Have An Emergency Fund
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I am not one who should be giving financial advice as I myself have made many financial mistakes in the past, but one of the things I have learned over the years is to make sure you keep an emergency fund so that should a situation arise where you have to pay for an unforeseen expense, you can cover it without having to shoulder it on a credit card. I have read the book “Total Money Makeover” by Dave Ramsey and he mentions that before you even attempt to chop your debt down you should save up and have $1,000 in a savings account that is used strictly for emergencies only. Only after you first establish an emergency fund you start focusing on paying off your debts from smallest to highest.
Recently an unforeseen expense with one of our vehicles which requires fixing had me thankful that I had put that money away for such a purpose, now to grow it back and continue the course to hack away at debt which is a long term goal.
-Justin Germino
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Tags: Dave Ramsey, emergency money, emergency savings, have emergency fund, keep emergency fund, keep emergency money, pay off debt, paying off debt, save before paying debt, save up some money, Saving Money, thousand dollar fund, Total Money Makeover, where to start with debt
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Vote on this arti... (5)
Klaus @ TechPatio (4)
MinnieRunner (3)
Karen & Gerar... (2)
MissEb (2)
$1,000 seems like a low emergency fund to me these days but I agree you should have AT LEAST that much. I have an automatic deposit made each month by the bank from my checking to savings and try to gradually increase the amount every year. Then on paper I break down my savings account by categories: car savings, medical savings, repair savings, improvement savings, gift savings, tax savings. This system works very well for me and then when unexpected expenses come up, I don’t feel so bad because I have funds specifically designated for that purpose.
Karen, author of “My Funny Dad, Harry”´s last blog ..Are You Sure You Want to Throw That Away?
A very basic advice that soooo many people forget about, and it’s really a shame. After all, it’s much cheaper to use from your emergency fund than to increase a loan, if you have unforseen expenses.
Klaus @ TechPatio´s last blog ..Interview With World Famous Problogger Darren Rowse (video)
The book I was reading mentions that having enough to cover a car or home deductible usually $500 or $1000 for deductible is the general rough start minimum to have. Any surplus after that should go to reducing debt, and after debt is reduced, then save up to 3 months worth of salary in savings.
Yep, that cushion is better than to try and put on a loan, or charge up a card where you might have to pay interest.