Hello Navink,
So you're in the forum seeking advise again.

No need to wait the dividend la... just clear the 14k debt out of the 30k in ASB. Still got balance of 16k. Then re-built the savings again...

But to be careful, you got to know how you got into the cc debt in the first place. Among the top rules or advise in personal financial management is paying the credit cards in full. If not able to do so, this means living above the monthly paycheck.

If it was a one-time big purchase/expense, this is what the savings are for. No point having savings, but using credit card instead of the savings.

This post has been edited by j.passing.by: Sep 10 2014, 01:02 PM

Yape.. that was what i am wondering.. a balance of RM16K should be sufficient to be noted as emergency fund.

Thanks! Atm, my expenses is quite high but still can manage to save around 2k/month.

Thanks for the advice. I'll consider to take out 10k and the balance 4k from my wife's ASB.


True that. 16k is sufficient as emergency back up.


Thanks for the advice..


Thanks. The debt is accumulated over the years when I'm in 20's. Now at 34 years, I think the debt and the monthly payment is not worth to pay for CC. Will try to be more prudent when spending thru CC.

Thanks. That is why this forum really helps.

I was shaking my head, because I read that reply (in blue) to me first.... and then need to edit and re-write this post after reading the first sentence.

I wonder how much interest the cc debt had compounded over the years.


============
FOLKS,
The first rule of using credit card is ALWAYS PAY THE BALANCE IN FULL.

Dreamer


(Dreamer-style)
LOL.

Yea, that's Y i added the caveat at the end of my advise. It's really hard to advise given we have not enough info.

We all advise as if he were in our shoes (Navink) but that is rarely the case.


Maybe I'm naive lol but isn't that what credit cards are for? Emergencies. Since he has 16k in debt, it's better to pay it off and IF an emergency arises, he could use that credit card. That's FAR better than keeping the 16k debt (@15% interest) for an emergency "saving/investment" that only nets ~8%.



just to add: the reason for credit cards to exist is
1. to build ur credit score
2. to get benefits/discounts
3. (it's better not to use this, but...) emergency

This post has been edited by polkiuj: Sep 10 2014, 03:57 PM

Yeah - understand where U are coming from where he has $ to knockoff his credit card debts BUT kept for emergency fund pulak.

i'm generalizing that "Relying on loans/credit card" for emergency fund
may get one into further hellish area
VS
having buffer funds (assUme-ing that one has no crazy interest rate owed).

I think one of the most misused and abused term in this thread is 'emergency fund'.

One site, Investopedia, defined it as:

An account that is used to set aside funds to be used in an emergency, such as the loss of a job, an illness or a major expense. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt, such as credit cards, as a last resort.

http://www.investopedia.com/terms/e/emergency_fund.asp

And from the Oxford Dictionary site, on 'emergency':
A serious, unexpected, and often dangerous situation requiring immediate action.

First, let's put aside the false notion that it is any emergency situation that you need to have cash in hand to meet the expenses. You may use credit card to 'pay first'. Or even negotiate that the urgent, immediate action to be done first... payment later... in a lump sum or in stages.

In short, an emergency fund is for meeting the expenses in an unexpected situation.

So, the important discussion point is (in this financial thread): How much should we set aside into an emergency fund?


Investopedia suggests 'enough money to cover at least three months of living expenses'. While I often heard Suze Orman talks about '8 months'.

Anyway, they are rough thumb-of-rule figures, because how do we really know how much the unexpected situation will cost? 3k, 30k or 300k? If we can expect it to cost this much or that much, it is NOT an "unexpected" situation!

So how to go about this whether we have adequate emergency fund or not?

Say in case of unexpected illness, or an accident that will have a hefty medical bill.

In my opinion, there's nothing much to worry unnecessary about when it is futile to do so. You do the best you could do, and save as much as you could for the rainy days. And if you can afford to, maybe buy some insurance.

If in the unexpected situation of losing one's job and income, the emergency fund should cover your monthly expenses till you get another job. In this case, I would say roughly about 6 months of your gross salary.

