Debt Management Tips - Is It OK to Use Credit Cards for Emergencies?
I used to think it was a good idea to have at least one credit card for emergencies. You know what I mean … the car breaks down, the washing machine tears up, the refrigerator goes out, someone needs to go to the doctor and it’s not covered by insurance, etc., etc.
Let’s face it … life is full of emergencies. If you are living and breathing in this world, you will continually have “emergencies” that pop up from time to time. How do you pay for them? Well, if you don’t have money in the bank, you probably do what most people do … whip out the old credit card.
The problem with this is that these debts eventually add up. You usually won’t get one debt paid off before another pops up. So this is added to the remaining balance of the first debt. And so it continues, and interest is added upon interest.
Get the picture? I’m sure you do. Pretty soon, you’ve got a large debt on your credit card, and you’re saying, “What happened?” and “How will I ever get out from under this?”
So what do you do? Simple … you build an emergency fund. “Ha!” I can hear you say now … “and where do I get the money for an emergency fund?”
Well, first of all, check your pockets … I bet you have some change there. Do you have an old jar or cup in your house? Well, you’ve got all you need to start an emergency fund.
At the end of each day take all the change out of your pockets or purse and put in your change jar. At the end of the month, roll the coins, take them to the bank and start your “emergency fund” savings account.
Each week, think of one thing you can do without and add that money you would have spent to your jar. This may be a candy bar, coke, or espresso at your favorite coffee shop. Whatever you can do without for that week to put toward getting out of debt, do it!
Ideally, you should try to get your “emergency fund” built up to about $2,000 minimum. Granted, some car repairs or other “emergencies” might cost more than this, so you should try to get it built up higher if you can, but $2,000 will cover a lot of the smaller “emergencies”.
Once you spend any of the money, replace that money as soon as possible.
Should you start saving this money even before you pay off your credit cards? Absolutely. This will help you to stop adding to your debt, so you can pay it off faster.
Once you get your emergency fund established, add a little extra onto the minimum payment of your debt. Take the money you were putting in your fund and add that to help pay down your debt faster.
Before you know it, you will be free from using your credit cards as a “crutch” for emergencies.
Add comment September 5th, 2007
