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Unexpected Trip - Unexpected Spending

June 27th, 2007 at 04:06 pm

I rec'd a phone call early Monday morning that my great-grandmother was possibly dying (chest pains, kidneys failing). I made the decision to take a quick trip to see her, if I could make it in time. Fortunately, she has rallied for the time being and is doing much better.

Anyway, this has caused our finances to take a bit of a hit (could only pay the trip expenses plus $17 toward the credit card this time). Oh well, it's what would have been taken out of an emergency fund, had we had one. I'm just glad that we could pay back the trip expenses and that it didn't set us back any.

So, begs the questions once again: Do we fund an emergency fund or continue to work at the debt? My vote is the debt. What do you think?

9 Responses to “Unexpected Trip - Unexpected Spending”

  1. fairy74 Says:

    It's a hard call. Personally I am big fan of a fully funded EF first and then debt payoff, but I know that others have equally valid opposite opinions on this matter. I just always felt better knowing I had a cash cushion in the bank. I guess my reasoning is this, If you fully fund EF and have an emergency, the money you spend is cash. If you put all your money towards paying down the debt and don't have an EF and then have an emergency, the money you spend will not be cash but more new debt...

  2. fairy74 Says:

    oh forgot to add: glad your great grandma is feeling better Smile

  3. Ima saver Says:

    I owuld go for the emergency fund first!

  4. ceejay74 Says:

    I vote debt. Suppose you put your money in savings at 0-5% interest, and you don't have an emergency. That thousand dollars or whatever could have saved you some interest on a credit card, and lowered your monthly payment so you could pay more toward principal, but instead it's just sitting there.

    Suppose on the other hand, that you put that thousand toward principal, saving interest, making it possible to pay down more principal. Then you have an emergency and you have to put it on your credit card. Well, some of the debt is back, but it wasn't sitting there accumulating interest the whole time, you paid principal faster than you would have, and now it will sit interest-free for the first 30 days it's on your credit card.

    Some people say you should have cash on hand in case of an emergency you can't use your card for. I say, take a cash advance on a credit card if you really need it that bad; there are very very few emergencies a credit card wouldn't solve. Or, get a checking account with a reserve line; works like a credit card but you can take cash out of the ATM even if you're below your balance. That's my emergency cash fund.

    Of course I wish I had savings, but I'm just not there yet. It doesn't make fiscal sense for me to save when I could be reducing debt.

    Just my 2 cents (do you take Visa? lol)
    CJ

  5. daybyday Says:

    I'm glad your great-grandmother is doing better.

    My vote is on the debt too. I couldn't see the sense in having money sitting around that could be busy working to lower interest expenses.

  6. shadon Says:

    Until I joined this site I would've have said the same as CJ and DBD. Mathematically, it doesn't make sense to be earning only 5% interest on savings when paying 15% interest on debt. Having said that, there is something else to consider and that is how you got into debt in the first place. If it was by relying on CCs to get you thru or using them to live beyond your means (as in our case) then it is important that you break that "cycle" and the only way to do that is by having cash in the bank to rely on as opposed to relying on CCs. That is why I decided to save money into an EF even though we were paying 12% interest on CC debt at the time. Now we can retrain ourselves to use cash in an emergency rather than credit.

  7. boomeyers Says:

    I vote debt too! Making that trip to see your great grandmother did'nt really cost anything in the long run - I'm sure it was priceless!

  8. mbkonef Says:

    I would say debt too, simply because the math seems to make the most sense that way, but the emotional side of me also loves the idea of an emergency fund. So how about putting aside just a small amount $5.00 even a week (or whatever small amount would work for you) into an account for an emergency fund. If you did not have an emergency any time soon, you might be surprised at how much you could accumulate without taking a significant amount away from debt repayment.

  9. tklahn Says:

    Thanks for all the awesome ideas!

    I suppose I should have mentioned that the debt we have is on a 0% credit card until July 2008, so we really don't have issues with paying interest.

    Plus, we have an ING account, where we could stash an emergency fund and earn 4.05%.

    Hmmm, this is making me rethink my "payoff the debt first" stance.

    I also like the idea of even starting to save just a little amount ($5 per week), so we can begin good saving habits.

    Thanks again!

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