Saturday, July 12, 2008
The emergency fund
I've been reading all I can about managing debt and getting rid of debt. Not the "quick, magic, rid of debt" falseness that's out there, but real, logical advice.
One interesting advice I read was that no matter what your financial situation is, one should create or build an "emergency fund".
I thought "How can I create an emergency fund if i'm pouring all the money i can into my credit cards?". Well, the answer was on the next paragraph. They said, "that logic is the same logic that got you in debt in the first place". It's like they were talking directly to me.
It says that one should build an emergency fund to tap into it when, well there is an emergency. That way you don't tap into the credit cards and get deeper in debt.
it says that the emergency fund should be about 3 months' worth of salary. WHAT! i can't even get one third of my salary in the emergency fund.
Anyway, it said i should start small and grow the fund as I could. I've asked the person who does the payroll in my office to send part of my money (a very little part) to another account that i've denonimated my "emergency fund". Whenever I get some extra money from other odd jobs and gigs I send some 10% of that money into the "emergency fund".
Now the hard part is establishing what is an "emergency". Lately getting the cars to not run out of fuel is an emergency. With the fuel prices rising each week here by about 5 US cents I have to get $7 or $15 out of the fund to put some gas in those tanks. Sometimes I also take out money to get take-out food on the weekends. I've cut down on the number of times that we get take-out food, and I use a prepaid food card (more on that on a future post about ways I try to save money).
I have to say that even this way, the "emergency fund" has helped me keep my credit cards stored and not used them.
I get those advice from a christian site called crosswalk. I'm not at all religious. It just that when searching for debt advice they had some. Their emails are very useful and they never push for you about religious subjects so I feel comfortable reading it.
IF you sign up for debt advice go here: http://www.crosswalk.com/newsletters/
Then look under the FAMILY section and select the one called "Debt Busters". It's a weekly email so it doesn't stuff your inbox.
You can also read around and see if there's more interesting for you. No pressure from me though.