When I first decided to get out of credit card debt, I didn’t understand the importance of an emergency fund.
But then I realized — the reason an emergency fund doesn’t make sense to me was because I used my credit cards as an emergency fund.
And that, friends, is a very easy way to stay in credit card debt indefinitely.
So I wised up. Dave Ramsey says that putting $1000 in an easy-to-access account is the first step toward financial freedom. The guy obviously knows what he’s talking about (or appears to!) so that’s where I started.
It surprised me at just how long it took to get that $1000 buffer in my checking account. Unexpected expenses come up all the time, and though I never felt like I was in an emergency situation, I was only able to save a few hundred dollars a month at best.
I’ve had that buffer in my account now for about a year. Then, I needed to replace my tires. Is this an emergency? I asked myself. Then I took a look at the cash in my account, the number of days left in the month, and the remaining bills that needed to be paid.
It was then I realized why I have this buffer in my account. I paid for tires without a second thought.
False. My first thought was, “hey that’s nice to have the money in my buffer to buy tires so I don’t die when it starts raining,” but my second thought was, “wow I cannot think of a less fun way to spend the better part of $500! jeez!”
I’m slowly building that buffer back up, and will have it topped off after I get paid this month.
Do you know, though, what $1000 buys you?
Peace of mind. Knowing that I can get out of a pickle without resorting to credit cards I can’t pay off in full is worth many thousands of dollars.
This is my contribution to Saving Advice‘s giveaway. Jeffrey wanted everyone to discuss the importance of an emergency fund, and wanted to give $100 toward someone’s e-fund.
$100 goes a long way!