no snake eyes
Something to keep in mind: Paycheck to paycheck is not good. Period.
This is why this blog is to be taken lightly. I wouldn’t suggest that someone else do the things I do, because they are risky. Instead of beefing up my emergency fund to cover months’ worth of expenses in case my primary (currently only) source of income is no longer available, I am funneling as much of my discretionary income as possible into eliminating old credit card debt. I have my reasons for doing this. First, the idea of continuing to pay interest on my old credit card debt really bothers me. Also, paying the debt will improve my ratio of available credit to my debt balances, and this may improve my credit, which is important to me, because down the road I want to fetch the best mortgage terms and most painless closing costs possible when I buy my house. (They say when your score is in the mid-700s, improvement is moot, but I say Every Little Bit Helps.) When I finally do move into my house, my mortgage won’t have to compete with my old credit card debt for a slice of the take-home pie. Generally, though, I just want it gone. My old credit card debt is like split ends, or hangnails, or extra tummy weight - you look at it, it bothers you, and you do what you have to do to excise it. It’s very psychological, and I’ll be glad when I move past this part of my financial journey.
That said, if I were to lose my job tomorrow, I’d be SO NOT "okay for a few months." I’d be at the unemployment office immediately. I’d be settling for a percentage of my current pay, while scrambling to get another position with no certainty in sight except my faith that something is out there for my skill set (or I’ll wind up taking "whatever" to make ends meet). I couldn’t pay my September rent until I got paid this week - not unless I was willing to dip into my small emergency fund.
So yes, I am making progress. But as Charles Barkley might say, "I am not a financial role model." I am gambling. I am depending on the ASSUMPTION that my income will continue at its current rate while I repay debt and that no emergency will happen that my emergency fund can’t handle alone. This is why folks recommend that you get up a certain amount of savings together before repaying debt. I’m just eager and hard headed. But I do know my risk.
Love love love your honesty! I feel you on that completely. Looking at those statments and seeing $xx.xx in interest makes me very anxious. But try to remember that patience is key!
Comment by K. — August 30, 2007 @ 10:59 am
Nothing like a fat emergency fund! You can always start with the baby steps http://www.daveramsey.com/etc/cms/baby_steps_2867.htmlc
Comment by Moneymonk — August 30, 2007 @ 12:38 pm
Thanks, Moneymonk - I followed that link. Baby Steps include a $1,000 e-fund. Then debt repayment. Then 3-6 months of living expenses. I’ve got #1 covered and I’m working on #2. It’s still risky, though, to put #2 in front of #3.
Comment by Sistah Ant — August 30, 2007 @ 12:45 pm
Heck, I’m still working on that $1000 E-fund part. Great link MM!
Comment by K. — August 30, 2007 @ 12:50 pm
If I were in your shoes, I’d be doing the exact same thing. Debt (especially CC debt) delays the progress towards achieving your real goals. I admire your focus and dedication.
Comment by Single Ma — August 30, 2007 @ 8:50 pm
I don’t think you should struggle to build an EF if you’re paying interest on credit card debt that exceeds that of your emergency account. I would be doing just what you are doing!
The fact of the matter is that having good credit is very important. If you DID lose your job you might qualify for a 0% (or at least a very low percent) credit card that you could use to pay bills and buy food and other necessities while you searched for a permanent job. Credit cards (as much as we’d hate to use them) can also be a form of emergency account. In fact, if I lost my job, I’d probably get a 0% card and spend on it while I left my savings in my EF earning 5% interest! Of course I’d pay it off before the 0% expired…
But in any event, keep up the good work!
Comment by Meg — September 1, 2007 @ 2:07 am