When the get out of debt bug hits, the last thing most people want to do is build an emergency fund. Many ask, why do I need an emergency fund? Well, to put it simply, you need an emergency fund to make sure that you continue to pay off debt when emergencies arise.
Time and time again, people start paying off their debt, but stop due to an unexpected emergency. When this unexpected expense hits, these people have to incur more debt to pay this expense.
That is where an emergency fund can save you.
If you build an emergency fund before starting to pay off debt, when these emergencies arise, you will not have to go into more debt. Instead, you can reach into your emergency fund, rebuild the fund, and get back on your debt repayment plan.
Many people make the mistake of not being patient and saving this emergency fund. But, then when an emergency arises, they become demoralized because they are back in debt. There is no worse feeling than going backwards. Having to incur more debt, can cause you to give up paying down your debt. To quote Benjamin Franklin, "By failing to prepare, you are preparing to fail."
But, with an emergency fund in place, you can plan for these unexpected expenses. No longer are they unexpected. You acknowledge that they will arise, but you are ready for them. YOU ARE IN CONTROL OF YOUR FINANCIAL LIFE.
Personal finance is all about being disciplined. Disciplined personal finance is the name of the game. An emergency fund is your first step to living a disciplined financial life.
So, don’t wait. Start building your emergency fund right now. If that means that you have to suspend your debt repayment plan, do it. The key here is to put yourself in the best position to get out of debt. That is why you need an emergency fund.
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{ 1 comment… read it below or add one }
Hey,
I can totally see that people may have great intentions when they started and probably would have seen it through. But when an unexpected expense adds to the debt or significantly slows the plan, it’s sometimes hard to get back on track.
Never thought of debt elimination as being as much psychological as about the numbers
Cheers,
Guy
Guy G.´s last blog ..Grocery Saving Tips – Tips on Budgeting