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Let’s imagine for a moment that the last load of laundry is in and you’re finishing the rest of the household chores when you notice the loud whirring of your washing machine stopping much too soon after it began its first spin cycle. You check it out and your worst washing machine fears are realized…it’s dead AND you have a load of half washed sopping wet towels.
Fast forward two hours later and you’re on your way to Home Depot with your husband discussing the details of this unexpected trip. You wish you could be talking about the crucial details…you know the ones like stainless steel or white, front or top loader? But you’re not. Instead, you’re discussing how you are going to afford this new washing machine. You’re dreading the fact that rather than lowering your debt number you will be adding to it when you hand over the credit card to finalize the purchase.
You aren’t alone in this scenario. Over 60% of Americans understand what you’re going through. Why? Because they don’t have the money saved to cover such an expense either. That is a big number and one that ought to change. While it isn’t always possible to keep misfortune like this from happening, it’s entirely possible to prepare for when it does occur. That’s why you need a Starter Emergency Fund before you pay down debt.
What Is an Emergency Fund?
An emergency fund is a savings amount you set aside specifically for emergency situations. It’s not a matter of if you will have an emergency, but when. Something will break, a tire will blow, or you will have to run to the emergency room (that last one happened to us in February actually). And more often than not, these little emergencies occur at the worst possible time. Aside from being able to pay cash for an unforeseen financial event, there are a number of other benefits to having money set aside to cover the costs.
You Will Avoid Going Further Into Debt
I know this may be obvious but I thought it should still be said. Not only will you keep adding to your debt but you will also stay motivated towards paying it down quickly. Adding a $500+ expense on your credit card does nothing for your drive to become debt free and is more likely to make you think that getting out of debt is near impossible.
It Will Give You Peace of Mind
Stress is something that we all wish we had less of and having an emergency fund is a great way to keep you from feeling a sense of impending financial doom. Having a little money saved to act as a shield from whatever life throws your way will help settle feelings of unease in regards to your finances.
How Much Should You Save?
This number varies a bit depending on circumstance. Generally, according to financial experts like Dave Ramsey, saving $1000 for your starter emergency fund is likely more than enough to protect you from the unexpected while you are working towards paying off debt. If you are struggling to make ends meet you may think saving up $1000 is impossible but with a little determination and creativity, you just may find yourself hitting your $1000 savings goal in no time! In fact, I made a post on ten ways to help you save. Click here to read it!
So, let’s go back to that shopping trip scenario. Only this time, you’re prepared. You have saved for this occasion and instead of fretting over which card you will use, you have peace in knowing you can handle this emergency without throwing your money goals off track. Instead of having additional monthly payments to your already too long list of bills, you will have a paid-for appliance. And because of that, you can get back to those crucial details and choose the washing machine of your dreams….within your budget, of course, but I shouldn’t have to tell you that.