Climbing From Debt » emergency fund

Response to Comment

KC — Tue, 17 Jun 2008 19:23:00 +0000

“After you pay your car off, don’t you think you should build a small emergency fund up first then start snowballing the cc debt?–your savings seems a little small –shouldn’t it be it least 500? just a thought.”

– Donna (6/16)

So I got this comment from Donna on my last net worth post and although I’d like to have a smart reason to disagree with what she says – the fact is she’s right.

To be honest, I had never saved up an emergency fund. My last $1000+ fund was due to a nice tax refund. This year, through a mistake of my own, I did not have a refund to distribute.

My weakness is that I’m in such a rush to pay down this debt and be done with it that I’m not being realistic in terms of how much I can afford to put towards it at one time. I’m setting myself up for a fall and, in some ways, I have been falling. I have stretched myself so thin a few times that I have been hit with overdraft fees at my bank. Those fees are $30 a hit.

I need to be smarter about my pay-down and I do need an emergency fund – so I’m going to dedicate a little more money to building that fund up.

Thanks for keeping me in line, Donna. This is exactly why I have this blog.

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Milestone Reached!

KC — Wed, 07 Mar 2007 22:53:00 +0000

Thanks to my trusty overpayment to Uncle Sam. I received my Federal Tax Refund yesterday.

Most of it went to paying off a credit card – my snowball plan has changed drastically since transferring a lot of my debt to recently opened 0% cards. That’s for the next post though.

But the rest of it went to bumping my “Income Security Account” (a.k.a. Emergency Fund) to $1000 status. I will still make my small monthly contributions, since I figure it can’t hurt and I barely notice the money is being taken out of my account anyway. Frankly, I’m just relieved that my Emergency Fund is up to a decent/recommended amount. Especially considering the alarming number of people out there that don’t have any money saved up “just in case”.

For my state return, which will be around $400, I’m planning to put about half of that towards my Christmas Gift account and the rest will help me get down to Florida for my buddy’s bachelor party in a few months.

And yes…again…I know it’s probably better to not get as many refunds or as much of a refund back at the end of the year. But there’s something therapeutic about these lump sum allocations that is worth the time missed. Maybe I’m alone on that.