Category: Debt

What’s The Purpose of An Emergency Fund?

Last week I had a $400 emergency. Actually it was more like a $513 emergency, and was left-out of work for two weeks. Fortunately I’m prepared for a situation like this, because I’ve been funding a small emergency fund.  And therefore had to withdraw some money from it.  Last year, it was reported that an average of 34% of respondents with an income less than $40k/year would be able to cover a $400 emergency.  Which means paying in cash, or using a credit card that’d be paid off by the end of the month.

The average number of respondents who reported being able to “handle the emergency” was higher along higher income brackets (e.g., of those making $40k – $100k / year, 62% responded in this way).  Which means that 38% and a full two-thirds (i.e., 66%) of individuals last year, earning between $40k – $100k and ≤ $40k respectively, reported being unable to handle an emergency expense totaling $400.  Furthermore, being unable to handle such an emergency expense was related to putting it on a credit card, and paying it off over time, borrowing money from friends and/or family members, or just not paying the expense all together¹.

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Tiny actions now will have a big effect later.

Eliminating Debt: How To Pay Off Credit Cards

 

What does having no credit card debt feel like?  Like discovering an oasis in the middle of the desert.  How do you get to that point?

You need to make much more than just the minimum monthly payment.  And I have transferred big chunks of my balance to low interest credit cards.  That means more of each payment is going towards the principal balance, instead of interest.   But that wasn’t always the case.   Read more