Tuesday, July 14, 2009

The Emergency Fund

Well, I can't live every day of this political crisis expecting someone else to come fix my problems. So back to talking about the money I owe and the progress i'm making.
I have a lot of ideas about stuff to write, like how i'm failing miserably at keeping records of my expenses or making a budget. I mean a detailed budget, because I already have a general budget. I will post my "general" budget soon I just have to copy it from my cellphone's to-do list.
One thing I had to touch on today was the emergency fund. I was read the debt kid's http://www.debtkid.com/why-you-need-an-emergency-fund article about it and I felt myself on his shoes.
Previous I used to think I was missusing money by saving it on an emergency fund when I had outstanding debt. I should put every penny I could towards paying debt.
Then as it happens to everyone the unexpected would hit, a car repair, a higher than usual bill, someone gets sick ,etc. Any unplanned or overbudget expenses makes one whip out the credit card if you don't have other way to pay for that thing.
So the emergency fund came to be after considering that it would take me several years to get out of this debt and probably the money in the fund wouldn't be missed so much compared to the satisfaction of self-financing in times of crisis.
Two things have made my emergency fund grow now to about L. 7,000.00 ($350) . One is the automatic payroll deduction that goes straight into my emergency fund bank account. Two is the help of a dear friend in keeping for me the ATM card for that account and thus protecting me from the temptation to use it in non-emergency situations.
I have done something else. Every time I take money out of the emergency fund to pay for some emergency I make a note on a sticky note I keep on the savings book for that account. I have made a strong effort to repay the fund and not just let it organically grow thru the money I normally put on it from my paycheck.  Right now I have 1000lps to repay. This is down from the highest of 2800lps some time back.
I think if I were to advise someone on things to do to get out of debt I would say that an emergency fund should be one of the first things to do, even if it sounds like going against the nature of paying up debt. It took a lot of meditation of my part to convince myself to do it, and now i'm glad I did it to keep myself from pulling credit cards (which I have destroyed anyway!).
Think about it and take my advice..it's free.

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