Before You Start To Pay Off Debt….Do THIS


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The comment reminded me of myself four and a half years ago. A reader of a post featuring my get out of debt story asked for insight regarding how I handled unexpected expenses during my debt pay-off period.

I’d like to say that I had done everything perfectly during my four and a half year quest to eliminate $109,000 of credit card debt, but there were plenty of bumps along the way. If I had to single out one thing as my biggest mistake, it would be not having an emergency fund in place from the very start.

The importance of an emergency fund is discussed frequently here at Enemy Of Debt. In my Friday posts, I’m even tracking my goal to have a $1000 emergency fund in place by the end of February. But for someone that is just starting the process of getting their finances in order, this concept may not resonate as deeply.

I certainly didn’t fully understand the importance of an emergency fund when my wife and I first enrolled in our debt management plan. Unexpected expenses were an exercise in crisis management:

  • When our washing machine broke down, we had to go to the laundromat a couple days a week until saved up enough money to have it fixed.
  • When we needed new tires on our van, we borrowed money from my mother-in-law and then scrimped and scraped for a few months to pay her back.
  • When our van’s brakes were wearing down, we kept driving it knowing we were wearing down the rotors ultimately resulting in a higher repair bill once we did save up the funds to have them fixed.
  • We did dishes by hand for months because we needed to save up to fix our dishwasher that broke one Thanksgiving day.

During our debt repayment we viewed an emergency fund much like we viewed saving for retirement: Something we didn’t have the funds to do right now, but would definitely look into once we completed our debt management program. Interesting fact, each time we had an unexpected expense, we found a way to eventually save up the funds needed to do the repair, or pay back borrowed money.

It seems we had the ability to have an emergency fund all along, we just didn’t execute correctly.

The emergency fund is one of the fundamental building blocks for being successful with your finances. Do yourself a favor and get that emergency fund started. It’ll be hard to cut spending a little bit more, but unexpected expenses ARE going to happen, it’s not a matter of if, but when.

So, EOD Nation, do you really have an emergency fund, or is it simply something you’ll do “later?” How do you handle unexpected expenses without an emergency fund?

About Travis

39 Responses to “Before You Start To Pay Off Debt….Do THIS”

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  1. The Warrior says:

    If I could go back and punch 16 year old me in the face, I would do so and then tell him this exactly thing.

    An emergency fund not only helps financially, but it is a emotional and mental relief while attacking the other financial goals you might have. Not worrying about the washing machine or tires and being able to focus on the other goals knowing you have the emergency fund in your back pocket is where the emergency fund really helps.

    The Warrior

  2. We have a healthy emergency fund and it’s the reason I sleep well at night. I like having cash when things go wrong….

    • Travis says:

      Good for you, Holly. I admit I sleep much better at night knowing that I could handle most unexpected situations that would come our way!

  3. Good post Travis! I could not agree more. I remember when I started my DMP years ago the person I worked with had me set up a simple budget and then she told me that I needed an EF before I got serious. It made no sense to me at the time, but am so glad she told me to do it. Now that we’re self-employed we have a fairly healthy EF, but it lets us sleep at night and you never know what’ll come up.

    • Travis says:

      I know exactly what you mean, John….I remember the first time I heard of Dave Ramsey and his baby emergency fund. Saving up money before beginning to pay back debt didn’t resonate at all to me – but then again, I didn’t have a freaking clue how to handle my finances correctly at that point either. Great to have you stop by!

  4. I have multiple “emergency” funds. I have different accounts for different reasons. I know the struggles that you went through Travis, so I understand the importance of the e-fund as well. I wish I had a bigger one when I was paying off my debt, but I can’t change that now. It taught me a lesson and now I have a few!

    • Travis says:

      Multiple emergency funds? That’s *awesome*! I would guess you have them targeted for specific things you know are coming down the pipe – such as brakes, tires, etc? It’s too bad we couldn’t have somehow learned these lessons earlier, isn’t it, Grayson? LOL. Thanks for reading!

  5. I’m a strong advocate of the emergency fund for sure! Especially as a freelancer! It’s really going to help with peace of mind. I hate parting ways with it when there is an emergency, but better that it’s there.

    • Travis says:

      The unfortunate thing about using the emergency fund is that you then have to build it back up…but better to be proactive than reactive – right?

  6. Stephanie r says:

    I have one NOW – but like you it didn’t start up until I was nearly out of debt. It’s really hard for me to justify actually using it though still. like what besides losing a job would be big enough to tap into it. I know that I need to occassionally, but it’s REALLY hard for me to give myself persmission to use it. I think because it was so hard to save up.
    But I agree, I should have done that from the very start. . . . good, solid advice.

    • Travis says:

      My issue with the emergency fund is that I gave myself permission TOO easily to use it. I’ve tried to build one a couple of times, and each time I found an excuse to use it instead of pinching my budget a little bit (which I could have totally done). Not only do I have to force myself to save money into the fund, but I have to teach myself to only use it in a TRUE emergency. It’s hard, but having one from the start would have made things sooo much easier. Thanks for your comment, Stephanie!

  7. Dear Debt says:

    I was the opposite– I had 10k in savings and then realized it wasn’t doing so much for me as I had over 60k in debt. Now I’m down to about $1500, which makes me a bit uneasy. I don’t have a car, or kids and I FINALLY have health insurance. Crossing my fingers all will be good in 2014. I still add money to my savings just for my own sanity and comfort. I believe in EF’s so much because I’ve needed them!

