the year.
I keep on thinking of things! Regarding the braces we are doing the program, that it is a fixed cost regardless of the length of time she needs to wear braces or number of visits, etc needed. It also covers the initial costs of the retainer, which they have already told us, she will have to wear for life.
« Last Edit: September 03, 2015, 11:54:56 AM by partgypsy »