Do You Have An Emergency Fund?

Today’s guest post is from Jackie who blogs over at debtfreebread. Jackie is a mother, wife, and aspiring entrepreneur who’s been described as goofy, uptight, unconventional, and sometimes rigid.

We’ve all heard different variations of the same advice, “Build up an emergency fund before paying off debt.” Financial advisers like Dave Ramsey advocate having at least $1000 saved up. While others like Suze Orman advocate having at least 6-8 months of bills stored in a savings account.

I realize both are offering sound advice. However, I don’t believe there is a one size fits all debt repayment plan. Why should a young couple that can create their own streams of income wait to payoff debt? I believe securities like disability, life, and accidental death insurance sufficiently cover life’s unexpected occurrences.

For example, my husband and I learned how to make the best out of a tough situation when he became unemployed in 2009 and 2010. Initially, we were both scared and shocked because we have two small children and no family to help us financially or otherwise. However, we realized money wasn’t our best asset. Our mind, body, and ability to work as a team was far more valuable than any emergency fund. Especially, during periods of long term unemployment like the one we experienced. Besides, when you’re already broke its pretty hard to get much broker.

Getting Creative

We discovered creativity is key which is why I began selling my own bath and body products on Etsy. Meanwhile, he cut and delivered firewood during the week. If his partner didn’t show up which was often, I filled in for him by splitting and stacking ricks of wood. In short, if you have grit and tough life experiences that have prepared you for rough times, money or lack thereof doesn’t seem like such a big problem. For instances, in the first 5 years of our marriage his father and my mother passed away. Plus, both of our sons were diagnosed with autism and considered intellectually disabled. In comparison, money problems don’t seem so big. Side note, neither parent had a life insurance policy. So, we received no financial assistance after they passed.

Now, I realize every couple is different. So, working together or finding creative ways to make money may not always be possible. However, assessing your individual situation before picking a debt repayment plan is crucial, if you want to get out of debt fast. Our experience taught us we can get through all situations no matter what. At the time we had no savings and little available credit but we were resourceful. We used our skills and creativity to generate steady income based on our own efforts. Plus, we’ve always lived below our means which gave us a fair amount of breathing room during the first few weeks of his unemployment.

The Decision

Would I advise everyone to payoff debt before saving? Absolutely not. At the moment we have $1000 in savings and about $4400 owed in student loan debt. Recently, we’ve been discussing using our savings to get out of debt faster. However, we haven’t made a decision yet. If we had a mortgage, maxed credit cards, or other money owed, I would never consider leveraging ourselves so thin but, that’s not our situation.

Before seriously attacking my student loan debt more than 50% of each payment was being directly applied to interest, not principle. For us, that was just too much to bare. Our decision to payoff debt first has been successful so far. We’ve managed to decrease our debt by $9500 in just five months. We couldn’t rationalize saving money in an account that gains 1% interest while having a debt that incurs 5.5% interest because, it would be like knowingly investing into a fund that is guaranteed to lose 4.5% of its value. Mathematically it just doesn’t make sense. However, I do understand people who need an emotional security blanket. Personally, I believe everyone’s situation is different and their debt repayment plan should be too.

My comments: Jackie you makes some good points and everyone should do what’s best for them. When I decided to pay off my debt, I didn’t empty my liquid savings to pay off my debt. The reason behind this was just in case something happened. (An emergency of course) I didn’t want to rely on my credit cards if my transmission blew, or if a pipe bursted. So I decided to create what I call my own credit card, where I pretty much saved what my credit card limit was, so I could dip into that if something was to happen.

Btw, congrats on your entrepreneurial endeavors and for pushing through those rough times. 

What are your thoughts on emergency funds, do you have one?


  1. We have an EF. It is fully funded with about 6 months worth of expenses and bills. We also have a lot of student loan debt and a mortgage, but we prefer to have a backup plan even though our jobs are stable. We would hate for something big to break in our house (such as replacing our furnace which would be around $6K) and not being able to pay for it.

  2. gregjohnson975182420 says:

    We have one and it helps me sleep at night. I wouldn't empty my savings to pay off debt…because I'm sure Murphy's law would guarantee that something unexpected would happen- water heater breaks, car repairs, etc.

    Just be patient with paying off your debt and you will get there eventually!

  3. Jackie says:

    Shondell, thank you for your support. I agree, using credit cards would be a bad way to survive unemployment or expected events. For us, it wouldn't work because we have two small credit cards. I found employment as a customer service agent during my husband's last bout of unemployment to keep us afloat.

  4. Many lenders providing student loans with low interest rates and flexible repayment options.

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