    • Travis says:

      Everyone has their own comfort level, but I can see how 10K in savings with a larger amount in debt may tempt you to use some of it to pay down debt. I always hear that $1000 will handle over 90% of emergencies that may come your way. You have to find your own balance between having a fund, and paying off debt – but it sounds like you’re working on finding that balance for yourself. Good for you, Dear Debt!

  8. I’ve always been a proponent of some sort of emergency fund. Even if it’s tiny, at least it’s something!

    • Travis says:

      Good for you, Leslie! As I mentioned above, it’s commonly said that 1K would handle 90% of emergencies that may cross your path….how much do you have in your efund?

  9. Mackenzie says:

    An emergency fund has been a lifesaver for us, many a time! I am a firm believer in having one 🙂

  10. E.M. says:

    Building up an emergency fund was the first thing I did once I graduated from college and got an actual job. I am really glad I did so, as it helps me sleep at night. You really never know when you might need it.

  11. We have a $1K emergency fund in place. Once we are done with our $109K debt repayment we will be bumping that up dramatically.

  12. Tonya Rapley says:

    What a great post. I’m in Emergency Fund rehab. I’ve committed to putting aside $300 a month towards it (Im on one income). That’s what I can handle now without dipping into it. Previous uses for my emergency fund were “Plane ticket home for my sisters graduation”, or a once a year sample sale. This year I’m practicing more discipline and will have $1,000 in it by the end of Feb. It feels good 🙂

    I live in NYC and don’t own a car nor my place. My emergency fund is for unemployment protection. After being laid off from my first two jobs out of college, one could say I’m skiddish.

    • Travis says:

      Emergency Fund Rehab <--- I love that term! You've obviously learned your lesson about the importance of having an emergency fund, Tonya - sometimes we learn by experience!

  13. Well Travis, I finally started a “true” emergency fund last year. This came in handy when our cat had unexpected vet bills. It’s at about one month’s expenses for us but I would love to get it to 3 months by the end of the year and then 6 months by the end of 2015 (woah did I just set a 2 year goal? Yikes…).

  14. Kim says:

    We didn’t have much of an emergency fund when we were in debt. We just pulled out the credit card, which compounded the problem. Now, we have a large amount stashed away. Since we have rentals, it helps us feel better about things that do happen. Ironically, since we’ve had a good cushion, we haven’t had to use much of it, but I know something will pop up eventually.

    • Travis says:

      In our case, our lines of credit were closed, so we didn’t have credit cards to fall back on for emergencies. It’s quite an experience to have an unexpected expense….and then have to scramble to find funds to resolve it. Those are life experiences that I’ll never forget….and why I want my efund to grow and grow!

  15. I have an emergency fund, and I’ve only just really started my debt repayment (two months ago truly). It’s not as large as what I want it to be once our is done with (I want $10,000 but it’s sitting around $5,500). I haven’t had any emergencies come up, and many people would make the argument of opportunity cost, but honestly, the peace of mind from it is priceless for this worry-wart!

  16. Great stuff here, Travis. Like you, we are in the process of building up an emergency fund, and I’m so glad we’ve started. One thing I really like about the story you shared above is that you guys didn’t just go out and get a new dishwasher – you made due with washing by hand, and etc., etc., each time you encountered an emergency. Great job, my friend!

    • Travis says:

      Thanks Laurie! It’s been four and a half years full of life lessons, that’s for sure – I won’t say we’ve been perfect, but we’ve done a pretty good job of forcing ourselves to make due with what we have for as long as we can.

  17. I admire you and Vonnie for using the laundromat and for washing dishes by hand. Even though you didn’t have an emergency fund, you had gumption enough not to go back into debt to finance the repairs. That was a step in the right direction.
    I gave my adult niece a copy of Dave Ramsey’s Total Money Makeover for Christmas, and she is psyched to begin paying off her debts. Ramsey makes saving an emergency fund of $1,000 the first step – just as you are advising. But my niece said, “I just want to get to the debt repayment.” It’s a natural eagerness, but I’m going to get her to read your post and hopefully she’ll reconsider. As you say, when it comes to emergencies, “it’s not a matter of if, but when.”

    • Travis says:

      As mentioned in a previous comment, the $1000 baby emergency fund as the first step sound crazy the first time I heard about it (through Dave Ramsey). But it makes so much sense now. Not having an emergency fund while paying off debt is walking a thin line… emergency and it could derail the whole “get out of debt” journey. You have to prepare for your journey before you take the first step, if you’re not ready, you may not make it to your destination. Good luck to your niece, I’d love follow along with how she’s doing…maybe via your blog? 🙂

  18. Stacia says:

    I am currently working on my ER fund. I will have it in place by mid February. Inhave read/half-assed participated in Dave Ramsey’s FPU and have vowed to make bigger progress as I start to whittle away at 10K in debt while trying to build a better financial future starting over at 44. Go Me!! Thanks for the awesome reminders!

    • Travis says:

      Hey, it’s never too late to take control of your life, Stacia….I’m starting over at 40 after paying off 109K in credit card debt (last payment in February). Keep working on that Emergency fund, and good luck in paying off that debt – would love to have you come back and tell us how you’re doing!

  19. After paying off my CC debt with my emergency fund, I almost immediately regretted it. I love being CC debt free, for sure! But the security that an emergency fund gives you is worth it to wait a month or so before attacking the debt. Now I’m an advocate for having an EF in place, even if it’s only $1,000!

    • Travis says:

      Great to hear, Lisa….thanks for sharing your real life example too! We’re actually facing a similar situation right now…we MAY be able to pay off our last payment of our DMP at the end of January (instead of waiting until February), but it would drain us of our Efund…it’s tempting because it’s been such a long road and we’re ready to be done….but I’d feel naked without my efund now! 🙂

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