Comments on: Switch from Debt Reduction to Emergency Fund http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/ Talking about money, without being boring. Fri, 25 Jul 2008 11:17:25 +0000 http://wordpress.org/?v=2.6 By: Gary http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-29024 Gary Mon, 17 Dec 2007 18:40:59 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-29024 Stephanie, The "peaceful" feeling you carry by having the emergency fund is one thing. But I think the practice of building the fund also teaches you (at least it did for me) something in the process of adding on a regular basis to the fund. It proves to yourself that you can save money, your can control how your money behaves. It puts you in control of where the coins are going, instead of them flying out. The emergency fund also let's you win and seeing the balance go up. For whatever reason the credit card bills seem to move downward ever so slowly. Keep building that fund because the "unexpected" is expected sometime. I wish ore young people would grab hold to the problems debt causes in their lives! All the Best, Gary Stephanie,

The “peaceful” feeling you carry by having the emergency fund is one thing. But I think the practice of building the fund also teaches you (at least it did for me) something in the process of adding on a regular basis to the fund. It proves to yourself that you can save money, your can control how your money behaves. It puts you in control of where the coins are going, instead of them flying out.

The emergency fund also let’s you win and seeing the balance go up. For whatever reason the credit card bills seem to move downward ever so slowly.

Keep building that fund because the “unexpected” is expected sometime.

I wish ore young people would grab hold to the problems debt causes in their lives!

All the Best,

Gary

]]> By: Stephanie http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-20927 Stephanie Wed, 17 Oct 2007 17:37:41 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-20927 <b>Brian,</b> Actually, I do have a cell phone. I'm not sure what point you're trying to go at, however. Yes, I have my own car. Yes, I'm getting a higher education. These things have been well addressed throughout this blog. I could better address your concerns if I knew what you're trying to point out. Brian,

Actually, I do have a cell phone. I’m not sure what point you’re trying to go at, however. Yes, I have my own car. Yes, I’m getting a higher education. These things have been well addressed throughout this blog.

I could better address your concerns if I knew what you’re trying to point out.

]]> By: Brian McGrath http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-20926 Brian McGrath Wed, 17 Oct 2007 17:05:53 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-20926 So ... you get to take classes while you work, live with your mom and dad, you have a generous grandmother, and you drive to work and to school in your own car. Tell me at least that you don't have a cell phone. So … you get to take classes while you work, live with your mom and dad, you have a generous grandmother, and you drive to work and to school in your own car. Tell me at least that you don’t have a cell phone.

]]> By: Stephanie http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-20268 Stephanie Tue, 09 Oct 2007 18:09:52 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-20268 <b>Brian</b>, I have a car because I live 20 miles away from my campus - where I go to class and work. My car was partially a gift from my grandmother. It is my biggest expense, but it allows me to live off campus, at home with my parents, which saves me $3,500 a year. Brian,

I have a car because I live 20 miles away from my campus - where I go to class and work. My car was partially a gift from my grandmother. It is my biggest expense, but it allows me to live off campus, at home with my parents, which saves me $3,500 a year.

]]> By: Brian McGrath http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-20263 Brian McGrath Tue, 09 Oct 2007 17:15:37 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-20263 You've got a car !? ... luxury, luxury, luxury. You’ve got a car !? … luxury, luxury, luxury.

]]> By: Jon http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14423 Jon Mon, 13 Aug 2007 16:02:01 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14423 For me, having an emergency fund gives me great peace of mind. I would rather have it sitting in the bank than have paid an extra $1000-$1500 on my debts during the time I was saving. It has already saved me in an instance where I needed to write a check to someone where a credit card would have been of no use. For me, having an emergency fund gives me great peace of mind. I would rather have it sitting in the bank than have paid an extra $1000-$1500 on my debts during the time I was saving. It has already saved me in an instance where I needed to write a check to someone where a credit card would have been of no use.

]]> By: Jennifer http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14265 Jennifer Sun, 12 Aug 2007 02:14:30 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14265 I have this sort of emergency fund, but for me it is called my summer fund. Since I drive school bus and don't work essentially all summer. I have to work all winter to make enough to be able to live during the summer and because I don't work in the summer I tend to want to do things, so I need that money to say go to the zoo. So my emergency fund runs short right now...but I grow it as large as possible by June. I try very hard not to use any credit cards. Those are my backup emergency fund. Aaaahhhh when I have to use them it sucks. I have this sort of emergency fund, but for me it is called my summer fund. Since I drive school bus and don’t work essentially all summer. I have to work all winter to make enough to be able to live during the summer and because I don’t work in the summer I tend to want to do things, so I need that money to say go to the zoo.

So my emergency fund runs short right now…but I grow it as large as possible by June.

I try very hard not to use any credit cards. Those are my backup emergency fund. Aaaahhhh when I have to use them it sucks.

]]> By: Don http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14244 Don Sun, 12 Aug 2007 00:01:57 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14244 Humph. I guess there is some logic there. That's a good point. Humph. I guess there is some logic there. That’s a good point.

]]> By: Stephanie http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14235 Stephanie Sat, 11 Aug 2007 22:37:18 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14235 <b>Don,</b> Except for in my case, many of my bills simply cannot be paid by credit card. Yes, if my car broke down, I might be able to pay for repairs with my credit card, but if I lost my income, I would not be able to pay all of my bills. Don,
Except for in my case, many of my bills simply cannot be paid by credit card. Yes, if my car broke down, I might be able to pay for repairs with my credit card, but if I lost my income, I would not be able to pay all of my bills.

]]> By: Don http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14232 Don Sat, 11 Aug 2007 20:27:47 +0000 http://poorerthanyou.com/2007/08/11/switch-from-debt-reduction-to-emergency-fund/#comment-14232 I have a friend who uses this logic as well. She has credit card debt but focuses on creating an emergency fund as if that "somehow" creates more security than having a smaller amount of debt. It doesn't. If you create a $1000 emergency fund and carry $1000 more on your credit card, what happens if you have a $1000 emergency? You pay it from your emergency fund. If you create no emergency fund because you paid that money down on your credit card balance, what happens if you have a $1000 emergency? You put it on your credit card, of course, and your card now has $1000 higher balance (i.e. you are in the same place as the previous paragraph). In the meantime, you are poorer by the amount of interest difference between the 5% you earn and the 18% you pay and it takes that much longer to get out of debt and achieve some real security. This is an unsound strategy to save you the feeling that you are backsliding. That may be worth something. Peace of mind (even imagined) is something. But don't be too dominated by the idea. The real financial security will come from having that expensive debt gone, and doing it by the math will get you there faster. I have a friend who uses this logic as well. She has credit card debt but focuses on creating an emergency fund as if that “somehow” creates more security than having a smaller amount of debt.

It doesn’t. If you create a $1000 emergency fund and carry $1000 more on your credit card, what happens if you have a $1000 emergency? You pay it from your emergency fund.

If you create no emergency fund because you paid that money down on your credit card balance, what happens if you have a $1000 emergency? You put it on your credit card, of course, and your card now has $1000 higher balance (i.e. you are in the same place as the previous paragraph).

In the meantime, you are poorer by the amount of interest difference between the 5% you earn and the 18% you pay and it takes that much longer to get out of debt and achieve some real security.

This is an unsound strategy to save you the feeling that you are backsliding. That may be worth something. Peace of mind (even imagined) is something. But don’t be too dominated by the idea. The real financial security will come from having that expensive debt gone, and doing it by the math will get you there faster.

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