First of all, Happy Veteran's Day and Thank You to those Veteran's out there!Today I got a pleasant surprise when I found out I was paid early because of Veteran's Day. I was so excited that I spent my whole lunch hour online paying bills. Okay, I just re-read that sentence and I sound like a complete dork, but I don't really care! I'm hoping that if you're reading this, you are kinda obsessed with your finances, like I am, so perhaps you can appreciate it and maybe even do the same thing? :)
Anyway, this week I got our account down to 6 cents! Yippee :) I'm proud. That's progress from when I started this last week and felt a little embarrassed to be so low. Now, I hold my head up high. I even showed a friend my checkbook and how little I had in it! Way to go me. The way our budget is set up, my husband and I get paid on opposite Fridays. My checks go to our bills for the month and his checks go to gas and groceries, so his becomes our actual cash that we play with. I'm loving the envelope thing and I've already convinced my hubby to look for the least expensive gas and make sure to get a receipt so we can track it.
One thing that came up while paying the bills was that I had a little extra in our account after paying the mandatory bills. I was torn on transferring it to our pretty much non-existent savings account, or putting it on a credit card that has a very high interest rate. I decided to put it towards savings. This was a bit tough for me, but I know why it makes sense. As Dave Ramsey points out... if you don't have an emergency savings account to fall back on when an emergency happens (WHICH IT WILL), you're stuck putting more money on your credit cards. In theory it all seems perfectly logical... it was just tough to do for some reason. I guess I think of all that interest building up on the credit cards and I just want to pay it off fast. Again, the magic word this week for me appears to be patience!
Question : For those of you who follow Dave Ramsey's seven steps, was it hard for you to build up your emergency savings account? Did you feel a strong desire to throw every extra penny towards your debt instead?
I guess you could say I dabble in in the 7 steps, but I did build up our emergency savings first with $1000. It's a semi hard decision because once you decide to be debt free, you want to go full throttle, but I think it is a vital part of the journey. Like you said an emergency WILL arise.
ReplyDeleteYou are not a dork, I like paying bills too... okay maybe we are both dorks.
Ha, Ha Niki - I think we both are :)
ReplyDeleteI am the same way with bills, so no worries. :)
ReplyDeleteI have had trouble building up an emergency fund because I want every loose dime thrown at my debt. However, I had an emergency a few months ago that required a $5,000 car repair and I had nothing saved up for it. I had to rely on my parents, which was embarrassing for me and probably would be impossible for others.
Anyway, I can't quite advise you to establish an emergency fund, because I'd be slightly hypocritical, but I think you will be surprised at how much mental security it provides (especially if you're running your checking account down to 6 cents at the end of the pay period). You could need an emergency $20 and wouldn't have it, which is probably taking a mental toll on you that you do not realize.
You can try it out - build up an emergency fund of $100, $200, $500 - whatever you feel comfortable with - and if it does not help and you really hate to see it sitting there, then you can always pay it to debt later!
Hope this helps. :)
At some point it was a though decision to make, but opted to build the savings.
ReplyDeleteTo make life easier I just decided that I would follow the plan for 1 year and it if didn't work I would try something else. (I am now in year 4)
You are off to a fantastic start!
Wow you are on the fast track! Good to see you are doing so well. I had the same feeling last month when I paid my bills.
ReplyDeleteI am currently not saving my $1000 due to car troubles but I do try to put aside at least $50 when I get paid. It's not much but it makes me feel a little better.
I chose to forgo the small emergency fund idea because 1) my parents can help if a true emergency comes up, 2) it's unlikely that an emergency of that kind of magnitude will come up, and 3) it just makes sense math-wise to put money toward my debt, which has a higher interest rate than any savings account out there. For your situation, I think you're doing the right thing, but it would be really hard for me too! :)
ReplyDeleteI haven't followed Dave Ramsey's steps, but I had the same issue - I knew I had to build up a savings account and I wanted to pay off debt as well. I wrote about it back in January in this post - http://payingmyself.wordpress.com/2010/01/24/dear-debt-i-choo-choo-choose-you/
ReplyDeleteI know exactly where you're coming from. It's tough! I started with just $50 or so a month and now have around $2000 saved. I am going to start paying off my credit card in January 2011 but definitely put it off (and put more on it in the interim I will admit).
I'm thinking that I should follow his cash flow plan more, and build up my 6 mos. emergency fund quicker. (Although Dave would prefer I pay off the cars first!) I hope to do both at the same time!
ReplyDeleteIf you are a nerd, then so am I! :)
I have my 1000.00 emergency fund... I still have to pay off some significant credit card debt.
ReplyDeleteThanks for the comments :) As you may have seen in my new post today, the emergency savings account is now fully funded. I hope to put it away and "forget about it" (all Italian accent style), and really start paying down the debt. Here's to it! (Raising my fake champagne glass!)
ReplyDeleteI slowly built the e-fund ($100 per month) while I paid down credit card debt. It worked out okay for me. :)
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