Of course, when you're unemployed and seeking new employment, you should trim your living expenses; and try to stretch the savings further as far as possible.

Some of the expenses are fixed and cannot be trimmed; such as installments for car and housing loans, and house or room rent.

Some may opined that living expenses such as food and drinks should take priority over the loans when the emergency fund is running low, and inadequate to meet all expenses... but why get into this sort of situation when we should be financially prudence over our expenditures and purchases?

I stop spending my cards since last year.. Since 2013, I managed to close my car loan n personal loan.
Now i'm targetting to pay off CC so I can close all my bad debt and fully concentrate on savings n investment..

That's a very good definition @j.passing.by

That's my suggestions exactly. Paying off that CC debt (for Navink) means that he still has ~14k in ASB and a full credit CC to utilize in case of emergency; i.e. lose job, medical, accident, etc. (pls dun unless really Really REALLY necessary)

Cos it just doesn't make sense to keep 30k and have a 16k debt with insanely high interest.

Other "emergencies" i can think of is if u need to move out, etc which will need a few thousand but not anywhere near 10k. I think you're pretty safe unless u have an Ah Long or something come after U.

Yes, we should be clear what is an emergency fund... and not go blindly into a mistaken idea that we must, to be financially secured and prudence in our spending, that we MUST have this amount X set aside in liquid savings/investments.

I'm not sure how ASB calculates their dividend, or how much the dividend will be, so I'm not going to comment further what Navink should or should not do. Maybe he need to have that amount to stand-by...

It is up to him to resolve and find his way out of his dilemma... and us to share our 2 cents opinions.

And here's another 2 cents... or maybe not worth 2 cents.

Generally, my financial 'principle' is "Spending first, then savings, then investments". (Somewhat copied off Suze Orman's "People first, then money, then things". )

So it does not really matter, to me, how much is the emergency fund, or how much would be left in the emergency fund after paying off any debt.

I would rather have zero savings and emergency fund if I have to used up all my savings to clear off a credit card debt or a personal loan. (Otherwise, how to achieve 'financial freedom' when you're not debt-free?)

We should take care of the 'spending' first, and let the savings will take care of themselves... by taking care of them with safe and sound 'investments'.

Always try to keep any concept as simple as possible; and avoid creating confusion to ourselves, such as how much we could saved or gained by having such-and-such investment by borrowing from such-and-such loan.

It could wrongly lead to thoughts that we have such-and-such amount of money in in Investments A, B, C while conveniently forgetting that we have also Debts A, B, and C.

It could creates a false illusion of having more wealth than we otherwise have.

When an unexpected situation finally arrived, we would then had a false budget of how much we can really spend. And more often than not, there's always room to bargain or negotiate or options to opt for a lower cost and expenditure... but since we started off with a false budget, we could end up overspending, and spending beyond our means.

ANOTHER RULE in personal financial management: Never spend and live above our means.





==============


Btw, taking a loan to invest into ASB is not going against the usual financial principle of 'don't borrow to invest'. Let's this be clear...

And it is a rare example where "Spending first, then savings, then investments' don't apply, since you don't need to have 'savings' to initiate the investment.

First of all, I would like to say THANK YOU to all the comments. You guys really take time to explain in details / not in details the cons of having the CC debt. I've decided to settle the CC debt by this week.

Thank you..

Congrats! I hope you will enjoy ur lack of high interest debts which can allow u to focus on ur savings and investments. Don't forget to spend time with your family and friends and try not to be Uncle Scrooge hehe. =)

Hopefully I can live happily without ANY BAD DEBT.
The CC debt eaten RM800 on monthly basis.. Now that RM800 will go straight into ASB.

Again Thank You.

remember to cut up your card! or stash them far far away.

Yup.. Plan to change card that have zero annual fees. Any recommendation?

All CC and banks can waive annual fees if you are a good pay master with 0 outstanding monthly

usually i need to call them and they'll say i need to swap a certain times for that month to waive the thing... thinking of switching cards within the same bank or different bank that comes with 0 annual fees.

Maybankard 2 Platinum. Best card ever. Not so great now but still very good.