Tuesday, October 2, 2007

Why I'm Creating an Emergency Fund

Ah, finally, a return to normalcy. Back in black! The direct deposit went through this morning and I am no longer a delinquent. The bank account is now positive again! Hurray!

The only problem is... the two $30 overdraft fres incurred as a result of this mess. Now I get to call the bank and beg & plead with them to take off the fees. Why does it seem like, now that I'm writing it all down, I'm running into more financial problems? :)

Nothing happens without something positive, though. Every cloud has a silver lining. Insert another cliche phrase here. But I did learn a few things:

  • We can only rely on ourselves. Not even something you think you can count on, like payroll, is 100% foolproof.
  • Nothing beats good old-fashioned cash. We've been using credit as an emergency fund, but some things can't be paid with credit. These things include the mortgage.
  • The cushion in our bank account is too small. I keep between $500-$1000 in the checking account to buffer against unexpected expenses and prevent overdrafts. You can see how well that worked out.
  • Our bank may not be the correct fit for us. I'll need to think about this more, and take into account their willingness to remove the overdraft fees. However, there are some bank accounts that don't charge overdraft fees and instead act as a line of credit. I have to look into this a little more.
All of this has changed our October objectives. Instead of plodding along and throwing every extra cent at the debt, we're going to create a real live emergency fund. Since I'll still be buffering the checking account, $1000 is the magic number. I tried to beat the system and I failed. Next time I'll be prepared.


Erin said...

Hey, I somehow stumbled across your blog and loved it. My husband and I have been married for almost five years. We got out of debt the first year and have been living tight ever since. I am amazed at how much we have been able to aquire with just living on a tight budget. We have two kids a house and we even dress cute and we were still able to save about 50% of our income last year. Don't give up. There is such a satisfaction and peace that comes from releasing yourself from the bondage of debt! Keep up the good work!


JvW said...

Thank you! You're an inspiration. When I am feeling unmotivated, I'm going to come back and read this.

Your kids are adorable! I love your pictures.

FinanceAndFat said...

Been there my friend...too many times.

Recently, I've opened an ING Direct Checking account- no overdraft fees, you just pay a margin rate to borrow. Same for a Charles Schwab account I opened. However, I am still chained to a WellsFargo checking account so we can have a local branch (not sure why I cling to that). I did recently finish funding a savings account there and now I have that for overdraft protection.

Good luck getting those fees cleaned up!