I've read quite a few good blog entries this week but, Tuesday's post over at Zen Habits was probably the best I had the opportunity to read this week.
It goes into the importance of an Emergency Fund if you are trying to get out of debt.
Before I started reading finance books for fun, I had no concept of what an emergency fund was. I would pay down my credit cards little by little and then something with my car would go wrong for $500-$700 or I would get an unexpected medical bill (back when I had no health insurance). Having no savings & no other option I would charge the unexpected expense to my credit card - the cycle of debt would continue to repeat itself. Talk about 1 step forward, two steps back!
Once I had learned about an emergency fund, I made it a priority to set aside a little savings away for these unexpected expenses. For the past year, I've tried to make sure there is at least $1K in the bank at all times - and I don't touch this for anything.
Technically I could have paid off my debt 1-2 months ago if I wasn't unwavering in keeping at least that $1000 in the bank. But it's a necessary evil as no one knows what tomorrow may bring.
My next goal - after I buy a piece of jewelry for my girlfriend - is to build upon the emergency fund until it's at least 3 months worth of expenses.
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