Boomer is off school yet again today, and my car got stuck twice this morning! This winter is SO MUCH FUN. Anyway on to today's topic.
I find it odd that about 6 months into my journey to be more financially literate and aware, friends are now turning to me to ask questions and advice. Case in point last week, when a girlfriend asked me
'Whitney, should I have an emergency fund in place first, or pay off my credit card?'
While I'm no expert (yet), based on what I've read and my own personal experience here is my $0.02 worth. I think it is important to set yourself up with some sort of emergency fund FIRST. A lot of people throw out amounts of $500-1000. I think that is a good place to start depending on your income. Here's why.
Let's say you throwing all your extra money at your credit card. You're making a dent in it, but then you blow out a tire. It's not in your budget, so how are you going to pay for this unexpected expense. That's right. You'll whip out your trusty credit card again and run up the balance, negating all the hard work you'd put into paying it off. Now if you'd had $500-1000 socked away you could have just dipped into it to take care of this emergency.
Depending on what your situation is, building up a small emergency fund shouldn't be too difficult. I've only been saving towards rebuilding mine since December and I'm already at $300. Cut out a few Starbucks trips here and there, and pack a few lunches and you'll be surprised how much money you can 'find' in your budget. It's not easy, and it's not quick, but it takes awhile to dig out of any financial mess you're in.
Bottom line: Keep paying those minimums until you have an emergency fund in place to cushion yourself.
For me, at first it seemed like all this work was a drop in the bucket. All told I am about $90,000 in debt.
Thank you student loans for 93% of that number.
When I stopped focusing on and being overwhelmed by that big number, I was able to focus on smaller goals. I can be proud that my savings are progressing. I can be excited that I threw an extra $75 on my car payment last month. Every little change and improvement to your finances is worth it!
It seems like financial health is something you guys are interested in based on the comments I've been receiving. Is there anything you'd like me to talk about in the future? I've already got one request for a post about how I'm saving money in my budget from Alisha so that's in the works! I also love reading the Sally and Perkins posts from Erin!
You can read my first A Girl and Her Money post HERE.