EMERGENCY FUND FIRST
There are as many strategies for managing debt as there are debtors. However, when researching debt elimination recently, I came upon an advertisement that suggested creating an emergency fund first. This may be old news to some, but it suddenly made a lot of sense to me. One of the main reasons for not being a slave to your debt is a sense of security. Having an emergency fund is one of the best ways to create some safety and security. It’s the first step in making sure that you are prepared for the unknown. The unknown being as minor as materials for a school project to needing to re-wire your house, or maybe losing your job due to mandatory quarantine.
If you have charged your credit cards to the limit, if you have high interest “payday” loans, if you have worn family loans thin, you are not safe. You are at the mercy of anyone who will extend credit again. Your family will suffer. Your lifestyle will not improve. My question to you is, “haven’t you worked too hard to be this broke!?” I hope you are answering to yourself “YES!”
Before tackling your excess debt and debt creating behaviors, start an emergency fund. Start by deciding how much you need to have in the fund. What is the right amount? It is different for everyone. Talk to your partner. Talk to your family. What amount of unplanned expenses has stymied you in the past? It’s guessing at the unknown. However, start with what you do know. For example, you know the deductibles on your car and house insurance policies. You have insurance for large losses, but you still have to pay a certain amount.
Set the goal. Now, build that fund by creating money and taking it out of play. Give up a coffee each day. Order water when eating at a restaurant (sodas can be 25% of the check!). Now, actually take the cash that you didn’t spend and put it in the bank. Here is your emergency fund. Keep at it. Build it. Reassure yourself that the security of it is more important than coffee, soda, another cell phone case. Another anything! Make it a game. You are setting yourself up to win!