Has anyone used their EF? I haven’t…much

September 9, 2010 at 6:48 am (emergency fund)

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?

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1 Comment

  1. Laura@NoMoreSpending said,

    We used our mini EF £1k for some chimney repairs and we’re in the process of replacing it; when I had debt I couldn’t keep my EF intact – every time I saved some money I would put it towards my debt, I couldn’t help it!

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