What if...I don't have an eFund or a sinking one?

iVillage Member
Registered: 04-21-2011
What if...I don't have an eFund or a sinking one?
7
Tue, 10-25-2011 - 1:41am

iVillage Member
Registered: 03-27-2005

From my experience having an emergency fund and appropriate sinking funds is a must.

iVillage Member
Registered: 04-10-2003
I agree with PP. A baby efund is a must have in order to feel peace of mind. Unexpected things happen and having cash on hand is a great feeling. Case in point. I had a CC with a balance of $13K. My credit was stellar, but it was close to the limit. I sold a vehicle and paid it off . . . and they immediately dropped my limit to $1500 and refused to move it. So if a big emergency came up (think furnace blows, roof leaks etc) I couldn't rely on that card. Granted $1k won't cover it either, but you never know what could come at you).
As far as the sinking funds go, I consider these part of my budget because they are necessary. If they are not accounted for they your budget really doesn't balance. Things like car registration or insurance (if you pay annually), oil changes etc NEED to be paid. The sinking fund idea is to spread those payments over 12 months rather than scramble when they are due.
Having said all that, there is also a mental game that is played and you need to figure out what works for you. Are you going to lose drive if you are forced back to the CC's and see all your hard work erased? Or would you rather see them go down faster and cross your fingers that an emergency doesn't happen? It's really up to you!
Good luck! You're doing great!

Bex -

iVillage Member
Registered: 11-14-2008

Hi,

I advocate for the efund, however, its not for everyone. If you think you will spend that money(or someone else in your family).....don't have it on hand.

I would rather relay on myself than a CC for an emergency fund and when I had an emergency(this is a when, not if) I would rather my progress not back slide. If it can't move that is fine, but going backwards on your debt journey and it taking so much longer would not be fun. What about

iVillage Member
Registered: 11-14-2008

oh and the sinking funds....

How do you pay for your car insurance right now? Or anything that is not due monthly? Do you charge it? That is going to mess up your pay off calendar. Sinking funds is not a savings account, it is a reserve for money that gets spent every year, but is there to make sure when the bills come due, you have the money.

iVillage Member
Registered: 04-21-2011

Hi Bex,

You got it...it's more of a mind game...I rather see the huge 80K CC and LOC debt go gown faster (and knowing I'm saving interests) and cross my fingers. I know I'll have this job till August 2012. After that, it depends on factors I can't control...it might or might nt be extended for another year...

So, if I pay the debt down sooner, when I need to shrink the budget, we will be able to live for a while on my H salary and my EI while I find a new job. However, if I keep the CCs high, the minimum will also stay high if my contract is not renewed, and we won't be able to pay them...

I do have a sinking fund and it includes ALL the things we have to pay one or twice a year PLUS all the small emergencies such as broken appliances, tires and similar things. I plan to continue with it even when it is very low now and it's being used by the things it's supposed to be...

I also have an eFund in a Tax saving account. It's too small ($325) and as I see it, it is for real emergencies: both my and my husband's families live out of the country. If something happens to them, we might need to travel or send money (extra to the one we are already sending). If we lose our jobs or there is a big emergency (hospital, crash, etc.), then the eFund should be used for that...

I also plan to pay my debts to stay out of debt...however, when you have such a big debt as ours and not too much time to save, concentrating on accumulating an impossible eFund while the CCs remind more or less the same (because of the big amounts) doesn't sound reasonable to me.

I still have this plan of reducing all of them to the next lower number by the end of this year

iVillage Member
Registered: 01-12-2008
<<< I also plan to pay my debts to stay out of debt...however, when you have such a big debt as ours and not too much time to save, concentrating on accumulating an impossible eFund while the CCs remind more or less the same (because of the big amounts) doesn't sound reasonable to me.>>>

I think right now you are looking at the Efund in the wrong light. You are looking at an impossible amount to save. Your first Efund is not enough to live off of for 3 months, it is enough to replace a dryer if it goes, or a refrigerator. Its to replace your windshield if a rock hits it and now you have a crack in your line of sight. This first Efund should be around 1K. and most should be able to save that in a couple of months. Even with big debts! Don't send extra to any of those payments, throw everything extra you have at that one place, you already have 325, shouldn't take much longer.

After you pay off your debt, you then save for your 3-6 month efund.

Oh and to make sure this efund is used in only true emergancies, put it in an account that is harder to get to, such as not having a ATM card for it, or it takes a day to transfer to your normal account.
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iVillage Member
Registered: 07-24-1997

I basically did the same thing as you for a long time.