Do I Really Need an Emergency Fund?

Part One- FOR ANYONE WITH CREDIT CARD DEBIT

YES, YES, Yes you do!   However, your personal situation will determine how big your emergency fund should be.

The first question you need to ask is do I have debt?  Not mortgage debt or a huge line of credit but the other debt.  The bad debt…you know credit cards, store credit cards, those things with an absurdly high interest rate.  If you have that kind of debt, then you NEED to start an emergency fund right away.

Don’t worry about paying off those credit cards first.  Instead get started right away and save or sell some things to get $1,000 quick. If you can’t save with your current income then you need a side hustle or you need to pick up some extra shifts, maybe work some overtime, is there a bonus coming – use that (you didn’t really need that new furniture or the trip to Mexico).   You see you need to pay off that bad debt soon, but first you need some safety in your life.  You need to get together $1,000 for emergencies and put it either in a cash account (not attached to your debit card) or literally in cash somewhere in your house.  Somewhere where you can’t easily spend it, because needing a pizza on Friday night, is not an emergency.  I’m tired and don’t feel like cooking, is not an emergency! Christmas and birthdays are not emergencies!

Things like a car accident, unexpected home repairs, true sickness, these are emergencies!  You need this emergency account so that when these things pop up – and they will- you are prepared, and you won’t have to go into more credit card debt to get out of them.

Once you have saved up $1,000 (see how easy that was😉) now you can start paying off your credit card debt.  Make a promise to yourself to not put anything else on those cards and pay them off – cut them up if you have no will power.  If you’re using credit cards to supplement your income, just stop.  What you need to do is to rethink your spending and your income- here’s where the B word comes in – BUDGET, because all you’re doing is making your creditors rich.

If you’ve had a true emergency and must dip into your $1,000, stop working on paying off your credit cards until you build this fund back up to $1,000.  Be super disciplined about it because this will give you that peaceful easy feeling that you deserve to feel about your finances.  Once you’ve filled that account back up, start back at knocking off your credit card debt. 

Remember that financial success is hard work and sometimes it’s not fun, however that feeling you’ll get when everything has been taken care of – you can’t beat that!

-Jodi