My financial train just derailed
I was *so* close to paying off my last credit card and tackling my final big SBA loan. Argh! And my truck has turned into a serious money sink this month. It was overdue for an oil change. Got it done and it turned into fixing a bunch of oil and fluid leaks. They didn’t tell me about it, so I got $50 in labor for free and just paid for the material/fluids. $52. Then they told me it was more than overdue for some things. It’s been months since the last big overhaul, so I made plans for it to go in for a tune-up and engine cleaning (to find out where leaks are occurring). Total: $532. However, during this time, they found out that that the clutch was slipping (badly) and it needed new a new clutch, and all the bells and whistles that go with it (resurfacing the fly wheel, yada yada). ARGH! $1200 extra. And it still needs new front tires, but I’m going to have to wait on the $200-$300 on that. I guess that’s what I get for having an older used vehicle. It’s at 170,000 miles now. It better not having anything go wrong for at least 6 months or I will cry.
This has turned into a very expensive month. I have cleaned out my emergency fund, my vehicle fund, my xmas fund (obviously since I spent everything this month!), and pretty much everything except for the kitten fund (which I am not going to touch, as that is for a true emergency with my 2 cats).
So I’ve cleaned out all my savings, and still will have $1,600 to pay on my credit card, which puts me back 2 months on my informal payment schedule. J still owes me rent and his half of some big home purchases this month, so I should be getting about $600 soon. That will help quite a bit, once he actually gives me the money.
The new year starts tomorrow and I’ll be starting it from a very low financial position. I think I’m going to start really tightening the belt. Seriously curtailing the eating out, buying more cheaply at the store, significantly reducing the amount of alcohol I purchase (no more bottles of wine). At least for January. I need to get back on firm financial footings.
We’ll see if my salary changes (negatively) on Jan. 20 – the company I work for has been losing money, so I expect if no raise, then a possible salary cut, or reduced hours.
I will make this vow. If they choose to cut my hours I will get a part time job.
Here’s to wishing you all health, wealth, and financial stability in this coming year!
Best,
debtmaven
Has anyone used their EF? I haven’t…much
If there is any such thing as a 10 commandments to personal finance, one of the most important is to build up an emergency fund (hitherto known as “EF”) before paying down debt. I totally get the concept – save up a reserve of money for those bigger unexpected events so you can pay them off without resorting to using credit cards. It’s especially difficult in the beginning. For me, I was all gung ho about wanting to reduce my debt to ashes! I wanted to start RIGHT AWAY! Unfortunately, $45K in debt won’t just disappear overnight, no matter how hard Iwanted it to. So I built a budget, paid all my debt minimum payments, and paid myself first (into an EF of course) before paying extra towards any actual debt.
Once I got to $1,000, I was set. I had that cushion…just in case – something – happened. Only it never really did. Oh sure, my truck has broken down, 3 times in the last year!, but my mini-savings fund for my vehicle covered it mostly (every so often I would be short say $200). My computer broke last month and had to be repaired. I had to move and poney up last month’s rent + deposit and all that. I have had to consistently cover reduced income from J’s unemployment checks (60% of his prior income!) since March. But ya know what? I haven’t really had to dig into my emergency fund almost at all.
Most of the time if something unexpected comes along, I just pay less towards debt that month. I have used it on a rare occasion to cover rent if I don’t have time to deposit my paycheck in time, but I’ll transfer the funds back within a day or two, but I really don’t use it.
I also have access to several credit sources that have fairly low rates. My SBA loan has 5%. My BECU visa is 6.9%. If it’s a difficult amount to cover all at once with my usualdisposable income, then I put it on a credit card – that’ll give me a few weeks of breathing room, and up to 2 months to pay it before any interest accrues. Plenty of time to not use my EF, and just pay less in debt for both months. You see where this is going?
I know I’ve been quiet on the blog in the past few months, but if anyone is reading this, have you used your EF? Has it been helpful?
Revisiting the ideal emergency fund
Up until this past week, I thought having a $1K emergency fund would be more than sufficient. My job is ultra-stable, not in danger of disappearing or being cut down even if other people have reduced hours. So I never worried too much about it – if something really BIG happened, more than I had saved up for, then I could always temporarily dip into my (now paid in full!) personal line of credit.
I get the concept of having 3-6 month’s of living expenses saved up, “just in case.” I’d love to do that! But I really want to pay my debt off first. Saving and increasing my 401K percentage and contributing to an IRA will just have to wait until my debt is GONE. It should be about 3 more years.
