Continuing to Fund Your Retirement With Unexpected Bills/Expenses

I know the purpose of your Emergency Fund is for those unexpected bills. But what if you don't have enough money in it? Do you stop funding your retirement to pay those unexpected expenses?

I chose not to stop funding my Retirement after having surgery($1,000+) two months ago and buying a new AC unit recently ($3,400). Instead I called the hospital to work out a payment plan for twelve months that is more manageable. With the AC unit, I'm splitting the cost with my sister who resides with me. We will repay my credit card over the next 12 months. I had an offer on my current credit card for 0% interest.

I would recommend the following when you have unexpected bills:

1. Continue to pay into your Emergency Fund
2. Continue to pay into your Retirement Fund
3. Check to see if you have an online offer with your current credit card (0% purchases, 0% transfers with low transaction fees (3% or less)). Otherwise, negotiate with your credit card company to see if they can reduce your interest rate, even if it is by 2%. 
4. Negotiate your other bills as well (phone, car insurance, TV, hospital, etc).
5. Put a little money a side for something fun. I'm taking my mom on a 7 day cruise in October 2013 and planning a trip to Madrid, Spain with my sister and friends in December 2013.

I would love to read your comments as to how you came to a decision to continue to fund your retirement and/or pay off those unexpected bills ASAP.

Rhonda W.

The Dave Ramsey's Debt "Snowball" Method

Christiandebtsolutions.org/debt-snowball

I attended the second series of financial workshops by the Richland County Public Library. "Budgeting and Saving" was presented last night by Newberry College Professor Paul Smith. After his seminar I decided to make one change.

I decided to go with the Dave Ramsey's Debt "Snowball" Method. I rearranged my payment plans so that I pay only the minimum on my two highest credit cards and all my extra money (part time jobs, unexpected money windfalls) are going to my largest credit balance. My highest should be paid off by December this year.

I've always heard about the "Snowball" method, but didn't like the fact I was only paying the minimum on my credit cards except the one with the highest balance. Psychology wise I could understand why the method works. It gives you the momentum to know you can do it, that you reached a goal, and can claim, "Yes I PAID off this card, now on to the NEXT".

Dave Ramsey's Debt Snowball Method: You start with your lowest balance and pay as much extra as you can over the minimum while on all your other balances you pay only the minimum. I made up the scenario below:

Credit Card                     Owe                      Min.                     Pay                Paid off after
Discover                            $340                     $20                        $40    8 1/2 months ($340/$40)
MasterCard                       $545                     $30                        $30
American Express             $620                     $35                        $35
Department Store              $980                     $50                        $50

After 8 1/2 Months
Credit Card                     Owe                      Min.                     Pay                Paid off after
Discover                           Paid                    
MasterCard                       $305                     $30                         $70    4 Months of paying $70
                                                                               $30 + $40(What you paid on Discover Card)

American Express             $340                     $35                        $35
Department Store              $580                     $50                        $50


After 12 1/2 Months
Credit Card                     Owe                      Min.                     Pay                Paid off after
Discover                           Paid                    
MasterCard                       Paid                    
American Express             $200                     $35                        $105   2 Months of paying $105
Department Store              $380                     $50                        $50

After a Year and 2 1/2 Months
Credit Card                     Owe                      Min.                     Pay                Paid off after
Discover                           Paid                    
MasterCard                       Paid                    
American Express             Paid                   
Department Store              $280                     $50                        $155            Almost 2 Months

Debt FREE after a Year and 4 Months!!!

You can then put that $155 you have been paying each month toward credit cards into your savings or Emergency fund so your credit cards won't be used as much or contribute more for Retirement. You can finally contribute to a 403b, Roth 403b, or Roth IRA with ValuTeachers if it is offered in your area. Go to ValuTeachers.com to learn more.

I would love to read your comments about the Dave Ramsey "Snowball" method.

Retirement vs Travel, Emergency Fund, & Debt Payment

When I tell people I'm a Retirement Specialist with ValuTeachers, they want to know for themselves how do I fund my own retirement, "I have high credit card debt", "I want to buy a house", "I want to pay for my kids College education", etc.  My thought is why can't you do both: Fund your Retirement and your other obligations/hobbies at the same time.

The Trevi Fountain in Rome, Italy.
Personal photo from Rhonda W.

TRAVEL: I love to travel and give it priority in my life. You learn so much from travel. My twin sister Sharee recently shared our love of travel on the Holstee Manifesto page. Prior to 2009 I didn't have a car payment so I saved what I used to spend on car payments to fund my retirement by maxing out my Roth Account ($5,000). My income in Education was not very high so I supplemented my income with various part time jobs (SAT proctoring, working football games, concert events, family shows, etc). Many people saw me at so many places they wondered when I sleep. I make it a priority to not only fund my retirement, but also Travel. 

EMERGENCY FUND: This is an area I need to improve on. You need to have 6 months to a year worth of monthly expenses in your Emergency fund. I have used my emergency fund to pay for unexpected expenses (car maintenance, health expense, etc). You can still do both: Fund your Retirement and your Emergency Fund.

DEBT PAYMENT: In 2009 I was in a car accident. Thus, I had to make car payments again. I bought a used car. With this new payment I wasn't able to finance my Roth Account to the max or fund my emergency account at the level I felt comfortable with. However, I still made it a priority to pay off my credit card balance each month. If I'm not able to pay off the full balance, I pay at least half of what I placed onto the card that month. I use Reward Cards so I get cash back or can redeem the rewards for Gift cards(great to redeem as a Birthday and Anniversary gifts). I still fund my retirement and pay down my debt.

The point is even if you have a hobby (in my case travel), funding an emergency account, and/or paying your credit cards, you still need to fund your retirement account. The standard amount to save is 15% of your gross pay. I looked at my gross pay the other day, took 15%, and it gave me an amount I should be investing. I looked at the actual figures and I was paying $5 more than I should. I was investing 7% into my State retirement fund, $100 into a 403b(LSW/National Life Group), $100 into a Roth 403b(LSW/National Life Group), and $25 into a Roth IRA with Edward Jones Investment.

You can do this. Go ahead and invest in your retirement. Whether you are in the education profession/non-profit sector or not remember to invest first in your State Retirement and then other supplemental places (Roth IRA, Traditional IRA, 401k, 403b, Roth 403b).

Rhonda W.