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Monday, March 7, 2011

Emergency Fund

For 28 years of my life I had no clue what Emergency Fund meant.  I remember sitting down with a friend who worked for Primerica.  He explained the importance of setting up an IRA account as well as an emergency fund.  He told me "Ideally, you will want to have about 6 months worth of income save up in the event of an emergency."  What an incredible idea!  Who ever thought of that is a genius.  However, 6 months worth of salary is a big number- it can be overwhelming especially when you are trying to get out of debt.

Enter Dave Ramsey.  I was recently introduced to his 7 Baby Steps.  Step number one is to put $1000 into an emergency fund.  This is logic that I can follow:  While you are trying to get out of debt, something will inevitably happen.  The car will break down, medical expenses, ect.  When those things happen, you need a reserve in which to pull.  Otherwise you will end up putting the bill back on a credit card you have worked so hard to pay down.  Not only will you pay interest on the bill, you will also be frustrated with the debt.  I know in my case, it is so discouraging and it mentally sets me back.  When this has happened to me in the past I think "Screw it, I am always going to be in debt.  I'm going shopping."  Bad thinking!!

So I've decided to build my emergency fund of $1,000.  I am lucky, because I am going to put part of our tax return into the fund. 

I am so excited to see my financial life shaping up.  I can see a light at the end of the tunnel.  It is far away, but it is there.  I just need to keep my eye on it and keep trudging forward!

3 comments:

  1. Welcome to the war! Good luck on your battles, because we are all here!

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  2. Slow and steady wins the race. And the first step is making these small commitments. You can do it!

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  3. Thanks guys! We can all win this war!

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