• SkepticalButOpenMinded
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    1 year ago

    I’d put it above a small emergency fund, which you need precisely to avoid bad debt. It hardly makes sense to set aside $1000 when you have $1000 in CC debt. I’d also put it above non-essential bills. That list is weird because I would consider cell phone and internet absolutely essential. But if it’s truly non-essential, like cable or a game subscription, I would cancel until I don’t have bad debt.

    The employer match is actually maybe the only one I might keep, since you get an instant 100% ROI.

    • Affaires de PiassesM
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      1 year ago

      Mathematically, it would indeed make sense. However, for some people, getting current could take weeks/month/years, while they may not have great access to money in the mean time (maxed credit card, no access to LOC, …).

      Having a small $1000 emergency fund won’t change much in terms of interests paid, but would probably drastically reduce their stress, as they would not be under the impression of failing anytime a new emergency pops-up.

      For the bills, in many cases, not paying them may lead to additional fees that put them way above a 10% rate : for example, a friend of mine missed an internet bill payment because his credit card number had changed, and got a $45 fee on top of his 39.95+tx bill for every month he didn’t do his payment on time, and also had to pay interests on the amount. I don’t think it’s saying “go out and subscribe to new services” but “just pay what you have to pay”.

      • SkepticalButOpenMinded
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        1 year ago

        People make lots of financial mistakes for psychological reasons. Keeping needless credit card debt because it “feels good” is precisely the sort of bad decision making that a finance community should discourage. I once had a friend who had $12k in her checking/savings but kept $10k of debt on her CC. Why? Because it “felt better” to see $12k than $2k. It was a small monthly bill, but over the course of a decade, she had paid almost $10k in interest.

        But as I’m writing this, I think I thought of a better reason to prioritize a small emergency fund: avoid payments bouncing and overdraft fees. So maybe a small fund is justified for that separate reason.

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        I am NOT saying don’t pay your bills! I am saying cancel it if it’s truly non-essential. Phone and internet are essential (that flowchart is weird for calling phones non-essential), but people can live without cable and Xbox live until they’ve paid back the worst debt.

        • Affaires de PiassesM
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          1 year ago

          I feel that’s why the flowchart says up to $1000 (I’d personally discard one month of expenses). But you’re also right that it allows you to manage your money without risking quite a bit of fees.

          I also agree with you on the cancelling your bills part. I’d even push it further as a cellphone can be replaced (with free voip apps like fongo/textnow) and you can use your library/local mcdonald’s internet if your really in a terrible spot.

          • SkepticalButOpenMinded
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            1 year ago

            Yes I think you’re right. I think I’ve come halfway and softened on my criticisms of this flowchart somewhat.

            I suppose I also think that, from a graphic design standpoint, it’s overly visually complex. I might try my hand at something more straightforward.

            Au fait, j’aime bien ton nom d’utilisateur. Il correspond bien à cette communauté.

            • Affaires de PiassesM
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              1 year ago

              I agree, I also find it very complicated. I’m working on an updated version for this community, but I realise it’s quite hard to nail, both in term of content and of design.

              Merci pour le commentaire. J’avais créé ce pseudo spécifiquement pour r/personalfinancecanada, puis c’est devenu mon identité principale sur reddit.