There is one major flaw with my accepted theory. An injury or health problem that causes me to be unable to work. A co-worker broke her wrist a week ago, outside of work. So worker’s comp won’t apply. She’s unable to do most of her job (it is physical and requires movement and range of motion). In effect she will be losing quite a bit of work until the whole healing process is complete.
If I had a similar situation, say I get into a bad car accident, or fall on a hike and break my leg or something, how would I handle that? Right now my EF is at $700 (but as I’ve mentioned recently, when I get my tax refund in the next 2 weeks, I will drop in another $300 to fully fund it). I think I’ll continue to gamble on nothing catastrophic happening. In the long run, having no debt and needing to use some to pay for it vs. having a big savings fund to deplete but not being able to make any headway on paying down debt come out equal in my book. So I guess I’ll continue with my status quo.
A few financial tidbits for the month
From my $450 car repair total (2 tows, a triple AAA membership and a $250 mechanic bill) $200 will come from my car fund – I had completely forgotten I had anything left in it!, and $100 will come from this month’s budget, so I will only have to deplete my emergency fund by $150!!! Not as bad as I had feared.
I can return my purchased (and unused) alternator at Napa and refund my credit card by $200.
I saved a tank of gas by not driving this past week, carpooling with J in his car (we have slightly divergent schedules, so we often don’t carpool), and using J’s car to do errands or just not go anywhere. I saved about $30-$35.
Found out that my landlord has paid the electric, water, sewage bills through the end of the year, so I don’t have to pay for December. Though once I do live in my house, these bills are paid quartly, so I may get burned when I move out (unless they prorate them with a refund at the end?).
I have to go get boxes for moving at the supermarket. I alsorealized that I can utilize a TON of used cube boxes from work, so I can pretty much start packing this weekend.
We had an unexpected transport to do last night at work, so I got a nice 4 hour overtime addition at the last minute, to my timecard. Whoo hoo! This was going to be an otherwise lean paycheck.
I also got a major deal on a rental truck from a vendor we work with. A flat $25, no mileage, for a truck for Weds night through Sunday. Can’t beat that!!! And I can get all the padded blankets, foam, boxes, straps and ratchets that I could possibly use from work.
Things aren’t looking as bad as I had thought financially. I will spend a little from my EF, but still make my debt payments this month. I don’t want to fall behind, I’ll just have to build up my EF again. There are $750 of extra deposits that I’m going to have to supply, and I may just use part of my EF for that and pay extra in savings each month until I can get it back to $1000.
Emergency fund: milestone reached!
Today I hit the $1,000 emergency fund milestone! I now have a sizeable stash of cash in the bank available for last minute emergencies. I can stop contributing $100 per month for the fund and can instead send that towards paying down my debt!! Whoo hoo!
This month will also see me reach past the 50% paid off amount on my personal line of credit – by the time of my next paycheck on May 5, I will have more unused credit available on my personal loan than what I owe. That will be a nice side to be on!
My job continues to be extremely secure (really, no chance of that changing unless the company goes under, and that is highly highly improbably, we’re definitely head, shoulders, and waist, possibly even knees, above water even in this economy). At this time, I have no plans to save up a 3-6 month EF in case of job loss or illness.
December Results
I finally got my paycheck deposited and caught up on keeping tally of my expenses. I looked to be in good shape this month, with a 1 very low initial paycheck and a 2nd very large (due to mega-overtime) check. I’m just going to squeak by on meeting my food expenses, and I’m under in every other category, though I did go over significantly for coffee (I blame snow days, being housebound and getting stir crazy). I didn’t budget for gifts, so that will be a new item to add for future months.
I had $116 in snowflakes.
I just paid $500 towards my Personal Line of Credit principal. I’ve decided to focus entirely on paying down this debt – it has the highest rate of anything I owe. The SBA is low enough that I will pay the minimum only – which is simply the interest only. They do not require payment on the principal, which lets me pay even more towards the higher percentage Personal Line which is at 10%.
This month saw me have a big expected expense, my laptop. I’ll have to pay that off next month, when it hits my citibank statement. I may not be able to make any extra Personal Line payments next month, and if I don’t have enough to cover the laptop payment, then I’ll dip into my EF to pay the full balance.
I’ve also decided to put $255 towards my emergency fund, which will bring the balance up to $500! This will put me halfway there!
Totals are now updated on the right side of the page, and I’ll post a budget spreadsheet after the end of the month.
How many of you are saving or budgetting, and how did you fare this month with the economy and holiday shopping?
