Not sure but if so then the interest you would be charged on credit would negate any interest you would trying not to lose in the savings account.

An emergency fund (in my opinion) is different from a life savings account. One is used specifically for emergencies (interest not important but a nice extra) and one is used for long-term savings (interest is wanted and expected).

Again not sure if that’s what you were thinking. I tend to try and not play that game. Some people justify not paying off debt by saying you should keep low interest debt and instead save what you would use to pay it off which would earn you more interest on your money than you would otherwise save by paying off the low interest debt. My brain gets tangled even trying to think like that about money. I think simple is better and all that is needed in order to come out ahead.

Thanks for the discussion Jeremy! Good luck with your blog.

There are many factors that would make having an emergency fund for emergencies different than having a credit card for the same purpose.

A real emergency fund of $1,000 would be in an interest bearing account. If you’re paying off debt and an emergency arises, you use whatever portion of your EF to fund the emergency. No debt is accumulated and when you replace the money used for the emergency and start paying your debt off again, you’re not in a worse position than you were. If anything your debt situation has improved since paying at least your minimum payments for the time it takes to replenish the EF brings down your total debt.

On the other hand, if you use a credit card to pay for emergencies, unless you are able to immediately pay it off before any interest will accrue then you are not only paying for the emergency but also any interest that accumulates because of the financed emergency cost.

So the emergency fund placed in a savings account will earn interest while the credit card charges interest. And that’s just one aspect of it. Having the mindset of using a credit card to pay for any and all of life’s problems can become very risky to the person doing it.

“To me, if that emergency comes up and you put it on credit, wouldn’t you be at the same position overall? I’d think you would’ve even saved some money on interest in the meantime.”

As far as your comment about saving money on interest, I’m a little confused. It seems as though based on your previous statement that you’re saying that you’d save on interest if you used a credit card to pay for an emergency. Since you pay interest on credit and earn interest on a savings account I’m not sure how you’re arriving at that conclusion.

You’re exactly right about the need to move away from putting everything on credit. Most people do not pay off their credit cards every month which makes using credit the more expensive way to spend money from month to month.

“So is it more about changing their way of thinking rather than worrying about a bit of extra interest?”

Again I’m not sure I’m following you completely here. If someone were worried about interest then not using credit cards would be the way to go not the opposite which is what you seem to be implying here. If I misunderstood you or missed something let me know but yes it is mainly about changing your financial mindset and debunking the common myths associated with debt and credit that must be addressed.

You may want to read this excellent post about using credit cards as emergency funds. http://www.enemyofdebt.com/2012/01/credit-card-emergency-funds-an-alarming-trend-in-society/

I did learn some things here I was not aware of before, such as your income not affecting your credit score. It doesn’t matter as long as you pay the bills! This is great news to me as I try to raise my scores and lower my debt!

Sorry for my ignorance in this matter, but I’d like to learn more about this. I guess the main point is that the person gets out of the habit of putting everything on credit, resulting in better long term success. So is it more about changing their way of thinking rather than worrying about a bit of extra interest?

My latest post is about this particular subject. It’s about “Marge”, a friend of mine’s mom who tried to apply for a store card after being debt free since 1966. Her score wasn’t just low, she didn’t even exist in the system. Why she wanted the card I don’t know, but how she handled it makes for a good story.

That’s just a start, but I am willing to bet that most people could easily find ways to save several hundred dollars a month by getting rid of all the convenience items in their lives.

BUT, what Ashley is essentially talking about here is having an emergency fund instead of using credit to fund life’s little problems. That is one of the most crucial elements to changing financial direction so I’m a little confused by your questions.

Are you both saying that someone with debt isn’t going to think it’s important to have an emergency fund so they should just accept that or are you saying that they should immediately start throwing extra money at their debt without having a backup emergency fund?

If everyone took this kind of an approach there would be lots of people, including myself that would have never become debt free. We had $26K in debt and we saved not $1,000 but $2,000 before we started paying down our debt. It’s a part of the process and something that made paying off our debt so much easier.

How else are you going to effectively pay off debt if every time you turn around you are having to put more on a credit card because you have no other option when an emergency arises?

Just curious as to what you guys mean.

I think perhaps January was a bad time to start it since a lot of people were recovering from Christmas plus we had trouble with finding good buys worth reselling. I think we pulled it off though. I say we because I attempted to do it myself and my wife bought her own stuff. She totally kicked my butt but I learned a lot!

My wife earned Power Seller status on ebay because of how much she sold in 2011 and that comes with some great perks and discounts on fees and shipping.

One thing being that YARD SALES are the best place to get good items. LOL I can’t wait until it warms up so we can start buying from them again.